    [Senate Hearing 109-827]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 109-827, Pt. 6

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2007

    =======================================================================

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2766

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2007 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
    PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR
                                 OTHER PURPOSES

                                   ----------

                                     PART 6

                                   PERSONNEL

                                   ----------

                         MARCH 1, 14, 30; APRIL 4, 2006

             Printed for the use of the Committee on Armed Services
    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                            2007--Part 6  PERSONNEL

                                                     S. Hrg. 109-827, Pt. 6

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2007

    =======================================================================

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2766

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2007 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
    PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR
                                 OTHER PURPOSES

                                   __________

                                     PART 6

                                   PERSONNEL

                                   __________

                         MARCH 1, 14, 30; APRIL 4, 2006

             Printed for the use of the Committee on Armed Services

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                          COMMITTEE ON ARMED SERVICES

                        JOHN WARNER, Virginia, Chairman

    JOHN McCAIN, Arizona                 CARL LEVIN, Michigan
    JAMES M. INHOFE, Oklahoma            EDWARD M. KENNEDY, Massachusetts
    PAT ROBERTS, Kansas                  ROBERT C. BYRD, West Virginia
    JEFF SESSIONS, Alabama               JOSEPH I. LIEBERMAN, Connecticut
    SUSAN M. COLLINS, Maine              JACK REED, Rhode Island
    JOHN ENSIGN, Nevada                  DANIEL K. AKAKA, Hawaii
    JAMES M. TALENT, Missouri            BILL NELSON, Florida
    SAXBY CHAMBLISS, Georgia             E. BENJAMIN NELSON, Nebraska
    LINDSEY O. GRAHAM, South Carolina    MARK DAYTON, Minnesota
    ELIZABETH DOLE, North Carolina       EVAN BAYH, Indiana
    JOHN CORNYN, Texas                   HILLARY RODHAM CLINTON, New York
    JOHN THUNE, South Dakota

                        Charles S. Abell, Staff Director

                 Richard D. DeBobes, Democratic Staff Director

                                     ______

                           Subcommittee on Personnel

                  LINDSEY O. GRAHAM, South Carolina, Chairman

    JOHN McCAIN, Arizona                 E. BENAJAMIN NELSON, Nebraska
    SUSAN M. COLLINS, Maine              EDWARD M. KENNEDY, Massachusetts
    SAXBY CHAMBLISS, Georgia             JOSEPH I. LIEBERMAN, Connecticut
    ELIZABETH DOLE, North Carolina       DANIEL K. AKAKA, Hawaii

                                      (ii)
    ?

                                C O N T E N T S

                                  ----------

                        CHRONOLOGICAL LIST OF WITNESSES
      Active Component, Reserve Component, and Civilian Personnel Programs
                                 march 1, 2006

                                                                       Page
    Chu, David S.C., Under Secretary of Defense for Personnel and
      Readiness......................................................     4
    Hagenbeck, LTG Franklin L., USA, Deputy Chief of Staff for
      Personnel, United States Army..................................    32
    Brady, Lt. Gen. Roger A., USAF, Deputy Chief of Staff, Manpower
      and Personnel, United States Air Force.........................    38
    Harvey, VADM John C., Jr., USN, Chief of Naval Personnel, United
      States Navy....................................................    41
    Osman, Lt. Gen. H.P., USMC, Deputy Commandant for Manpower and
      Reserve Affairs, United States Marine Corps....................    63

                          Health Benefits and Programs
                                 march 14, 2006

    Schmidli, Tanna, Chairman of the Board and Chief Executive
      Officer, National Military Family Association..................   107
    McCarthy, Lt. Gen. Dennis, USMC (Ret.), Executive Director,
      Reserve Officers Association...................................   128
    Ryan, VADM Norbert R., Jr., USN (Ret.), President, The Military
      Officers Association of America................................   138
    Zerr, Edgar M., National President, Fleet Reserve Association....   171

                      Reserve Component Personnel Policies
                                 march 30, 2006

    Hall, Hon. Thomas F., Assistant Secretary of Defense for Reserve
      Affairs........................................................   192
    Blum, LTG H. Steven, USA, Chief, National Guard Bureau...........   202
    Vaughn, LTG Clyde A., ARNG, Director, Army National Guard........   245
    James, Lt. Gen. Daniel, III, ANG, Director, Air National Guard...   245
    Helmly, LTG James R., USA, Chief, Army Reserve...................   246
    Cotton, VADM John G., USNR, Chief, Navy Reserve..................   274
    Bergman, Lt. Gen. John W., USMCR, Commander, Marine Forces
      Reserve........................................................   280
    Bradley, Lt. Gen. John A., USAF, Chief, Air Force Reserve........   292

                                     (iii)
                  Continuation of Health Benefits and Programs
                                 april 4, 2006

    Chu, Dr. David S.C., Under Secretary of Defense for Personnel and
      Readiness......................................................   352
    Winkenwerder, William, Jr., M.D., Assistant Secretary of Defense
      for Health Affairs.............................................   354
    Cody, GEN Richard A., USA, Vice Chief of Staff, United States
      Army...........................................................   366
    Willard, ADM Robert F., USN, Vice Chief of Naval Operations,
      United States Navy.............................................   368
    Magnus, Gen. Robert, USMC, Assistant Commandant of the Marine
      Corps, United States Marine Corps..............................   371
    Corley, Gen. John D.W., USAF, Vice Chief of Staff, United States
      Air Force......................................................   375

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2007

                                  ----------

                            WEDNESDAY, MARCH 1, 2006

                                   U.S. Senate,
                             Subcommittee on Personnel,
                                    Committee on Armed Services
                                                        Washington, DC.

      ACTIVE COMPONENT, RESERVE COMPONENT, AND CIVILIAN PERSONNEL PROGRAMS

        The subcommittee met, pursuant to notice, at 9:29 a.m. in
    room SR-232A, Russell Senate Office Building, Senator Lindsey
    O. Graham (chairman of the subcommittee) presiding.
        Committee members present: Senators Graham and E. Benjamin
    Nelson.
        Committee staff member present: Leah C. Brewer, nominations
    and hearings clerk.
        Majority staff members present: David M. Morriss, counsel;
    Scott W. Stucky, general counsel; Diana G. Tabler, professional
    staff member; and Richard F. Walsh, counsel.
        Minority staff members present: Jonathan D. Clark, minority
    counsel; Gabriella Eisen, research assistant; and Gerald J.
    Leeling, minority counsel.
        Staff assistants present: Jill L. Simodejka and Pendred K.
    Wilson.
        Committee members' assistants present: Meredith Beck,
    assistant to Senator Graham; and Eric Pierce, assistant to
    Senator Ben Nelson.

        OPENING STATEMENT OF SENATOR LINDSEY O. GRAHAM, CHAIRMAN

        Senator Graham. The hearing will come to order, and let the
    record reflect that we're a minute early. That's history for
    the Senate. The marines are out there doing some reconnaissance
    somewhere, but we know they'll show up here soon. Thank you all
    for coming. Good morning.
        The subcommittee meets today to receive testimony on
    Active-Duty, Reserve, and civilian personnel programs in review
    of the National Defense Authorization Request (NDAA) for Fiscal
    Year 2007.
        Senator Nelson, my partner here on the subcommittee, will
    be coming shortly. I would like to say, for the record, that I
    could not have asked for a better person to work with. He has
    been a terrific partner in trying to do what's best for the men
    and women who serve our country. I look forward to hearing his
    remarks here later on.
        I also want to express my thanks to the other members of
    the Personnel Subcommittee, Senators McCain, Collins,
    Chambliss, Dole, Kennedy, Lieberman, and Akaka, and, of course,
    to Senator Warner, who's been a great chairman, and Senator
    Levin, the ranking member, for their support, encouragement,
    and hard work. Each Senator and their staffs contributed
    greatly to the formulation of last year's NDAA, which I am very
    proud of, which provided new authorities for the benefit of our
    Active-Duty, Reserve, and National Guard personnel. I'd like to
    congratulate everyone, including our Department of Defense
    (DOD) partners here, and the men and women in uniform on a job
    well done last year.
        Secretary Chu, we're glad to have you here again. You're a
    reform-minded guy. I really enjoy working with you, and I think
    you have some good ideas on how we can make the military and
    the DOD run more efficiently.
        We also have our personnel chiefs today: Lieutenant General
    Hagenbeck, U.S. Army, Deputy Chief of Staff for Personnel--and
    we appreciate your being here, sir; Vice Admiral John Harvey,
    U.S. Navy, Chief of Naval Personnel; Lieutenant General Osman,
    U.S. Marine Corps--he'll be here in a minute--and Lieutenant
    General Brady, U.S. Air Force, Deputy Chief of Staff for
    Personnel.
        Thank you all for coming. I look forward to hearing what
    you have to say.
        I would like to introduce my opening statement in full for
    the record.
        [The prepared statement of Senator Graham follows:]

                Prepared Statement by Senator Lindsey O. Graham

        As chairman of the Subcommittee on Personnel, I am very pleased
    with the accomplishments of the Committee on Armed Services last year
    and with the advances that were made on behalf of the men and women of
    the Army, Navy, Marine Corps, and Air Force. The conference report that
    was signed by the President on January 6, 2006, was the product of
    dedicated hard work and unprecedented cooperation by the House and
    Senate Committees on Armed Services and their staffs. At a time of war
    and ongoing combat operations, the Nation should expect no less. I
    point out some of the key provisions of that legislation, which became
    Public Law 109-163, later in this statement.
        As the report of the Quadrennial Defense Review that was released
    earlier this month made clear, the United States and the Armed Forces
    have accepted the reality of a protracted, ``long war'' against
    terrorism and in support of our national security goals, including the
    advancement of democracy and freedom throughout the world. Our troops--
    volunteers all--in the Active and Reserve components, have responded
    superbly, to every mission and every call to duty. I want to express,
    on behalf of all my colleagues, our gratitude and admiration for the
    service and sacrifices of all men and women in uniform and their
    families.
        Without question, the stress of wartime operations in Operations
    Iraqi Freedom and Enduring Freedom have affected recruiting in the All-
    Volunteer Force. All the Services, and particularly the Army and Marine
    Corps, have worked this challenge with characteristic energy and
    positive attitudes. We are standing by to assist you as we can in
    helping young Americans and their parents, relatives, and influencers
    make good decisions about the great value of military service.
        I assure all our members that the Committee on Armed Services and
    this subcommittee, in particular, are determined to work with the
    Department of Defense (DOD) to ensure good recruiting and retention,
    outstanding programs in support of quality-of-life for the men and
    women of the armed services and their families, and sustained
    readiness.
            national defense authorization act for fiscal year 2006
        The Personnel Subcommittee continued its focus on improving
    compensation and quality-of-life programs, supporting achievement of
    recruiting and retention of military personnel, and providing for
    severely wounded and the survivors of military personnel killed on
    Active-Duty. Highlighting just a few of the key advances that were
    made, the conference report:

             Approved a 3.1 percent pay raise for all military
            personnel
             Authorized an increase to $100,000 in the death
            gratuity payable to survivors of all military decedents,
            including retroactive payment to October 7, 2001, the date of
            commencement of Operation Enduring Freedom
             Authorized increases in Active-Duty end strength of
            10,000 for the Army and 1,000 for the Marine Corps
             Authorized government-subsidized access to TRICARE
            Standard for every member of the Selected Reserve who commits
            to continued service in the Selected Reserve
             Approved full basic allowance for housing for
            reservists who are ordered to Active-Duty for more than 30 days
             Authorized increases in the maximum amount of the
            Active-Duty enlistment bonus and the selective reenlistment
            bonus
             Authorized $30 million in supplemental educational aid
            to local school districts which are affected by the assignment
            or location of military families, including $5.0 million for
            educational services to severely disabled children, and an
            additional $10.0 million for districts experiencing a change in
            the number of students due to rebasing, activation of new
            military units, or base realignment and closure
             Authorized $50.0 million increase in military child
            care services, and $10.0 million increase in family assistance
            services
             Authorized accelerated phase-in of full concurrent
            receipt for military retirees receiving veterans' disability
            compensation as a result of a disability by reason of a
            determination of individual unemployability
             Approved full basic allowance for housing for
            reservists who are ordered to Active-Duty for more than 30 days
             Approved income replacement payments for reservists
            experiencing extended and frequent mobilization for Active-Duty
            service
             Authorized higher Selected Reserve officer affiliation
            and accession bonuses and Selected Reserve enlistment bonus
             Authorized an interservice transfer bonus of up to
            $2,500 for Active and Reserve members who transfer to the
            Active or Reserve component of another military service
             Authorized a critical skills career retention bonus of
            up to $100,000 for members of the Selected Reserve
             Authorized a special pay for members undergoing
            rehabilitation from injuries or wounds incurred in a combat
            zone or combat operation
             Directed establishment of comprehensive DOD policies
            to improve assistance to survivors of military personnel killed
            on Active-Duty and to families of seriously injured or wounded
            servicemembers
             Directed establishment of a DOD task force on mental
            health matters affecting members of the Armed Forces and their
            families
             Authorized a $18.0 million increase in clinical
            diagnosis and care of victims of blast injury, including
            traumatic brain injury
             Directed the Army to conduct a pilot program that
            would provide for ``matching funds'' contributions of up to 5
            percent of basic pay for first term enlistees who participate
            in the Thrift Savings Plan
             Authorized $10.0 million for pilot programs to improve
            early diagnosis and treatment of post-traumatic stress disorder
            and other mental health disorders
             Authorized $77.0 million for physical examinations and
            medical and dental readiness for members of the Selected
            Reserve
             Authorized up to 21 days of leave for military members
            in connection with the adoption of a child
             Directed the use of appropriated funds for overseas
            transportation of Army and Air Force Exchange merchandise for
            military members and their families overseas

        Senator Graham. I'd like to end with this thought: The men
    and women who are serving in Active and Reserve roles are
    giving their all. They and their families are going above and
    beyond any reasonable expectations. The Guard and Reserve are
    being used at levels not seen since World War II. The Reserve
    community air crews are all, basically, in volunteer status.
    They've been activated for their 2-year statutory tour. They
    could all quit tomorrow if they wanted to, but they've chosen
    not to. I don't believe they will, because they're great
    Americans. The stress on the family is real. The stress on our
    troops is real, but it is part of the job. This year, our goal
    is to come up with a budget that meets their needs and relieves
    as much stress as possible.
        With that said, Secretary Chu, I would love to hear what
    you have to say about this year's proposal.

      STATEMENT OF DAVID S.C. CHU, UNDER SECRETARY OF DEFENSE FOR
                        PERSONNEL AND READINESS

        Secretary Chu. Thank you, Mr. Chairman. Thank you for your
    leadership and the partnership with you and members of the
    committee on the important issues facing our military
    personnel.
        This is the 33rd year in which the country returned to its
    tradition of an All-Volunteer Force as the way of staffing its
    military. I agree with you, this volunteer military has
    performed magnificently in its current operations. It is, as my
    colleagues would promptly remind me, not just an All-Volunteer
    Force, but also an All-Recruited Force. In that regard, we
    appreciate the partnership of Congress in speaking to what we
    call the ``influencers,'' the older Americans, the adults,
    parents, counselors, teachers, et cetera, who have such an
    important effect on young people's decisions. We need more help
    from them in celebrating the positive choice of young Americans
    to consider military service.
        We recognize, however, that, in an All-Volunteer Force, our
    pay and benefits package must be competitive. That is the
    reason we are proposing an across-the-board pay increase for
    the uniformed force this year that matches the change in the
    employment cost index in the economy as a whole. At the same
    time, we are proposing additional increases for the
    noncommissioned officer (NCO) corps in order to bring them to
    the standard that the 9th Quadrennial Review of Military
    Compensation set; that is to say, to be at the level that is
    equal or better than 70 percent of the American workforce,
    adjusted for experience and degree of educational achievement.
        We're looking forward to the 10th Quadrennial Review of
    Military Compensation, which began this year, as required by
    statute. We will, of course, take as one of the important
    documents for that review, the soon-to-be-received report from
    the Defense Advisory Committee on Military Compensation
    appointed by the Secretary last year at this time.
        We recognize that personnel are the single largest element
    in the overall budget of DOD; and, therefore, we have to be
    judicious in our choices about compensation, pay, and benefits.
        We thank the conferees who worked on last year's NDAA, for
    giving great deference to the issue of costs, in terms of
    changing pay and benefit programs. This is one of the reasons
    the Department has been very careful about any change in the
    permanent planned end strength of the force--the Active
    military force, specifically. At the same time, on the pay and
    benefits side, we recognize we must be able to sustain the
    package we have now--for those who are serving, especially.
    Hence, our proposals on the health benefit for retirees under
    65. We should keep that benefit, the fine program that it is
    now, into the future.
        We look forward to working with you, Mr. Chairman, and I
    look forward to answering your questions now and in the weeks
    ahead.
        Thank you.
        [The prepared statement of Secretary Chu follows:]

                   Prepared Statement by Hon. David S.C. Chu

                                  introduction

        Mr. Chairman and members of this distinguished subcommittee, thank
    you for inviting me to be here today.
        I am struck by the consistent theme of our annual review of the
    Department of Defense's (DOD) personnel programs: we are a Nation
    committed to an All-Volunteer Military Force and we must do our very
    best to sustain it. It falls to us to sustain it not in a time of peace
    and tranquility, but in the midst of a long war--a war irregular in
    nature in which we fight against unconventional enemies, extremists,
    and global terrorist networks.
        Additionally, we must sustain that force with limited resources.
    Difficult choices will need to be made, predicated on careful analysis
    and careful consideration of risks.
        The Department began its transformation journey before September
    11, 2001, and we have been re-tooling continuously our structure,
    missions, and capabilities. The Quadrennial Defense Review (QDR)
    represents the latest stage in that journey. It recommends developing
    an information age human capital strategy to shape a 21st century Total
    Force. Over 3 million people across the military services and
    components, multiple organizations and agencies work for DOD. The
    Department uses over 15 different occupational systems with over 6,000
    occupational definitions. The future human capital strategy should
    provide a uniform competency-based approach to occupational planning,
    performance-based management, and enhanced opportunities for personal
    and professional growth.
        Some ask if the force is broken. It is not. Our military and
    civilian forces comprise high quality, motivated individuals who are
    choosing to continue to serve. Almost two thirds of the Active military
    tell us they intend to stay on Active-Duty and a similar fraction
    expresses satisfaction with the overall military way of life. Survey
    results likewise show a strong, resilient Reserve Force--over 70
    percent are satisfied overall with the military way of life.
    Furthermore, in recent surveys over 80 percent of civilians indicate
    they are satisfied with their jobs and three quarters indicate they
    plan to continue to work for their current organization.
        Obviously, we have done many things right over the last several
    years, but we should not assume that we have done enough. To that end,
    we seek expert reviews of some of our most important policies and
    programs. The Defense Advisory Committee on Military Compensation was
    chartered last year to provide the Secretary with advice on matters
    pertaining to military compensation. The Advisory Committee has been
    examining approaches to balancing military pay and benefits and
    incentive structures and may make suggestions for improvements that
    they believe will assist us in meeting our recruiting and retention
    objectives. I look forward to the release of the final report in April
    and discussing its conclusions with the leadership of the Department
    and Congress. We will use the Advisory Committee's report as a starting
    point for the 10th Quadrennial Review of Military Compensation,
    mandated by statute.

                            the all-volunteer force

    End Strength, Stress, and Shaping the Force
        Maintaining a strong defense which is able to quickly overcome and
    defeat enemy threats remains an imperative for our Nation. In that
    regard, the DOD continues to take actions aimed at reducing the stress
    on the force as operations in Iraq, Afghanistan, and the global war on
    terrorism continue, while maximizing present and future Total Force
    capabilities. By focusing our efforts on more effectively structuring
    and managing our forces, and employing advanced technology, we strongly
    believe there is no requirement for permanent increases in our end
    strength. In fact, we believe that planned reductions resulting from
    transformation efforts in the active Air Force and Navy manpower
    programs, and the Navy Reserve, as stated in our fiscal year 2007
    President's budget request, balance risk with fiscally responsible
    manpower program decisions.
        To support these programmed strengths, we continue to transform how
    the U.S. military is structured. We are continuing to develop an
    integrated package of voluntary separation incentives that do not
    ``break faith'' with members who have given loyal and dedicated
    service. I want to recognize the targeted incentive authority that you
    provided us, which allows us to offer monetary incentives to shape the
    military services in specific year of service officer cohorts.
    Voluntary incentive tools like this are of particular importance when
    the Air Force and Navy are decreasing in size while the Army and Marine
    Corps are increasing operating strength. Our goal is to use these tools
    sparingly to make sure our forces are sized and shaped to be the most
    effective, flexible, and lethal. Only if voluntary separations do not
    suffice would the military departments, as a last resort, implement
    involuntary separation measures such as Selective Early Retirement.
        We also recognize that stability of the force, particularly its
    leaders, is key to the successful transformation of organizations.
    Although development is an important endeavor that requires a breadth
    of experience, far too often we accept extraordinary turbulence in
    positions of special responsibility, and tacitly accept shorter careers
    and earlier retirement. I do not believe this is a prescription for
    long-term success, particularly during periods of transformation. As a
    result, we have begun looking for opportunities to extend tenure and
    careers where it makes sense.
        The old force structure, designed to respond to Cold War threats,
    does not provide us with the best balance of capabilities in the Active
    and Reserve components for the 21st century. Rebalancing the force must
    continue, converting capabilities within and between the Active and
    Reserve components, shifting resources from lower demand capabilities
    to higher priorities. The Services are improving their posture with
    respect to the Active component/Reserve component mix and have
    rebalanced about 70,000 spaces through fiscal year 2005. The Services
    are pursuing additional rebalancing initiatives for fiscal year 2006
    through fiscal year 2011 totaling 55,000 additional spaces.
        Military-to-civilian conversions are also helping to alleviate
    stress on the force while increasing our combat potential. In fiscal
    year 2004 and fiscal year 2005, the Department converted over 20,000
    military billets to DOD civilian or private sector performance and
    currently plans to convert an additional 10,000 plus billets in fiscal
    year 2006 and fiscal year 2007. Further conversions are being
    identified for fiscal year 2008 through fiscal year 2011. Military
    strength made available from these conversions is being used to
    ameliorate high demand/low density challenges, alleviate stressed
    career fields, and enable initiatives such as Army Modularity. Because
    of conversions, the Navy and the Air Force will be able to reduce their
    authorized military end strength without any loss of combat
    capabilities. In fact, savings from these conversions will result in
    increased force effectiveness as resultant savings are applied toward
    force modernization, recapitalization, and other compelling needs.
        Stress on our All-Volunteer Force will also be reduced through
    targeted investments in less manpower intensive platforms and new age
    technologies such as electronic hardware, communications systems,
    precision weapons and unmanned air, land and sea vehicles. One such
    example is the application of new technologies that reduce the manpower
    required for the performance of Air Force installation security. This
    success is being implemented around the world. To ease the burden on
    some high demand/low density units and individuals, we have employed
    innovative joint concepts to meet mission requirements. Today, Navy and
    Air Force personnel are augmenting ground forces in Iraq and elsewhere.
    Actions like this result in additional capabilities and effects that
    would simply not be possible in a parochial ``stove-piped''
    organization.
    Active-Duty Recruiting and Retention
        The success of our All-Volunteer Force starts with recruiting. An
    improving economy, growing concerns from global war on terrorism,
    increased Army recruiting goals, and high operational tempo continue to
    challenge our ability to recruit. During fiscal year 2005, the military
    services recruited 153,887 first-term enlistees and an additional 9,372
    individuals with previous military service into their Active-Duty
    components, for a total of 163,259 Active-Duty recruits, attaining 96
    percent of the DOD goal of 169,452 accessions. The quality of new
    Active-Duty recruits remained high in fiscal year 2005. DOD-wide, 95
    percent of new Active-Duty recruits were high school diploma graduates
    (against a goal of 90 percent) and 70 percent scored above average on
    the Armed Forces Qualification Test (versus a desired minimum of 60
    percent).
        Through January, fiscal year 2006 all Services have met or exceeded
    numerical recruiting objectives for the Active Force. Army achieved
    19,859 of its 19,100 recruiting goal through January, for a 104 percent
    accomplishment. However, the Army's high school diploma graduate rate
    of 85 percent is not yet at our desired level (90 percent). The Army is
    focusing its recruiting on the summer months when more high school
    diploma graduates are available.

                  FISCAL YEAR 2006 ACTIVE COMPONENT ACCESSIONS
                             [Through January 2006]
    ------------------------------------------------------------------------
                                                       Quantity
                                         -----------------------------------
                                                                  Percent of
                                          Accessions     Goal        Goal
    ------------------------------------------------------------------------
    Army................................      19,859      19,100       104.0
    Navy................................       9,758       9,643       101.2
    Marine Corps........................       9,836       9,674       101.7
    Air Force...........................       9,711       9,641       100.7
                                         -----------------------------------
      Total.............................      49,164      48,058       102.3
    ------------------------------------------------------------------------

        We appreciate the new authorities to support recruiting you
    provided in the National Defense Authorization Act (NDAA) for Fiscal
    Year 2006, especially the increased levels of enlistment bonuses and
    the $1,000 referral bonus. Additionally, the 3-year opportunity for the
    Army to provide additional recruitment incentives will allow the
    Department a level of additional flexibility to tailor incentives
    quickly to meet current needs. We have every confidence that requested
    supplemental funding and policy modifications will be sufficient to
    ensure continued success in achieving recruiting goals. Active-Duty
    officer accessions are on track in all Services for numerical success
    this year.
        Army, Air Force, and Marine Corps met or exceeded fiscal year 2005
    retention goals. Navy did well, achieving 91 percent of its mid-career
    goal, reflecting a shortfall in retention for a limited number of
    nuclear specialties. Retention bonuses for nuclear specialties at the
    statutory ceilings were insufficient for fiscal year 2005, but
    legislation in fiscal year 2006 provides higher retention bonus
    ceiling.
        Overall, retention remains healthy in fiscal year 2006, and we
    expect all Services to meet or exceed fiscal year 2006 retention goals.
    To date, the Army has reenlisted 24,671 soldiers toward an end of year
    goal of 64,200. Army mid-career retention is 5 percent below the
    desired glide path, but the Army is targeting bonuses toward that
    population, and we believe the additional Non-Commissioned Officer
    (NCO) pay raise for fiscal year 2007 will also help the Army finish
    fiscal year 2006 in a strong position. Navy, Marine Corps and Air Force
    have enjoyed excellent reenlistment rates through January 2006, and are
    predicted to meet their goals for the fiscal year.
        The Army is the only Service currently executing stop-loss. As of
    December 2005, 7,620 Active soldiers, 2,418 Army Reserve soldiers, and
    2,429 Army National Guard soldiers were impacted by the stop-loss
    program. The Army will terminate stop-loss as soon as it is
    operationally feasible. Army initiatives of modularity restructuring
    and rebalancing the Active/Reserve component mix, and force
    stabilization will over time eliminate the present need for stop-loss.
        Over the past 3 years, the Department has worked to improve
    servicemembers' quality-of-life. We look forward to working with
    Congress to achieve needed military pay raises and flexible,
    discretionary compensation programs. We have every confidence that
    those actions will be sufficient to ensure continued success in
    achieving desired strength levels.
    Purpose, Missions, and Policies of the Reserve Components
        The Department's use of the Reserve components has changed
    significantly since 1990, and a mission-ready National Guard and
    Reserve Force has become a critical element in implementing our
    National Security Strategy. The Reserve components support day-to-day
    defense requirements, and portions of the Reserve have served as an
    operational force since Operations Desert Shield/Desert Storm. This
    force is no longer just a strategic Reserve used only in a generation.
    Since September 11, 2001, an annual average of about 60 million duty
    days have been provided by Reserve component members--the equivalent of
    adding over 164,000 personnel to the Active strength each year.
        The Reserve components support the full spectrum of operational
    missions and currently furnish about 20 percent of the troops in the
    Central Command (CENTCOM) theater of operation. The Reserve components
    are performing a variety of nontraditional missions in support of the
    global war on terrorism, including providing command and control and
    advisory support teams in support of the training that will allow Iraqi
    and Afghan forces to assume a greater role in securing their own
    countries. The National Guard also remains integral to homeland defense
    missions and will remain a dual-missioned force, performing Federal and
    state missions, exemplified by the more than 50,000 National Guard
    members who responded to Hurricane Katrina relief efforts last fall.
        The Department's development of a ``continuum of service''
    construct in fiscal year 2001 facilitates this transition to an
    Operational Reserve and provides the foundation for the new
    ``Operational Support'' strength accounting category authorized by
    Congress in the fiscal year 2005 NDAA. This new strength category makes
    it easier and less disruptive for Reserve component members to
    volunteer to perform operational missions.
        Recognizing that this Operational Reserve is still a Reserve Force,
    our policies continue to support the prudent and judicious use of
    National Guard and Reserve members--something we have emphasized since
    2001. We have focused on husbanding Reserve component resources and
    being sensitive to the quality-of-life of mobilized personnel, their
    families, and the impact on civilian employers of reservists. Our
    policies stress advance notification to aid in predictability, as well
    as now enabling reservists and their families to take advantage of
    early access to medical benefits.
        Volunteerism is the cornerstone of our force. Of the more than
    485,000 Reserve component members who have served since September 11,
    2001, approximately 84,000 have served more than once--and almost all
    of those who have served more than once have been volunteers. No
    reservist has been involuntarily mobilized for more than 24 cumulative
    months.
        This Operational Reserve supports ongoing missions where
    appropriate, while providing the additional Reserve capacity needed to
    meet surge requirements or support wartime or contingency operations.
    This new construct allows greater flexibility to perform new missions
    ideally suited to Reserve service, such as ``reach-back'' missions
    (intelligence, communications, unmanned arial vehicles, etc.) and
    training missions which would be appropriate to assign to a Reserve
    component unit.
        One element in responding to domestic terrorist attacks is the
    fielding of 55 Weapons of Mass Destruction Civil Support Teams (WMD
    CSTs), one in each State, territory, and the District of Columbia.
    These 55 teams support our Nation's local first responders by
    identifying the agents or substances involved, assessing current and
    projected consequences, advising on response measures, and assisting
    with appropriate requests for additional State support. Each team is
    comprised of 22 highly-skilled, full-time, well trained and equipped
    Army and Air National guardsmen. To date, the Secretary of Defense has
    certified 36 of the 55 congressionally authorized teams as being
    operationally ready. The WMD CST funding for fiscal year 2006 is $214.6
    million, and the budget request for fiscal year 2007 is for $224.2
    million. The Department is preparing eight teams for certification in
    fiscal year 2006. The final 11 teams are being prepared for
    certification in fiscal year 2007.
    Reserve and National Guard Utilization
        There continues to be considerable discussion about the stress that
    the global war on terrorism is placing on the force. The most
    frequently asked question is: what level of utilization can the Guard
    and Reserve sustain while still maintaining a viable Reserve Force?
    Recognizing that the global war on terrorism is a long war, the
    Department established a strategic approach to ensure the judicious and
    prudent use of the Reserve components, postulating involuntary
    mobilization no more than 1 year in 6. We will continue to assess the
    impact of mobilization and deployment on the Guard and Reserve and
    adjust our policies as needed to sustain the Reserve components.
        As stated earlier, more than 485,000 Reserve component members have
    served in support if the current contingency since September 11, 2001.
    Of the current Selected Reserve Force of about 825,000 today, slightly
    more than 46 percent have been mobilized. We are monitoring the effects
    of this level of effort.
        End strength achievement in fiscal year 2004 was less than 100
    percent (98.4 percent) for the first time in 5 years, with the
    shortfall primarily in the Army National Guard and the Navy Reserve.
    Fiscal year 2005 the Army National Guard, the Army Reserve, and the
    Navy Reserve fell short of achieving their authorized strengths. Fiscal
    year 2006 projections, based partially on first quarter fiscal year
    2006 data, indicate we will see some improvement in end strength
    achievement for the Army Guard.
        The composite Reserve component percentage of recruiting goals
    achieved over the past 3 years are 97.5 percent in fiscal year 2003,
    95.9 percent in fiscal year 2004, and 85.5 percent in fiscal year 2005.
    However, fiscal year 2006 first quarter recruiting results show a
    general reversal of this negative trend, with four of the six DOD
    Reserve components meeting or exceeding their recruiting goals--
    including both Army Reserve components.
        Overall, Reserve component attrition rates remain at historically
    low levels: 18.4 percent in fiscal year 2003, 18.7 percent in fiscal
    year 2004, and 19.2 percent in fiscal year 2005. Fiscal year 2006 first
    quarter data indicate that attrition rates will remain at this level
    for fiscal year 2006, and may even decrease.
        Department of Labor (DOL) cases involving Reserve component member
    claims of mistreatment by civilian employers have risen from 724 in
    fiscal year 2001 to 1,752 fiscal year 2005, reflecting the mobilization
    of nearly half million Reserve personnel, and a usage rate of Reserve
    component members in 2005 over five times higher than in 2001 (68
    million mandays in 2005 compared to 12.7 million mandays in 2001).
        We implemented a variety of mitigation strategies to reduce stress:
    retaining reservists on Active-Duty only as long as absolutely
    necessary; limiting the total period that a member may be involuntarily
    mobilized to 24 cumulative months for the current contingency
    operation; using innovative concepts to spread mission requirements
    across the Reserve Force where possible; rebalancing forces to reduce
    the need for involuntary Guard and Reserve mobilization; and, providing
    increased predictability of service and increased notification time to
    aid members, their families, and their employers. Simultaneously, to
    help ensure that we meet rotation requirements, other mitigation
    strategies have been developed. These strategies include, but are not
    limited to: use of provisional units; use of joint solutions; use of
    civilians and contractors; developing new incentives; increased use of
    volunteers; and, the training and use of indigenous forces.
        Compared to Operation Desert Storm when we mobilized 30,000
    Individual Ready Reserve (IRR) members, since September 11, 2001, we
    have only mobilized slightly over 10,000 IRR members. We have
    established an enhanced expectation management program to ensure that
    members, their families, their employers, Congress, and the public are
    more informed of Reserve service obligations and requirements--
    including obligations and service while in the IRR.
    Reserve Component Recruiting and Retention
        As noted earlier, recruiting has been a challenge for the Reserve
    components over the last 3 fiscal years. Although fiscal year 2006
    first quarter data indicate a reversal, we are aware that the Reserves
    will continue to face a very challenging recruiting environment.
    Through January 2006, four of the six Reserve components met or
    exceeded their recruiting goals; only the Navy Reserve and Air National
    Guard did not achieve their goals. We are seeing steady improvements
    with overall Reserve component attainment of recruiting objectives--
    increasing from 98 percent achievement in October 2005 to 101 percent,
    year-to-date, in January 2006. The Army National Guard is leading the
    Reserve components at 109 percent achievement of its goal through
    January 2006, with the Army, Marine Corps and Air Force Reserve all
    attaining 100 percent of their goals. The Air Force Reserve has
    exceeded its recruiting goals for each of the past 4 months. The Marine
    Corps Reserve performance is quite remarkable since it has had the
    greatest proportion of its force mobilized since September 11, 2001, in
    support of the global war on terrorism, yet recruiting remains strong.
    Fiscal year 2006 Reserve component enlisted accession performance,
    year-to-date, is depicted below.

                                      FISCAL YEAR 2006 RESERVE COMPONENT RECRUITING
                                                 [Through January 2006]
    ----------------------------------------------------------------------------------------------------------------
                                                                                  Accessions  Percent of    Annual
                            Reserve Component                          Goal YTD       YTD        Goal        Goal
    ----------------------------------------------------------------------------------------------------------------
    Army National Guard.............................................      18,219      19,807         109      70,000
    Army Reserve....................................................       8,888       8,854         100      36,032
    Navy Reserve....................................................       3,147       2,705          86      11,180
    Marine Corps Reserve............................................       2,458       2,468         100       8,035
    Air National Guard..............................................       3,142       2,499          80       9,380
    Air Force Reserve...............................................       2,354       2,362         100       6,780
    DOD.............................................................      38,208      38,695         101     141,407
    ----------------------------------------------------------------------------------------------------------------

        To address their recruiting challenges, the Army National Guard and
    Army Reserve have employed the enhanced enlistment and reenlistment
    incentives provided in the National Defense Authorization Acts for
    Fiscal Year 2004 and Fiscal Year 2005. They fielded additional
    recruiters and increased advertising funding. As a result, Army
    National Guard and Reserve recruiting is trending upward. Additionally,
    Army Reserve component recruiting efforts are again focusing on those
    personnel separating from Active service who have long been an
    important Reserve recruiting source. Accordingly, they are determining
    how to best use incentives that encourage those leaving Active service
    to join the Reserves, and also offering interservice transfers to help
    accessions.
        The Navy Reserve is still experiencing both quantity and quality
    recruiting shortfalls. Part of the reason for the Navy Reserve
    shortfalls is the downsizing that the Navy Reserve has been undergoing.
    Once the significant programmed downsizing is over at the end of fiscal
    year 2006, healthier recruiting numbers are expected.
        All Reserve components, with the exception of Navy, are achieving
    success in retention, with attrition (through December 2005) at or
    below our baseline year of 2000. Reserve attrition rates remain at
    historically low levels.

                                               RESERVE COMPONENT ATTRITION
    ----------------------------------------------------------------------------------------------------------------
                                                                        Fiscal      Fiscal      Fiscal      Fiscal
                                                                       Year 2006   Year 2000   Year 2005   Year 2006
                                Component                               Target     YTD  Dec.   YTD  Dec.   YTD  Dec.
                                                                       (Ceiling)     1999        2004        2005
    ----------------------------------------------------------------------------------------------------------------
    Army National Guard.............................................        19.5        5.44        5.33        4.17
    Army Reserve....................................................        28.6         6.5        5.45        4.69
    Navy Reserve....................................................          36        3.91        7.79        7.92
    Marine Corps Reserve............................................          30        7.15        4.58        5.11
    Air National Guard..............................................          12        3.05        2.52        2.62
    Air Force Reserve...............................................          18        5.73        3.48        3.33
    DOD.............................................................          NA        5.33        5.02        4.38
    ----------------------------------------------------------------------------------------------------------------

        The mission of the National Committee for Employer Support of the
    Guard and Reserve (ESGR) is directly related to retention of the Guard
    and Reserve Force. ESGR's mission is to ``gain and maintain support
    from all public and private employers for the men and women of the
    National Guard and Reserve as defined by demonstrated employer
    commitment to employee military service.'' Employer support for
    employee service in the National Guard and Reserve is an area of
    emphasis, considering the continuing demand the global war on terrorism
    has placed on the Nation's Reserve components and the employers who
    share this precious manpower resource. The broad-based, nationwide
    support for our troops by employers continues to be superb.
        Through its locally-based network of 3,500 volunteers and its full-
    time national staff, ESGR reaches out to both employers and
    servicemembers to help ensure the requirements of the Uniformed
    Services Employment and Reemployment Rights Act (USERRA), 38 U.S.C.,
    (sections 4301-4334) are understood and applied. Servicemembers and
    employers may resolve USERRA conflicts by utilizing the free mediation
    and ombudsman services provided by ESGR. ESGR's aggressive outreach
    efforts have resulted in a 50-percent reduction in the number of
    ombudsman cases from 2004 to 2005. ESGR continually increases the
    percentage of cases resolved through informal mediation. Additionally,
    DOD and DOL have established a Memorandum of Understanding that
    enhances communication and information sharing and provides greater
    efficiencies of all available government resources for Reserve
    component members.
        We established the Civilian Employment Information Database and now
    require Reserve component members to register their employers. ESGR has
    established a Customer Service Center Hotline to provide information,
    assistance, and to gather data on issues related to Reserve component
    service. Used together, these databases enable ESGR to develop personal
    relationships with employers, measure and manage employment issues, and
    advise the Department when developing policies and practices to
    mitigate the impact on employers when a reservist employee is called to
    military duty.

                          compensation and management

    Compensation
        Prosecuting the global war on terrorism requires top quality,
    highly skilled men and women whose compensation package must be
    competitive enough to recruit and retain them in voluntary service.
    Basic pay, housing and subsistence allowances, bonuses, special and
    incentive pay and other key benefits must serve to sustain these
    warfighting professionals. We are grateful to Congress for its work in
    improving each of these areas, especially over the past several years.
        Since September 11, 2001, the DOD and Congress have worked together
    to increase military basic pay by approximately 25 percent. In addition
    to an overall pay raise of 2.2 percent, the fiscal year 2007 budget
    increases pay for warrant officers and higher ranking enlisted
    personnel. DOD intends to propose extending the pay table to encourage
    longer service. With these pay increases, the Department will reach the
    standard for pay that the 9th Quadrennial Review of Military
    Compensation established--that is, enlisted at the 70th percentile
    against the distribution of comparably educated civilians.
        Members view the housing allowance as one of the key elements of
    their total compensation package and can be confident they can afford
    adequate housing when they move in the service of their country. The
    Basic Allowance for Housing increased almost 70 percent since 2000 as a
    direct result of the close cooperation between the Department and
    Congress. To ensure the allowance accurately reflects the current
    housing markets where servicemembers and their families reside, the
    Department will continue its efforts to improve our data collection.
    Additionally, we are grateful to Congress for the authority to increase
    the allowance or extend the Temporary Lodging Expense period for areas
    subject to major disasters or installations experiencing a sudden
    increase in troop levels.
        The Department is committed to taking care of servicemembers and
    their families through appropriate compensation while members are
    deployed and serving their country in dangerous locations around the
    world. Military personnel serving in Operation Enduring Freedom (OEF)
    and Operation Iraqi Freedom (OIF) in a designated combat zone, as well
    as members serving in direct support of these operations, receive
    combat zone tax benefits that exclude all the income of our enlisted
    members from Federal income tax. These servicemembers also receive $225
    per month in Imminent Danger Pay and $250 per month in Family
    Separation Allowance. Additionally, these individuals qualify for
    Hardship Duty Pay (HDP)-Location at the rate of $100 per month and $105
    per month in incidental expense allowance. This results in pay
    increases for a typical married member of over $700 per month and over
    $500 per month for a typical single member, while deployed.
        In recognition of deployments of excessive duration, the Department
    has authorized payment of Assignment Incentive Pay (AIP) to members
    serving longer than 12 months in Iraq or Afghanistan. These payments
    are as much as $1,000 per month for members serving necessary but
    involuntary extensions beyond 12 months. The Department is grateful to
    Congress for its substantiation of AIP as a flexible and responsive
    means for Services to compensate appropriately members who are called
    on to extend their service in demanding assignments by increasing the
    cap to $3,000 and providing for lump sum payments. We also appreciate
    the increase in the ceiling for HDP, as it will allow us further
    flexibility with additional options to better address these pressing
    issues of frequent deployments as well as those that follow in quick
    succession.
        Retention of Special Operations Forces (SOFs) presents another
    critical compensation challenge. The United States Special Operations
    Command force structure is projected to increase. Retention of current
    SOF members, in the face of ever demanding requirements and lucrative
    alternatives, is critical to the success of that growth. In 2004, the
    Department authorized a robust retention incentive package that
    includes extensive use of the Critical Skills Retention Bonus, Special
    Duty Assignment Pay, AIP, and the Accession Bonus for new Warrant
    Officers in Critical Skills. For example, we are offering bonuses of up
    to $150,000 for highly skilled senior noncommissioned officers to serve
    an additional 6 years. The Department continues to monitor SOF
    retention and review initiatives to sustain these highly valued
    professionals.
        We realize that no benefits can replace a human life; the lost
    presence of the family member is what survivors face. We are grateful
    to Congress for supporting the President's initiative to increase death
    benefits in the NDAA for Fiscal Year 2006, which acknowledges the
    principle that a servicemember be able to elect a benefits package that
    would provide up to $500,000 to the surviving family. Our objective is
    to ensure that we fully support our servicemembers when we send them
    into harm's way, and that we properly support the family's needs if the
    servicemember dies on Active-Duty.
    Joint Officer Management
        In 1986, title IV of the Goldwater-Nichols Act codified joint
    officer personnel policies, providing specific personnel management
    guidance on how to identify, educate, train, promote, and assign
    officers to joint duties. While the operational forces have developed
    an exceptional capability to execute joint operations, the system used
    for Joint Officer Management has not kept pace. We recognize the need
    to modernize current joint management processes to enable a flexible
    joint qualified officer construct to meet both the challenges of today
    and the 21st century warfighting environment.
        Joint Task Forces (JTFs) now define the way we array our Armed
    Forces for both war and operations other than war. The effectiveness of
    joint operations is no longer simply the interoperability of two or
    more military services; it requires the synergistic employment of
    forces from multiple services, agencies, and nations. Nongovernmental
    agencies and commercial enterprises must now be routinely combined with
    traditional military forces and interagency components to achieve
    national objectives. Such a dynamic and varied environment demands
    flexibility, responsiveness, and adaptability not only from the
    individual soldiers, sailors, airmen, and marines, but also from the
    programmatic infrastructure supporting joint force development.
        The Department will deliver to Congress in the next few weeks the
    culmination of a multi-phase strategic review of joint officer
    management and joint officer development. This review examined the
    demand for joint officers in the 21st century environment and our
    ability to produce a supply to meet the demand. Also assessed was
    whether today's management structure is suitable to fit the supply-
    demand model. The findings from this review were incorporated in the
    recently completed Strategic Plan for Joint Officer Management and
    Joint Professional Military Education.
        This strategic plan proposes an expansion of the existing joint
    officer management system in pursuit of a career-long development
    model. This model recognizes that joint experience can be gained in a
    myriad of locations and organizational constructs. Many of these
    constructs were not in existence when the Goldwater-Nichols Act was
    initiated. This model also takes into consideration that the level, or
    amount, of joint experience attained by an officer may be a function of
    currency, frequency, and intensity in addition to the standard measure
    of a specific period of time in a billet. This expansion can be
    executed with only minor increases in flexibility to the existing
    statutes. Flexibility which will recognize the realities of today's
    multi-national and interagency operating environment and the need to
    capture all joint experiences, not just those attained through
    traditional means. The end result of this proposed expansion will be a
    flexible and dynamic joint officer management system which will stay
    true to the stated and implied objectives and goals of the Goldwater-
    Nichols Act throughout the 21st century.
    Transforming DOD Training
        Secretary Rumsfeld reported to you, in his submission of the 2006
    QDR, that although the military departments have established
    operationally proven processes and standards, it is clear that further
    advances in joint training and education are urgently needed to prepare
    for complex multinational and interagency operations in the future. The
    Department has made extraordinary progress in building a transformed
    joint training capability. Our ability to successfully defend our
    Nation's interests relies heavily upon the Department's Total Force--
    its Active and Reserve military components, its civil servants, and its
    contractors--for its war fighting capability and capacity. The Total
    Force must be trained and educated to adapt to different joint
    operating environments, develop new skills and rebalance its
    capabilities and people if it is to remain prepared for the new
    challenges of an uncertain future. Our forces must be capable of
    adapting to rapidly changing situations, ill-defined threats, and a
    growing need to operate across a broad spectrum of asymmetric missions,
    including stability and support operations and disaster response.
        The Department's Training Transforming Program is focused on
    melding world-class individual Service competencies and training
    capabilities into a cohesive joint capability. We are developing three
    joint capabilities: Joint knowledge development and distribution
    capability (joint training and education for individuals), joint
    national training capability (joint unit and staff training), and joint
    assessment and enabling capability (assessments to answer the question:
    are we truly transforming training?).
        The joint knowledge development and distribution capability (JKDDC)
    provides access to Service and DOD agency learning management systems,
    anywhere and anytime. Populated with 19 joint courses, the JKDDC Web
    site addresses prioritized combatant command needs and fills individual
    joint knowledge gaps and seams. Another success for JKDDC is its
    hosting of the ``Combating Trafficking in Persons'' course developed
    collaboratively with the Department of State and our Academic Advanced
    Distributed Learning Co-laboratory at the University of Wisconsin.
        Joint National Training Capability (JNTC) is providing realistic
    distributed joint context to the Services' training sites and events as
    well as to the combatant commands. JNTC has already moved from discrete
    ``throw-away after one use'' events to a more persistent ``stay-
    behind'' capability. Service and combatant command training sites and
    training events are now being accredited and certified. We continue to
    decrease planning time for joint training and mission rehearsal
    exercises. We are distributing joint training over large distances to
    the right training audience for their specific mission needs. Jointness
    is moving from the strategic to the tactical level. All DOD operations
    in the global war on terrorism are joint. We are creating, a live,
    virtual, constructive (LVC) environment that supports efficient
    participation of joint forces in appropriate training across the
    country and around the world. When not utilized for joint training,
    this LVC environment is being used by the Services to improve their own
    training capability. We will, with your continued support, expand the
    persistence of JNTC to be more globally postured. JNTC will become a
    joint global training capability in the future.
        Our joint assessment and enabling capability created a performance
    assessment architecture and used it as a start point for the conduct of
    a block assessment and balanced scorecard assessment. Our first block
    assessment serves as a baseline set of metrics to measure training
    transformation. Upon completion of these assessments and outcome
    measurements of training transformation missions and programs we will
    adapt and revise our strategic guidance and programmatics.
        The training transformation interagency, intergovernmental,
    multinational mission essential tasks (TIM2) task force is a
    collaborative effort supported by my staff and is under the purview of
    the Office of the Under Secretary of Defense (Policy). TIM2 seeks to
    integrate DOD capabilities better in support of other Federal entities,
    including the Departments of State and Homeland Security.
        Training Transformation has created a capability to tailor
    distributed training to deploying forces. In fact, our priority for
    joint training is to the deploying force. Exercise Unified Endeavor 06-
    1 this past fall prepared Army's 10th Mountain Division headquarters
    and staff for their upcoming rotation to Afghanistan to head Combined
    Joint Task Force 76. The exercise used actual lessons learned from
    Afghan operations. Real and simulated input and stimuli were used to
    feed real--world systems and decision cycles. Tailored realistic joint
    training tasked members of the training audience to conduct joint
    operations while coordinating air, ground and space forces with the
    ongoing ground campaign and all its related cultural exigencies. The
    leadership also had to work with the North Atlantic Treaty Organization
    (NATO), coalition, Afghan and non-governmental organizations during
    each phase of the operation. This could not have been done 3 years ago.
    Sexual Assault Prevention
        The Department's Sexual Assault Prevention and Response (SAPR)
    Program has made great progress during the past year. We introduced and
    implemented a comprehensive policy designed to effect a cultural change
    and serve as a benchmark for other large organizations. The Joint Task
    Force for Sexual Assault Prevention and Response (JTF-SAPR) published a
    DOD Directive. The JTF-SAPR has transitioned into a permanent office to
    lead the Department's long-term efforts.
        The Directive and its forthcoming Instruction incorporate the 14
    Directive Type Memorandums that the DOD released in 2005. These
    publications form the framework of a comprehensive response structure
    and protocol that ensures a consistent level of care and support
    worldwide for military victims of sexual assault. These documents
    implement a fundamental change in how the Department responds to sexual
    assault with a confidential reporting structure for victims of sexual
    assault. This removes a major barrier to reporting by enabling victims
    to receive medical care without necessarily initiating a criminal
    investigation. Although confidential reporting has been available only
    since June 14, 2005, early analysis indicates that the program is
    meeting our objective of increasing victim access to care and support.
        The Department has mandated an aggressive training and education
    program that ensures training is conducted throughout every
    servicemember's career at both the unit level and at all professional
    military education programs. The military services have implemented
    ambitious training programs to meet this requirement and to provide
    trained sexual assault response coordinators at all major
    installations. Additionally all major commands in the Army have
    received baseline SAPR training as well as 1,850 deployable uniformed
    victim advocates. The Navy has successfully integrated SAPR baseline
    training into all Navy military training, resulting in 365,900 trained
    sailors. In addition to its sexual assault response coordinator
    training, the Marine Corps has trained over 700 unit victim advocates
    and has targeted leadership instruction at both the junior and advanced
    level. As part of its training program, the Air Force produced a highly
    acclaimed video which facilitated the training of over 356,000 airmen.
        This aggressive training and outreach program along with
    confidential reporting will predictably result in an increase in the
    overall number of reported sexual assaults in DOD. Future data will
    assist the Department in evaluating how the new sexual assault policy
    and our training efforts are affecting the incidence of this crime.
    Trend data on reported cases will be augmented with surveys such as the
    Reserve component survey which now provides a baseline to measure
    progress in the Reserve component.
        The Department's next steps will focus on continued guidance to the
    Services and oversight of their implementation of the SAPR program. We
    will continue our comprehensive survey schedule in 2006, including the
    Service academies \1\, and the fourth quadrennial survey of Active-Duty
    members. Additionally, we will use the Defense Task Force on Sexual
    Assault in the military services as another source to evaluate the
    effectiveness of the SAPR program.
    ---------------------------------------------------------------------------
        \1\ We believe it would be more effective to conduct the Academy
    Survey biennually, and is considering a change in the statute to permit
    this.
    ---------------------------------------------------------------------------
                                   readiness

    Readiness Assessment and Reporting
        To meet its challenges, the Department needs visibility into the
    current status and capabilities of forces across the Department. Over
    the past year we have increased the capabilities of our new Defense
    Readiness Reporting System (DRRS). DRRS contains near real time
    assessments of military capabilities in terms of the tasks or missions
    that units and organizations are currently able to perform. These
    assessments are informed by the availability of specific personnel and
    equipment. Our partnerships with United States Northern Command
    (NORTHCOM), United States Joint Forces Command, United States Pacific
    Command, and United States Strategic Command have produced working,
    scalable versions of measurement, assessment and force management tools
    over the past year. We continue to add more data describing the
    structure, status, and location of military forces. Of special interest
    this year is the registry of title 32 capabilities in support of the
    homeland defense/security mission under NORTHCOM. Development of DRRS
    will continue through 2007.
    Expanding Our Foreign Language and Regional Expertise Capabilities
        To win the long war the Department must embrace and
    institutionalize foreign language and regional expertise into DOD
    doctrine, planning, contingencies, organizational structure, and
    training, as the QDR directs. Last year the Defense Language
    Transformation Roadmap provided three broad goals that will ensure a
    strong foundation in language and cultural expertise, a capacity to
    surge, and a cadre of language professionals. This year our focus and
    goal is to take deliberate steps and actions to transform our force.
    One key goal is to establish policies, practices and funding that will
    ensure a base of officers possessing language ability in key languages
    such as Arabic, Chinese, Persian Farsi, and Urdu. We have been
    successful in establishing policies that will create language as a core
    capability and obtained necessary funding through the QDR to effect
    this needed change.
        We have begun the process to imbed language and regional expertise
    as a core military skill. The Chairman of the Joint Chiefs of Staff has
    published an instruction that will drive a more accurate documentation
    of language capabilities needed, which is essential to effective
    planning, commanders and planners will identify and analyze the key
    language skills and performance capabilities they will need to be
    successful in all operations.
        The need for language and regional expertise has long been a core
    requirement for Special Forces Command, but as the type of conflicts
    and wars in which we engage change, and irregular operations and
    counterinsurgency and stability operations increase, language and
    regional expertise and cultural awareness become key skills needed by
    every soldier, marine, sailor, and airman for this century's global and
    ever-changing mission.
        Through guidance in the roadmap, we have completed self-reported
    screening of 83 percent of our military personnel. Over 17,000 of our
    members reported language skills in Arabic, Chinese, Farsi, Urdu, Hindi
    and Korean. We have provided for increased proficiency by adding 785
    training billets for crypto-language analysts in the Army, Navy, and
    the Air Force and increasing funding for Defense Language Institute
    Foreign Language Center (DLIFLC) to change the graduation standard to
    higher proficiency levels. We have developed 26 on-line language
    survival courses and provided over 183,000 language survival kits for
    deploying units. Our prestigious DLIFLC has scheduled 23 languages
    classes for fiscal year 2006 for over 3,000 new students. Special
    Operations Command will teach over 1,300 students in 10 different
    languages focused on the long war.
        The QDR provided $429.7 million through the Future Years Defense
    Program for nine initiatives that include technology, training and
    education, and recruitment. The QDR targets officer candidates for
    foreign language training, with regional and cultural training to be
    embedded in follow-on professional military education. It funds the
    enhancement of the three Service Academies language training of cadets
    and midshipmen in the strategic languages; grants to colleges and
    universities with Reserve Officers Training Corps (ROTC) programs to
    incentivize teaching of languages of strategic interest to the
    Department; increased grants to expand the National Security Education
    Program, which provides civilians scholarships and fellowships to
    undergraduate and graduate students in critical languages to national
    security; and expansion and continuation of the Army's successful 09L
    Translator Aide heritage language recruiting program. The QDR also
    directed funding for the development of a pilot Civilian Linguist
    Reserve Corps; increased foreign language proficiency pay based on
    language in the NDAA for Fiscal Year 2005; technology enhancement at
    the DLIFLC; pre-deployment training for members prior to deployment;
    and centralized accession screening to identify personnel with language
    aptitude.
        We are very proud is the Army's 09L Translator Aide program. This
    pilot program generated over 500 Arabic and Afghani speaking soldiers
    in the IRR to support OEF and OIF. Acclaimed by on-the-ground
    commanders, 09L is now the Army's newest Military Occupational
    Specialty (MOS). Establishment of the MOS allows soldiers to pursue
    full careers in the Army, making it more likely they will remain. The
    QDR provided $50 million to further expand this program.
        We view Foreign Area Officers (FAO) as a key asset for the 21st
    century military--providing a unique combination of regional expertise,
    political knowledge, languages and military skills. That is why we are
    building a more robust FAO program that will form a professional cadre
    of military officers with the right skills to support our combatant
    commanders. We published a new ``Military Department Foreign Area
    Officer Programs'' Directive in April 2005 which provides common
    standards for the FAO program across the Services, focusing on
    accession, training, utilization, promotion and retention rates. Our
    current plan will create an additional 400 officers with languages and
    skills critical to the Department's mission.
        At the national level, we have worked with other Federal agencies
    and were proud to be part of the team for the President's announcement
    of the National Security Language Initiative (NSLI). The initiatives
    have three broad goals which will expand the number of Americans
    mastering critical languages at a younger age, increase the number of
    advance-level speakers of foreign languages, and increase the number of
    foreign language teachers and their resources. We will support this
    initiative through the Civilian Linguist Reserve Corps, which will
    develop a cadre of civilian personnel with high levels of language
    proficiency in less commonly taught languages, available when needed by
    the Nation. We have also expanded the National Security Education
    Program by adding additional fellowships and languages which will
    produce 2,000 advanced speakers of Arabic, Chinese, Persian, Hindi, and
    central Asian languages by 2009. Additionally, in September 2005,
    through our National Security Education Program, we launched a pilot K-
    16 Chinese program with the University of Oregon. The program is a
    major grant to the University of Oregon and Portland Public Schools to
    become the National model for the study of Mandarin Chinese. The goal
    of the K-16 project is to develop a fully articulated program of
    instruction for students that progress from early learning through
    advanced proficiency levels in high school to superior levels in
    college. This is the first project of its kind in the U.S; the NSLI
    proposes to build on this model.
    Secretary Rumsfeld's Mishap Reduction Initiative
        The Department continues its pursuit of reducing mishaps and
    injuries. We have established a 75-percent reduction goal by the end of
    fiscal year 2008 from our fiscal year 2002 baseline. Our metrics focus
    on civilian and military injuries, aviation mishaps and the number one
    non-combat killer: private motor vehicle accidents.
        The direct cost of these accidents and injuries is over $3 billion
    per year. We believe that the use of technologies to address these
    safety issues has a demonstrated cost benefit and increases operational
    readiness. Safety technologies include systems and processes. For
    example, we are pursuing the Military Flight Operations Quality
    Assurance process to reduce aircraft flight mishaps. We are exploring
    the use of data recorders and roll-over warning systems as tools to
    help drivers avoid wheeled vehicle accidents. Our plan is for all DOD
    components to include these and other appropriate safety technologies
    as a standard requirement in all future acquisition programs.
    Range Sustainment
        Training transformation calls for significant advancements in the
    joint nature of training and a major change in the way we use our
    existing training infrastructure. Continued and assured access to high-
    quality test and training ranges and operating areas plays a critically
    important role in sustaining force readiness.
        However, the DOD finds itself increasingly in competition with a
    broad range of interests for a diminishing supply of land, air and sea
    space and frequency spectrum that we use to test and train effectively.
    Exacerbating the encroachment challenge, the demands of the military
    mission are expanding. The increased complexity and integration of
    training opportunities necessary to satisfy joint mission requirements,
    combined with the increasing testing and training battlespace needs of
    new weapons systems and evolving tactics associated with force
    transformation, point to a military need for more, rather than less,
    range space. The confluence of these competing trends makes it clear
    that encroachment remains a powerful challenge to military readiness,
    and requires a comprehensive and continuing response.
        Through the DOD Range Sustainment Integrated Product Team, the
    Department seeks to mitigate encroachment's impacts and to ensure the
    long-term sustainability of military readiness and the resources
    entrusted to our care. Congressional action on a number of DOD
    legislative provisions has provided increased mission flexibility, and
    at the same time has enabled improved environment management on our
    test and training ranges. The Department is increasingly looking beyond
    its fence lines to engage with local, State, regional, and national
    stakeholders in order to address concerns and build effective
    partnerships that advance range sustainment.
        As we move forward, we are emphasizing cooperative approaches to
    sustainment, such as the acquisition of buffers from willing sellers
    around our ranges, conservation partnering, increased interagency
    coordination on cooperative Federal land use, improved sustainment
    policy and planning for overseas training with our allies, and more
    integrated development of information and decision making tools for
    range management. Such thrusts clearly build on our past efforts, and
    will emplace enabling capabilities, tools, and processes to support
    range sustainment goals well into the future.

                             the dod civilian force

    Human Capital Planning
        Department of Defense civilian employees have joined our military
    forces and faced significant challenges this past year. They have
    supported the global war on terrorism here and on the front-line of
    battle, helped build democracies in Afghanistan and Iraq, and responded
    with alacrity and compassion to those affected by the tsunami,
    hurricanes, and earthquakes around the globe and here at home. Just as
    agile military forces are needed to meet a mission characterized by
    irregular, catastrophic and disruptive challenges, we need agile and
    decisive support from our DOD civilians. It is only through the
    integration of DOD civilian employees that we can realize the potential
    of a Total Force.
        The Department continues to make great strides in our strategic
    human capital planning by ensuring that human capital investments are
    focused on long-term issues. These guiding principles are continually
    reviewed and refreshed in the Department's Human Capital Strategic Plan
    (HCSP). Our 2006-2011 HCSP recognizes the need to refocus civilian
    force capabilities for the future--that is a civilian workforce with
    the attributes and capabilities to perform in an environment of
    uncertainty and surprise, execute with a wartime sense of urgency,
    create tailored solutions to multiple complex challenges, build
    partnerships, shape choices, and plan rapidly.
        Our HCSP is based upon the 2006 QDR. The QDR calls for an updated
    integrated human capital strategy for the development of talent that is
    more consistent with 21st century demands. As a human capital strategy
    it aims to ensure DOD has the right people, doing the right jobs, at
    the right time and place, and at the best value. The HCSP is delineated
    by a DOD-wide set of human resources goals and objectives that focus on
    leadership and knowledge management, workforce capabilities, and a
    mission-focused, results-oriented, high-performing workforce. These
    goals and objectives incorporate a competency-based occupational system
    that reinforce a performance-based management system and provide
    enhanced opportunities for personal and professional growth.
        The National Security Personnel System (NSPS) provides the
    framework for implementation. This modern, flexible, and agile human
    resource system enables contemporary responses to meet our national
    security mission requirements, while preserving employee protections
    and benefits, veterans' preference, as well as the enduring core values
    of the civil service.
        The Department plans to begin implementing NSPS this spring. NSPS
    design and development has been a broad-based, participative process
    involving key stakeholders, including employees, supervisors and
    managers, unions, employee advocacy groups, and various public interest
    groups. Employees slated for conversion will be included in groupings,
    or Spirals. The first phases of NSPS will cover over 11,000 DOD
    civilian employees. We anticipate that the labor relations portion of
    NSPS will likewise be implemented across the Department this spring,
    providing a collaborative, issue-based labor management relations
    system that is more responsive to our national security mission while
    respecting and preserving collective bargaining.
    Acquiring, Developing, and Retaining Civilians
        The Department's civilian workforce is a unique mix of employees
    providing support to DOD's national security and military mission. The
    Department's challenge will be attracting and sustaining the right
    talent--those who can perform in ambiguous, uncertain environments,
    create rapid solutions, perform with a wartime sense of urgency,
    develop integrated approaches, and lead multiple complex challenges
    with integrity and excellence. Technological advances, contract
    oversight, and complex missions have generated the need for more
    employees with advanced education and more sophisticated technical
    skills. Additionally, there must be a very active campaign for
    recruitment of a diverse workforce. We take seriously the
    responsibility to foster and promote an environment that is attractive
    to individuals from all segments of society.
        Last year, the Department launched a campaign to reach out to the
    injured and disabled men and women who fought and served on behalf of
    our Nation. We are committed to providing every disabled veteran who
    wants to serve our country as a DOD civil servant the opportunity to do
    so. The Department offers over 700 diverse, challenging, and rewarding
    occupations for those who want to continue to serve their country as a
    DOD civilian employee. We introduced a new Defense Web site especially
    for disabled veterans--www.DODVETS.com. This web portal serves as a
    resource of employment information for veterans, their spouses, and
    managers. To date, 68 servicemembers have been offered positions, of
    whom 54 have accepted positions at various DOD and Federal agencies. We
    are continuing to work with other Federal agencies, such as, the DOL to
    provide job training, counseling, and reemployment services to
    seriously injured or wounded veterans.
        We have dedicated an office within the Department to help us
    transform the way we attract and hire talented civilian employees. Our
    nationwide recruitment campaign takes us to college and university
    campuses where we personally invite talented individuals to serve the
    Department. Through technology, including importantly the Internet, we
    educate and interest talent from a variety of sources. Our exciting
    internship programs, while still too modest, continue to entice and
    infuse specialized and high-demand talent into our workforce.
        Workforce planning takes on a special importance with the expected
    exodus of Federal employees over the next decade. Significant to this
    equation are DOD career Senior Executive Servicemembers, 67 percent of
    whom are eligible to retire in 2008. Our HCSP calls for the
    identification and closing of leadership competency gaps and
    strengthening the pipeline to ensure continuity of diverse and capable
    leaders. In addition, the Department is updating its civilian human
    resources policies for the deployment of civilians in support of
    military operations to ensure that DOD civilian employees are able to
    contribute to the DOD mission.
        The Defense Leadership and Management Program (DLAMP) is the
    premier DOD program to develop senior civilian leaders and a key
    component of the Department's succession management strategy. DLAMP is
    important to DOD readiness, providing a vehicle to mature a diverse
    cadre of civilian leaders throughout the Department, with a joint
    perspective on managing the Department's workforce and programs.
    Through a comprehensive program of Professional Military Education,
    formal graduate education, and courses in national security strategy
    and leadership, DLAMP ensures that the next generation of civilian
    executives has the critical skills to provide strong leadership in a
    joint environment in challenging times. With 350 participants who have
    met program goals to date and approximately 200 more each year
    projected to complete their development programs, DLAMP is providing a
    pipeline of well-qualified leaders ready for tomorrow's challenges. We
    are currently reviewing the DLAMP curriculum to ensure alignment with a
    DOD-wide competency-based leadership development model and best
    practices in private and public sector executive development.
        The Department has established and fully implemented the Pipeline
    Reemployment Program. The program enables partially recovered employees
    with job related injuries and illnesses to return to work. The program
    supports the President's Safety, Health, and Return-to-Employment
    initiatives by assisting each Department installation in reducing lost
    days resulting from injuries. DOD organizations will have resources and
    funding to reemploy partially recovered injured employees for up to 1
    year. Returning injured employees to suitable productive duty, as soon
    as they are able, improves that employee's sense of value to the
    organization while minimizing the cost of workers' compensation
    disability payments. To date the Pipeline program has returned 211 of
    employees to productive positions, and saved the Department
    approximately $171 million in cost avoidance charges.
    Civilian Force Shaping
        A number of initiatives are influencing the size and shape of the
    Department's civilian workforce. The most significant items are
    upcoming Base Realignment and Closure (BRAC) actions, global
    repositioning of deployed military and civilians, competitive sourcing,
    and military-to-civilian conversions. The DOD is committed to provide
    comprehensive transition tools and programs that take care of our
    employees and families when these changes occur. Since the first BRAC
    round in 1988, the Department has reduced the civilian workforce by
    more than 400,000, with less than 10 percent of that total separated
    involuntarily. To mitigate the impact of these force-shaping
    initiatives on our civilians, we have sought and obtained extensions to
    several of our transition tools assuring that any drawdown or
    reorganizations are handled strategically and to make sure we maintain
    and continue to recruit the talent needed to support the Department's
    mission.
        Employees adversely affected by BRAC may be offered the opportunity
    to separate voluntarily under the Voluntary Early Retirement Authority
    and the Voluntary Separation Incentive Payment programs. Involuntarily
    separated employees are also eligible for a number of post-separation
    benefits and entitlements, to include temporary continuation of health
    insurance for 18 months with the Department paying the employer portion
    of the premium; severance pay, including a lump-sum payment option; and
    unemployment compensation.
        The Department will continue to seek regulatory and legislative
    changes to assist employees affected by these actions in transitioning
    to other positions, careers, or to private life. We are continuing to
    establish and foster employment partnerships with Federal agencies,
    State, county, and local governments, trade and professional
    organizations, local Chambers of Commerce, and private industry. Our
    goal is to provide comprehensive transition tools and programs that
    take care of our employees and their families.

                           the military health system

    Sustaining the Military Health Benefit
        Department seeks to sustain this important benefit for the future
    by rebalancing its fees in a way that will control long-term costs. As
    Secretary Rumsfeld and General Pace have testified, it is critically
    important to place the health benefit program on a sound fiscal
    foundation for the long term. Costs have doubled in 5 years from $19
    billion in fiscal year 2001 to $38 billion in fiscal year 2006, despite
    management actions to make the system more efficient. Our analysts
    project these costs will reach $64 billion by 2015, over 12 percent of
    the Department's projected budget (vs. 4.5 percent in 1990). One of the
    important factors contributing to this cost spiral is increased usage
    among retirees under 65, reflecting our failure to adjust cost-sharing
    since the TRICARE program began 11 years ago.
        Our proposals to manage cost growth and sustain this valuable
    benefit encourage beneficiaries to elect medically appropriate, cost-
    effective health care options. Our proposals seek to re-norm
    contributions closer to those when TRICARE was established in 1995,
    while recognizing differences in the financial circumstances of
    officers and enlisted personnel.
    Management
        The Department has initiated several management actions to use
    resources more effectively and thus help to control the increasing
    costs of health care delivery. The Military Health System (MHS) is
    implementing performance-based budgeting that focuses on the value of
    health care provided instead of the cost of health care delivered. An
    integrated pharmacy benefits program, including a uniform formulary
    based on relative clinical and cost effectiveness, is being
    established. Discounted Federal pricing of pharmaceuticals in the
    TRICARE retail pharmacy program will be used to generate cost
    avoidance. We have established new TRICARE regional contracts to
    streamline our managed care support contracts and reduce administrative
    overhead. Utilization management programs continue to ensure that all
    provided care is clinically necessary and appropriate.
        We need your assistance by restoring the flexibility to manage
    Defense Health Program (DHP) resources across budget activity groups.
    Our new health care contracts use best-practice principles to improve
    beneficiary satisfaction, support our military treatment facilities
    (MTFs), strengthen relationships with network providers and control
    private sector costs. Our civilian partners must manage their enrollee
    health care and can control their costs by referring more care to our
    MTFs in the direct care system. In concert with the new contracts, we
    are implementing a Prospective Payment System to create the financial
    incentive for our MTFs to increase productivity and reduce overall
    costs to the Department. Funds will flow between the MTFs and the
    private sector based on where the patient care is delivered. Currently,
    MTFs' enrollee care funds (revised financing funds) are in the private
    sector budget activity group. Fencing DHP In-House Care funds inhibits
    the Department's ability to provide the TRICARE benefit in the most
    accessible, cost effective setting, particularly during time of war
    when MTFs frequently lose health care providers to support contingency
    operations. We understand and appreciate the congressional intent to
    protect direct care funding; however, congressionally-imposed
    restrictions fencing the DHP funds adversely affects both the MTFs and
    care in the private sector. We urge you to allow the MTFs and the MHS
    to manage the DHP as an integrated system. Funds must be allowed to
    flow on a timely basis to where care is delivered.
        During fiscal year 2005, we successfully introduced the TRICARE
    Reserve Select program for Reserve component members and their
    families. We deployed the Extended Health Care Option (ECHO) which
    replaced the Program for Persons with Disabilities and recently revised
    policy allows survivors to remain eligible for TRICARE prime during a
    3-year transitional survivor period.
        AHLTA, an innovative electronic record system, is being implemented
    throughout the MHS. Information in AHLTA's one central data repository
    can be accessed anytime, anywhere. It represents one of the most
    comprehensive technology deployments ever undertaken by any health care
    system.
        We have begun on the design and development of government
    requirements for TRICARE's third generation of contracts (T-3). The
    Managed Care Support Contracts are TRICARE's largest and most complex
    purchase care contracts. Others include the TRICARE Pharmacy Program,
    the TRICARE Dual Eligible Fiscal Intermediary Contract (TDEFIC), the
    Active-Duty Dental Contract, the National Quality Monitoring Contract,
    and the TRICARE Retiree Dental Contract.
        Military medical facilities remain at the core of the MHS, and the
    TRICARE structure promotes increased involvement of the military
    commanders in determining the optimum approach to health care delivery
    within each region. Military commanders' accountability and
    responsibility for patient care in their communities is now centered on
    sound business planning and resourcing to meet their planned
    production.
        We now have in place a new TRICARE Regional Governance structure.
    The three TRICARE Regional Directors are actively engaged in managing
    and monitoring regional health care with a dedicated staff of both
    military and civilian personnel. They are strengthening existing
    partnerships between the Active-Duty components and the civilian
    provider community to help fulfill our mission responsibilities.
    Force Health Protection
        Force Health Protection embraces a broad compilation of programs
    and systems designed to protect and preserve the health and fitness of
    our servicemembers--from their entrance into the military, to their
    separation or retirement, and follow-on care by the Department of
    Veterans' Affairs (VA).
        Since January 2003, environmental health professionals have
    analyzed over 4000 theater air, water, and soil samples to ensure that
    forces are not unduly exposed to harmful substances during deployments.
    These samples were taken at 274 locations in Iraq, 28 locations in
    Afghanistan, and from other sites across the world. The most important
    preventive health measures in place for our servicemembers today--
    immunization programs--offer protection from diseases endemic to
    certain areas of the world and from diseases that can be used as
    weapons. These vaccines are highly effective, and we base our programs
    on sound scientific information that independent experts have verified.
    Insect repellant impregnated uniforms and prophylactic medications also
    protect our servicemembers from endemic diseases during deployments.
        Among the many performance measures tracked within the MHS is the
    medical readiness status of individual members, both Active and
    Reserve. The MHS tracks individual dental health, immunizations,
    required laboratory tests, deployment-limiting conditions, service-
    specific health assessments, and availability of required individual
    medical equipment. We are committed to deploying healthy and fit
    servicemembers and to providing consistent, careful post-deployment
    health evaluations with appropriate, expeditious follow-up care when
    needed.
        Servicemembers receive pre-deployment health assessments to ensure
    they are fit to deploy and post-deployment health assessments to
    identify any health issues when they return. Deployment health records
    are maintained in the individual's permanent health record and
    electronic copies of the health assessment are archived centrally for
    easy retrieval. We have an aggressive quality assurance program to
    monitor the conduct of these assessments. Most recently, we have begun
    post-deployment health reassessments, which are conducted 3 to 6 months
    after deployment.
        Mental health services are available for all servicemembers and
    their families before, during, and after deployment. Servicemembers are
    trained to recognize sources of stress and the symptoms of depression,
    including thoughts of suicide, in themselves and others, that might
    occur because of deployment. Combat stress control and mental health
    care are available in theater. Before returning home, servicemembers
    are briefed on how to manage their reintegration into their families,
    including managing expectations, the importance of communication, and
    the need to control alcohol use. During redeployment, the
    servicemembers are educated and assessed for signs of mental health
    issues, including depression and Post Traumatic Stress Disorder (PTSD),
    and physical health issues. During the post-deployment reassessment we
    include additional education and assessment for signs of mental and
    physical health issues. The Services began initial implementation of
    this program in June 2005 and we are working toward Department-wide
    implementation. After returning home, help for any mental health issues
    that may arise, including depression and PTSD, is available through the
    MHS for Active-Duty and retired servicemembers, or through the VA for
    non-retired veterans. TRICARE is also available for 6 months post-
    return for Reserve and Guard members. To facilitate access for all
    servicemembers and family members, especially Reserve component
    personnel, the Military OneSource Program--a 24/7 referral and
    assistance service--is available by telephone and on the Internet.
        Medical technology on the battlefield includes expanded
    implementation of the Theater Medical Information Program and Joint
    Medical Work Station in support of OIF. These capabilities provide a
    means for medical units to capture and disseminate electronically near
    real-time information to commanders. Information provided includes in-
    theater medical data, environmental hazards, detected exposures and
    critical logistics data such as blood supply, beds, and equipment
    availability. With the expanded use of the Web-based Joint Patient
    Tracking Application, our medical providers should have total
    visibility into the continuum of care across the battlefield, and from
    theater to sustaining base. New medical devices introduced to OIF
    provide field medics with blood-clotting capability, while light,
    modular diagnostic equipment improves the mobility of our medical
    forces, and individual protective armor serves to prevent injuries and
    save lives.
        Pandemic influenza represents a new threat to national security.
    With our global footprint and far-reaching capabilities, we are
    actively engaged in the Federal interagency effort to help prevent,
    detect and respond to the threat of avian influenza, domestically and
    internationally. The President's National Strategy for Pandemic
    Influenza includes the DOD as an integral component in our Nation's
    response to this threat.
    DOD-VA Sharing
        DOD works closely with the VA at many organizational levels to
    maintain and foster a collaborative Federal partnership. We have shared
    health care resources successfully with the VA for 20 years, but many
    opportunities for improvement remain. Early in this administration we
    formed the DOD-VA Joint Executive Council, which meets quarterly to
    coordinate health and benefit actions of the two cabinet departments.
        DOD and VA are electronically sharing health information to enhance
    the continuity of care for our Nation's veterans. Each month, DOD
    transfers electronic patient information on servicemembers who have
    recently separated. This data includes laboratory and radiology
    results, outpatient pharmacy data, allergy information, consult
    reports, discharge summaries, transfer information and patient
    demographic information. To date, we have transferred this electronic
    health information on more than 3.2 million separated servicemembers to
    a central data repository at the VA Austin Automation Center. Over 2
    million of these separated servicemembers have presented to VA. We are
    in the process of developing solutions for transmitting key inpatient
    information and documentation to the VA. We believe that this
    collaborative effort with the VA has been going extremely well, and,
    together, the DOD and VA are improving services to our veterans.
    Another important capability is the bidirectional real-time sharing of
    allergy information, outpatient prescription and demographic data, and
    laboratory and radiology results between DOD and VA for patients being
    treated by both DOD and VA. This capability is operational at seven
    sites, including the National Capital Area. Deployment to additional
    sites is planned in fiscal year 2006. The electronic health information
    from each DOD facility that implements this functionality is available
    to all VA facilities.
        In addition, DOD is now sending electronic pre- and post-deployment
    health assessment information to VA. More than 515,000 pre- and post-
    deployment health assessments on over 266,000 individuals are available
    to VA. This number will continue to grow as assessments on newly
    separated servicemembers are sent each month. VA providers began
    accessing the data in December 2005. DOD plans to add post-deployment
    health reassessment information in fiscal year 2006.
        In the past year, DOD and VA have developed and improved a number
    of joint planning efforts. For instance, the 2006 Joint Strategic Plan
    builds upon successes of the two previous plans. Each goal, objective
    and strategy in the previous plan was reviewed to reflect the current
    climate of DOD/VA joint collaboration.
        DOD and VA are implementing the Joint Incentive Fund (JIF) and
    Demonstration Site Projects required by sections 721 and 722 of the
    NDAA for Fiscal Year 2003, respectively. The demonstration sites are
    submitting quarterly interim project reviews to the VA/DOD Joint
    Utilization/Resource Sharing Work Group and are finalizing their
    business plans. In this past year, the Financial Management Work Group
    under the VA/DOD Health Executive Council (HEC) recommended 12 projects
    to the HEC for JIF funding for a total combined cost of $29.9 million.
        To ensure OEF and OIF veterans benefit from continuity of care, DOD
    works with the VA's Office of Seamless Transition. In the past year,
    DOD and VA completed a Memorandum of Understanding to define protected
    health information datasharing activities between DOD and VA. DOD is
    now transmitting rosters to VA's Office of Seamless Transition
    containing pertinent demographic and clinical information of all
    servicemembers who have been recommended for Medical and/or Physical
    Evaluation Boards. This enables VA to place its benefits counselors and
    social workers in touch with prospective veterans prior to separation
    to expedite the delivery of benefits.
        DOD has worked closely with VA's Office of Seamless Transition to
    ensure that VA is a partner in a new program, the Post-Deployment
    Health Reassessment (PDHRA). The PDHRA is a force health protection
    process designed to enhance the deployment-related continuum of care.
    Targeted at 3 to 6 months post return for a contingency operation, the
    PDHRA provides education, screening and a global health assessment to
    identify and facilitate access to care for deployment-related physical
    and mental health as well as re-adjustment concerns.
        In the coming year, the VA/DOD Joint Executive Council will
    continue to focus on further improving collaboration, service, and
    assistance to our severely injured veterans from OIF and OEF, as well
    as on our capital planning and facility life-cycle management efforts
    to benefit all of our beneficiaries and the American taxpayer.

                   taking care of the force and our families

        The Department's Social Compact with troops and families declares
    that ``families also serve.'' Today, our troops and families are rising
    to the current challenge and responding to unprecedented deployments in
    support of the global war on terrorism. We are committed to providing
    troops and families with the support and services necessary to balance
    the competing demands of military and personal life.
    State Liaison Initiation
        The Department has recognized the need to collaborate with State
    and local governments to effect positive change at the local level.
    Through interaction with governors and other State officials, DOD has
    prompted action on 10 key quality-of-life issues. With DOD assistance,
    the National Governors Association (NGA) developed a survey of state
    actions to support Guard and Reserve members and families, which showed
    the 50 States are providing over 600 benefits in education, family
    support, licensure and certification, tax breaks, and State employment
    benefits. In April 2005, the NGA co-hosted a working conference
    attended by senior gubernatorial policy advisors from 18 States with
    large military populations to discuss best practices relative to the 10
    key issues.
    Communication
        We have instituted an integrated communication strategy to ensure
    troops and families have access to reliable information and support
    services 24 hours per day/7 days a week. Our communications system is
    comprised of a variety of Web sites, linked together by a portal, to
    provide information and to connect with troops and families,
    particularly those outside the gate, and Guard and Reserve components.
    In fiscal year 2005, total contacts with troops and families averaged
    3.8 million per month. During the first 3 months of fiscal year 2006,
    contacts have increased to over 8 million per month.
        The cornerstone of our communications with troops and families is
    Military OneSource. Each military service has its own OneSource
    identity: Marine Corps Community Services OneSource, Army OneSource,
    Navy OneSource and Air Force OneSource. This toll-free information
    service is available 24 hours a day, 365 days a year, from anyplace in
    the world. Military OneSource has quickly become the trusted source of
    information and assistance for our troops and families.
        This very high performance capability provides families with
    immediate access to professionals trained to listen and assess any
    number of situations for the best solution. The telephones are staffed
    by Master's level professionals, and questions can be answered in over
    120 languages. Case managers can refer troops and families to licensed
    counselors if they wish to receive personal assistance. The areas that
    receive the most inquiries are deployment-related issues, parenting,
    child care, and finances. Military OneSource professionals can also be
    accessed via the Internet with researched, tailored answers to each
    question. In January 2006, Military OneSource incorporated Turbo Tax
    into its arsenal of resources, and to date, nearly 150,000
    servicemembers (including Guard and Reserve members) have filed their
    2005 taxes online with Turbo Tax at no-cost to them. Troops can even
    file while overseas in Iraq, Afghanistan, or anywhere their military
    duties take them.
        Research has shown that use of the Internet/Web sites is the number
    one way troops prefer to get information for themselves and their
    families. The sources of information expand so frequently that DOD
    needed to launch a quality of life Web portal--
    www.MilitaryHomefront.mil, to consolidate all military Web sites and
    act as a directory of all quality of life information.
    MilitaryHomefront has been in operation less than a year and has
    already reached 2 million hits a month.
        Another component of communication is telephone service for
    personnel in OEF and OIF. U.S. CENTCOM provides two phone services that
    enable servicemembers to call anywhere in the world--health, morale,
    and welfare calls using official phone lines and unofficial
    telecommunications provided by the Armed Services Exchanges. There are
    an average of 27,000 health, morale, and welfare calls made each day.
    The November 2005 unofficial call volume was nearly 16.4 million
    minutes. Servicemembers also have free access to the non-secure
    military Internet by using their military e-mail address and free
    Internet access through 32 morale, welfare, and recreation (MWR)
    operated fixed site Internet cafes and 146 military unit operated
    mobile Internet cafes in Iraq.
    Expediting Citizenship
        On behalf of the non-citizens on Active-Duty, the Department
    continues to work closely with the Department of Homeland Security's
    (DHS) Citizenship and Immigration Service to expedite citizenship
    applications for non-U.S. citizen members of the Armed Forces. Over
    27,000 military members have been granted U.S. citizenship through an
    expedited process since September 2001. We are working with the DHS and
    the Federal Bureau of Investigation (FBI) to streamline the military
    member citizenship application process by accessing fingerprints
    provided at the time of enlistment versus requiring fingerprints to be
    retaken for a citizenship application. The Department has also worked
    closely with the Citizenship and Immigration Service to accomplish
    naturalization processing for military personnel overseas. Over 1,500
    military members have been naturalized at overseas ceremonies conducted
    since October 1, 2004; most recently, 249 military members were
    naturalized in Iraq and Kuwait in December 2005.
    Child Care
        The DOD continues to be the model for the Nation on employer
    supported child care. A report issued in 2005 on non-monetary benefits
    shows child care to be one of the most important benefits we provide to
    our servicemembers and families. The Senior Enlisted Advisors testified
    last year that child care is the number one quality-of-life issue.
    Child care also supports spouse employment as part of a family's
    financial readiness. Currently, DOD provides 184,000 spaces--but needs
    30,000 more. We appreciate the support from Congress in the fiscal year
    2006 appropriation for child care, and will apply the increase to child
    care for deployed high personnel tempo installations.
        The Department initiated an emergency intervention strategy, funded
    with emergency supplemental funding, to address the most pressing child
    care needs at locations affected by significant deployments. Many
    locations had high post-deployment birth rates, causing a greater need
    for infant care. To increase child care spaces, the Department
    dedicated over $90 million toward the purchase of modular facilities
    and renovations and expansion of current facilities. The intervention
    will create 4,077 child care spaces in 35 high personnel tempo
    locations. The Army will build 17 centers and the Navy and Marine Corps
    will each build 2 centers. The Air Force will add or renovate space at
    24 locations.
        Further, in fiscal year 2005 the Department used $9 million to
    subsidize child care on a temporary basis for deployed Active-Duty and
    activated Guard and Reserve families who do not have access to on-base
    care. Funding provided extended hours care, subsidies for family child
    care providers, Reserve component weekend drill care, and family
    support group meetings. Since fiscal year 2003, over 10 million hours
    of subsidized child care has been provided to support families affected
    by the global war on terrorism.
    Casualty Assistance
        The Department's longstanding practice is to recover, identify, and
    return deceased servicemembers to their families as expeditiously and
    respectfully as possible. When a military member dies, our first
    concern is to inform the next-of-kin in a manner that is accurate,
    timely, and deeply respectful. Casualty assistance is provided until
    family members indicate assistance is no longer needed. Our military
    personnel assigned to casualty assistance or notification
    responsibilities receive appropriate training, and when possible a
    servicemember who has prior assistance experience assists first-time
    casualty assistance officers.
        The Department's casualty program is constantly reviewed and
    revised as needed to ensure the most accurate reporting systems are
    utilized and the most compassionate and dignified notification and
    assistance procedures are provided to the survivors of servicemembers.
    Today's complex family structures demanded that we establish a new
    procedure that requires all servicemembers to identify the person
    authorized to direct disposition of their remains should they be
    killed. During the casualty assistance process, family members provide
    instructions for their loved one's remains; every possible action is
    taken to satisfy the requests and directions of the family. The remains
    of the fallen are handled in the most appropriate and respectful manner
    possible at each point of the final journey home.
        We have established partnerships with non-governmental
    organizations to draw on their expertise in responding to the needs of
    survivors. This ensures our policies are responsive and are addressing
    the needs of our families. The expedited claims process initiated in
    partnership with the VA and the Social Security Administration
    continues to enhance the delivery of critically needed financial
    assistance and service to our families.
    Military Severely Injured Center
        In February 2005, DOD established the Military Severely Injured
    (MSI) Center, a 24/7 call center to assist OEF and OIF severely injured
    and their families as they transition through their recovery,
    rehabilitation, and reintegration either back into the military or into
    the civilian communities. The Center augments the efforts of severely
    injured programs of the individual Services (Army Wounded Warrior
    Program, Marine-For-Life Injured Support, Air Force Palace HART, and
    Navy SAFE HARBOR) in serving these men and women who have sacrificed so
    much. The MSI Center team of military personnel and contractors, to
    include counselor advocates at hospitals with large numbers of the
    severely injured, has made more than 11,000 contacts with severely
    injured servicemembers, their families and support resources.
    Assistance provided encompasses advocacy for rehabilitation, education
    and training, job placement, accommodations, coordination of air
    travel, personal and family counseling, and financial resources.
        To assist in this effort, the MSI Center has as part of its full-
    time staff representatives from three Federal agencies: DOL, the VA,
    and the DHS's Transportation Security Administration (TSA). With these
    key partnerships, the Center can facilitate resolution of the issues
    important to the severely injured: Labor assists in finding employment
    for the severely injured and in some cases, the spouses and parents;
    the VA helps with health and benefits related issues; and TSA helps
    troops travel through security checkpoints at airports. The Department
    is also committed to linking severely injured members and their
    families with local, State, and national level groups to ensure that
    their continuing needs are provided for.
        We thank Congress for its support for the administration's
    Traumatic Servicemember's Group Life Insurance (TSGLI) legislation
    which is now providing our severely injured from OIF and OEF with lump
    sum payments ranging from $25,000 to $100,000, depending on the
    injuries sustained. While no amount of money will ever compensate for a
    loss, the TSGLI payments are certainly appreciated by the members and
    their families, and are assisting with the challenges they face as they
    progress through recovery, rehabilitation, and long-term reintegration.
    Transition Assistance Program
        In partnership with the DOL and the VA, our transition assistance
    program helps separating, retiring, and deactivating servicemembers and
    their families, from both Active and Reserve components, make smooth
    and successful transitions to civilian life. Upon separation or
    demobilization, servicemembers are provided information on employment,
    relocation, education and training, health and life insurance, finances
    and other veterans' benefits. We established an Interagency Working
    Group to focus on the improvement of transition assistance. To respond
    to the needs of the Guard and Reserve members, DOD is working to retool
    the Transition Assistance Program (TAP) and bring it into the 21st
    century. The vision, entitled ``Just in Time Transition Assistance,''
    is to make TAP a Web-based accessible program, available whenever the
    member may need it.
        The DOL, in collaboration with DOD, recently launched a new ``Key
    to Career Success Campaign'' focused on career guidance, job search,
    skills training, child care, and transportation services available at
    the local DOL One-Stop Career Centers. Additionally, the VA and the
    National Guard Bureau signed a Memorandum of Understanding to locate
    additional opportunities to provide veterans benefits information to
    members of the Guard and other military personnel.
    Voluntary Education
        We are proud to continue our commitment to our Voluntary Education
    Program, the largest continuing education program in the world--each
    year over 420,000 servicemembers enroll in postsecondary education. In
    fiscal year 2003, we began uniformly funding 100 percent tuition
    assistance across the Services, up to $250 per semester hour of credit
    and $4,500 per year. This past year 789,000 enrollments were funded and
    well over 35,000 diplomas and degrees were completed. In the coming
    year, we plan to place even more emphasis on our voluntary education
    benefits, including working with major book distributors to reduce
    expenditures of the cost of books and providing personal, one-on-one
    education counseling for our severely injured personnel.
    Financial Readiness
        Equipping servicemembers with the tools and resources they need to
    make sound financial decisions is integral to both military readiness
    and the strength and stability of our servicemembers and their
    families. The Department has partnered with over 26 Federal agencies
    and nonprofit organizations to increase awareness and education of
    servicemembers and their families. For example, the InCharge Institute,
    in collaboration with the National Military Family Association,
    distributes 250,000 copies of Military Money Magazine quarterly to
    military spouses through commissaries and direct distribution. The
    Financial Literacy and Education Commission ``mymoney.gov'' Web site
    has linked the resources of 20 Federal agencies to DOD and Service
    quality-of-life Web sites. Additionally, the National Association of
    Securities Dealers has developed a $6.8 million multi-year personal
    finance education program focused on training troops and families on
    the importance of saving money.
        However, unscrupulous insurance and financial product solicitors
    continue to prey on our troops. Over the past 18 months we have
    included predatory lending, in particular payday lending, as one of our
    key issues which we have addressed with governors and state legislators
    to make them aware of the impact of their statutes on the quality-of-
    life of servicemembers and their families. We are collaborating with
    consumer advocate organizations who have pledged their assistance, some
    of whom have agreed to assist installations in defining the prevalence
    of predatory lending activities. We appreciate the support of Congress
    in providing additional protections to servicemembers and their
    families with regards to the sale of insurance and certain investment
    products.
    Spousal Careers and Education
        The majority of military spouses continue to work outside of the
    home in order to stay current in their career of choice and supplement
    the family income. The Department is committed to helping military
    spouses pursue rewarding careers and to remove barriers to career
    advancement. Significant progress has occurred in the last 2 years.
    Employers have been made aware of the value of hiring military spouses
    and we have greatly increased our efforts at the State level where
    licensing and certification requirements differ from State to State. We
    have identified a range of popular spouse careers that have state-
    specific licensing requirements and have designed strategies to address
    them, initially focusing on teaching and real-estate. To offer more
    scholarships, grants, and reduced tuition for servicemembers' spouses,
    we are working closely with colleges and universities.
        In order to raise employer awareness, we partnered with
    military.com, a division of Monster, Inc. to create a military spouse
    career network Web site portal: www.military.com/spouse. At this site,
    spouses can post their resumes, search both private sector and Federal
    jobs (USAJOBS) simultaneously and they can search them by using
    installation names. Over 60 spouse-friendly employers are actively
    recruiting military spouses for their vacant positions; these
    organizations can post jobs at no cost and may search this exclusive
    database for military spouse candidates. In the 9 months since this
    site was launched, over 800,000 spouses have visited the site; over
    500,00 have signed up for the newsletter, over 400,000 have visited the
    chat rooms and over 1.5 million job searches have been conducted. In
    recent months, DOD has co-sponsored specialty career fairs that focus
    employers on severely injured servicemembers and military spouses.
        To assist military spouses to find employment and careers the
    Department's partnership with the DOL was expanded to include a Web
    site (www.milspouse.org). This site assists spouses with resume
    development, locating careers and identifying available training.
    During this past year, the DOL was able to include military spouses
    under the definition of dislocated workers. This increases the
    benefits, such as training, available to them and also ensures they get
    assistance in finding new employment.
    Military Children's Education
        The Department recognizes that quality education for their children
    is a key factor in decisions to accept assignments for servicemembers
    and their families. There are approximately 692,000 school age children
    in Active-Duty families (1.3 million including the Reserves).
        Our DOD schools have high expectations for the 91,300 students
    enrolled in our 220 schools located in 13 countries, 7 States, and 2
    territories. The worldwide Department of Defense Schools system serves
    as a model education system for the Nation and is critical to the
    quality-of-life for servicemembers and families. DOD students are among
    the highest performing in the Nation as measured by norm-reference
    assessments like the TerraNova and the National Assessment of Education
    Progress. DOD schools are also leading the Nation in closing the
    achievement gap between white and non-white students.
        Our schools work aggressively to resolve transition issues as more
    than 30 percent of the student body transitions each year. The
    Department recently entered into a formal memorandum of understanding
    to promote cooperative efforts between the DOD and the U.S. Department
    of Education to address the quality of education and the unique
    challenges of children of military families who move from one education
    system to another. We are working with Johns Hopkins University to
    identify and disseminate proven educational best practices and policies
    that can respond to the academic and affective needs of mobile military
    children. Further, educational consultants are building an information
    resource of educational options around military installations to
    provide military families a wide array of quality educational choices.
        DOD has worked with renowned experts on terrorism, trauma and
    children, regarding publications, Web site information and program
    development for students of deployed families, their parents and
    teachers. All publications are on a special Web site designed to meet
    the needs of children of deployed parents, www.MilitaryStudent.org. We
    continue to work to provide national, state and local education
    agencies, schools, parents and health professions with an awareness of
    the issues, current best practices, and services to promote academic
    success.
    Youth and Family Support
        With the extensive number of parents deployed, it has been more
    important than ever to stay connected. Computer-connectivity and
    special kits help youth ``stay in touch'' and become involved in
    understanding the stages of development and the emotional challenges
    that they may experience. DOD recently developed a ``Guide for Helping
    Youth Cope with Separation'' as an additional resource.
        Each youth responds differently to the challenges of military life
    and a variety of programs provide positive outlets and help youth
    channel feelings into personal growth rather than violent or
    destructive behavior. One supportive outlet is camping experiences,
    with an emphasis on leadership and understanding the military better.
    Boys and Girls Clubs of America have opened their doors to our military
    youth and provided wholesome recreation designed to help young people
    succeed in school, stay healthy and learn important life skills. A
    partnership between the Services and the U.S. Department of Agriculture
    Extension Services/4H provides outreach to those youth whose parents
    are Reserve or National Guard or are not geographically located near a
    military installation.
        For the youngest children of parents deployed, our ``Read to the
    Kids'' program was developed in partnership with the Army Library
    program and the Army Arts and Crafts program manager. The project films
    individual soldiers reading a children's book to their children while
    deployed or during pre-deployment. The books used in the program will
    be available in the base libraries for the child to take home and read
    along with the deployed parent.
        Each of the military departments has a highly responsive family
    support system to help families cope with the demands of military life.
    The cornerstone is a worldwide network of installation family centers.
    Located at roughly 300 active military installations worldwide, the
    centers provide a wide range of services supporting commanders,
    military members, and families. Thanks to the National Guard Bureau,
    over 400 family assistance centers provide outreach to Guard and
    Reserve families who are not located near an installation. Unit Family
    Readiness Groups, staffed by volunteers, actively maintain
    communication with families in outlying areas through newsletters, Web
    sites, and direct communication to enhance unit-to-family communication
        Young families, although resourceful and resilient, occasionally
    need guidance and support to help them over life's rough spots. The
    Department's non-medical counseling program helps these families by
    providing civilian counselors in the military family's community, at no
    cost to troops or families. The goal of this program is to deliver
    short-term assistance on everyday issues and problems, such as raising
    children when the member is deployed, managing finances, and preparing
    for deployment and reunion. Counseling is offered in a variety of
    settings to individuals, families and couples, and groups. Using
    civilian counselors is an important aspect of this program, because
    research has shown that military members and their families prefer the
    privacy thus provided.
    Domestic Violence
        We have strengthened our response to domestic violence. We have
    adopted a restricted reporting policy for incidents of domestic abuse--
    this new policy offers the option of confidentiality to victims. In the
    military community, a victim is usually concerned that reporting will
    have immediate repercussions on the military career of the family-
    member offender, and thus affect the family's financial welfare. Our
    new system affords victims access to medical and victim advocacy
    services without immediate command or law enforcement involvement and
    encourages victims to feel more comfortable and safe about reporting
    domestic abuse.
        I am pleased to report that we have initiated implementation of 121
    of the nearly 200 Domestic Violence Task Force recommendations,
    focusing first on recommendations pertaining to victim safety and
    advocacy, command education, and training key players who prevent and
    respond to domestic violence such as law enforcement personnel, health
    care personnel, victim advocates, and chaplains. We worked closely with
    Congress to create or change legislation pertaining to transitional
    compensation for victims of abuse, shipment of household goods for
    abused family members, and a fatality review in each fatality known or
    suspected to have resulted from domestic violence or child abuse.
    During the past year, we conducted eight domestic violence training
    conferences, five of which were offered to joint gatherings of
    commanding officers, Judge Advocates, and law enforcement personnel.
    These conferences addressed each groups' responsibilities in responding
    to domestic violence in accordance with new domestic violence policies
    issued by the Department.
        In partnership with the Office on Violence Against Women of the
    Department of Justice, we have continued several joint initiatives,
    including training for law enforcement professionals, victim advocates,
    chaplains, and fatality review team members. Additionally, we are
    conducting domestic violence coordinated community response
    demonstration projects in two communities near large military
    installations. The goal of the projects is to develop a coordinated
    community response to domestic violence focusing on enhancing victim
    services and developing special law enforcement and prosecution units.
        In partnership with the National Domestic Violence Hotline, we
    developed and launched a public awareness campaign to increase
    awareness of the Hotline as a resource for victims and their families.
    Finally, a central victim advocacy program provides access to on-call
    victim advocates and shelters to assist victims of domestic violence.
    Exchanges and Commissaries
        All three of the exchange systems are modernizing their policies
    and practices. Force repositioning, BRAC, and the global war on
    terrorism, with its attendant increased costs to provide the exchange
    benefit, will continue to challenge exchange profitability. We are
    currently reviewing options to save on costs through consolidation of
    backroom functions. The DOD Executive Resale Board is providing
    oversight of exchange operations and revenues.
        To directly support troops in the OIF and OEF theaters, there are
    40 Tactical Field Exchanges, 60 exchange supported/unit run field
    exchanges, and an average of 15 ships' stores providing quality goods
    at a savings, and quality services necessary for day-to-day living.
    Goods and services offered include phone call centers, music CDs, DVDs,
    laundry and tailoring, photo development, health and beauty products,
    barber and beauty shops, vending and amusement machines, food and
    beverages, and name brand fast food operations. Goods and services vary
    by location based on troop strength and unit missions requirements.
    Commissaries now have `gift' food packs that can be forwarded to
    troops.
        The Department's commissary is a critical quality-of-life component
    for members of the Active-Duty and Reserve Forces and their families.
    The Department's strategy remains to sustain the value of the
    commissary benefit without increasing--indeed, preferably reducing--its
    cost. The Defense Commissary Agency's (DeCA) re-engineering efforts are
    aimed at reducing overhead by centralizing support and streamlining
    store operations. Although in the early states of re-engineering, DeCA
    has demonstrated success. DeCA's strong stewardship of taxpayer dollars
    has also been demonstrated by the fourth consecutive unqualified audit
    opinion of its financial records. DeCA's sales remain strong with solid
    growth over the last 2 years. This demonstrated vote of confidence by
    military families is confirmed by both the internal and external
    customer satisfaction scores awarded to DeCA.
    Morale, Welfare, and Recreation
        MWR programs support the servicemembers and families at the
    homestation and while the servicemembers are deployed. Fitness centers
    consistently rank as the most popular MWR program and improving fitness
    programs, to include upgrading and modernizing fitness facilities, is a
    high priority within the Department. The military services operate 478
    fitness centers worldwide.
        Computers and Internet service at home station libraries, youth
    centers, and Internet cafes provide for access to world events and
    ensure families can send and receive e-mails to and from their loved
    ones who are deployed. Additional recreational and social activities
    include sports, motion pictures, continuing education support, board
    games, large screen televisions, DVD/CD players, video games and game
    CDs. MWR programs are designed to support all phases of deployment; the
    Army's ``Battlemind'' program is noteworthy for engaging personnel in
    high adventure activities to address the high adrenalin of the
    returning warriors.
        MWR libraries are very important component in the education and
    advancement of today's servicemembers. Paperback book kits are an
    essential part of MWR during combat situations. On ships, Library
    Multimedia Resource Centers provide a much needed communication vehicle
    for those back home. This support in the areas of operation provides a
    means of mental escape from the rigors of being deployed in a hostile
    environment.
        The Department has a responsibility to provide morale enhancing
    entertainment for troops and families assigned overseas. Nowhere is
    this support more important than in the austere locations where
    servicemembers are performing duty in support of the global war on
    terrorism. Armed Forces Entertainment (AFE), in cooperation with the
    United Service Organization, continues to provide much welcomed
    entertainment to our forces, both overseas and on military installation
    in the United States. In 2005, AFE provided 136 tours with 1,268 shows
    at 370 sites overseas. From 2002 through 2005, the Robert and Nina
    Rosenthal Foundation has worked closely with the Country Music industry
    to provide 62 celebrity entertainment shows at military installations
    at no cost to military personnel and their families. The Spirit of
    America Tour provides a brief reprieve from the stresses of
    deployments. Performers have given generously of their time and
    talents.
    BRAC and Rebasing
        Our most recent challenge is to ensure quality-of-life support is
    realigned to coincide with the movement of troops and families during
    BRAC and rebasing. Once BRAC/rebasing decisions were announced,
    commanders began working with local communities to lay out timelines.
    We are taking a proactive approach to ensure quality-of-life for our
    troops and families is being planned as they move to new communities.
    Twenty-five installations are gaining more than 500 Active-Duty members
    in 16 States. We estimate BRAC and rebasing will affect more than
    77,000 Active-Duty members, more than 40,000 military spouses and over
    78,000 minor children. Currently, two thirds of families live outside
    the gates and service policies are allowing E-4 and above more choice
    to live off base. Our plan is to partner with community based service
    agencies to serve large numbers of our military servicemembers and
    their families. Community partnerships will need to be increased to
    deliver support such as child care, fitness opportunities, youth
    services, and other family services.
                                   conclusion
        Mr. Chairman, I want to thank you and members of this subcommittee
    for your advocacy on behalf of the men and women of the Department of
    Defense.
        We established our survey program to listen to our military and
    civilian personnel. We believe they are telling us that we have a
    stable, satisfied, and committed Total Force.
        Four-fifths of Active-Duty members believe they are personally
    prepared, and two-thirds believe their unit is prepared, for their
    wartime jobs. These views have held steady from the start of OIF (March
    2003) through the latest survey (December 2005). The top concerns of
    those currently deployed are problems their spouses are facing back
    home, the ability to communicate with their families, and the
    possibility of experiencing emotional issues as a result of deployment.
    Today I have reviewed many of the programs that address these specific
    issues, and we are fielding special surveys to spouses so we can fully
    understand the impact of deployments on the family.
        In April 2004, 14 percent of our servicemembers indicated they were
    having problems ``making ends meet'' or ``being in over their head,''
    while only 9 percent indicated this in a March 2005 survey. Overall,
    more than three-fifths of members reported being financially
    comfortable in March 2005, up 10 percentage points from results in the
    previous year.
        Reserve retention intentions are currently at 67 percent--up three
    percentage points between June and December 2005. We also have seen
    increased perceptions of personal and unit readiness, and a reduction
    in reports of stress. Through the survey program, we have identified
    the factors affecting reservists' continuation decisions--and pay and
    allowances top that list. With your help, we have taken actions to
    improve Reserve pay incentives and medical and dental benefits. Seventy
    percent of members indicated TRICARE medical and dental coverage was
    better or comparable to their civilian plans--food for thought as we
    consider how to sustain the military health program. The June 2005
    survey results show that approximately two-thirds of members say they
    have not been away longer than expected. In addition, over three-
    fourths of members indicate their Reserve duty has been what they
    expected--or better than they expected--when first entering the
    Reserves.
        Although we have challenges ahead managing our civilian workforce--
    assimilating them into jobs previously performed by the military,
    implementing a new personnel system, and managing the exodus of
    retiring personnel--the outlook is very encouraging. Since we began
    surveying civilians in the fall of 2003, we have learned that large
    majorities are satisfied, and their satisfaction levels on a number of
    indicators are rising. Two-thirds are satisfied with their overall
    quality-of-work life, the quality of their co-workers and supervisors.
    Ninety percent consistently report they are prepared to perform their
    duties in support of their organization's mission, and over half are
    satisfied with management and leadership.
        In conclusion, we continue to have a dynamic, energetic, adaptable
    All-Volunteer Total Force. The force is increasingly joint and,
    increasingly ready for new challenges. I look forward to working with
    you this year to provide the means by which we can sustain this
    success.

        Senator Graham. Thank you very much.
        Let's just go to the theme of military compensation. Do you
    think that there is a pay gap between military salaries for
    enlisted personnel and the private sector? Is the 2.2 percent
    raise sufficient, in your view, to bridge the gap or maintain
    parity?
        Secretary Chu. The short answer is, no, we do not think
    there is a gap, in the sense that perhaps some might mean it.
    Our standard is actually a little bit different. We have to be
    competitive. We have to be successful in attracting the talent
    we need, and retaining that talent over time.
        Against that standard, we do believe that the 2.2 percent
    proposed increase is appropriate. But we also believe that we
    need somewhat more for the NCO corps, and that, with that
    additional increase, we think we'll be in the right competitive
    position.
        We intend to propose an extension of the pay table, as
    well, to 40 years of service. We need to encourage some people
    to stay longer, and we need to recognize that longer service
    with some degree of additional pay increase. We look forward to
    transmitting that to you for your consideration at the earliest
    possible date.
        Senator Graham. I think that's a very clever thing to do
    now, to adopt some private sector programs, in terms of giving
    pay raises to particular specialties. How does that work? How
    is that being received by the troops in the field?
        Secretary Chu. I would defer to my colleagues. I think it
    has been very important in achieving the high degree of
    retention in the career force that we have enjoyed the last
    several years. I think it also has an extraordinary effect on
    morale. It signals, particularly to the NCO force, that we
    recognize their contribution to the outcomes that our military
    forces are enjoying.
        General Hagenbeck, do you want to say a word?
        General Hagenbeck. Yes sir, I would echo that.
        Senator Graham. Give me an example of how it would work.
        General Hagenbeck. Sir, it would be keeping them beyond
    their eligible retirement date. Our retention has exceeded all
    expectations for the last 6 years, and we're on a glide path
    now to exceed even last year's, which saw historic highs. So,
    we're going after 64,200. We have over 31,000 on Active-Duty
    that have already re-enlisted this fiscal year. That's been a
    function, of course, of both the incentives and the bonuses
    that have been available to them. What they always have to
    weigh is what their base pay is, which is applied against the
    retirement compensation. That would be an additional incentive
    to keep those combat-experienced and veteran NCOs in our force.
        Senator Graham. Do you think the stop-loss utilization is
    going to go down?
        General Hagenbeck. Sir, I could address that. It will
    always wax and wane. It's really a function of team building.
    We have about 15,000 across the force now that are deployed on
    stop-loss. About 8,000 or so, on average, of Active-Duty. The
    delta is with our Reserve and Guard. So, as our footprint
    shrinks, as it is now in Iraq with the National Guard, for
    instance, the numbers in stop-loss will go down. But in out
    years, if there's continued mobilization, it will tend to go
    back and forth.
        Senator Graham. Is there any period in service where we're
    having a harder time retaining people, like the 10-year mark or
    the 8-year mark?
        General Hagenbeck. It's always a challenge. We've been
    doing very well. When we talk about the first-termers, mid-
    career, and then career soldiers, the mid-grades are the ones
    that we always have to take a close look at. Certainly in our
    Reserves, we're paying a lot of attention to that.
        Secretary Chu. That is one of the reasons, Mr. Chairman,
    that we are seeking this additional increase for the NCO corps,
    to give them that added motivation to stay with us.
        Senator Graham. On the recruiting front, how is that going?
        Secretary Chu. I think we should all be pleased at the
    efforts that have been made, and the success enjoyed, on the
    recruiting front. The Army had troubles toward the middle of
    fiscal year 2005, and, as a result, did not makes its Active-
    Duty nor its National Guard or Reserve recruiting targets. I'm
    pleased that, in the first months of the current fiscal year,
    all Services on the Active front have made their recruiting
    targets. The Army Guard is also making its recruiting targets.
        Senator Graham. What would you say contributes to the
    change?
        Secretary Chu. I think there are three elements out there,
    sir.
        First, all Services, particularly the Army and the Army
    Guard, have put a lot more energy into the recruiting, and have
    put more recruiters out there. That's crucial. This is an All-
    Recruited Force, my colleagues are right about that point.
        Second, the large set of incentives that this committee has
    given the Department has been very important. Those tools are
    out there. They were given to us in a series of actions over
    the last 2 years. They are being employed. They are working.
    They are very helpful.
        Third, I think the leadership of everyone in pointing to
    military service as an excellent choice for young people is
    crucial to reinforcing what we see from our polls that it is
    their natural inclination to consider military service. We need
    to continue to emphasize the value of that service, and that
    we, as older adults, see it as valuable, and that they're
    making a good choice.
        Senator Graham. I have one last remark, and then we'll let
    Senator Nelson make his opening statement and ask questions.
        The number of people getting off Active-Duty going into the
    Guard and Reserve had a dramatic drop. Has that turned around
    at all? How is minority recruiting going?
        General Hagenbeck. Sir, with regard to Active-Duty going to
    the Guard and Reserves, with some of the incentives that
    Congress has provided, we think that's turned around. It's not
    to the level that we would like right now. The other side of
    that equation is that we're encouraging them to stay on Active-
    Duty, as well. There's a dynamic there that sometimes works
    against each other. But we're seeing more of that right now.
    We're keeping an eye on it.
        Senator Graham. Senator Nelson?

                STATEMENT OF SENATOR E. BENJAMIN NELSON

        Senator Ben Nelson. Thank you, Mr. Chairman. I apologize
    for being delayed this morning.
        I want to, first, Mr. Chairman, thank you for setting this
    hearing today. It's a privilege to serve with you. You've
    always graciously included me in the decisions of the
    subcommittee, and we've worked together, and will continue to
    do so, to significantly improve the quality-of-life for our
    servicemembers and their families.
        I also want to thank the witnesses for being here today,
    but, more importantly, for what you do to improve and continue
    to help develop additional efforts to improve recruitment,
    retention, and to develop what's necessary to maintain and
    manage our forces. I believe we are going to continue to have
    an All-Volunteer Force, and we should. It's being tested for a
    prolonged engagement at the present time, and I think we can
    all conclude that, overall, it's working well. Obviously, we
    have some challenges that are before us. The stress that is
    felt by the force is affecting reenlistment. In some cases,
    reenlistment figures are at record highs, in spite of the high
    operational tempo. We hope that will continue.
        Our National Guard and Reserve Forces have responded
    magnificently on every occasion, demonstrating the quality of
    our Total Force. Of course, now is the time to assess our
    personnel policies and authorities to ensure that we have the
    right programs in place to recruit and retain. That's why it's
    important to have you here today, to help us understand whether
    or not that's the case. It's too easy, in an office, to sit
    down and decide what kinds of incentives we ought to have. It's
    very different to test them out and find out whether or not
    they work. Obviously, we're only interested in having things
    that work, but, unfortunately, we have to come up with the
    ideas before we can even test them.
        So, now, the Army--and, to some extent, the Marine Corps--
    is seeking innovative tools for recruiting and retaining the
    right people as they are challenged to meet their authorized
    end strengths. At the same time, the Air Force and the Navy
    need force-shaping tools to allow them to make rather
    substantial reductions to their end strength, but in a very
    smart way that keeps the servicemembers with these skills and
    training experience that they need in the post-Cold War era. We
    need to work together to find ways to invigorate underused
    force-shaping tools, such as the Blue-to-Green Program, perhaps
    by tying that program's effectiveness to other force-shaping
    programs to incentivize the Services to work together to
    increase the number of Navy and Air Force personnel who
    participate in Blue-to-Green. We need to continue to do that. I
    know that adding Federal civilian employees and contractor
    personnel can help with that, to some degree.
        This year we also face important decisions about sustaining
    health care benefits for our servicemembers and retirees, as
    well as their family members, and we need to work on the
    Terrorism Risk Insurance Act (TRIA). I appreciate having had
    the opportunity to visit with Secretary Chu on this previously.
    Obviously, the cost of providing benefits continues to rise in
    this field, as in every field. The question is, at what rate
    can we pass that cost back to retirees? We need to find a way
    to do that that's not only appropriate, but is also fully
    protective of budgets at home. While increases may not be as
    large for enlisted as for retired officers' nevertheless, a
    sudden impact on a budget for a retired person is not something
    to be ignored.
        Mr. Chairman, I appreciate this opportunity so much, and
    I'm anxious to hear from our witnesses on the many questions
    we're all going to have and try to find a way to make that all
    work.
        Senator Graham. Thank you very much, Senator. I've enjoyed
    working with you. It's been a real pleasure.
        It's now time to hear from the Services. I'm sorry I didn't
    allow that to happen at first. I apologize.
        General Hagenbeck.

     STATEMENT OF LTG FRANKLIN L. HAGENBECK, USA, DEPUTY CHIEF OF
                STAFF FOR PERSONNEL, UNITED STATES ARMY

        General Hagenbeck. Senator Graham and Senator Nelson, thank
    you for the opportunity to come before you today on behalf of
    America's Army.
        The United States Army is grateful for all the legislation
    passed recently that improved incentives and bonuses,
    attracting and retaining the very best soldiers. We're
    competing in a very tough recruiting market within an improving
    economy. These recent legislative changes will truly assist the
    Army to continue the successes of the All-Volunteer Force.
        With regard to the short time that we have now, I'll
    suspend any further statements. I've submitted a written
    statement for the record.
        Please let me thank you again for all the support that
    you've given in the past, and we look forward to your continued
    support here in the coming months and over the fiscal year.
        Thank you, sir.
        [The prepared statement of General Hagenbeck follows:]

              Prepared Statement by LTG Franklin L. Hagenbeck, USA

        Senator Graham, Senator Nelson, distinguished members of the
    subcommittee, thank you for providing me opportunity to appear before
    you today on behalf of America's Army. The United States Army is
    grateful to this committee for all legislation passed recently that
    improved incentives and bonuses for attracting and retaining the very
    best soldiers. We are competing in a very tough market within a robust
    economy and these recent legislative enactments will assist the Army to
    continue to grow and maintain the All-Volunteer Force. With your
    support now and in the future, our Army will meet the needs of the
    Nation and continue to fight the global war on terror. These soldiers
    continue to make history and demonstrate to America that this Army is
    unparalleled. This generation shows for the first time in our history
    that the All-Volunteer Force can be called upon to face a prolonged
    conflict and persevere. Creating the right composition of this All-
    Volunteer Army is our challenge. With your assistance we will achieve
    the right mix of incentives to compensate, educate, and keep the Army
    properly manned with the best and brightest our Nation has to offer.
        As the Army transforms, the soldier remains the centerpiece in all
    that the Army is now and aspires to achieve. The responsibility is ours
    to provide these soldiers as relevant and ready land forces to the
    combatant commanders to meet mission accomplishment, now and in the
    future. As I speak to you today, more than 600,000 soldiers are serving
    on Active-Duty. Currently we have more than 245,000 soldiers, Active,
    Guard, and Reserve deployed or forward stationed overseas and another
    13,000 securing the homeland. Soldiers from every State and territory .
    . . soldiers from every corner of this country . . . serving the people
    of the United States with incredible honor and distinction. Soldiers
    participate in homeland security activities and support civil
    authorities on a variety of different missions within the United
    States. This past year showed an unprecedented reliance on the Army
    National Guard and Reserve Forces both here and abroad in reaction to
    natural disasters and to the continued fight in the global war on
    terrorism. As the regular Army rotated out of theater to re-set as a
    modular force for continued operations in the global war on terrorism,
    the Reserve component stepped up to the mission. We are truly one Army
    with Active and Reserve Forces working the same mission in concert and
    with great successes. Additionally, a large Army civilian workforce
    (over 240,000), reinforced by contractors, supports our Army--to
    mobilize, deploy, and sustain the operational forces--both at home and
    abroad. Our soldiers and Department of Army civilians remain fully
    engaged around the world and remain committed to fighting and winning
    the global war on terrorism.
        The Army continues to face and meet challenges in the Human
    Resources Environment. In recent years, congressional support for
    benefits, compensation, and incentive packages has ensured the
    recruitment and retention of a quality force. Today, I would like to
    provide you with an overview of our current military personnel policy
    and the status of our benefits and compensation packages as they relate
    to maintaining a quality force.

                                   recruiting

        Recruiting soldiers who will fight and win on the battlefield is
    critical to the success of our mission. These soldiers must be
    confident, adaptive, and competent; able to handle the full complexity
    of 21st century warfare in our current combined, joint, expeditionary
    environment. They are the warriors of the 21st century. However,
    recruiting these qualified young men and women is extremely challenging
    in the highly competitive environment. The head to head competition
    with industry, an improving economy, lower unemployment, decreased
    support from key influencers, the media and the continuing global war
    on terrorism present significant challenges.
        Currently we are meeting our recruiting missions. The Active
    component finished January 2006 at 103 percent accomplished with a
    year-to-date achievement of 104 percent. The United States Army Reserve
    finished January 2006 at 103 percent accomplished with a year to date
    achievement of 114 percent. The National Guard finished January 2006 at
    113 percent accomplished with a year to date achievement of 109
    percent. All components are projecting successful annual missions for
    fiscal year 2006. Bear in mind, there is still two-thirds of the
    mission remaining. Much work remains to be done but the assistance from
    Congress and the current efforts of the recruiting force are cause for
    optimism. It is a challenge that we must meet.

                       incentives and enlistment bonuses

        The Army must maintain a competitive advantage to remain successful
    in attracting high quality applicants. Bonuses are the primary and most
    effective competitive advantage for the Army. These incentives are
    instrumental in filling critical Military Occupation Specialties.
        Enacted legislation last year has assisted the Army in this effort
    by increasing the cap on bonuses from $20,000 to $40,000. ($10,000 to
    $20,000 for Reserves) These bonuses are designed to attract the special
    needs of the Army and our applicants. These bonuses help us to compete
    against current market conditions now and in the future. The bonuses
    enable us to target critical skills in an increasingly college oriented
    market and meet seasonal (``quick-ship'') priorities.
        The Army's recruiting program is most effective when equipped with
    the right mix of incentives and bonuses. The Army College Fund is a
    proven expander of the high-quality market. College attendance rates
    are at an all-time high and continue to grow, with 66 percent of the
    high school market attending college within 1 year of graduation. The
    Army College Fund allows recruits to both serve their country and earn
    additional money for college.
        The Loan Repayment Program, with a maximum of $65,000 payment for
    already accrued college expenses, is another expander of the high-
    quality market. This Loan Repayment Program is the best tool for those
    who have college education credits and student loans. In fiscal year
    2005, 28 percent of our recruits had some college education credits.
        Other recently passed legislation we expect to assist in our
    recruiting mission includes the increase of enlistment age, the $1,000
    referral bonus (Pilot ends December 31, 2007), the expanded Student
    Loan Repayment Program to include officers, and the Temporary
    Recruiting Incentives Authority. Collectively these will directly
    assist the Army in achieving the fiscal year 2006 mission and build the
    entry pool for fiscal year 2007. The reality is that given the
    competition with industry, an improving economy, decreased support from
    key influencers and continuing deployments to wage the global war on
    terrorism, we need your continued support for the additional resources
    to maintain the All-Volunteer Army.

                               enlisted retention

        The Active Army has achieved all retention goals for the past 6
    years, a result that can be directly attributed to the Army's Selective
    Reenlistment Bonus (SRB) program and the motivation of our soldiers to
    accept their ``Call to Duty.'' The Active Army retained 69,512 soldiers
    in fiscal year 2005, finishing the year 108 percent of mission. The
    Army Reserve finished the year 102 percent of mission and the Army
    National Guard finished at 104 percent of mission.
        In fiscal year 2006, the Active Army must retain approximately
    64,200 soldiers to achieve the desired manning levels. This year's
    mission is similar in size to last year and we are on glide path and
    ahead of last year's pace. We remain confident that we will achieve all
    assigned retention goals. Thus far, the active Army has achieved 107
    percent of the year-to-date mission, while the Army Reserve has
    achieved 96 percent of the year-to-date mission and the Army National
    Guard has achieved 103 percent of their year-to-date mission. A robust
    bonus program facilitates meeting Army retention goals.
        We continue to review our Reenlistment Bonus Programs and their
    impacts on retaining sufficient forces to meet combatant commander and
    defense strategy needs. It is imperative for the Army to receive
    complete future funding of the SRB program to ensure program
    flexibility during the foreseeable future. Developing ways to retain
    soldiers directly engaged in the ongoing global war on terrorism is
    critical. We are now using a deployed reenlistment bonus as a tool to
    attract and retain quality soldiers with combat experience. This bonus
    aggressively targets eligible soldiers assigned to units in
    Afghanistan, Iraq, and Kuwait. Soldiers can receive a lump sum payment
    up to $15,000 to reenlist while deployed to Afghanistan, Iraq, or
    Kuwait. All components are benefiting from this program and we are
    realizing increased reenlistments among deployed soldiers.
        Worldwide deployments and an improving economy affect retention.
    All components closely monitor leading indicators including historic
    reenlistment rates, retirement trends, first term attrition, Army
    Research Institute surveys, and mobilization/demobilization surveys, to
    ensure we achieve total success.
        Moreover, all components are employing positive levers including
    force stabilization policy initiatives, updates to the reenlistment
    bonus program, targeted specialty pays, and policy updates to
    positively influence the retention program. Ultimately, we expect to
    achieve fiscal year 2006 retention success in the active Army, the Army
    National Guard, and the United States Army Reserve.

                               officer retention

        The Army is retaining roughly 92 percent of our company grade
    officers. Company grade loss rates (lieutenant and captain) for fiscal
    year 2005 were 8.55 percent, slightly below the historical Army average
    of 8.64 percent (fiscal years 1996-2004). First quarter, fiscal year
    2006 company grade loss rates were 8.4 percent. Immediately following
    September 11, 2001, company grade loss rates were at historical lows:
    7.08 percent and 6.29 percent respectively. The 3 years prior to
    September 11, 2001, company grade loss rates averaged 9.8 percent.
    Officer retention has taken on renewed interest not because of an
    increase in officer loss rates, but because of a significant force
    structure growth and modularity. The Army is short roughly 3,500 Active
    component officers, most of which are senior captains and majors. While
    the overall company grade loss rates are not alarming, the Army is
    being proactive and is working several initiatives to retain more of
    our best and brightest officers. These initiatives include higher
    promotion rates for captains and majors. The Army is currently
    promoting qualified officers above the Defense Officer Personnel
    Management Act promotion goals. These initiatives also include earlier
    promotion pin-on points. The Army is promoting officers sooner than
    historical averages in order to fill the expanding captain and major
    authorizations. Promotion to captain averages 38 months time-in-
    service, against the historical average of 42 months. Another
    initiative we are utilizing is expanding graduate school opportunities.
    The Army is offering up to an additional 200 fully funded graduate
    school opportunities to high performing company grade officers. These
    officers will begin attending school in the summer of 2006. This is
    above the normal 412 officers the Army currently sends to school.
    Branch and Posting for Active Service is another program that offers
    United States Military Academy and Reserve Officer Training Corps
    cadets their first choice for branch or assignment in exchange of 3
    additional years of Active-Duty service. To date, over 800 officers
    have signed up for these programs. Officer loss rates are consistent
    with historical trends; however, in order to fill the growth of officer
    modularity structure, we must retain more of our officers. We are
    confident that we can achieve this through these officer retention
    initiatives.

                                   stop-loss

        The focus of Army deployments is on trained and ready units. Stop-
    loss is a management tool that effectively sustains a force that has
    trained together, to remain a cohesive element throughout its
    deployment. Losses caused by non-casualty oriented separations,
    retirements, and reassignments have the potential to adversely impact
    training, cohesion, and stability in Operation Iraqi Freedom (OIF),
    Operation Enduring Freedom (OEF), and Operation Nobel Eagle (ONE)
    deploying units. The commitment to pursue the global war on terrorism
    requires us to provide our combatant commanders with cohesive, trained,
    and ready forces necessary that will decisively defeat the enemy. This
    effort requires us to continue the following two stop-loss programs,
    the first of which is Active Army Unit stop-loss. This applies to all
    Regular Army soldiers assigned units alerted or participating in OIF
    and OEF. The second program is the Reserve component unit stop-loss
    which is applicable to all Ready Reserve soldiers who are members of
    Army National Guard or United States Army Reserve who are assigned to
    Reserve component units alerted or mobilized for participation in ONE,
    OEF, and OIF.
        There is not a specific end date for the current use of stop-loss.
    The size of future troop rotations will in large measure determine the
    levels of stop-loss needed in the future. Initiatives such as Force
    Stabilization (3-year life cycle managed units), Modularity, and the
    program to rebalance/restructure the Active component/Reserve component
    for mix should alleviate much stress on the force and will help
    mitigate stop-loss in the future.
        The number of soldiers affected by stop-loss will decrease as the
    Army moves towards more lifecycle manned units, reduced deployment
    requirements and a smaller overseas footprint. For the National Guard
    and Reserve, unit stop-loss will still occur--at a reduced level--
    during periods of mobilization due to limited control for distributing
    personnel resulting from community based manning. The Army intends to
    terminate stop-loss as soon as operationally feasible or upon
    determination that it is no longer needed.
        As of the end of the month of December 2005 stop-loss potentially
    affected a total of 12,467 soldiers from all components (Active Army,
    7,620; Army National Guard, 2,429; and United States Army Reserve,
    2,418).

                     individual ready reserve mobilization

        The mission of the Individual Ready Reserve (IRR) is to provide a
    pool of soldiers who are ``individually ready'' for call-up. In August
    of 2004, the Army began its most current IRR mobilization effort. As of
    February 2006, over 5,347 IRR soldiers have served on Active-Duty in
    support of current operations. The IRR has been used primarily to fill
    deploying Reserve component forces supporting OIF and OEF and to fill
    individual augmentation requirements in joint organizations supporting
    combatant commanders.
        The IRR has improved the readiness of deploying Reserve component
    units and has reduced required cross-leveling from other Reserve
    component units, which allows us to preserve units for future
    operations. Currently there are over 2,200 IRR soldiers filling
    positions in deployed units, with approximately 500 more in the
    training process who will link up with their units by the end of March
    2006. Approximately 87 percent of the soldiers scheduled to report to
    Active-Duty through February 2006 reported for duty. We continue to
    work with the remaining 13 percent to resolve issues that may have
    precluded them from reporting.
        The IRR has also contributed to the manning of joint headquarters
    elements such as the Multi-National Force-Iraq, Combined Forces
    Command-Afghanistan, and others; which allows the Army to balance the
    contributions of the active and Reserve components in these
    headquarters. Over 365 IRR soldiers have served in individual
    augmentation positions. Another 143 IRR soldiers have served in a
    special linguist program to support commanders on the ground in the
    Central Command (CENTCOM) area of operations.
        The Army plans to continue use of the IRR and has developed a
    transformation plan to reset and reinvigorate the IRR. Previously a
    large number of the IRR were either unaware of their service
    obligations or not qualified to perform further service. The Army is
    implementing several programmed initiatives to transform the IRR into a
    more viable and ready prior-service talent bank. We created a new
    administrative category called the Individual Warrior. This category
    requires soldiers to participate in virtual musters, attend annual
    readiness processing and participate in training opportunities thus
    maintaining their military occupational specialties. To improve
    soldier's understanding of service commitments, the Army will develop
    and deliver expectation management briefings and obligation
    confirmation checklists to all soldiers at initial enlistments/
    appointments and again during transition. The Army is also conducting
    systematic screening to reconcile records and identify non-mobilization
    assets which will likely result in a reduction in the current IRR
    population and aid in establishing realistic readiness reporting.

                       military benefits and compensation

        Maintaining an equitable and effective compensation package is
    paramount in sustaining a superior force. A strong benefits package is
    essential to recruit and retain the quality, dedicated soldiers
    necessary to execute the National Military Strategy. In recent years,
    the administration and Congress have supported compensation and
    entitlements programs designed to support our soldiers and their
    families. An effective compensation package is critical to efforts in
    the global war on terrorism as we transition to a more joint,
    expeditionary, and cohesive force.
        The Reserve components represent a significant portion of the
    capability of the Total Force and are an essential element in the full
    spectrum of worldwide military operations. Both the Department of
    Defense (DOD) and Congress recognize the importance of appropriate
    compensation and benefits for these soldiers. The National Defense
    Authorization Act for Fiscal Year 2006 authorized the full rate of
    Basic Allowance for Housing for Reserve component members called or
    ordered to Active-Duty for greater than 30 days. We now have the
    ability to provide involuntarily mobilized soldiers replacement income
    should they make less money on Active-Duty than they do in their
    civilian employment. Additionally, we believe the increases to
    affiliation bonus and special pay for high priority units will ensure
    we can attract and retain our Reserve component force.
        The Army continues to develop programs to address the unique
    challenges we face with our recruiting and retention mission. The
    legislation authorized by Congress provides the flexible tools needed
    to encourage citizens to enlist in the Army. The Army is currently
    developing the pilot program for first-term initial entry soldiers to
    offer matching funds for Thrift Savings Plan contributions. We expect
    to announce this program 3rd quarter of this fiscal year. We are
    executing increases in enlistment and reenlistment bonuses. We continue
    to use the Critical Skills Retention Bonus (CSRB) to retain the
    valuable experience of our senior soldiers who are in high-demand, low-
    density critical skills such as Explosive Ordnance and Special
    Operations.
        We constantly look for ways to compensate our soldiers for the
    hardships they and their families endure and we appreciate your
    commitment in this regard. We evaluated military housing areas affected
    by Hurricane Katrina and will continue to address areas where soldiers
    may need additional housing assistance due to the impacts of disasters
    on the local housing market.
        The Army appreciates your emphasis and interest in soldiers and
    families and their need for financial support when they suffer a combat
    injury or become a casualty. Soldiers perform best when they know their
    families are in good care. Many of our surviving families are able to
    stay in Government housing for an extended period during their recovery
    from the loss of their spouse contributing to a better organized
    transition from the Service and allowing their children to continue the
    school year with the least amount of interruption. The changes to
    survivor benefits ensure all soldiers and their families are treated
    fairly and equitably. We are working with our sister services and the
    Office of the Secretary of Defense in developing the procedures to
    implement the Combat-injury Rehabilitation Pay to assist our injured
    soldiers in their time of need. These enhancements to survivor benefits
    and entitlements for our wounded soldiers demonstrate recognition of
    their ultimate contributions and a commitment to taking care of our
    own.

                                   well being

        A broad spectrum of services, programs, and initiatives from a
    number of Army agencies provide for the well-being of our people while
    supporting senior leaders in sustaining their joint warfighting human
    capabilities requirements. Our well-being efforts are focused on
    strengthening the mental, physical, spiritual and material condition of
    our soldiers, civilians, and their families while balancing demanding
    institutional needs of today's expeditionary Army. Allow me to take a
    few minutes to address three of our programs that directly support our
    Army at war, regardless of component.

                       u.s. army wounded warrior program

        Wounded soldiers from OEF and OIF deserve the highest priority from
    the Army for support services, healing and recuperation,
    rehabilitation, evaluation for return to duty and successful transition
    from Active-Duty if required. To date the Army has assisted nearly
    1,000 soldiers under this program.
        The Army Wounded Warrior (AW2) Program takes to heart the Warrior
    Ethos, ``Never leave a fallen comrade.'' The severely injured soldier
    can be assured the Army will be with him and do whatever it takes to
    assist a soldier during and after the recovery process.
        As soldiers progress through their care and rehab, AW2 remains with
    them to ensure all their immediate non clinical needs are met (securing
    financial assistance in the form of grants from a network of providers,
    resolving travel claims, and finding a place for family members to
    live). AW2 has resolved numerous wounded soldier pay issues and
    benefits to ensure all soldiers' pay is properly protected and
    monitored while they recover. AW2 is staffed now with an Army Finance
    Specialist, Veterans' Affairs (VA) Specialist, Human Resources and
    Employment Specialists to get to the root of the problems and fix them
    quickly.
        AW2 has taken active roles in changing policy to resolve soldier
    debts, remain on Active-Duty despite traumatic injuries (e.g.
    amputations, blindness), and working with public and private sector
    employers to provide meaningful employment. Corporations interested in
    our wounded soldiers include Disney, Evergreen Aviation Intl, Osh-Kosh
    Trucking and other Federal agencies as well.

                  centcom rest and recuperation leave program

        A fit, mission-focused soldier is the irreducible foundation of our
    readiness. For soldiers fighting the global war on terrorism in the
    CENTCOM area of responsibility, the Rest and Recuperation (R&R) Leave
    Program is a vital component of their well-being and readiness.
        Every day, flights depart Kuwait City International Airport
    carrying hundreds of soldiers and DOD civilians to scores of leave
    destinations in the continental United States and throughout the world.
    Such R&R opportunities are essential to maintaining combat readiness
    and capability when units are deployed and engaged in such intense and
    sustained operations. Since September 25, 2003, 311,949 soldiers and
    DOD civilians have participated in this highly successful program. They
    have benefited through a break from the tensions of the combat
    environment and from the opportunity to reconnect with family and loved
    ones.
        General Abizaid, the CENTCOM Commander has stated, ``The Rest and
    Recuperation Leave Program has been a major success.'' Additionally,
    this program also generates substantial, positive public reaction and
    increased political support for U.S. objectives in the global war on
    terrorism. The R&R Leave Program has become an integral part of
    operations and readiness and is a significant contributor to our
    soldiers' success.

                            deployment cycle support

        Deployment Cycle Support (DCS) is a comprehensive process focused
    on preparing soldiers, their families, and deployed Department of the
    Army civilians for their return and reintegration into their families,
    communities, and jobs.
        As of February 10, 2006, nearly 400,000 (387,550) soldiers have
    completed the in-theater Redeployment Phase DCS tasks prior to
    returning home to their pre-deployment environment. The DCS phase is
    expanding to include all phases of the deployment cycle (train up/
    preparation, mobilization, deployment, employment phases).
        The bravery and sacrifices of today's soldiers and family members
    are in the tradition set by our retired soldiers and family members.
    Those who fight the global war on terrorism follow in the footsteps of
    retired soldiers who fought in World War II, Korea, Vietnam, and
    Operation Desert Storm and the families who supported them.

                              retirement services

        I would like to also point out that our efforts extend beyond our
    Active-Duty population. The Army counts on its retired soldiers to
    continue to serve as mobilization assets and as volunteers on military
    installations. Retired soldiers are the face of the military in
    communities far from military installations and often act as adjunct
    recruiters, encouraging neighbors and relatives to become part of their
    Army.
        Retired soldiers and family members are a force of more than a
    million strong. Retired soldiers receiving retired pay and retired
    Reserve soldiers not yet age 60 and not yet receiving retired pay,
    total almost 800,000 and their spouses and family members brings this
    total to over a million.

                                   conclusion

        In our efforts to maintain your All-Volunteer Army, we need the
    continued support of Congress for the appropriate level of resources.
    In addition we need your support as national leaders to affect
    influencers and encourage all who are ready to answer this Nation's
    call to duty. To ensure our Army is prepared for the future, we need
    full support for the issues and funding requested in the fiscal year
    2006 supplemental and the fiscal year 2007 President's budget to
    support the Army manning requirements given the current operational
    environment.
        Once again thank you for the opportunity to appear before you
    today. I look forward to answering your questions.

        Senator Graham. General Brady.

      STATEMENT OF LT. GEN. ROGER A. BRADY, USAF, DEPUTY CHIEF OF
         STAFF, MANPOWER AND PERSONNEL, UNITED STATES AIR FORCE

        General Brady. Thank you, Senator Graham and Senator
    Nelson. I'd like to echo General Hagenbeck's comments. The
    committee has been extraordinarily helpful to us in making sure
    that we retain the quality-of-life that our men and women need
    so much.
        I'll also make my remarks very brief, given the limits on
    time.
        This year, the Air Force is in the situation of balancing
    books. We have huge challenges, like the other Services do. So,
    we're balancing investment programs to recapitalize the oldest
    fleet we've ever flown. We're also looking at getting the right
    structure, the right operation and maintenance accounts, and
    the right people accounts. People are the most important thing
    we have. They also turn out to be the most expensive. So, we
    are working very hard to make sure that we have the very best
    people, with the right skills, in the right places. We
    appreciate your help in assisting us in shaping our force in a
    way that recognizes the tremendous sacrifice and contribution
    of our people, and, at the same time, being responsible in the
    way that we provide the force to this Nation.
        Thank you, and I look forward to any questions that you
    have.
        [The prepared statement of General Brady follows:]

              Prepared Statement by Lt. Gen. Roger A. Brady, USAF

                                  introduction

        We are America's airmen. Our mission is to deliver sovereign
    options for the defense of the United States of America and its global
    interests--we fly and we fight--in air, space, and cyberspace. For the
    past 15 years, our Air Force team has proven its mettle and skill every
    day. Since the days of Operation Desert Storm, we have been globally
    and continuously engaged in combat. We will continue to show the same
    ingenuity, courage and resolve and achieve success in our three most
    important challenges: winning the global war on terrorism; developing
    and caring for our airmen; and maintaining, modernizing, and
    recapitalizing our aircraft and equipment.
        To ensure we have the right sized and shaped force to face the
    challenges of the new century, the Air Force is transforming itself to
    meet the threats of the future security environment by recapitalizing
    our force to develop capabilities across a range of sovereign options
    for our Nation's leaders. However, we must judiciously balance our
    transformation with the ongoing global demands of the global war on
    terrorism; hence, transforming the Air Force of the 21st century will
    require reductions in our legacy force structures; bold, new thinking
    to derive process efficiencies and development of innovative
    organization structures to facilitate our recapitalization efforts.
        Our people have been the key to our success. We will continue to
    look for ways to maintain and improve their training, their personal
    and professional development and their quality-of-life, so they may
    continue to meet the commitments of today while preparing for the
    challenges of tomorrow.
    Force Shaping
        For the past 18 months, the Air Force has reduced our Active-Duty
    end strength to congressionally-authorized levels and taken action to
    relieve some of our most stressed career fields. The 2004-2005 Force
    Shaping Program allowed officers and enlisted personnel to separate
    from Active-Duty service earlier than they would otherwise have been
    eligible. In addition to voluntary force shaping measures, the Air
    Force significantly reduced enlisted accessions in 2005 to help meet
    our congressional mandate.
        While we met our 2005 end strength requirement, we began 2006 with
    a force imbalance: a shortage of enlisted personnel and an excess of
    officer personnel, principally among those officers commissioned from
    2000 to 2004. This imbalance created several unacceptable operational
    and budgetary impacts. Consequently, we took several actions to ensure
    our force is correctly sized and shaped to meet future challenges and
    to reduce unprogrammed military pay costs. First, we increased our
    enlisted accession target for 2006 to address the enlisted imbalance.
    Second, we continued to encourage qualified officers, especially those
    commissioned in 2000 and later, to consider voluntary options to accept
    service in the Air National Guard, Air Force Reserve, civil service, or
    as an interservice transfer to the Army.
        Additionally, we are institutionalizing the force shaping authority
    granted in the National Defense Authorization Act for Fiscal Year 2005
    to restructure our junior officer force. Only after exhausting all
    efforts to reduce officer end strength by voluntary means, we will
    convene a Force Shaping Board in 2006 to consider the performance and
    potential of all eligible officers commissioned in 2002 and 2003. This
    board will be held annually thereafter, as required, to properly shape
    and manage the officer corps to meet the emerging needs of the Air
    Force. Essentially, the Force Shaping Board will select officers for
    continued service in our Air Force. Current projections indicate that
    we need about 7,800 of these eligible officers (2002 and 2003 year
    groups) to continue on Active-Duty. Approximately 1,900 officers will
    be subject to the force reduction. Exercising this authority is
    difficult, but our guiding principle is simple--we must proactively
    manage our force to ensure the Air Force is properly sized, shaped, and
    organized to meet the global challenges of today and tomorrow. To this
    end, we will continue to look at legislation necessary to properly
    shape our total force of Active-Duty, civilian employees, Air National
    Guard and Air Force Reserve airmen.
        Balancing the Total Force
        In addition to maintaining and shaping the Active-Duty Force, we
    must continue to focus on the balance of forces and specialties between
    Regular, Air National Guard and Reserve components, as well as our
    civilian employees and contractor partners--the Total Force. We are
    diligently examining the capabilities we need to provide to the
    warfighter and to operate and train at home. We continue to realign
    manpower to our most stressed areas and are watchful for any new areas
    that show signs of strain.
        As we look to the future in implementing Base Realignment and
    Closure (BRAC) and Quadrennial Defense Review (QDR) decisions, we must
    ensure a seamless transition to new structures and missions while
    preserving the unique capabilities resident in our Regular Air Force,
    Air National Guard and Reserve communities. Examining functions for
    competitive sourcing opportunities or conversion to civilian
    performance will continue to be one of our many tools for striking the
    correct balance of missions across the Total Force.
        Force Development
        The Air Force's Force Development construct is a Total Force
    initiative that develops officers, enlisted members, and civilian
    employees from the Regular Air Force, the Air National Guard and the
    Air Force Reserve. The fundamental purpose of force development is to
    produce leaders at all levels with the right capabilities to meet the
    Air Force's operational needs by leveraging deliberate training,
    education and experience opportunities.
        To succeed internationally, as an Aerospace Expeditionary Force,
    and in the global war on terrorism, it is essential to breakdown the
    barriers of culture and language and set new patterns of thinking. This
    necessitates understanding and successfully using knowledge of language
    and culture to enhance mission success. Our goal is to rigorously
    educate our force, as well as, provide additional learning
    opportunities that will enable airmen to become internationally savvy.
    In our continuums of learning and education, additional emphasis is
    being placed on language and culture. Officers at the Air Force Academy
    and Reserve Officer Training Corps (ROTC) will receive a foundation in
    a foreign language. As our officer and noncommissioned officer (NCO)
    Corps progress through their career they will receive additional
    education to develop cultural understanding and awareness as a
    foundation for building relationships. For example, at our intermediate
    level education we are instituting courses to develop regional cultural
    awareness and study of a corresponding language such as Spanish,
    French, Arabic, or Chinese. At our senior level education we will
    continue that depth of knowledge emphasizing cross-cultural
    communication and negotiation skills as a foundation for planning and
    executing military operations.
        In addition, today's dynamic security environment and expeditionary
    nature of air and space operations require a cadre of Air Force
    professionals with a deeper international insight, foreign language
    proficiency, and cultural understanding. The International Affairs
    Specialist Program is a force development initiative that offers airmen
    the opportunity to fully develop these key military competencies.
    Officers will receive more in-depth formal training and education with
    an appropriate follow-on assignment. Many officers will do this as a
    well-managed, single-career broadening opportunity to gain
    international political-military affairs experience. But, for some this
    will be a more demanding developmental opportunity creating a true
    regional expert possessing professional language skills. These officers
    will be carefully managed to remain viable and competitive. To ensure
    all these efforts are synchronized in our development of the force, I
    established a Foreign Language and Culture office under the Air Force
    Senior Language Authority within the Directorate of Manpower and
    Personnel.
        To operationalize force development, the Air Force Personnel Center
    created a division dedicated to supporting corporate and career field
    development team needs. Development teams have now been incorporated
    into the officer assignment process and they now guide assignment of
    all officer career fields. Additionally, development teams recommend
    officers for special selection boards and developmental education
    opportunities.
        The Air Force is also deliberately developing our enlisted airmen
    through a combined series of educational and training opportunities. We
    are exploring new and exciting avenues to expand our process beyond the
    current system in place today. Each tier of the enlisted force will see
    changes to enlisted development. Airmen (E-1 to E-4) will be introduced
    to the enlisted development plan, increasing their knowledge and
    solidifying future tactical leadership roles. The NCO tier will be
    encouraged and identified to explore career-broadening experiences and
    continuing with developmental education. Our Senior NCO tier will see
    the most dramatic changes as we explore the use of development teams in
    conjunction with assignment teams to give career vectoring and
    strategic level assignments. Institutionalizing the practice of
    development as a part of enlisted Air Force culture is paramount for
    supervisors, commanders, and senior leaders.
        On the civilian side, the Air Force is making significant progress
    in civilian force development as we align policy, processes and systems
    to deliberately develop and manage our civilian workforce. We have
    identified and mapped over 97 percent of all Air Force civilian
    positions to career fields and have 15 Career Field Management Teams in
    place with 3 additional management teams forming this year.
    Additionally, we manage various civilian developmental opportunities
    and programs, with our career-broadening program providing several
    centrally funded positions, specifically tailored to provide career-
    broadening opportunities and professionally enriching experiences.
        Recruiting/Retention
        After intentionally reducing total accessions in 2005, the Air
    Force is working to get the right mix of officer and enlisted airmen as
    we move to a leaner, more lethal and more agile force. We will align
    the respective ranks to get the right person, in the right job, at the
    right time to meet the Air Force mission requirements in support of the
    global war on terrorism, the Joint Force and the Air Force's
    expeditionary posture.
        A key element for success is our ability to continue to offer
    bonuses and incentives where we have traditionally experienced
    shortfalls. Congressional support for these programs, along with
    increases in pay and benefits and quality-of-life initiatives, has
    greatly helped us retain the skilled airmen we need to defend our
    Nation.
        Personnel Services Delivery
        To achieve the Secretary of Defense's objective to shift resources
    ``from bureaucracy to battlefield,'' we are overhauling Air Force
    personnel services. Our personnel services delivery initiative
    dramatically modernizes the processes, organizations and technologies
    through which the Air Force supports our airmen and their commanders.
        Our goal is to deliver higher-quality personnel services with
    greater access, speed, accuracy, reliability, and efficiency. The Air
    Force has been able to program the resulting manpower savings to other
    compelling needs over the next 6 years. This initiative enhances our
    ability to acquire, train, educate, deliver, employ, and empower airmen
    with the needed skills, knowledge, and experience to accomplish Air
    Force missions.
        National Security Personnel System
        Our civilian workforce will undergo a significant transformation
    with implementation of the Department of Defense (DOD) National
    Security Personnel System (NSPS). NSPS is a simplified and more
    flexible civilian personnel management system that will improve the way
    we hire, assign, compensate, and reward our civilian employees. This
    modern and agile management system will be responsive to the national
    security environment, preserve employee protections and benefits, and
    maintain the core values of the civil service.
        NSPS design and development has been a broad-based, participative
    process to include employees, supervisors and managers, unions,
    employee advocacy groups and various public interest groups. We plan to
    implement these human resource and performance management provisions in
    three phases called ``spirals.'' NSPS is the most comprehensive new
    Federal personnel management system in more than 50 years, and it's a
    key component in the DOD's achievement of a performance-based, results-
    oriented Total Force.
        Caring for Airmen
        Combat capability begins and ends with healthy, motivated, trained,
    and equipped airmen. We must remain committed to providing our entire
    Air Force team with world class programs, facilities and morale-
    enhancing activities. Our ``Fit to Fight'' program ensures airmen
    remain ready to execute our expeditionary mission at a moment's notice,
    and our food service operations further complement an Air Force healthy
    lifestyle.
        Through various investment strategies in both dormitories and
    military family housing, we are providing superior living spaces for
    our single airmen and quality, affordable homes for our airmen who
    support families. Our focus on providing quality childcare facilities
    and programs, on and off installations, enables our people to stay
    focused on the mission, confident that their children are receiving
    affordable, quality care. The Air Force is a family, and our clubs and
    recreation programs foster and strengthen those community bonds,
    promoting high morale and an esprit de corps vital to all our
    endeavors.
        Additionally, we are equally committed to ensuring that all airmen
    in every mission area operate with infrastructure that is modern, safe
    and efficient, no matter what the mission entails--from depot
    recapitalization to the bed down of new weapon systems. Moreover, we
    must ensure airmen worldwide have the world class training, tools and
    developmental opportunities that best posture them to perform with
    excellence. We also continually strive to provide opportunities and
    support services that further enable them to serve their Nation in a
    way that leaves them personally fulfilled, contributes to family
    health, and provides America with a more stable, retained, and capable
    fighting force.

                                   conclusion

        As we continue to develop and shape the force to meet the demands
    of the Air Expeditionary Force, we continue to seek more efficient
    service delivery methods, opportunities to educate our future leaders,
    and make the extra efforts required to recruit and retain the
    incredible men and women who will take on the challenge of defending
    our Nation well into the 21st century. While doing so, we will remain
    vigilant in our adherence to our core values of Service, Integrity, and
    Excellence which make ours the greatest Air and Space Force in the
    world.

        Senator Graham. Admiral Harvey.

      STATEMENT OF VADM JOHN C. HARVEY, JR., USN, CHIEF OF NAVAL
                     PERSONNEL, UNITED STATES NAVY

        Admiral Harvey. Good morning, sir. Thank you for this
    opportunity to appear before you and make these comments.
        I've learned that it's always a good idea to follow the
    example of General Hagenbeck; and so, I will also suspend a lot
    of what I had looked forward to talking about, in order to
    leave more time for your questions.
        One of the things I want to say is that, as we reshape and
    adapt the U.S. Navy, as we are in a very big way now, to defeat
    the emerging threat, we shall continue to be the preeminent
    naval fighting force in the world. At the very heart of this
    Navy, at the core of its strength is our people, Active and
    Reserve, military and civilian, the most fundamental elements
    of our readiness and strength. They are making significant
    sacrifices, as you alluded to, sir, to protect this Nation and
    prosecute this global war on terrorism, and these patriotic and
    professional Americans continue to perform brilliantly for us,
    and you have every reason to be proud of them.
        We are extremely grateful for your commitment, and the
    commitment of this committee, to the men and women of the U.S.
    Navy and to the programs that make them the premier maritime
    fighting force, and that sustain them and their families. On
    behalf of all our sailors and our civil servants and their
    families, I'd like to thank you and your committee for your
    continued and unwavering support.
        Thank you very much, sir.
        [The prepared statement of Admiral Harvey follows:]

              Prepared Statement by VADM John C. Harvey, Jr., USN

                         introduction--a changing world

        Chairman Graham, Senator Nelson, distinguished members of the
    Personnel Subcommittee, thank you for providing me with this
    opportunity to appear before you today.
        Our Navy is adapting rapidly to the new challenge of a very changed
    world. We are transforming from the largely blue water force of the
    Cold War to a much more broadly and jointly engaged force. Our sailors
    today are pursuing everywhere the enemy in the global war on terrorism.
    While we man the ships and aircraft of a matchless fleet in every one
    of the world's oceans, we are also fighting on the mountaintops of
    Afghanistan, in the deserts of Iraq, in the Horn of Africa and
    increasingly near shore, on rivers and inland waterways. We can also be
    found providing humanitarian relief to Tsunami victims in Indonesia and
    Southeast Asia, earthquake victims in Pakistan, mudslide victims in the
    Philippines, and to flood victims on our own Gulf Coast. The pace of
    our missions has changed. We no longer operate under a peacetime tempo,
    but rather with a wartime sense of urgency. Our enemies are not
    predictable--they rely on surprise, confusion and uncertainty. We can
    no longer be reactive to threats, but must be proactive and focused on
    capabilities we can apply to rapidly changing situations. We must be
    combat ready--every day.
        Navy operations are requiring us to get the most we can out of our
    available resources--to deliver ever-increasing capability from an
    increasingly talented and educated force. At the same time, our market
    for this talent is changing--getting more competitive. The increasing
    pace of technological change, globalization, and demographic changes
    will significantly impact the pool of talent from which we draw the
    Navy's workforce. We will need to successfully compete in a more
    dynamic labor market, with a smaller, more diversified population.
        To meet Navy workforce demands in the 21st century, we must take a
    broader view--we must take a Total Force approach. To be successful in
    delivering the Navy workforce of the 21st century and beyond we must
    start planning now. We are positioning ourselves to deliver a more
    responsive Navy workforce with new skills, improved training and better
    preparation to increasingly deliver a wide range of capabilities
    precisely where needed. Navy is meeting the dynamic national defense
    needs by creating a strategy for our people that addresses the total
    Navy workforce--Active, Reserve, civil service, and contractors, and is
    capability-based--i.e., defined by the work and workforce required to
    carry out Navy and joint missions. We are building this long-term
    strategy through integration, collaboration, and coordination of all
    the Manpower Personnel Training and Education (MPT&E) organization. We
    are capitalizing on Navy's Enterprise approach, and using our initial
    efforts as the single manpower resource sponsor as a launching point
    for our new capabilities-based approach. We will deliver this strategy
    by significantly changing the way we do business, and implementing new
    Sea Warrior systems that enable more flexible and responsive
    development and deployment of the total Navy workforce. Underlying the
    capability-based approach, and necessary to support our new sea warrior
    systems is a newly merged Manpower, Personnel, Training and Education
    Organization.
    Strategy for Our People
        The strategy for our people provides the guidance and tools to
    assess, train, distribute, and develop our manpower to become a
    mission-focused force that meets the warfighting requirements of the
    Navy. It gives us a roadmap--with objectives, desired effects, and
    specific tasking that, when executed, will transform the MPT&E domain.
    The goal is to be postured better to determine, based on the Department
    of Defense (DOD) and Department of the Navy (DON) strategic guidance
    and operational needs, the future force--capabilities, number, size,
    and mix. The goal of a transformed MPT&E is to define and deliver the
    required Navy workforce capabilities at best value in an uncertain
    future. Specifically, a transformed MPT&E domain will deliver:

             A Workforce Responsive To The Joint Mission: Based on
            national defense strategies. Derived from, and responsive to,
            the needs of joint warfighters as described in DOD guidance.
             A Total Force: Address the Total Force--Active and
            Reserve military, civil service and contractor. Provide for a
            flexible mix of manpower options to meet warfighting needs
            while managing risk.
             Cost Effectiveness: This ability to balance across the
            total workforce permits the Navy to deliver its future
            workforce at best value, within fiscal constraints and
            realities.

    Single Manpower Resource Sponsor
        One of the first steps in moving toward a new approach for MPT&E
    was to review the ``glideslope.'' Previous estimations of current and
    future manpower needs focused on identifying the lowest possible
    execution end strength limit--determining the right number for the
    current mission. It was based on managing ``the numbers.'' As we move
    to a capabilities-based approach, we will focus on determining the
    right workforce (number, skills, and mix) based on current and future
    missions--based on an analysis of the work and work management,
    balanced with cost and operational risk. We examined and analyzed the
    Navy's shipbuilding and aircraft procurement plans. We reviewed the
    Quadrennial Defense Review (QDR) and understand its implications on
    Navy missions and force structure. We have explored sea/shore rotation
    options. We understand and now incorporate these drivers into the
    definition and development of our workforce requirements and
    compensation needs. Figure 1 describes the past and future approaches.

        Future definitions of MPT&E requirements and resource needs will be
    based on significant collaboration with the Navy Enterprises, which use
    DOD and DON strategic guidance to define their warfighting capabilities
    and, subsequently, their workforce needs. The Enterprise construct
    gives us a good start in gaining understanding of missions,
    requirements, and capabilities. Using current billet baselines, we will
    validate the Enterprise domains and the associated work using a value
    chain assessment. The Navy Enterprises will be asked to define new
    capability requirements and asked where we can take risk or divest
    functions and workload, allowing the Navy to identify ``puts and
    takes'' (billets needed and offsets). From this information we can
    build forward-looking, capability-based, affordable demand plans for
    recruiting, retention, and training.
    Sea Warrior
        Sea Warrior evolved over several years from three separate efforts
    to transform the manpower, personnel, and training domains (Figure 2).
    These separate efforts were merged into a single program, and the
    projects integrated to provide cohesive, coordinated products. Sea
    Warrior comprises the training, education, and career-management
    systems that provide for the growth and development of our people and
    enhance their contribution to joint warfighting ability. Sea Warrior
    delivers sailors greater career management and enables them to take a
    more active role in furthering their careers through education and
    training opportunities. The goal is to create a Navy in which the Total
    Force--Active, Reserve, civil service, and contractors--are optimally
    accessed, trained and assigned so they can contribute their fullest to
    mission accomplishment.
        This year we deliver the initial functionality of Sea Warrior
    (known as Spiral 1). Sea Warrior Spiral 1 fiscal year 2006 deliverables
    consists of four systems that provide our sailors with better
    information to plan their Navy careers. My Course provides an
    individualized roadmap of the training needed to meet the requirements
    of a desired position. Life-Long Learning is the longer-term view of
    meeting the sailor's professional and personal education and training
    goals. Certifications and qualifications, along with the Five Vector
    Model Advancement Index, provide sailors online assistance to bridge
    navy and civilian credentialing, as well as additional career planning
    tools.

         changing demand signals . . . new and non-traditional missions
    Expeditionary Combat Command
        We established the Navy Expeditionary Combat Command (NECC) in
    recognition of the need to establish combat capability in the non-blue
    water regions adjacent to the littoral. Some of these new missions
    (such as Riverine Warfare and Civil Affairs) will be enduring while
    others (such as Detainee Operations) may be transitory in nature. NECC
    will provide the oversight of the unique training and equipping these
    challenging missions will require.
    Individual Augmentations (Iraq, Afghanistan, Horn of Africa)
        The Navy has been proactive in assuming nontraditional missions in
    order to take maximum advantage of the superb capabilities inherent in
    our force. As a result, Navy augmentation to ground forces in the
    Central Command (CENTCOM) area of responsibility has grown from
    approximately 2,000 in December 2003 to over 10,000 today. Navy is
    leaning forward to assume even more combat, combat support and combat
    service support missions. For sailors in today's Navy it is not a
    question of whether they will do an augmentation tour but when.
    Increased Interaction with Global Partners and Allies
        Given the changes in the strategic landscape since September 11,
    the diversity of post-Cold War cultures we now interact with, and the
    unique security challenges of the 21st century, our success depends in
    large part on our ability to understand both adversaries and partners
    around the globe. Development and improvement of our foreign language
    skills, regional expertise, and awareness of foreign cultures is
    essential to conducting successful operations.
        Accordingly, Navy is developing a Language, Regional Expertise and
    Culture (LREC) Strategy tailored to our mission. This strategy
    acknowledges language skill and regional expertise as key warfare
    enablers and provides overarching guidance for their development in the
    force. A core element of this effort is the reinvigoration of Navy's
    Foreign Area Officer (FAO) Program. FAOs are a professional cadre of
    officers with regional expertise and language skills who provide
    support to fleets, component commanders, combatant commanders, and
    joint staffs. We are also closely examining Navy's Personnel Exchange
    Program (PEP) with the intent of better distributing PEP members
    according to Navy component commander regional engagement strategies to
    enhance interoperability and mutual understanding with emerging partner
    nations.

                                changing market

        As Navy's technology becomes increasingly sophisticated and the
    world in which we deploy becomes increasingly complex, we need more
    capable and better-educated sailors. To enlist the very high quality
    recruits necessary for today's Navy, we are competing head to head with
    business in a robust economy to attract the best and brightest of
    America's youth.

                          size and shape of the force

    Recruiting and Retaining the Right Force
        Our future Navy must be shaped to best support the global war on
    terrorism while still preserving our ability to prevail in major combat
    operations. Our force must be sized properly and shaped to meet the
    uncertain and dynamic security environment.
    One Force
        Navy has worked aggressively to integrate our Active and Reserve
    components into a single, seamless force, which will support a more
    operational and flexible unit structure. Together, as one team, we are
    providing all of the capabilities and skills required by Navy. Our
    experienced Navy reservists augment the Active Force with the right
    numbers of personnel, in the right skills and at the right time to meet
    mission demands. For example, we directly integrate our Fleet
    Replacement Units (FRU) with Active component units. The FRU supports
    the Fleet Response Plan by providing Reserve component sailors who are
    already trained to operate the same equipment and thus enables a smooth
    transition to mobilization and/or deployment. We also reduce training
    costs by having all sailors train on the same equipment. Over 38
    percent of Construction Battalion (Seabees) personnel deployed to Iraq
    are reservists and 791 Expeditionary Logistics Support Force sailors
    are filling a vital combat service support role as customs inspectors.
    A detachment from Helicopter Combat Support Special Squadron FIVE is
    providing direct support to ground forces engaging the enemy.
        Reserve sailors are also contributing to operational support while
    on drills (IDT), annual training, Active-Duty for training (ADT), and
    Active-Duty for special work (ADSW). During the past year, these
    sailors provided over 15,000 man-years of support to the fleet. This
    support is the equivalent of 18 Naval Construction Battalions or two
    Carrier Battle Groups.
    Active Component End Strength
        Navy has reduced active end strength steadily since 2003 using a
    controlled, measured approach to shape and balance the skill mix within
    the force to maximize warfighting readiness. Several initiatives have
    played a key role in allowing us to reduce active military manpower.
    These initiatives include optimal manning and substitution of civilian
    personnel in certain formerly military positions. We continuously
    assess the optimal mix of military manpower, procurement, and
    operations and maintenance required in light of evolving technology,
    missions, and Navy warfighting capabilities. We are positioning
    ourselves to take on new or increased roles in mission areas such as
    riverine operations, Naval Expeditionary Security Force and Special
    Operations; we have focused significant efforts to recruit the right
    individuals, significantly reduce post-enlistment attrition, and retain
    highly qualified and motivated sailors. The fiscal year 2007
    President's budget supports, and the Defense Authorization Request
    seeks, a Navy Active-Duty strength authorization of 340,700. (Figure 3)

    Reserve Component End Strength Request
        The Navy Reserve Zero-Based Review identified those capabilities
    best provided by Reserve component members to support Navy missions on
    a periodic and predictable basis. Accordingly, Reserve component end
    strength for fiscal year 2007 is requested to be 71,300.

    Achieving the Right Force Mix
        Three components are key to achieving and affording the right force
    mix within the end strength numbers requested. First--recruiting the
    numbers and quality of personnel to fully man needed skill sets;
    second--retaining personnel whose skill sets and experience are in
    demand; and third--incentivizing the voluntary separation of personnel
    whose skill sets are in excess or for which a need is no longer
    foreseen.
    Conversion of Military Positions to Civilian Performance
        Navy is intent on shaping our workforce so the military can focus
    on military work. Conversion of former military positions to civilian
    positions allows us to better align the military personnel to
    warfighting functions. The programmed conversions target non
    warfighting functions previously staffed and performed by military
    personnel. Programmed conversions include: transfer of U.S.S. vessels
    to Military Sealift Command (civilian mariners); medical; legal
    services; training support; and headquarters administrative functions.

                                   recruiting

    Active Enlisted Navy Recruiting
        With the judicious application of recruiting incentives authorized
    by Congress, fiscal year 2005 marked the seventh consecutive year we
    achieved overall Active-Duty accession mission. It is very important to
    note that we met our Active-Duty accession goal while maintaining high
    recruit quality standards.
        We have been successful in our active enlisted recruiting. Over the
    last 5 years, the quality of Navy accessions has increased
    significantly. In 2001, 90 percent of accessions were High School
    Diploma Graduates (HSDG), 63.3 percent scored in the Test Score
    Categories (TSC) I-IIIA, and 4.7 percent had some college. In fiscal
    year 2005, we met 100 percent of our Active enlisted accession goal,
    with 95 percent HSDG and 70 percent in TSC I to IIIA. Eleven percent of
    accessions had some college. In addition to overall quality goals, we
    met TSC I-IIIA goals for all diversity groups for the first time in
    history and increased the TSC I-IIIA percentage of every diversity
    group over the previous year. This improved quality has contributed to
    reductions in first-term attrition and changes in training regimen that
    reduced training time and improved fleet readiness. Our emphasis on
    quality continues.
        It is becoming increasingly clear that we are competing in a far
    more challenging environment where unemployment is predicted to
    continue at low levels and where we are experiencing a significantly
    reduced propensity for America's youth to enlist in the Armed Forces.
    Future Active and Reserve recruiting success will require continued and
    perhaps enhanced authority for tools such as Enlistment Bonuses.
        We continue to fall short of goals in recruiting for certain highly
    demanding and specialized communities, specifically Special Operations
    (SPECOPs) and Naval Special Warfare (SPECWAR). These special programs,
    with some of the most demanding training in the world, require
    exceptionally bright and physically fit individuals. The health of
    these communities is very important to the Navy's success in the global
    war on terrorism and requires us to place special emphasis both on
    recruiting and on fleet accessions. As a Navy we have taken the
    following measures to improve the enlisted SEAL and Special Warfare
    Combatant Crewman manning from their 83 percent and 79 percent levels
    (respectively):

             Established a SEAL Rating program which will ship
            recruits directly to Basic Underwater Demolition School after
            Recruit Training Command Basic Training.
             Established a SEAL recruiting goal for each Navy
            Recruiting District (NRD).
             Designated a SEAL coordinator in each NRD to monitor
            all SEAL recruits in the Delayed Entry Program (DEP). In the
            near future we will also hire former Special Warfare and
            Special Operations personnel as contractors to assist districts
            in selection, testing, education and mentoring of new recruits
            for Naval Special Warfare programs.
             Directed Commander Navy Recruiting Command NRDs to
            administer the Physical Standards Test prior to shipping the
            recruiting with a SEAL Challenge contract to RTC by March 2006.

        Similar initiatives have also been implemented to address
    shortfalls in our very demanding programs for enlisted Explosive
    Ordnance Disposal and Fleet Diver communities.
        Another area of great challenge for us is Reserve Enlisted
    Recruiting.

    Reserve Enlisted Recruiting
        Recruiting for the Navy Reserve is fundamentally different from
    recruiting for Active-Duty. Whereas for most Active-Duty recruits the
    Navy will provide the first real job and the start of a career, those
    entering the Navy Reserve are either continuing service after leaving
    Active-Duty or enlisting for a part-time commitment.
        In fiscal year 2005 Navy only achieved 85 percent of goal for
    Reserve enlisted recruits. While fiscal year 2006 attainment is ahead
    of the pace from fiscal year 2005, we are still not on track to make
    goal for this year. Much of the shortfall for fiscal year 2005 and
    fiscal year 2006 was in those ratings, which directly support global
    war on terrorism. These ratings include Seabees, Hospital Corpsmen,
    Master at Arms and Information Specialists. These ratings are
    particularly challenging to fill because sailors with prior naval
    service primarily populate them. The issue here is two-fold. First, is
    high Active-Duty retention and the consequently low supply of eligible
    recruits with the specific rating experience. Second, some sailors in
    these ratings saw high operational tempo (OPTEMPO) during their Active
    service and are now hesitant to join the Reserves and face the
    possibility of further mobilization.
        To address our Reserve recruiting challenges and to promote
    continued success in recruiting the Active Force, Navy initiated a
    process in fiscal year 2003 that is leading us to a single recruiting
    force and command responsible for supplying all our manpower needs. We
    have now nearly completed the consolidation of Active and Reserve
    infrastructure and recruiting forces. In the near future, the six
    Reserve area commands that oversaw Reserve recruiting and two of the
    four Active regions will be closed, leaving two regions in charge of
    both Active and Reserve recruiting. We have determined the most
    efficient design for the recruiting infrastructure and the headquarters
    workforce and will reduce the number of NRDs conducting mission
    operations. Through the 2005 Base Realignment and Closure process, 5
    NRDs are slated for closure, with their territory being realigned to
    the remaining 26 districts. Our recruiting command realignment will be
    complete by June 2006.
        We are also increasing the amount of enlistment bonuses for both
    prior service and non-prior service Reserve accessions. Congress raised
    the legislative cap from $10,000 to $20,000 for this important program
    that will be key to enhancing the attractiveness of service in the
    Reserves for those currently in our targeted ratings.
        Other measures being taken to address our Reserve recruiting
    shortfall include implementation of expanded authorities provided by
    Congress in the National Defense Authorization Act (NDAA) for Fiscal
    Year 2006. These include: authority to pay Reserve Affiliation Bonuses
    in lump sum, enhanced high-priority unit assignment pay; and increases
    in the amount of the Reserve Montgomery G.I. Bill. Navy is also
    applying force-shaping tools to attract non-rated Reserve sailors to
    undermanned ratings.
    National Call to Service
        Another measure being taken to address our accession shortfall in
    the Navy Reserve is our increased use of the National Call to Service
    (NCS) Act enacted by Congress in the NDAA for Fiscal Year 2003. This
    program, which combines service in the Active and Reserve components,
    is enjoying considerable success and is helping to mitigate some of the
    prior-service shortage in ratings that are critical to the prosecution
    of global war on terrorism. Under this program, a recruit enlists for
    an Active-Duty commitment of 15 months after training. At the end of
    the commitment, the individual can either extend on Active-Duty or
    commit to 2 years of drilling in the Selected Reserve. Navy has been
    particularly aggressive in recruiting Masters at Arms and Hospital
    Corpsmen for this program and the first of those recruited will begin
    drilling in the Reserves this year. Navy's success in attracting
    recruits for this program is growing steadily. We took in 998 recruits
    in 13 ratings in fiscal year 2004, 1866 recruits in 23 ratings in
    fiscal year 2005 and this year we have a goal of 2,340 recruits in 45
    different ratings.
    Continuum of Service
        The direct link between Active-Duty commitment and Reserve
    commitment in NCS is a model worth emulating. We are developing the
    concept of a continuum of service with a transition at the end of
    Active-Duty obligation to drilling with the Selected Reserve. By
    beginning the recruiting process while the sailor is still on Active-
    Duty, we significantly improve our chances of follow on affiliation
    with the Reserves.
    New Enlisted Recruiting Initiatives
        An area where our focus on quality is evident is our increasing
    emphasis on education. Additional education after high school is almost
    a requirement for success today. The market's desire for college
    education creates competition for the best and brightest, but also
    provides an opportunity for the Navy to capitalize on the many
    education benefits we offer. Navy is working this issue by targeting
    more recruits who already have college and by expanding programs that
    will help our sailors to further their education. In order to attract a
    broader, brighter and more diverse market of applicants, Navy is
    implementing a number of new recruiting initiatives:
        College First
        To meet the desire of America's youth for college education, as
    well as to prepare our recruits to meet Navy's increasingly demanding
    performance requirements, Navy has implemented the College First
    Program that was authorized by the NDAA for Fiscal Year 2005. Qualified
    recruits, who have committed to join the Navy and are in our DEP, can
    now start college and receive a stipend from the Navy. This program
    will help them earn credits toward a degree and should also result in
    lower attrition from the recruiting and recruit training pipelines.
        Enlisted Bonus Cap Increase in Fiscal Year 2006
        The importance of meeting SPECOPS/SPECWAR goals with our current
    very high tempo of operations cannot be overemphasized. These programs
    are exceptionally challenging and require special incentives to attract
    the right people. Congress raised the Enlistment Bonus cap from $20,000
    to $40,000 and this will significantly improve our ability to attract
    the best recruits to these very demanding programs.
    Improving Diversity
        The Navy diversity strategy is aimed at creating and maintaining
    our Navy as a team whose people are treated with dignity and respect,
    are encouraged to lead and feel empowered to reach their full
    potential. The changing composition of the American workforce, with
    increased participation by women and minorities, will have significant
    impact upon the military. The changing demographics over the next two
    decades mean that we must work now to establish processes and programs
    to ensure that we have access to the full range of talent in our
    Nation. Navy has embarked on a force-wide diversity campaign plan to
    improve diversity up, down and across our organization. Specific
    initiatives are aligned under four focus areas of recruiting, growth
    and development, organizational alignment and communications. The
    intent of the plan is to operationalize diversity as a frontline issue
    by involving all Navy leadership and their commands in this effort,
    rather than delegating the issue to the Manpower, Personnel, Training,
    and Education Organization. We are attempting to understand why we have
    diversity shortfalls in some communities, ratings and occupations, and
    how we can best improve and sustain representation in those areas. We
    also want to leverage our current diversity and build a culture which
    values ``diversity of thought'' at all levels. There are many
    initiatives tied to this effort. Nationwide ``Navy Weeks'' will
    increase our community outreach, to highlight Navy opportunities to
    potential recruits and get the Navy message to a larger segment of the
    population. Recruiting command is energizing programs to partner and
    network with diverse centers of influence to provide exposure to
    specific communities we are attempting to attract. We are improving our
    growth and development processes so we can ensure all of our sailors
    and civilians are growing equally and effectively and to maximize their
    talents in support of our mission. Diversity efforts are aimed at
    improving our retention processes so we can retain the top quality
    talent in whom we have invested. Lastly, we are continuing to stress in
    our communications that a diverse organization is a more effective
    organization, essential to current and future readiness. Executing the
    diversity strategy will be a long-term process; we are taking big steps
    each year as we streamline and improve all of the efforts that help us
    leverage our diverse Total Force.
    ``Heritage Recruiting''
        The increased involvement in Nation building, development, and
    humanitarian relief efforts requires sailors with additional skill
    sets. The ability to speak other languages and understand cultural
    norms and values is very important. Navy recruiting is partnering with
    other Service Recruiting Commands to gather data on potential markets
    for heritage language speakers to supplement those traditionally
    assigned to intelligence gathering communities and other ratings likely
    to have contact with indigenous people.
        To expand foreign language and cultural expertise capability and
    capacity in the total force, particularly in areas considered
    strategic, the Navy is implementing language-related accession and
    heritage-community recruiting goals. Tapping the strength of the
    Nation's rich diversity, the Heritage Language Program is designed to
    recruit native-level speakers of languages and dialects deemed critical
    to the global war on terrorism. To the extent practical, we will place
    these valuable assets in occupational specialties where their languages
    and dialects can be employed.
    Increased Recruiting of Women for Technical Ratings
        Representation of women in the Navy is important across all ratings
    to ensure women have appropriate promotion and leadership
    opportunities. Since fiscal year 2004, Chief of Naval Operations (CNO)
    Guidance has driven Navy recruiting to increase the number of women
    entering non-traditional and sea intensive ratings. Initiatives to
    support this effort include increasing the number of female recruiters
    and developing better marketing plans.
    Active-Duty Officer Recruiting
        Navy fills its Active-Duty officer ranks from several sources,
    including the Naval Academy, Navy Reserve Officer Training Corps
    (NROTC), Officer Candidate School, and Officer Indoctrination School.
        Navy Recruiting Command has the mission for the latter three. Navy
    attained 84 percent of Active-Duty officer goals in fiscal year 2005
    with shortages mostly in medical programs. The latter continue to be
    very challenging to recruit for because of high levels of compensation
    in the private sector and because of demographic shifts among new
    medical professionals towards higher numbers of women and older
    students with families. Both groups have a lower propensity for
    military service.
    Reserve Officer Recruiting
        The primary market for Reserve officers is Navy veterans. This
    limits the size of the market, particularly in an era when Active-Duty
    retention is very high. Consequently, Navy has not met its Reserve
    officer recruiting goal since fiscal year 2002. For medical programs,
    the same market and compensation issues challenging Active-Duty
    recruiting inhibit the ability to meet Reserve mission. There are
    additional objections which must be overcome; doctors with private
    practices are concerned that a prolonged recall to Active-Duty will
    cause them to lose patients and the compensation and benefits the Navy
    offers do not always offset the perceived risk to their practices.
    Compensation Strategy
        The compensation strategy must complement and be aligned with the
    strategy for our people and all associated sub-strategies (recruiting/
    accessions, training and education, distribution, etc.). In an All-
    Volunteer Force environment the primary function of the compensation
    strategy must be to incentivize sailors to choose the behavior desired
    to meet the Navy's current and future needs. Our ability to attract and
    retain quality people is directly related to our ability to promote
    voluntarism in a challenging and dynamic environment. It follows the
    system must be market-based--flexible and responsive enough to address
    both expected and unexpected changes.
        To be an ``employer of choice'' in an All-Volunteer Force
    environment means compensation must effectively function, i.e.,
    compete, against the backdrop of the broader national (and often
    global) economy. The compensation policies that support this strategy
    must be rational and holistic, encompassing both tangible and
    intangible forms of compensation. They should support a system that is
    competitive, equitable, flexible, and sufficiently responsive to be
    effective in an ever changing operational and market environment. Sound
    implementation of the strategy will ensure cost-efficient stewardship
    of the commitments made by our personnel and the American taxpayers.
        Overall, today's military compensation does succeed and is
    generally competitive in the market place. It is a product not of
    deliberate design, but rather more than 200 years of evolution. Since
    pays and entitlements are founded in statute and implemented through
    DOD-wide policy and regulation, change often comes slowly and
    incrementally. The current compensation system is best characterized as
    evolutionary, not revolutionary.
        The men and women who serve are with us not through the coercion of
    conscription, but through voluntary decisions to enter and remain in
    military service. It is the innate ability, training, experience and
    motivation of our men and women that are the primary reasons for the
    Navy's superb capabilities. The compensation offered to both Active and
    Reserve members, coupled with patriotism and the willingness to serve
    are the most important factors affecting our ability to attract and
    retain qualified people.

                          force shaping and retention

        The elements necessary to achieve a properly sized and manned force
    are retaining personnel whose skill sets and experience are in demand
    and incentivizing the separation of personnel whose skill sets are in
    excess or for which a need is no longer foreseen. Our goal is to build
    a manpower, personnel, training, and education organization that can
    deliver the right sailor; with the right skills, experience, and
    training; to the right place, at the right time, for the best value.
    Achieving this goal requires a robust array of force shaping tools to
    carry out efficient force realignment within fiscal constraints and to
    remain an ``Employer of Choice'' in a dynamic, competitive marketplace.
    Congress's support has resulted in improving, enhancing, and adding to
    our force shaping tool kit. Improvements to Selective Reenlistment
    Bonus (SRB), Assignment Incentive Pay (AIP), nuclear officer bonuses,
    and Reserve component bonuses are all appreciated. ``Authority enacted
    by Congress in the NDAA for Fiscal Year 2006 which provided incentives
    for targeted voluntary separations was an especially welcome addition
    to our toolkit.''
        Navy has employed a very carefully controlled, measured approach to
    the use of the above listed authorities. We use these force shaping
    authorities sparingly and as precision tools rather than as blunt force
    instruments. We also employ a progressive and cost effective approach
    when determining which ``tools'' to use:

             Retaining personnel in the skills we need,
             Shifting personnel from overmanned to undermanned
            skills through retraining and conversion,
             Transferring from Navy's Active component to valid
            Reserve component requirements, and
             Encouraging interservice transfers.

        Under no circumstance should we retain personnel in overmanned
    skills if it were feasible and cost-effective to move them into
    undermanned skills. To do so would be poor stewardship of taxpayer
    dollars and would force Navy to endure gaps in undermanned skills to
    remain within authorized aggregate strength levels, adversely impacting
    our readiness. Retraining and converting personnel from overmanned
    skills to undermanned skills is our primary approach for retaining
    experienced personnel while simultaneously improving the balance of the
    force.
        We are finding significant savings--and, indeed, significant
    efficiencies--right now by better aligning our personnel skill and
    experience mix with current fleet requirements.
        In some cases, retraining and conversion are neither feasible nor
    cost-effective. Only after exhausting all logical retention options do
    we then consider encouraging sailors whose experience levels and skills
    are ``in excess'' to voluntarily separate from the Service. To
    accomplish the latter, Navy has employed available force shaping tools
    to the fullest extent practicable: approving waivers for portions of
    minimum Active-Duty service requirements; authorizing 1-year waivers of
    the requirement to serve 3 years in pay grades O-5 and O-6 to be
    eligible to retire; employing our Perform-to-Serve Program for enlisted
    members in their first term; authorizing sailors who have made the
    decision to voluntarily leave the Navy to do so slightly ahead of the
    end of their current enlistments; and establishing High Year Tenure
    limits.
    Perform to Serve
        Three years ago, Navy introduced the Perform-to-Serve Program to
    align our Navy personnel inventory and skill sets by means of a
    centrally managed reenlistment program and to instill competition in
    the retention process. Perform-to-Serve encourages sailors to reenlist
    in ratings that offer more advancement opportunity. Perform-to-Serve
    features a centralized reenlistment and extension reservation system,
    which gives sailors other avenues to pursue success. Designed primarily
    with fleet input and to meet fleet readiness needs, Perform-to-Serve
    offers first-term sailors in ratings with stalled advancement
    opportunity the chance to reenlist and retrain for conversion to a
    rating where advancement opportunity is better and in which the fleet
    most needs skilled people. We have already used existing authorities
    and our Perform-to-Serve program to preserve the specialties, skill
    sets and expertise needed to continue the proper shaping of the force.
    Since inception, more than 3,300 sailors have been guided to
    undermanned ratings, and more than 52,000 have been approved for in-
    rate reenlistment. Our Perform-to-Serve and early transition programs
    are part of our deliberate, controlled, and responsible force-shaping
    strategy.
    Navy Success in Retaining and Utilizing the Right People/Skills
        Retaining the best and brightest sailors has always been a Navy
    core objective and key to mission success. We retain the right people
    by offering rewarding opportunities for professional growth,
    development, and leadership. Navy has experienced significant
    reenlistment improvement since a 20-year low in fiscal year 1999,
    reaching a peak at the end of fiscal year 2003.
        Targeted special pays continue to have the strongest impact on
    reenlistments. Maintaining SRB funding is essential to sustained
    retention of critical skills. One specific area of challenge is Zone B
    retention (a category comprised of sailors with between 6 and 10 years
    service) in technically oriented ratings. Congress raised the
    legislative cap from $60,000 to $90,000 for Zone B, allowing selected
    ratings to increase their SRB multiples to target shortfalls.
    Reduced Undesirable Attrition
        Since 1999, we have made significant reductions in enlisted
    attrition. Specifically, we reduced Zone A attrition by nearly 37
    percent (Zone A is comprised of sailors who have served for up to 6
    years). We've also reduced attrition in Zones B (6-10 years) and C (10-
    15 years) by more than 50 percent.
        This past year, leaders throughout our Navy successfully attacked
    the number one cause for Zone A attrition: illegal drug use. Despite a
    9-percent increase in Navy-wide drug use testing, the number of
    individuals who tested and turned up positive has decreased by 20
    percent since 2003. The result is attrition due to illegal drug use is
    no longer the leading cause for enlisted attrition. Current leading
    contributors to attrition are fraudulent enlistments into the Navy and
    medical disqualifications. We are exploring ways to reduce attrition in
    these areas as well.
        With enlisted attrition near all time lows, we are benefiting from
    the highest quality workforce the Navy has ever had.
    Assignment Incentive Pay
        An integral part of our ``Strategy for our People,'' Navy's AIP
    program is enhancing combat readiness by permitting market forces to
    efficiently distribute sailors where they are most needed. The success
    of AIP in attracting volunteers to difficult-to-fill geographic
    locations and jobs has led to the progressive elimination of non-
    monetary, but nonetheless costly, incentives such as awarding sea duty
    credit for assignment to hard-to-fill overseas shore duty billets. The
    result has been a growth in the available population of sailors
    eligible for assignment to sea duty without a concurrent increase in
    end strength. Navy will ultimately be able to allocate almost 10,000
    additional sailors to sea duty who would previously have been locked
    into a shore duty assignment following an overseas tour of duty ashore.
    This will provide future readiness benefits in the form of better at-
    sea manning and a more efficient use of sailors' acquired fleet
    experience. More importantly, challenging duty assignments can be
    filled without forced assignments.
        The numbers of applications for AIP continue to grow as this
    adaptable and highly flexible authority allows us to address unique
    assignment and distribution challenges in a market-based manner by
    emphasizing and rewarding volunteerism. Today, 18-months after
    implementation of Navy's AIP program, its success is unequivocal. The
    ``fill rate'' of AIP jobs is almost ten percent higher than the Navy-
    wide rate, while the average bid since inception is $362 per month.
        Perhaps there is no better example of the success of AIP and its
    ability to leverage volunteerism and the forces of the market place
    than its use in 2005 to respond to an emergent global war on terrorism
    requirement. In early May 2005, 259 Master-at-Arms sailors were needed
    to report to the detainee operations detachment in Guantanamo Bay,
    Cuba, for 12-month unaccompanied tours. By mid-May, Navy assignment
    officers had only been able to recruit 42 volunteers. AIP was
    subsequently implemented to attract volunteers to these assignments;
    223 sailors volunteered with AIP as an incentive in just a 6-day
    assignment window. Of those, 40 of the 42 sailors who had previously
    volunteered based on receiving non-monetary ``sea duty credit'' toward
    a future ship-board tour, opted instead to bid for a billet with AIP
    and forego the non-monetary (and ultimately more expensive to the Navy)
    sea duty credit.
        The AIP bid system is also currently used to incentivize extensions
    among personnel in designated continuity billets in dependent-
    restricted Bahrain and to attract volunteers for subsequent longer 18-
    month assignments. Bahrain is also the location of the first Navy
    application of AIP for officer assignments. Its use there will afford
    us an opportunity to evaluate the impact of market-based incentives in
    addressing future officer manning and distribution challenges.
        With congressional support, we now have the authority to make lump-
    sum AIP payments, and an expanded payment cap of $3,000 per month that
    allows us to set and adjust the incentive to best match the nature of
    the assignment and the available labor pool. This expanded authority
    will significantly improve our ability to apply a valuable assignment
    tool to manning challenges and emergent requirements arising from the
    global war on terrorism.
    Selective Reenlistment Bonuses
        The SRB is without question our most successful and effective
    retention and force-shaping tool. It enables us to retain the right
    number of high quality sailors with the right skills and experience.
    While we have enjoyed much success in our retention efforts of recent
    years, we must not presume we can rest on these accomplishments or
    surrender to the notion that the tools, which made such successes
    possible, are no longer needed. SRB authority is sometimes questioned
    because of the funding required to support it. SRB directly supports
    Navy's emerging strategy for our people and enables us to selectively
    retain the sailors we need as we transform to a lean, high-tech, high
    capability, mission-centric force. More importantly, SRB affords Navy
    the ability to compete in a domestic labor market that is increasingly
    demanding of skilled, technically proficient, highly trainable, and
    adaptable personnel.
        The Navy is at a crucial juncture in the transformation of our
    workforce. In the future we will recruit fewer generalists, and instead
    seek a predominantly technical and more experienced force. To that end,
    our SRB strategy has shifted from targeting general skill sets in zones
    A and B (17 months to 10 years) to focusing on specific skill sets
    across all zones (17 months to 14 years). Navy Enlisted Community
    Managers (ECMs) have applied increasing levels of analytical rigor to
    predicting and monitoring reenlistment requirements at a very granular
    skill level and by individual years of service [also called Length of
    Service Cells]. By monitoring actual reenlistment behavior in
    comparison to requirements, the ECMs review clear and unambiguous data
    flagging SRB performance and pointing to areas meriting increase or
    decrease. This ensures precious SRB dollars are applied only when and
    where needed based on requirements and outcome.
        Congress raised the SRB cap from $60,000 to $90,000; we will ensure
    award level increases are applied in a prudent and fiscally responsible
    manner. This cap increase will initially allow us to adequately
    incentivize experienced nuclear-trained personnel to reenlist. We will
    later apply it to other skills as retention trends dictate. We save
    over $100,000 in training costs and retain 10 to 14 years of invaluable
    nuclear power plant experience for each one of these individuals SRB
    allows us to reenlist. Navy-wide, we also cannot laterally hire
    experienced technicians as Oracle or Microsoft can, but must grow from
    recruits and retain as journeymen from an internal labor market.
    Failure to fully fund the SRB program would create a long-term
    degradation in readiness. Congress' continued support for this vital
    program is necessary; we need fully funded SRB at the President's
    fiscal year 2007 requested budget levels of $179.7 million for
    anniversary payments and $159.8 million for new payments.
    Targeted Separation Incentives
        With the enactment of the NDAA for Fiscal Year 2006, Congress
    provided a targeted voluntary separation incentive to help shape our
    force in the short-term while allowing us to maintain a positive tone
    that will not detract from recruiting and retention of talented
    professionals over the long-term. The addition of this authority goes a
    long way to filling the previously existing gap in our force-shaping
    toolkit, i.e., the lack of incentives to selectively target voluntary
    separations. Voluntary Separation Pay, while limited in its application
    through December 2008 to officers with more than 6 but less than 12
    years of service, enhances our ability to properly shape the force,
    aids us in reducing officer excesses and ultimately saves the taxpayer
    money. We are aggressively working to field this new tool and reap the
    readiness benefits of its use.
        With the continuing support of Congress--and reliance on the
    talents of America's men and women who choose to serve--the Navy will
    continue to build a force that is properly sized, balanced, and priced
    for tomorrow.
    Foreign Language Proficiency Bonus
        To incentivize the identification, development, and sustainment of
    proficiency in foreign languages, especially those considered
    strategic, we will award a Foreign Language Proficiency Bonus (FLPB) to
    the Total Force (Active, Reserve, and civilians) to the maximum extent
    allowable by law and consistent with current DOD policies. Navy
    instructions relative to FLPB are being updated to reflect both higher
    award levels and expanded eligibility.

                          officer community management

        The officer community is trained and prepared to continue leading
    Navy Forces in support of the global war on terrorism. We are
    experiencing improved retention rates across most officer communities.
    This is attributable to the highly effective special and incentive pays
    enacted by Congress. These bonuses are essential to our ability to
    recruit and retain our officers.
    Special Operations
        At perhaps no other time in our Navy's history have the skills of
    our Special Operations officers and technicians played such a vital
    role in mission accomplishment. Since the events of September 11, 2001,
    the demand for their skills in Explosive Ordnance Disposal (EOD) Anti-
    terrorism and Force Protection has skyrocketed. Our Officer accessions
    are aligned to fill our EOD detachment officer in charge demands and
    require approximately 38 officers per year (fiscal years 2006/2007)
    accessed through a variety of sources including direct accessions as
    well as lateral transfers. Retention of SPECOPS officers is measured by
    the continuation of officers serving in years 6 through 11 of
    commissioned service. In fiscal year 2005, we retained 48 percent of
    our senior lieutenants and control grade officers, two percent
    shortfall from the goal. To address this shortfall we recently
    implemented a Critical Skill Retention Bonus (CSRB) of up to $75,000 to
    improve retention of EOD Lieutenants. Our Special Operations community
    is heavily involved in providing the operational and tactical
    leadership to our newly established Riverine Forces, the NECC and the
    Joint Improvised Explosive Device (IED) Defeat Organization.
    Naval Special Warfare Officer Community
        The Naval Special Warfare Officer (NSW) Community is manned at 95
    percent of assigned billets. SEAL Officer accessions are currently
    averaging five applicants for every opening and new accessions are on
    track to meet increasing Officer Department Head requirement (SEAL
    Platoon commander) at the sixth year of commissioned service (YCS 6).
    The community now requires 34 department heads per year (76 percent
    retention rate across 6-11 YCS) based on increased growth in pay grades
    O-4 thru O-6. Fiscal year 2005 retention was 62 percent. Nonetheless,
    we currently face a number of manpower and personnel challenges at the
    O-4 and O-5 level. NSW currently has a shortage of 50 lieutenant
    commanders and 8 commanders. These shortages primarily result from the
    effects of Navy downsizing of all Officer accessions in the early
    1990s. The Navy has used Naval Special Warfare Officer Continuation Pay
    since 1999 to successfully retain officers with 6-14 Years of
    Commissioned Service (YOCS). The Navy is evaluating options for closing
    the remaining gaps.
    Seabee and Civil Engineer Corps
        Seabee and Civil Engineer Corps communities are healthy and fully
    engaged in supporting global war on terrorism operational requirements.
    In the aggregate the Seabee community is 95 percent manned and the
    Civil Engineer Corps is 98 percent manned. Current Seabee attrition,
    retention and reenlistment behavior are trending in line with or better
    than average Navy levels while the Civil Engineer Corps has seen an
    increase in attrition. We continue to predict and forecast that
    additional incentive pays may be necessary to sustain current retention
    and reenlistment behavior based upon the current high OPTEMPO endured
    by our Seabees and Civil Engineer Corps officers. The Naval
    Construction Force Reserve Seabees and Civil Engineer Corps officers
    have experienced significant manning shortages and accession
    challenges. Reserve Seabee accessions have significantly missed goals
    for the past 3 years. The health of our Reserve component Seabees,
    Civil Engineer Corps and Naval Construction Force is imperative to the
    Navy's global war on terrorism support. The Navy MPT&E Enterprise is
    working on this challenge and has developed plans to guide this focused
    effort.
        Next I'd like to discuss selected other officer communities:
    Surface Warfare Officer Community
        The Surface Warfare community's initial accession plan is designed
    to yield sufficient officers to meet the demand for department heads
    with about 7 years of cumulative service; in fiscal year 2006 we will
    bring in approximately 750 new Surface Warfare Officers (SWOs). This
    year Navy implemented a junior Surface Warfare CSRB to help meet
    community requirements for trained and experienced department heads
    (currently 275 per year). This program, in conjunction with the Surface
    Warfare Officer's Continuation Pay (SWOCP), targets officers reaching
    their first retention decision milestone and has been a very successful
    tool to persuade them to remain on Active-Duty through completion of
    mid-grade department head tours. The community is generally well-manned
    now except for a shortage of control grade officers. That shortage is
    being remedied with the help of a CSRB authorized by Congress.
    Continued CSRB support is key to long-term retention and proper shaping
    of this community.
    Submarine Warfare Officer Community
        As a direct result of improved junior officer retention, accession
    requirements have been reduced from 440 to 346 between fiscal year 2004
    and fiscal year 2006. Although overall accession goals have been met
    for the past 6 years, significant challenges remain in recruiting high
    quality candidates into this technically demanding warfare community.
    The 5-year average retention rate for submarine junior officers has
    improved from 29 percent in fiscal year 2000 to 39 percent in fiscal
    year 2006 as a direct result of targeted Nuclear Officer Incentive Pay
    (NOIP) and Continuation Pay rate increases authorized since fiscal year
    2001. Despite these significant improvements, retention has only fully
    met requirements once in the past 6 years. NOIP has proven to be an
    extremely effective tool over its more than 35-year history and is
    largely responsible for improving submarine officer retention. NOIP is
    widely viewed as DOD's model retention incentive program. It remains
    the surest, most cost-effective means of sustaining required retention
    and meeting fleet readiness requirements for high-quality, highly-
    trained officers.
    Aviation Community
        The fiscal year 2006 requirement for pilots and naval flight
    officers is 380. This reduction from previous years is due to reduced
    training attrition and fleet requirements. Fiscal year 2005 aviation
    retention was 47.8 percent through department head tours (at 12 years
    of commissioned service), a slight decrease from fiscal year 2004 but
    still well above the historical average of 40 percent. Retention has
    started to rise through the first quarter of fiscal year 2006 and
    currently stands at 51.8 percent. The excellent aviation retention
    figures can be attributed in large part to 5 consecutive years of
    congressional authorization for Aviation Career Continuation Pay
    (ACCP). ACCP continues to be our most efficient and cost-effective tool
    for stimulating retention behavior to meet current and future
    requirements and overall manning challenges.
    Medical Communities
        Navy medicine has been actively executing military-to-civilian
    conversions in fiscal year 2005, as directed by the Office of the
    Secretary of Defense. In addition, many of our medical personnel are
    directly involved in the global war on terrorism, and we are faced with
    several challenges in recruiting and retention. Specific community
    issues are as follows:
    Medical Corps
        As of December 2005, the Medical Corps dipped below end strength
    targets for the first time since 1998, with acute shortages in
    subspecialties critical to support wartime requirements and hospital
    operations. On the recruiting side, the Health Professions Scholarship
    Program, the primary student pipeline for medical corps officers, made
    84 percent of goal during fiscal year 2004 and only made 56 percent of
    goal in fiscal year 2005. Early indications are fiscal year 2006
    attainment will again fall far short of goal; Navy is considering an
    initiative for an HPSP accession bonus to attract applicants. Decreased
    accessions have not been able to make up for increased loss rates in
    retention among all specialties. Increased medical special pay rates
    have been offered for fiscal year 2006 but do not seem to be having a
    significant impact on increasing retention at this point.
    Dental Corps
        Dental Corps is significantly under end strength in the range of 5-
    13 years commissioned service. Dental accessions continue to be
    problematic. Retention rates for Dental Corps officers, reaching the
    end of their initial obligation, have steadily declined over the past 8
    years. The Dental Corps is projected to lose 144 officers in fiscal
    year 2006, or 13 percent of the dental force. Residency training
    opportunities and significant increases in the Fiscal Year 2006 Dental
    Officer Multi-year Retention Bonus are being used to try to retain
    dental officers for long-term service. We are considering establishing
    a CSRB, under existing statutory authority, to help reduce junior
    officer losses after completion of their initial obligation. Initiative
    has been submitted and funding is available for this CSRB.
    Medical Service Corps
        The Medical Service Corps accesses to vacancies in subspecialties,
    and direct accessions are market-driven. Last year the Medical Service
    Corps fell short of their direct accession goal by 30 percent, directly
    impacting ability to meet current mission requirements. Retention of
    specialized professionals such as clinical psychologists, pharmacists,
    and podiatrists has been the greatest challenge. Licensed clinical
    psychologists have experienced an increasingly heavy OPTEMPO and the
    resulting loss rates are signified. Health Professions Loan Repayment
    Program has been implemented as an accession and retention tool to
    attract and retain critical specialties with some success.
    Additionally, the community is requesting authority for CSRBs to retain
    officers in critically undermanned specialties.
    Nurse Corps
        National nursing shortages and competition with other Services have
    resulted in shortfalls in Navy Nurse Corps accessions over the last 2
    years. To counter this, in 2006 we have increased levels for both the
    Nurse Accession Bonus and the Nurse Candidate Program. Retention of
    Nurse Corps officers also poses a significant challenge. Retention
    rates after initial obligation range from 60-72 percent and decrease
    even further beyond 5 years of service. The Health Professions Loan
    Repayment Program is being used to attract and retain Nurse Corps
    officers and is drawing significant interest. The Nurse Corps community
    is also studying options for a CSRB in specific surgical
    subspecialties.
    Joint Officer Development and Management
        The future of national and international security rests with
    interoperability and cooperation among the Services, interagency,
    international partners and nongovernmental organizations. Naval forces
    bring to the fight unique maritime and expeditionary prowess. The Navy-
    Marine Corps Team will continue to enhance its joint warfighting
    readiness with expeditionary agility, flexibility, and lethality, while
    working closely with these interagency, international, and
    nongovernmental organizations to promote peace, stability, and U.S.
    interests. Navy seeks fully qualified and inherently joint leadership
    forces that are skilled joint warfighters and strategically minded
    critical thinkers. We will plan for, prepare, and assign high quality
    officer and senior enlisted personnel to joint positions to enhance
    joint warfighting readiness. We will develop leaders with professional
    qualifications and skills needed in the joint environment to achieve
    their full potential, so that national and joint decisionmakers seek
    out Navy Joint warfighters as trusted advisors and key staff members,
    and all national and theater campaign strategies, plans, operations,
    and activities fully address maritime considerations and utilize the
    strengths of the maritime force. The Navy fully supports the Chairman's
    Vision for Joint Officer Development and DOD's Strategic Plan for Joint
    Officer Management and Joint Officer Development.
    Civilian Community Management
        National Security Personnel System (NSPS) will provide new civil
    service rules for the over 700,000 DOD civilian workers. It will
    strengthen our ability to accomplish the mission in an ever-changing
    national security environment. NSPS accelerates the Department's
    efforts to create a Total Force, operating as one cohesive unit, with
    each performing the work most suitable to their skills. DON needs a
    human resources system that appropriately recognizes and rewards
    employee performance and the contributions they make to the DOD
    mission. NSPS will give us better tools to attract and retain the best
    employees.

                             revolution in training

        The key to our operational prowess is a properly trained, educated,
    and ready force. In 2002, the Navy launched the Revolution in Training
    (RIT) to revitalize training and education to deliver the right skills,
    to the right sailors, at the right time and at the best cost. The RIT
    continues and will ultimately deliver individual assessment
    capabilities, simulation, and adaptive learning technologies to produce
    a dynamic and responsive individual training system. It also provides
    the foundation for a fully integrated manpower, personnel, training,
    and education system. The overarching integration will be accomplished
    through Sea Warrior, which encompasses the Navy's training, education,
    and career-management systems. The RIT has three underlying concepts
    embedded in its approach: the Human Performance Systems Model (HPSM),
    the Science of Learning (SL) and the Integrated Learning Environment
    (ILE).
    Human Performance Systems Model
        A ``systems approach,'' HPSM is a cyclical model that defines
    organization and individual performance requirements, establishes how
    best to achieve this performance, develops the necessary tools or
    products to enable this performance, implements the solution set, and
    provides feedback based on an evaluation of the outcomes. HPSM may best
    be described as a systematic method for finding cost-effective ways to
    enable people to perform their jobs better by focusing on selecting the
    right interventions based on root cause and true requirements.
    Science of Learning
        The SL will transform the Navy's training and education
    environments by applying the latest advances in technology and
    educational psychology to the learning process. It will move Navy
    training and education from a lecture, listen, learn format to a more
    active learning process through which sailors will receive feedback
    necessary to improve their performance.
    Integrated Learning Environment
        The ILE is the means by which we will provide individually
    tailored, high quality learning and electronic performance aids in
    order to allow the best fit between the worker and the work to be
    performed.

                        professional military education

        Education is a key enabler in developing the competencies,
    professional knowledge, and critical thinking skills to deliver combat-
    ready naval forces to meet joint warfighting requirements of the Navy.
    In July 2004, we established the Professional Military Education
    Continuum to provide the framework for life-long learning that enables
    mission accomplishment and provides for personal and professional
    development. The continuum integrates Advanced Education (beyond the
    secondary level), Navy-specific Professional Military Education, Joint
    Professional Military Education (JPME) and leadership development. It
    is focused on ensuring future leaders have the knowledge base to think
    through uncertainty; drive innovation; fully exploit advanced
    technologies, systems and platforms; understand the culture,
    environment and language of the battle space; conduct operations as a
    coherently joint force; and practice effects-based thinking and
    operations. It applies to all sailors. Specific education opportunities
    to provide learning solutions sequenced to meet growing and changing
    roles and requirements throughout a career are being phased in across
    multiple years.
        We are sharpening our focus on requirements linked to competencies
    and capabilities to better prepare more capable sailors for joint
    warfighting. We are also focused on integrating education achievements
    into a career development system to ensure the ability to plan and
    track growth, and measure competency attainment.
    Flexible Learning Options
        Internet or computer-based delivery of course material remains an
    important focus of our effort to make educational material readily
    available to all of our people both ashore and afloat. The Naval
    Postgraduate School, Naval War College, and Center for Naval Leadership
    are endeavoring to increase non-resident opportunities to enable
    education anytime, anywhere to accommodate busy careers that do not
    always allow time for resident education. Naval Postgraduate School
    distance learning options include select degree programs; non-degree
    certificate programs that provide a concentrated focus in a specific
    field, for example: space systems, information systems and operations,
    and anti-submarine warfare; and individual courses. Naval War College
    is employing web-enabled, CD-ROM and Fleet Concentration Area Seminar
    programs to provide maritime focused Joint Professional Military
    Education at a distance. Naval War College JPME courses have been
    embedded into many of the degree programs at Naval Postgraduate School.
    The Center for Naval Leadership continues to develop online
    opportunities for all sailors to complete Leadership Education as a
    part of their career development. Our content is dynamic and reflects
    the most current leadership theories and principles.
        While we continue to promote non-resident learning opportunities
    for our force, our fiscal year 2007 budget also requests funds to allow
    us to increase the number of officers we will send in-residence to
    Naval Postgraduate School for technical, analytical, and regional area
    studies programs. The latter supports our FAO program, which promotes
    graduate degrees in regional area studies.
        The Navy College Program continues to provide opportunities for
    sailors to earn college degrees while on Active-Duty. Partnerships with
    colleges and universities leverage academic credit recommended for Navy
    training and experience and offer rating related associate and
    bachelors degrees through distance learning. The Navy College Program
    for Afloat College Education makes it possible for sailors to pursue
    courses at sea and in remote locations at no tuition cost to
    themselves.
    Joint Professional Military Education
        In the fiscal year 2007 budget, we expand resident service college
    opportunities to enhance Navy's ability to provide unique and
    complementary warfighting from the sea to Joint Force Commanders. The
    expansion enables Navy to ensure the appropriate service composition
    requirements for certification of senior service college instruction of
    JPME Phase II as authorized by the Ronald W. Reagan NDAA for Fiscal
    Year 2005. Additionally, the expansion supports the Navy's new
    requirement for completion of JPME Phase I for Unrestricted Line
    Officer Commander Command beginning with Command Screen Boards in 2008.
    Culture of Effects-Based Thinkers
        In keeping with The Strategy for Our People, we are in the process
    of moving towards a capabilities-based and competency-focused learning
    continuum whose education programs will result in measurable mission
    capability while enabling personal and professional development. A key
    area we are addressing is the development of a culture of effects-based
    thinkers and operators who evaluate effect as a measure of execution by
    focusing on desired outcomes and root causes, measuring results, and
    making appropriate adjustments. Updated Naval Postgraduate School,
    Naval War College, and executive learning program curricula provide
    essential learning building blocks while we continue to expand and
    sequence course offerings to ensure a full continuum of the appropriate
    learning.

                             sailor quality-of-life

        Commitment to personal and family readiness is fundamental to
    sustaining a combat-ready naval force. Our success in the Nation's
    defense depends on the entire Navy community--Active, Reserve,
    civilian, and their families. The frequent deployments of our highly
    mobile force places considerable stress upon our sailors and their
    families. Our deployed servicemembers characteristically enjoy high
    morale and pride. They value the opportunity to use their training in
    real world missions and realize a sense of accomplishment that
    contributes to positive attitudes and is reflected in their decisions
    to reenlist in the Navy. At the same time, however, the family
    separation and high OPTEMPO place great stress upon them and their
    families. Our challenge is clear. We must provide effective, responsive
    programs and services to our sailors and their families to mitigate the
    negative factors.
    Predatory Lending
        An issue that is becoming a significant concern to Navy leadership:
    Navy leadership is very concerned over the serious problem of predatory
    lending practices and the impact on financial and personal readiness of
    sailors and families. Predatory lending occurs when a lender takes
    unfair advantage of a borrower through deception, fraud or loans
    containing extremely high interest rates or fees. Our junior sailors
    and families are particularly vulnerable as they find themselves short
    of money between paydays to pay essential expenses such as rent,
    groceries, utility bills, unexpected expenses, and car payments. For
    example in our research we have found personal predatory loans with
    interest rates as high as 2,146 percent, 1,288 percent, and 782
    percent.
        The use of these ``bridge'' loans, with exorbitant interest rates,
    leads to a downward cycle of more borrowing and increased indebtedness.
    Not only does it result in continued financial hardship and damage to
    credit but it also seriously impacts unit morale and personal and
    family readiness. The CNO has challenged leadership to develop and
    aggressively implement a plan to improve consumer education and
    personal financial counseling for military personnel in order to
    increase awareness of the practice and risks and to assist in recovery
    for those who have fallen into this downward financial spiral.
        State laws vary widely in their oversight and control of commercial
    lending practices. This is a complicated challenge to personal
    readiness that deserves the attention of a diverse group of experts
    including financial industry professionals, legislators, and State
    government officials. We seek your support in encouraging a coalition
    of leadership in government, the commercial sector, nonprofit agencies
    and the military services to curtail and constrain predatory lending
    practices. I am prepared to partner with Congress in seeking means to
    effectively address this serious problem.
    Task Force Navy Family
        The lives of more than 88,000 Navy personnel, retirees, and
    immediate family members were severely disrupted by Hurricanes Katrina
    and Rita. Task Force Navy Family leveraged existing agencies and local
    community support centers to assist our personnel. While we still have
    cases outstanding, we have transitioned the Task Force to Commander,
    Navy Installations Command for follow-up. This effort to respond to the
    crisis in ``our own backyard'' has been a reminder of the importance we
    place on the family and has also provided several lessons learned we
    could employ in case of future catastrophic events.
    Personal and Family Readiness Initiative
        Commander, Navy Installations Command and I recently established a
    Personal and Family Readiness Program Board of Directors. Actionable
    issues are identified, analyzed by a Family Readiness Program Advisory
    Council and implemented by the Board of Directors. I am enthusiastic
    about the significant opportunity to identify real needs and workable
    solutions to improve quality-of-service and life issues for our Navy
    family.
    Child Development and Youth Programs
        Sailors and their families continue to rank the need for Child and
    Youth Programs (CYP) very high. This program is now an integral support
    system for mission readiness and deployments. To help meet the demand,
    multiple delivery systems are offered to include child development
    centers, child development homes, child development group homes,
    school-age care, and resource and referral to licensed civilian
    community childcare programs. To meet the needs of shift workers and
    watch standers, we piloted several programs; including the addition of
    around-the-clock in-home care providers, as well as two new child
    development group homes. Following the success of those pilot programs,
    we are expanding those initiatives at several additional sites.
        The DOD goal is to provide CYP spaces to meet 80 percent of the
    potential need for ages 0 to 12 by fiscal year 2007. The Navy potential
    need has been calculated as 65,858 spaces. Navy CYP achieved 69 percent
    of that potential need in fiscal year 2005 and with added spaces will
    reach 71 percent in fiscal year 2006. The CYP waiting list in fiscal
    year 2005 was 7,908, up 19 percent since fiscal year 2003. The new
    Youth Program DOD Instruction directs the implementation of performance
    standards and eventual DOD certification similar to the current
    requirements for children under 12. This requirement will add to the
    overall future funding requirements for Navy CYP. Also in fiscal year
    2005, we achieved 100 percent DOD certification and 96 percent
    accreditation of our child development centers by the National
    Association for the Education of Young Children. Our objective for
    fiscal year 2006 is to ensure all Navy child development centers and
    school age care programs are accredited. This tells our Navy families
    their children are receiving top quality care that equals or exceeds
    the highest national standards.
    Caring for Our People
        Navy maintains a longstanding and proud tradition of ``taking care
    of our own'' by providing prompt and compassionate care to sailors and
    their families in times of crisis. In the past, we have measured our
    success by how quickly we could certify benefits and entitlements and
    by how expeditiously we could transport families to the bedsides of
    their seriously ill or injured sailors. These traditional metrics,
    while still important, are insufficient and do not fully address what
    our families need and deserve. Through careful research and
    collaboration with the Department of Veterans' Affairs, Social Security
    Administration, and the other Services, we have identified additional
    areas of focus. We have set ourselves goals to improve our casualty
    reporting process and to provide better and more personal oversight of
    casualty cases. We also endeavor to maintain our benefits certification
    efficiency and to improve case management effectiveness.
    Traumatic Servicemembers' Group Life Insurance
        We are extremely grateful for your efforts in enacting the
    Traumatic Servicemembers' Group Life Insurance (TSGLI) program, which
    is essential to our ability to provide appropriate and well-deserved
    support for our severely injured personnel. Navy implemented TSGLI in
    December 2005, and it is providing much needed financial support to our
    wounded heroes and their families as they deal with expenses incurred
    during convalescence.
    Safe Harbor Program
        This past summer, Navy established the ``Safe Harbor'' program,
    designed to have senior staff personally visit and assist our seriously
    injured sailors and their families. Our commitment is to a seamless
    transition from arrival at a continental United States (CONUS) medical
    treatment facility, throughout medical treatment, and then in
    subsequent rehabilitation and recovery. Since instituting this program,
    we have contacted every sailor who has been seriously injured since
    September 11, 2001. Twenty-six of them asked to have their names placed
    on our Active follow-up list and are periodically contacted. When
    Hurricane Katrina struck, we identified and contacted all seriously
    injured sailors who were residents in the affected area to offer them
    assistance and attend to their needs and those of their families. Since
    then, we have established a toll-free number and set up a Web site to
    further speed access to information and facilitate contact with our
    program office personnel. We are committed to maintaining personal
    links with our seriously injured sailors, sustaining effective follow
    up programs and doing everything in our power to advance the quality of
    their care and the support to their families.
    Care of All Returning Sailors and their Families
        Navy has long been in the business of preparing sailors and family
    members with pre-, mid-, and post-deployment briefings and services. In
    view of the recent research on the needs of our returning
    servicemembers and their families, as well as CNO's commitment to
    personal and family readiness, we have fine tuned those programs and
    services to ease return from deployment or mobilization. We have met
    increased demand for our return and reunion programs in which Fleet and
    Family Support Center teams embark upon returning ships, in transit, to
    provide educational briefings, workshops, and consultation for our
    personnel. These programs focus on re-establishment of personal and
    family relationships, understanding behavioral and developmental stages
    of children, effective parenting strategies and financial management.
    Command leaders are trained to identify post-deployment stress symptoms
    and refer personnel for treatment.
    Sexual Assault Victim Intervention
        Sexual assault prevention, victim assistance, and treatment are top
    priority efforts throughout the Navy and our Sexual Assault Victim
    Intervention (SAVI) program has been recognized as a model for over a
    decade. We enforce a zero tolerance policy while continually striving
    to improve support for victims.
        Navy contributed significantly to the work of the DOD Care for
    Victims of Sexual Assault Task Force and fully supports enhancements
    enacted in the Ronald W. Reagan NDAA for Fiscal Year 2005. This past
    year, we aggressively implemented DOD's joint service policy changes
    based on Task Force recommendations. Navy has adopted revised
    definitions, provided additional Sexual Assault Response and Prevention
    specialists in the field, upgraded command and victim advocate
    training, improved reporting and leadership awareness, strengthened the
    effectiveness of the program through implementation of confidential
    reporting procedures, and implemented a case management approach to
    improve sexual assault response and prevention capabilities.
    Transition Assistance Management Program
        The Navy Transition Assistance Management Program (TAMP)
    coordinates post-military employment assistance workshops, veterans'
    benefit seminars, and disability entitlements briefings at 65 shore-
    based sites worldwide and aboard ships at sea. These specialized
    classes assist our sailors and their family members as they prepare to
    transition to civilian life or formulate decisions to remain on Active-
    Duty. In fiscal year 2005, we expanded Veterans' Affairs benefit
    counseling to our deployed personnel operating in Navy Region Southwest
    Asia and developed a web-based training curriculum for command career
    counselors to improve pre-separation counseling. We also implemented
    military life-cycle career development seminars for first-term and mid-
    career sailors and placed increased emphasis on developing and
    providing assistance to our demobilizing Reserve component and war-
    wounded sailors.
    Culture of Fitness--Fit for Duty, Fit for Life--Cornerstone of Personal
            Readiness
        The Navy fitness program provides members of the Navy community
    ready access to high quality fitness programs, equipment, and
    facilities dedicated to meeting their total fitness needs. Morale,
    Welfare, and Recreation (MWR) maintains 145 fitness centers, more than
    200 indoor basketball courts, over 300 racquetball courts, 150 swimming
    pools, and thousands of outdoor sports facilities, including softball/
    football/soccer fields, tennis/volleyball courts and running tracks.
    MWR fitness incorporates all elements of personal and group fitness
    activities such as cardio and weight training, intramural (team and
    individual) sports, group exercise (e.g., aerobics, step, martial arts,
    yoga) classes, personal training, group and individual fitness testing
    and programming, aquatic activities, swimming, and special events
    (e.g., runs, tri/biathlons, track meets, swim meets). In fiscal year
    2005, Navy MWR centrally funded and procured over 868 pieces of fitness
    equipment for 54 Operational Support Centers. This action completed an
    initiative that outfitted all 134 Navy Reserve Centers with fitness
    equipment to enable personnel to maintain proper fitness levels and
    adopt healthy lifestyle changes.
    MWR Fleet Readiness
        The MWR Fleet Readiness Program remains the cornerstone of MWR. We
    continue to use a variety of funding and equipment initiatives to
    ensure that the fleet has the MWR support it needs. We used allocations
    and supplemental funding to enhance our fitness and recreation support
    to deployed forces at sea and ashore. In fiscal year 2005, we began
    expanding our Civilian Afloat Program that provides recreation and
    fitness professionals, who live and work onboard our aircraft carriers,
    amphibious assault ships and submarine tenders, to enhance shipboard
    habitability and promote positive use of off-duty time. Feedback from
    the fleet remains very positive as reflected in customer surveys and
    reports from commanding officers.
        We also developed and conducted an Importance-Performance Program
    Assessment to measure the overall effectiveness of the Fleet Readiness
    Program by providing an understanding of what sailors perceive to be
    the most and least important components of service delivery and service
    performance. Over 10,000 sailors participated in this valuable program
    assessment for Afloat Recreation, Fitness and Liberty programs. This
    data will serve as our baseline in establishing various performance
    metrics as we move forward with our ``Focus on the Fleet'' initiatives.
        The top rated MWR program and service for fleet sailors over the
    past several years remains access to electronic mail (e-mail) and
    Internet connectivity. The Library Multimedia Resource Center (LMRC) on
    each ship is the delivery point for this service. We completed the
    total fleet LMRC replacement and upgrade in fiscal year 2005 with the
    purchase and distribution of an additional 1,950 laptops and other
    related equipments.
    Navy Movie Program
        The Navy Movie program supports one of the most popular
    recreational activities for Active-Duty personnel and their families,
    with attendance figures of 2.7 million patrons ashore and 23 million
    viewing hours afloat. We distributed 192 movie titles to 800 Navy fleet
    and shore sites, Marine Corps, Coast Guard, National Oceanic and
    Atmospheric Administration, Military Sealift Command, and Department of
    State locations. This consisted of 150,000 videotapes, 5,500 35mm
    prints, 30 early tape releases to forward-deployed ships, and 30 first-
    run features to CONUS base theaters, 2 weeks after the U.S. premiere.
    The Navy Movie program conducted 13 free sneak previews at CONUS base
    theaters, attended by 110,000 sailors and family members. The movie
    program continues to evolve to stay current with technology changes. In
    a cooperative effort with the Naval Media Center, we have established
    digital format requirements to replace analog tapes, and will begin
    deploying them later this year.

                                   conclusion

        As we reshape and adapt the U.S. Navy to defeat emerging threats,
    it continues to be the predominant naval force in the world. At the
    very heart of that Navy, people, Active and Reserve, military and
    civilian, remain our greatest strength and the most fundamental element
    of our readiness and success. They, and their families, are making
    daily sacrifices to protect this Nation and to prosecute the global war
    on terrorism. These patriotic and professional Americans continue to
    perform brilliantly and you have every reason to be proud of them.
        We often think of the 21st century as the future. It is not. It is
    today. The sailors, civil servants, and contractors that will support
    joint missions in the future are entering the workforce and Navy today.
    What we do today--the decisions we make, the constraints we live
    under--will determine what we are capable of in the future.
        If we are to succeed in defining, developing and delivering the
    workforce required in the future, we must examine today's practices and
    make necessary changes now. For example, in order to continue to
    respond effectively to new and increased mission areas, we will analyze
    our manpower requirements to determine if we need to move to a
    different officer/enlisted mix or a more senior mix within the officer
    or enlisted structure. This analysis will include evaluating and
    analyzing the impact of current Defense Officer Personnel Management
    Act control grade ceilings and considering the need for relief from
    these constraints.
        We will continue to look at our compensation strategy to ensure it
    is the right compensation strategy for 2020-2025 given our changing
    demographics. A compensation system for that timeframe must acknowledge
    that our future lies with the All-Volunteer Force, and must therefore
    emphasize volunteerism. We must shift our focus to competency,
    performance and skill-based compensation and away from longevity and
    rank. We need to refocus away from deferred compensation and instead
    optimize the current compensation in a manner that creates a ``push''
    to a full career (as opposed to the current cliff-vested retirement's
    ``pull'' to full career). Major bonus programs should remain separate
    and intact in the near term (e.g. SRB, community-specific bonuses) with
    a long-term eye toward rational consolidation into a select number of
    broad, flexible authorities applied with agility in response to
    ``market conditions.''
        We must devise ``on ramps and off ramps'' to facilitate smooth
    transition between Active-Duty, Reserve duty, and civil service. We
    need to compensate the total workforce we want in peace & wartime. Our
    future compensation strategy must incentivize voluntary acquisition and
    effective utilization of skills/competencies for a diverse workforce,
    while enhancing service flexibility and discretion vis-a-vis statutory
    ceilings to provide room for future growth ahead of the power curve in
    a rapidly changing environment. Such a system must also incentivize
    voluntary transitions/separation of careerists and support the
    Service's ability to pilot and demonstrate new business practices.
        We are grateful for your commitment to the men and women of the
    U.S. Navy and to the programs that make them the premier maritime
    fighting force and sustains them and their families. On behalf of all
    Navy sailors and civil servants, and their families, I'd like to thank
    Congress for its continuing and unwavering support.

        Senator Graham. General Osman.

     STATEMENT OF LT. GEN. H.P. OSMAN, USMC, DEPUTY COMMANDANT FOR
        MANPOWER AND RESERVE AFFAIRS, UNITED STATES MARINE CORPS

        General Osman. Chairman Graham, Senator Nelson, I, also,
    thank you for the opportunity to appear before this
    subcommittee today to bring you some good news about your
    marines.
        Since 1967, when I joined the Marine Corps, I've had an
    opportunity to work with and observe marines from a number of
    generations--World War II, Korea, Vietnam, certainly the first
    batch of All-Volunteers, and, of course, the marines that have
    deployed to the Middle East over the past 20-plus years. I have
    to tell you that I've never seen a finer marine than the marine
    that we have today. He's a true volunteer. He believes in what
    he's doing. He has a sense of dedication and a level of
    professionalism that often belies his youth. He has a genuine
    love for his Nation, for his Corps, and for his fellow marine.
    This truly sets him apart, in my eyes.
        My written statement is pretty positive, because things are
    good. Certainly we have some challenges. There are some things
    we want to address. Things aren't perfect, but they are very
    good. I credit this to that wonderful young marine that we have
    today, to the support that we've given to his family, which is
    very important, to the way we've been able to integrate our
    Active and Reserve components into truly a Total Force, and,
    finally, for the great support that Congress has given us, in
    the form of the right legislation, in the form of budgets and
    supplementals that allow us to operate today, and, finally, for
    your strong moral support. We couldn't do it without you.
        Thank you very much, gentlemen. I look forward to your
    questions.
        [The prepared statement of General Osman follows:]

                Prepared Statement by Lt. Gen. H.P. Osman, USMC

        Chairman Graham, Senator Nelson, and distinguished members of the
    subcommittee, it is my privilege to appear before you today to provide
    an overview of your Marine Corps from a personnel perspective.

                                  introduction

        We remain a Corps of Marines at war with over 39,000 marines
    deployed to dozens of countries around the globe. Your marines are
    performing magnificently in no small part due to your support and the
    realization that they have the support of the American people. The
    young men and women who fill our ranks today recognize the global,
    protracted, and lethal nature of the challenges facing our Nation, and
    their dedicated service and sacrifice rivals that of any generation
    preceding them.
        The continued commitment of Congress to increase the warfighting
    and crisis response capabilities of our Nation's Armed Forces, and to
    improve the quality-of-life of marines, is central to the strength that
    your United States Marine Corps (USMC) enjoys today. marines remain
    committed to warfighting excellence, and the support of Congress and
    the American people is indispensable to our success in the global war
    on terrorism. Thank you for your efforts to ensure that your marines
    and their families are poised to continue to respond to the Nation's
    call in the manner Americans expect of them.
        The 25,000 marines and sailors under the command of II Marine
    Expeditionary Force (MEF) in the Al Anbar Province, Iraq and those
    marines assigned to transition teams have made significant progress in
    their efforts to develop capable, credible Iraqi Security Forces. In
    setting the conditions for the historic constitutional referendum and
    national elections, they have also distinguished themselves with valor
    and distinction in places like Fallujah, Ramadi, and the Euphrates
    River Valley. In Afghanistan, we have 1,200 marines and sailors
    continuing to provide support to the increasingly capable Afghan
    National Army. As part of the Combined Joint Task Force-76 (CJTF-76), a
    marine infantry battalion has conducted operations against the Taliban
    and Anti-Coalition Militia in the north-eastern portion of the country.
    Marine officers and senior enlisted leaders continue to train, mentor,
    and operate with their Afghan counterparts as part of Task Force
    Phoenix.
        The success of our marines in the current fight is the result of
    time-tested methods. Today, we continue to recruit quality Americans
    who are infused into a culture that requires them to think
    independently and act aggressively in chaotic and unpredictable
    environments where information is neither complete nor certain. We
    rigorously train these young marines to perform under adverse
    circumstances, and to accept greater responsibility as part of a team.
    We educate our marines and their leaders to prepare their minds for the
    intellectual component of the clash of wills and chaos inherent to
    combat. Our fundamental tenet--every marine a rifleman--continues to
    serve as the foundation for all our training, and provides the common
    core that defines every marine. I know you share my pride in the young
    men and women we are fortunate to have in our Corps of Marines.
        Your marines have proven equally capable of responding in support
    of humanitarian operations. In the aftermath of Hurricane Katrina and
    following the earthquake in Pakistan, marines were quickly on the
    scene. In response to Katrina, 2,650 marines and sailors, from our
    Active and Reserve components deployed to conduct search and rescue,
    humanitarian relief, and disaster recovery operations in Louisiana and
    Mississippi. Survivors were rescued, streets were cleared, food and
    water was distributed, transportation provided, and medical care
    administered in six separate locations. Our contribution totaled 815
    helicopter sorties which transported 1.1 million tons of cargo and
    5,248 survivors. We conducted 446 rescue missions, rescuing 1,467
    people. After the devastating earthquake in Pakistan, your marines
    deployed to the cities of Shinkiari and Muzaffarabad providing a
    hospital, helicopter support teams, and air traffic control in support
    of the CJTF. The marines and sailors treated more than 11,600 patients.
        The Nation is receiving a superb return on its investment in the
    world's finest expeditionary force. Nearly one in three marines of our
    operating forces is today forward deployed or forward based protecting
    America's interests. This contribution remains distinctly out of
    proportion to the 4 percent share of the Department of Defense (DOD)
    budget the Marine Corps typically receives.

                              personnel readiness

        The Marine Corps continues to answer the call because of our
    individual marines and the support they receive from their families,
    the Nation, and Congress. The individual marine is the most effective
    weapon system in our arsenal. Our ranks are comprised of intelligent
    men and women representing a cross section of our society. Our marines
    must think critically and stay one step ahead of the enemy despite an
    uncertain operating environment; their lives and the lives of their
    fellow marines depend upon it. Morale and commitment remain high.
    Marines join the Corps to ``fight and win battles'' and they are
    receiving the opportunity to do that.
    Warfighting Initiatives
        On 28 October 2005, the Secretary of Defense approved a Marine
    component within Special Operations Command (MARSOC). The new Marine
    component will provide approximately 2,600 USMC/Navy billets within
    U.S. Special Operations Command (SOCOM), led by a Marine major general.
    The MARSOC will provide additional capability to SOCOM by adding forces
    that will conduct direct action, special reconnaissance,
    counterterrorism, and foreign internal defense. MARSOC will include
    organic fires integration, combat support, and logistics capabilities.
    Additionally, Marine Corps Special Operations Forces linked to the
    Marine Expeditionary Unit will provide a scalable worldwide maritime
    special operations force presence for SOCOM. The current plan provides
    the MARSOC to SOCOM with an initial operational capability during the
    spring of 2006 and a full operational capability by 2010.
        In 2004, we conducted an extensive force structure review
    recommending approximately 15,000 structure changes to improve the
    Marine Corps' ability to meet the long-term needs of the global war on
    terrorism and the emerging requirements of the 21st century. This
    effort was end strength and structure neutral--offsets to balance these
    increases in capabilities come from military to civilian conversions
    and the disestablishment and reorganization of less critical
    capabilities. For example, we are assigning each artillery regiment a
    secondary mission to conduct civil military operations (CMO). To do
    this, each regiment will be augmented by a Reserve civil affairs
    capability. By assigning a secondary CMO mission to artillery units, we
    have augmented our high-demand/low density civil affairs capability
    while retaining much needed artillery units.
        This spring, we will be conducting an even more comprehensive
    initiative to determine what capabilities we must have in your Marine
    Corps of the future and in what capacity. We are conducting this review
    to ensure we are fully prepared for irregular warfare and as we adjust
    to the establishment of MARSOC, our decision to man infantry battalions
    at 100 percent, and the potential reduction of authorized end strength.
    End Strength
        The Marine Corps greatly appreciates the increase in end strength
    to 179,000 as authorized in the National Defense Authorization Act
    (NDAA) for Fiscal Year 2006. If appropriated, we will use this
    additional end strength to help implement our force structure
    initiatives, to support the global war on terrorism. Currently, our
    program of record requires that we internally fund any end strength in
    excess of 175,000 marines. We are resourcing these additional costs
    through supplemental funding.
    Military-to-Civilian Conversions
        The Marine Corps continues to pursue sensible military-to-civilian
    conversions in support of Marine Corps warfighting initiatives. These
    conversions increase the number of marines in the operating force and
    help reduce stress on the force. Funding remains a critical issue to
    the success of this initiative; cuts in both the Appropriations Bill
    for Fiscal Year 2005 (35 million) and Appropriations Bill for Fiscal
    Year 2006 (20 million) has decreased our ability to execute our planned
    fiscal year 2005 conversion program and will reduce our planned fiscal
    year 2006 conversions.
    Funding
        The President's fiscal year 2007 budget provides for a Total Force
    of 175,000 Active-Duty marines, 39,600 Reserve marines, and
    approximately 14,000 appropriated fund civilian marines. Approximately,
    61 percent of Marine Corps Total Obligation Authority is targeted
    toward military pay, retired pay accrual, Basic Allowance for Housing,
    defense health care, Basic Allowance for Subsistence, Permanent Change
    of Station relocations, and special pays. Only 1 percent of our
    military personnel budget is available to pay for discretionary items
    such as our Selective Reenlistment Bonus (SRB), Marine Corps College
    Fund recruitment program, and Aviation Continuation Bonus. Of the few
    discretionary pays that we utilize, the SRB is crucial. We take pride
    in our prudent stewardship of these critical resources. For fiscal year
    2007, we are requesting $55.4 million, up from $53.1 million in fiscal
    year 2006. This remains just one-half of 1 percent of our military
    personnel budget, and it is critical to effectively target our
    retention efforts. In fiscal year 2005, the Marine Corps derived great
    results from our SRB efforts in the infantry Military Occupational
    Specialties (MOSs). This proven application of SRB monies is a sound
    investment. The Marine Corps' prudent utilization of the SRB reduces
    recruiting costs and retains experienced marines in the force.
    Congress' continued support of our SRB program is critical to the
    continued health of your Marine Corps.
    Compensation
        The Marine Corps appreciates the efforts by this subcommittee to
    raise the standard of living for our marines. Being a Marine is both
    challenging and rewarding. America's youth continue to join the Marine
    Corps and remain, in a large part because of our institutional culture
    and core values. However, it is important that the other factors in the
    accession and retention decision remain supportive, to include
    compensation. Compensation is a double-edged sword in that it is a
    principle factor for marines both when they decide to reenlist and when
    they decide not to reenlist. Private sector competition will always
    seek to capitalize on the military training and education provided to
    our marines--marines are a highly-desirable labor resource for private
    sector organizations. The support of Congress to continue appropriate
    increases in basic pay and to ensure a sound comprehensive compensation
    and entitlements structure greatly assists efforts to recruit and
    retain the quality Americans you expect in your Corps. As the Defense
    Advisory Committee on Military Compensation concludes its review, we
    look forward to a complete and thorough analysis of their
    recommendations during the Quadrennial Review of Military Compensation.

                                   recruiting

    Active Component
        In fiscal year 2005, the Marine Corps achieved 100.1 percent of the
    enlisted shipping (accession) objective. Nearly 96 percent of those
    shipped to recruit training were Tier 1 high school diploma graduates,
    above the DOD and Marine Corps standards of 90 percent and 95 percent,
    respectively. In addition, 70 percent were in the I-IIIA upper mental
    testing categories, again well above the DOD and Marine Corps standards
    of 60 percent and 63 percent, respectively. As of 31 January 2006, we
    have shipped (accessed) 9,836 marines which represents 102 percent of
    our shipping mission. We fully anticipate meeting our annual mission.
    With regard to our self-imposed contracting mission, we are ahead of
    our current plan for the year and expect to meet our objectives.
    Concerning officers, we accessed 1,425 in fiscal year 2005, 100 percent
    of mission, and we are on course to make our officer accession mission
    in fiscal year 2006.
    Reserve Component
        The Marine Corps similarly achieved its fiscal year 2005 Reserve
    enlisted recruiting goals with the accession of 5,927 non-prior service
    marines and 2,259 prior service marines. As of 31 January 2006, we have
    accessed 1,668 non-prior service and 800 prior service marines, which
    reflects 28 percent and 39 percent of our annual mission, respectively.
    Again, we project to meet our Reserve recruiting goals this year.
    Officer recruiting and retention for our Selected Marine Corps Reserve
    units is traditionally our greatest challenge, and remains the same
    this year. The challenge continues to exist primarily due to the low
    attrition rate for company grade officers from the Active Force. We
    recruit Reserve officers exclusively from the ranks of those who have
    first served a tour as an Active-Duty marine officer. We continue to
    explore methods to increase the Reserve participation of company grade
    officers to include the use of increased command focus on Reserve
    participation upon leaving Active-Duty and Reserve officer programs for
    qualified enlisted marines. Your support of legislation to authorize
    the payment of the Reserve officer affiliation bonus has helped in this
    effort.
    Accomplishing the Mission
        The Marine Corps' recruiting environment continues to be highly
    competitive and challenging. Low unemployment, lower propensity to
    enlist and higher costs in advertising continue to foster the need for
    innovation in marketing the Marine Corps. We continue to market
    intangible benefits by projecting the Marine Corps message of ``tough,
    smart, elite warrior,'' focused on the ``transformation'' that a young
    man or woman makes to become a marine. The Corps continues to explore
    the most efficient manner to communicate and appeal to the most
    qualified young men and women of the millennial generation. We continue
    to attempt to inform and influence the parents of potential applicants.
    Parents continue to have the greatest influence on young men and women
    in their decision to serve their country, and it is important that we
    educate them on the benefits of serving in the Marine Corps.
        Our message is reinforced through marketing and advertising
    programs--paid media, leads for recruiters, and effective recruiter
    support materials. Paid advertising continues to be the most effective
    means to communicate our message and, as a result, remains the focus of
    our marketing efforts. As advertising costs continue to increase it is
    imperative that our advertising budgets remain competitive in order to
    ensure that our recruiting message reaches the right audience. Marine
    Corps recruiting successes over the past years are a direct reflection
    of a quality recruiting force and an effective and efficient marketing
    and advertising program.
        Finally, a very important factor in our success lies in ensuring
    clear and direct responsibility and oversight. The Commanding Generals
    of our Marine Corps recruiting regions are ``dual-hatted'' as the
    Commanding Generals of our training depots, responsible for obtaining
    the right high quality individual and seeing them through initial
    training until they earn the title marine. Consistent with this, our
    recruiters' commitment to recruiting quality recruits is reinforced by
    the fact that they are held accountable for recruits' successful
    completion of ``boot camp.''

                                   retention

        A successful recruiting effort is but one part of placing a
    properly trained marine in the right place at the right time. The
    dynamics of our manpower system must match skills and grades to our
    commanders' needs throughout the Operating Forces. The Marine Corps
    endeavors to attain and maintain stable, predictable retention
    patterns. However, as is the case with recruiting, civilian
    opportunities abound for marines as employers actively solicit our
    young marine leaders for private sector employment. Leadership
    opportunities, our core values, and other similar intangibles are a
    large part of the reason we retain dedicated men and women to be
    Active-Duty marines after their initial commitment. Of course retention
    success is also a consequence of the investments made in tangible forms
    of compensation and in supporting our Operating Forces--giving our
    marines what they need to do their jobs in the field, as well as the
    funds required to educate and train these phenomenal men and women.
    Enlisted Retention
        As we continue our fight on the global war on terrorism, we
    recognize that achieving our enlisted retention goals is of national
    importance for the Marine Corps, our senior civilian and military
    leaders, and the American people. History has proven that the enlisted
    leadership in our Noncommissioned Officer (NCO) and Staff NCO ranks is
    the cornerstone to our Marine Corps' combat effectiveness on today's
    battlefield.
        The Marine Corps is a youthful service by design and retaining the
    highest quality marines to lead our force remains of paramount
    importance. Within our 160,260 Active-Duty enlisted force, 107,545
    marines are on their first enlistment. Sustaining our career force
    requires that we reenlist approximately 25 percent of our first-term
    marine population. In fiscal year 2005, we reenlisted 6,159 first-term
    marines with a 96.0 percent MOS match and achieved our first-term goal
    for the 13th consecutive year. To better manage the career force, we
    introduced the Subsequent Term Alignment Plan in fiscal year 2002 to
    track reenlistments in our active career force. In fiscal year 2005, we
    met our career reenlistment goals for the fourth consecutive year.
    Concerning our Reserve Force, we satisfied our manpower requirements by
    retaining 80 percent in fiscal year 2005; the fifth consecutive year
    above our pre-September 11 historic norm of 70.7 percent.
        The Marine Corps' appeal for today's marines remains the
    ``intangible'' benefits of leadership, esprit de corps, and camaraderie
    from claiming the title `U.S. Marine' and is the singular reason why we
    continue to experience retention success in our Marine Corps. We are
    off to another strong start this fiscal year. As of February 10, 2006,
    I am pleased to report that we have attained 84.3 percent of the First
    Term Alignment Plan's goal of reenlisting 5,887 marines while
    sustaining a 99 percent MOS match. This impressive MOS match ensures
    that we are keeping the ``best and brightest'' while prudently placing
    the right skilled marines in the right job. We have also achieved a
    higher reenlistment rate for first-term infantry marines this fiscal
    year by reenlisting 86.2 percent of our goal thus far, as compared to
    81.3 percent at this point in fiscal year 2005. The Marine Corps is
    also on track to achieve its career force target of 6,250 marines for
    fiscal year 2006; we have already reenlisted 3,355 (53.7 percent)
    marines with a corresponding MOS match of 98 percent for our career
    force, ahead of last year's successful pace.
        The Selective Reenlistment Bonus Program (SRBP) continues to shape
    and complement our reenlistment efforts; it helps us keep our
    critically skilled marines. Surveys of marines nearing the end of their
    first enlistment, and Center for Naval Analyses studies, continue to
    bear out that the SRBP and duty station options add impetus to the
    intangibles of being a `U.S. Marine.' Thus, we increased the SRBP from
    51.1 million in fiscal year 2005 to 53.1 million in fiscal year 2006,
    with a supplemental request for another $31.5 million. To date, we have
    paid over $62.5 million in SRBs, with an average payment of $15,354.
    This program remains a powerful influence for the undecided who witness
    another marine's reenlistment and receipt of his or her SRB in a ``lump
    sum.'' With the added benefit of the Thrift Savings Program, our
    marines can now confidently invest their SRBP funds for future
    financial security. The Marine Corps takes great pride in prudent
    stewardship of the resources Congress has allocated to the critical
    SRBP.
    Officer Retention
        Overall, we continue to achieve our goals for officer retention. We
    are retaining experienced and high quality officers. Our aggregate
    officer retention rate was 91.3 percent for fiscal year 2005, which is
    above our historical average. Current officer retention forecasts
    indicate healthy continuation rates for the officer force as a whole.
    Reserve officer retention in fiscal year 2005, was 79.5 percent,
    slightly above the pre-September 11 historical average of 77 percent.
    For the current year, Reserve officer retention has thus far remained
    above historical norms. It is important to note that despite high
    retention in the Active component, which reduces the number of officers
    transitioning (thus accessions) into the Selected Marine Corps Reserve,
    our Reserve Force continues to meet its operational requirements.
    Several initiatives are being reviewed to significantly close the gap
    between Reserve officer requirements and manning, specifically in the
    junior officer ranks.

                              marine corps reserve

        This year marks the fourth year that our Reserve component has
    augmented and reinforced our Active component in support of the global
    war on terrorism. Thanks to strong congressional support, the Marine
    Corps has staffed, trained and equipped its Reserve to respond to
    crises around the world. Our Reserve component possesses capabilities
    to fight across the full spectrum of conflicts to support our Marine
    Air Ground Task Forces. To date, over 36,000 Reserve marines have
    served on Active-Duty since September 11, 2001. The Marine Corps
    Reserve continues to recruit and retain quality men and women willing
    to serve in our military and help our Nation fight the global war on
    terrorism. These men and women do so while maintaining their
    commitments to their families, their communities and their civilian
    careers.
        More than 7,000 Reserve marines are currently on Active-Duty with
    over 5,500 in cohesive Reserve ground, aviation and combat support
    units and nearly 1,600 serving as individual augments in both marine
    and joint commands. Seventy one percent of all mobilized reservists
    deploy to the Central Command area of operations. To support ongoing
    mission requirements for Operation Iraqi Freedom (OIF), the Marine
    Corps Reserve provides approximately 10 percent of our Total Force
    commitment. The progression of the current mobilization reinforces the
    point that our Reserve Force is a limited resource that must be
    carefully managed to ensure optimum employment over a protracted
    conflict. In addition to supporting the overseas global war on
    terrorism mission, our Reserve marines are positioned throughout the
    country ready to support homeland defense if required or assist with
    civil-military missions such as disaster relief efforts as shown in the
    wake of Hurricanes Katrina and Rita.
        As mentioned, recruiting and retention remain a significant
    interest as the Marine Corps Reserve continues its support for the
    global war on terrorism. The funding increases and flexibility inherent
    in the Reserve incentives you provided in the NDAA for Fiscal Year 2006
    are an invaluable asset to assist in our continued recruitment and
    retention mission. The approved legislation assists our efforts to
    encourage Reserve affiliation by officers transitioning from Active-
    Duty. The generous increase in affiliation bonus and the broadening of
    eligibility to include those officers who have prior enlisted service
    in the Reserve are greatly appreciated. The increased bonus not only
    generates greater interest in Reserve affiliation, but also provides
    financial assistance during the critical period of transition from
    Active-Duty to Reserve service.
        Health care remains an essential part of mobilization readiness for
    our Reserve component. The new health care benefits that Congress
    authorized this fiscal year will help ensure that our Selected Marine
    Corps Reserve members, and their families, have access to affordable
    health care as they do their part to prosecute the global war on
    terrorism. Increased access and flexibility to health care for these
    families assists in alleviating one of the most burdensome challenges
    facing families of deploying Reserve marines.
        The long-term success and sustainability of our Reserve Forces is
    directly related to our ability to prepare and employ our forces in
    ways that best manage limited assets while meeting the expectations and
    needs of individual marines and their families. In an effort to ensure
    a well-balanced Total Force and address any potential challenges that
    may arise, we are constantly monitoring current processes and policies,
    as well as implementing adjustments to the structure and support of our
    Reserve Forces.
        In order to meet the operational needs of the global war on
    terrorism, the Marine Corps continues to make changes to Active and
    Reserve structure and capabilities. We conducted a top-to-bottom review
    of our Individual Mobilization Augmentee (IMA) program during the
    spring of 2005 as part of our force rebalancing efforts. As a result,
    we increased overall IMA manning levels by nearly 1,200 paid billets--
    matching paychecks to previously unmanned structure. The preponderance
    of manning increases were applied to commands possessing unique high
    demand-low density skill set requirements, such as military
    intelligence or communications and information systems. We view our IMA
    marines as force multipliers--augmenting Active component staffs and
    commands with trained, skilled, and experienced marines--and we will
    continue to actively and effective employee all members of our Total
    Force when and where needed to meet mission requirements.
        In regard to the Individual Ready Reserve (IRR), the Marine Corps'
    present policy is to only activate members who have volunteered for
    duty. The current number of activated IRR volunteers is 820. The two
    primary means of recruiting IRR volunteers for Individual Augmentee
    billets are through the use of Reserve Duty On-Line and the
    Mobilization Command Call Center. Currently, there are 1,324 individual
    augment billets being filled by individual mobilization augmentees,
    Individual Ready Reserves, and retired recall or retired retained
    marines. These marines have been critical to successfully meet these
    individual augment requirements.

                                civilian marines

        Civilian marines are integral to the Marine Corps Total Force
    concept. We have approximately 25,000 civilian marines, of which
    approximately 14,000 are appropriated fund employees and 11,000 are
    non-appropriated fund employees. Our civilian marines fill key billets
    aboard Marine Corps bases and stations, freeing Active-Duty marines to
    perform their warfighting requirements in the operating forces.
    Marine Corps Civilian Workforce Campaign Plan
        Marines, more than ever before, recognize the importance of our
    civilian teammates and the invaluable service they provide to our Corps
    as an integral component of the Total Force. To that end we continue to
    mature and execute our Civilian Workforce Campaign Plan, a strategic
    road map to achieve a civilian workforce capable of meeting the
    challenges of the future. We are committed to building leadership
    skills at all levels, providing interesting and challenging training
    and career opportunities, and improving the quality-of-work life for
    all appropriated and non-appropriated civilian marines. As part of our
    effort to meet our goal of accessing and retaining a select group of
    civilians imbued with our core values, we have developed a program to
    provide our civilian marines an opportunity to learn about the Marine
    Corps ethos, history, and core values--to properly acculturate them to
    this special institution. All this supports our value proposition, why
    a civilian chooses to pursue a job with the Marine Corps--to ``Support
    Our Marines. Be Part of the Team.''
    National Security Personnel System
        The Marine Corps is actively participating with the DOD in the
    development and implementation of this new personnel system. Following
    an intensive training program for supervisors, managers, human
    resources specialists, employees, commanders and senior management, we
    will execute our first phase of implementation, with a tentative
    conversion date of October 2006. In the Marine Corps we will lead from
    the top and have our Marine Corps Headquarters civilian personnel
    included in our first phase.

                             information technology

        We continue to transform our manpower processes by exploiting the
    unique benefits of the Marine Corps Total Force System (MCTFS), our
    fully integrated personnel, pay, and manpower system. The MCTFS
    seamlessly serves our Active, Reserve, and retired members, both
    officer and enlisted; provides total visibility of the mobilization and
    demobilization process of our marines; and ensures proper and timely
    payments are made throughout the process. MCTFS provides one system,
    one record, regardless of an individual's mobilization status.
        MCTFS is addressing three key deficiencies currently existing in
    DOD:

             Financial visibility/traceability--Positioning the
            Marine Corps for an unqualified audit opinion in fiscal year
            2007, a DOD strategic goal;
             Manpower recruiting and retention goals--Pay marines
            on time and accurately, while supporting manpower models for
            recruiting; and
             Information Technology Management--Supporting the
            Department's stated IT goal of ``making information readily
            available and in a useable format.''

        MCTFS is a key enabler of the Marine Corps Financial Improvement
    Initiative. Sixty-one percent of the Marine Corps budget is calculated,
    obligated, and accounted for by MCTFS. Intrinsic to MCTFS is full
    traceability of all of these expenditures to the source of input. MCTFS
    contains robust business logic that seamlessly links personnel and pay
    events. According to the Defense Finance and Accounting Service's
    ``Bare Facts'' report, MCTFS has an accuracy rate of 100 percent for
    our Active component and 99.73 percent for our Reserve component so far
    in fiscal year 2006.
        With MCTFS as the backbone, the Marine Corps developed the Total
    Force Administration System (TFAS), a virtual administration center.
    TFAS's enterprise architecture and software, business processes,
    organizational arrangements, and the defined roles of the commanders
    and individual marines all combine to efficiently reduce and/or
    eliminate highly labor intensive and redundant administrative
    processes. During 2005, individual marines and their leaders leveraged
    MCTFS' capabilities using TFAS via Marine OnLine, a Web-based
    application that automatically processes more than 1.3 million
    transactions, including over 60 percent of our annual leave events. In
    December alone, more than 26,000 marines processed their leave via
    TFAS/Marine OnLine. This capability eliminated the need for 26,000
    individual pieces of paper to be manually routed from requesters, to
    one or more approvers, to an administrative clerk's desk, and to then
    be manually entered into MCTFS. Coupling MCTFS integrated business
    logic with Marine OnLine's web-based capabilities increases the amount
    of time marine leaders can to devote to warfighting. Routine
    administrative tasks are being virtually eliminated, decreasing the
    requirement for administrators. TFAS is the catalyst for realignment of
    more than 1,700 administrative billets to other critical occupational
    fields.
        MCTFS' integrated environment directly feeds our Operational Data
    Store Enterprise and Total Force Data Warehouse, a shared data
    environment of current and historical individual and aggregate data.
    Our manpower performance indicators then present this data in a
    flexible, easy to read, graphical format to operational commanders and
    headquarters planners via the Internet. We program continued technology
    investments that build on these integrated capabilities, ultimately
    providing greater effectiveness and efficiencies to allow us to
    continue decreasing marine administrative support and redirect
    structure to warfighting capabilities. Proper management of our
    manpower requirements and processes requires continued investment in
    modern technologies; we remain committed to these prudent investments.

                          military health care benefit

        The DOD military health care benefit is important, and a benefit we
    must properly sustain. To sustain this outstanding benefit, the issue
    of the rising costs of the military health care benefit needs to be
    addressed. Despite past management actions, these alone will not stem
    the rising cost of the military health benefit. Costs have doubled in
    the past 5 years and projections indicate that they will jump to over
    12 percent of the total DOD budget by 2015 (vs. 4.5 percent in 1990).
        We support DOD's efforts concerning military health care and want
    to work closely with Congress to sustain this outstanding health
    benefit for the men and women of our Armed Forces and our retired
    community. It is critically important that we place the health benefit
    program on a sound fiscal foundation for the long term, so that we can
    sustain the vital needs of our military to recruit, train, equip, and
    protect our servicemembers who daily support our national security
    responsibilities throughout the world.

                   taking care of marines and their families

        We remain committed to providing for our marines and their families
    in a manner befitting their unwavering dedication and sacrifice. As an
    expeditionary force, the personal and family readiness of marines and
    their families has always been integral to mission readiness. Today,
    some of our marines are on their third deployment to Operation Enduring
    Freedom (OEF)/OIF. Separation from loved ones can be a challenging
    experience and tests the endurance of marines and their families. While
    away for a 7-month deployment, significant life events may occur on
    both the battle and home fronts. During the same cycle, a marine may
    experience the joy and wonder of parenthood and the loss and sympathy
    associated with the death of a fellow marine or family member at home.
    The stress of combat and increased operational tempo may also be
    experienced. Marine spouses certainly experience the responsibilities
    associated with ``keeping the home fire burning.'' Our marines and
    their families must be ready, therefore, for separation and the
    inherent requirements to sustain and succeed in the mission. As our
    warfighting skills are advanced and honed, so too must be our personal
    and family readiness skills, regardless of the number of times
    deployed. We have made transformational advances in providing for the
    personal and family readiness of marines and their families and believe
    these changes are making a positive contribution to their preparedness.
    Organization and Program Delivery
        Separation from loved ones necessitates clear communication, a plan
    for discharge of responsibilities, such as family care plans, payment
    of bills, a review of benefits and beneficiaries, and other
    miscellaneous but important actions. To address these issues and
    information requirements, we provide marines and families a continuum
    of support throughout the deployment cycle by way of the Marine Corps
    Community Services (MCCS).
        MCCS was first established in 1999 and enables the leveraging of
    all community services programs for common achievement of goals. The
    melding of our exchange operations, Morale, Welfare, and Recreation
    (MWR) programs, and personal and family readiness programs is a model
    that has provided incredible support to our marines and their families.
    As a former operational commander and significant user of the programs,
    I believed MCCS was the right model for the marines in the field, as
    well as being the ideal tool to assist commanders in support of marines
    and their families. As the Deputy Commandant for Manpower and Reserve
    Affairs, I have observed the continued evolution of MCCS and seen the
    energy and dedication of base and station commanders and their staffs
    as they seek to provide needed support. MCCS is right for the Marine
    Corps and has proven to be beneficial for customers and leaders alike.
    At home stations of marines and their families, MCCS offers more than
    80 programs that make our bases and stations responsive and livable
    communities. In the process, MCCS programs are helping marines and
    their families pursue healthy lifestyles, lifelong learning,
    responsible citizenship, family readiness, quick acclimation (whether a
    result of relocation or transition), and providing valued goods and
    services to support basic necessities and other desired merchandise.
    This home station support is the base of MCCS capabilities that is then
    scaled for deployment with marines, while still supporting the needs of
    those who remain behind. Regardless of environment, MCCS is focused on
    enhancing the personal and family readiness of marines and their
    families.
    Deployment Support
        At the pre-deployment phase, marines and spouses receive briefs on
    a wide range of issues from coping skills, including the potential of
    traumatic combat experiences and stress; to financial matters; to
    safety. These briefs help to ensure smooth household operation while
    the marine is away.
        Marines are proud of their accomplishments in OEF/OIF and morale
    remains high among these selfless warfighters. They are appreciative of
    the touches of home they receive while in theater, and we endeavor to
    see that deployed marines, especially those at remote sites, enjoy a
    measure of recreation and relaxation. Working with the Army and Air
    Force Exchange Service, the Marine Corps Exchange (MCX) offers warriors
    items such as health and comfort products, DVDs, magazines, and snack
    foods. MCX services are available at the main camps 7 days a week. We
    also have Tactical Field Exchanges at various locations. Moreover, we
    have placed a high priority on our Warrior Express Service Teams, who
    regularly travel to marines at the outlying remote sites to ensure they
    have access to MCX items. To keep marines in steady contact with home,
    there is in-theater phone service and mail service. We also continue to
    offer our Internet-based mail service, ``MotoMail.'' MotoMail has been
    highly successful and its popularity continues to grow--the service has
    generated nearly one million letters since its inception in December
    2004. MotoMail services are currently offered at 11 camps in OIF. As a
    result of its success, we plan to extend it to additional deployed
    environments.
        Successfully providing for our families allows us to maintain our
    warrior ethos and operate effectively in the current high operational
    tempo, wartime environment. There is a direct correlation between
    mission readiness and family sustainment. Marines concentrate on their
    mission because they know their families at home have the resources and
    support necessary to tackle and triumph over issues that may arise
    during deployment. Our resources, tools, and support mechanisms are
    readily available and easily accessible to help marines manage
    separation issues, multiple deployments, and other associated
    challenges.
        Especially today, the Key Volunteer Network (KVN) and Lifestyle
    Insights, Networking, Knowledge and Skills (L.I.N.K.S.) programs are
    particularly relevant. The KVN supports the spouses of deployed marines
    by providing official communication from the Command about the welfare
    of the unit and other key status or information. Beyond providing a
    source for accurate and reliable information, KVN also offers referral
    services and fosters a sense of community within the unit. L.I.N.K.S.
    is a mentoring program that helps spouses adapt to the military
    lifestyle and understand Marine Corps history, our traditions, and
    language. Spouses who participate in L.I.N.K.S. gain important
    knowledge from seasoned spouses, veritable pros, on surviving and
    flourishing during separation periods. Participants also learn about
    benefits and services such as health, housing, and compensation, and
    available community services. For our Reserve families, we are updating
    and streamlining our KVN and L.I.N.K.S. training guides to more
    appropriately reflect their needs, based upon their separated
    locations. Under a recent enhancement, Reserve unit Key Volunteers can
    contact MCCS/Military OneSource and request a ``Know Your
    Neighborhood'' report on all available community support resources to
    be used as part of the ``Local Resources'' portion of KVN education. We
    will continue to grow and improve KVN and L.I.N.K.S. programs.
    Strengthening Personal and Family Readiness
        Combat/Operational Stress Control
        The nature of today's battlefield is uncertain and chaotic and the
    Marine Corps will continue to recruit and retain the right men and
    women to thrive in this environment. We educate marines and their
    leaders to prepare their minds for the intellectual component of the
    clash of wills and chaos inherent to combat. Part of this preparation
    is effectively addressing the potential effects of combat/operational
    stress both before and after it may occur. Since the Marine Corps
    crossed the line of departure into Iraq in March 2003, we have
    continuously developed and improved our operational stress control
    programs based upon lessons learned.
        Though we provide many prevention and treatment programs, we know
    that their success is dependent upon marines confidently availing
    themselves of the support offered. As such, we consistently encourage
    use of our many easily accessible resources. We also emphasize that
    stress heals more quickly and completely if it is identified early and
    managed properly. We are vigilant in watching our young and vigorous
    members for signs of distress and endeavor to effectively manage
    operational stress at every level. We provide pre-deployment training,
    assistance when the stress is occurring, a multi-tiered deployment
    health assessment process, and post-combat monitoring and assistance to
    identify mental health issues early so those affected will have the
    best chance of healing completely.
        To coordinate our combat/operational stress control (COSC) efforts,
    we have established a COSC section in our Manpower and Reserve Affairs
    Department. The objectives of the Marine Corps' COSC program are to
    provide the tools to prevent, identify, and treat combat/operational
    stress injuries in warfighters and their family members before, during,
    and after deployment.
        To assist during the pre-deployment phase, marine officers and
    staff NCOs are trained to prevent, identify, and manage stress
    injuries. Moreover, marines are trained on the stressors to be expected
    and how to monitor and manage personal stress levels.
        In January 2004, we launched the Operational Stress Control and
    Readiness (OSCAR) program. OSCAR embeds mental health professionals
    with ground units, and has been successful in helping marines deal with
    the acute stress of combat. It keeps marines with low-level problems at
    their assigned duties and allows those with more severe conditions to
    immediately receive appropriate treatment. OSCAR also plays a role in
    pre-deployment, as personnel train with the units they will support
    during the deployment. This builds two-way trust and familiarly. In
    addition to OSCAR, there are mentorship programs and treatment services
    by Chaplains in theater. We also have briefs for marine leaders on
    homecoming and how to identify, and refer for help, marines with
    persistent operational stress injuries. For families during
    deployments, KVN and L.I.N.K.S. (discussed previously) provide valuable
    support and resources. Our families can also avail themselves of
    various programs offered by MCCS, and Military/MCCS OneSource.
        To ensure smooth homecomings, we launched the Warrior Transition
    and Return and Reunion Programs. These programs, launched in 2003, help
    marines and their families readjust when the combat marine reintegrates
    to home life. Beyond training marines for homecoming, family members
    also receive briefs, including information on reuniting with their
    marine spouses, and how to know whether their spouse is experiencing a
    stress problem that requires attention.
        We are beginning to screen all returning marines and sailors for a
    variety of potential mental health problems after they have been back
    home for 90-180 days, and those who screened positive are evaluated and
    treated. Marines experiencing a severe form of stress are referred to
    medical professionals for diagnosis.
        To ensure COSC training participation, we have a system using the
    Marine Corps Total Force System for unit-level tracking by individual
    marines during pre-deployment, re-deployment, and post-deployment.
        Finally, we are very proud of the recent activation of a new Web-
    based information and referral tool, the ``Leaders Guide to Managing
    Marines in Distress.'' The guide gives marine leaders the ability to
    help marines at the point of greatest positive impact: marine-to-
    marine. It offers leaders at all levels information to resolve high-
    risk problems faced by marines that could be detrimental to personal
    and unit readiness. The faster and more effectively these problems are
    solved, the more time the individual and unit will have to focus on the
    mission. The guide is separated into six major categories: deployment,
    family, personal, harassment, substance use, and emotional. Within
    these categories, there are 16 main problem areas that include an
    overview of the problem, risk factors, why marines may not seek help,
    prevention strategies, resources, and Marine Corps guidance. The guide
    can be accessed at http://www.usmc-mccs.org/leadersguide.
    Marine Corps Critical Incident Stress Response
        In the case of mass casualties experienced by a command/unit, the
    Marine Corps' critical incident stress management trained teams provide
    crisis management briefings to family members and friends of the
    command/unit. During crisis management briefings, Marine Corps
    personnel, Chaplains, and Managed Health Network (MHN) counselors are
    available to provide information and answer questions concerning the
    casualties. MHN is an Office of the Secretary of Defense (OSD)-
    contracted support surge operation mechanism that allows us to provide
    augmentation counselors for our base counseling centers and primary
    support at sites around the country to address catastrophic
    requirements.
    Child Care
        We work to help the youngest members of the Marine Corps family
    adjust to being separated from a deployed parent by providing children-
    specific deployment briefs. For children who are experiencing
    difficulties adjusting to deployments, we offer the Operation Hero
    Program. This program targets children from 6 to 12 years and provides
    after-school tutoring and mentoring assistance in small groups with
    certified teachers. We also have initiatives that target care and
    support for children of activated reservists who are geographically
    separated. For example, we have established partnerships with the Boys
    and Girls Clubs of America, the Early Head Start/Zero to Three Program,
    and the National Association for Child Care Resource and Referral
    Agencies.
        Especially when a parent is deployed, emergency child care needs
    may arise. Using DOD funds, the Marine Corps implemented the Enhanced
    Extended Child Care initiative, provided through family child care
    homes. Examples of situations where the services are provided are: when
    family members have been hospitalized; for attendance at bereavement
    ceremonies; respite for family members during deployments; and
    unexpected duty or duty hours.
    Suicide Prevention
        For the Marine Corps, one suicide is too many, and we remain
    steadfast in our dedication to prevention and the early identification
    of problems that could potentially contribute to suicide. All marines
    receive annual suicide awareness training to support early
    identification of problems. We also provide ready access to counseling
    support and crisis intervention services. More recently, we have
    updated Marine Corps-specific videos on suicide prevention. In
    addition, the Leaders Guide to Managing Marines in Distress includes
    extensive information on suicide prevention. As with any prevention
    program, its effectiveness is dependent upon on proper usage. With this
    in mind, we are fostering a climate in which marines feel compelled to
    convince their fellow marines that seeking help is a sign of good
    judgment and for the betterment of personal and mission readiness.
        As for a possible correlation between deployments and the high
    operational tempo, we closely monitor our suicide cases to determine
    whether OEF/OIF operations are having an impact on our rates. Our
    analysis shows no correlation between marines with a history of
    deployments and suicide rates.
    Domestic Abuse
        We have observed that spouse and child abuse continues to decline
    for the Marine Corps. In fiscal year 2001, there were 1,358
    substantiated cases of spouse abuse. In fiscal year 2005, the number
    dropped to 995 substantiated cases. Similarly, substantiated child
    abuse cases declined from 821 in fiscal year 2001 to 448 in fiscal year
    2005. An analysis of this data indicates that abuse does not increase
    as marines deploy. Our prevention efforts and care for victims remain
    strong and effective. We focus on early intervention, education for new
    parents, and for our victims, our Victim Advocate Program is available
    around-the-clock.
    Sexual Assault
        For the Marine Corps, we have always had a zero tolerance policy
    when it comes to sexual assault. Beyond punishing offenders, we place a
    high priority on prevention and protecting and supporting victims.
        We are in complete compliance with the mandates of the DOD's Joint
    Task Force for Sexual Assault Prevention and Response. We have
    established a Sexual Assault Prevention Office, which serves as the
    single point of contact for all sexual assault matters, including
    victim support and care, reporting, training, and protective measures.
    We thoroughly educate marines on this issue and have instituted
    extensive sexual assault awareness training for all entry-level
    officers and enlisted members. We have also established procedures to
    protect a victim's privacy and right to select unrestricted or
    restricted reporting. For in-theater incidents, we have trained
    Uniformed Victim Advocates who stand ready to provide support and care.
    Transition Assistance
        Our Transition Assistance Management Program (TAMP) provides
    resources and assistance to enable separating marines and their
    families to make a successful and seamless transition from military to
    civilian life. TAMP provides information and assistance on various
    transition topics, including: employment, education and training
    benefits, determining health and life insurance requirements, financial
    planning, the benefits of affiliating with the Marine Corps Reserves,
    and veteran's benefits and entitlements. For our injured marines, we
    provide TAMP services at a time and location to best suit their needs,
    whether at bedside at a military treatment facility or their home. In
    cases where the marine is not in a condition to receive transition
    information, but the family members are, assistance and services are
    provided to the family member.
        Transition services are available to all marines and their family
    members who are within 12 months of separation or within 24 months of
    retirement. On a space-available basis, separated marines can attend
    workshops up to 180 days after their date of separation. Pre-separation
    counseling and the Transition Assistance Program workshops are
    mandatory for all separating marines. Other services include:

             Career Coaching Employment and training assistance
             Individual Transition Plan Career assessment
             Financial Planning Instruction in resume preparation,
            cover letter, and job applications
             Job analysis, search techniques, preparation and
            interview techniques
             Federal employment application information
             Information on Federal, State, and local programs
            providing assistance
             Veteran's benefits
             Disabled Transition Assistance Program

    Casualty Assistance
        Marine Corps casualty assistance is viewed as a fulfillment of duty
    and commitment to take care of marines and their families. Our trained
    Casualty Assistance Calls Officers (CACOs) receive training that is
    always supported by ongoing online assistance and the continuous 24/7
    availability of the Marine Corps Headquarters Casualty Section. Our
    training is regularly refined based upon lessons learned. We have
    approximately 5,000 trained CACOs across the country to help our
    survivors by providing consistent and measured engagement during the
    entire casualty process and beyond. They provide death notification,
    help to coordinate funeral arrangements (including travel), and serve
    as the primary point of contact to connect survivors with benefits
    agencies, such as the Department of Veterans Affairs (VA), the Social
    Security Administration, and TRICARE. When survivors relocate, CACO
    assignments are geographically transferred to continue support of the
    survivor as needed or desired. In these cases, there is a ``warm
    handoff'' between CACOs. For our survivors requiring extended support,
    CACOs connect families to a long-term survivor case manager. The case
    manager makes personal contact with our survivors to reassure them that
    support will be provided for as long as it is needed.
        As with all we do, we will continue to seek ways to improve how we
    take care of marines and families into the future.
    Marine-for-Life--Injured Support
        Built on the philosophy ``Once a Marine, Always a Marine'' and
    fulfilling our obligation to ``take care of our own,'' the Marine-For-
    Life program offers support to approximately 27,000 honorably
    discharged marines transitioning from Active service back to civilian
    life each year.
        Leveraging the organizational network and strengths of the Marine-
    For-Life Program, we implemented an Injured Support Program during
    January 2005 to assist combat injured marines, sailors serving with
    marines, and their families. The program essentially seeks to bridge
    the gap that can exist between military medical care and the VA--
    providing continuity of support through transition and assistance for
    several years afterwards.
        The program recently assigned two full-time Marine Corps liaison
    officers to the Seamless Transition Office at the VA. These liaison
    officers interface between the Veterans Health Administration, the
    Veterans Benefits Administration, and the Marine Corps on individual
    cases to facilitate cooperative solutions to transition issues.
        Additionally, the Injured Support Program conducts direct outreach
    to injured marines and sailors via phone and site visits to the
    National Naval Medical Center, Walter Reed, and Brooke Army Medical
    Centers. On average, 30 percent of our seriously injured marines
    requested and received some type of assistance.
        Lastly, the program continues to work closely with OSD on Marine
    Corps-related injury cases. Information sharing between the program and
    OSD contributes to developing capabilities for the Military Severely
    Injured Center.

                                   conclusion

        As we continue to fight the global war on terrorism, our Services
    will be required to meet many commitments, both at home and abroad. We
    must remember that marines, sailors, airmen, and soldiers are the heart
    of our Services--they are our most precious assets--and we must
    continue to attract and retain the best and brightest into our ranks.
    Personnel costs are a major portion of the DOD and Service budgets, and
    our challenge is to effectively and properly balance personnel,
    readiness, and modernization costs to provide mission capable forces.
    In some cases a one-size fits all approach may be best, in others
    flexibility to support service unique requirements may be paramount.
    Regardless, we look forward to working with Congress to maintain
    readiness and take care of your marines.
        The Marine Corps continues to be a significant force provider and
    major participant in joint operations. Our successes have been achieved
    by following the same core values today that gave us victory on
    yesterday's battlefields. Our Active, Reserve, and civilian marines
    remain our most important assets and, with your support, we can
    continue to achieve our goals and provide what is required to
    accomplish the requirements of the Nation. Marines are proud of what
    they do! They are proud of the ``Eagle, Globe, and Anchor'' and what it
    represents to our country. It is our job to provide for them the
    leadership, resources, quality-of-life, and moral guidance to carry our
    proud Corps forward. With your support, a vibrant Marine Corps will
    continue to meet our Nation's call as we have for the past 230 years!
    Thank you for the opportunity to present this testimony.

        Senator Graham. Senator Nelson.
        Senator Ben Nelson. Secretary Chu, the Quadrennial Defense
    Review (QDR) concludes that, ``The Reserve component must be
    operationalized so that select reservists and units are more
    accessible and more readily deployable than today.'' Then it
    further provides that DOD will, ``pursue authorities for
    increased access to Reserve component to increase the period
    authorized for presidential Reserve call-up from 270 to 365
    days.''
        Now, it's unclear to me why we would want to increase the
    authority from 270 days to essentially a year. For operations
    where 270 days is not sufficient, the President already has
    partial mobilization authority to declare a national emergency
    and to order National Guard and Reserve personnel to Active-
    Duty for up to 24 consecutive months. Maybe you can help me
    understand why the Department feels it's important to increase
    this presidential Reserve call-up authority to a year, and why
    is the President's current partial mobilization authority not
    sufficient, even though it can go up to 2 years?
        Secretary Chu. Thank you, sir. I'd be delighted to.
        As you point out, under a declaration of a national
    emergency, the President has broad authority, broader than is
    being proposed, with this change. We do want to look ahead,
    however, to a period in which there might not be a declaration
    of a national emergency. It might not be appropriate to issue
    such a declaration. But we would still like the President to
    have authority for access to Reserve components. As you
    appreciate, Congress gave him that authority under the so-
    called Presidential Reserve Call-up section of the statute. It
    is limited to 270 days. It is the authority the country used
    during the 1990s for the Balkans deployments.
        Our conclusion is, that's a bit too short. Obviously, this
    is a balance, in terms of requesting the expanded authority. We
    find that our Reserve community is comfortable with a 1-year
    period of service. That is understood by people as reasonable.
    Within a 1-year period, if we had access for that length of
    time, we could have preparation and return steps accomplished
    in 2 or 3 months, which would give you a deployed time closer
    to 9 to 10 months, versus the 6 or so that's feasible under the
    270 days.
        We'd like this additional authority. It's not actually
    applicable, at the moment, because we are under a declaration
    of a national emergency, but it's an important hedge for the
    future. I think it's a significant change we'd like your
    support for.
        We'd also like support, as the QDR indicates, for authority
    of the President explicitly to mobilize for natural disasters,
    which is not an authority he currently possesses.
        Senator Ben Nelson. With respect to end strength, General
    Osman, the currently released QDR proposes to stabilize the
    Marine Corps end strength at 175,000 Active and 39,000 Reserve
    component personnel by fiscal year 2011. The Commandant,
    however, has recently publicly stated that he's not sure the
    Marine Corps end strength should be reduced below 180,000
    marines. Did the Marine Corps provide input to the QDR
    regarding that desired end strength for the Marine Corps? If
    so, what did the Marine Corps itself request? Has anything
    changed since this input was provided?
        General Osman. Sir, our current end strength is about
    180,000. We have been authorized an end strength of 179,000.
    The Secretary of Defense has the authority to float the end
    strength, and we've taken advantage of that, to bring us up to
    180,000. At this time, we feel like that is the end strength we
    need in order to execute operations as they are today. Needless
    to say, as things change, then obviously the requirement for
    the end strength may change.
        You probably know that the Commandant is commissioning a
    capabilities assessment group that has begun deliberations--it
    will take about 3 months--to take a very hard look at the
    Marine Corps, Active and Reserve, a Total Force look, to see
    what the Marine Corps would look like as we began a downward
    slope that would take us down to an end strength of 175,000. Of
    course, this would include the new Marine Special Operations
    Command (MARSOC) that recently stood up, which has a membership
    of about 2,500 marines. Within that 175,000, include the 2,500
    for the MARSOC. We'll take a hard look operationally at how
    we'll have to tailor the force in order to reach that.
        At this particular point in time, the Commandant's focus,
    however, of course, is on current operations. As long as we
    continue to receive the supplementals we receive that allow us
    to have an end strength of 180,000, that is what we need in
    order to continue to execute operations as they are today.
        Senator Ben Nelson. Dr. Chu, is the reduction based on an
    expectation that the 175,000 is adequate, or is this an effort
    to reduce the cost, or a budget-cutting proposal, or something
    else?
        Secretary Chu. I think it's something else, sir. As I
    indicated in my opening remarks, the Department understands
    that we have to keep a good control of operating costs of the
    enterprise, or there will not be room within the likely total
    budget for the Department for the reinvestment in new equipment
    that is essential to our future success. So, we have set, as
    objectives for the Department, that, by the close of the
    current program period, which is fiscal year 2011, the Army and
    the Marine Corps would be able, through a variety of changes in
    the way we do business--military/civilian conversions,
    reconsideration of how we produce various capabilities, et
    cetera--to come back to strength levels that you have
    described, 175,000 for the Marine Corps, and 482,400 for the
    United States Army.
        As General Osman testified, as circumstances change, our
    answers to these questions may change over time, but that is
    the trajectory on which we have set ourselves. We think that's
    a prudent trajectory in order to protect the future
    capabilities of the Department when you take all factors into
    account. It really is a strategic choice on the part of the
    Department.
        Senator Ben Nelson. So, the choice is to consider other
    requirements with regard to the budgeting process, even though
    that may reduce the end strength below what the Commandant
    believes is necessary to continue to do and perform at the
    level they're performing at the present time?
        Secretary Chu. I would say it a little bit differently. I
    think the Commandant's statement goes to: what does he need
    today in order to staff the capabilities and produce those
    outcomes in the way we now do business? What we're looking for,
    4-5 years from now, is a slightly different outcome in which we
    get the same, or better, capabilities, but we do not need quite
    as much Active-Duty manpower as is currently on the books.
        The Marine Corps has already done that. The Marine Corps is
    in the process of, out of the current strength levels, creating
    two additional infantry battalions, two additional long-range
    reconnaissance companies, et cetera. The Army is doing
    something similar with its move to a modular structure in which
    we're expanding by nine Active brigades within a strength level
    that's not all that different from the one at which the Army
    started.
        During the transition period, as you move into new areas
    and acquire new people with new skills, or take people in with
    old skills and retrain them, then yes, there are going to be
    more people on the books than we think is necessary, in the
    long term. Some of the extra capacity will come, I acknowledge,
    from expanding, at least at the margin, the civil workforce of
    the Department--which is one of the reasons we're so eager to
    get the National Security Personnel System (NSPS) into place--
    and have civilians do some of the things that are now done by
    military personnel, which, de facto, gives you more military
    strength to devote to purely military objectives.
        I'll take an example, in the lane of my office and my
    colleagues here, in how we run the Military Entrance Processing
    Stations. We had well over 1,000 military personnel in those
    stations before we began this review. We've agreed to reduce
    that to a few hundred. We can do it with a larger civilian
    content. It does mean we have to change how we staff those
    enterprises, how we deal with overtime, how we deal with
    Saturday hours, and so on and so forth. Those are all solvable
    problems. On the other hand, they cannot be solved overnight.
    So, there is this transition period, in which you're going to
    see higher strength levels than we believe we need to maintain
    for the long term.
        Senator Ben Nelson. Are we simply shifting end strength
    from the Marine Corps to, let's say, civilian personnel, so
    that the numbers are essentially the same in total strength,
    without regard to whether they're civilian or Marine Corps
    personnel?
        Secretary Chu. Not necessarily. There might be fewer, in
    the end, because part of this is what people in the private
    sector like to call ``business process reinvention.'' Also, I
    should emphasize that, on average, it's somewhat less expensive
    to have a civilian staff member than a military staff member.
    So, from the budgetary perspective, even if you were one for
    one, on average you would have a lower operating cost than
    would otherwise be the case. So, this is, again, a strategic
    choice by the Secretary, and by the Department, to ensure that
    we keep a good margin for the reinvestment in new equipment and
    new capabilities we need for the future, and not consume the
    entire budget in current operating costs.
        Senator Ben Nelson. But without reducing end strength to
    some lower, but dangerous, level?
        Secretary Chu. We don't think it's dangerous, no, sir. It
    will all be done after careful study and debate.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        Senator Graham. That was very interesting.
        When we look at our force model, we look at how many people
    we need and how we can have a higher-hitting weight with fewer
    people is one of the things we're looking at. What do we
    project, 2 years from now, the military footprint in Iraq to
    be?
        Secretary Chu. I think it would be a bit out of my lane to
    offer projections on strength on the ground. I think, if I
    could echo what the President and Secretary have said
    repeatedly, we will be there in the numbers needed--no more, no
    less, no longer, no shorter.
        Senator Graham. I agree with that. What those numbers might
    be, no one knows, so I would just make a cautionary statement
    to bootstrap what Senator Nelson has said--as we go from
    180,000 to 175,000 marines, I'll like my chances. That's a
    pretty potent force. So, Dr. Chu, we're going to make sure that
    the model of rotations and the footprint in Iraq has to be a
    little more resolved before we can go too far down the road.
        Now, as to the Navy and the Air Force, we're making fairly
    massive reductions in force. Can you tell me, starting with the
    Air Force, how we're going to do this without hurting morale
    and readiness? What efforts are we making in both Services to
    get people who are trained and military oriented to at least
    consider the Army or the Marine Corps or the Reserves?
        General Brady. Yes, sir. I'd be happy to address that.
        Senator Graham. Could we do more along those lines?
        General Brady. Sir, as I said, there are a couple of things
    that we've looked at. I piggyback a little bit on Senator
    Nelson's question about what drives this. As we look at our
    force over the last 4 or 5 years, and we look at how many
    people have deployed and what skill sets have deployed, we
    start to look, as you point out, Senator Graham, at this tooth-
    to-tail thing. Where are we putting our people? Are we focusing
    on skills that go forward, and doing the rest of it as
    efficiently as possible? We think we have potential for doing
    that. We have about 22,000+ people in the Central Command
    (CENTCOM) Area of Responsibility (AOR) today. We have about
    half of our force, though--about 52 percent of the Active-
    Duty--supporting a combatant commander around the world
    somewhere today. So, we're heavily engaged. At the same time,
    we have a lot of people who are not deployed, and we have
    significant numbers of people who have not. As we look at that,
    we start to look at how we can use our people a lot more
    effectively. That includes things like retiring some legacy
    systems--you've heard that, I'm sure--which gives us some
    relief.
        Senator Graham. What will be the total number you're
    looking at reducing over the next 5 years?
        General Brady. We're looking at full-time equivalents of
    about 40,000.
        Senator Graham. Does this consider the fact that we may
    have two operational engagements at the same time?
        General Brady. Yes, sir, I believe it does. In fact, we
    have bounced this against the national strategy, and against
    our war plans that we have. Quite frankly, the most demanding
    scenario is the scenario of our Air Expeditionary Forces
    (AEFs), of our five-time rotations. So, if we can do that, we
    can handle almost anything--because that's what's deployed
    times five, so we think we can do this.
        Senator Graham. What percentage of your Reserve aircrews
    have hit the 2-year maximum involuntary deployment?
        General Brady. I'd have to get back to you with the exact
    number, but it's principally in areas that the people you tend
    to ride with when you go to the AOR.
        [The information referred to follows:]

        Nine percent of ANG C-17 aircrews and 32 percent of Reserve C-17
    aircrews have hit their 2-year maximum mobilization ceiling.

        Senator Graham. I know the 130s, but I'm curious about the
    C-17s flying out of Charleston.
        General Brady. It tends to be the C-130s, primarily, yes,
    sir.
        Senator Graham. The Reserve commander told me that
    everybody in his unit, except for the new young guys and gals,
    have already hit their 2-year point.
        General Brady. We have a significant number. I can get you
    the exact number of people who have reached their 2 years, but
    I don't have it right with me.
        [The information referred to follows:]

        A C-17 crew is comprised of two 11As (Pilot) and one (or more if
    necessary) 1A2s (Loadmaster). C-17 statistics for Charleston are as
    follows:

              11A (Pilot): Charleston has 209 assigned assets; 89 have
            reached the 24-month mobilization ceiling--43 percent burned-
            out.
              1A2 (Loadmaster): Charleston has 140 assigned assets; 64 have
            reached the 24-month mobilization ceiling--46 percent burned-
            out.

        Senator Graham. What if they all said tomorrow, ``I don't
    want to fly anymore''?
        General Brady. I think that that would be pretty
    significant.
        Senator Graham. That's not going to happen, but that would
    be significant.
        General Brady. The likelihood of that happening is zero,
    though.
        Senator Graham. I guess the question I'm trying to ask is:
    What percentage of the air bridge going into theater is flown
    by reservists?
        General Brady. All the time, they would fly about 15
    percent of it. Today, it's a bit higher than that, but again,
    it depends on the weapons system involved. I would have to get
    back to you.
        Senator Graham. Say, C-17s. Get back to me on C-17s.
        General Brady. Yes, sir, I will.
        [The information referred to follows:]

        Of the total number of global war on terror air bridge sorties
    since September 11, 2001, 64 percent were flown by Active-Duty, 6
    percent were flown by Air National Guard, and 30 percent were flown by
    Air Force Reserve. A breakout by Mission Design Series follows:

        Active-Duty

            C-5: 55 percent
            C-17: 70 percent
            C-130: 50 percent

        Air National Guard

            C-5: 8 percent
            C-17: 2 percent
            C-130: 38 percent

        Air Force Reserve

            C-5: 37 percent
            C-17: 28 percent
            C-130: 12 percent

        Senator Graham. Okay.
        General Brady. I think something else that's important is
    the Air Expeditionary Force (AEF) structure that we have allows
    for shorter rotations, particularly of our very experienced
    mobility crews. That allows us to do a lot. We only have about
    3,600 people mobilized today, but we have twice that number of
    volunteers. So, we have more than 6,000 guardsmen and
    reservists. The rotation structure that we have allows that.
        Senator Graham. What specialties would these 40,000 come
    from? Would it be kind of across the board?
        General Brady. It would be targeted, obviously, because
    there are some areas that we're seeing--as the nature of the
    global war on terrorism changes, we need more of some skills
    than others. So, for example, you wouldn't see reductions in
    security forces. You would see the need for more of tactical
    air-control-party people, combat controllers, people who work
    with the Army. As the Army develops its Future Combat System,
    there'll be an increase in the requirement for us to have
    people on the ground with the Army in the distributed
    battlefield. At the same time that we see some reductions in
    some areas, we'll see some increases in others. It's not a
    salami slice, it'll be very tailored to the missions that we
    have today and the missions that we can foresee tomorrow.
        Senator Graham. You don't think this number will affect
    morale and readiness, in terms of longer deployments, or mean
    more stress for the people who are left behind?
        General Brady. I don't think it will entail more stress. I
    think, as we find more innovative ways to get a higher
    percentage of our people into the fight, that helps a lot with
    that. As we make some reductions, obviously their morale is an
    issue that you have to consider, because our people have done
    honorable work, and great work, and a high percentage of them
    want to stay with us. For that reason, as we go through this we
    need to find ways for them to serve. That gets to the other
    part of your question, about how we're doing that. We have
    aggressively looked at all of the alternatives for people to go
    to the Guard and to the Reserve. The Federal Bureau of
    Investigation (FBI) has looked at our people and other
    Government agencies have looked at our people. We are joined at
    the hip with General Hagenbeck and his folks. In fact, our
    Chief has written a personal letter to a group of folks that we
    are looking at for some reductions. Our Chief has sent a
    personal letter to each one of them telling them what their
    options are. Last week General Hagenbeck sent them all a
    personal letter inviting them to go green.
        We are in a joint fight. We realize that. The Army has the
    names and addresses of everyone that's in a career field that
    we think is vulnerable for reduction, and we'll continue to
    work with them to make sure people know what their
    opportunities are to continue to serve.
        Senator Graham. Admiral?
        Admiral Harvey. Yes, sir. What you see us doing, in the
    last 2 years, is really a manifestation of work that began in
    2000, when we undertook the revolution in training under
    Admiral Clark's, then our Chief of Naval Operations,
    leadership. We went out and identified work. Then we asked, how
    do we get at that work? How do we take that work out of the
    system, both on our ships and in our shore infrastructure? This
    was a very important precursor, because the goal of this is not
    to do more with less. That gets into the very point you make,
    we're going to risk breaking the existing force. The goal is to
    take the work out of this system with the new kinds of ships
    and aircraft squadrons we're bringing online, and the new kinds
    of infrastructure we're developing ashore. That gives us the
    confidence to proceed as we are going, along with some civilian
    substitution of those types of jobs that we can keep.
        Senator Graham. Along those lines, like the C-130J, you do
    away with a couple of crew members, right? You need fewer
    people to fly the plane. Is that what's going on in the Navy,
    you just need fewer people to man the shift?
        Admiral Harvey. Oh, yes, sir, very much so. We're going
    from a destroyer that takes 350 people now to a destroyer that
    takes 260 people, and a littoral combat ship that will take 75
    crewmen. We invest more in individuals, which gets us at the
    retention issue. We are making a tremendous investment in their
    capabilities at the same time we're able to draw down the
    strength and, by the way, grow strength, in areas that
    contribute directly to this--growing capabilities we need for
    the war on terrorism, such as in the security, the Seabees, and
    special warfare. It's a fine dynamic that's going on. What
    encourages me is that when we set those rheostats for the
    retention we want, we're still getting the output that we want.
    We can have some control over that. That's really due, in large
    part, to the force-shaping tools you've given us, that we're
    exercising now, to enable a scalpel approach on how we go after
    these capabilities we don't need, as opposed to a more brutal
    approach where you do a lot of harm in the process.
        Senator Graham. I have just one more question, and then
    I'll let Senator Nelson take over here. Every business,
    including DOD, needs to be run more efficiently. If you can
    rearrange your force to have more capability, but fewer people,
    that's good for the budget, that's good for everybody, and it's
    good for those who are serving. But I don't want us to get so
    driven by increased personnel costs--which are real--that we do
    not understand that there may be more than one fight and that
    this is a dangerous world that we're living in. I think I know
    the Marine Corps well enough--that is a huge asset to this
    country. It is no small thing. I'll just end with that thought.
        Religious practices. I've gotten plenty of input in my
    office here lately from the Chaplain Corps and other people
    about this balance that we're trying to achieve in the
    military, Secretary Chu, between allowing people to express
    themselves religiously without stepping on people's feelings
    and getting out of bounds when it comes to religious practices.
    One of the things that the Air Force is looking at is new
    guidelines, in terms of chaplain practices. I'll be up front
    with you, there are a lot of chaplains that I've heard from
    that, when they're called on to offer a prayer in a public
    setting, that they're being told that they can't express that
    they're praying, that ``this prayer is offered,'' ``I pray in
    Jesus' name,'' just substitute the religion. To me, the reason
    we have chaplains of different faiths is because we have
    diversity in the force. If every chaplain's going to be a
    widget, then we've lost that diversity. It's a fine line
    between allowing individual religious expression and adopting a
    particular religion.
        I don't want any military member to feel like someone's
    religion is being forced upon them. When it comes time for
    someone to have a chance to express themselves in a religious
    manner, which I think is very appropriate, our military men and
    women need a place to go worship, if they choose to, and need
    to exercise and practice their faith as they see fit, in an
    appropriate way. Could you give me some ideas about where we're
    headed down this road? I don't want to get to the point that we
    destroy diversity in the name of political correctness, for
    lack of a better word.
        Secretary Chu. Sir, on the contrary, we celebrate
    diversity, and we recognize that we have in our force members
    of a wide range of faiths, and we want to be sure that the
    chaplain resources are there to sustain those faiths as we go
    forward. It's exactly as you suggest, sir. It's a matter of
    balance. I think, on this issue of public prayer, it is
    important to recognize there are different kinds of public
    occasions. In particular, the Department is in the position of
    advising that if an occasion is mandatory, where there is not
    much choice about whether you attend, we have to be
    particularly careful to recognize that there is a range of
    faiths there, and choose our language and the thoughts we
    express accordingly. The vast majority of our chaplains
    understand that responsibility, and accept that responsibility.
        Senator Graham. I would be interested to work with you on
    that. That is a point of personal importance to me. I've been
    around the military most of my life, and I want everyone to
    feel comfortable. One of the ways you feel comfortable is to be
    able to express yourself in an appropriate way.
        I think we have a vote going on. Senator Nelson, I
    appreciate your showing up. This is to be continued.
        To all of you, thank you. Let's see if we can get our force
    to where it needs to be with the ability to do the job for
    America--save money, but also make sure that we're saving--and
    taking stress off those who are doing the job.
        Thank you very much.
        Secretary Chu. Thank you, Mr. Chairman. We do have formal
    statements for the record. I hope you'll accept them as part of
    the committee's record.
        Senator Graham. Absolutely.
        Secretary Chu. Thank you, sir.
        Senator Graham. I'd also like to insert into the record at
    this time the statement of Dr. John A. Phillips, Superintendent
    of Schools for Muscogee County, Georgia.
        [The prepared statement of Dr. Phillips follows:]

                   Prepared Statement by Dr. John A. Phillips

        Mr. Chairman and members of the subcommittee, I am Dr. John
    Phillips, Superintendent of Schools for Muscogee County, Georgia. I am
    extremely grateful for this opportunity to speak to you not just on
    behalf of Muscogee County and the other school districts in the
    Chattahoochee Valley near Fort Benning, but also on behalf of a
    coalition of school districts from around the country, called the Seven
    Rivers National Coalition, facing a similar problem. In short, several
    major actions now underway within the Department of Defense (DOD) are
    going to combine to bring far more school-aged children of our military
    personnel into our school districts than we can possibly handle.

                                    overview

        Fort Benning is located along the Chattahoochee River outside
    Columbus, Georgia. Given the size of the installation, the students of
    Fort Benning personnel attend school districts in eight counties in
    Georgia and Alabama: Muscogee, Chattahoochee, Harris, Marion, and
    Talbot Counties in Georgia; and Phenix City, Lee and Russell Counties
    in Alabama.
        Meanwhile, I am also honored to represent today a number of school
    districts around the country that serve children of military families
    at installations expected to gain a large number of personnel over the
    next few years. These installations include Fort Riley in Kansas, Fort
    Lee in Virginia, Fort Bliss in Texas, Fort Carson in Colorado, Little
    Rock Air Force Base in Arkansas, Fort Leonard Wood in Missouri, and
    Fort Sill in Oklahoma. Appendix A lists each of these facilities and
    the school districts that will be impacted by their local
    installations' personnel gains. In all, over 45,000 school-aged
    children of military personnel will be moving to these eight
    installations during the next 4 years.
        My remarks will focus primarily on the impact facing Muscogee
    County and the other school districts surrounding Fort Benning.
    However, all of these other school districts face similar challenges
    over the coming years, and we are combining our efforts in the hope of
    securing critically needed Federal funding to address this problem.
                           defense department actions
        There is a storm gathering over Muscogee County and the other
    school districts in the Chattahoochee Valley. As we watch it grow in
    intensity and move toward us, it seems that we are facing the perfect
    storm.
        To be accurate, there are three storms converging on us. The first
    is the recently completed base realignment and closure (BRAC). We are
    all thrilled that Fort Benning emerged from the BRAC with a resounding
    vote of confidence and a robust and expanding mission. Most
    significantly, the Armor Center and School will move from Fort Knox to
    Fort Benning, where it will join with the Infantry Center and School to
    create a Maneuver Center of Excellence.
        The second storm is the process of transformation that the Army--
    indeed all of our Service branches--is undergoing. With the end of the
    Cold War, our enemies have changed. So we are changing the profile and
    composition of our defenses, and Fort Benning will play a major role in
    this, as demonstrated by a significant increase in Brigade Combat
    Teams.
        Finally, the third storm facing us is global repositioning. The
    DOD is bringing as many as 50,000 troops home from Europe and Korea,
    and many of them are coming to Fort Benning.
        These three actions will result in the arrival at Fort Benning of
    roughly 5,500 new military personnel, and an additional 5,500  DOD
    civilians and contractors over the next 4 years. These 11,000 new
    federally-connected personnel at Fort Benning will enroll over 10,000
    school-aged children into our local school districts.
        I want to stress again how proud our community is to be serving
    such an important role in our Nation's defense, and we welcome these
    families. We have had the strongest of relationships for years with
    Fort Benning and those who have served there. Our Nation could not have
    placed its trust in better hands.

                                  the problem

        However, I also must tell you about the very real problems that
    this surge of new students will cause. The largest challenge facing us,
    and where we are requesting Federal assistance, is the need to
    construct new schools and classrooms to accommodate this sudden influx
    of students.
        Simply stated, without significant new construction, we will have
    nowhere to put these students. We will not only have to place many of
    them in trailers, but they also will be forced to attend classes in
    every available space we have. This means holding classes in the
    cafeteria, in the media center, the auditorium, former teacher lounges,
    and converted closets and storerooms. These locations are highly
    substandard for teaching, and also lack technology connectivity. In
    essence, those forced to learn in such an environment will clearly be
    subject to ``second class'' status. Our students will also be denied
    many extra-curricular activities because the space in which they are
    ordinarily conducted will have been converted to classroom use.
        Beyond classroom space, this surge in student enrollment will also
    lead to a variety of other logistical concerns. Lunch periods will
    likely need to begin as early as 9 a.m., and continue through late
    afternoon, in order to accommodate all of the students. Furthermore,
    the impact on the transportation system will require some students to
    be picked up and arrive at school well before classes begin, and others
    to depart school well after classes end.
        We will also be forced to adopt double sessions at all levels--
    elementary through high school. While such double sessions are not
    unprecedented in some high schools around the country, they are almost
    unheard of for elementary and middle school students.
        All of these teaching, schedule, and transportation issues do not
    just affect students, but are also tremendously disruptive to family
    schedules. Needless to say, they also will have a damaging impact on
    teacher morale, which will further impact our students' education.
        In the meantime, their fathers or mothers may be serving their
    third rotation in Iraq and Afghanistan. We owe them the assurance that
    their children are receiving the best education we can give them. We
    know that when military personnel prepare for each new assignment,
    among their most immediate concerns are the availability of good
    housing and good schools. These issues are critical for soldier morale,
    and are increasingly important as the Army's divorce rate has soared in
    the past 3 years and the Service faces increasing challenges in
    recruitment and reenlistment.
        We have made three series of visits to Washington to alert Federal
    policymakers of the pending impact on our schools, and have met with a
    very positive response . . . up to a point. No one we talked with
    denies the size and sweep of what confronts us. They all understand
    that our situation results from decisions taken by the Federal
    Government. However, like us, they are overwhelmed by the cost of
    addressing it . . . and no one has yet stepped forward to accept even
    part of the responsibility. The costs are significant--our current
    estimate of the costs of the new school and classroom construction
    facing the Chattahoochee Valley alone approaches $350 million.
        But as I mentioned at the start, this problem is bigger than us. We
    have gone out and located the other school districts which serve
    gaining installations and formed a loose coalition known as the Seven
    Rivers National Coalition. I have enclosed other materials showing the
    anticipated increases in Federally-connected school-aged children at
    the school districts in the Seven Rivers Coalition (Appendix B).

                                 local support

        We are not just coming before you with the intention of dumping
    this whole problem in your laps. We are gathering our information in
    the most credible and professional way that we can. In fact, the Army
    has approved our methodology and is encouraging other installations to
    employ it. We want to be sure you are looking at apples-to-apples
    numbers, because that is the only way you will truly appreciate what we
    are facing.
        More importantly, we are doing absolutely everything we can to
    generate funding at the State and local level, and I would welcome the
    opportunity to sit down with any of you and tell you more about that. I
    am proud of our effort.
        For instance, we generally receive funds from the State of Georgia
    for Capital Outlay Projects. However, these funds are insufficient to
    address even our ongoing renovation and modification needs. As a
    result, our school districts have also approved Special Purpose Local
    Option Sales Taxes to fund our existing needs.
        We realize that our revenue base will increase somewhat because of
    the soldiers and their families coming into our area. In addition, we
    also will continue to receive Federal Impact Aid through the Department
    of Education for all of our federally-connected students, and these
    payments will increase as the number of federally-connected students in
    our districts increase. However, we have statistical models
    demonstrating that these revenue increases do not come close to solving
    our problem.
        For instance, while many of these military families live off-base,
    their homes in the community do not add significantly to the property
    tax base. The biggest property tax revenue sources are large, expensive
    homes (which military families generally do not inhabit) and, more
    importantly, local businesses. While Fort Benning will certainly
    expand, its operations are exempt from taxes and thus do not contribute
    to the local tax revenue. Meanwhile, the operating cost of each student
    in our school district is roughly $6,600. Yet, we generally receive
    only $225-$250 per student in Federal Impact Aid, and much of this
    funding takes 1 to 2 years to arrive. As a result, the Impact Aid does
    not even approach our ongoing costs of educating these students, and
    certainly would not provide any funding for construction of new
    classrooms.
        I would also like to point out that there is a precedent for
    Federal help right here within Muscogee County. During World War II,
    the Korean War, and the Vietnam War, Fort Benning was subject to
    similar dramatic increases in personnel. During these periods, the
    Federal Government partnered with the Muscogee County School District
    to build a total of 15 new schools and make additions at 8 others to
    accommodate the increased number of school-aged children of Fort
    Benning personnel.
        Let me also stress that we are seeking Federal assistance only to
    handle this sudden influx of students directly connected to these
    military actions. I don't want to leave the impression that we are
    using this unique situation as a way to secure Federal funding for our
    other problems. As I noted, we are already taking other steps to
    address our existing problems.

                                   conclusion

        In closing, let me say that the people of our area are more than
    willing to step up to this challenge. We are proud to have the future
    of these young people in our hands. You will find that we will do our
    part and more in dealing with this situation.
        But in order to fulfill this mission, we need to have help from the
    Federal Government in building new schools and classrooms to house
    these students. Unfortunately, the clock is ticking, and the armor-
    piercing issue is simple. If we are to maintain a strong, voluntary
    Armed Forces, we must provide a quality-of-life for our military
    families which they so richly deserve. Without Federal assistance, it
    is not within our reach. Again, I thank you for your attention and for
    the opportunity to come before you today.

        Senator Graham. We are adjourned.
        [Questions for the record with answers supplied follow:]

                Questions Submitted by Senator Lindsey O. Graham

                       national security personnel system

        1. Senator Graham. Secretary Chu, on February 27, Judge Emmet
    Sullivan of the United States District Court ruled that the DOD's
    implementation of the National Security Personnel System (NSPS) does
    not meet the letter of the law concerning the guarantee of collective
    bargaining rights, independent review of labor decisions, and fair
    treatment of employees who appeal disciplinary actions. What is the
    status of NSPS implementation as a result of this decision? Please
    provide revised implementation plans and new milestones.
        Secretary Chu. The DOD and Office of Personnel Management (OPM) are
    working with the Department of Justice to determine the next steps
    regarding the February 27th District Court decision that enjoins
    implementing parts of NSPS. The affected portions of the NSPS final
    regulations are Subpart G, Adverse Actions; Subpart H, Appeals; and
    Subpart I, Labor-Management Relations.
        The lawsuit did not challenge NSPS's performance management,
    compensation and classification, staffing, and workforce shaping
    provisions. Beginning in late April, the Department intends to
    implement these provisions to 11,000 employees in Spiral 1.1
    organizations. The Department is reviewing its options for deployment
    of Spirals 1.2 and 1.3, planned for later this year and early in 2007,
    respectively.
        NSPS contributes to overall DOD transformation. Accordingly, the
    ability to recruit, shape, and sustain the civilian workforce to meet
    the mission will continue to drive NSPS's strategy.

                            increase in tricare fees

        2. Senator Graham. Secretary Chu, Secretary Rumsfeld testified that
    a major factor in DOD's growing health care costs is ``private
    employers . . . increasingly are asking military retirees on their
    payrolls to use TRICARE to avoid having to pay insurance premiums for
    those employees.'' Has your office initiated any investigation into
    this practice among defense contractors?
        Secretary Chu. We are surveying the Web sites of some of our major
    contractors to determine if they include special health benefit
    offerings to their employees who are eligible for TRICARE. This cursory
    review indicates that Northrop Grumman, Raytheon, BAE Systems, and L3
    Communications are among the companies offering such programs, and that
    Boeing has proposed it to certain unionized employees.
        To understand the implications, consider this quote from a military
    beneficiary on an Internet forum, discussing health benefits for post-
    military employment: ``Actually my TRICARE supplement is through my
    employer. Instead of taking their single insurance which costs them
    $483 a month, they provide me with the TRICARE supplement offered by
    ASI which only costs them $160 a month and covers my entire family.
    They save $323 and I get 100 percent free (no co-pays, no deductibles)
    insurance that allows me to go to whatever doctor I want, when I want,
    with no referrals. Spent 2 weeks in the hospital a way back and my cost
    share was zero. I get scripts filled at the base for free as well. It
    is the best of all worlds.''
        The overarching issue is the appropriateness of such offerings,
    given the long-established premise that TRICARE (and its predecessor,
    the Civilian Health and Medical Program of the Uniformed Services)
    would be the secondary payor to health benefits provided by other
    employers. We are seeing the same approach spread to employees of State
    governments, including Alabama, Florida, Nebraska, North Carolina,
    South Carolina, Texas, and Washington. Frequently this is characterized
    as a win for the employee, for the State government, and for State
    taxpayers. I would submit that the losers are the Federal taxpayers who
    face ever-increasing expenses for TRICARE.

        3. Senator Graham. Secretary Chu, is it not true that a DOD
    contractor who charges the government for employee health benefits,
    then urges employees to seek health care under TRICARE in order to
    avoid paying for those benefits, would be gaining a double benefit, at
    taxpayer expense?
        Secretary Chu. The answer to that question depends on the nature of
    the contract (e.g., fixed price or cost plus) and, if cost plus,
    whether the contractor attempts to recover costs that it does not incur
    (in other words, whether the contractor's reduced costs for health care
    for these employees are reflected in its costing information and
    payments to the government).

        4. Senator Graham. Secretary Chu, given Secretary Rumsfeld's
    testimony, do you agree that this is worth looking into and referring
    to the Inspector General for investigation?
        Secretary Chu. I do believe that the matter warrants further
    investigation, to confirm that contractor's billings are appropriate
    and to determine whether there are steps that should be taken to ensure
    the proper relationship of TRICARE benefits to health benefits obtained
    through post-retirement employment.

                 recruiting and retention of medical personnel
        5. Senator Graham. Secretary Chu, General Hagenbeck, Admiral
    Harvey, and General Brady, while recent investments in recruiting and
    retention appear to be paying off, failure to achieve goals for medical
    personnel is significant--and will be very difficult to overcome. For
    example, for the Army and Navy in fiscal year 2005, 199 fully paid
    health professions scholarships for medical students were ``left on the
    table--unused'' due to failure to recruit young students interested in
    military medical careers. We are facing a potential crisis in
    recruitment of medical, dental, and nurse corps in the Active and
    Reserve components, especially in the Army where medical requirements
    have increased as a result of Army transformation and modularity.
    Gentlemen, what do you plan to do about it and what additional
    authorities, if any, do you need?
        Secretary Chu. We are awaiting the most recent Health Manpower and
    Personnel Data System (HMPDS) analysis. When that data analysis is
    complete, we will make recommendations in changes to special pays to
    target or increase incentives for critically short specialties.
        For anesthesiologists and radiologists, we are still below the
    congressional ceilings for special pays so they can be increased
    without congressional action. Last year, Congress increased the special
    pay authorization for certified registered nurse anesthetics (CRNAs)
    and the Services have implemented those increases. We will assess the
    impact based on the HMPDS data. Congress also provided an increase in
    the Nurse Officer Accession Bonus which allows the Services to pay an
    accession bonus to a nurse officer in an amount not to exceed $15,000
    for a 4-year obligation. We are awaiting the HMPDS data to determine
    the effect of this incentive. Retention of general dentists continues
    to decline. We received authority in the NDAA for Fiscal Year 2006 to
    offer oral and maxillofacial surgeons an Incentive Special Pay (ISP),
    but we do not have a general dental ISP. There is a Dental Officer
    Multiyear Retention Bonus (DOMRB), but that is only for dental
    specialists. In the civilian sector, general dentists' pay has risen
    faster than physicians' pay.
        In terms of what congressional action is needed, we are not
    requesting any at this time, but we may ask for additional authority in
    the future. Special pay for physicians has some room for expansion. We
    can increase the ISP and medical special pay for physicians and stay
    within the congressional ceilings. We are awaiting the HMPDS data
    analysis to determine the effect the CRNA special pays has had on
    retention.
        The Services are reviewing their options to address their need for
    dentists. Use of the Critical Skills Retention Bonus (CSRB) is one
    option under consideration. We have increased the DOMRB amounts for
    several of the dental specialties. We will closely monitor retention
    for all dentists. If needed, we will consider requesting an increase in
    the DOMRB and also the opportunity to use it for general dentists. We
    are also reviewing with the Services whether to request legislative
    action to provide additional incentives for dentists.
        The QDR has also proposed a pilot program to use larger incentives
    to test accessing more fully trained providers needed for wartime
    critical specialties. We are working with the Services to develop a
    specific proposal.
        General Hagenbeck. The Health Professions Scholarship Program
    (HPSP) continues to provide us with the majority of our medical,
    dental, and veterinary force. Currently we have over 1,500 active
    participants and our recruitment efforts in fiscal year 2006 will take
    us well over 1,600. In fiscal year 2005, we experienced challenges in
    filling all of the available allocations. Our strategic focus is to
    assist United States Army Recruiting Command (USAREC) in developing the
    appropriate tools and incentives to accomplish their mission in the
    recruitment of AMEDD officers for both the Active and Reserve Forces.
    The Army is conducting a variety of initiatives to increase accessions
    of medical professionals. The year, The Army Surgeon General initiated
    a new program, entitled ``Peer to Peer,'' with the goal to increase
    HPSP accessions. Medical Corps officers will directly support health
    care recruiters during on-campus recruiting by addressing a group of
    medical students, telling their Army story emphasizing why they joined
    the Army and why they have remained in the Army. The Army Medical
    Department is augmenting USAREC recruiting booths with Active-Duty
    Medical Corps officers at national conventions this year. The Army is
    also reviewing a pilot program to expedite the applicant process and
    shorten the time from contacting the applicant to accession into the
    Army. The Army is also working with our sister Services and the Office
    of the Secretary of Defense (OSD) to maximize use of existing DOD
    authorities to improve accessions of medical professionals. Increasing
    current dollar amounts for existing loan repayment programs and
    expanding loan repayment programs to additional specialties and the
    Reserve components is one area we are pursuing. We need to revise tri-
    service concurrence rules on accessions and retention incentives that
    limit flexibility for meeting Army needs. Establishing health
    professions accession bonus and a generic health professions bonus
    would assist USAREC direct recruiting mission. We would like to adjust
    the HPSP stipend to account for cost-of-living increases and allow HPSP
    time to count towards basic pay computations.
        Admiral Harvey. While the specific reasons that Health Professions
    Scholarships went unused this past year are unclear, I am aware that
    the Uniformed Services University of Health Sciences (USUHS) received
    more applications than they had available opportunities. I am looking
    to see whether we have an effective process in place for informing non-
    select USUHS applicants of the availability of Health Professions
    Scholarships. I am also evaluating the potential benefits associated
    with conducting a pilot of the HPSP modeled on, and incorporating the
    best practices of, our Judge Advocate General Corps accession programs,
    to determine if this might enhance the incentive power of HPSP.
        I am not yet able to identify additional legislative authorities
    required. I am working first to maximize use of existing authorities
    and to implement recruiting and retention incentives that are available
    to me without new legislation. I will offer appropriate recommendations
    on both policy and legislative initiatives to Navy and Defense
    leadership in the next several weeks.
        Some corrective actions are already underway. For example, Navy
    Medicine has recently reallocated funds for the Health Professions Loan
    Repayment Program to improve recruiting and retention across all
    medical communities. I am also evaluating policy actions within
    existing authority to establish critical skills accession bonuses for
    Medical Corps and Dental Corps Health Professions Scholarship Students
    and Direct Accession Dentists.
        To address shortfalls within the Nurse Corps, I have increased
    accession goals in our traditionally successful student pipeline
    programs and am weighing further increases. This market has been a more
    productive source than direct accessions. I am evaluating a CSRB for
    this community to address continuation shortfalls among Navy nurses at
    7-9 years of commissioned service. I am also evaluating the use of CSRB
    for junior dentists with 3 to 8 years of service. Currently 61 percent
    of Navy's junior dentists leave the Navy at their first career decision
    point.
        In concert with the recommendations of the Defense Advisory
    Committee on Military Compensation and the impending 10th Quadrennial
    Review of Military Compensation, I will continue to evaluate the need
    for enhancements to incentives to attract and retain personnel with
    critical health professions skills.
        General Brady. In the past, the Air Force attempted to recruit the
    majority of its medical, dental, and nurse corps officers from the
    ``fully qualified'' market of graduated medical professionals. This
    hasn't met our requirements for many years. There are insufficient
    accession incentives (i.e., bonuses and loan repayments) to bring these
    fully trained professionals into the Air Force.
        Our Air Force Recruiting Service, in close cooperation with our
    Surgeon General, implemented the following changes to improve
    recruiting: Dedicated a major portion of its 272 officer accession
    recruiters to recruit health care providers, streamlined the
    application and selection process, made assignments available prior to
    the completion of a 2-6 month application process, and increased
    outreach programs aimed to hospital and dental school teaching staff
    such as Health Profession Educator Tours to expose these influencers to
    Air Force Medicine firsthand.
        We will also refocus on the student market and increase accession
    bonuses in future years. We realize that increased funding of Health
    Profession Scholarship Programs (medical and dental school) and
    Financial Assistance Programs (medical and dental residency) to attract
    these students will be required. If a shift to the student market is
    not possible, significant improvement in accession incentives will be
    necessary to attract the fully qualified market. We will also explore
    the benefit of establishing adequate loan repayment programs for
    medical, dental, and nurse corps applicants.

                   army deployment cycle support for families

        6. Senator Graham. General Hagenbeck, in your statement you
    acknowledge that the Army Deployment Cycle Support Program provides
    needed services to members and their families--before, during, and
    after mobilization. We agree, and yet the request for funding in fiscal
    year 2007 is reduced by half. Would you please look into the reasons
    for this reduction and provide assurances that there will be no erosion
    in deployment support for military members and their families?
        General Hagenbeck. The Army Deployment Cycle Support (DCS) cost
    reduction is based on contract support cost, not funding reduction. The
    DCS contract support for base year (May 2005 to April 2006) is
    $1,029,806. Contract support for option year one (May 2006 to April
    2007) is $1,034,737. The current DCS Program contract expires in
    September 2007. Therefore, the projected contract cost for the
    remaining 5 months from May to September 2007 (fiscal year 2007) is
    $433,250. The projected lower cost for ``Option Year Two'' year is
    based on a 5-month period of performance (May-September 2007) versus
    the standard 12-month period for the prior 2 years.

              medical care problems at naval hospital jacksonville

        7. Senator Graham. Admiral Harvey, the Navy Times recently reported
    that a military physician, who acknowledged negligence in a malpractice
    claim at Naval Hospital, Jacksonville, Florida, involving 15 instances
    of substandard care, has been reassigned to Cherry Point, North
    Carolina, where she continues to treat military patients. Are you aware
    of this situation and are you concerned that Navy medicine will be seen
    as a haven for poor performing physicians as a result?
        Admiral Harvey. Each adverse medical event is tragic for the
    patient and for their family. Navy medicine provides excellent, high
    quality care to thousands of beneficiaries every day, including at
    Naval Hospital Jacksonville. As unfortunate as adverse medical events
    are, not all bad outcomes are the result of physician error.
        Navy medicine has detailed and robust quality assurance processes
    that are designed to provide the highest quality-of-care, to prevent
    adverse outcomes, to rapidly and thoroughly treat those who suffer an
    untoward event, and to systematically address and resolve what we
    identify as root causes of variation or substandard performance.
    Quality Assurance (QA) processes include ensuring proper training,
    credentialing, privileging, continuing education, and practice
    performance and review for all physicians and other independent
    practitioners. QA processes also include adverse event reviews,
    including in the case referenced in the above question, that promote
    timely identification and correction of process or system issues,
    address any provider competency issues, identify trends, and determine
    whether standards of care have been breached.
        The provider referenced in this question underwent prolonged
    deposition testimony in relation to a malpractice claim that had been
    filed for care provided at Naval Hospital Jacksonville in 2002. During
    that testimony (a short video clip of which was placed by the Florida
    Times-Union on their public Web site), the provider indicated she had
    not reviewed all of the patient's prior medical records, in part
    because they were not readily locatable in the medical records
    department, before scheduling the patient's surgery. The reference to
    ``15 instances of substandard care'' relates to testimony by
    plaintiff's expert witness that alleged this number of failures to meet
    the standard of care. Media reports have provided this number out of
    context in a way that wrongly implies that the court found that there
    was this number of instances of substandard care in the case and that
    this provider admitted to 15 separate mistakes. We are providing
    further specifics regarding the cases cited in Navy Times, including
    Section 1102--protected QA information, to Senator Warner and to SASC
    professional staff members in appropriate closed settings.
        The care in this and other cases at Naval Hospital Jacksonville has
    been thoroughly reviewed, including by external review agencies under
    contract with Navy and DOD. No discernible negative trend in care has
    been identified. Nevertheless, Naval Hospital Jacksonville and Navy
    medicine will not rest in their efforts to eliminate adverse medical
    outcomes. Further, no provider continues to practice in Navy medicine
    unless privileging and QA reviews confirm that they meet high standards
    for professional competence.
        I remain confident in the high quality of the medical care we
    provide and in the knowledge, training, experience, and professional
    abilities of our providers.

                  military quality-of-life and family support

        8. Senator Graham. Secretary Chu, General Hagenbeck, Admiral
    Harvey, General Osman, and General Brady, we all know that the decision
    to join or remain in military service often rests with the satisfaction
    of the family with health care, housing, and other vital quality-of-
    life programs. Yet this year the budget assumes significant increases
    in out-of-pocket for TRICARE for military retirees. Morale, welfare,
    and recreation (MWR) funding has declined in important areas. Last
    year, Congress stepped in to reduce the longstanding deficit in child
    care services, but there is still a shortfall of nearly 30,000 child
    care spaces throughout DOD. Even in a time of constrained resources, we
    cannot let support to families deteriorate. I ask each of you to
    comment on these challenges, and explain why the budget does not
    request more for these vital quality-of-life programs.
        Secretary Chu. Senator, thank you for the opportunity to address
    both the importance of quality-of-life programs and their funding. From
    a departmental perspective, this committee has been extremely
    supportive of the quality-of-life of our service men and women. This is
    especially true in the areas of child care, support of severely injured
    servicemembers, non-medical counseling, privatized housing, medical
    care, and other important programs. Your support of our servicemembers
    and their families has had a dramatic and beneficial impact on their
    quality-of-life, morale, and readiness.
        The DOD is trying to achieve equity across the Services in quality-
    of-life program delivery. We have made progress in the Off-Duty
    Voluntary Education/Tuition Assistance program.
        The Army, Marine Corps, and Air Force achieved the DOD uniform
    tuition assistance goal that funds up to 100 percent of out-of-pocket
    costs for servicemembers attending college in their off-duty time.
        In the MWR program, all Services are meeting the funding goal of 85
    percent appropriated funding for Category A and 65 percent for Category
    B activities. However, we are seeing a disparity in the funding per
    capita for MWR which ranges from $466 to $833. The Department will
    monitor this closely and we hope to close this gap and achieve equity
    in the future.
        To expand the availability of child care, the Department initiated
    an emergency intervention strategy in 2005. By purchasing modular
    facilities and renovating and expanding current facilities, we will
    create 4,077 child care spaces at 35 locations in fiscal year 2006.
    Authorizations for child care construction granted in the NDAA for
    Fiscal Year 2006 will allow the DOD to continue to address the most
    pressing child care needs.
        General Hagenbeck. The Army recognized the challenges that
    constrained resources and competing priorities place on balancing the
    full spectrum of Army programs, including quality-of-life and family
    support. The Army's base budget reflects the priorities necessary to
    meet Army Campaign Plan priorities.
        The Army's fiscal year 2007 budget request invests significant
    resources for quality-of-life programs. This includes $67.7 million in
    military construction funding for eight child development centers, as
    well as $26.0 million for a single project that includes two
    facilities: a  physical fitness center and a child care center. The
    request also includes $97.7 million in operations and maintenance
    funding for family centers, $180.9 million for child care programs,
    $58.5 million for youth programs, and $211.1 million for MWR programs.
        The request also includes $1,271.8 million for Army family housing
    to replace or renovate 1,622 homes, privatize 6,239 additional homes,
    operate and sustain 45,500 Government-owned and leased homes, provide
    housing services for the 67 percent of soldiers residing off post, and
    manage over 76,600 privatized homes.
        TRICARE is a comprehensive health benefit, and our retirees' cost-
    shares have not increased in more than 10 years. In fact, real out-of-
    pocket costs have decreased. Out of the fiscal year 2006 budget,
    TRICARE makes up $19 billion, 8 percent of the DOD budget. DOD now
    predicts that health care costs will consume 12 percent of the DOD
    budget by 2015. This rate of growth is not sustainable within the
    existing budget and action must be taken to ensure that health care
    costs do not erode the Army's readiness and modernization programs. The
    President's budget request includes actions to help stem this cost
    growth and index fees to inflation. The Army believes these proposals
    are a reasonable approach to protecting readiness and modernization
    programs from health care inflation while sustaining a superior health
    care benefit for our current and future retirees.
        Admiral Harvey. In regards to MWR funding, Navy MWR funding has
    declined from the high water mark set in fiscal year 2003 but the Navy
    remains committed to quality MWR programs for sailors and their
    families by providing the right level of service through the most
    efficient delivery mechanism possible. The Navy has streamlined and
    implemented business improvements, which will reduce overhead costs
    before reducing program delivery to sailors.
        The decline in MWR funding from fiscal year 2004 to fiscal year
    2005 was ameliorated by two important Navy actions that helped maintain
    a quality MWR program. First, through internal funding realignments,
    appropriated funds (APF) support for MWR was increased for fiscal year
    2005. Direct APF for fiscal year 2005 totaled almost $297 million, an
    increase of over $28 million from the amount previously programmed.
    Second, Navy used $18 million in non-appropriated funds (NAFs)
    earmarked for capital improvements to fund operational expenses in
    fiscal year 2005. This strategy greatly reduced the direct impact on
    program delivery to sailors and their families at the cost of a short-
    term reduction in capitalization.
        Programmed appropriated fund support for MWR in fiscal year 2006
    increased to over $300 million. As we continue to seek efficiencies in
    back shop operations to protect program dollars, we have established
    additional funding priorities to protect the core MWR programs to the
    fullest extent possible. Included in these priorities are fitness,
    afloat recreation and movies, single sailor, and child and youth
    programs.
        Our sailors and their families greatly appreciate your support for
    our efforts to reduce the shortfall of child-care spaces. With your
    continued support, several initiatives that we have underway will
    provide facilities that will reduce our waiting list by about 625
    spaces (about 8 percent) by fiscal year 2007. The Navy is currently
    considering a variety of funding alternatives to support this growing
    program in the out years.
        The Navy will continue to provide funding for all core programs
    that are supported by sailors along with supporting more robust program
    delivery for deployed forces and outside the continental United States
    sites due to the stresses involved at those sites.
        General Osman. Marine Corps MWR funding has not declined. In fact,
    MWR programs have benefited from an appropriated funding ramp that
    began in fiscal year 1996 in order to meet OSD funding goals for MWR
    Category A and B Programs of 85 percent and 65 percent, respectively.
    Our fiscal year 2005 funding execution was 92 percent (for Category A)
    and 71 percent (for Category B). MWR has not been the only quality-of-
    life program to receive funding increases. Substantial resources have
    been invested in all areas of quality-of-life to include pay and
    compensation, housing, health care, community services, and
    installation infrastructure.
        In terms of the child care benefit, the Marine Corps is currently
    exceeding DOD's potential need standard of 65 percent of need. At 70
    percent (12,562 spaces), we continue to strive toward the fiscal year
    2007 DOD target of 80 percent.
        General Brady. The DOD's health care budget for fiscal year 2006 is
    $38 billion, a 100 percent increase from the $19 billion budget in
    fiscal 2001. Incremental changes to TRICARE's cost sharing are needed
    to ensure the continuation of an affordable and comprehensive health
    benefit for Active-Duty, National Guard, reservists, retirees, and
    their families.
        Military members are called upon to endure hardship and turbulence
    over the course of a full and successful career that few other
    Americans experience. Changes to their earned benefits, flowing as a
    result of those sacrifices, should be carefully assessed, should
    recognize the unique nature of military service, and must be done
    fairly and equitably.
        MWR activities are funded with a combination of taxpayer dollars,
    APFs, and self-generated NAFs. APFs can be used in MWR programs;
    Congress has directed the grouping of these activities in three
    categories:
        Category A (mission essential--receives 100 percent APF funding):
    Activities that support the warfighter, such as fitness centers,
    intramural sports, libraries, recreation centers, basic recreation, and
    parks.
        Category B (essential to community and family support--receives at
    least 50 percent APF funding): Examples include child development,
    youth programs, recreation pools, outdoor recreation, skills
    development, bowling centers (12 lanes and under), marinas (without
    resale), and tickets/travel services.
        Category C (business activities--limited APF funding support, must
    generate their own funding through profits): Contains activities that
    have revenue-generating capability such as clubs, golf courses, bowling
    (13 lanes or more), retail stores, snack bars, aero clubs, marinas
    (with resale), and base restaurants.
        Appropriated funds for Air Force MWR programs have shown consistent
    growth over the years. Air Force leaders have listened to Congress
    about what should be funded with APFs rather than NAFs. As a matter of
    policy, we won't use NAFs where APFs are authorized.
        Regarding child care, the Air Force currently has a 6,300-space
    child care shortfall, and has a plan to eliminate this deficit by 2011.
    An increase of 1,553 spaces through minor construction was funded in
    fiscal year 2005 and an additional 774 spaces have been identified for
    2006 as funds become available. Twelve military construction projects
    in fiscal years 2008-2011 will add 3,000 more spaces, and another
    funded initiative will provide an additional 1,000 spaces in on- and
    off-base in-home care.
                                     ______

                 Questions Submitted by Senator Saxby Chambliss
                                   education

        9. Senator Chambliss. Secretary Chu, the Department of Defense
    (DOD) is clearly undergoing a series of tremendous changes through Base
    Realignment and Closure (BRAC), the DOD transformation initiative, and
    the global re-basing initiative. These changes will have a dramatic
    impact not only on our country's military installations, but also on
    their neighboring civilian communities. In particular, people from
    local school districts near Fort Benning have expressed great concern
    about the ``perfect storm'' brewing that will result in a huge influx
    of school-age children.
        The National Defense Authorization Act (NDAA) for Fiscal Year 2006
    includes a provision authorizing a limited amount of funding to assist
    local educational agencies in adjusting to these changes in student
    levels. In addition, the conference report for this act includes
    language directing the Department to prepare a detailed report to the
    House and Senate Armed Services Committees on this issue, including how
    the Department will assist local education agencies in accommodating
    these incoming students. Meanwhile, the House report on the fiscal year
    2006 Labor/Health and Human Services/Education appropriations bill also
    urges the Secretary of Education to consult with the DOD on the effect
    these actions will have on the Impact Aid Program.
        While these are important first steps, I believe the scope of this
    problem may be much greater than it first appeared. In the
    Chattahoochee Valley school districts surrounding Fort Benning, they
    could receive a direct increase of more than 10,000 students over the
    next few years just from these various defense initiatives, not to
    mention expected indirect growth from these actions, as well as natural
    community growth. This amount of growth in students as a result of a
    BRAC realignment, to my knowledge, is unprecedented and to place the
    fiscal burden for accommodating this growth completely on local
    communities, many of which have a low to moderate tax base, is equally
    problematic.
        I recognize that the Department has been asked to prepare a
    detailed report on this situation by July 6, 2006. However, I would
    appreciate anything you can share with the committee at this point
    regarding what general steps the Department is taking to assist local
    educational agencies to accommodate the influx of students resulting
    from these Department actions?
        Secretary Chu. We are working with the Services to determine the
    number of military dependent students and a timetable to help
    communities plan for school expansion needs. Recently, the Army asked
    each impacted installation to confirm or adjust the numbers previously
    reported to ensure accuracy. Additionally, we are working closely with
    the Department of Education and our DOD Office of Economic Adjustment
    to coordinate our efforts to find ways of offering impacted communities
    an array of successful strategies to help meet their needs. The DOD
    Office of Economic Adjustment is hosting a meeting in May 2006, in
    Atlanta, Georgia, for communities that are experiencing the impact of
    BRAC. This forum will provide an opportunity to address these issues
    and possible solutions.

        10. Senator Chambliss. Secretary Chu, do you believe that the
    funding thus far authorized by Congress will be sufficient to ensure
    that students in impacted school districts receive an education
    equivalent to that offered other students in non-impacted areas?
        Secretary Chu. The authorized funds in the NDAA for Fiscal Year
    2006 may be sufficient since they are for those schools with enrollment
    changes during the school year 2003-2004. Impact Aid is funded after
    the school year ends. Unfortunately, Impact Aid does not help the
    transition of children in the actual year of impact.

        11. Senator Chambliss. Secretary Chu, have previous BRAC rounds
    resulted in the influx of military dependent students as large as this
    round? If so, how was that growth dealt with by the Department and the
    Federal Government?
        Secretary Chu. No. Consequently, we have not had the opportunity to
    experience the type of growth expected.
                                     ______

                 Questions Submitted by Senator Elizabeth Dole

                      military financial education program

        12. Senator Dole. Secretary Chu, on February 16, the DOD launched
    the Military Financial Education Program to help military personnel
    manage their money better and protect them from unscrupulous financial
    institutions. While I applaud this effort by the Department, I am still
    concerned about predatory lending practices directed at members of the
    Armed Forces and their families. Included in the NDAA for Fiscal Year
    2006 is a provision that requires a report on predatory lending
    (section 579). As a part of the report, will you be able to give an
    assessment of the effects of the Military Financial Education Program?
        Secretary Chu. We appreciate the opportunity to report back to you
    on the prevalence and impact of predatory lending, as well as ongoing
    and planned efforts to educate servicemembers and to deal with the
    prevalence of these practices. We are currently in the process of
    collecting data on installation-level initiatives to educate
    servicemembers and their spouses. We look forward to sharing this
    information with you in the coming months.
        On February 16, I joined Members of Congress and the leadership of
    the National Association of Securities Dealers (NASD) in launching the
    NASD Foundation Financial Awareness and Education Initiative in support
    of servicemembers and their families. Their effort adds to the support
    provided by other nonprofit organizations and Federal agencies to
    assist the military Services in making servicemembers and their
    families more aware of financial concerns and educating them on
    managing their money wisely.
        The Department's efforts to increase awareness and understanding of
    financial principles and the potential negative impact of predatory
    lending is ongoing, and as we measure the amount of education being
    provided, we are also measuring the percentage of servicemembers who
    say on surveys they have used predatory lending products. We will be
    able to report the percentage using these lending practices as part of
    the report, but we believe it will be too soon to determine if
    educational programs have affected their choices.

        13. Senator Dole. Secretary Chu, how many ``hits'' has the online
    resource center averaged per month?
        Secretary Chu. The NASD Foundation sponsored Web site at
    www.saveandinvest.org averaged 650,770 hits per month during the period
    February 1 to March 21, 2006 (from inception to the present).

        14. Senator Dole. Secretary Chu, how many servicemembers were
    provided on-the-ground training?
        Secretary Chu. The on-the-ground training phase of the NASD
    Foundation partnership begins in April 2006. The first series of
    sessions will be conducted in the Pacific, with scheduled programs
    April 12-21, in Honolulu, Hawaii; Okinawa, Japan; and Yokosuka, Japan.
    Educational events are also set for the U.S.S. Ronald Reagan in April
    and Kings Bay, Georgia in June.
        Our training campaign to ensure competency in personal finance,
    enhance awareness, and enhance consumer protection is well underway.
    The military Services and over 26 Federal agencies and nonprofit
    organizations provide information to servicemembers and their families.
    We are collecting data on installation-level initiatives to educate
    servicemembers and their spouses. That information will be provided to
    you in the coming months.

        15. Senator Dole. Secretary Chu, how many on-base awareness
    programs were conducted concerning predatory lending?
        Secretary Chu. There have been several sessions conducted by the
    military Services concerning predatory lending over the past 12 months.
    We will provide a number as part of the section 579 report requirement.
        There have been several financial fairs conducted at military
    installations, which have included exhibitors and presentations that
    included predatory lending. We have had assistance from organizations
    such as the Federal Trade Commission, the National Association of
    Consumer Advocates, members of the National Association for Credit
    Counseling, the Center for Responsible Lending, the InCharge Institute,
    and the Better Business Bureau to assist in these presentations.
    Additionally, the military Services provide information about predatory
    lending as part of their training on personal finances to junior
    enlisted and officers as part of technical training or at their first
    duty station.

        16. Senator Dole. Secretary Chu, how effective is the public
    outreach campaign?
        Secretary Chu. The launch of the NASD Foundation program has been
    considered very successful, considering the number of visits thus far
    to their Web site. Another indication is the response from military
    installations to host on-base educational programs.
        In addition to the public outreach campaign sponsored by the NASD
    Foundation, the American Savings Education Council has provided over 60
    award winning public service announcements (PSAs), that have been
    featured on American Forces Radio and Television Service, along with
    ``Military Money Minute'' radio spots provided by the InCharge
    Institute and two seasons of the ``Moneywise'' television show provided
    by Kelvin Boston and New River Media. We do not have direct measures
    concerning the effectiveness of these PSAs; however the leading
    indicators used by the Department to assess overall financial readiness
    of the force have continued to improve over the past 4 years. When
    asked how they assess their financial condition, the percentage of
    junior enlisted servicemembers (financially most vulnerable) who
    answered that they were finding it ``tough to make ends meet but
    keeping your head above water,'' or ``in over your head,'' has
    decreased from 26 percent in 2002 to 14 percent in 2006.

            armed forces health longitudinal technology application
        17. Senator Dole. Secretary Chu, the advances made in battlefield
    medicine are contributing to an incredible survival rate for those
    wounded in Iraq and Afghanistan. How will the Armed Forces Health
    Longitudinal Technology Application (AHLTA) be integrated worldwide,
    such as into our field hospital in Balad, Iraq, so we are able to
    support our Armed Forces wherever they may be deployed in support of
    the global war on terrorism?
        Secretary Chu. The Theater Medical Information Program (TMIP),
    intended for use in the theater environment, integrates components of
    various medical information systems to ensure timely, interoperable
    medical support for rapid mobilization, deployment, and sustainment of
    theater forces during combat operations.
        In support of Operation Iraqi Freedom, TMIP is currently deployed
    to medical units in Iraq and Kuwait. Medical personnel use TMIP to
    support health care operations, capture electronic patient encounter
    information, and transfer health care information to the Joint Medical
    Work Station (JMeWS). Records stored in JMeWS support command and
    control and health surveillance. This information is securely
    transmitted to the stateside AHLTA clinical data repository, where each
    individual soldier's longitudinal electronic health record is
    maintained. At the point of discharge from the Service, health data is
    transmitted to the Veterans Health Administration.

        18. Senator Dole. Secretary Chu, when do you expect AHLTA to be
    fully integrated?
        Secretary Chu. The implementation of AHLTA across the Military
    Health System in support of our 9.2 million beneficiaries will be
    completed in December 2006. Additional enhancements to AHLTA's
    capabilities, to include electronic dental records, will continue
    through 2011.
                                     ______

                Questions Submitted by Senator Edward M. Kennedy

                qualified pool of eligible youth for recruiting

        19. Senator Kennedy. Secretary Chu, during testimony at the Senate
    Armed Services Committee Army posture hearing, General Schoomaker,
    Chief of Staff, United States Army, testified that only 3 of 10 males
    age 17-24 are qualified to serve in the Army. This point came up during
    an exchange with Senator Lieberman where General Schoomaker was
    explaining that any proposed increase in Army end strength was an
    academic discussion because the Army, including Guard and Reserve,
    would be unable to recruit above the current goal of 170,000 per year
    due to the limited pool of qualified youth.
        This issue lies at the heart of our ability to affordably recruit
    for our Armed Forces. It may speak to flaws in our national social and
    educational policies for developing our Nation's youth. Of note, a New
    York Times op-ed that same day highlighted the dangers, both to the
    Service and to the individual, of lowering recruiting standards. This
    confirms the importance of improving the qualifications of the youth
    pool, as opposed to considering lowering recruiting standards. Does the
    DOD concur with the Army's analysis?
        20. Senator Kennedy. Secretary Chu, why are so few of our male
    youth qualified to enlist?
        21. Senator Kennedy. Secretary Chu, what are the trends?
        22. Senator Kennedy. Secretary Chu, most importantly, what can be
    done to improve the size of the pool over the long term without
    lowering standards?
        Secretary Chu. A number of independent studies have estimated the
    size of the qualified pool of eligible youth and have arrived at
    conclusions similar to those cited by the Army. The principal
    disqualifying factor lies in the medical area, principally in physical
    conditioning, as demonstrated by high body fat.
        Obesity is becoming far more prevalent today. In 1980, 5 percent of
    youth were obese; today, 15 percent are, with another 15 percent coming
    close. Fully two-thirds of youth are overweight. It has been reported
    that today only 20 percent of young men and women participate in
    organized sports, far fewer than the 80 percent figure cited for 1970.
    Also, many more youth today report disqualifying medical conditions
    such as asthma or attention deficit disorder.
        The Department is working hard to identify subsets of these groups
    who might qualify by way of a waiver, despite their disqualifying
    medical condition. In terms of asthma and attention deficit disorders,
    we have updated and revised the enlistment standards in a medically
    sound way to expand the number of young people eligible without
    compromising safety and job performance. Likewise, we have identified
    screens (including a form of the Harvard Step Test) that may be
    employed to identify those who, while above current body fat standards,
    are likely to successfully complete basic training.
        Even so, it remains challenging for the military to recruit
    sufficient numbers owing to a reluctance by key influencers (parents,
    teachers, and coaches, for example) to recommend military service. We
    must change the viewpoint of influencers to one that attaches far
    greater value to the nobility to military service, and ask that
    Congress join the Department in that pursuit. Our Joint Advertising and
    Marketing Research and Studies program is directing all of its energies
    to that end.

                           impact of tricare changes
        23. Senator Kennedy. General Hagenbeck, during the Army posture
    hearing there was considerable discussion about strain on the Army and
    the potential need for increased end strength. At one point General
    Schoomaker responded that even if the Army increased end strength, it
    would be difficult to achieve in view of recruiting challenges. If this
    is the case, then isn't it in our interest to make our best efforts to
    retain the force, particularly the mid-grade noncommissioned officers
    (NCOs) and officers so critical to leading the soldiers?
        General Hagenbeck. The Army is retaining soldiers at exceptionally
    high levels. Since 2002, we have exceeded our total Army retention
    goals every year, culminating with 106 percent of our combined (AC,
    USAR, and ARNG) overall Army goal in 2005. In a time of war and with
    the pace of current operations, this is a significant indicator of the
    quality of leadership within our ranks, the fact that soldiers believe
    in what they are doing and value the traditions of service to the
    Nation. Moreover, all components are employing positive levers
    including force stabilization policy initiatives, updates to the
    reenlistment bonus program, targeted specialty pays, and policy updates
    to positively influence the retention of our soldiers, especially the
    midgrade NCOs. Officer retention has taken on renewed interest not
    because of an increase in officer loss rates, but because of a
    significant force structure growth and modularity. The Army is short
    roughly 3,500 Active component officers, most of which are senior
    captains and majors. While the overall company grade loss rates are not
    alarming, the Army is being proactive and is working several
    initiatives to retain more of our best and brightest officers. These
    initiatives include higher promotion rates, earlier promotion pin-on
    points, expanded graduate school opportunities, branch and posting for
    Active service, and officer critical skills retention bonus.

        24. Senator Kennedy. General Hagenbeck, in that case, it would seem
    that we would want to maintain the benefits that Congress has worked,
    in a bipartisan manner, to establish. If we want to retain these
    leaders, why is it appropriate to increase the TRICARE cost-share for
    some retirees?
        General Hagenbeck. Congress' and the DOD's decision to make no
    upward adjustments in beneficiary out-of-pocket costs for over 11 years
    was very helpful to military families. We believe now is the time to
    begin to act in order to preserve the comprehensiveness of the military
    health benefit for all categories of beneficiaries into the future. The
    DOD designed the proposed cost-shares to ensure no out-of-pocket
    increases for soldiers, minimal changes in pharmacy co-payments for
    Active-Duty family members, and to renorm retiree cost-shares to 1995
    levels. Further, the DOD agreed that we should tier retiree cost-shares
    so junior enlisted retirees do not have to pay the same cost-shares as
    officers. Delaying these adjustments will only force more extreme
    increases in the future and have the potential to consume a larger
    portion of the budget that is needed for modernization and readiness
    programs.

        25. Senator Kennedy. General Hagenbeck, don't you think the
    soldiers who are making career decisions will see a change in their
    retirement benefits as breaking the faith with them?
        General Hagenbeck. A recent survey by the U.S. Army Research
    Institute (ARI) suggests that retirement benefits and the continuation
    of benefits may affect retention. Of the top six reasons for enlisted
    soldiers thinking or planning on leaving the Army before retirement,
    number six was retirement benefits. While the report indicates
    retirement benefits as a factor that may affect retention, we have no
    detailed data that quantifies the impact of changes in TRICARE cost-
    shares on retention. The conclusion seems logical based upon this and
    anecdotal evidence that suggests retirement benefits are important to
    retention and any perceived erosion in benefits could, in fact,
    negatively impact retention. To mitigate the negative impacts these
    changes may have on retention, we have done a good job of educating
    soldiers and retirees on the need for these changes. We believe we can
    overcome the negative impacts of these proposals by demonstrating that
    TRICARE will remain a superb health benefit for all soldiers, Active
    and retired, and their families. Even after these changes, TRICARE will
    remain a very affordable health care option for retirees. Without these
    changes, we risk an erosion of the Department's ability to invest in
    readiness, modernization, and training due to increased health care
    costs.

     equity of guard pay and allowances while on similar state and federal
                                      duty
        26. Senator Kennedy. General Hagenbeck, members of the
    Massachusetts National Guard recently filed lawsuit seeking
    compensation for out-of-pocket expenses they said they paid after being
    called to duty. These soldiers indicate they were forced to pay for
    transportation, lodging, and meals because they were called up on State
    orders to protect U.S. military bases and water reservoirs from terror
    attacks after September 11, 2001. Reportedly Guard members called up on
    Federal orders had similar expenses paid for them by the government.
    While this particular case affects the Massachusetts Guard, are there
    similar issues in other States? Are there any policy changes that the
    Army and National Guard should consider to prevent a repeat of this
    situation?
        General Hagenbeck. Each State has its own rules and regulations
    regarding compensation for members of the National Guard called to
    State Active-Duty. We cannot comment on those State entitlements.
        For members of the National Guard called to Active-Duty in a title
    10 or title 32 status, the DOD, Per Diem and Transportation Allowance
    Committee, the Defense Finance and Accounting Service (DFAS), and each
    of the Services promulgate policy used to determine appropriate
    reimbursement for official travel-related expenses. Reimbursement for
    transportation, lodging, and meals for soldiers called to Active-Duty
    depends on the location of the soldier's residence at the time ordered
    to Active-Duty, location of duty duration of duty and other factors.
    Accordingly, some cases may arise in which two soldiers performing
    similar duties at the same installation may be entitled to different
    amounts of reimbursement for travel-related expenses.
        The National Guard Bureau is reviewing this situation to help
    achieve a solution. Additionally, the National Guard Bureau knows of no
    similar instance in other States.

                             recruiting advertising
        27. Senator Kennedy. Secretary Chu, as you are aware, Congress has
    a history of providing additional funding to the President's budget
    submission for the Joint Advertising Market Research and Studies
    (JAMRS). We have supported the program with the understanding that
    JAMRS is a key component of the Department's recruiting programs and
    provides a corporate-level marketing campaign which builds advocacy
    among parents, teachers, coaches, etc., who are the influencers of
    youth. We have heard many good things about the program and wonder what
    is your assessment?
        Secretary Chu. The JAMRS program is vital to recruiting efforts.
    JAMRS provides products and services that support the Active-Duty,
    Guard, and Reserve recruiting efforts. It also offers the Department
    invaluable outreach and insight into the adult influencers of youth who
    may choose to enlist.
        JAMRS research indicates adult influencers, particularly parents,
    play an integral role in the decisions that youth make regarding their
    future educational and career plans following high school and college.
    Research also indicates the most important role that influencers play
    in the enlistment process centers around their ability to have an open
    and informed discussion about the military. It is important that the
    Department reach these adult influencers with information that
    accurately represents the benefits of military service. Congressional
    support allows the JAMRS program to address this need through a variety
    of targeted public outreach initiatives, driven by valid and timely
    market research.
        The JAMRS ``Today's Military, Get the Facts, Make it a Two-Way
    Conversation'' campaign broadens the public's understanding by exposing
    over one billion people to information about the military through
    print, direct marketing, online, and television initiatives. Public
    outreach creates over six million impressions in high profile national
    media outlets. A 49 percent increase in Web site visitor-traffic
    demonstrates the effectiveness of the campaign and the willingness of
    the public to seek out more information about the military. JAMRS has
    produced an educational DVD featuring a documentary that highlights
    extraordinary servicemembers with extraordinary opportunities. The
    documentary has gained acceptance to air in over 75 percent of the
    United States. The DVD is also being shipped to 40,000 educators and
    can be ordered online by schools across the Nation.
        In today's increasingly difficult military recruiting environment,
    the JAMRS mission is more critical than ever. Continued program funding
    allows marketing research and communications programs to support joint
    recruitment initiatives, minimizing duplication among the Services,
    maximizing distribution channels, and broadening the public's
    understanding of military service.
                                     ______

                 Questions Submitted by Senator Daniel K. Akaka

                                  conversions

        28. Senator Akaka. Secretary Chu, during congressional
    consideration of the NSPS in 2003, the Department testified that NSPS
    would aid in the conversion of military positions to civilian
    positions. It was estimated at that time that there were approximately
    320,000 positions that could be converted. You testified today that
    over 20,000 positions have been converted to date.
        Last year you testified that 703 positions were converted to the
    private sector in fiscal year 2004. Can you tell me the nature of the
    job or function that was converted to private sector performance and
    how many of the converted positions for fiscal year 2005 have been
    subject to competitive sourcing and are now being performed by the
    private sector? Please detail the job or function that was converted to
    private sector performance.
        Secretary Chu. In previous testimony, we estimated that there were
    approximately 320,000 positions that could be studied for possible
    conversion. Since that time, the Department has conducted a series of
    reviews to identify areas for conversions. In fiscal year 2004, a total
    of 7,640 military billets were converted to DOD civilian or private
    sector performance. 836 of these were accomplished through competitive
    sourcing; 703 of these were converted to private sector performance.
    The rest remained in-house.
        Of the 1,790 Air Force military-to-civilian conversions in fiscal
    year 2004, 595 were a result of competitive sourcing. Public-private
    competitions for all these military billets were awarded to private
    sector contractors. These competitions were predominantly in the
    following functional areas: Computing Services and/or Data Base
    Management; Expeditionary Force Operations; Telecommunication Centers;
    and Management Headquarters--Communications, Computing, and Information
    Services.
        None of the Army's 4,281 or the Navy's 905 conversions for fiscal
    year 2004 resulted from competitive sourcing. However, installation
    security guard functions performed by 4,100 Army National Guardsmen
    were converted to contract performance in fiscal year 2004, and the
    guardsmen were subsequently demobilized.
        Of the 664 military billets converted by the Marine Corps in fiscal
    year 2004, 241 were a result of competitive sourcing. However,
    competitions for only 108 of the military billets were awarded to
    private sector contractors. Competitions for the rest of the billets
    (133) were awarded to the government and the work was converted to DOD
    civilian performance. Marine Corps competitions awarded to the private
    sector involved the following functions: Range Operations, Motor
    Vehicle Maintenance, Fuel Distribution, Real Property Management and
    Grounds Maintenance.
        In fiscal year 2005, the Army, Navy, and Marine Corps did not
    convert any military billets through competitive sourcing. However, the
    Air Force converted 335 billets to private sector performance through
    competitive sourcing. These competitions were in the following
    functional areas: Minor Construction, Maintenance, and Repair of
    Buildings and Structures other than Family Housing; Expeditionary Force
    Operations; Storage and Warehousing; and Distribution of Petroleum,
    Oil, and Lubricant Products.

        29. Senator Akaka. Secretary Chu, you also testified that the
    Department plans to convert 10,000 positions in fiscal year 2006 and
    fiscal year 2007. In total, this number falls far short of the 320,000
    touted by the Department in 2003. Given that certain positions should
    not be converted due to rotation and career progression needs, what is
    the total number of military-to-civilian conversions that the
    Department plans to make and what jobs or functions should not be
    converted to civilian personnel?
        Secretary Chu. The Department's military-to-civilian conversions
    are a key part of the Department's efforts to ensure that the Total
    Force is fiscally responsible and that military personnel are only used
    to perform ``military essential'' activities. Additionally, these
    conversions help to preclude the need for a permanent increase in
    military end strength. In fiscal year 2004 and fiscal year 2005, over
    20,600 military billets were converted to DOD civilian or private
    sector performance. By fiscal year 2007, we expect the number of
    conversions to exceed 31,000. In addition, the DOD components have
    developed goals that, together with the number of conversions already
    completed and programmed, could raise the number of conversions to over
    61,000. As the Department implements its plans for Active/Reserve
    rebalancing and BRAC, the number of military conversions could change
    significantly. Also, as the NSPS is implemented, it will provide the
    Department with greater flexibility in managing the civilian workforce
    that will aid in the conversion of additional billets.
        In previous testimony, we estimated that there were approximately
    320,000 positions that could be studied for possible conversion. This
    estimate included military billets in functions that were identified as
    commercial in nature. Our analysis is verifying which of these billets
    must remain military due to laws, treaties, executive orders, and
    international agreements and which are required for readiness or
    workforce management reasons. This includes military positions needed
    for military career progression, rotation, wartime assignments, risk
    mitigation, and other similar requirements. In addition, certain
    inherently governmental responsibilities that require military-unique
    knowledge and skills cannot be converted to either DOD civilian or
    private sector performance. Decisions to convert military billets
    depend on the merits of each situation with the 300,000+ positions
    under review. As a result, the ``total number'' of conversions will
    change from year to year as Defense priorities, threat levels, and
    technologies change how the Department structures its workforce to
    fight and win wars.

                                foreign language
        30. Senator Akaka. Secretary Chu, I am pleased to see that the DOD
    has taken great efforts to strengthen foreign language education,
    particularly with the pilot K-16 Chinese program with the University of
    Oregon. I understand that this program is being used as the national
    model for the study of critical languages and is the basis of the
    similar proposal in the National Security Language Initiative (NSLI).
    What are the lessons learned from this pilot program?
        Secretary Chu. The grant by the National Security Education Program
    (NSEP) to the University of Oregon and Portland Public Schools was
    awarded in August 2005 as part of the National Flagship Language
    Initiative. This grant represented a first effort to build a national
    model for an articulated K-16 program using Chinese for the pilot. It
    is too early in the program implementation process to systematically
    assemble ``lessons learned.'' Full implementation of programs in the
    Portland elementary, middle, and high schools will begin in the fall of
    2006 and the University of Oregon will admit its first pilot group of
    high school graduates from Portland high schools this September. It is
    clear, however, from our efforts to date, that a number of criteria are
    critical to the success of this and future K-16 programs in the NSLI.
    These include: (1) a clear plan for structuring a continuing and fully
    articulated approach to language education from K-12 and beyond; (2)
    ability to convey and communicate an approach that can be replicated in
    other K-16 environments throughout the United States and for languages
    other than Chinese; (3) demonstrated understanding of ongoing national
    efforts to develop and implement national standards for foreign
    language learning; (4) performance benchmarks at critical points in
    students' progression through levels of instruction; (5) availability
    of expertise in language pedagogy; and (6) clear demonstration and
    evidence of active participation of school(s) and school district(s) in
    the effort.

        31. Senator Akaka. Secretary Chu, you testified about the
    Department's work with other Federal agencies to develop the NSLI,
    which is designed to expand the number of Americans mastering critical
    languages at a younger age, increase the number of advance-level
    speakers of foreign languages, and increase the number of foreign
    language teachers and their resources. According to the White Paper
    produced by the participants at the Department's National Language
    Conference in 2004, the engagement of stakeholder groups and Federal,
    State, and local governments in solving the Nation's language
    deficiency is essential. Does the NSLI reflect input from stakeholders
    and State and local government leaders and if not, what outreach is
    planned to gain their support and suggestions?
        Secretary Chu. The NSLI does indeed reflect extensive input from
    stakeholders and State and local government leaders. The White Paper
    which emerged from the DOD-sponsored National Language Conference
    recognized that collaboration with stakeholders was a necessary
    ingredient of any effort to address the language crisis in American
    education. NSLI focuses exclusively on the investment in the United
    States educational infrastructure. It responds to the concerns
    expressed by the foreign language education community that more
    emphasis needs to be placed on the development of programs at earlier
    levels of the education process and answers the call for more teacher
    education and certification. The K-16 pipeline concept embodied in NSLI
    is an outgrowth of extensive dialogue and conversation with key
    language associations including the American Council of Teachers of
    Foreign Languages. We fully expect the implementation of NSLI programs
    will continue to require an ongoing collaboration with all
    stakeholders.

        32. Senator Akaka. Secretary Chu, I am interested about costs
    associated with the Department's efforts to improve foreign language
    education and proficiency. Please state for the record how much funding
    the Department will set aside in fiscal year 2007 and during the next 3
    years for NSLI, programs proposed in the Defense Language
    Transformation Roadmap, and current language training programs.
        Secretary Chu. The Department of Defense is dedicating $19.2
    million per year in fiscal years 2007-2011 toward the DOD programs that
    contribute to the NSLI.
        The QDR emphasizes the need for growing the foreign language and
    regional expertise capability within DOD and targets funding for
    several initiatives that support the Defense Language Transformation
    Roadmap, including ramping up language and cultural expertise
    instruction at the Service academies and at universities with Reserve
    Officer Training Corps programs; expanding the Army's 09L program that
    recruits Arabic heritage speakers into the Individual Ready Reserves;
    the NSLI, etc. We are dedicating $429.7 million during fiscal years
    2007-2011 toward these efforts.
        In order to increase the proficiency of our linguists to the level
    demanded by new communication technologies (3-3), we are reducing class
    size and revising instruction at the Defense Language Institute as well
    as expanding overseas training. In fiscal years 2007-2010, $330 million
    will be used for these purposes.

                       national security personnel system
        33. Senator Akaka. Secretary Chu, under the current scheduled
    rollout of NSPS, some employees in Hawaii will be included in Spiral 1.
    Because DOD is considering an employee's occupation in addition to
    geographic location in determining whether an employee receives
    locality pay, what impact will this have on employees who do not
    receive locality pay but rather non-foreign COLA (5 U.S.C. 5941), which
    is based on the employee's geographic location, which is not waived by
    NSPS?
        Secretary Chu. NSPS implementation will have no effect on COLAs for
    non-foreign areas that are authorized under 5 U.S.C. 5941. As you
    noted, the Department has no authority to waive section 5941. With
    respect to NSPS provisions, local market supplements are additional
    payments to employees in specified local market areas, occupations,
    specializations, and/or pay bands. They may be established in response
    to labor market conditions that are not already fully addressed by the
    worldwide pay band rate ranges. As the Department makes decisions on
    authorizing local market supplements, the applicability (presence) of
    non-foreign COLAs will be a factor in determining the amount and
    coverage of those local market supplements.

        34. Senator Akaka. Secretary Chu, will pay bands remain stagnant
    due to the mandatory non-foreign COLA increase and if no information is
    available yet, when do you expect we will receive details on this
    issue?
        Secretary Chu. The NSPS pay bands, and their applicable rate
    ranges, apply in all areas, both within and outside the continental
    United States. In determining adjustments to these rate ranges, the
    Secretary may consider mission requirements, labor market conditions,
    availability of funds, pay adjustments received by employees of other
    Federal agencies, and other relevant factors. The non-foreign COLAs
    will not affect decisions on the NSPS worldwide rate ranges. However,
    the presence of non-foreign COLAs will be considered in establishing
    any applicable local market supplements.

        35. Senator Akaka. Secretary Chu, after U.S. District Judge
    Rosemary Collyer ruled in August 2005 that the Department of Homeland
    Security's (DHS) new personnel system did not ensure collective
    bargaining and did not provide for a fair appeals system, DOD informed
    me that it had reviewed the DHS decision and made some changes to the
    proposed NSPS regulations to avoid the issues raised in Judge Collyer's
    decision. On Monday, February 27, Judge Emmet Sullivan ruled that the
    final regulations on the NSPS are inconsistent with its enabling
    statute in that it does not ensure collective bargaining, the National
    Security Labor Relations Board is not independent, and the new appeals
    process is not fair. Given the similarities in these court decisions,
    can you specify what changes DOD and OPM made to the NSPS to avoid the
    problems found in DHS's personnel system?
        Secretary Chu. We were certainly aware of, and informed by, Judge
    Collyer's decision. However, the statutory authority for NSPS is
    different than the statutory authority provided to DHS. Ultimately,
    changes that were made to the final regulations were a result of the
    many public comments received, as well as input from the unions during
    the meet and confer process.

        36. Senator Akaka. Secretary Chu, as a former educator, I firmly
    believe that agencies should adequately fund their training programs.
    How much is DOD's overall training budget for fiscal year 2007 and what
    portion is being used for NSPS training and how does this amount
    compare to the training budget for fiscal year 2006, both for NSPS
    training and established training programs employees rely on to do
    their jobs?
        Secretary Chu. Generally, the Department budgets for training as
    part of the operations and maintenance requirement. Training required
    by law and mission essential training, including NSPS training, will
    continue to be the Department's top training priorities.
        The DOD has budgeted approximately $522 million for civilian
    education and training in the fiscal year 2007 budget and expects to
    spend approximately $5.4 million on NSPS content-specific training in
    fiscal year 2007. The Department budgeted approximately $509 million
    for civilian education and training for fiscal year 2006 and expects to
    spend approximately $5.4 million on NSPS content-specific training in
    fiscal year 2006.
                                     ______

             Questions Submitted by Senator Hillary Rodham Clinton

               defense integrated military human resources system

        37. Senator Clinton. Secretary Chu, the military continues to deal
    with pay issues relating to wounded soldiers. In fact, I have recently
    re-engaged the Secretary of the Army regarding my continuing concerns
    with wounded soldier pay problems. A possible longer-term solution is
    an integrated personnel and pay system that brings all components of
    all Services under one system, the Defense Integrated Military Human
    Resources System (DIMHRS). Please provide an update on the current
    status of DIMHRS within the DOD, and specifically address the following
    issues:

              (A) What is the current time line and fielding plan for
            DIMHRS?
        Secretary Chu. A preliminary timeline was approved by the Acting
    Deputy Secretary of Defense (Mr. England) during the Defense Business
    Systems Management Committee meeting held on March 23, 2006. The
    timeline showed an Initial Operating Capability to the Army in April
    2008 with implementation in the Air Force to follow shortly after in
    August 2008. The Defense Business Systems Acquisition Executive is in
    the process of developing a full schedule. The Navy and United States
    Marine Corps are currently conducting their assessments and have not
    yet produced a projected deployment timeline.

              (B) What is the total amount that has been invested in
            developing DIMHRS to date?
        Secretary Chu. Investment costs and operations costs incurred by
    the DIMHRS (Pers/Pay) Program Manager (Oracle/PeopleSoft COTS software,
    Northrop-Grumman developer/implementer contracts and Program Management
    costs) for fiscal years 1998-2005 were approximately $373 million. Some
    of this cost was incurred in fiscal year 2005 to support the Service
    assessments of the software. These costs do not include the costs of
    functional analyses of personnel and pay processes, business process
    reengineering, and the documentation of standards and requirements,
    since these activities were needed regardless of the technical
    solution.

              (C) What additional resources and/or congressional action
            will be required to complete development and fielding of
            DIMHRS?
        Secretary Chu. The Defense Business Systems Acquisition Executive
    (DBSAE) is currently working on finalizing the resource requirements
    for the remainder of the program. The DBSAE is also working with the
    Comptroller to develop a plan for funding the program. Congressional
    support and guidance is critical to the success of the DIMHRS (Pers/
    Pay) program.
        As we streamline business processes, we may wish to request changes
    to the language of legislation to support smooth implementation.
    Congressional support for requests for changes that will ultimately
    streamline and standardize our processes is paramount to the success of
    this effort.

              (D) How will DIMHRS address the following issues related to
            wounded soldier pay problems:

                      (1) What safeguards will the system have to prevent
                    the military from mistakenly over-paying wounded
                    soldiers and then trying to claim debts and also asking
                    for other payments that are not well-founded?
        Secretary Chu. DIMHRS (Pers/Pay) is an integrated personnel and pay
    system. Entry of personnel information based upon pay affecting events
    will result in timely and accurate computation of pay for all military
    members. Overpayments result when a member's change in status and
    geographical location is not reported to the compensation system in a
    timely manner. Overpayments will be avoided with timely and accurate
    entry of information relative to the member's status and automated
    business rules that will govern eligibility for those pays driven by
    status and geographical location. Business processes are already in
    place.

                      (2) How will it enhance oversight of the debt
                    forgiveness process?
        Secretary Chu. DIMHRS (Pers/Pay) will provide access to basic
    personnel and pay information in a manner that will allow quick and
    accurate identification of members in an overpayment or debt status.
    Similarly, this access will enable the Department to quickly identify
    members who fall into specific categories that would make them eligible
    for forgiveness (for instance, wounded in action). This will allow for
    quicker identification of the debt condition and ultimate resolution as
    well as provide for a more consistent and timely adjudication of a debt
    forgiveness request.

                      (3) How will it streamline providing assistance to
                    servicemembers making a request for debt forgiveness?
        Secretary Chu. Complete information about a member's pay and an
    audit trail for pay affecting event transactions will be immediately
    available. This tool will provide needed information for responsible
    finance officers to make appropriate determinations for cause, effect,
    and amount of member indebtedness. This information is not flagged or
    readily available today and thus results in cumbersome processes to
    adjudicate requests. DIMHRS (Pers/Pay) will first substantially reduce
    the number of overpayment cases and then facilitate the resolution of
    any overpayments that do occur. It will reduce the dollar amounts of
    the overpayment given timely entry of pay affecting information into
    DIMHRS (Pers/Pay).

                      (4) What benchmarks will be established to measure
                    progress in correcting future pay problems?
        Secretary Chu. Metrics are already in use to measure the percentage
    of military members accurately paid correctly within 15 and 30 days of
    a pay affecting event. We will continue to use these measurements to
    monitor improvement. Additionally, an automated Case Management Tool
    (first developed by the Air Force) is being used to collect, maintain,
    track, administer, and provide historical reference to each pay problem
    reported. The Department sets standards for the timeliness of
    resolution of pay problems and uses the tool to measure success in
    meeting the standards. This tool will continue to be used as long as
    pay problems exist.

        [Whereupon, at 10:17 a.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2007

                                  ----------

                            TUESDAY, MARCH 14, 2006

                                   U.S. Senate,
                             Subcommittee on Personnel,
                                   Committee on Armed Services,
                                                         Washington DC.

                          HEALTH BENEFITS AND PROGRAMS

        The subcommittee met, pursuant to notice, at 2:34 p.m. in
    SR-325, the Caucus Room, Russell Senate Office Building,
    Senator Lindsey Graham (chairman of the subcommittee)
    presiding.
        Committee members present: Senators Graham, Dole, and E.
    Benjamin Nelson.
        Committee staff member present: Leah C. Brewer, nominations
    and hearings clerk.
        Majority staff members present: David M. Morriss, counsel;
    Scott W. Stucky, general counsel; Diana G. Tabler, professional
    staff member; and Richard F. Walsh, counsel.
        Minority staff members present: Jonathan D. Clark, minority
    counsel; Gabriella Eisen, research assistant; and Gerald J.
    Leeling, minority counsel.
        Staff assistants present: Benjamin L. Rubin, Jill L.
    Simodejka, and Pendred K. Wilson.
        Committee members' assistants present: Meredith Beck and
    Matthew R. Rimkunas, assistants to Senator Graham; Greg Riels,
    assistant to Senator Dole; and Eric Pierce, assistant to
    Senator Ben Nelson.

        OPENING STATEMENT OF SENATOR LINDSEY O. GRAHAM, CHAIRMAN

        Senator Graham [presiding]. Good afternoon. Senator Dole,
    Senator Nelson, and I appreciate your coming. We have a dilemma
    on our hands, ladies and gentlemen. We're going to start taking
    budget votes at about 3:15 and we're going to have nine votes
    so what we have to do is have a double-header here. The
    Department of Defense (DOD) part of this hearing has been
    rained out. We will reschedule the DOD witnesses on Panel II so
    they may still come up here to make their presentation to the
    subcommittee. Today, we'll hear from the groups representing
    our military retired community. We appreciate everyone coming.
        This is one of the most important hearings we'll have this
    year about recruiting, retention, and the sustainability of
    health care. I'm very eager to hear from everybody and I
    appreciate those who attended an informal discussion on this
    topic a couple of weeks ago. I learned a lot from it and I
    thought it was tremendously beneficial.
        Our panel today consists of Ms. Schmidli, Chairman and
    Chief Executive Officer of the National Military Family
    Association (NMFA); Lieutenant General McCarthy, Executive
    Director of the Reserve Officers Association (ROA); Vice
    Admiral Ryan, President of the Military Officers Association of
    America (MOAA); and Edgar Zerr, National President of the Fleet
    Reserve Association (FRA). We will hear from all of you
    shortly.
        I have a quick opening statement. The tale of the numbers.
    Under the Civilian Health and Medical Program of the Uniformed
    Services (CHAMPUS), before TRICARE came along, I've been told
    that the average cost share for a military retiree was about 27
    percent. TRICARE came along and it's about 12 percent. The
    average increase in retirement benefits over the last decade
    has been about 32 percent in terms of increase in retirement
    pay. The DOD proposal is a 115-percent increase in fees and
    services over a 2-year period. Ten years ago the DOD medical
    expenditure was about 4 percent of its budget, and today it's
    about 8 percent. As you project data in the future it's going
    to be about 12 percent.
        How do we reconcile all of these numbers? How do we find a
    balance between 32 percent retired pay increase and a 115-
    percent fee increase? How do we get ahead of the dynamic that
    the military health care budget is growing exponentially and
    you're having to pick between operational needs and military
    retired needs? I think the way you do it is to talk to each
    other, understand a common definition of the problem the best
    you can, and phase in solutions that are fair, that increase
    health care benefits, and at the same time will make the
    program sustainable. It will only work if we work together. You
    have my pledge and my promise to try to find some fair and
    equitable way to deal with this on my watch, because I am not
    going to pass this on to the next generation of senators and
    military retirees.
        Senator Nelson.
        [The prepared statement of Senator Graham follows:]

                Prepared Statement by Senator Lindsey O. Graham

        Good afternoon. The committee meets today to consider the National
    Defense Authorization Request for health benefits and programs for
    fiscal year 2007, and in particular, the proposal of the Department of
    Defense to begin the process of reform, through increasing TRICARE fees
    for retirees.
        Today's panel is comprised of advocates for military families and
    retirees, and includes:

             Tanna Schmidli, Chairman of the Board and Chief Executive
            Officer of the National Military Family Association;
             Lieutenant General Dennis M. McCarthy (USMC Ret.), Executive
            Director of the Reserve Officers Association;
              Vice Admiral Norbert R. Ryan (USN Ret.), President of the
            Military Officers Association of America; and
              Edgar Zerr, National President of the Fleet Reserve
            Association.

        We welcome all of you.
        I begin with an acknowledgment that military service in an All-
    Volunteer Force comes with a commitment for the highest quality health
    care. Providing that benefit is essential, and this subcommittee will
    ensure that the benefit is sustained.
        To do so, however, in an era of rapidly growing health care costs,
    requires our best thinking. I am committed to enacting carefully
    crafted reforms which protect its quality, improve people's health, and
    maximize the efficiency of the health care delivery mechanisms within
    our control.
        These are the questions that we will examine today. I hope that
    this hearing will shed light on a way forward that is fair, and most
    importantly will reflect our commitment to men and women in uniform and
    their families, as well as retired members and their families for a
    sustainable quality health benefit.
        Senator Nelson, thank you once again for your service as we examine
    the programs which support our military personnel and their families.
    We have made significant advances in many areas, including health care
    for the Reserves, military pay and quality-of-life. Our subcommittee's
    tradition of bipartisanship is alive and well, and has produced
    important programs and support for the quality-of-life of our men and
    women in uniform and their families.

                STATEMENT OF SENATOR E. BENJAMIN NELSON

        Senator Ben Nelson. Thank you, Mr. Chairman, and thank you
    to the panel for being here today. Obviously this is a very
    important issue for the military retirees who correctly view
    this program as an earned benefit. All throughout their
    military careers they've been told that a significant portion
    of their compensation for service was a generous health care
    benefit throughout their entire retirement. They based their
    career plans, as well as their retirement plans, on the promise
    of an affordable health care benefit based on the structure in
    existence for the last decade.
        However, that doesn't mean that reasonable adjustments
    cannot, and at times, should not be accommodated. While we
    can't dismiss the legitimate concerns, we do have an obligation
    to make sure that we can sustain this excellent health care
    program for those who have already retired, for those who are
    serving now, and for those yet to serve. It's very clear this
    will require a careful balancing of interests, making all those
    percentages that my colleague just recited balance out and work
    for everybody who is concerned. I have a lengthier opening
    statement, Mr. Chairman, but I'd like to have that submitted
    for the record.
        Senator Graham. Without objection.
        Senator Ben Nelson. Thank you.
        [The prepared statement of Senator Nelson follows:]

                Prepared Statement by Senator E. Benjamin Nelson

        Thank you, Senator Graham, for holding this hearing on military
    health care. One of the most significant issues the Personnel
    Subcommittee will address this year is the Department of Defense's
    (DOD) proposal to increase health care premiums and annual deductibles
    for retirees who are not yet eligible for Medicare and TRICARE for
    Life.
        This is a very emotional issue for many military retirees who
    correctly view this as an earned benefit. All throughout their military
    careers, they have been told that a significant portion of their
    compensation for service was a generous health care benefit throughout
    their retirement. They based their career plans, as well as their
    retirement plans, on the promise of an affordable health care benefit
    based on the fee structure in existence for the last decade. However,
    that does not mean that reasonable adjustments cannot be accommodated.
    While we cannot dismiss their legitimate concerns, we have an
    obligation to make sure that we can sustain this excellent health care
    benefit for those who have already retired, for those who are serving
    now, and for those yet to serve. This will require a careful balancing
    of interests.
        My experience as a Governor and as a Senator has taught me that if
    you are going to adjust a benefit, it cannot be a surprise and it must
    be done in moderation. I am concerned that the Department's proposal is
    too much too fast. The Department has had authority to adjust the
    premiums for TRICARE since its inception in 1995 and has elected not to
    increase them until now. It seems to me that trying to make up for
    those 11 years in 2 years is too extreme. Increasing the enrollment fee
    for TRICARE Prime in just 2 years from $460 a year to $650 a year for
    family coverage for junior enlisted members, from $460 to $950 for
    senior noncommissioned officers, and from $460 to $1,400 for officers
    seems a bit much for families that have based their retirement plans on
    the retired pay and health care costs as they existed when they
    retired. Maybe we need to moderate the increase and spread it out over
    a longer period to give these families time to make reasonable
    adjustments to their budgets.
        We also have to take into account the effect these proposed changes
    will have on recruiting. The Service Personnel Chiefs have been telling
    us for some time that one of the main challenges to successful
    recruiting is the lack of support for military service by influencers.
    These influencers include parents, teachers, guidance counselors, and
    coaches. Those who have served in the military, especially retirees,
    are very significant influencers. If military retirees believe that the
    Government has reneged on a promised, earned benefit, can we count of
    them to promote military service by the young people in their sphere of
    influence?
        I think we also need to understand the impact these proposed
    increases will have on those who are serving today. Will these proposed
    increases, if enacted, have an effect on the family decision to remain
    in the military? Will they start to question what other benefits might
    be changed that would have an impact on their retirement plans? I plan
    to ask the military leaders whether they have attempted to ascertain
    how this proposal is viewed by currently serving military personnel and
    their families.
        Mr. Chairman, we do need to help the DOD control the continuing
    increases in health care costs. However, that includes more than just
    looking at raising the premiums for retirees. For starters, it is not
    clear to me that the Department's proposed increases will provide the
    savings the Department is counting on. Their own figures show that the
    increased fees will amount to $199 million while the Department's
    health care budget reflects savings of $578 million. The Department has
    reduced its budget request by $405 million on the theory that large
    numbers of retirees will leave the TRICARE program because of the
    increased fees, and by another $15 million, assuming that the increase
    in annual deductibles will result in decreased utilization of health
    care services. I'm not entirely sure why the administration has drawn
    this conclusion--DOD acknowledges that ``the TRICARE benefit will
    remain the best health benefit offered in this country,'' and even at
    the increased rates, will still be less costly than almost any other
    commercial or employer sponsored health care plan.
        Mr. Chairman, however this works out, we need to make sure that the
    Defense health program is fully funded. To do this, we will need to add
    funding or find other efficiencies. One area that warrants greater
    exploration is greater cooperation and resource sharing between the DOD
    and the Department of Veterans' Affairs (VA). While I am committed to
    separate health care systems for the VA and DOD, we need to continue to
    look for opportunities for the two systems to work together to provide
    better health care for the beneficiaries of each system in the most
    economical way. We also need to look for efficiencies in the delivery
    of health care within the DOD. Is the Department doing all that it can
    to provide disease management for high-cost chronic illnesses? Has the
    Department done enough to encourage use of the cost-effective mail
    order pharmacy? Are the Services making the most effective use of
    medical treatment facilities when this would result in cost savings?
    These are just a few of the areas that should be explored in our joint
    effort to control rising health care costs.
        The witnesses on today's panel are all familiar with the military's
    health care benefit, and I understand they have some very interesting
    ideas for controlling increases in the cost of military health care.
    Hearing their testimony today will give us the benefit of their ideas
    so that we can discuss them with our second panel when we reschedule
    their portion of this hearing.
        Mr. Chairman, I am anxious to hear what our witnesses have to tell
    us this afternoon. Thank you.

        Senator Graham. Thank you for being such a good partner,
    Senator Nelson. I could not have asked for a better person to
    work with and I appreciate it.
        Senator Dole.
        Senator Dole. Thank you, Mr. Chairman. I want to say to
    you, Ms. Schmidli, that I've had an opportunity to become
    familiar with Operation Purple and I want to congratulate you
    on the tremendous work helping kids of parents who've been
    deployed through some very difficult times, times of tension
    and stress. I think it's a marvelous program and in North
    Carolina the National Guard has a very similar program called
    Kids on Guard. Again, it's wonderful for those who are being
    deployed in terms of increasing their readiness because they
    have peace of mind knowing that their families are being taken
    care of and certainly for the families back home it also
    provides a support network. What I'd like to suggest, if I may,
    is that you get in touch with Lil Ingram, who is the wife of
    our Adjutant General of North Carolina. I think there might be
    synergies which could be produced as a result of this liaison,
    which could be beneficial too, and could strengthen each
    program.
        I welcome all of you today. I just wanted to make those
    comments in case I don't have a chance later if the votes
    begin. Thank you.
        Ms. Schmidli. Thank you so much for comments.
        Senator Dole. Thank you, Mr. Chairman.
        Ms. Schmidli. I have actually met Mrs. Ingram and I look
    forward to meeting her again.
        Senator Dole. Great, wonderful, thank you.
        Ms. Schmidli. Thank you for your compliment.
        Senator Graham. Ms. Schmidli, would you like to lead off
    please?

     STATEMENT OF TANNA SCHMIDLI, CHAIRMAN OF THE BOARD AND CHIEF
        EXECUTIVE OFFICER, NATIONAL MILITARY FAMILY ASSOCIATION

        Ms. Schmidli. It would be my honor, sir. Mr. Chairman,
    Senator Nelson, Senator Dole, thank you on behalf of the
    National Military Family Association for the opportunity to
    testify.
        NMFA thanks you for your concern for servicemembers and
    their families, particularly we thank you for the provisions
    you sponsored in the National Defense Authorization Act (NDAA)
    for Fiscal Year 2006. While our written statement submitted for
    the record highlights many critical issues facing families, I
    will speak today about DOD's health care proposals and NMFA's
    response.
        The proposal by DOD to raise TRICARE fees by exorbitant
    amounts has resonated throughout the beneficiary population. As
    expected, this reaction is across the board from all
    beneficiaries. Families see the proposal as a concentrated
    effort by DOD to change their earned entitlement of health care
    into an insurance plan. NMFA is alarmed that DOD has already
    instructed TRICARE contractors to develop plans to implement
    its proposed changes in TRICARE prime enrollment fees without
    allowing for sufficient congressional oversight.
        NMFA believes DOD's premise of anticipated savings based on
    an estimate of military retirees leaving the military health
    system for other options is flawed. We believe the Department
    is reaping the rewards of its own success and that families are
    opting to retain their Prime benefit in retirement because of
    their satisfaction and familiarity with the program. Retirees
    who currently opt to use TRICARE Standard as a wrap-around of
    their employer-sponsored plan may buy into Prime when offered,
    rather than pay for both their civilian insurance and Standard.
    NMFA strongly suggests that DOD look within itself for cost
    savings before suggesting beneficiaries bear the burden. We
    have outlined some possible efficiencies in our written
    statement.
        NMFA most emphatically opposes an enrollment fee for
    TRICARE Standard because it would move the earned medical
    entitlement into an insurance program. TRICARE Standard is the
    successor to CHAMPUS, which was implemented as an extension of
    the health care entitlement when the Direct Care System could
    not care for all eligible beneficiaries. We understand unless
    retirees pay this premium, they will be locked out of any care
    at a military treatment facility (MTF). We believe enrollment
    fees for Prime are different because additional benefits are
    given to Prime beneficiaries: access guarantees, low out-of-
    pocket costs, additional preventative care, and management of
    the beneficiary's health care. Please see the changes on page
    eight of our statement to view the differences between these
    two options.
        DOD's proposal to increase Prime enrollment fees, while
    completely out of line dollar wise, is not unexpected. However,
    NMFA is concerned that DOD's proposed tiering of the fees
    increases may be too arbitrary and would impose inappropriate
    charges to some of our most vulnerable beneficiaries,
    especially wounded servicemembers who are medically retired and
    survivors.
        Acknowledging that the annual Prime enrollment fee has not
    increased in more than 10 years, and that it may be reasonable
    to have a mechanism to increase fees, NMFA would like to
    present an alternative to DOD's proposal should Congress deem
    some sort of cost increase necessary. NMFA suggests that over
    the next 2 years DOD could raise the base annual Prime
    enrollment fee by a percentage amount of the cumulative retiree
    cost-of-living adjustment (COLA) since 1995. If DOD thought the
    original fees were fair for all in 1995, it would appear that
    raising the fees simply by the percentage increase in retiree
    COLA is also fair.
        NMFA also suggests that future increases in Prime
    enrollment fees be the same percent as the annual retiree COLA.
    We also suggest adjusting the TRICARE Standard deductibles by
    the amount of the cumulative COLA since 1995 and set future
    increases in the same percent as the annual retiree COLA.
        In conclusion, NMFA would like to state its concern for the
    long-term mental health and well-being of servicemembers and
    their families who have faced repeated deployments in arduous
    conditions. We ask you to ensure our country's commitment to
    them continues as long as the need exists. Thank you for your
    support of military families.
        [The prepared statement of Ms. Schmidli follows:]

                      Prepared Statement by Tanna Schmidli

        Mr. Chairman and distinguished members of this subcommittee, the
    National Military Family Association (NMFA) would like to thank you for
    the opportunity to present testimony today on the state of military
    health care, as well as other quality-of-life issues affecting
    servicemembers and their families. Once again, we thank you for your
    focus on many of the elements of the quality-of-life package for
    servicemembers and their families: access to a quality health care
    benefit, military pay and benefits, and support for families dealing
    with deployment.
        NMFA endorses the recommendations contained in the statement
    submitted by The Military Coalition (TMC), with the exception of those
    related to increases in TRICARE Prime enrollment fees and TRICARE
    Standard deductibles. In this statement, NMFA will provide its
    alternative both to the health care recommendation contained in the
    Coalition's statement and to the proposals made by the Department of
    Defense (DOD) in its fiscal year 2007 budget request. We will also
    briefly address other quality-of-life issues for military families in
    the following subject areas:

            I. Military Health Care

                DOD's Proposal to Increase TRICARE Fees
                DOD Must Implement More Cost-Saving Measures
                TRICARE Standard: Not Just Another Insurance Plan!
                TRICARE Prime and TRICARE Standard
                Prime Access Standards and Quality-of-Care
                Obstetrical and Pediatric Rates
                Deployment Health for Servicemembers and Families
                Wounded Servicemembers Have Wounded Families
                Health Care for Survivors
                National Guard and Reserve Health Care
                Pharmacy
                Health Care for Special Needs Family Members/
            Enhanced Care Health Option (ECHO)
                Retiree Dental Insurance
                Health Care Implications of Transformation, Global
            Rebasing, and Base Realignment and Closure (BRAC)

            II. Family Readiness

                Caring for Military Children and Youth
                Spouse Employment

            III. Families and Deployment

            IV. Families and Transition

                Transformation, Global Rebasing, and BRAC
                Survivors

            V. Compensation and Benefits
                Funding for Commissaries, Exchanges, and Other
            Programs
                Permanent Change of Station Improvements
                Adjusting Housing Standards

            VI. Families and Community

        Servicemember readiness is imperative for mission readiness. Family
    readiness is imperative for servicemember readiness. Family readiness
    requires the availability of coordinated, consistent family support
    provided by well-trained professionals and volunteers; adequate child
    care; easily available preventative mental health counseling as well as
    therapeutic mental health care; employment assistance for spouses; and
    youth programs that assist parents in addressing the concerns of their
    children during stressful times. However, no issue is more important to
    family readiness than the military family's ability to access quality
    health care in a timely manner and at a cost that is commensurate with
    the sacrifices made by both servicemembers and families.
                              military health care
        NMFA thanks this subcommittee for its steadfast authorization of a
    robust military health care system. This system must continue to meet
    the needs of servicemembers and the DOD in times of armed conflict. It
    must also acknowledge that military members and their families are
    indeed a unique population with unique duties, who earn an entitlement
    to a unique health care program.
    DOD's Proposal to Increase TRICARE Fees
        The proposal by DOD to raise TRICARE fees by exorbitant amounts has
    resonated throughout the beneficiary population. Seldom has the
    reaction of servicemembers and families been as strong and strident.
    Interestingly, this reaction is across the board from all
    beneficiaries, even though the proposal would only marginally affect
    current Active-Duty families or retirees over age 64. Beneficiaries see
    the proposal as a concentrated effort by DOD to change their earned
    entitlement to health care into an insurance plan. How detrimental this
    could be to retention is unknown. But the volume of the voices suggests
    that if the proposals are enacted as presented there will be an effect.
    In addition, since statistics show the children of veterans are more
    likely to volunteer for the uniformed services than the children of
    non-veterans, and that the more positive ``influencers'' of service in
    the military are military retirees and other military family members,
    one must also wonder at the effect such proposals could have on
    recruitment.
        NMFA is alarmed DOD has already instructed the TRICARE Managed Care
    Support Contractors to begin drawing up plans to implement its proposed
    changes in TRICARE Prime enrollment fees on October 1, 2006. We believe
    this action is inappropriate given that Congress has not yet had the
    necessary time to study the proposals and the budget assumptions behind
    them. We appreciate the many questions Members of Congress are asking
    about these proposals. We urge Congress to direct DOD--possibly by
    inserting a provision in the Emergency Supplemental Appropriations Act
    now being debated--to cease efforts to implement its proposals until
    Members have had the opportunity to study them more closely.
        As part of your review of these proposals, NMFA requests you ask
    DOD officials which retirees they believe will leave TRICARE and bring
    about their predicted cost savings. DOD asserts retirees under age 65
    are leaving the health insurance offered by their civilian employer and
    returning to TRICARE. Since the Department has produced no concrete
    numbers to validate this assertion, it is difficult to comment on, but
    NMFA does not dispute that some are doing so. However, we also believe
    the Department is reaping the rewards of its own success. We suggest
    TRICARE Prime has improved so significantly that many new retirees are
    opting to stay in Prime since it has worked well for them on Active-
    Duty. Anecdotally, NMFA has noticed a profound difference in retiree
    behavior regarding health care choices over the past decade. The
    younger retirees, when in an area where Prime is offered, appear
    overwhelmingly to continue their Prime enrollment into retirement.
    Older retirees appear more likely either to use Standard as a wrap-
    around to their employer-provided health insurance or choose to buy a
    TRICARE supplemental plan and use Standard as their primary benefit. We
    would be very interested in seeing numbers to learn whether the steady
    increase in retirees under age 65 enrolled in Prime is due more to the
    retention of Prime in retirement among recent retirees or if it is
    indeed the so-called ``ghosts'' returning.
        If most of the increased numbers of retirees using TRICARE are
    those who are retaining their Prime enrollment in retirement, then NMFA
    questions if many (or any) will migrate to employer-provided health
    insurance. NMFA believes most families entering retirement will choose
    to stay with a known system that has worked for them rather than switch
    to an unknown one. If it is the ``ghosts'' returning, then NMFA asserts
    that the current proposal would exacerbate the situation. Retirees who
    currently use TRICARE Standard as a wrap-around to their civilian
    employer's health insurance may well opt to buy into TRICARE Prime
    (where offered) rather than pay for both their civilian health
    insurance and a TRICARE Standard premium (enrollment fee). NMFA is also
    concerned that many retirees in this age group may not have access to
    employer-provided health care as they are self-employed or work for a
    small business that does not offer health care. These individuals would
    be penalized for their choice of employment in retirement simply to try
    to influence the decisions of others.
        Active-Duty families fear for the future of their health care
    entitlement. Retirees, once they can think beyond their outrage, are
    frankly perplexed. When TRICARE Prime was first introduced, many
    retirees could only participate in the option if they enrolled at a
    military treatment facility (MTF). Later, many were told there was no
    longer room for them at the MTF and they were forced to use Prime in
    the civilian sector. Retirees who used CHAMPUS or TRICARE Standard
    seldom could access space available care in MTFs and were forced to buy
    supplemental policies to guard against high out-of-pocket expenses.
    Yet, when an inpatient hospitalization loomed and continuity of care
    with their civilian provider was upper most in their minds, they could
    be forced back into the MTF via non availability statements. Note this
    enforced return to the MTF was not for full care, but only for the
    treatment or surgery required for that particular inpatient episode.
    Now, retirees see the system does not want them at all! These are the
    same retirees to whom President Bush referred in a speech before the
    American Legion Convention on February 24, 2006, when he said: ``Our
    men and women on the front lines are taking inspiration from the valor
    and courage that you've shown in the field of battle.''
        Finally, the Department is stating two reasons for its proposed
    exorbitant increases in beneficiary cost shares. One is these cost
    shares must be put in place to ``sustain the benefit.'' The other is
    that the Department cannot afford to buy weapons systems and pay for
    the earned health care entitlement. This mixed message cannot help but
    send morale in a downward spiral. Are military retirees buying the next
    submarine or aircraft or are they supposed to sacrifice their
    entitlement to preserve the benefit for the future?

              NMFA does not believe DOD's estimate of the migration of
            retirees out of TRICARE is realistic and urges Congress to
            obtain more information on the economic assumptions used by DOD
            to formulate its budget proposal. We also urge Congress to
            ensure adequate authority for DOD health care funding is
            included in the fiscal year 2007 Budget Resolution and National
            Defense Authorization Act (NDAA) for Fiscal Year 2007. Because
            DOD has already directed the TRICARE contractors to begin plans
            to implement its proposed increases, NMFA requests that
            Congress insert a provision in the Emergency Supplemental
            Appropriations bill now being debated to forestall the
            implementation of any increases until Congress has had more
            time to study their impact on beneficiaries and to evaluate
            DOD's cost assumptions.
    DOD Must Implement More Cost-Saving Measures
        In section 733 of the NDAA for Fiscal Year 2006, Congress requested
    a report on the delivery of health care benefits through the military
    health system (MHS). This report, due to you no later than February 1,
    2007, asks key questions that should be answered before DOD attempts to
    change beneficiary cost shares drastically. Many of the topics required
    in the report deal with ways DOD could improve efficiencies in
    delivering the benefit. NMFA believes DOD has many options available to
    make the MHS more efficient and thus make the need for large increases
    in beneficiary cost shares unnecessary.
        For example, had the Department implemented a marketing plan for
    the TRICARE Mail Order Pharmacy (TMOP) several years ago, the migration
    to TMOP might have reduced health care costs significantly. Similarly,
    if the TRICARE Uniform Formulary had been implemented when first
    authorized by Congress in the fall of 2000 rather than just starting in
    March 2005, additional savings could have been realized. NMFA is aware
    DOD is attempting to get Federal pricing for medications in the TRICARE
    Retail Pharmacy (TRRx); however, in the meantime, it may have passed up
    several opportunities to receive significant discounts from
    pharmaceutical companies.
        In recent years at the annual TRICARE conferences and other venues,
    DOD officials have discussed the benefits of disease management,
    especially for certain chronic illnesses. These benefits flow to the
    beneficiaries through better management of their conditions and to DOD
    through patients' decreased need for costly emergency room visits or
    hospitalizations. Most MTFs and all of the TRICARE Managed Care Support
    Contractors have at least one disease management program, offered to
    beneficiaries in both TRICARE Prime and Standard. However, not all
    programs are offered everywhere, nor is there an effort to apply
    disease management programs across the entire system, to include
    pharmacy. DOD officials say disease management programs can benefit
    patients and the Department's bottom line and that successful disease
    management must include medical and pharmacy components. NMFA was
    disappointed, therefore, to find no mention of disease management or a
    requirement for coordination between the pharmacy contractor and
    Managed Care Support Contractors in the recently-released request for
    proposals for the new TRICARE pharmacy contract. NMFA was pleased to
    see Congress recognized the importance of improved disease management
    programs and included the study of the ``means of improving integrated
    systems of disease management, including chronic illness management''
    in section 733 of the NDAA for Fiscal Year 2006.
        Similarly, section 739 of the NDAA for Fiscal Year 2006 directed
    DOD to conduct a study evaluating the feasibility and cost
    effectiveness of a Medicare Advantage Regional PPO demonstration for
    TRICARE for Life (TFL) beneficiaries. This demonstration, focused on
    the TFL population with its high utilization of resources, could
    provide another opportunity to determine potential benefits from case
    management and disease management programs for beneficiaries with
    complex and/or chronic conditions. NMFA expects this program would be
    voluntary and would preserve all the benefits currently available to
    TFL beneficiaries under TRICARE and Medicare. NMFA has not yet heard
    from DOD regarding its plans to implement this demonstration.
        Despite the successes of the TRICARE Next Generation (T-Nex)
    managed care support contracts implemented last year, NMFA remains
    concerned that efforts to optimize the MTFs have not met expectations
    in terms of increasing or even maintaining access for TRICARE
    beneficiaries. NMFA believes optimizing the capabilities of the
    facilities of the direct care system through timely replacement
    construction, funding allocations, and innovative staffing would allow
    more beneficiaries to be cared for in the MTFs, which DOD asserts is
    the least costly venue. Innovative staffing approaches should look at
    the mix of staff available through a variety of sources: military,
    civilian, contract, and resource sharing. As with disease management,
    staffing initiatives must involve a systemic approach to make the best
    use of resources available through both the MTFs and the Managed Care
    Support Contractors.
        NMFA also believes the Managed Care Support Contractors have
    additional beneficial suggestions that could reduce health care costs
    through more efficient claims processing, the elimination of
    redundancies, and the reduction of the number of DOD-unique
    requirements in the contracts. Because the costs of recompeting and
    implementing large contracts can be extremely high, NMFA suggests that
    DOD delay the next round of TRICARE contract competitions for at least
    a year. Last year's implementation of the T-Nex contracts went more
    smoothly than many predicted, but beneficiaries and providers still
    experienced a certain amount of turmoil. Both would benefit from a
    longer period of stability and anticipated improvements in customer
    service as the contractors become more familiar with their regions and
    their implementation tasks. It is probable DOD could better serve its
    beneficiaries and enhance savings and efficiency if it would take the
    time to test new concepts for the next contracts through demonstration
    projects evaluated in the current program rather than implementing them
    untested in the new contracts. The Department should also ensure the
    three major issues still outstanding in the implementation of the
    current contracts--electronic claims, clean and legible records, and
    referrals and authorizations--have been solved before launching into
    another contract round.

              NMFA strongly suggests that DOD look within itself for cost
            savings before first suggesting that beneficiaries bear the
            burden! We encourage DOD to investigate further cost saving
            measures such as: a systemic approach to disease management, a
            concentrated marketing campaign to increase use of the TRICARE
            Mail Order Pharmacy, eliminating contract redundancies,
            delaying the recompetition of the TRICARE contracts, speeding
            implementation of the Uniform Formulary process, and optimizing
            military treatment facilities.
    TRICARE Standard: Not Just Another Insurance Plan!
        NMFA thanks Congress for its sustained concern regarding providing
    information and support to TRICARE Standard beneficiaries. We are
    hopeful the newer emphasis on this population by DOD and the Managed
    Care Support Contractors will translate into actual increased support
    for these beneficiaries. However, we retain the right to come back to
    Congress if such support does not materialize!
        The precursor to TRICARE Standard, the basic benefit provided for
    care in the civilian sector, was CHAMPUS. CHAMPUS was enacted when the
    direct military health care system could no longer provide care for all
    eligible beneficiaries. The relatively high deductibles for the time,
    25 percent cost share for doctor visits and extremely high inpatient
    costs (currently $535/day in non network hospitals), were included to
    discourage the indiscriminate use of CHAMPUS when care was available in
    the direct care system. However, CHAMPUS was then, as TRICARE Standard
    is now, an extension of the earned entitlement to health care. Charging
    a premium (enrollment fee) for TRICARE Standard moves the benefit from
    an earned entitlement to an opportunity to buy into an insurance plan.
    Active-Duty families appear to see this proposal from two points of
    view. First, the security of knowing their earned entitlement to health
    care would follow them into retirement has just flown out the window;
    and second, that the constant reference to other health insurance plans
    and the proposal to tie future increases to the Federal Employees
    Health Benefit Program (FEHBP) will eventually affect their own cost of
    health care. NMFA must also note that because TRICARE Prime is not
    offered everywhere, Standard is the only option for many retirees and
    their families and survivors who need to access their military health
    care benefit.
        NMFA opposes DOD's proposal to institute a TRICARE Standard
    enrollment fee and believes Congress should reject this proposal
    because it changes beneficiaries' entitlement to health care under
    TRICARE Standard to just another insurance plan. However, we would be
    remiss if we did not ask the many questions beneficiaries have about
    how a Standard enrollment fee would be implemented and its implications
    regarding access to care:

              1. Will retirees who do not enroll in Prime and do not pay a
            premium (enrollment fee) for Standard be refused space
            available care in MTFs, including their emergency rooms?
              2. Will these same retirees be refused pharmaceutical
            services at MTFs or be unable to use TRICARE retail network
            pharmacies and the TRICARE mail order pharmacy?
              3. Will retirees who only use Standard as a wrap-around to
            their employer-provided health care insurance pay the same
            premium (enrollment fee) as those who will use Standard as
            their primary benefit?
              4. What type of open enrollment season will be needed to
            provide retirees with the opportunity to coordinate coverage
            between TRICARE and their employer-sponsored insurance?
              5. How will DOD inform all eligible beneficiaries of this
            significant change in their benefit and of the opportunity to
            enroll?
              6. What additional resources will DOD require the TRICARE
            Managed Care Support Contractors to put in place to handle the
            enrollment of beneficiaries?
              7. How much will it cost to implement the enrollment fee,
            including the education efforts, additional tasks imposed on
            the TRICARE contractors, and the inevitable cost of handling
            appeals from beneficiaries whose claims were denied because
            they did not know they had lost their benefit?
              8. Has DOD incorporated realistic cost estimates for the
            implementation of a Standard premium into its budget proposal
            and savings projections?

        We also ask what additional services beneficiaries who enroll in
    Standard will receive after paying the enrollment fee. Or, will they
    only be paying for the ``privilege'' of having to seek their own
    providers, often filing their own claims, meeting a deductible, paying
    a 20-percent cost share for their care (plus an additional 15 percent
    if the provider does not participate in the claim), and being liable
    for a daily hospitalization charge of up to $535? And, because they
    recognize the cost liabilities of being in Standard, we know most will
    continue to bear the cost of a TRICARE supplemental insurance policy.

              NMFA strongly asserts DOD's proposal to change the earned
            entitlement to health care into an opportunity to buy into an
            insurance plan breaks both faith and the implied contract with
            currently serving members and those who have retired. We urge
            Congress to reject any plan to establish a TRICARE Standard
            enrollment fee.
    TRICARE Prime and TRICARE Standard
        In the current debate about whether or not to raise beneficiary
    fees for TRICARE, NMFA believes it is important to understand the
    difference between TRICARE Prime and TRICARE Standard and to
    distinguish between creating a TRICARE Standard enrollment fee and
    raising the Standard deductible amount. As we have stated above,
    TRICARE Standard is the successor name for CHAMPUS, and as such is a
    civilian extension of the basic entitlement to health care originally
    provided only in MTFs. At the start of TRICARE in 1995, when TRICARE
    Standard became the name for CHAMPUS, DOD also introduced an HMO-type
    benefit called TRICARE Prime. Since Prime offered enhancements to the
    health care benefit (lower out-of-pocket costs, access to care within
    prescribed standards, additional preventive care, assistance in finding
    providers, and the management of one's health care), enrollment fees
    for Prime were charged for retirees. These fees, which have not changed
    since the start of TRICARE, are $230 per year for an individual and
    $460 per year for a family. Below is a general comparison of TRICARE
    Standard and Prime for retired beneficiaries under the age of 65 when
    they access care in the civilian sector. Retirees enrolled in Prime
    with an MTF provider also pay the annual enrollment fee, but do not
    have a co-payment for outpatient care and only a modest fee for
    inpatient care received in the MTF.

    ------------------------------------------------------------------------
                                             Prime             Standard
    ------------------------------------------------------------------------
    Enrollment fees.................  $230/year for an    None
                                       individual; $460/
                                       year for a family.
    Annual Deductibles..............  None..............  $150/individual;
                                                           $300 for a family
    Outpatient co-payment (Prime)/    $12...............  25 percent of
     cost share (Standard) for                             allowed charges
     individual providers.                                 1,2
    Inpatient co-payment/cost share   None..............  25 percent of
     for individual providers.                             allowed charges
                                                           1,2
    Daily inpatient hospitalization   Greater of $11 per  Lesser of $535/day
     charge.                           day or $25 per      or 25 percent of
                                       admission.          billed charges if
                                                           treated in non-
                                                           network hospital
                                                           \3\
    Emergency Services co-payment/    $30...............  25 percent of
     cost share.                                           allowed charges
    Ambulance Services co-payment/    $20...............  25 percent of
     cost share.                                           allowed charges
    Preventive Examinations (such     None..............  25 percent cost
     as: blood pressure tests,                             share 1,2
     breast exams, mammograms,
     pelvic exams, PAP smears,
     school physicals) co-payments/
     cost shares.
    ------------------------------------------------------------------------
    \1\ Providers may charge 15 percent above the TRICARE allowable and the
      beneficiary is responsible for this additional cost, making the
      potential cost share 40 percent.
    \2\ If care is accessed from a TRICARE Prime/Extra network provider the
      cost share is 20 percent.
    \3\ If care is received in a TRICARE Prime/Extra network hospital the
      daily hospitalization rate is the lesser of $250/day or 25 percent of
      negotiated charges.

        DOD's proposal to increase TRICARE Prime enrollment fees, while
    completely out-of-line dollar wise, is not unexpected. In fact, NMFA
    was surprised DOD did not include an increase as it implemented the new
    round of TRICARE contracts last year. NMFA views enrollment fees for
    Prime as justified because enrollees enjoy the additional benefits of
    access guarantees, lower out-of --pocket costs, more preventive care,
    and management of their health care. In other words, enrollment fees
    for Prime are not to access the earned entitlement, but for additional
    services.
        NMFA does have concerns about the amount of DOD's proposed
    increases for TRICARE Prime and the plan to impose a tiered system of
    enrollment fees and TRICARE Standard deductibles. We believe the tiered
    system is arbitrarily devised and fails to acknowledge the needs of the
    most vulnerable beneficiaries: survivors and wounded servicemembers.
    For example, under the DOD plan an individual retired officer or family
    member would pay an enrollment fee of $700 for TRICARE Prime by fiscal
    year 2008. The surviving spouse of a 2nd Lieutenant who died in Iraq
    last year will revert to retiree status in terms of health care in
    2008. Under the DOD plan, she would pay the $700 enrollment fee, the
    same as paid by a retired General Officer. A marine with just a few
    years' service who is medically retired after sustaining a serious
    injury would pay the same premium for his/her family as would a retired
    E-6 who served 20 years.
        Acknowledging that the annual Prime enrollment fee has not
    increased in more than 10 years and that it may be reasonable to have a
    mechanism to increase fees, NMFA would like to present an alternative
    to DOD's proposal should Congress deem some cost increase necessary.
    NMFA suggests DOD apply the cumulative retiree cost-of-living
    adjustment (COLA) to the base annual Prime enrollment fee of $230 for
    an individual and $460 for a family. Using the 31.4 percent cumulative
    COLA for the years from 1995 through 2006, the annual fee would rise to
    approximately $302 for a single servicemember and $604 for a family. If
    DOD thought $230/$460 was a fair fee for all in 1995, then it would
    appear that raising the fees simply by the percentage increase in
    retiree pay since then is also fair. NMFA also suggests that, to avoid
    another ``sticker shock,'' fees be raised annually by the same percent
    as the retiree COLA. NMFA further believes adjusting the current fees
    over a 2-year period would decrease the effect of ``sticker shock'' and
    allow families to adjust their budgets. We are aware the current system
    does require retirees/survivors with smaller incomes to pay a higher
    percentage of their pension/annuity for Prime than those with higher
    incomes; however, we believe the benefits of simply updating the
    current fees are greater for almost all concerned than devising another
    option, especially an arbitrarily-designed tier system. NMFA also
    suggests it would be reasonable to adjust the TRICARE Standard
    deductibles in the same manner: cumulative COLA for the years since
    1995 and then tie future increases to the percent of the retiree annual
    COLA.

              NMFA believes its alternative proposal to increase Prime
            enrollment fees and Standard deductibles using the cumulative
            retiree COLA over the past 10 years and to tie future increases
            to the same percent as the retiree COLA is a fair way to
            increase beneficiary cost shares should Congress deem an
            increase necessary.
    Prime Access Standards and Quality-of-Care
        NMFA remains concerned that prescribed access standards are not
    being met for enrolled TRICARE Prime beneficiaries at MTFs. No one is
    more cognizant of the need for superior health care to be provided to
    servicemembers in harm's way than their families. In addition, no one
    is more willing to change providers or venues of care to accommodate
    the need for military health care providers to deploy than the families
    of those deployed. However, a contract was made with those who enrolled
    in Prime. Beneficiaries must seek care in the manner prescribed in the
    Prime agreement, but in return they are given what are supposed to be
    guaranteed access standards. When an MTF cannot meet those standards,
    appointments within the civilian TRICARE network must be offered. In
    many cases this is not happening and families are told to call back
    next week or next month. MTFs must be held as accountable as the
    Managed Care Support Contractors for meeting stated access standards.
    In addition, requests for referrals for specialty care must not be held
    up beyond access standards simply to meet some arbitrary ``right of
    first refusal'' standard. MTFs must be as responsive to civilian
    providers regarding care provided to beneficiaries in the direct care
    system as the contracts require civilian network providers to be to the
    MTF for beneficiaries referred within the civilian network.
    Beneficiaries should not be caught in a bureaucratic ``catch 22'' when
    care is needed from both venues.
        Because operational requirements have reduced the number of
    uniformed health care personnel available to serve in the MTF system, a
    more coordinated approach is needed to optimize care and enable MTFs to
    meet access standards. Efficient contracting for health care staffing
    could increase the amount of care provided in the direct care system,
    thereby reducing the overall cost of care to the military health care
    system. NMFA suggests Congress direct DOD to reassess the resource
    sharing program used prior to the implementation of the T-Nex contracts
    and take the steps necessary to ensure MTFs meet access standards with
    high quality health care providers.
        NMFA also emphasizes that quality care must be available to
    beneficiaries both in the direct care and purchased care systems.
    Routinely contracting for the lowest cost providers is a high risk
    strategy that does not serve the long-term interests of the military
    health care system. The inherent risks are heightened by the absence of
    clear, consistent standards for firms providing health care staffing.
    NMFA understands the Joint Commission on Accreditation of Health Care
    Organizations (JCAHO) has implemented a certification program for
    private sector health care staffing firms operating in the civilian
    sector to ensure they meet established standards. We encourage Congress
    to direct DOD to adopt these JCAHO standards as well for health care
    staffing firms that support military hospitals and clinics. The
    military beneficiaries receiving care in MTFs deserve at least the same
    protections as those who receive care in private sector hospitals.
    Obstetrical and Pediatric Reimbursement Rates
        NMFA thanks Congress for requiring the Comptroller General to
    investigate reimbursement levels for obstetrical and pediatric care. We
    continue to receive concerns from families that finding providers in
    these two specialties is extremely difficult in many areas. We look
    with anticipation to the report and request appropriate legislation if
    DOD does not propose adequate remedies for the situation.
    Deployment Health for Servicemembers and Families
        As servicemembers and families experience numerous lengthy and
    dangerous deployments, NMFA believes the need for confidential,
    preventative mental health services will continue to rise. The Services
    must balance the demand for mental health personnel in theater and at
    home to help servicemembers and families deal with unique emotional
    challenges and stresses related to the nature and duration of continued
    deployments. The good news for family support professionals who believe
    military families are reluctant to seek help for mental health issues
    is that many now recognize counseling is an option for them. Families
    perceive counseling and mental health support as especially helpful if
    it is confidential and with a professional familiar with the military.
    One spouse who completed NMFA's recent Cycles of Deployment Survey
    stated:

              Three deployments have caused great mental strain on me as
            the spouse of a servicemember. Thank goodness for mental health
            services, which I have used for more than a year now and will
            continue to use. I have to work daily on managing depression
            and anxiety, which I feel are a direct result of the
            deployments.

        The Services recognize the importance of educating servicemembers
    and family members about how to achieve a successful homecoming and
    reunion and have taken steps to improve the return and reunion process.
    Information gathered in the now-mandatory post-deployment health
    assessments may also help identify servicemembers who may need more
    specialized assistance in making the transition home. Successful return
    and reunion programs will require attention over the long term. Many
    mental health experts state that some post-deployment problems may not
    surface for several months or years after the servicemember's return.
    NMFA is especially concerned that not as many services are available to
    the families of returning Guard and Reserve members and servicemembers
    who leave the military following the end of their enlistment. Although
    they may be eligible for transitional health care benefits and the
    servicemember may seek care through the Department of Veterans' Affairs
    (VA), what happens when the military health benefits run out and
    deployment-related stresses still affect the family?
        Military OneSource (www.militaryonesource.com) helps returning
    servicemembers and families access local community resources and
    receive up to six free face-to-face mental health visits with a
    professional outside the chain of command. NMFA is pleased DOD has
    committed to funding the counseling provided under the OneSource
    contract. This counseling is not medical mental health counseling, but
    rather assistance for family members in dealing with the stresses of
    deployment or reunion. It can be an important preventative to forestall
    more serious problems down the road.
        NMFA notes, however, that Military OneSource is only available for
    members of the four Services under the authority of the DOD. The parent
    Departments of the Coast Guard, Public Health Service, and National
    Oceanic and Atmospheric Administration operate their own Employee
    Assistance Programs and provide some of the same information through
    them as Military OneSource. However, these EAPs may not be equipped
    with the resources and experience to provide the same type of
    deployment-related information and assistance as offered by Military
    OneSource. We ask members of this subcommittee to urge the appropriate
    committees with jurisdiction over the three uniformed services not part
    of DOD to work with DOD and ensure deployed members of all uniformed
    services and their families have access to the same level of
    deployment-related assistance--including the face-to-face counseling
    services--provided under Military OneSource.

              NMFA remains concerned about access to mental health care,
            both preventative and therapeutic, for the long haul.
            Unfortunately the costs of war may linger for servicemembers
            and their families for many years. It is imperative that
            whether or not the member remains on Active-Duty and entitled
            to military health care there are provisions for both
            servicemembers and their families to access appropriate mental
            health services paid for by their government.
    Wounded Servicemembers Have Wounded Families
        Post-deployment transitions could be especially problematic for
    injured servicemembers and their families. NMFA asserts that behind
    every wounded servicemember is a wounded family. We have been pleased
    the military medical centers are involving VA personnel to ease wounded
    servicemembers' transition to civilian life and care in the VA. The
    transition between the DOD and the VA health system can be confusing
    for servicemembers and their families. In the case of the severely
    disabled, there should be an individual written transition plan that is
    explained in full to the supporting family members. Robust transition,
    employment and training programs for wounded/injured servicemembers and
    their family members are also important for seamless transition to
    occur. Wounded servicemembers who are medically retired need more
    information on the full benefit package available to them from both DOD
    and the VA. They especially need more education about their eligibility
    for both DOD and VA health care and when it is most appropriate to use
    each system.
        To ease wounded servicemembers' and their families' health care
    transition and reduce their out-of-pocket costs in the years
    immediately following their injury, we urge Congress to allow wounded/
    injured servicemembers who are medically retired and their families to
    be treated as Active-Duty family members in terms of TRICARE costs and
    access to care at military hospitals for 3 years following the
    servicemembers' retirement. This change would mirror the 3-year
    transitional status provided to surviving spouses of Active-Duty
    deaths.
        Family Assistance Centers established at Walter Reed and other
    major medical centers have proved invaluable in assisting families of
    wounded servicemembers and in providing a central location to filter
    community offers of help. NMFA is hearing the Services are now sending
    more wounded servicemembers back to their home installations sooner to
    receive care at their home installation MTF--which could be a community
    hospital rather than a medical center. Therefore, NMFA believes Family
    Assistance Centers are urgently needed in every MTF that treats injured
    servicemembers. In addition to the recreation, travel, and emergency
    support these centers provide, they also assist the family in dealing
    with the servicemember's transition back home.
        NMFA applauds recent provisions in the NDAA for Fiscal Year 2006
    that require standards for assisting wounded and injured
    servicemembers. NMFA strongly encourages the Services to cooperate and
    expedite the standardization of programs. NMFA has heard from families
    of wounded servicemembers that they are not offered the ``same
    services.'' An injured soldier, airman, sailor, or marine should be
    offered access to the same services as the soldier, airman, sailor, or
    marine recuperating in the bed next to them in a military hospital. We
    continue to ask that the role of the DOD and the VA be clearly
    explained and delineated and joint efforts between all the Services and
    the VA, in support of the servicemember and family, continue to be the
    priority.

              To support wounded and injured servicemembers and their
            families, NMFA recommends that Congress extend the 3-year
            survivor health care benefit to servicemembers who are
            medically retired and their families and direct DOD to
            establish a Family Assistance Center at every MTF caring for
            wounded servicemembers.
    Health Care for Survivors
        NMFA thanks Congress for including section 715 in the NDAA for
    Fiscal Year 2006, which allows surviving children of Active-Duty deaths
    to be treated as Active-Duty family members for purposes of enrolling
    in TRICARE Prime until they age out of TRICARE. We and the surviving
    families who contact us are waiting--slightly impatiently--for word
    from DOD on how this important benefit change will be implemented. To
    date, we have not received this information.
        This year, we ask for consideration of several other proposals to
    ease the health care transition for survivors of Active-Duty deaths.
    First, we ask Congress to update the survivor benefit to enable
    survivors of Active-Duty deaths to enroll in TRICARE Prime Remote
    during the time they are treated as Active-Duty family members for
    health care--3 years for the spouse. Some survivors may immediately
    relocate to the area where their parents live for the security and
    support they need. Others may remain for their 1 year entitlement in
    government quarters and then relocate to family or for the necessity of
    employment. In these cases, the area to which the survivors have
    relocated may not be one in which TRICARE Prime is offered. It seems
    reasonable these survivors should be able to qualify for the Prime
    Remote option during the period when they are treated as Active-Duty
    family members in terms of TRICARE to minimize their out of pocket
    costs during this traumatic transition time.
        National Guard and Reserve families may choose to keep their
    employer sponsored health and dental care when their servicemember is
    activated and deployed. The family's eligibility for this care may
    cease if the servicemember is killed on Active-Duty. Legislative
    changes are needed to enable these family members to take advantage of
    their survivor benefit for coverage under the TDP, the dental insurance
    for Active-Duty families. As the law is currently written, with limited
    exceptions, only those families enrolled in the TDP at the time of the
    servicemember's death are eligible to continue enrollment and receive
    premium-free dental insurance for 3 years. NMFA recommends, in cases
    where the family has employer sponsored dental insurance, survivors be
    treated as if they had been enrolled in the TDP at the time of the
    servicemember's death.
        Survivors of those who die on Active-Duty or in retirement justly
    lose their entitlement to DOD benefits to include access to
    commissaries, exchanges, morale, welfare, and recreation (MWR)
    benefits, and health care when they remarry. Survivors eligible for the
    Veterans' Administration CHAMPVA program are eligible for health care
    reinstatement if their second marriage ends, but NOT those previously
    eligible for DOD-provided health care, even though their entitlement
    for all other benefits is reinstated. NMFA requests this inequity be
    removed and these survivors have their health care entitlement
    restored.

              In cases where the family of a deceased servicemember has
            been enrolled in an employer-sponsored dental plan, NMFA
            recommends survivors be treated as if they had been enrolled in
            the TRICARE Dental Program at the time of the servicemember's
            death. We also recommend that Congress update the TRICARE
            benefit provided in the period following the servicemember's
            death in which the surviving spouse and children are treated as
            their Active-Duty family members and allow them to enroll in
            TRICARE Prime Remote.
    National Guard and Reserve Health Care
        NMFA also asks for an update to the TRICARE Prime Remote
    eligibility rules for some National Guard and Reserve families. While
    Guard and Reserve families in remote locations may be eligible for
    Prime Remote while their servicemember is on Active-Duty, they lose
    their eligibility once the servicemember is demobilized and is eligible
    for the 180-day Transitional Assistance Management Program (TAMP)
    benefit. We believe, for the sake of continuity of care as well as the
    family's financial stability during the Guard or Reserve member's
    transition back to civilian live, the servicemember and family should
    retain eligibility for Prime Remote during the TAMP period.
        NMFA thanks Congress for extending the ability to buy into TRICARE
    to members of the Selected Reserve, but is concerned the ``one shoe
    fits all'' solution does not translate into continuity-of-care for all
    their families when the member is mobilized. Certainly those with no
    access to health care insurance will benefit from the ability to buy
    into TRICARE and thus ensure their families have continuity of care
    when they are mobilized. However, a large segment of this population
    has employer-provided health insurance and for their families
    continuity of care would best be achieved by a DOD subsidy of this
    insurance when they are mobilized. Having to change health care plans
    and possibly providers when the member is going in harm's way are not
    conducive to family readiness!
        We also ask you to monitor the process by which DOD determines
    rates for TRICARE Reserve Select. We were just as surprised as the
    Reserve Select beneficiaries when DOD chose to increase premiums for
    this program so soon after its implementation. NMFA was also concerned
    at the percentage increase in the premium, which was tied to the
    premium increase for the standard option Blue Cross/Blue Shield plan
    offered under the FEHBP.

              To promote continuity of care for families of mobilized Guard
            and Reserve members, NMFA asks that Congress authorize DOD to
            subsidize the cost of family coverage under the member's
            employer-sponsored health insurance while the servicemember is
            mobilized. NMFA also asks Congress to monitor the premium-
            setting process used by DOD for TRICARE Reserve Select.
    Pharmacy
        NMFA applauds DOD's proposal to encourage migration to the TRICARE
    Mail Order Pharmacy by removing cost shares for generic medications.
    NMFA and other associations have long encouraged DOD to launch a
    concentrated marketing effort to promote use of the TMOP, as it
    provides significant savings to beneficiaries as well as huge savings
    to the Department. The proposed beneficiary cost share increases in the
    pharmacy retail network program are not as exorbitant as the proposals
    for increases in Prime enrollment fees, the premium to access TRICARE
    Standard, or the increase in Standard deductibles, but do represent a
    67-percent increase for all beneficiaries. If some additional cost
    share for TRRx is instituted, NMFA believes it should not be
    implemented until all of the medications available through TRRx are
    also available through TMOP and DOD joins the associations in actively
    and strongly promoting use of the TMOP.
        NMFA is most grateful to Congress for establishing the Beneficiary
    Advisory Panel to review and comment on the recommendations of the
    Pharmacy and Therapeutics Committee for the Uniform Formulary. It
    appears as though the process has been beneficial to both groups and a
    good working relationship has been established. However, NMFA has
    several concerns. First, even when the majority of the panel recommends
    against a Pharmacy and Therapeutics Committee recommendation, there is
    no feedback on why its comments were rejected by the final decision
    maker, the Director of the TRICARE Management Agency. While NMFA would
    certainly not suggest the Director ``report'' to the Panel, in the
    spirit of collegiality, a direct communication to the Panel on why
    their recommendations were rejected would enhance the working
    relationship. Second, NMFA and our fellow associations were initially
    assured few drugs would move to the nonformulary or third co-payment
    tier. Yet in the first year of the process, 41 drugs out of 131
    considered have been moved to the third tier. Third, the law clearly
    states congressional intent that beneficiaries were to have access to
    nonformulary drugs; they just had to pay more for them. However, an
    internal DOD policy currently appears to require MTF providers to write
    prescriptions only for drugs that are available on that MTF's
    formulary, unless medical necessity has been determined. Hence,
    beneficiaries treated at an MTF are precluded from accessing
    nonformulary drugs at either the TRRx or the TMOP, even if they are
    willing to pay the higher cost share. Finally, it is well understood,
    and NMFA has no great argument with the premise, that the process of
    establishing a Uniform Formulary was to provide clinically appropriate
    drugs at a cost savings to the Department. We believe information must
    be gathered to determine if the Uniform Formulary process is meeting
    the desired goals.

              NMFA requests the Government Accountability Office (GAO) be
            asked to conduct a review to see if the Uniform Formulary
            process is producing the savings projected and the extent, if
            any, beneficiaries believe they have been denied medications
            they and their provider believe would be more clinically
            appropriate for them.
    Health Care for Special Needs Family Members/ECHO
        On September 1, 2005, the TRICARE Management Activity (TMA) at last
    implemented the Enhanced Care Health Option, which was authorized in
    the NDAA for Fiscal Year 2002 as the replacement for the Program for
    Persons with Disabilities (PFPWD). ECHO is intended to provide
    additional benefits to Active-Duty family members with a qualifying
    mental or physical disability, generally defined as: moderate or severe
    mental retardation; a serious physical disability; or an extraordinary
    physical or psychological condition of such complexity that the
    beneficiary is homebound. The program recognizes the additional
    challenges faced by Active-Duty families because of the servicemember's
    deployment or frequent relocations that often make accessing services
    in the civilian community difficult.
        ECHO offers services and supplies beyond the basic TRICARE benefit
    covered in Prime and Standard, up to a maximum of $2,500 per eligible
    family member per month, a $1,500 increase over the PFPWD.
    Additionally, some beneficiaries may qualify for ECHO Home Health Care,
    which provides medically-necessary skilled services to eligible
    homebound beneficiaries. Families registered in ECHO pay a rank-based
    monthly cost share. They must be enrolled in their Service Exceptional
    Family Member Program in order to receive ECHO services.
        Active-Duty families with a special needs family member had eagerly
    awaited the often-delayed implementation of ECHO. While the numbers of
    eligible beneficiaries for ECHO is much smaller than for the PFPWD
    because certain services covered by the PFPWD have now been moved to
    the basic TRICARE benefit, there have been numerous problems with the
    transition to the new program. These problems generally fall into three
    areas: information about ECHO eligibility and how to access services,
    obtaining covered respite care, and changes in TRICARE coverage for
    Applied Behavioral Analysis (ABA) therapy.
        In the early months of ECHO implementation beneficiaries generally
    reported confusion about eligibility for ECHO services, what services
    are covered, and how to obtain the needed authorization for these
    services. Because of the relatively-small numbers of eligible
    beneficiaries, the TRICARE contractors generally chose to manage the
    information flow through its case managers rather than through its
    TRICARE Service Centers or customer service lines. Beneficiaries who
    grew frustrated with a lack of answers to their questions had to learn
    from each other to ask for a case manager or someone familiar with ECHO
    when seeking assistance.
        Respite care is a new benefit under ECHO that was not available
    under the PFPWD and was probably the most anticipated of all ECHO
    benefits. There are two types of respite care benefits: the ECHO
    respite care benefit of 16 hours per month when receiving other ECHO
    services and the ECHO Home Health Care ``sleep benefit'' of 8 hours per
    day for 5 days each week. Because of some confusion about what other
    services are covered under ECHO or a difficulty in accessing these
    services, many beneficiaries found they were not eligible for the ECHO
    respite care benefit. Families had looked forward to this service
    because it would give the parents the opportunity to spend time
    together or with their other children without worrying about the care
    of the special needs child. Beneficiaries have also told NMFA they and
    their TRICARE contractors have been confused about the type of provider
    qualified to provide the respite care services. Often, local home
    health agencies are geared toward providing care for the elderly and
    not for children. In some locations, there are not enough agencies
    available to meet the demand for these services.
        Beneficiaries who cannot obtain respite care services note a
    benefit isn't a benefit if you can't access it. Complaints of a hollow
    benefit have been heard most often in connection with the provision of
    ABA services for children with autism. ABA is a type of educational
    therapy that has been effective for some children with types of autism.
    In recent years, DOD paid for ABA therapy under the PFPWD and promised
    it would continue as a benefit under ECHO. Unfortunately, many military
    children who received ABA therapy under the PFPWD lost these services
    when they were transitioned to ECHO. With the implementation of ECHO,
    DOD chose to change its standards for authorizing and paying ABA
    providers. At issue is who provides the hands-on, in-home therapy that
    is the key to effective ABA therapy. Currently, the industry standard
    for treatment in ABA therapy is that certified ABA therapists develop
    the treatment plan and train and supervise tutors who provide the
    hands-on therapy, often several times each week. Formerly, DOD paid for
    therapy following this standard. With the implementation of ECHO, DOD
    announced it would only pay for ABA therapy when it was done by the
    board-certified therapist and not by a tutor operating under the
    therapist's supervision.
        DOD has argued this change is necessary to ensure therapy is
    provided by qualified providers. Unfortunately, there are not enough
    board-certified therapists in the field to meet the demand for this
    therapy and as a result military families are reporting their children
    are losing ground in their ability to learn and function because their
    services have been scaled back or curtailed. Of course NMFA believes
    DOD should have high quality standards for all providers; however, we
    are concerned the Department is ignoring industry standard and is
    opting to eliminate a benefit promised under ECHO rather than devise a
    more reasonable way to ensure quality. We find it ironic that DOD
    officials talk about the need for highly trained providers but yet have
    suggested parent training in ABA therapy as a viable alternative to
    paying for trained tutors working under the supervision of certified
    providers. NMFA does not disagree that parents should be knowledgeable
    about the therapy in order to reinforce the work done by the tutor
    during the home visits. However, parents should not be the DOD-
    authorized replacements for trained therapists!

              NMFA requests this subcommittee direct DOD to meet military
            families' needs for promised services under ECHO and to revise
            policies that would deny special needs family members access to
            these services.
    Retiree Dental Insurance
        NMFA frequently hears from individuals in the two categories of
    TRICARE-eligible beneficiaries who were not included in the list of
    eligibles in the legislation creating the TRICARE Retiree Dental Plan.
    We recommend Congress add military retirees and their families who live
    overseas as well as TRICARE-eligible former spouses to the list of
    eligible beneficiaries for this plan. Since the TRICARE Retiree Dental
    Plan is not subsidized by DOD, there is no cost to the Department to
    include these otherwise TRICARE eligible beneficiaries.

              NMFA requests TRICARE eligible former spouses and military
            retirees and their family members who live overseas be allowed
            to participate in the TRICARE Retiree Dental Plan.
    Health Care Implications of Transformation, Global Rebasing, and BRAC
        NMFA believes it imperative the full spectrum of health care be
    available to families at losing or closing installations until the last
    family has left and also be in place before the first new family
    arrives at a gaining installation. NMFA is fully aware this cannot be
    accomplished solely through the direct care system. However, the
    Managed Care Support Contractors must be required to meet the need when
    the direct care system cannot and to do so within the Prime access
    standards. In communities experiencing an increase in Active-Duty
    population, this may mean they will need to recruit more family
    practice providers, pediatricians, and OB/GYNs for their networks.
    Because of housing patterns in affected communities, more network
    providers may be needed in locations farther from the installations
    than are currently requred. For example, the North region contractor
    has already had to recruit additional network providers in the
    Syracuse, New York, area because families of servicemembers stationed
    at Fort Drum have been forced to find housing there. The contractors
    must also be prepared to work together to ease the transition of large
    numbers of Active-Duty members and their families from installation to
    installation, in many cases across regional boundaries.
        In addition, NMFA is concerned about other beneficiaries, to
    include those who are medically retired and survivors, who may be left
    without access to an MTF at closing or downsizing installations. At a
    minimum, Prime must continue to be an option in BRAC areas and a robust
    network of providers, to include all relevant specialists, must be in
    place before an MTF downsizes or closes. In areas where military
    hospitals are being downsized to outpatient clinics, every effort must
    be made to ensure continuity of care for beneficiaries needing to move
    back and forth between the direct care and purchased care segments of
    the MHS. DOD must ensure the contractors develop adequate hospital
    networks to replace care now provided in the direct care system.
                                family readiness
        NMFA recognizes and appreciates the continued focus all the
    Services are placing on family readiness. Family readiness affects a
    servicemember's entire career from recruitment to retention to
    retirement. DOD must continue to refine and improve family readiness
    programs not only because it is the right thing to do, but also to
    retain highly trained and qualified servicemembers.
        In NMFA's recent Cycles of Deployment Survey, respondents' comments
    paint a picture of both successes and failures in the family support/
    readiness arena. A common theme was the desire for a ``purple'' family
    support system. As an Active-Duty Army spouse stated: ``We are all in
    this together--it doesn't matter the branch of service.'' What matters
    to the family is that the information and support that they are
    promised is provided in a consistent manner. Accessing the right
    information when they need it continues to be a critical issue for
    Guard and Reserve families who generally have very limited access to
    military installations. Like the families in our survey, NMFA believes
    family support agencies must reach out to all families located in their
    geographical area regardless of Service affiliation.
        Evidence of this need for outreach by strong, well-coordinated
    programs was seen in the confusion and frustration experienced by so
    many uniformed service families in the wake of Hurricane Katrina and in
    the responses initiated by their Services. In the wake of the disaster
    and in response to calls from families and family support providers
    alike, NMFA worked quickly to compile contact and support information
    for all agencies and Services in order to be able to provide accurate
    and timely advice to families. While we were happy to provide a one-
    stop information portal for families from all the uniformed services
    and while the individual Services ended up offering a wide variety of
    information and support resources, we just kept thinking how nice it
    would have been if military leaders had focused more from the beginning
    on working together to meet families' needs.

              NMFA applauds the various initiatives designed to meet the
            needs of servicemembers wherever they live and whenever they
            need them. DOD must have the flexibility to meet emerging
            needs, the mandate to reach out to families, and the resources
            to ensure continuation of the ``bedrock'' support programs.
            Whenever possible, these programs should focus on a joint
            solution and reach out to all family members, including parents
            of single servicemembers.
    Caring for Military Children and Youth
        Frequent deployments and long work hours make the need for quality
    affordable and accessible child care critical. We thank Congress for
    making additional funding available for child care since the beginning
    of the global war on terrorism. We were pleased that DOD has requested
    military construction for eight child development centers for fiscal
    year 2007. The communities slated to receive these centers desperately
    need them. Currently, DOD estimates it has a shortage of 31,000 child
    care spaces within the system, not counting the demand from the
    mobilized Guard and Reserve community. While efforts are being made to
    bridge this gap, thanks in part to congressional funding for child care
    over the past few years, additional innovative strategies are needed.
    Programs such as Military Child Care in Your Neighborhood and Operation
    Military Child Care, which assist military families in finding and
    paying for child care, are welcome pieces of the solution, but are
    insufficient to completely meet all the need.
        Older children and teens cannot be overlooked. Parents tell us
    repeatedly they want resources to ``help them help their children.''
    NMFA is working to meet this need through programs such as our
    Operation Purple summer camps and a pilot after school program for
    children of deployed servicemembers. We also applaud the partnership
    between DOD and Johns Hopkins School of Public Health to assist school
    personnel in helping military children deal with frequent moves or the
    deployment of a parent. We urge Congress to increase its funding for
    schools educating large numbers of military children. This supplement
    to Impact Aid is vital to these districts, which have shouldered the
    impressive burden of ensuring military children receive a quality
    education despite the stresses of military life.

              Schools serving military children, whether DOD or civilian
            schools, need the resources to meet military parents'
            expectation that their children receive the highest quality
            education possible. Because Impact Aid funding from the
            Department of Education is not fully funded and has remained
            flat in recent years, NMFA recommends increasing the DOD
            supplement to Impact Aid to $50 million to help districts
            better meet the additional demands caused by large numbers of
            military children, deployment-related issues, and the effects
            of military programs and policies such as family housing
            privatization. Initiatives to assist parents and to promote
            better communication between installations and schools should
            be expanded across all Services.
    Spouse Employment
        In recent years, DOD has sponsored a variety of programs, including
    a partnership with Monster.com, to promote spouse employment. However,
    with 700,000 Active-Duty spouses, the task of enhancing military spouse
    employment is too big for DOD to handle alone. NMFA encourages more
    private employers to step up to the plate and form partnerships with
    local installations and DOD. We ask DOD to reach out to potential
    employers and acquaint them with the merits of hiring the members of
    this talented and motivated workforce.
        Despite greater awareness of the importance of supporting military
    spouse career aspirations, some roadblocks remain. State laws governing
    unemployment compensation vary greatly regarding eligibility for
    military spouses who have moved because of a servicemember's government
    ordered move. NMFA is appreciative of DOD's efforts to work with States
    to promote the award of unemployment compensation to military spouses,
    eligibility for in-State tuition, and reciprocity for professional
    licenses.

              NMFA asks Congress to promote Federal and State coordination
            to provide unemployment compensation for military spouses as a
            result of Permanent Change of Station (PCS) orders. State
            governments should be encouraged to look at ways to make
            college credits and fees more easily transferable and also
            explore paths towards national standards or reciprocity for
            licensing and professional certification. DOD and private
            sector employers who protect employment flexibility of spouses
            and other family members impacted by deployment should be
            applauded and used as role models for others to follow. Last,
            but not least, military spouses should be encouraged to use all
            available resources to educate themselves about factors to
            consider regarding employment benefits, to include investments,
            health care, portability, and retirement.
                            families and deployment
        In July 2004, NMFA published Serving the Home Front: An Analysis of
    Military Family Support from September 11, 2001 through March 31, 2004.
    This report noted progress made to the military's support of its
    families during the first 18 months of the global war on terrorism.
    Understanding the need for further research and information on the
    long-term effects of repeated deployments and the reunion and
    reintegration of both Active and Reserve component families, NMFA
    developed its Cycles of Deployment survey. This survey was active on
    the NMFA website between April and November 2005 and received 1,592
    responses. The message from military families came through loud and
    clear: families cannot nor should they have to make it through a
    deployment alone. They expect family support to be available to all,
    regardless of their Service component or where the family lives.
    Respondents acknowledged they had a role to play in their own family
    readiness; however they looked to their commands, their unit
    volunteers, and their communities to recognize their sacrifice and help
    them make it through deployments.
        NMFA could not agree more. We are pleased to note the progress made
    on innovative ways in which families can communicate with command and
    family readiness/support groups. The Army Virtual Family Readiness
    Group (VFRG) has just recently gone live and will soon be able to
    connect up to 800 battalions with family members and significant
    others, to include spouses, children, fiances, parents, and extended
    family members. VFRGs should be a tremendous help in meeting the needs
    of geographically-dispersed servicemembers, Guard and Reserve members,
    and individual augmentees and their families who feel left ``out of the
    communication loop'' and consistently ask: ``who's my group?''
        As deployments have continued, the Services have refined programs
    dealing with the return and reunion process. Families worry about how
    the reunion will go even as they are worrying about the servicemember's
    safety in theater. Attention also needs to be placed on how children,
    at varying stages of their lives, reconnect with a parent who in all
    likelihood will be deployed again sometime soon.
        Families need to be better educated in how to deal with problems
    that could surface months after the servicemember returns.
        Multiple deployments are no longer the exception but rather the
    norm. Families experiencing a second or third deployment never start
    from the same place. Along with skills acquired during the first
    deployment, there are unresolved anxieties and expectations from the
    last. New families are entering the cycle, whether they are new
    recruits, servicemembers deploying with new units, or families whose
    life situations have changed since the last deployment. More families
    seem willing to seek mental health care and counseling but it is not
    always readily available. Many of our survey respondents called for
    counselors to be assigned to unit family readiness groups, as well as
    on-call professionals who would be available to deal with troubled
    families or the emergency situations currently being thrust on often
    inadequately trained volunteers. NMFA applauds the Soldier and Family
    Life Consultants Program, which is used by the Army to provide
    additional preventative counseling support to soldiers and their family
    members, especially following soldiers' return from deployments. The
    number of Army installations using this program is growing; services
    have also been provided to the Marine Corps Reserve for returning
    units. NMFA recommends increased funding for this program and for DOD
    to provide the option to expand it to all Services.

              Higher stress levels caused by open-ended and multiple
            deployments require a higher level of community support. We ask
            Congress to ensure the Services have sufficient resources to
            provide robust quality-of-life and family support programs
            during the entire deployment cycle: pre-deployment, deployment,
            post-deployment, and in that critical period between
            deployments. Programs must also address the specific needs of
            family volunteers, who make up the front line of family
            readiness.
                            families and transition
        Transitions are part of the military life. For the individual
    military family, transitions start with the servicemember's entrance in
    the military and last through changes in duty station until the
    servicemember's separation or retirement from the service. Another
    transition comes with the injury or death of the servicemember.
    National Guard and Reserve families face a transition with each call-up
    and demobilization of the member. The transition to a restructured
    military under Service transformation initiatives, Global Rebasing, and
    BRAC will affect servicemembers, their families, and their communities.
    Transformation, Global Rebasing, and BRAC
        As the Global Rebasing and the BRAC process are implemented,
    military families look to Congress to ensure key quality-of-life
    benefits and programs remain accessible. Members of the military
    community, especially retirees, are concerned about the impact base
    closures will have on their access to health care and the commissary,
    exchange, and MWR benefits they have earned. They are concerned that
    the size of the retiree, survivor, Guard, and Reserve populations
    remaining in a location will not be considered in decisions about
    whether or not to keep commissaries and exchanges open. In the case of
    shifts in troop populations because of Service transformation
    initiatives, such as Army modularity and changes in Navy home ports, or
    the return of servicemembers and families from overseas bases,
    community members at receiving installations are concerned that
    existing facilities and programs may be overwhelmed by the increased
    populations.
        NMFA cannot emphasize enough the urgency for DOD and Congress to
    allocate resources now to support communities involved in movements of
    large numbers of troops. Increased visibility of issues such as the
    smooth transition of military children from one school to another and a
    military spouse's ability to pursue a career means that more family
    members will expect their leadership to provide additional support in
    these areas.
        Army transformation has already had an impact in some communities.
    Installations such as Fort Drum, Fort Campbell, and Fort Lewis and
    their surrounding communities expect strains on housing availability--
    both on and off-base--health care access, and school capacity. Fort
    Riley and Fort Carson are already seeing the troops arriving from
    overseas installations being downsized. The latest news is that the
    Army will move approximately 7,200 soldiers and 11,000 family members
    from Germany to stateside installations during fiscal year 2006. Over
    the next 5 or 6 years, U.S. Army Europe will reduce from 62,000
    soldiers to 24,000. Several communities in Europe will also grow, as
    the remaining troops are consolidated into fewer locations. The DOD
    must do more now to ensure that communities have the resources to
    support these increased populations.
        Most of the Army installations expecting an increase in population
    have already privatized their housing or expect to do so soon.
    Privatization contracts were structured to deal with those
    installations' housing needs at the time the contracts were signed, and
    not in anticipation of the arrival of several thousand servicemembers
    and their families. At most of these installations, waiting lists for
    housing on the installation are common now. What will happen when the
    troops arrive from overseas? Where will their families live? The
    Services generally deem the amount of housing in the area surrounding
    an installation is adequate if enough exists within a 40-mile radius of
    the installation. Forcing military families, especially those of junior
    enlisted servicemembers, to live that far from the installation will
    increase their financial hardships because of transportation costs, as
    well as their isolation from the military community.
        We ask you to seek information from the Services on housing
    capacity, not just on the installations anticipating growth, but also
    in the surrounding communities. We also ask you to encourage DOD to re-
    negotiate housing privatization contracts or authorize more military
    construction funding where appropriate to increase the housing stock on
    affected installations and to look for other innovative ways to meet
    housing demands caused by these troop movements. We urge you to pay
    particular attention to the effect of the influx of servicemembers and
    families on local housing costs to ensure that sufficient funding is
    provided for Basic Allowance for Housing (BAH) in these communities.
        We also urge Congress to remember that, as families are forced to
    seek housing farther from the installation, they lose some of their
    connection with other military families and the military community. The
    installation is the focal point for the military family. When families
    are scattered in towns and subdivisions miles from the installation,
    they lose not only their link to that focal point but also find it more
    difficult to access the support services--commissaries, exchanges,
    health care, youth programs, chapel programs, family readiness
    activities--offered on the installation. The challenge to the
    installations experiencing growth will be to reach out to isolated
    families and let them know they remain a part of the community. Leaders
    will also have to answer the question of what MWR programs and family
    support services must be available for families regardless of their
    location and which can be offered only to families who can or choose to
    access them on an installation on a regular basis. Will additional
    subsidies be available for child care slots at civilian facilities?
    Should family center personnel operate satellite facilities or do
    outreach to areas farther from an installation? How valuable is a
    commissary or exchange benefit if a young family must drive 45 miles to
    reach it? How can DOD help these families located far from an
    installation access their benefits?
        We are pleased Congress has directed DOD to report on the impact of
    troop and family movements on schools. We thank Congress for providing
    funds to assist schools in meeting the additional costs that come with
    the arrival of large numbers of military students. We believe this DOD
    funding--$7 million appropriated for this year vice $10 million
    authorized--will be needed in larger amounts for several years until
    districts are able to secure resources from other Federal, State, or
    local resources. Because many incoming families may be forced to find
    housing farther away from the installation than families now live, they
    may find themselves in school districts that have little experience
    with military children. Nevertheless, they will expect these schools to
    have the resources needed to educate their children properly. Schools
    must have at least 20 percent military student enrollment to qualify
    for additional funds for schools experiencing an increase in student
    population due to transformation, rebasing, or BRAC, according to
    section 572 of the NDAA for Fiscal Year 2006. That means schools with
    the least experience with military children, who potentially could see
    significant increases in their military population, will not qualify
    for assistance from DOD. What message does this send to these
    communities and to the military families who must move there about
    DOD's concern about the quality of education there?

              Quality-of-life issues that affect servicemembers and
            families must be considered on an equal basis with other
            mission-related tasks in any plan to move troops or to close or
            realign installations. Regarding the DOD funding for schools
            experiencing an increase in the number military children, NMFA
            recommends eligibility be based on increases in population
            alone and not on the percentage of military children already in
            the district. DOD must provide support for all districts facing
            a large influx of military children, those facing rising
            enrollments of military students for the first time as well as
            those currently educating a high percentage. We want these
            districts to welcome military children and not blame them for
            cutbacks in services because the schools could not receive DOD
            funds to assist them in supporting these children.
    Survivors
        NMFA believes the obligation as articulated by President Lincoln,
    ``. . . to care for him who shall have borne the battle and for his
    widow and his orphan,'' is as valid today as it was at the end of the
    Civil War. We are most grateful to members of this committee for your
    advocacy in providing the increased death gratuity of $100,000 to
    survivors of all Active-Duty deaths as part of the NDAA for Fiscal Year
    2006. NMFA would also like to thank Senator Carl Levin, Ranking Member
    of the full Committee, for requesting budget authority for $45 million
    to provide the same enhanced death gratuity to the survivors of certain
    servicemembers who died between May 12, 2005 and August 31, 2005. A gap
    between the language of the fiscal year 2005 Emergency Supplemental and
    that of the NDAA for Fiscal Year 2006 inadvertently denied the enhanced
    death gratuity to these survivors. NMFA hopes this situation can be
    fixed as soon as possible.
        NMFA also appreciates the work done this year by DOD and the
    Services to improve the education of casualty assistance officers and
    to make sure survivors are receiving accurate information in a timely
    manner. A new DOD publication will soon be available for each surviving
    spouse and/or parent outlining the benefits available to them. It is an
    on-line document and can be easily updated as changes occur. It will be
    supplemented by Service-specific information. NMFA also looks forward
    to the results of the GAO study on the casualty notification and
    assistance process.
        DOD and the VA have formed a committee to examine procedures and
    review complaints that they hear about the present casualty
    notification and assistance process and have included stakeholders like
    the Gold Star Wives, the Transition Assistance Program for Survivors
    (TAPS), the military relief societies, and NMFA. These initiatives
    provide a response to the recent language included in the NDAA for
    Fiscal Year 2006, which requires DOD to develop and implement a
    comprehensive casualty assistance program that offers training of
    casualty assistance officers, centralized case management, personalized
    benefits information for survivors, financial counseling, and liaison
    with VA and Social Security. While we still hear from some widows that
    they received wrong or incomplete information from their casualty
    assistance officer, these problems are quickly resolved when surfaced
    to the higher headquarters. We are concerned, however, about the widows
    or parents who still do not know who to call when there is a problem.
        An area that NMFA feels could still be addressed is the need for
    specific training in bereavement and other counseling for family
    readiness group leaders, ombudsmen, and key volunteers. Many widows say
    they suddenly felt shut out by their old unit or community after the
    death of their servicemember. Often the perceived rejection is caused
    by a lack of knowledge on the part of other families about how to meet
    the needs of the survivors in their midst. Because they find contact
    with survivors difficult, they shy away from it. In some communities,
    support groups outside the unit family support chain have been
    established to sustain the support of the surviving families in the
    days and months after the death of the servicemember. Fort Hood, Texas,
    for example, has a special command-sponsored support group for the
    widows in the surrounding area. We have been especially pleased to note
    the development of the ``Care Team'' concept at a growing number of
    installations. Care Teams are family volunteers who receive special
    training to assist survivors immediately after the casualty
    notification. Key in making the Care Teams effective is the extensive
    training received by the volunteers and the de-briefing of these
    volunteers by chaplains or other trained counselors that occurs after
    their contact with the surviving family members.
        NMFA believes the benefit change that will provide the most
    significant long term advantage to the surviving family's financial
    security would be to end the Dependency Indemnity Compensation (DIC)
    offset to the Survivor Benefit Plan (SBP). DIC is a special indemnity
    (compensation or insurance) payment that is paid by the VA to the
    survivor when the servicemember's service causes his or her death. It
    is a flat rate monthly payment of $1,033 for the surviving spouse and
    $257 for each surviving child. The SPB annuity, paid by the DOD
    reflects the longevity of the service of the military member. It is
    ordinarily calculated at 55 percent of retired pay.
        Surviving Active-Duty spouses can make several choices, dependent
    upon their circumstances and the ages of their children. Because SBP is
    offset by the DIC payment, the spouse may choose to waive this benefit
    and select the ``child only'' option. In this scenario, the spouse
    would receive the DIC payment and her children would receive the full
    SBP amount until the last child turns 18 (23 if in college), as well as
    the individual child DIC until each child turns 18 (or 23 if in
    college). Once the children have left the house, this leaves the spouse
    who has chosen this option with an annual income of $12,396. In each
    case, this is a significant drop in income from what the family had
    been earning while on Active-Duty. The percentage of loss is even
    greater for survivors whose servicemembers had served longer. Those who
    give their lives for their country deserve more fair compensation for
    their surviving spouses. We urge Congress to intensify efforts to
    eliminate this unfair ``widow's tax'' this year.

              As part of the standardization and improvement of the
            casualty assistance process, more effort needs to be placed on
            supporting the long-term emotional needs of survivors and of
            communities affected by loss. NMFA recommends that the DIC
            offset to SPB be eliminated. Doing so would recognize the
            length of commitment and service of the career servicemember
            and spouse and relieve the spouse of making hasty financial
            decisions at a time when he or she is emotionally vulnerable.
            To ensure the VA continues to meet survivors' long-term needs,
            NMFA recommends the establishment of a Survivor Office within
            the VA to provide long-term information and support for
            surviving spouses and children and offer individualized
            information about each surviving family's benefit package.
                           compensation and benefits
        NMFA appreciates the military pay raises set above the Economic
    Cost Index for the past several years. They serve as both an
    acknowledgement of service and recognition of the need for financial
    incentives as a retention tool. As DOD prepares its Quadrennial Review
    of Military Compensation, NMFA hopes Congress, in evaluating its
    recommendations, considers their effects on the whole pay and
    compensation package. Changes in individual elements of that package
    can have unintended consequences on other elements or on the package as
    a whole. And, while pay raises are important, equally important is the
    need to maintain the non-pay benefit package that makes up such a vital
    part of military compensation.
    Funding for Commissaries, MWR, and other Programs
        Commissaries, exchanges, recreational facilities and other MWR
    programs are an integral part of military life and enhance the overall
    quality-of-life for servicemembers and their families. Respondents to
    NMFA's recent survey on military benefits spoke emphatically about the
    value of commissaries, exchanges, and MWR programs. Almost three-
    quarters of the respondents stated the commissary benefit was important
    to their family; more than half voiced a similar opinion about military
    exchanges. The majority of respondents used at least one MWR activity
    monthly. Families also value their installation family centers.
    Delegates at the recent Army Family Action Plan Conference, for
    example, rated Army Community Services as their most valued service.
        NMFA urges Congress to strengthen and protect these benefits during
    the upheavals and troop movements over the next few years. We are
    concerned about the timeline for the closure of commissaries and
    exchanges overseas and the ability of stores at installations
    experiencing growth to handle the increased demand. We understand the
    Army and Air Force Exchange Service earns approximately 50 percent of
    its profits at overseas stores, many of which will close or downsize as
    troops and families move back to continental United States
    installations. When these stores are gone, what will be the future of
    the MWR programs funded by these profits? Are the Army and Air Force
    examining their program needs, developing a plan, and identifying
    alternate funding sources to maintain vital programs despite a
    projected increase in exchange revenues?
    Permanent Change of Station Improvements
        NMFA is grateful for recent increases in PCS weight allowances for
    senior enlisted members included in the NDAA for Fiscal Year 2006.
    Weight allowances for these ranks were dramatically out of sync with
    the expected accumulation of goods over the course of a career and with
    the responsibility shouldered by these servicemembers. These increases,
    while still below the levels NMFA believes are appropriate, will ease
    the financial burden for many servicemembers and their families when
    the government orders them to move. NMFA asks Congress to continue
    reviewing the weight allowance tables and increase them to better
    reflect the needs and responsibilities of today's force.
        While applauding this much needed change in weight allowances,
    families still wait for what they view as the most important
    improvement to the PCS process: full replacement value reimbursement
    for household goods lost or damaged in a government-ordered move. In
    the NDAA for Fiscal Year 2004, based on promises that the DOD household
    goods re-engineering initiative, ``Families First,'' would be
    implemented in the fall of 2004, Congress authorized full replacement
    value reimbursement for military moves, but tied its implementation to
    the implementation of the re-engineering project. Unfortunately for
    families, ``Families First'' has not yet been implemented. The Military
    Surface Deployment and Distribution Command, the agency in charge of
    the household goods move process, announced last fall that, after many
    other delays, the implementation of ``Families First'' is in a
    ``strategic pause.'' NMFA finds it disappointing that families have
    been anything but first in DOD's efforts to improve the move process.
    The delay to implement these improvements has gone on long enough. We
    believe DOD must have this program in place before the bulk of the
    overseas rebasing and BRAC moves occur. Military families want and
    deserve a program that works and have waited long enough.

              NMFA asks Congress to press DOD to implement ``Families
            First'' and begin paying full replacement value reimbursement
            as promised more than 2 years ago.

        The shipment of a second vehicle for all uniformed services members
    moving to outside the continental United States assignment (including
    Alaska and Hawaii) has been a major quality-of-life issue for
    servicemembers and their families stationed overseas. With
    servicemembers' long work hours in support of the mission, having only
    one car available to the family limits a spouse's employment options
    and family members' access to commissaries, children's schools and
    activities, and installation support programs. NMFA hopes Congress will
    address this concern and authorize and fund the costs of shipping a
    second vehicle for overseas PCS moves.
        PCS mileage reimbursement rates are no more than 20 cents per mile
    and then, only if four persons are in the vehicle. The official
    explanation for this rate is that the Monetary Allowance in Lieu of
    Transportation (MALT) and PCS rates were never intended to reimburse
    the transportation costs for driving a car; they are based on
    commercial fares and are a payment instead of providing the member or
    employee with government-procured transportation. The MALT/PCS mileage
    rates do not reflect the price of gasoline. As we all know, commercial
    carriers are raising their rates because of the increased price of
    fuel. NMFA feels an increase in the PCS mileage rates would reflect the
    increase in the commercial rate and provide a more realistic
    reimbursement for mileage to servicemembers and families as they
    relocate.
    Adjusting Housing Standards
        Increased funding for BAH over the past 6 years has been a quality-
    of-life success story for military families. This funding has cut
    families' out-of-pocket costs tremendously, especially in high cost-of-
    living areas. DOD's claims that out-of-pocket costs for military
    families living off the installation have been ``zeroed out'' only
    apply, however, to averages. Many servicemembers' BAH still does not
    cover their families' total housing costs. This disparity is due in
    part to the housing standard tied to a servicemember's rank.
        The trend in housing construction on military installations,
    whether through military construction or the privatization contracts,
    has been to construct larger homes that meet so-called ``community
    standards.'' The standard on the installation for assigning or offering
    housing is based on rank and the number of family members. If an E-5
    with three dependents is lucky enough to live on the installation in
    privatized housing, they may be living in a three-bedroom duplex or
    townhouse. Yet, if that E-5's family is forced to live off the
    installation in the community, the rate of BAH they receive is based on
    the DOD E-5 standard of a two bedroom townhouse. Servicemembers needing
    a larger home off-base cover the additional rental costs out of their
    own pockets. An enlisted member must be an E-9 before ``earning''
    sufficient BAH to rent a single family dwelling.

              NMFA believes it is time to revisit and possibly revamp the
            housing standards used to determine Basic Allowance for Housing
            to better reflect the ``community standards'' used in
            constructing housing on military installations and the
            responsibilities placed on servicemembers.
                             families and community
        Military families are members of many communities. Communities
    small and large in every corner of the United States now have military
    families, due to the increased deployment and utilization of National
    Guard and Reserve members since the beginning of the global war on
    terrorism. NMFA has heard how these communities want to help the
    military families in their midst. They want to be better informed on
    how to provide this help. How can this be accomplished?
        As the sacrifice of servicemembers and families continues in the
    global war on terrorism, many States have implemented military family
    friendly programs and passed legislation to support families. NMFA
    applauds the states assisting servicemembers and their families with
    in-State tuition, unemployment compensation for spouses, licensing
    reciprocity, and education and sports provisions for military children.
    The DOD State Liaison office works to promote these policies and
    publicizes them on the DOD Web site USA4MilitaryFamilies.org, a web
    forum for sharing information about State and local initiatives to
    support military families. Of special importance is the work this
    office is doing to improve community-based support for disabled
    servicemembers. It is also working to deter the payday lenders, check
    cashing stores, title loan companies, and other financial predators
    that plague servicemembers. DOD is promoting financial literacy
    programs to insure stability for the members and their families. NMFA
    has worked closely with the State Liaison Office on several State
    initiatives concerning spouse unemployment compensation, predatory
    lending, and in-State tuition.
        Many States recognize the financial difficulties facing some
    National Guard and Reserve families. Some have instituted State-
    coordinated emergency funds financed through corporate and individual
    donations or through State residents' designations on their State
    income tax forms. Others pay the differential between State employees'
    military and civilian pay when the employee is mobilized or pay the
    health insurance premiums to enable the Guard or Reserve member's
    family to maintain continuity of health care. New Mexico pays the
    Servicemembers' Group Life Insurance premium for the deployed National
    Guard and Reserve members from their State.
        Concern for deployed servicemembers from North Carolina and
    compassion for their loved ones left behind prompted the creation of a
    unique partnership to help the combatants' families, particularly those
    in remote areas. The Citizen-Soldier Support Program (CSSP) is a
    collaborative effort, funded by Congress through a DOD grant, and
    coordinated by the University of North Carolina at Chapel Hill. CSSP is
    designed to mobilize communities and make them aware of the needs of
    local military families so people can reach out and help when help is
    needed. The program is designed as a preventative measure, as opposed
    to a crisis-response structure, to help with little things before they
    become big things. The support program uses existing agencies within
    counties and communities to broadcast the needs of military families.
    Liaisons also seek help from representatives of Rotary Clubs, Lions
    Clubs, the American Legion, and Veterans of Foreign War units who are
    interested in helping military families. Other States have expressed
    interest in starting similar programs. We hope North Carolina will be
    the training center to expand the program to other States and
    communities.

              NMFA recommends increased funding for community-based
            programs, including the North Carolina Citizen-Soldier Support
            Program, to reach out to meet the needs of geographically
            dispersed servicemembers and their families.

        In conclusion, NMFA would like to thank the many dedicated people
    who serve our military families. We again express our extreme gratitude
    for the actions of this subcommittee, which has consistently supported
    the needs of our Nation's warriors and their families, both while on
    Active-Duty and in retirement. You too are part of the tapestry of
    support. By keeping military families strong, you are ensuring the
    force will remain strong.

        Senator Graham. Thank you. General.

     STATEMENT OF LT. GEN. DENNIS McCARTHY, USMC (RET.), EXECUTIVE
                 DIRECTOR, RESERVE OFFICERS ASSOCIATION

        General McCarthy. Mr. Chairman, I must begin by first
    expressing my very sincere thanks for the opportunity to appear
    here today. I ask that my written statement be accepted for the
    record. Thank you, sir.
        I'm here to tell you that the ROA believes very strongly
    that the Nation's commitment to first class military health
    care for Active and Reserve members, for serving and retired
    personnel, must be honored. Our resolve on that point is
    unshakeable.
        I had the privilege of serving in uniform as a United
    States Marine for almost 41 years. During 33 of those years,
    our Nation developed and depended on an All-Volunteer Force
    that was composed of both Active and Reserve components. Each
    of those components is essential to national security. The
    Active component was never designed to fight a sustained
    conflict without augmentation and reinforcement. Some of the
    earliest proponents of the All-Volunteer Force thought that
    that surge of reinforcements would have to come from a draft.
    As it turns out, that has not been necessary.
        In the global war on terrorism we fought the first really
    sustained conflict with our All-Volunteer Force and we have
    done so without recourse to a draft because of the 500,000 men
    and women of the National Guard and Reserves who have surged
    forward to augment and reinforce the Active Forces. Keeping
    both components of that force together for future service
    requires a sustained recruiting and retention effort. It is in
    that context that military health care must be viewed.
        Among the commitments that the Nation has made to the
    warrior citizens of the All-Volunteer Force is to provide first
    class health care to them and their families while they're
    serving in uniform and during their years of retirement.
    Congress has come to realize that this commitment is critical
    for both the Active and the Reserve components. The ROA has
    sought and will continue to seek to find a path that will allow
    the Nation to meet its health care commitments to the warrior
    citizens and will also enable to it to meet other important
    commitments.
        I'd like nothing better than to sit here and say ``just
    appropriate more money,'' that whatever it costs, ``just find
    the money.'' But regretfully, I don't believe that that's how
    things work in the real world and I don't think it's how they
    work in Washington, either.
        As an association chartered by Congress to advance national
    security, ROA has chosen to support the position taken by the
    Chairman of the Joint Chiefs and by his fellow Service Chiefs
    who, we believe, are seeking a balanced approach that
    recognizes the fiscal realities of life in a time of war. We
    wish to work with Congress in finding a balance to meet health
    care commitments, to fund training and equipment needs of those
    serving in uniform today, and to avoid a course that will break
    the ability of our Nation to have an All-Volunteer Force.
        Our key points are these: first, that independent
    verification is needed of the total cost of DOD health care
    benefits, and we believe Congress should propose a brief
    moratorium on changes until true costs are known; second, we
    believe that changes in the beneficiary cost share should be
    phased in and that the 2-year period proposed by the DOD is too
    abrupt; and third, that a fair 3-tier system is attainable for
    Reserve members, but operational reservists serving today are
    paying a disproportionate cost and we think Congress needs to
    take a hard look at that.
        At the end of the day, we need a first class military
    health care system that our country can afford and that our
    warrior citizens see as a true benefit. I thank you for your
    consideration and I look forward to your questions.
        [The prepared statement of General McCarthy follows:]

         Prepared Statement by Lt. Gen. Dennis M. McCarthy, USMC (Ret.)

                                  introduction

        Mr. Chairman and distinguished members of the Senate Armed Services
    Committee, on behalf of its 75,000 members, the Reserve Officers
    Association (ROA) thanks the committee for the invitation and
    opportunity to present testimony on military health care issues.
        ROA applauds the efforts by Congress to address the issue of
    increasing Department of Defense (DOD) health care costs and its
    interest to initiate dialogue and work with both the Pentagon and the
    beneficiary associations to find the best solution. Unfortunately, the
    Members of Congress are caught between DOD and a coalition of
    beneficiary associations as particular positions are being advanced.
        The health care issues that are before us are not black and white.
    No single source for solution is the best one. Outreach to many groups
    should be encouraged to solicit various concepts. ROA favors open
    dialogue and the generation of new ideas in support of the best
    solution. We hope that this hearing is just one step in a series of
    discussions toward finding an accord.
        Health care services are vital to keeping the Nation's military
    force strong and ready. It is also a deferred benefit and recognition
    of retired members for their service to the Nation. ROA strongly urges
    that when all cost-sharing is finally taken into account, our
    beneficiaries must still view DOD health care as an enhanced benefit
    when compared to the private sector.
                               executive summary
        Increasing the cost-share of DOD health care beneficiaries is
    admittedly an emotional issue. Yet the Nation and the DOD are faced
    with ever increasing health care costs. Because of the dynamics
    involved, this is an issue that shouldn't be rushed. Here is a summary
    of the key points as seen by the ROA.
    Moratorium:
            -  As DOD has already directed the TRICARE contractors to move
            ahead on implementing the TRICARE PRIME fee increases, a
            moratorium on such increases should be declared to allow
            Congress time to review this action.
    TRICARE Prime:
            -  Adjustments to the enrollment fee are acceptable if tied to
            true health care costs.
            -  It is important to independently verify the current total
            cost of DOD health care benefits. Such an audit will permit
            Congress to validate proposals based on cost-sharing
            percentages.
            -  A 2-year implementation is too abrupt. Cost-sharing
            adjustments should be spread over at least 5 years to permit
            household budgets to adjust.
            -  Annual increases should not be tied to the market-driven
            Federal Employee Health Benefits Plan (FEHBP).
    TRICARE Standard:
            -  ROA does not endorse an annual enrollment fee for either DOD
            or the Department of Veterans' Affairs (VA).
            -  If TRICARE Standard requires beneficiary enrollment, it
            should be only a one-time minimal administrative fee.
            -  Adjustments to TRICARE Standard should be made to the
            deductible.
            -  Because of larger co-payments of 25 percent after the
            deductible, the costs of TRICARE standard need to be analyzed
            from a total cost rather than initial cost perspective.
            -  TRICARE Standards cost deductible automatically adjusts with
            escalating health care costs.
    TRICARE Reserve Select (TRS):
            -  ROA is deeply concerned that after they return from
            deployment, operational reservists pay substantially higher
            premiums than retiree enrollment costs.
            -  Family Premiums for a Tier I TRS operational reservist are
            $3,336 per year for fiscal year 2006 compared to a proposed
            combined cost of $1,120 for TRICARE Standard in fiscal year
            2008. This is inequitable.
            -  We agree that today's operational reservists should pay a
            fair share of the cost of their DOD health care when not on
            Active-Duty. However, a ``fair share'' should reflect their
            past and future contributions to the Nation. Congress's role in
            finding that ``fair share'' balance cannot be overstated.
            -  TRICARE standard deductible increases should not be rolled
            over into TRS.
    On Pharmacy Co-payments:
            -  ROA believes higher retail pharmacy co-payment should not
            apply on initial prescriptions, but on maintenance refills.
            -  ROA supports DOD efforts to enhance the mail-order
            prescription benefit.
                                   background
        In testimony before Congress, Secretary of Defense Rumsfeld talked
    about the rising cost of health care. ``The current health care system
    [as] funded is not sustainable. . . The Department's health care costs
    have almost doubled over the past 5 years--from $19 billion in 2001 to
    $37 billion in fiscal year 2006. . . Using a conservative projection,
    these health care costs will likely reach $64 billion in fiscal year
    2015, an estimated 12 percent of the total Department budget. By
    comparison, health costs were 4.5 percent of the Department's budget
    back in 1990. . .''
        ``In 1995, beneficiaries paid 27 percent of their total health care
    costs,'' his testimony continued. ``Today, because there has been no
    change in TRICARE annual premiums for 11 years, beneficiaries currently
    pay not 27 percent, but just 12 percent of costs. The proposed plan
    would ask retirees to pay somewhat more in premiums and for certain co-
    payments.''
        ROA clearly understands that health care costs must be brought back
    into alignment and that some cost will have to be borne by retirees and
    families of serving members, both Active and Reserve.
                                   discussion
        A number of visible issues relate to TRICARE in calendar year 2006.
    The Reserve Officers Association is concerned that a myopic focus on
    any one issue may cause a loss of focus on other equally important
    issues.
        The ROA is disappointed in how the DOD Health Affairs has attempted
    to address such an emotionally laden issue unilaterally. ROA would like
    to thank Congress for its continued involvement and leadership on DOD
    health care issues.
        While it is important to sustain the DOD health care benefit as a
    deferred benefit for our serving Active and Reserve component members
    and their families, it is not a necessary to do two quick increases
    ``overnight'' in the TRICARE fee schedules.
        While retired, these beneficiaries have accepted risks and made
    sacrifices in their earlier military careers that have not been asked
    of the remaining 99 percent of the Nation's population. TRICARE
    fulfills an ongoing promise by the government for continued health care
    to those who have served or are serving.
        Conversely, the DOD and this Nation cannot afford to carry the full
    burden of health care costs. The operational Active and Reserve Force
    and their families deserve the best, both while serving and into
    retirement. To preserve the top health care program in the Nation as a
    DOD benefit, the ROA is a proponent of cost-sharing.
        ROA does not find the goal of returning the retiree beneficiary
    contribution to 27 percent of DOD's health care cost as being out of
    line, as it was Congress's intent in 1995. Yet, after 10 years of fixed
    costs, these increases should be phased-in over a wider duration of
    time to help those retirees on fixed incomes, and then any future
    increases should be affixed to a formula other than the civilian health
    care market place.
        Some associations will suggest that there should be no jumps in
    annual premiums and that beneficiary fees should only be raised
    annually by the level of retiree cost-of-living adjustment. ROA's
    concern is by using this approach to cost share, the percentage of
    beneficiary contribution would continue to decline, with DOD paying an
    every increasing share. This could give DOD justification to implement
    a different plan.
        Secretary Rumsfeld has publicly stated that DOD should not be in
    the business of health care. Ever increasing health care would provide
    DOD with a good reason to civilianize health care for families and
    retirees by transferring the program over to a company such as Blue
    Cross/Blue Shield. Beneficiaries would pay more for less benefits, and
    be subjected to the profit-making pressures of the commercial market,
    where premium cost have increased by double digits over the last 5
    years.
        Under a freeze on fees, the current Active-Duty retiree
    beneficiaries might continue paying a low cost-share, but the next
    generation, who is currently serving, would end-up paying more for
    their retirement programs. As with any deficit, the medical
    expenditures of the current generation would be cost-shifted to the
    next.
    Fuzzy Numbers on Both Sides:
        The challenge for using a 27 percent base line is determining of
    what it is 27 percent. Yet the pentagon seems to have trouble measuring
    this accurately. The TRICARE Reserve Select family premium (Tier I) is
    set in law at 28 percent as a TRICARE Standard program. The 2006 annual
    premium and deductible is $3,336 based on a $10,834 a FEHBP premium
    base of $10,834. Excluding deductibles, this is 28.02 percent.
        Beneficiary medical expense totals have not yet been provided by
    DOD. Congress should ask the Pentagon for a financial breakdown. An
    independent audit by the Government Accountability Office (GAO) or
    another agency would allow Congress an opportunity to validate
    proposals based on cost-sharing percentages.
        The numbers being used in materials by some beneficiary
    associations have also not been adequately delineated. ROA hopes in
    this testimony to provide sufficient details to support our positions.
        TRICARE Prime has been the primary focus of DOD Health Affairs and
    its civilian health care contractors. A ``fully loaded model'' health
    care plan, it has been rated the #1 health care plan in national
    surveys for the last 3 years. Prime currently costs a retiree $460 per
    year. DOD has suggested a 2-year phase-in, 141 percent increase to $650
    for enlisted E-6 and below, a 206.5-percent increase to $950 per year
    for E-7 thru E-10, and a 304-percent increase to $1,400 per year for
    officers. This is still a bargain when compared to what the average
    U.S. family is paying. A Kaiser Family Foundation Survey reported that
    in 2005 an employee paid 26 percent of the employer's annual premiums
    for family coverage of $10,880, or $2,828.80 per year for lesser health
    care coverage.
        Single enrollees will have a 141-percent increase to $325 for
    enlisted E-6 and below, a 204.35-percent increase to $475 per year for
    E-7 thru E-10, and a 304-percent increase to $700 per year for single
    officers. Kaiser reported that civilian workers opting for single
    coverage paid an average of $643.84 per year, which could indicate the
    single officers' increase may be a little high.
    TRICARE Standard:
        The Reserve Officers Association has concerns with suggested
    enrollment fees and deductible increases for TRICARE Standard. TRICARE
    Standard is the system on which TRICARE Reserve Select is based. DOD
    Health Affairs and its contractors have benignly neglected TRICARE
    Standard at best.
        While offered as an option to TRICARE Prime to Active-Duty
    retirees, TRS is the required choice for serving reservists and may be
    the health care plan of choice for Guard and Reserve retirees between
    the ages of 60 and 65 because most live outside the TRICARE Prime
    network of health care providers.
        These areas have fewer authorized TRICARE providers. It becomes
    incumbent upon the TRICARE beneficiary to find a physician that accepts
    TRICARE Standard and often the beneficiaries must administer their own
    TRICARE health plan. Because of its costs and problems with
    availability, TRICARE Standard can only be viewed as DOD's ``basic
    model'' health care program.
        TRICARE Prime is DOD's voluntary health maintenance organization,
    while TRICARE Standard is DOD's preferred provider organization plan
    and a fee for service plan.
        Ironically, TRICARE Standard, which was intended by Congress to be
    the Civilian Health and Medical Program of the Uniformed Services
    (CHAMPUS) replacement, has become more expensive than TRICARE Prime,
    even without DOD's suggested enrollment fee increases. With a $150
    deductible for singles and a $300 deductible for families, TRICARE
    Standard beneficiaries pay co-payments (cost-share) of 25 percent per
    visit after the deductible.
        Comparing the average cost of an office visit between TRICARE Prime
    and TRICARE Standard we see that costs favor the beneficiary with
    TRICARE Prime. (See Appendix A.) From these calculations, it appears
    that the TRICARE Standard retiree beneficiary will be paying much more
    than 27 percent of the DOD cost share goal as set for TRICARE Prime.
        TRICARE Prime beneficiaries pay only $12 per outpatient visit, and
    $30 for emergency care. However, if they choose to get care under the
    Point of Service option with care outside the TRICARE network, there's
    an annual deductible (for both inpatient and outpatient care) of $300
    for an individual and $600 for a family.
        TRICARE Extra gives a discount of 5 percent for co-payments (cost-
    share) for TRICARE retired standard beneficiaries who use TRICARE
    health care providers from the TRICARE Prime network.
        DOD Health Affairs [table one] is attached, which gives more
    details on current cost.
        For a healthy family, TRICARE Standard can be low cost, if they
    don't use the health care benefits, which is why it should remain a fee
    for service. If a family has frequent visits, costs under TRICARE
    standard will surpass those of TRICARE Prime. By adding a $140-$560
    annual enrollment fee and increasing the annual deductible, TRICARE
    standard costs are being aligned with those of TRICARE PRIME. This is
    making the down payment on the ``basic model'' Standard as expensive as
    the ``fully loaded'' Prime.

    ------------------------------------------------------------------------
                                                           TRICARE Standard
                                         TRICARE Prime       Enrollment +
                                        Enrollment Fee    Deductible  Single/
                                         Single/Family          Family
    ------------------------------------------------------------------------
    E-6 and Below...................  $325/$650.........  $325/$650
    E-7 thru E-10...................  $475/$950.........  $385/$770
    Officers........................  $700/$1,400.......  $560/$1,120
    ------------------------------------------------------------------------

        The Reserve Officers Association does not endorse annual enrollment
    fees for individuals who don't use the health care plan, whether it is
    DOD or VA.
        ROA has never objected to requiring a TRICARE enrollment, as this
    would include those service members and retirees who don't use the
    TRICARE benefit. Rather than an annual fee, this can be handled by a
    one time fee to cover administrative costs; perhaps in the range of
    $25-$50, although this is atypical of the commercial market which
    charges only monthly premiums.
        If increases were required for TRICARE Standard, ROA would rather
    see an emphasis on deductible costs rather than an annual enrollment
    fee.
        We should also examine the levels of proposed deductibles. In the
    most common type of plan--PPO plans--the average deductible for in-
    network services was $323 for single coverage and $679 for family
    coverage. Yet, 44 percent of them have plans requiring co-payments of
    $20 or $25 for physician visits and prescription drugs, far less the
    TRICARE Standard's 25 percent co-payment.
    Annual premium increases:
        Once the 27 percent cost share is achieved, it is been reported
    that DOD wants to tie further annual increases to the premium increases
    of the FEHBP. According to a Kaiser Family Foundation survey released
    in September 2005, the average premium growth rate in 2005 year was 9.2
    percent. This outpaced both the growth in wages (2.7 percent) and
    inflation (3.5 percent). The FEHBP increased its premiums by 14.5
    percent. FEHBP has had double-digit increase for each of the last 5
    years. Such disparity between increased health care costs and FEHBP
    premium increases will cause the retiree beneficiary cost share to rise
    beyond 27 percent.
        If DOD is unable to calculate premium cost using the 27 percent
    figure, other cost-of-living indexes could be used, such as an annual
    inflation rate.
    Pharmacy Co-payment changes:
        DOD is suggesting an increase in co-payments in retail pharmacy
    from $3 to $5 dollars for generic prescriptions, and from $9 to $15 for
    brand drugs. Generic pharmacy prescriptions would drop from $3 to $0 to
    align with military clinics.
        ROA understands the motives for this change, to encourage pharmacy
    beneficiaries to use the mail order pharmacy system, which is the least
    expensive. What DOD overlooks is that often times the retail pharmacy
    network is the only source to immediately fill a prescription, as many
    pharmacy beneficiaries are unable to go to a military clinic for the
    initial prescription.
        ROA suggests that the higher retail pharmacy co-payments not apply
    on an initial prescription, but on refills of a serial maintenance
    prescription.
    TRICARE Reserve Select:
        While ROA is satisfied with a three-tier construct for cost share
    as developed by Congress, we are deeply concerned that the cost share
    for operational reservists who have just returned from mobilization is
    much higher than what is paid by Active-Duty retirees.
        TRICARE Reserve Select family premium (Tier I) is based on a
    Federal Employee Health Benefit Plan premium base of $10,834. Family
    premiums and deductible for a Tier I TRS operational reservist are
    $3,336 per year for fiscal year 2006 compared to a proposed combined
    cost for retired officers of $1,120 for TRICARE Standard in fiscal year
    2008. Single TRS combined costs $1,272 compared to the suggested
    TRICARE standard cost of $560. ROA finds this is inequitable.
        This again gives an appearance that the reservist is a second-class
    warrior in the Total Force, when Active-Duty personnel are not charged
    any fee. We agree that today's operational reservists should pay a fair
    share of the cost of their DOD health care when not on Active-Duty.
    However, a ``fair share'' should reflect their past and future
    contributions to the Nation. Congress's role in finding that ``fair
    share'' balance cannot be overstated.
        DOD may argue that Active personnel remain on Active-Duty, while
    the Selected reservist returns to civilian status; yet neither
    component is deployed 100 percent. General Pace has stated that the
    deployed schedule of Active personnel will be 1 year deployed, for
    every 2 years stateside duty. The plan for operational Army Guard or
    Reserve member is 1 year deployed, for every additional 4 years in
    ``drill and training'' status.
        Using costing numbers for Active-Duty personnel, the Pentagon has
    determined that the Active-Duty member is on duty 270 days a year. A
    Guard or Reserve member's civilian employment is 264 days a year, plus
    Reserve employment per title 10 is another 38 days. Operational
    reservists are being encouraged to spend those 28 days in support of
    Active commands, which normally are outside the average commute
    distances of civilian employment. Including travel, Reserve duty days
    increase to over 50 days. Since operational support doesn't include
    administrative time, or professional training, another 24 days without
    pay can be added, at a minimum, to senior Guard and Reserve duty time,
    bringing Reserve contributions to 75 days or more. By the Pentagon's
    own numbers the average reservist is contributing over 120 days a year
    between drill and deployments.
        ROA hopes that Congress re-examines the costs percentage of Guard
    and Reserve warriors who operational support the Total Force.
        TRICARE Reserve Select is evolving into a stand alone health plan.
    While it uses the TRICARE standard as an engine, its fees are based on
    FEHBP premiums, so it is no longer a TRICARE standard program. TRICARE
    standard fee increases must not be rolled over into TRS.
        ROA Suggestions for Enhancing TRICARE Reserve Select:
        1. Many different types of orders are being cut for operational
    support of Active-Duty. Guard and Reserve members are serving on these
    orders for various lengths of time. Operational support is being
    provided within theater, in support of theater, and on the peripheral.
    Examples:

            1. Warfighters in Iraq and Afghanistan
            2. Custom inspectors in Kuwait
            3. Joint Task Force--Horn of Africa in Djibouti
            4. Fleet support in Rota, Spain.
            5. Air maintenance on combat aircraft in Turkey.
            6. Guard duty at Guantanamo Bay
            7. Active-Duty command support
            8. Pentagon Staffing
            9. Working with wounded marines and sailors at National Naval
            Medical Center, Bethesda, MD

        Each duty disrupts a Guard or reservist's civilian career and
    interferes with the continuity of health care. Communication of
    benefits and narrow interpretation of ``in support of contingency
    operations \1\'' by Reserve service components has created an
    inconsistent policy when extending TRS to all who might qualify.
    ---------------------------------------------------------------------------
        \1\ Title 10, section 101(a), paragraph (13), The term
    ``contingency operation'' means a military operation that----
          ``(A) is designated by the Secretary of Defense as an operation
    in which members of the armed forces are or may become involved in
    military actions, operations, or hostilities against an enemy of the
    United States or against an opposing military force; or
          ``(B) results in the call or order to, or retention on, Active-
    Duty of members of the uniformed services under section 688, 12301(a),
    12302, 12304, 12305, or 12406 of this title, chapter 15 of this title,
    or any other provision of law during a war or during a national
    emergency declared by the President. . .''
    ---------------------------------------------------------------------------
        Section 701 of Public Law 108-375, 108th Congress, does not use the
    definition of ``contingency operation.'' Instead, this section defines
    eligibility based on ``service on Active-Duty.'' \2\
    ---------------------------------------------------------------------------
        \2\ a Guard and Reserve member as ``eligible for health benefits
    under TRICARE Standard as provided in this section after the member
    completes service on Active-Duty to which the member was called or
    ordered for a period of more than 30 days on or after September 11,
    2001.''
    ---------------------------------------------------------------------------
        Section 704, Waiver of Certain Deductibles Under TRICARE Program
    for Members on Active-Duty for a Period of more than 30 Days, and
    Section 705, Authority for Payment by United States of additional
    amounts billed by health care providers to activated Reserves, do
    contain the contingency language.
        Suggested changes:
        1.a. Expand eligibility of the Tier I ``earned benefit'' to all
    members who are serving in support of the global war on terrorism, no
    matter what the type of order. Since the language only defines
    ``Active-Duty'' Congress should direct DOD to a broader interpretation.
        1.b. Include legislative change to permit mobilized Reserve
    component member to accumulate health care to qualify for future TRS
    utilization. Suggested language footnoted.\3\
    ---------------------------------------------------------------------------
        \3\ Sec. 1076d (a) ``. . . which the member was called or ordered
    for a period of more than 30 days on or after September 11, 2001, under
    a provision of law referred to in section 101(a)(13)(B), if the
    member----
          ``(1) served continuously on Active-Duty for [an accumulated] 90
    or more days pursuant to such call or order; and
    ---------------------------------------------------------------------------
        2. Request a study by GAO or another agency to explain why there is
    such a high drop out from application to acceptance in TRS. Over 40,000
    have applied, but only 9,500 have been accepted. (See Appendix B)
        3. Provide TRS to demobilized reservists returning to the
    Individual Ready Reserve (IRR). While Congress improved the benefit by
    allowing individual ready reservists a year to find a Selected Reserve
    Billet, this is not an option for many senior members.
        Rather than precluding these operational reservists from a deserved
    benefit, have IRR members commit to a continued period in the IRR,
    subject to future recall, where these members will be required to
    maintain training and qualifying years.
        4. Provide TRS to demobilized recalled retired reservists. As an
    incentive to recalled ``gray area'' retired reservist who volunteer for
    operational support should qualify for TRS. It is wrong to send them
    back into a ``retirement'' that has no benefits.
        5. TRS should be an incentive to transition Active-Duty members
    into the Reserve. If an Active component member leaves following a
    deployment, they can qualify for TRS.
        6. Gray area retiree buy-in to TRS. Gray-area reservists are
    currently in limbo between TRS while drilling and TRICARE with
    retirement-in-pay. TRS buy-in would be at the full monthly cost, but at
    least this would provide a continuity of coverage for those waiting for
    TRICARE retirement.
        7. Employer health care option: The Reserve Officers Association
    continues to support an additional option where DOD pays a stipend to
    employers of deployed Guard and Reserve members to continue employer
    health care during deployment. Because TRICARE Prime or Standard is not
    available in all regions that are some distance from military bases, it
    is an advantage to provide a continuity of health care by continuing an
    employer's health plan. This stipend need not be higher than any DOD
    contribution to Active-Duty TRICARE.
                                   conclusion
        The Reserve Officers Association encourages ongoing oversight
    management of DOD health care by Congress. There is an attitude of
    autonomy within the Pentagon that overlooks the partnership of the
    branches of government. ROA looks forward to working with this
    committee, Congress, and the Pentagon on this and other issues for
    constructive solutions. When DOD clarifies these costs, ROA is willing
    to take this new information back to educate our members and support
    increases as necessary.

        Senator Graham. Admiral Ryan.

    STATEMENT OF VADM NORBERT R. RYAN, JR., USN (RET.), PRESIDENT,
              THE MILITARY OFFICERS ASSOCIATION OF AMERICA

        Admiral Ryan. Thank you, Mr. Chairman, Senator Nelson, and
    Senator Dole. We appreciate your leadership in arranging this
    meeting. In the interest of time I'll jump to MOAA's 3 minute
    bottom line, if I could, using these charts.
        [The chart referred to follows:]

        We see the DOD proposed health fee increases as
    inappropriate and disproportional. Proposed increases for all
    grades would far exceed military retired pay growth as shown by
    the blue line on the chart. This is unfair for the retired
    force and a current readiness concern too.
        [The chart referred to follows:]

        Some claim this isn't an issue for currently serving
    people, but this recent quote from the Navy Times shows how one
    leader sees health care affecting retention. In surveying our
    members' views, we've been overwhelmed by 34,000 responses as
    of this morning, including 4,000 Active-Duty members.
        [The chart referred to follows:]

        This next chart shows that more than 9 out of 10 oppose the
    DOD plan. They know they already paid huge up front premiums
    through decades of sacrifice. People aren't exactly lined up
    around the block at recruiting offices to get this great
    military health deal. Why? Because very few are willing to pay
    the extremely high price required to earn the benefit.
        [The chart referred to follows:]

        DOD's projected savings assume the fee increases will stop
    hundreds of thousands of people from using their earned
    military benefit. Congressman McHugh questioned the morality of
    that and we agree. On the pure budget side, some Pentagon
    analysts admit to us privately that the projected savings are
    grossly overstated. So the fee increases will just anger the
    troops, leave the health budget underfunded, and put our
    volunteer force at further risk. The sustainability of our
    superb All-Volunteer Force in this prolonged war already keeps
    many of us awake at night. A thousand dollar a year retirement
    benefit cut can't help.
        [The chart referred to follows:]

        This next chart shows MOAA's recommendations. First, do no
    harm, no fee increases this year. Second, DOD has lots of other
    ways to cut health care spending without charging
    beneficiaries. I offer for the record, this list of 16 possible
    options, just two of which, in the pharmacy area alone, could
    generate as much first year savings as DOD's proposal.
        [The chart referred to follows:]

        There should also be an outside look at DOD's cost
    containment efforts and alternative savings options. Finally,
    we support some statutory constraints on DOD's current fee
    adjustment authority.
        [The chart referred to follows:]

        Mr. Chairman, my last chart is a list of suggested
    statutory caps we hope this subcommittee will consider. While
    this hearing's focus is on health care, I hope the subcommittee
    can continue to make progress again this year on other military
    coalition priorities concerning end strength, the survivor
    benefit plan, concurrent receipt, and certainly Guard and
    Reserve health and retirement needs. We thank all of you for
    your leadership and your efforts to find fair answers on these
    vital issues.
        [The joint prepared statement of Admiral Ryan and Mr. Zerr
    follows:]

     Joint Prepared Statement by VADM Norb Ryan, Jr. (USN-Ret.) and Edgar
                                      Zerr

        Mr. Chairman and distinguished members of the subcommittee. On
    behalf of The Military Coalition, a consortium of nationally prominent
    uniformed services and veterans' organizations, we are grateful to the
    subcommittee for this opportunity to express our views concerning
    issues affecting the uniformed services community. This testimony
    provides the collective views of the following military and veterans'
    organizations, which represent approximately 5.5 million current and
    former members of the seven uniformed services, plus their families and
    survivors.

             Air Force Association
             Air Force Sergeants Association
             Air Force Women Officers Associated
             American Logistics Association
             AMVETS (American Veterans)
             Army Aviation Association of America
             Association of Military Surgeons of the United States
             Association of the United States Army
             Chief Warrant Officer and Warrant Officer Association,
            U.S. Coast Guard
             Commissioned Officers Association of the U.S. Public
            Health Service, Inc.
             Enlisted Association of the National Guard of the
            United States
             Fleet Reserve Association
             Gold Star Wives of America, Inc.
             Jewish War Veterans of the United States of America
             Marine Corps League
             Marine Corps Reserve Association
             Military Chaplains Association of the United States of
            America
             Military Officers Association of America
             Military Order of the Purple Heart
             National Association for Uniformed Services
             National Guard Association of the United States
             National Military Family Association
             National Order of Battlefield Commissions
             Naval Enlisted Reserve Association
             Naval Reserve Association
             Non Commissioned Officers Association
             Reserve Enlisted Association
             Society of Medical Consultants to the Armed Forces
             The Retired Enlisted Association
             United Armed Forces Association
             United States Army Warrant Officers Association
             United States Coast Guard Chief Petty Officers
            Association
             Veterans of Foreign Wars of the United States
             Veterans' Widows International Network

        The Military Coalition, Inc., does not receive any grants or
    contracts from the Federal Government.
          executive summary--recommendations of the military coalition
    Health Care Issues
        Defense Health Program Funding
        The Military Coalition (TMC) urges the subcommittee to ensure
    continued full funding for Defense Health Program (DHP) needs.
        Protecting Beneficiaries Against Cost-Shifting
        The Coalition recommends against implementing any increases in
    health fees for uniformed services beneficiaries this year. The
    Coalition believes strongly that America can afford to and must pay for
    both weapons and military health care. The Coalition recommends
    strongly against establishment of any TRICARE Standard enrollment fee.
    The Coalition urges the subcommittee to require the Department of
    Defense (DOD) to pursue greater efforts to improve TRICARE and find
    more effective and appropriate ways to make TRICARE more cost-efficient
    without seeking to ``tax'' beneficiaries and make unrealistic budget
    assumptions. (See separate National Military Famility Association
    (NMFA) testimony concerning TRICARE Prime premiums and Standard
    deductibles.)
        TRICARE Standard Improvements
        The Coalition urges the subcommittee to establish requirements for
    TRICARE Standard beneficiary surveys and a definition of what level of
    provider participation shall be deemed to require positive action to
    increase it. The Coalition urges the subcommittee to direct DOD to
    eliminate TRICARE-unique administrative requirements that deter
    provider participation and thus contribute to denying beneficiaries
    access to care. The Coalition recommends requiring DOD to work with the
    State Medical Associations and the Centers for Medicare and Medicaid
    Services to initiate an appropriate information program for providers
    who will not see TRICARE patients, highlighting specific improvements
    in claims/payment processing timeliness.
        TRICARE Reimbursement Rates
        The Coalition urges the subcommittee to exert what influence it can
    to persuade the Ways and Means/Finance Committees to reform the
    Medicare/TRICARE statutory payment formula. To the extent the Medicare
    rate freeze continues, we urge the subcommittee to encourage the
    Defense Department to use its reimbursement rate adjustment authority
    as needed to sustain provider acceptance. The Coalition urges the
    subcommittee to require a Comptroller General report on the relative
    propensity of physicians to participate in Medicare vs. TRICARE, and
    the likely effect on such relative participation of a further freeze in
    Medicare/TRICARE physician payments.
        TRICARE vs. Medicare Coverage
        The Coalition urges the subcommittee to align TRICARE coverage to
    at least match that offered by Medicare in every area.
        TRICARE Reserve Select
        The Coalition strongly recommends capping TRICARE Reserve Select
    (TRS) premium increases at a percentage not to exceed the percentage of
    their basic pay raise. The Coalition recommends increasing the Federal
    subsidy for TRS, at least for those members who do not have access to
    employer-sponsored health coverage. The Coalition recommends developing
    a cost-effective option to have DOD subsidize premiums for member's
    private insurance as an alternative to TRICARE Reserve Select coverage.
    We recommend a Government Accountability Office (GAO) report to
    identify the level of payment that would represent a cost-effective
    option for the government.
        Uniformed Services Employment and Reemployment Rights Act (USAERRA)
            Protections
        The Coalition urges continued efforts to ensure consistency of
    benefits and continuity of care for Guard and Reserve members and their
    families in an environment of increased length and frequency of
    deployments.
        Restoration of TRICARE For Widows
        The Coalition recommends restoration of TRICARE benefits to
    previously eligible survivors whose second or subsequent marriage ends
    in death or divorce.
        TRICARE Prime Remote
        The Coalition recommends removal of the requirement for the family
    members to reside with the Active-Duty member to qualify for the
    TRICARE Prime Remote Program.
        BRAC, Re-Basing, and Relocation
        The Coalition urges Congress to codify the requirement to provide
    TRICARE Prime in Base Realignment and Closure (BRAC)-affected areas and
    ensure, via a report from DOD, that adequate health resources are
    available to provide care within access standards for those affected by
    re-basing.
        Mental Health
        The Coalition strongly urges Congress to closely monitor DOD and
    Department of Veterans' Affairs (VA) implementation of much-needed Post
    Traumatic Stress Disorder (PTSD) awareness and treatment programs.
        Pharmacy Copayments
        The Coalition recommends no changes to the copayment rates until
    all medications are available in the mail order program and limiting
    any future pharmacy copayment increases to the lesser of the percentage
    increase in basic pay or retired pay, rounded down to the next lower
    dollar. The Coalition recommends eliminating beneficiary copayments in
    the mail-order pharmacy system for generic and brand name medications
    to incentivize use of this lowest-cost venue and generate substantial
    cost savings.
        Expansion of ``Third Tier'' Formulary
        The Coalition urges the subcommittee to monitor DOD's consideration
    of Beneficiary Advisory Panel input in future uniform formulary
    decisions and reassert its intent that the Panel should have a
    substantive role in the process, including access to meaningful data on
    relative cost of drugs in each affected class. The Coalition recommends
    a GAO review of the Uniform Formulary process to determine whether
    actions taken thus far have realized the projected savings.
        TRICARE Prime Referral and Authorization System
        The Coalition recommends that Congress require a cost analysis
    report concerning the referral process within DOD and reliance on
    Civilian Network Providers within a Military Treatment Facility's (MTF)
    Prime Service Area.
        DOD-VA Transition
        The Coalition urges the committee to direct and oversee a concerted
    ``Manhattan Project'' effort to ensure full and timely implementation
    of seamless transition activities, a bi-directional electronic medical
    record (EMR), enhanced post-deployment health assessments, and one-stop
    physical at time of discharge.
        Tax Law Changes
        The Coalition urges all Armed Services Committee members to press
    the Ways and Means and Finance Committees to approve legislation to
    allow all beneficiaries to pay TRICARE-related insurance premiums in
    pre-tax dollars, to include TRICARE Prime enrollment fees and premiums
    for TRICARE Standard supplements, long-term care insurance, and TRICARE
    dental premiums.
        Dental Issues
        The Coalition recommends allowing TRICARE-eligible former spouses
    to participate in the TRICARE Retiree Dental Plan. The Coalition
    recommends a GAO study of the viability of subsidizing the retiree
    dental program, including the likely long-term impact of different
    subsidy levels on retiree participation and dental health.
    Active Force Issues
        Pay Raises
        The Military Coalition strongly recommends providing military pay
    raises that exceed the Employment Cost Index until such time as full
    military pay comparability has been restored. The Coalition further
    recommends targeted increases for selected noncommissioned officers/
    petty officers and warrant officers as needed to attain the 70th-
    percentile comparability standard.
        Family Readiness, Support Structure, and Morale, Welfare and
            Recreation Programs
        The Military Coalition urges Congress to maintain a well-funded
    family readiness and support structure to enhance family well-being and
    to improve retention and morale. The Coalition also asks Congress to
    highlight and protect the interests of all beneficiaries impacted by
    overseas rebasing, Army modularity, and BRAC and ensure support
    services and infrastructure remain in place throughout the entire
    transition period for all beneficiary populations.
        Personnel Strengths
        TMC strongly urges sustaining end strengths to meet mission
    requirements, and opposing force reductions that have the primary
    purpose of paying for other programs.
        Housing
        TMC urges correction of military housing standards that inequitably
    depress Basic Allowance for Housing (BAH) rates for mid to senior
    enlisted members by assuming their occupancy of inappropriately small
    quarters.
        Flexible Spending Accounts
        TMC urges the subcommittee to continue pressing the DOD until
    servicemembers are provided the same eligibility to participate in
    Flexible Spending Accounts (FSAs) that all other Federal employees and
    corporate employees enjoy.
        Permanent Change of Station Reimbursement
        The Military Coalition supports upgrading permanent change-of-
    station (PCS) allowances to reflect the expenses members are forced to
    incur in complying with government-directed relocations.
        Dependent Education
        The Coalition urges the subcommittee to continue its priority on
    mitigating adverse effects of government decisions on military
    children's education. The Coalition urges the subcommittee to support
    nationwide in-State tuition eligibility for service families in the
    State in which the member is assigned or the member's home State of
    record, and continuity of in-State tuition once established for a
    military student. The Coalition also urges support of a nationwide
    reciprocity standard to allow full transfer of school credits for
    graduation requirements for service and family members. The Coalition
    continues to believe that it would be a powerful career retention
    incentive to authorize transferability of at least a portion of
    Montgomery G.I. Bill (MGIB) benefits to family members for long-serving
    members who agree to complete a military career.
        Montgomery GI Bill
        The Coalition urges the subcommittee's support for a 21st century
    MGIB, with benefit amounts indexed to the cost of a 4-year education at
    a public institution, and no reduction in benefits for education
    obtained while on Active-Duty.
    Guard and Reserve Issues
        Guard/Reserve Health Care
        The Coalition strongly recommends increasing subsidy levels for
    TRICARE coverage for drilling Guard/Reserve members not yet mobilized
    and having one set rate for members of the Guard and Reserve who
    continue to be drilling members. The Coalition supports further
    strengthening rights under the Uniformed Services Employment and
    Reemployment Rights Act (USERRA) to permit Reserve component members to
    retain employer-sponsored insurance if coverage is terminated due to
    TRICARE benefits provided 90 days prior to mobilization. The Coalition
    supports extending military dental coverage to reservists for 180 days
    post mobilization (during Transition Assistance Management Program
    (TAMP)), unless the individual's dental readiness is restored to T-2
    condition before demobilization.
        Guard/Reserve Retirement Age
        TMC urges Congress to reduce the age when a Guard and Reserve
    member is eligible for retirement pay, particularly for those members
    who have experienced extended mobilizations.
        Transition Assistance Services and Protections
        TMC urges funding of tailored Transition Assistance Program (TAP)
    services and enactment of stronger economic, financial, academic,
    health and legal protections for Guard and Reserve members and their
    families.
        ``Total Force'' Montgomery GI Bill
        TMC supports the integration of all elements of the MGIB under
    title 38, restoring benefit rates commensurate with service performed,
    and a post-service eligibility period for Selected Reserve members.
        Guard and Reserve Family Support Programs
        TMC urges Congress to continue and expand its emphasis on providing
    consistent funding and increased outreach to connect Guard and Reserve
    families with these support programs.
    Overseas Rebasing, Base Realignment and Closure Issues
        Rebasing and BRAC
        The Military Coalition urges the subcommittee to monitor the
    implementation of rebasing, BRAC, and Service Transformation
    initiatives to ensure protection of support services for military
    families.
    Survivor Program Issues
        Survivor Benefit Plan-Dependency Indemnity Compensation (SBP-DIC)
            Offset
        The Military Coalition strongly supports legislation to repeal the
    SBP-DIC offset introduced by Senator Nelson (D-FL) (S. 185) and
    Representative Brown (R-SC) (H.R. 808), respectively. Enactment remains
    a top Coalition goal for 2006.
        30-Year Paid-Up SBP
        The Military Coalition recommends a 2-year acceleration of the
    implementation date for paid-up SBP coverage, so that it takes effect
    on October 1, 2006.
        Final Retired Pay Check
        The Military Coalition urges Congress to allow survivors of
    retirees to retain the full month's retired pay for the month in which
    the retired member dies.
    Retirement Issues
        Concurrent Receipt
        The Coalition urges the subcommittee to expand Combat-Related
    Special Compensation to members who were medically compelled to retire
    short of 20 years of service solely because of their combat-incurred
    disabilities, as envisioned in H.R. 1366. The Coalition urges the
    subcommittee to end the disability offset to retired pay immediately
    for otherwise-qualifying members rated as ``unemployable'' by the VA.
        Former Spouse Issues
        The Military Coalition urges legislation to eliminate inequities in
    the USFSPA.
                                    overview
        Mr. Chairman, TMC thanks you and the entire subcommittee for your
    continued, unwavering support of our Active-Duty, Guard, Reserve,
    retired members, and veterans of the uniformed services, to include
    their families and survivors. The subcommittee's work has generated
    significant improvements in military end strength, pay, health care,
    survivor benefits, and disabled retiree programs.
        Six years ago, the Joint Chiefs of Staff advised Congress of the
    need to repeal REDUX, fix pay raises, and correct inequities in retiree
    health care, all of which were having a negative retention impact on
    serving members. You heard the call, and made those fixes and others.
        Now, unfortunately, we hear increasing complaints about the cost of
    some of those improvements from leaders who seem to have forgotten why
    they were enacted.
        Some in the administration argue for a return to past practices of
    capping military pay raises below private sector wage growth. Service
    leaders are planning force reductions even as Congress has authorized
    end strength increases to meet frenetic rotation requirements that have
    no end in sight. Defense officials decry the cost of retiree health
    care and seek to impose four-figure increases in health care fees
    charged to those who spent a career thinking they were paying their
    premiums in specie of personal and family sacrifice.
        Some contend that support for military personnel programs
    inevitably faces a periodic cycle of ebb and flow, and that the benefit
    improvements of the last 6 years must now yield to several years of
    cutbacks.
        The Military Coalition continues to look to this subcommittee for
    leadership to ensure the country doesn't return to the penny-wise and
    pound-foolish benefit cutbacks that caused the retention problems of
    the 1970s and the 1990s.
        Today's reality is that servicemembers and their families are being
    asked to endure ever-greater workloads and ever-greater sacrifices.
    Repeated deployments, often near back-to-back, have stressed the force
    to the point where recruiting is a real concern, and anyone who talks
    to frustrated military families has to question the credibility of any
    alleged rosy retention outlook.
        In testimony today, TMC offers its collective recommendations on
    what needs to be done to address these important issues and sustain
    long-term personnel readiness.
    Full Funding for the Defense Health Program
        We particularly appreciate the key role played by the subcommittee
    in ending the chronic under funding experienced in past years. But
    recent events raise our concern that this condition is likely to arise
    again unless the subcommittee continues its aggressive oversight.
        The Defense Department, Congress, and The Military Coalition all
    have reason to be concerned about the rising cost of military health
    care. But it is important to recognize that the bulk of the problem is
    a national one, not a military-specific one. It's also important, in
    these times of focus on deficits, to keep in perspective the
    government's unique responsibility as the recruiter, retainer,
    employer, and custodian of a career military force that serves multiple
    decades under extraordinarily arduous conditions to protect and
    preserve our national welfare.
        In this regard, the government's responsibility and obligations to
    its servicemembers go well beyond those of corporate employers. The
    Constitution itself puts the responsibility on the government to
    provide for the common defense, and on Congress to raise and maintain
    military forces. No corporate employer shares any such awesome
    responsibility and obligation, and there is no other employee
    population upon whom the entire Nation depends for its very freedom.
        Congress has pursued its responsibilities with vigor on behalf of
    those who are sacrificing, have sacrificed, and will continue to
    sacrifice so much for the rest of America. Continuing those vigorous
    efforts will be essential in addressing the budget challenges of the
    years ahead.

              The Military Coalition urges the subcommittee to ensure
            continued full funding for Defense Health Program needs.
    Protecting Beneficiaries Against Cost-Shifting
        The administration is proposing a significant increase in fees paid
    by retired uniformed services beneficiaries, including doubling or
    tripling enrollment fees for TRICARE Prime and tripling or quadrupling
    fees for TRICARE Standard. In addition, the President's budget
    recommends a 67-percent increase in retail pharmacy fees for all
    Active-Duty, Guard, Reserve, retired, and survivor beneficiaries.
        The Coalition believes strongly that these proposed increases are
    disproportional, inequitable, inappropriate, and unwise. (See separate
    NMFA testimony concerning TRICARE Prime premiums and Standard
    deductibles.)
        The Coalition recommends against implementing any increases in
    health fees for uniformed services beneficiaries this year.
        People vs. Weapons
        Dr. William Winkenwerder, Assistant Secretary of Defense (Health
    Affairs), briefed the Coalition that rising military health care costs
    are ``impinging on other service programs.'' Other reports indicate
    that DOD leadership is seeking more funding for weapons programs by
    reducing the amount it spends on military health care and other
    personnel needs.
        The Military Coalition asserts that such budget-driven trade-offs
    are misguided and inappropriate. Cutting people programs to fund
    weapons ignores the much larger funding problem, and only makes it
    worse.
        The Coalition believes strongly that the proposed defense budget is
    too small to meet national defense needs. Today's defense budget (in
    wartime) is less than 4 percent of gross domestic product, well short
    of the average for the peacetime years since WWII.

              The Coalition believes strongly that America can afford to
            and must pay for both weapons and military health care.

        Comparison With Civilian Plans Is Inappropriate
        Defense leaders assert that substantial military fee increases are
    needed to bring military beneficiary costs more in line with civilian
    practices. But comparison with corporate practices is inappropriate.
        Military medical and retirement benefits must be markedly better
    than civilian benefits, since they are the primary offsets for enduring
    decades of extraordinarily arduous military service conditions that
    constitute military members' unique contributions toward their unique
    retirement and health benefits.
        The Nation has a far greater obligation to military retirees than
    corporations have to theirs. In demanding such extraordinary
    commitments from career servicemember, the government assumes a
    reciprocal obligation to provide benefits commensurate with their
    extraordinary sacrifices.
        TRICARE Standard Enrollment Fee is Inappropriate
        TRICARE Standard has long been the basic military insurance
    coverage. Only 50 percent of providers in America have ever submitted a
    TRICARE claim, and many providers are reluctant to accept Standard
    beneficiaries. Many who do so refuse to accept any new TRICARE
    patients. To date, little effort has been expended by the DOD or its
    contractors to assist Standard beneficiaries in finding providers.
        When TRICARE Prime was authorized in 1995, Congress authorized an
    enrollment fee for this program in recognition that beneficiaries who
    signed up for Prime could expect a higher level of service. They were
    to be guaranteed access to a participating provider within established
    timeliness standards.
        The Department is now attempting to establish an enrollment for
    TRICARE Standard without any such commitment for a higher level of
    service. With TRICARE provider payments expected to decline in the
    future under current law, provider participation is actually likely to
    decline in the future.
        Establishing an enrollment fee without any commitment to provide
    improved service for that fee is inappropriate.

              The Coalition recommends strongly against establishment of
            any TRICARE Standard enrollment fee.

        Large Retiree Fee Increases Can Only Hurt Retention
        The reciprocal obligation of the government to maintain an
    extraordinary benefit package to offset the extraordinary sacrifices of
    career military members is a practical as well as moral obligation.
    Mid-career military losses can't be replaced like civilians can.
        Eroding benefits for career service can only undermine long-term
    retention/readiness. Today's troops are very conscious of Congress'
    actions toward those who preceded them in service. One reason Congress
    enacted TRICARE For Life (TFL) is that the Joint Chiefs of Staff at
    that time said that inadequate retiree health care was affecting
    attitudes among Active-Duty troops.
        The current Joint Chiefs have endorsed increasing TRICARE fees only
    because their political leaders have convinced them that this is the
    only way they can secure funding for weapons and other needs. TMC
    believes it is inappropriate to put the Joint Chiefs in the untenable
    position of being denied sufficient funding for current readiness needs
    if they don't agree to beneficiary benefit cuts.
        Reducing military retirement benefits would be penny-wise and
    pound-foolish when recruiting is already a problem and an overstressed
    force is at increasing retention risk.
        TFL Trust Fund Accrual Deposit Is Dubious Excuse
        An analysis by the Congressional Budget Office showed that most of
    the growth in defense health spending (56 percent) is attributable to
    overall growth in national health care spending. The next largest
    contributor is beneficiary population growth (23 percent).
    Establishment of the accrual accounting methodology for the TFL trust
    fund (which doesn't affect current outlays) accounts for 18 percent of
    the DOD cost growth.
        When the DOD argued 2 years ago that the trust fund deposit was
    impinging on other defense programs, the Coalition and the subcommittee
    agreed that that should not be allowed to happen. When the
    administration refused to increase the budget topline to accommodate
    the statutorily mandated trust fund deposit, Congress changed the law
    to specify that the entire responsibility for TFL trust fund deposits
    should be transferred to the Treasury. Subsequently, administration
    budget officials chose to find a way to continue charging that deposit
    against the defense budget anyway.
        In the Coalition's view, this represents a conscious and
    inappropriate administration decision to cap defense spending below the
    level needed to meet national security needs. If the administration
    chooses to claim to Congress that its defense budget can't meet those
    other needs, then Congress (which directed implementation of TFL and
    the trust fund deposit) has an obligation to increase the budget as
    necessary to meet them.
        Proposed Increases Far Exceed Inflation Increases
        The administration's proposed increases are grossly out of line
    with TRICARE benefit levels originally enacted by Congress, even
    allowing for interim inflation since current fees were established.
        If the $460 family prime enrollment fee were increased by interim
    consumer price index (CPI) changes (those used to increase retired
    pay), assuming the same 2.5 percent future CPI change assumed in the
    President's budget, it would be $635 for fiscal year 2008--far less
    than $1,400 proposed by DOD.
        If the $300 deductible for TRICARE Standard were CPI-adjusted for
    the same period, it would be $414 by 2008--one-third the $1,200 in
    annual deductible and new fees proposed by DOD.
        Further, the administration proposes to make annual fee adjustments
    thereafter, based on Federal Employees Health Benefit Plan (FEHBP)
    medical inflation, which has been two to three times the inflation-
    based increases in members' retired pay. This would ensure that
    members' medical costs would consume a larger share of their income
    with each passing year. The Coalition realizes that this has been
    happening to many private sector employees, but believes strongly that
    the government has a greater obligation to protect the interests of its
    military beneficiaries than private corporations feel for their
    employees.
        Proposed Increases Disproportional to VA Fee Changes
        Congress acted wisely in each of the last 2 years by squelching
    administration proposals to institute an annual enrollment fee of $250
    and significantly raise pharmacy co-payments for non-disabled veterans
    who had served as few as 2 years. This year, the VA has increased
    pharmacy copayments by $1. Tripling and quadrupling TRICARE fees for
    retirees who served 20-30 years in uniform and raising retail pharmacy
    copays by 67 percent for all military beneficiaries would be grossly
    disproportionate in comparison.
        Unrealistic Budget Assumptions Will Leave TRICARE Underfunded
        The DOD budget proposal assumes the proposed fee increases and co-
    payment changes will save money by shifting 14 percent of pharmacy
    users away from retail outlets and causing hundreds of thousands of
    current beneficiaries to exit TRICARE by 2011. Thus, DOD has reduced
    the amount budgeted for health care on the assumption that it will be
    treating fewer beneficiaries.
        Many Defense and Service analysts believe it is unrealistic to
    assume that this number of beneficiaries will leave TRICARE if such
    fees are introduced, largely because switching to civilian coverage
    usually would entail even larger fees for beneficiaries.
        Because the assumed level of beneficiary flight is extremely
    unlikely to occur, the Department almost certainly will experience a
    substantial budget shortfall before the end of the year. This would
    then require supplemental funding, further benefit cutbacks, and even
    greater efforts to shift more costs to beneficiaries in future years.
        Thus, the most likely result of this misguided cost-shifting
    proposal would be to disproportionately penalize retirees, undermine
    military health benefits, and further threaten future retention and
    readiness.
        Alternative Options to Make TRICARE More Cost-Efficient
        The Coalition believes strongly that the DOD has not sufficiently
    investigated other options to make TRICARE more cost-efficient without
    shifting costs to beneficiaries. The Coalition offers the list of
    alternatives below as initial cost saving possibilities.

             Promote retaining other health insurance by making
            TRICARE a true second-payer to other insurance (far cheaper to
            pay another insurance's copay than have the beneficiary migrate
            to TRICARE)
             Eliminate DOD-unique administrative requirements that
            make DOD pay higher overhead fees
             Size and staff military treatment facilities (least
            costly care option) to reduce reliance on non-MTF civilian
            providers
             Change electronic claim system to kick back errors in
            real time to help providers submit ``clean'' claims, reduce
            delays/multiple submissions
             Change law to limit incentives private firms can offer
            employees to shift to TRICARE, or require such matching
            payments to TRICARE
             Increase efficiency via a single contract for all
            claims processing
             Implement effective disease management programs and
            ensure coordination across the entire system
             Test voluntary participation in Medicare Advantage
            Regional PPO to foster chronic care improvement and disease
            management
             Negotiate with drug manufacturers for retail pharmacy
            discounts (the most costly venue), which DOD has failed to do,
            or change the law to mandate Federal pricing for retail
            pharmacy network (rather than charging beneficiaries more if
            drug companies don't agree to Federal pricing)
             Reduce/eliminate all mail-order copays to boost use of
            lowest-cost venue
             Do more to educate beneficiaries and providers on
            advantages of mail-order pharmacy
             Establish one central DOD facility to order/fill all
            prescriptions for exceptionally high-cost drugs (Air Force
            model has been successful)
             Centralize military treatment facility pharmacy
            budget/funding process, with emphasis on accountability and
            cost-shifting

        TRICARE Still Has Significant Shortcomings
        While DOD chooses to focus its attention on the cost of the TRICARE
    program to the government, the Coalition believes those making that
    case too often fail to acknowledge that TRICARE continues to have
    significant problems that deter many providers from accepting it and
    affect delivery of care to beneficiaries.

              The Coalition urges the subcommittee to require DOD to pursue
            greater efforts to improve TRICARE and find more effective and
            appropriate ways to make TRICARE more cost-efficient without
            seeking to ``tax'' beneficiaries and make unrealistic budget
            assumptions.
    TRICARE Standard Improvements
        The Coalition very much appreciates the subcommittee's continuing
    interest in the specific problems unique to TRICARE Standard
    beneficiaries. In particular, we applaud your efforts in the National
    Defense Authorization Act (NDAA) for Fiscal Year 2006 to expand TRICARE
    Standard provider surveys and establish Standard support
    responsibilities for TRICARE Regional Offices. These are needed
    initiatives that should help make it a more effective program. We
    remain concerned, however, that more remains to be done. TRICARE
    Standard beneficiaries need assistance in finding a provider that can
    provide health care services within a reasonable time and distance from
    their home. This will become increasingly important with the expansion
    of TRICARE Reserve Select as these individuals are most likely not
    living within a Prime Service Area.
        Provider Participation Adequacy
        The provider surveys are a first step and should provide a wealth
    of additional information. The question is what use will be made of the
    information.
        The Coalition is concerned that DOD has not established any
    standard for the adequacy of provider participation. Participation by
    half of the providers in a locality may suffice if there is not a large
    Standard beneficiary population. The Coalition would prefer to see an
    objective participation standard (perhaps number of beneficiaries per
    provider) that would help shed more light on which locations have
    participation shortfalls of Primary Care Managers and Specialists that
    require positive action. The Coalition is not asking DOD to build a
    TRICARE Standard network. However, once shortfalls are identified then
    further action by DOD should be undertaken to entice providers to
    accept TRICARE Standard patients.
        We are also concerned about whether the Standard surveys actually
    measure what they purport to measure. In particular, we are perplexed
    that DOD survey results for some locations do not conform to
    (admittedly anecdotal) inputs that beneficiary associations have
    received from some of the same localities. Coalition discussions with
    those who processed the surveys yielded acknowledgements that health
    care providers may give different answers to the surveyors than they
    give to beneficiaries--if only because the beneficiaries may ask
    different questions of them than the survey-takers do. The Coalition
    believes it would be useful and appropriate to conduct independent
    surveys of TRICARE Standard beneficiaries, so that beneficiary inputs
    could be correlated with provider inputs for a given area.

              The Coalition urges the subcommittee to establish
            requirements for TRICARE Standard beneficiary surveys and a
            definition of what level of provider participation shall be
            deemed to require positive action to increase it.

        Administrative Deterrents to Provider Participation
        Feedback from providers indicates TRICARE imposes additional
    administrative requirements on providers that are not required by
    Medicare or other insurance plans. On the average, about 50 percent of
    a provider's panel is Medicare patients, whereas only 2 percent are
    TRICARE beneficiaries. Providers are unwilling to incur additional
    administrative expenses that affect only a small number of patients.
    Thus, providers are far more prone to non-participation in TRICARE than
    in Medicare.
        One problem is that TRICARE requires that each provider be
    identified by each physical location where he or she performs services.
    If a clinic has 50 providers that have privileges at 10 different
    addresses in a clinic group, TRICARE requires 500 unique provider
    numbers. Medicare and most commercial insurers are moving to embrace a
    National Provider Indicator. TRICARE has been reluctant to change
    because of concerns for identifying fraud, but Medicare has been
    successful in fraud identification using one unique provider
    identification number.
        Another problem is that, TRICARE still requires submission of a
    paper claim to determine medical necessity on a wide variety of claims
    for Standard beneficiaries. This thwarts efforts to encourage
    electronic claim submission and increases provider administrative
    expenses and delays receipt of payments. Examples include speech
    therapy, occupational/physical therapy, land or air ambulance service,
    use of an assistant surgeon, nutritional therapy, transplants, durable
    medical equipment, and pastoral counseling.
        Another source of claims hassles and payment delays involve cases
    of third party liability (e.g., auto insurance health coverage for
    injuries incurred in auto accidents). Currently, TRICARE requires
    claims to be delayed pending receipt of a third-party-liability form
    from the beneficiary. This often delays payments for weeks and can
    result in denial of the claim (and non-payment to the provider) if the
    beneficiary doesn't get the form in on time. Recently, a major TRICARE
    claims processing contractor recommended that these claims should be
    processed regardless of diagnosis and that the third-party-liability
    questionnaire should be sent out after the claim is processed to
    eliminate protracted inconvenience to the provider of service.

              The Coalition urges the subcommittee to direct DOD to
            eliminate TRICARE-unique administrative requirements that deter
            provider participation and thus contribute to denying
            beneficiaries access to care.

        Provider Education Needs Improvement
        While these and other administrative impediments remain to be
    corrected, the Coalition does believe that overall claims processing
    timeliness has improved considerably from previous years.
        We believe one reason for provider non-participation in TRICARE is
    lack of information, outdated information, or previous bad experiences
    with TRICARE in areas that have subsequently seen substantial
    improvement. DOD is currently developing an annual newsletter for
    TRICARE Standard beneficiaries and could generate an informative
    newsletter to providers who have submitted claims. This will be all
    well and good but the target group of providers that will not get a
    newsletter or information are those who do not see TRICARE
    beneficiaries. We look forward to working with DOD to improve efforts
    to educate providers with respect to the differences between TRICARE
    Standard and TRICARE Prime. A solid education and communication program
    will go a long way to attract providers.

              The Coalition recommends requiring DOD to work with the State
            Medical Associations and the Centers for Medicare and Medicaid
            Services to initiate an appropriate information program for
            providers who will not see TRICARE patients, highlighting
            specific improvements in claims/payment processing timeliness.
    Tricare Reimbursement Rates
        Physicians consistently report that TRICARE is virtually the
    lowest-paying insurance plan in America. Other national plans typically
    pay one-quarter to one-third higher rates. In some cases the difference
    is even higher.
        While TRICARE rates are tied to Medicare rates, TRICARE Managed
    Care Support Contractors make concerted efforts to persuade providers
    to participate in TRICARE Prime networks at a further discounted rate.
    Since this is the only information providers receive about TRICARE,
    they see TRICARE as even lower-paying than Medicare.
        This is exacerbated by annual threats of further reductions in
    TRICARE rates due to the statutory Medicare rate-setting formula.
    Doctors are unhappy enough about reductions in Medicare rates, and many
    already are reducing the number of Medicare patients they see.
        But the problem is far more severe with TRICARE, because TRICARE
    patients typically comprise a small minority of their beneficiary
    caseload. Physicians may not be able to afford turning away large
    numbers of Medicare patients, but they're more than willing to turn
    away a small number of patients who have low-paying, high-
    administrative-hassle TRICARE coverage.
        Congress has acted to avoid Medicare physician reimbursement cuts
    for the last 3 years, but the failure to provide a payment increase for
    2006 is another step in the wrong direction according to physicians.
    Further, Congress still has a long way to go in order to fix the
    underlying reimbursement determination formula.
        Correcting the statutory formula for Medicare and TRICARE physician
    payments to more closely link adjustments to changes in actual practice
    costs and resist payment reductions is a primary and essential step. We
    fully understand that is not within the purview of this subcommittee,
    but we urge your assistance in pressing the Ways and Means and Finance
    Committees for action.
        In the meantime, the rate freeze for 2006 makes it even more urgent
    to consider some locality-based relief in TRICARE payment rates, given
    that doctors see TRICARE as even less attractive than Medicare.
        The TRICARE Management Activity has the authority to increase the
    reimbursement rates when there is a provider shortage or extremely low
    reimbursement rate for a specialty in a certain area and providers are
    not willing to accept the low rates. In some cases, a State Medicaid
    reimbursement for a similar service is higher than that of TRICARE. To
    date, this authority has been used only in Alaska. One concern, as
    mentioned previously, is that the Department has been reluctant to
    establish a standard for adequacy of participation.
        There are specialties that do not fall cleanly within the Medicare
    reimbursement rates. Obstetrical and pediatric services have been a
    constant source of aggravation for military beneficiaries and the
    Managed Care Support Contractors. We applaud Congress' requirement for
    a Comptroller General report on obstetrical and pediatric reimbursement
    levels to ensure the adequacy of a quality network. We look forward to
    its findings and in the meantime encourage DOD to make full use of its
    authority to set higher rates for these specialties.

              The Coalition urges the subcommittee to exert what influence
            it can to persuade the Ways and Means/Finance Committees to
            reform Medicare/TRICARE statutory payment formula. To the
            extent the Medicare rate freeze continues, we urge the
            subcommittee to encourage the Defense Department to use its
            reimbursement rate adjustment authority as needed to sustain
            provider acceptance.
              The Coalition urges the subcommittee to require a Comptroller
            General report on the relative propensity of physicians to
            participate in Medicare vs. TRICARE, and the likely effect on
            such relative participation of a further freeze in Medicare/
            TRICARE physician payments.

        Minimize the Differences between Medicare and TRICARE Coverage
        DOD submitted a report to Congress last year indicating the
    coverage differences between Medicare and TRICARE. The report showed
    that there are at least a few services covered by Medicare that are not
    covered by TRICARE. These include an initial physical at age 65,
    chiropractic coverage, respite care, and certain hearing tests. We
    believe that the TRICARE coverage should at least be the equal of
    Medicare's in every area. Our military retirees have made sacrifices
    far and above those who have not served and deserve no less coverage
    than is provided to other Federal beneficiaries.

              The Coalition urges the subcommittee to align TRICARE
            coverage to at least match that offered by Medicare in every
            area.
    Guard and Reserve health care
        The Coalition applauds the subcommittee for extending TRS coverage
    to all member of the Selected Reserve in the NDAA for Fiscal Year 2006.
    Since DOD is relying upon the Guard and Reserve personnel more heavily
    and deployments are becoming longer and more frequent we must continue
    to view these individuals as an indispensable part of our Armed Forces.
    We should treat them accordingly.
        Setting the TRS Premium
        We have concerns over the manner at which the premiums for this
    program are set. Currently, the DOD adjusts TRS premiums based on
    annual adjustments to the basic FEHBP insurance option. This adjustment
    mechanism has no relationship either to the Department's military
    health care costs or to increases in eligible members' compensation.
        The Coalition believes we have a higher obligation to restrain
    health cost increases for currently serving military members who are
    periodically being asked to leave their families and lay their lives on
    the line for their country. These members deserve better than having
    their health premiums raised arbitrarily by a formula that has no real
    relationship to them.

              The Coalition strongly recommends capping TRS premium
            increases at a percentage not to exceed the percentage of their
            basic pay raise.
        Improve Premium Subsidies
        Although we recognize that Congress took a huge step in expanding
    eligibility to all members of the Selected Reserve, we are also aware
    that the step finally taken fell well short of what both the House and
    Senate Armed Services Committees initially recommended last year. We
    are very concerned that the high premiums required for those who have
    not been mobilized in the recent past will deter many Guard and Reserve
    members from needed participation.

              The Coalition recommends increasing the Federal subsidy for
            TRS, at least for those members who do not have access to
            employer-sponsored health coverage.
        Private Insurance Premium Option
        The Coalition believes Congress is missing an opportunity to reduce
    its health care costs (for retired members as well as for Selected
    reservists) by failing to authorize eligible members the option of
    electing a partial subsidy of their civilian insurance premiums in lieu
    of TRICARE coverage.
        Many members would be motivated to elect this option, especially if
    their family's current health care provider is reluctant to participate
    in TRICARE. Rather than having to find a new provider who will accept
    TRICARE, many beneficiaries may prefer a partial subsidy (at lower cost
    to DOD) to preserve the convenience and continuity of their family's
    health care.
        The Department could calculate a maximum monthly payment level that
    would represent a cost savings to the government, so that each member
    who elected that option would reduce TRICARE costs.

              The Coalition recommends developing a cost-effective option
            to have DOD subsidize premiums for member's private insurance
            as an alternative to TRICARE Reserve Select coverage. We
            recommend a GAO report to identify the level of payment that
            would represent a cost-effective option for the government.
        USERRA protections
        We very much appreciate Congress' continuing efforts to ensure that
    USERRA provisions catch up to recent changes in members' service
    requirements. One continuing need is to further strengthen rights under
    USERRA to permit Reserve component members to retain employer-sponsored
    insurance if coverage is terminated due to the existence of TRICARE
    coverage, and to protect their re-enrollment rights in employer-
    provided health coverage upon expiration of TAMP and 28-percent-
    subsidized TRS coverage.

              The Coalition urges continued efforts to ensure consistency
            of benefits and continuity of care for Guard and Reserve
            members and their families in an environment of increased
            length and frequency of deployments.
    Consistent Benefit
        As time progresses and external changes occur, we are made aware of
    pockets of individuals who for one reason or another are denied the
    benefits that they should be eligible for. DOD and all its health
    contractors were leaders in modifying policy and procedures to assist
    Katrina victims. Additionally, Congress' action to extend eligibility
    for TRICARE Prime coverage to children of deceased Active-Duty members
    was truly the right thing to do.
        Restoration of TRICARE for Widows
        One group of individuals that has earned the TRICARE benefit is now
    being closed out and needs to be brought back into the fold. When a
    TRICARE-eligible widow/widower remarries, he/she loses TRICARE
    benefits--and rightly so. When that individual's second marriage ends
    in death or divorce, the individual has eligibility restored for
    military identification card benefits, including SBP coverage,
    commissary/exchange privileges, etc.--with the sole exception that
    TRICARE eligibility is not restored.
        This is out of line with other Federal health program practices,
    such as the restoration of Civilian Health and Medicare Program of the
    Veterans' Administration (CHAMPVA) eligibility for survivors of
    veterans who died of service-connected causes. In those cases, VA
    survivor benefits and health care are restored upon termination of the
    remarriage.
        Military survivors deserve equal treatment.

              The Coalition recommends restoration of TRICARE benefits to
            previously eligible survivors whose second or subsequent
            marriage ends in death or divorce.
        TRICARE Prime Remote exceptions
        We thank Congress for the NDAA for Fiscal Year 2006 provision
    allowing the Secretaries to waive the requirement for the spouse to
    reside with the servicemember for purposes of TRICARE Prime Remote
    eligibility if the service determines special circumstances warrant
    such coverage. We remain concerned about the potential for inconsistent
    application of eligibility, however.
        With longer deployments and sea shore and overseas assignment
    patterns families are faced with some tough decisions. A spouse and
    children may find it easier and more supportive to reside with or
    around relatives during extended separations from their Active-Duty
    spouse. The special authority is a step in the right direction, but
    there is a wide variety of circumstances that could dictate a family
    separation of some duration, and the Coalition believes each family is
    in the best situation to make its own best decision.

              The Coalition recommends removal of the requirement for the
            family members to reside with the Active-Duty member to qualify
            for the TRICARE Prime Remote Program.
        BRAC, Rebasing, and Relocation
        Relocation from one geographic region to another brings multiple
    problems. A smooth health care transition is crucial to a successful
    relocation. That means ensuring a robust provider network and capacity
    is available as long as members and families remain in either losing or
    gaining locations affected by BRAC and global rebasing. A major effort
    is essential by the Department and its Managed Care Support Contractors
    to ensure smooth beneficiary transition from one geographic area to
    another.
        It also is important to sustain Prime networks at closing locations
    to protect health care access for Guard/Reserve and retired members and
    families remaining in the area. We stress the importance of
    coordination of construction and funding in order to maintain access
    and operations while the process takes place.

              We urge Congress to codify the requirement to provide TRICARE
            Prime in BRAC-affected areas and ensure, via a report from DOD,
            that adequate health resources are available to provide care
            within access standards for those affected by rebasing.
    Mental Health
        We are most appreciative of the extra effort the subcommittee made
    in the NDAA for Fiscal Year 2006 to assist members and families who may
    be affected by PTSD or other psychological conditions. The pilot
    projects on PTSD and creation of a Task Force on Mental Health are
    major steps to establish outreach and ensure returning members and
    their families get timely access to the care they need.
        We support the establishment of a meaningful pre- and post-
    deployment mental health screening process to ensure members and their
    families are referred to and receive appropriate interventional
    services. We will be very interested in the results of the studies
    Congress has required of DOD on this topic and look forward to working
    with DOD and Congress as the results are completed.

              The Coalition strongly urges Congress to closely monitor DOD
            and VA implementation of much-needed Post Traumatic Stress
            Disorder awareness and treatment programs.
    Pharmacy
        The TRICARE Pharmacy benefit must remain strong and affordable and
    meet the pharmaceutical needs of millions of eligible beneficiaries.
    While we are pleased at the overall operation of the program, the
    Coalition does have concerns about certain apparent trends.
        In particular, we are concerned about ongoing efforts to shift
    disproportional cost increases onto military beneficiaries.
        Pharmacy Copayment Changes
        The Coalition is concerned that, 5 years after pharmacy copayment
    levels were established, the Department is proposing a 67-percent
    increase in retail copayments. The rationale for the proposed increase
    is the rapid growth in retail pharmacy use since enactment of TRICARE
    For Life.
        The Coalition believes strongly that uniformed services
    beneficiaries deserve more stability in their benefit levels, and that
    DOD has not performed due diligence in exploring other ways to reduce
    pharmacy costs without shifting such increased expense burdens to
    beneficiaries. Thus far, the Department has refused to negotiate with
    drug companies for discounts in the retail arena. Not enough has been
    done to educate beneficiaries and providers on the advantages of the
    mail-order program. The Department has failed to centralize purchasing
    and filling of prescriptions for high-cost drugs, as the Air Force has
    done successfully.
        Last year, Congress rightfully rejected the administration's
    proposal to double VA pharmacy copayments for certain categories of
    nondisabled veterans. This year, the VA increased copayments by $1 for
    those categories, a much more reasonable adjustment that would not have
    happened without Congress' intervention. Military beneficiaries deserve
    no less protection.
        A formula that limits pharmacy copayment increases to the lesser of
    the percentage increase in basic pay or retired pay, rounded down to
    the next lower dollar, would provide for modest periodic adjustments
    consistent with beneficiary income increases. DOD should not modify
    copayment rates until all medications that are available in the retail
    system are also available in the mail order program.

              The Coalition recommends no changes to the copayment rates
            until all medications are available in the mail order program
            and limiting any future pharmacy copayment increases to the
            lesser of the percentage increase in basic pay or retired pay,
            rounded down to the next lower dollar.

        Most of all, the Department has ignored what the Coalition believes
    would create the most powerful incentive for beneficiaries to shift
    from the more costly retail program to the mail order program--
    eliminating mail-order copays. While modest already, mail-order
    copayments entail considerable processing expense for the contractor
    and DOD. In many cases, the processing expense is greater than the
    value of the copayment. Marketers know that offering something for free
    is a powerful economic incentive. The Coalition believes that
    eliminating mail-order copayments altogether would send a strong
    economic and educational message to beneficiaries on the advantages of
    the mail-order system, and that the government would realize very large
    savings from this change.
        The average drug purchased in the mail-order system saves the
    government $49 relative to providing the drug through the retail
    system. If all mail-order copayments would be eliminated, the savings
    would still be at least $43 per prescription (in fact, savings would be
    larger, since the government would no longer pay contractors to process
    copayments). Elimination of mail-order copays would save the government
    $20 million for each 1 percent of prescriptions that migrate from the
    retail to the mail-order pharmacy system.

              The Coalition recommends eliminating beneficiary copayments
            in the mail-order pharmacy system for generic and brand name
            medications to incentivize use of this lowest-cost venue and
            generate substantial cost savings.

        Rapid Expansion of ``Third Tier'' Formulary
        The Coalition very much appreciated the efforts of the subcommittee
    to protect beneficiary interests by establishing a statutory
    requirement for a Beneficiary Advisory panel (BAP) to give beneficiary
    representatives an opportunity in a public forum to voice our concerns
    about any medications DOD proposes moving to the third tier ($22 co-
    pay). We were further reassured when, during implementation planning,
    Defense officials advised the BAP that they did not plan on moving many
    medications to the third tier.
        Unfortunately, this has not been the case. To date, DOD has moved
    41 medications to the third tier. While the BAP did not object to most
    of these, the BAP input has been universally ignored in the small
    number of cases when it recommended against a proposed
    reclassification. In at least one case, the medications moved to the
    third tier affected 98 percent of the beneficiaries with prescriptions
    in that particular class of drug. The Coalition is also concerned that
    the BAP has been denied access to information on relative costs of the
    drugs proposed for reclassification and the DOD has established no
    mechanism to provide feedback to the BAP on why its recommendations are
    being ignored.
        The Coalition believes the subcommittee envisioned that the BAP
    would be allowed a substantive input in the Uniform Formulary decision
    process, but that has not happened. We hope to address this matter
    substantively with the Assistant Secretary of Defense for Health
    Affairs (ASD(HA)).

              The Coalition urges the subcommittee to monitor DOD's
            consideration of BAP input in future uniform formulary
            decisions and reassert its intent that the Panel should have a
            substantive role in the process, including access to meaningful
            data on relative cost of drugs in each affected class.
              The Coalition recommends a GAO review of the Uniform
            Formulary process to determine whether actions taken thus far
            have realized the projected savings.
    TRICARE Prime and Managed Care Support Contractor Issues
        DOD and its health contractors are continually trying to improve
    the level of TRICARE Prime service. We appreciate their inclusion of
    our associations in their process improvement activities and will
    continue to work with them to ensure the program remains beneficiary-
    focused and services are enhanced, to include: Beneficiary education,
    network stability, service level quality, uniformity of benefit between
    regions (as contractors implement best business practices), and access
    to care.
        Referral and Authorization System
        There has been much discussion and consternation concerning the
    Enterprise Wide Referral and Authorization system. Much time, effort
    and money have been invested in a program that has not come to
    fruition. Is adding to the administrative paperwork requirements and
    forcing the civilian network providers into a referral system really
    accomplishing what DOD set out to do? Rather than forcing unique
    referral requirements on providers, perhaps DOD should look at
    expanding its Primary care base in the Prime Service Areas and capture
    the workload directly.

              The Coalition recommends that Congress require a cost
            analysis report concerning the referral process within DOD and
            reliance on Civilian Network Providers within an MTF's Prime
            Service Area.
    DOD/VA Transition
        TMC is grateful that the NDAA for Fiscal Year 2005 required DOD to
    do a better job of collecting baseline health status data through a
    formal medical readiness tracking and health surveillance system.
        Seamless Transition
        Our Nation's service men and women deserve first class treatment
    and services before, during and after separation from military service.
    DOD and VA have critical, complementary roles in the transition
    process. Unfortunately, bureaucratic inertia and intramural priorities
    in DOD and the VA have slowed the pace of collaborative efforts towards
    the goal of ``seamless transition''. Some of these efforts have been
    going on for decades with little or no substantive progress, in part
    because those responsible for action have come to have low
    expectations. Time and again, progress has been stymied by a
    combination of a lack of leadership priority and oversight, management
    turnover, bureaucratic inertia, and technological backwardness.
        Single Separation Exam
        We are particularly concerned about the significant gaps in
    implementing a single separation physical in the Washington, DC, area.
    Key MTFs like Walter Reed Army Medical Center and National Naval
    Medical Center do not have a single, systematic process in place. This
    is particularly alarming considering the DOD and VA are headquartered
    here. It seems reasonable to expect the Washington, DC MTFs to serve as
    models for other DOD and VA medical delivery systems. TMC recommends
    the committees to provide continued oversight to ensure that this
    important program is implemented promptly and effectively at all sites.
        Electronic Medical Record
        DOD has developed an electronic health record system (AHLTA) that
    will provide DOD providers with real-time, centrally based access to
    beneficiary health information regardless of current location. This is
    a wonderful advancement and we applaud DOD's efforts. However, the
    current system still does not allow direct transfer of this information
    to the VA upon separation of an Active-Duty member. This poses a major
    problem which must be corrected as soon as possible. We look forward to
    seeing the results of the report on this topic as required by the NDAA
    for Fiscal Year 2006 and hope that Congress will demand a highly
    ambitious implementation of two-way electronic data exchange between
    DOD and VA.

              The Coalition urges the committee to direct and oversee a
            concerted ``Manhattan Project'' effort to ensure full and
            timely implementation of seamless transition activities, a bi-
            directional EMR, enhanced post-deployment health assessments,
            and one-stop physical at time of discharge.
    Tax Law Changes
        Many uniformed services beneficiaries pay annual enrollment fees
    for TRICARE Prime, and premiums for supplemental health insurance, such
    as a TRICARE supplement, the TRICARE Dental and Retiree Dental Plans,
    or for long-term care insurance. For most military beneficiaries, these
    premiums are not tax-deductible because their annual out-of-pocket
    costs for health care expenses do not exceed 7.5 percent of their
    adjusted gross taxable income. In 2000, a Presidential directive
    allowed Federal employees who participate in FEHBP to have premiums for
    that program deducted from their pay on a pre-tax basis. Similar
    legislation for all active and retired military and Federal civilian
    beneficiaries would restore equity with private sector workers, many of
    whom already can pay their health premiums with pre-tax dollars. Tax
    incentives will help offset the cost of these important coverages,
    promote enrollment, and reduce members' liability for catastrophic
    expenses.

              The Coalition urges all Armed Services Committee members to
            press the Ways and Means and Finance Committees to approve
            legislation to allow all beneficiaries to pay TRICARE-related
            insurance premiums in pre-tax dollars, to include TRICARE Prime
            enrollment fees and premiums for TRICARE Standard supplements,
            long-term care insurance, and TRICARE dental premiums.
    Dental Issues
        Former Spouse Dental Coverage
        The TRICARE Retiree Dental plan offers retirees the option to
    purchase a dental insurance policy. There is only one category of
    TRICARE-eligible beneficiaries who are denied eligibility to
    participate in the TRICARE Retiree Dental Plan--otherwise qualifying
    former spouses. The Coalition believes this inconsistency is
    inappropriate.

              The Coalition recommends allowing TRICARE-eligible former
            spouses to participate in the TRICARE Retiree Dental Plan.
        Retiree Dental Plan
        The TRICARE Retiree Dental Plan is contractor-operated and is not
    subsidized by the government. Retired beneficiary premiums must cover
    the total cost of the program. For retirees, this has become an
    increasing monthly expense, with some choosing to forego dental care.
    For the long term, the Coalition would like to see some level of
    government subsidy for the TRICARE Retiree Dental Plan.

              The Coalition recommends a GAO study of the viability of
            subsidizing the retiree dental program, including the likely
            long-term impact of different subsidy levels on retiree
            participation and dental health.
                              active force issues
        The Coalition appreciates the subcommittee's many actions to help
    relieve the stress of repeated deployments--end strength increases,
    bonus improvements, family separation, and danger area pay increases,
    and more.
        From the servicemembers' standpoint, the increased personnel tempo
    necessary to meet continued and sustained training and operational
    requirements has meant having to work progressively longer and harder
    every year. They are enduring longer duty days; increased family
    separations; cutbacks in installation services; less opportunity to use
    education benefits; and significant out-of-pocket expenses with each
    PCS move.
        Intensified and sustained operations in Iraq and Afghanistan are
    being met by servicemembers' patriotic dedication, but retention must
    be an increasing concern as 1 percent of Americans continue to bear the
    entire burden of national sacrifice in the global war on terrorism.
    Service leaders may tout seemingly high retention figures, but the
    Coalition cannot reconcile this with the ever-increasing stresses on
    military families.
        Military families have continued to demonstrate their exceptional
    support of servicemembers' long, recurring deployments; yet, many
    servicemembers and their families debate among themselves whether the
    rewards of a service career are sufficient to offset the attendant
    demands and sacrifices inherent in uniformed service. Unless they see
    some prospect of near-term respite, many of our excellent soldiers,
    sailors, airmen, and marines will opt for civilian career choices, not
    because they don't love what they do, but because their families just
    can no longer take the stress. High retention simply cannot continue to
    co-exist with such levels of high operations tempo and family
    separations, despite the reluctance of some to see anything but rosy
    scenarios.
        The Coalition views with alarm the Defense Department's
    determination to sacrifice troop levels to pay for weapons systems,
    with seemingly little regard for the impact these decisions will have
    on servicemembers and their future retention. The finest weapon systems
    in the world will be of little use if the Services don't have enough
    high quality, well-trained people to operate, maintain and support
    them.
        The Coalition believes the ``weapons or people'' debate is a
    patently false one--akin to forcing a choice between one's left and
    right arms.
        Pay Raises
        Now that the statutory requirement to reduce the relative military
    ``pay gap'' has expired, the Coalition is concerned that an
    administration looking for ways to cut people costs may seek to
    reintroduce the failed practice of capping military raises. In the
    relatively recent past, the Office of Management and Budget (OMB)
    advocated capping military pay raises at the level of inflation, rather
    than restoring comparability with private sector wage growth. The
    measure of merit with pay raises is not inflation--it's the draw from
    the private sector. Pay comparability with private sector wage growth
    is a fundamental underpinning of the All-Volunteer Force, and it cannot
    be dismissed without dire consequences for national defense.
        When the pay raise comparability gap reached 13.5 percent in 1999--
    resulting in predictable readiness crises--this subcommittee took
    responsible action to change the law. Thanks to your efforts, the gap
    has been reduced to 4.4 percent in 2006. But while the subcommittee
    recently established private sector wage growth as the statutory
    standard for future military pay raises, there is no longer any
    statutory requirement to continue reducing the current comparability
    gap.
        The subcommittee also has supported previous DOD plans to fix
    problems within the basic pay table by authorizing special ``targeted''
    adjustments for specific grade and longevity combinations in order to
    align career servicemembers' pay with private sector earnings of
    civilians with similar education and experience. Those targeted raises
    were intended to establish a new pay comparability standard, setting
    military pay at the 70th percentile of earnings for private workers of
    comparable age, experience, and education as recommended by the 9th
    Quadrennial Review of Military Compensation..
        In recent years, however, the OMB has denied DOD's request to
    continue targeted raises for career servicemembers--a decision that
    deeply disappointed the Coalition.
        Pay and allowance raises and higher reenlistment bonuses are
    essential to reduce other significant career irritants, but they can't
    fix fatigue and lengthy, frequent family separations.
        A recent RAND Corporation survey indicated that the higher
    operations tempo and extended working hours, even when not deployed,
    are taking a toll on military members and families that will harm
    retention. Over the long run, experience has shown that time and again
    that time spent away from the family--whether on deployment or at the
    home duty station--is the single greatest retention disincentive. The
    Military Coalition believes that those who ignore this and argue there
    is no retention problem are ``whistling past the graveyard.''

              The Military Coalition strongly recommends providing military
            pay raises that exceed the Employment Cost Index until such
            time as full military pay comparability has been restored. The
            Coalition further recommends targeted increases for selected
            noncommissioned officers/petty officers and warrant officers as
            needed to attain the 70th-percentile comparability standard.
        Maintain Well-funded Family Readiness, Support Structure, and
            Morale, Welfare and Recreation Programs
        Today, two-thirds of Active-Duty families and virtually all Guard
    and Reserve families live off military installations, and more than
    one-half of these servicemembers are married. A fully funded family
    readiness program to include financial education and benefit
    information has never been a more crucial component to the military
    mission and overall readiness than it is today, especially when
    military families are coping with the increased deployments and
    separation.
        More needs to be done to ``connect'' servicemembers and their
    families with important resources. Military OneSource has provided a
    great start to improve family readiness; however, a more aggressive
    outreach effort is needed to educate servicemembers and their families
    on the benefits and programs to which they are entitled. These outreach
    efforts need to address the unique needs of National Guard and Reserve
    families to include transitioning to and from Active-Duty status.
    Traditional delivery systems of ``build it and they will come'' no
    longer serve the transforming military community of today that is
    increasingly non-installation based. More robust outreach delivery
    systems and programs are called for that can be accessed anywhere and
    anytime.
        Additionally, we cannot forget Public Health Service families as
    deployments are expected to increase under Public Health Service
    transformation initiatives. A systematic and integrated family support
    system will help families cope with deployment stresses and military
    life demands. Addressing such issues as childcare, spousal employment/
    education, flexible-spending accounts, increases in Servicemembers
    Group Life Insurance, and other quality-of-life concerns will go a long
    way in enhancing family well-being and improving retention and morale
    of the force.
        Because of multiple DOD modernization efforts (global rebasing,
    Army modularity, and BRAC initiatives) that are occurring
    simultaneously, TMC is concerned about the synchronization, pace of
    planning, implementation timetables, timing of budgets and resource
    allocations, and the evaluation of the rebasing and BRAC plans. TMC
    asks Congress to ensure necessary family support/quality-of-life
    program dollars are in line with the DOD/military services overseas
    rebasing and BRAC plans. Further, the Coalition urges Congress to
    insist that support services and infrastructure remain in place at both
    the closing and the gaining installations, throughout the transition
    period.
        The Coalition appreciates the recent congressional enhancements in
    military childcare, family readiness, and supportive counseling
    programs to assist families in dealing with deployments and the return
    of servicemembers. Family support, quality-of-life, and morale,
    welfare, and recreation (MWR) programs are especially critical to the
    readiness of our forces and the support of their families during
    periods of conflict and extended separations. Therefore, the Coalition
    urges the subcommittee to block any DOD initiative that withholds,
    reduces, or eliminates program dollar availability for military
    beneficiaries. In order for these programs to flourish, they require
    consistent sourcing, deliberate outreach, and must remain flexible to
    meet emerging challenges.

              The Military Coalition urges Congress to maintain a well-
            funded family readiness and support structure to enhance family
            well-being and to improve retention and morale.
              The Coalition also asks Congress to highlight and protect the
            interests of all beneficiaries impacted by overseas rebasing,
            Army modularity, and BRAC and ensure support services and
            infrastructure remain in place throughout the entire transition
            period for all beneficiary populations.

        Personnel Strengths
        The Coalition has been disappointed at the Defense Department's
    annual resistance to Congress' repeated offers to permanently increase
    Service end strength to relieve the stress on today's Armed Forces.
    While we are encouraged by the subcommittee's work to increase Army and
    Marine Corps end strength and authorizing much needed recruiting and
    retention bonuses; however, we are deeply concerned that
    administration-proposed plans rely too heavily on overly optimistic
    retention assumptions, overuse of the Guard and Reserves, optimistic
    scenarios in Southwest Asia, and the absence of new contingency needs.
        The Department has indicated that it prefers to ``transform''
    forces, placing non-mission essential resources in core warfighting
    skills, and transferring certain functions to civilians. However, any
    such implementation will take a long time while we continue to exhaust
    our downsized forces.
        In addition, the Department is already cutting back even on those
    plans, proposing to reduce six Army National Guard brigades, reduce
    planned growth in the number of Active-Duty brigades, continue
    systematic personnel reductions within the Navy, and impose further
    dramatic reductions in Air Force personnel. Media reports indicate that
    previous plans to civilianize military positions have been changed, and
    that substantial numbers of military positions now will simply be
    eliminated, without civilian replacements--imposing even greater stress
    on the remaining force.
        Force reductions envisioned in the Quadrennial Defense Review are
    being undertaken not because of any reduction in mission, but simply to
    free up billions of dollars for weapons programs.
        Defense leaders warn that the long-term mission against terrorism
    will require sustained, large deployments to Central Asia and
    elsewhere, but the Services are being denied the manpower to meet those
    requirements without unacceptable impacts on members' and families'
    quality-of-life.
        If the administration does not recognize when extra missions exceed
    the capacity to perform them, Congress must assume that obligation.
    Deferral of additional meaningful action to address this problem cannot
    continue without risking serious consequences.
        The Military Coalition's concerns in this regard are not limited to
    the Army and Marine Corps. The DOD Inspector General reported that
    visits to 14 units found that four units deployed with less than 80
    percent of their senior enlisted warfighting positions filled.
    According to the report, ``personnel in those units were exposed to a
    higher level of risk for mishap or injury during their deployment.''
    Planned strength reductions can only exacerbate this problem.

              The Military Coalition strongly urges sustaining end
            strengths to meet mission requirements, and opposing force
            reductions that have the primary purpose of paying for other
            programs.
        Access to Quality Housing
        The Military Coalition thanks Congress and the subcommittee for
    this past year's provision that provides temporary housing allowance
    adjustments for military members affected by disasters. Additionally,
    the Coalition is particularly grateful for the subcommittee's multi-
    year effort to raise housing allowances to cover 100 percent of
    servicemembers' median housing costs, by grade and location. But the
    recent achievement of that goal doesn't satisfy all of the housing
    problem, especially for enlisted members. Fundamental flaws in the
    standards used to make those calculations remain to be corrected.
        The Coalition supports revised housing standards that are more
    realistic and appropriate for each pay grade. Many enlisted personnel
    are unaware of the standards for their respective pay grade and assume
    that their BAH level is determined by a higher standard or by the type
    of housing for which they would qualify if they live on a military
    installation. For example, only 1 percent of the enlisted force (E-9)
    is eligible for BAH sufficient to pay for a 3-bedroom single-family
    detached house, even though thousands of more junior enlisted members
    do, in fact, reside in detached homes. The Coalition believes that as a
    minimum, this BAH standard (single family detached house) should be
    extended gradually to qualifying servicemembers beginning in grade E-8
    and subsequently to grade E-7 and below over several years as resources
    allow.
        In addition, we urge the subcommittee to keep close vigilance on
    two areas that could potentially impact military members and families,
    housing privatization initiatives and the end of geographic housing
    rate protection. The Coalition will monitor the impact of these
    initiatives to ensure increases to occupant costs and housing
    allowances are applied uniformly and that military personnel accounts
    remain adequate to ensure servicemembers on average have zero out of
    pocket costs for housing at the standard for their rank.

              The Military Coalition urges correction of military housing
            standards that inequitably depress BAH rates for mid to senior
            enlisted members by assuming their occupancy of inappropriately
            small quarters.
        Flexible Spending Accounts
        The Coalition cannot comprehend the DOD's continuing failure to
    implement existing statutory authority for Active-Duty and Selected
    Reserve members to participate in FSAs.
        All other Federal employees and corporate civilian employees are
    able to use this authority to save thousands of dollars a year by
    paying out-of-pocket health care and dependent care expenses with pre-
    tax dollars. It is unconscionable that the Department has failed to
    implement this money-saving program for the military members who are
    bearing the entire burden of national sacrifice in the global war on
    terrorism.
        We are grateful to the subcommittee for its report language in the
    NDAA for Fiscal Year 2006 that requires a Pentagon report to Congress
    with a plan to evaluate and implement this much-needed program.

              TMC urges the subcommittee to continue pressing the DOD until
            servicemembers are provided the same eligibility to participate
            in Flexible Spending Accounts that all other Federal employees
            and corporate employees enjoy.
        Permanent Change of Station Reimbursement Needs
        The Military Coalition is most appreciative of the significant
    increases in the Temporary Lodging Expense allowance authorized for
    fiscal year 2002 and the authority to raise PCS per diem expenses to
    match those for Federal civilian employees in fiscal year 2003. The
    Coalition also greatly appreciates the provision in the NDAA for Fiscal
    Year 2004 to provide full replacement value for household goods lost or
    damaged by private carriers during government directed moves, but is
    concerned that the DOD has not yet implemented its ``Family First'' re-
    engineering that would allow payment under this provision. The
    Coalition appreciates this past year's gains and Congress' support by
    modifying the personal property weight allowances for senior enlisted
    grades (E-7, E-8, and E-9).
        These were significant steps to upgrade allowances that had been
    unchanged over many years. Even with these changes, servicemembers
    continue to incur significant out-of-pocket costs in complying with
    government-directed relocation orders.
        For example, PCS mileage rates still have not been adjusted since
    1985. The current rates range from 15 to 20 cents per mile--less than
    half the 2006 temporary duty mileage rate of 44.5 cents per mile for
    military members and Federal civilians. The Military Coalition also
    supports authorization of a 500-pound professional goods weight
    allowance for military spouses.
        In addition, the overwhelming majority of service families own two
    privately owned vehicles, driven by the financial need for the spouse
    to work, or the distance some families must live from an installation
    and its support services. Authority is needed to ship a second
    privately-owned vehicle at government expense to overseas accompanied
    assignments. In many overseas locations, families have difficulty
    managing without a second family vehicle because family housing is
    often not co-located with installation support services.
        With regard to families making a PCS move, members are authorized
    time off for housing-hunting trips in advance of PCS relocations, but
    must make any such trips at personal expense, without any government
    reimbursement such as Federal civilians receive. Further, Federal and
    State cooperation is required to provide unemployment compensation
    equity for military spouses who are forced to leave jobs due to the
    servicemember's PCS orders. The Coalition also supports authorization
    of a dislocation allowance to servicemembers making their final
    ``change of station'' upon retirement from the uniformed services.
        We are sensitive to the subcommittee's efforts to reduce the
    frequency of PCS moves. But we cannot avoid requiring members to make
    regular relocations, with all the attendant disruptions in their
    children's education and their spouses' career progression. The
    Coalition believes strongly that the Nation that requires military
    families to incur these disruptions should not be requiring them to
    bear the resulting high expenses out of their own pockets.

              The Military Coalition supports upgrading permanent change-
            of-station allowances to reflect the expenses members are
            forced to incur in complying with government-directed
            relocations.
        Dependent Education Needs
        Quality education is an instrumental retention tool for DOD--we
    recruit the member, but retain the family. However, many ongoing
    initiatives--housing privatization, service transformation, overseas
    rebasing, and BRAC--will have a direct impact on the surrounding
    communities that provide educational programs for our military
    families. A positive step in the right direction is reflected by the
    subcommittee's efforts in the NDAA for Fiscal Year 2006 that provided
    increased Impact Aid funding for highly impacted school districts with
    significant military student enrollment.

              The Coalition urges the subcommittee to continue its priority
            on mitigating adverse effects of government decisions on
            military children's education.

        Affordability of children's college education is a critical issue
    for military families. This is of particularly importance for members
    whose frequent moves cause difficulties in satisfying eligibility
    requirements for graduation and in-State tuition rates. Some States,
    but not all, authorize in-State tuition eligibility for servicemembers
    assigned within the State. A smaller number allows continuation of such
    eligibility for already enrolled children after the member is
    reassigned out of the State, recognizing the difficulty of completing a
    degree during one military assignment. Graduation requirements also
    vary greatly by State-by-State. Military children or family members
    often must repeat course work and incur additional costs because school
    credits do not transfer to another State.

              The Coalition urges the subcommittee to support nationwide
            in-State tuition eligibility for service families in the State
            in which the member is assigned or the member's home State of
            record, and continuity of in-State tuition once established for
            a military student.
              The Coalition also urges support of a nationwide reciprocity
            standard to allow full transfer of school credits for
            graduation requirements for service and family members.
              The Coalition continues to believe that it would be a
            powerful career retention incentive to authorize
            transferability of at least a portion of MGIB benefits to
            family members for long-serving members who agree to complete a
            military career.
        Montgomery GI Bill
        Military transformation and rising pressures on the Total Force
    point to the need to restructure the MGIB, which Congress intended to
    support military recruitment as well as transition. The Coalition notes
    with appreciation that Congress has enacted increases to MGIB benefits
    for Active-Duty recruits and authorized full access to these benefits
    during Active-Duty.
        However, the ``laptop generation'' of Active-Duty troops gets
    reduced MGIB benefits compared to veterans, if they use them on Active-
    Duty. Fixing this could stimulate greater retention. Moreover, double-
    digit education inflation is dramatically diminishing the value of
    MGIB. Despite recent increases, MGIB benefits fall well short of the
    actual cost of education at a 4-year public college or university. In
    addition, approximately 63,000 career servicemembers who entered
    service during the Veterans' Educational Assistance Program (VEAP) era
    but declined to enroll in that program (in many cases, on the advice of
    government education officials) have been denied a MGIB enrollment
    opportunity.

              The Coalition urges the subcommittee's support for a 21st
            century MGIB, with benefit amounts indexed to the cost of a 4-
            year education at a public institution, and no reduction in
            benefits for education obtained while on Active-Duty.
                            guard and reserve issues
        More than a half a million members of the National Guard and
    Reserve have been mobilized since September 11, 2001, and many
    thousands more are in the activation pipeline. Today, they face the
    same challenges as their active counterparts, with a deployment pace
    greater than at any time since World War II.
        Guard/Reserve operational tempo has placed enormous strains on
    reservists, their family members, and their civilian employers that
    were never anticipated by the designers of Guard and Reserve personnel
    and compensation programs.
        The Coalition fully supports the prominent role of the Guard and
    Reserve Forces in the national security equation. However, many Guard
    and Reserve members are facing increased family stresses and financial
    burdens under the current policy of multiple extended activations over
    the course of a Reserve career. Many Reserve component leaders are
    rightly alarmed over likely manpower losses if action is not taken to
    relieve pressures on Guard and Reserve troops.
        The Coalition believes it is essential to substantively address
    critical Guard and Reserve personnel, pay, and benefits issues--along
    with Active-Duty manpower increases--to alleviate those pressures and
    help retain these qualified, trained professionals.
        The Coalition greatly appreciates this subcommittee's effort to
    address several Guard and Reserve priorities with the NDAA for Fiscal
    Year 2006. Specifically, the Coalition commends the subcommittee for
    implementing limited income replacement authority for mobilized members
    and extending fee-based TRICARE eligibility to all drilling Guard and
    Reserve members. Still, we believe that more must be done to ensure
    that Guard and Reserve members' and their families' readiness remains a
    viable part of our National Security Strategy. It is clear that our
    country is absolutely dependent on these valuable members of our
    national military team to meet ongoing readiness requirements.
        Guard/Reserve Health Care
        The Military Coalition recognizes Congress' significant progress
    over the last 2 years in authorizing ``TRICARE Reserve Select''
    coverage for all drilling Guard and Reserve members. Nevertheless, the
    Coalition believes strongly the new authority falls short of meeting
    the reasonable needs of these members and their families.
        We believe the enrollment fees will prove cost-prohibitive for
    members who have not been mobilized since September 11, 2001, and the
    high fees represent an ill-advised deterrent to members we need to
    retain in the Reserve components. Such fees are particularly unfair for
    members who do not have access to other health insurance coverage.

              The Coalition strongly recommends increasing subsidy levels
            for TRICARE coverage for drilling Guard/Reserve members not yet
            mobilized and having one set rate for members of the Guard and
            Reserve who continue to be drilling members.
              The Coalition supports further strengthening rights under
            USERRA to permit Reserve component members to retain employer-
            sponsored insurance if coverage is terminated due to TRICARE
            benefits provided 90 days prior to mobilization.
              The Coalition supports extending military dental coverage to
            reservists for 180 days post mobilization (during TAMP), unless
            the individual's dental readiness is restored to T-2 condition
            before demobilization.
        Guard/Reserve Retirement Age
        The fundamental assumption for the Reserve retirement system
    established in 1947 is that a reservist has a primary career in the
    civilian sector. But it's past time to recognize that greatly increased
    military service demands over the last dozen years have cost tens of
    thousands of reservists significantly in terms of their civilian
    retirement accrual, civilian 401(k) contributions, and civilian job
    promotions.
        DOD routinely relies on the capabilities of the Reserve Forces
    across the entire spectrum of conflict from homeland security to
    overseas deployments and ground combat. This reliance is not just a
    trend--it's a central fixture in the national security strategy. DOD,
    however, has shown little interest adjusting the Reserve compensation
    package to acknowledge this long-term civilian compensation cost to
    Guard and Reserve members. Inevitably, civilian career potential and
    retirement plans will be hurt by frequent and lengthy activations.
        The time has come to recognize the Reserve retirement system must
    be adjusted to sustain its value as a complement to civilian retirement
    programs. The future financial penalties of increased military service
    requirements are clear, and should not be ignored by the government
    that imposes them. Failing to acknowledge and respond to the changed
    environment could have far-reaching, catastrophic effects on Reserve
    participation and career retention.

              The Military Coalition urges Congress to reduce the age when
            a Guard and Reserve member is eligible for retirement pay,
            particularly for those members who have experienced extended
            mobilizations.
        Transition Assistance Services and Protections
        Congressional hearings and media reports have documented that many
    of the half-million mobilized Guard and Reserve members have not
    received the transition services they and their families need to make a
    successful readjustment to civilian status. Needed improvements
    include, but are not limited to, the following:

             Funding to develop tailored Transition Assistance
            Program (TAP) services in the hometown area following release
            from Active-Duty
             Expansion of VA outreach to provide ``benefits
            delivery at discharge'' in the hometown setting
             Authority for mobilized Guard and Reserve members to
            file Flexible Spending Account claims with a civilian employer
            for a prior reporting year after return from Active-Duty
             Authority for employers and employees to contribute to
            401(k) and 403(b) accounts during mobilization
             Enactment of academic protections for mobilized Guard
            and Reserve students, such as academic standing and refund
            guarantees and exemption from making Federal student loan
            payments during activation
             Automatic waivers on scheduled licensing/
            certification/promotion exams scheduled during a mobilization
             Reemployment rights protection for Guard and Reserve
            spouses who must suspend employment to care for children during
            mobilization
             Stronger credit protections under the Servicemembers
            Civil Relief Act

              TMC urges funding of tailored `TAP' services and enactment of
            stronger economic, financial, academic, health and legal
            protections for Guard and Reserve members and their families.
        ``Total Force'' Montgomery GI Bill
        The Nation's Active-Duty, National Guard, and Reserve Forces are
    operationally integrated under the Total Force policy. But educational
    benefits under the MGIB neither reflect that policy nor match benefits
    to service commitment. TMC is grateful to Congress for significant
    increases in Active-Duty MGIB benefits enacted prior to September 11,
    2001, but little has been done since then.
        For the first 15 years of the MGIB, Reserve MGIB benefits (Chapter
    1606, Title 10 USC) maintained almost 50 percent parity with Active-
    Duty MGIB benefits. Slippage from the 50 percent level began following
    the September 11, 2001 attacks. Today the Guard and Reserve MGIB pays
    less than 29 percent of the Active-Duty program. Congress attempted to
    address the gap by authorizing a new MGIB program (chapter 1607, title
    10 USC) for Guard and Reserve servicemembers mobilized for more than 90
    days in a contingency operation. More than a year after the law was
    changed, the new ``1607'' program still has not been implemented.
    Further, there is no readjustment benefit for MGIB benefits earned by
    mobilized reservists. If the benefit is not used during the period of
    their Reserve service, it is lost. This is a non-benefit at best, and
    false advertising at worst, when members are effectively precluded from
    using their MGIB entitlement because of repeated mobilizations.
        A ``total force'' MGIB program is needed to integrate all
    components of the MGIB under title 38, benchmark benefits to the
    average cost of a public college education, and provide equity of
    benefits for service rendered. A total force approach to the MGIB will
    better support Active and Reserve recruitment programs, readjustment to
    civilian life and administration of the program.

              TMC supports the integration of all elements of the MGIB
            under title 38, restoring benefit rates commensurate with
            service performed, and a post-service eligibility period for
            Selected Reserve members.
        Guard and Reserve Family Support Programs
        The increase in Guard and Reserve operational tempo is taking a
    toll on the families of these servicemembers. These families are
    routinely called upon to make more and more sacrifices as the global
    war on terrorism continues. Reserve component families live in
    communities throughout the Nation, and most of these communities are
    not close to military installations. These families face unique
    challenges in the absence of mobilized members, since they don't have
    access to traditional family support services enjoyed by Active-Duty
    members on military installations.
        Providing a core set of family programs and benefits that meet the
    unique needs of these families is essential to meeting family readiness
    challenges. These programs would promote better communication with
    servicemembers, specialized support for geographically separated Guard
    and Reserve families, and training (and back-up) for family readiness
    volunteers. Such access would include:

             Web-based programs and employee assistance programs
            such as Military OneSource and Guard Family.org;
             Enforcement of command responsibility for ensuring
            that programs are in place to meet the special information and
            support needs of families of individual augmentees or those who
            are geographically dispersed
             Expanded programs between military and community
            religious leaders to support servicemembers and families during
            all phases of deployments
             The availability of robust preventive counseling
            services for servicemembers and families and training so they
            know when to seek professional help related to their
            circumstances
             Enhanced education for Guard and Reserve family
            members about their rights and benefits
             Innovative and effective ways to meet the Guard and
            Reserve community's needs for occasional child care,
            particularly for preventive respite care, volunteering, and
            family readiness group meetings and drill time
             A joint family readiness program to facilitate
            understanding and sharing of information between all family
            members, no matter what the service

              TMC urges Congress to continue and expand its emphasis on
            providing consistent funding and increased outreach to connect
            Guard and Reserve families with these support programs.
             overseas rebasing, base realignment and closure issues
        Thousands military members and families will be under great stress
    in the months and years ahead as a result of rebasing, closure, and
    transformation actions. But the impact extends beyond the Active-Duty
    personnel currently assigned to the affected installations. The entire
    local community--school districts, chambers of commerce, Guard/Reserve,
    retirees, survivors, civil servants, and others--experiences the
    traumatic impact of a rebasing or closure action. Jobs are lost or
    transferred, installation support facilities are closed, and
    beneficiaries who relied on the base for support are forced to search
    elsewhere.
        The Coalition urges the subcommittee to ensure rebasing plans are
    not executed without ensuring full support is available to families as
    long as they are present at losing installations and before they arrive
    at gaining installations. The critical family support/quality-of-life
    programs include MWR, childcare, exchanges and commissaries, housing,
    health care, education, family centers, and other traditional support
    programs.
        The Coalition will actively be engaged in ensuring the
    implementations of the 2005 BRAC recommendations, Service
    transformation initiatives, global repositioning, and Army modularity
    initiatives not only take each beneficiary community into
    consideration, but also to advocate for beneficiaries significantly
    impacted by these initiatives.

              The Military Coalition urges the subcommittee to monitor the
            implementation of rebasing, BRAC, and service transformation
            initiatives to ensure protection of support services for all
            military members and their families.
                            survivor program issues
        The Coalition thanks the subcommittee for past support of
    improvements to the Survivor Benefit Plan (SBP), especially the NDAA
    for Fiscal Year 2005 provision that will phase out the SBP age-62
    benefit reduction in the next 2 years. This victory for military
    survivors is a major step forward in addressing longstanding survivor
    benefits inequities.
        But two serious SBP inequities remain to be addressed and the
    Coalition hopes that this year the subcommittee will be able to support
    ending the SBP-DIC offset and moving up the effective date for paid-up
    SBP to October 1, 2006.
        SBP-DIC Offset
        The Coalition was extremely disappointed that House and Senate
    conferees failed to make at least some progress in the NDAA for Fiscal
    Year 2006 to ease the unfair law that reduces military SBP annuities by
    the amount of any survivor benefits payable from the VA DIC program.
        Under current law, the surviving spouse of a retired member who
    dies of a service-connected cause is entitled to DIC from the VA. If
    the military retiree was also enrolled in SBP, the surviving spouse's
    SBP benefits are reduced by the amount of DIC (about $1,000 per month).
    A pro-rated share of SBP premiums is refunded to the widow upon the
    member's death in a lump sum, but with no interest. The offset also
    affects all survivors of members who are killed on Active-Duty. There
    are approximately 60,000 military widows/widowers affected by the DIC
    offset.
        The Coalition believes SBP and DIC payments are paid for different
    reasons. SBP is purchased by the retiree and is intended to provide a
    portion of retired pay to the survivor. DIC is a special indemnity
    compensation paid to the survivor when a member's service causes
    premature death. In such cases, the VA indemnity compensation should be
    added to the SBP the retiree paid for, not substituted for it. It's
    also noteworthy as a matter of equity that surviving spouses of Federal
    civilian retirees who are disabled veterans and die of military-
    service-connected causes can receive DIC without losing any of their
    purchased Federal civilian SBP benefits.
        In the case of members killed on Active-Duty, a surviving spouse
    with children can avoid the dollar-for-dollar offset only by assigning
    SBP to the children. But that forces the spouse to give up any SBP
    claim after the children attain their majority--leaving the spouse with
    only a $1,000 monthly annuity from the VA. Military members whose
    service costs them their lives deserve fairer compensation for their
    surviving spouses.

              The Military Coalition strongly supports legislation to
            repeal the SBP-DIC offset introduced by Senator Nelson (D-FL)
            (S. 185) and Representative Brown (R-SC) (H.R. 808),
            respectively. Enactment remains a top Coalition goal for 2006.
        30-Year Paid-Up SBP
        Congress approved a provision in the NDAA for Fiscal Year 1999
    authorizing retired members who had attained age 70 and paid SBP
    premiums for at least 30 years to enter ``paid-up SBP'' status, whereby
    they would stop paying any further premiums while retaining full SBP
    coverage for their survivors in the event of their death. Because of
    cost considerations, the effective date of the provision was delayed
    until October 1, 2008.
        As a practical matter, this means that any SBP enrollee who retired
    on or after October 1, 1978 will enjoy the full benefit of the 30-year
    paid-up SBP provision. However, members who enrolled in SBP when it
    first became available in 1972 (and who have already been charged
    higher premiums than subsequent retirees) will have to continue paying
    premiums for up to 36 years to secure paid-up coverage.
        The Military Coalition is very concerned about the delayed
    effective date, because the paid-up SBP proposal was initially
    conceived as a way to grant relief to those who have paid SBP premiums
    from the beginning. Many of these members entered the program when it
    was far less advantageous and when premiums represented a significantly
    higher percentage of retired pay. In partial recognition of this
    problem, SBP premiums were reduced substantially in 1990, but these
    older members still paid the higher premiums for up to 18 years. The
    Coalition believes strongly that their many years of higher payments
    warrant at least equal treatment under the paid-up SBP option, rather
    than forcing them to wait 4 more years for relief, or as many retirees
    believe, waiting for them to die off.
        By October 2006, a 1972 retiree already will have paid 25 percent
    more SBP premiums than a 1978 retiree will ever have to pay. Without
    legislative relief, those 1972 enrollees who survive until 2008 will
    have to pay 34 percent more than their 1978 counterparts.
        We hope that, with only 2 years remaining before the change becomes
    law anyway, Congress will provide at least this last modest measure of
    relief to ``Greatest Generation'' retirees who already have paid far
    more than their fair share of SBP premiums.

              The Military Coalition recommends a 2-year acceleration of
            the implementation date for paid-up SBP coverage, so that it
            takes effect on October 1, 2006.
        Final Retired Pay Check
        The Military Coalition believes the policy requiring recovery of a
    deceased member's final retired paycheck from his or her survivor
    should be changed to allow the survivor to keep the final month's
    retired pay payment.
        Current regulations require the survivor to surrender the final
    month of retired pay, either by returning the outstanding paycheck or
    having a direct withdrawal recoupment from his or her bank account. In
    most cases, the latter method is used, which often imposes a sudden,
    severe and unexpected financial hardship on the survivor.
        The Coalition believes this is an inappropriate and insensitive
    policy, coming at the most difficult time for a deceased member's next
    of kin. Unlike his or her Active-Duty counterpart, the survivor of a
    retiree receives no death gratuity to assist with transition expenses.
    Many older retirees have been able to provide little or no financial
    cushion for surviving spouses in the case of a sudden demise. Very
    often, the surviving spouse already has had to spend the final
    retirement check/deposit before being notified by the military finance
    center that it must be returned. Then, to receive the partial month's
    pay of the deceased retiree up to the date of death, the spouse must
    file a claim for settlement--an arduous and frustrating task, at best--
    and wait for the military's finance center to disburse the payment. Far
    too often, this takes extended time and strains the surviving spouse's
    ability to meet the immediate financial obligations in the wake of the
    death of the average family's ``bread winner.''

              The Military Coalition urges Congress to allow survivors of
            retirees to retain the full month's retired pay for the month
            in which the retired member dies.
                               retirement issues
        The Military Coalition is grateful to the subcommittee for its
    historical support of maintaining a strong military retirement system
    to help offset the extraordinary demands and sacrifices inherent in a
    career of uniformed service.
        Concurrent Receipt
        The Military Coalition applauds the progress the subcommittee has
    made in recent years to expand combat-related special compensation to
    all retirees with combat-related disabilities and authorize concurrent
    receipt of retired pay and veterans' disability compensation for
    retirees with disabilities of at least 50 percent.
        While the concurrent receipt provisions enacted by Congress benefit
    tens of thousands of disabled retirees, an equal number are still
    excluded from the same principle that eliminates the disability offset
    for those with 50 percent or higher disabilities. The fiscal challenge
    notwithstanding, the principle behind eliminating the disability offset
    for those with disabilities of 50 percent is just as valid for those
    with 40 percent and below, and the Coalition urges the subcommittee to
    be sensitive to the thousands of disabled retirees who are excluded
    from current provisions.
        We recognized that many in Congress are looking to the Veterans
    Disability Benefits Commission for recommendations on this issue, and
    the Coalition fully expects the Commission will validate the principle
    that a military retiree should not forfeit any portion of earned
    retired pay simply because he or she also had the misfortune of
    incurring a service-connected disability.
        But we are concerned that the recent 1-year extension of the
    Commission's work can only delay an equitable outcome further. In the
    meantime, we believe action is needed on at least two critical areas on
    which we believe there should be little question as to their propriety.
        As a priority, the Coalition asks the subcommittee to consider
    those who had their careers cut short solely because they became
    disabled by combat, or combat-related events, and were forced into
    medical retirement before they could complete their careers.
        Under current law, a member who is shot in the finger and retires
    at 20 years of service with a 10-percent combat-related disability is
    rightly protected against having that disability compensation from his
    or her earned retired pay.
        But a member who is shot through the spine, becomes a quadriplegic
    and is forced to retire with 19 years and 11 months of service, suffers
    full deduction of VA disability compensation from his or her retired
    pay. This is grossly inequitable.
        For chapter 61 (disability) retirees who have more than 20 years of
    service, the government recognizes that part of that retired pay is
    earned by service, and part of it is extra compensation for the
    service-incurred disability. The added amount for disability is still
    subject to offset by any VA disability compensation, but the service-
    earned portion (at 2.5 percent of pay times years of service) is
    protected against such offset.
        The Coalition believes strongly that a member who is forced to
    retired short of 20 years of service because of a combat disability
    must be ``vested'' in the service-earned share of retired pay at the
    same 2.5 percent per year of service rate as members with 20+ years of
    service, as envisioned in H.R. 1366. This would avoid the ``all or
    nothing'' inequity of the current 20-year threshold, while recognizing
    that retired pay for those with few years of service is almost all for
    disability rather than for service and therefore still subject to the
    VA offset.

              The Coalition urges the subcommittee to expand combat-related
            special compensation to members who were medically compelled to
            retire short of 20 years of service solely because of their
            combat-incurred disabilities, as envisioned in H.R. 1366.

        The Coalition also believes the subcommittee recognizes the
    inequity of the current situation in which members paid as 100 percent
    disabled retirees by virtue of being designated by the VA as
    ``unemployable'' face significant discrimination. For purposes of
    combat-related special compensation, they suffer no disability offset,
    but those with non-combat disabilities--alone among all other 100
    percent-disabled retirees--must wait many more years to see this
    inequity end.
        In the NDAA for Fiscal Year 2006, Congress reduced their 10-year
    wait to 6 years, and the Coalition doesn't want to appear ungrateful
    for that progress. However, we are extremely disappointed and perplexed
    that such blatant and unwarranted discrimination may be allowed to
    continue for 3 more years.

              The Coalition urges the subcommittee to end the disability
            offset to retired pay immediately for otherwise-qualifying
            members rated as ``unemployable'' by the VA.
        Former Spouse Issues
        The Military Coalition recommends corrective legislation to
    eliminate inequities in the Uniformed Services Former Spouse Protection
    Act (USFSPA) that were created through years of well-intended,
    piecemeal legislative action initiated outside the subcommittee.
        The Coalition supports recommendations in the DOD's September 2001
    report, which responded to a request from this committee for an
    assessment of USFSPA inequities and recommendations for improvement.
    The DOD recommendations to allow the member to designate multiple SBP
    beneficiaries would eliminate the current unfair restriction that
    denies any SBP coverage to a current spouse if a former spouse is
    covered, and would allow dual coverage in the same way authorized by
    Federal civilian SBP programs.
        The Coalition also supports DOD recommendations to require the
    Defense Finance and Accounting Service (DFAS) to make direct payments
    to the former spouses, regardless of length of marriage; require DFAS
    to deduct SBP premiums from the uniformed services retired pay awarded
    to a former spouse if directed by a court order; and permit a former
    spouse to waive SBP coverage.
        Also, DOD recommends that prospective award amounts to former
    spouses should be based on the member's grade and years of service at
    the time of divorce--rather than at the time of retirement. The
    Coalition supports this proposal since it recognizes that a former
    spouse should not receive increased retired pay that is realized from
    the member's service and promotions earned after the divorce.
        The Coalition believes that, at a bare minimum, the subcommittee
    should approve those initiatives that have the consensus of all
    military and veterans' associations. The Coalition would be pleased to
    work with the subcommittee to identify and seek consensus on other
    measures to ensure equity for both servicemembers and former spouses.

              The Military Coalition urges legislation to eliminate
            inequities in the USFSPA.
                                   conclusion
        The Military Coalition reiterates its profound gratitude for the
    extraordinary progress this subcommittee has made in advancing a wide
    range of personnel and health care initiatives for all uniformed
    services personnel and their families and survivors in recent years.
    The Coalition is eager to continue its work with the subcommittee in
    pursuit of the goals outlined in our testimony. Thank you very much for
    the opportunity to present the Coalition's views on these critically
    important topics.

        Senator Graham. Mr. Zerr.

     STATEMENT OF EDGAR M. ZERR, NATIONAL PRESIDENT, FLEET RESERVE
                              ASSOCIATION

        Mr. Zerr. Thank you, Mr. Chairman, Senator Nelson, and
    Senator Dole. I appreciate the opportunity to present the FRA's
    recommendation on the DOD health care budget. In addition to
    our brief written statement, FRA fully supports the more
    extensive The Military Coalition (TMC) testimony.
        The FRA appreciates the progress in recent years to improve
    pay, health care, and other benefits. We thank this
    distinguished subcommittee and professional staff for your
    great work on these enhancements. The FRA understands the
    challenges associated with rising health care costs but opposes
    drastic fee increases proposed in the defense budget.
        We're at war and the FRA believes there are other cost
    saving options as alternatives to this plan. These include
    establishing TRICARE as a true second payer to other health
    care insurance, negotiating for retail pharmacy discounts,
    improving the mail order pharmacy option, and accelerating DOD
    and Department of Veterans' Affairs (VA) cost-sharing
    initiatives. The fee increases are a major concern in the
    retiree communities and also a morale issue within the senior
    enlisted ranks. Active-Duty personnel view the plan as an
    erosion of their promised benefits before they retire.
        After 1 week, hundreds of respondents to the FRA's Web site
    health care survey have included comments with their surveys.
    One Active-Duty respondent wrote, ``I'm a third generation
    Navy, and after 30 years of service I'm extremely concerned
    about the erosion of medical and other benefits. The medical
    coverage was fundamental for my continued service after my
    initial enlistment. This, once again, is simply a break in the
    faith.'' Enlisted personnel who retired prior to major pay and
    benefit increases enacted since 1999 receive much less retired
    pay than those who have retired since.
        The FRA believes that funding health care and other
    programs for beneficiaries is part of the cost of defending our
    Nation and ensuring our freedoms. Military service is also much
    different than working in the corporate world and the benefit
    packages must reflect this.
        Thank you again for the opportunity to express concerns of
    our membership and I stand ready to answer any questions you
    may have.
        [The prepared statement of Mr. Zerr as follows:]

                      Prepared Statement by Edgar M. Zerr

                                  introduction

        Mr. Chairman and distinguished members of the subcommittee, thank
    you for the opportunity to present the Fleet Reserve Association's
    views on the fiscal year 2007 Defense Health System budget.
        The Fleet Reserve Association (FRA) is a congressionally chartered,
    non-profit organization, representing the interests of U.S. Navy,
    Marine Corps, and Coast Guard personnel with regard to pay, health
    care, benefits, and other quality-of-life programs.
        The FRA is the oldest and largest association representing enlisted
    members of the Sea Services whether on Active-Duty, in the Reserves,
    retired or veterans. In addition to its extensive legislative program,
    the Association sponsors annual scholarship and patriotic essay
    competitions, and recognition programs honoring the Navy Sailors and
    Recruiters of the Year, the Marine Corps Recruiters and Drill
    Instructors of the Year, and the Coast Guard Enlisted Persons and
    Recruiters of the Year.
        FRA is most appreciative of the subcommittee's exceptional efforts
    over several years to honor the government's health care commitments to
    all uniformed services beneficiaries. These enhancements represent
    great advancements that have significantly improved access to health
    care. The FRA particularly appreciates the subcommittee's outstanding
    measures to address the needs of standard beneficiaries as well as
    provide increased access for members of the Reserve components.
        While much has been accomplished, the Association is equally
    concerned about making sure the enhancements are implemented and the
    desired positive effects actually achieved. FRA also believes some
    additional initiatives are essential to providing equitable and
    consistent health care for all categories of TRICARE beneficiaries,
    regardless of age or geography. The FRA looks forward to continuing our
    cooperative efforts with the members of the subcommittee and staff in
    pursuit of this common objective.
        FRA is a founding member and active participant in the Military
    Coalition (TMC) and fully endorses the TMC health care testimony which
    has been submitted to this subcommittee.
                 adequately funding the defense health program
        Once again, a top FRA priority is to work with Congress and the
    Department of Defense (DOD) to ensure full funding of the Defense
    Health Program to meet readiness needs--including full funding of both
    direct care and purchased care sectors, providing access to the
    military health care system for all uniformed services beneficiaries,
    regardless of age, status or location, and Graduate Medical Education.
    A fully-funded health care benefit is critical to readiness and the
    retention of qualified uniformed services personnel.
        The DOD, Congress, and FRA all have reason to be concerned about
    the rising cost of military health care. But it is important to
    recognize that the problem is a national one, not military-specific.
    It's also important, in these times of focusing on deficits, to keep in
    perspective the government's unique responsibility to provide health
    care and other benefits for a military force that serves and has served
    under extraordinarily arduous conditions to protect and preserve our
    freedoms and security. Military service is also much different than
    work in the corporate world.

              The FRA strongly recommends the subcommittee continue to
            ensure full funding of the Defense Health Program.
                     fra opposes the tricare fee increases
        The DOD is proposing a significant increase in fees paid by retired
    uniformed services beneficiaries, including doubling or tripling
    enrollment fees for TRICARE Prime, and tripling or quadrupling fees for
    TRICARE Standard, along with higher prescription co-pays. FRA believes
    this plan would result in a drastic increase in retiree costs,
    especially during a war and particularly since there have been no
    enrollment fee hikes since TRICARE was established in 1995. Providing
    and funding health care benefits for all beneficiaries is part of the
    cost of defending our Nation.
        FRA also strongly opposes the plan to impose a $250 enrollment fee
    for veterans in Priority Groups 7 and 8 within the Department of
    Veterans' Affairs (VA) Health Care System in fiscal year 2007. The
    administration's request also includes a recommendation to nearly
    double prescription drug co-payments from $8 to $15, for a 30-day
    supply--a plan FRA also opposes.
        According to VA estimates, 200,000 veterans would be discouraged
    from seeking VA health care, and more than a million veterans currently
    enrolled in priority groups 7 and 8 would drop out of the system if
    this fee structure were implemented. Beneficiaries in these priority
    groups are veterans, and FRA adamantly opposes shifting costs to them
    for care they've earned in service to our Nation.
                             other funding options
        FRA believes that the DOD has not sufficiently investigated other
    options to make TRICARE more cost-efficient as alternatives to shifting
    costs to young retirees.
        A detailed list of alternatives to reducing cost is included in the
    TMC statement and FRA draws attention to the following:

             Promote making TRICARE a true second-payer to other health
            insurance. FRA questions DOD's assumptions about driving some
            150,000 retirees with other health care coverage away from
            TRICARE, and believes there are other ways to achieve this goal
            to achieve significant budget savings.
             Negotiate with drug manufacturers for retail pharmacy
            discounts, or change the law to mandate Federal pricing for the
            retail pharmacy network. FRA believes this change could result
            in significant savings to the Defense Health System.
             Reduce/eliminate all mail-order co-pays to boost use of this
            lowest cost option for beneficiaries to receive prescription
            medications. The elimination of all co-pays will help drive
            many more beneficiaries to this pharmacy benefit option.
             Accelerate DOD/DVA cost sharing initiatives to ensure full
            implementation of seamless transition, including electronic
            medical records and one stop military discharge physicals.

        There is confusion about the interpretation of the mandatory
    funding aspect of TRICARE for Life and the costs included in the DOD
    budget which for fiscal year 2006 totals $38 billion. Office of
    Management and Budget requires that TRICARE for Life trust fund
    allocation be included in the DOD budget, instead of the Treasury
    Department, which significantly increases the total DOD budget.
        The proposed future fee adjustments which are pegged to health care
    inflation will also significantly erode the value of retired pay,
    particularly for enlisted retirees who retired prior to larger and
    targeted recent pay adjustments enacted to close the pay gap. Military
    service is very different from work in the corporate world and requires
    service in often life threatening duty commitments and the associated
    benefits offered in return must be commensurate with these realities.

              FRA urges DOD to identify other ways to achieve budget
            savings without shifting costs to younger retirees and to
            implement policy/legislative changes to make TRICARE a second
            payer to other health insurance.
                                  troop morale
        The proposed health care fee increases are a morale issue within
    the senior enlisted Active-Duty communities who view this as reducing
    the value of their future retiree benefits. They are aware of the
    government's failures to honor past commitments and sensitive to
    threats to their retiree benefits.
        Eroding benefits for career service can only undermine long-term
    retention/readiness. Today's sailors, marines, and coast-guardsmen are
    very conscious of Congress' actions toward those who preceded them in
    service. Strong support for the enactment of TRICARE for Life was based
    in part on the fact that inadequate retiree health care was affecting
    attitudes and career decisions among Active-Duty troops. Today, despite
    the significant progress in restoring retiree benefits arguing that
    funding for retiree health care and other promised benefits negatively
    impacts military readiness is fueling resentment and anger in retiree
    communities and raising concerns within the senior career enlisted
    force about their future benefits.
    Health Care Survey Responses
        There is a strong negative reaction to the proposed fee increases
    within the Senior Enlisted and retiree communities and to gauge our
    member's reaction to the plan, FRA launched a Web survey on 2 March
    2006. To date, 539 have responded.
        One Active-Duty survey respondee reflects these sentiments: ``I am
    third generation Navy, and after 30 years of service, I am extremely
    concerned about the erosion of medical, as well as other benefits. I
    have a very unique historical view of how much benefits that were
    believed to be everlasting for both Active and retired servicemembers
    have been decreased or terminated. The medical coverage was fundamental
    for my continued service after my initial enlistment. This once again
    is simply a break in the faith. This philosophy needs to be suspended
    and the faith re-affirmed for past present and future military
    generations.''
         A retiree stated: ``My spouse and I have relied on the Navy and
    the Military Health Care System to provide us with all our medical
    needs. We expect that health care to continue without monetary
    increase, throughout our remaining years. We both provided our country
    with a valuable service in the defense posture of this country. We
    stood ready at the call without complaint. We now expect the high
    quality of care that we were led to believe would be available at no
    cost throughout our remaining years if we used the Military Health Care
    System and facilities. I do not expect to absorb increasing cost for
    health care, when my retired pay does not increase with the cost of
    health care increases.''
        On the question of the importance of health care benefits on
    respondents' decisions to remain in the military, 86 percent indicated
    that health care influenced their decision to remain in the military as
    of 9 March 2006.
                            tricare standard issues
        The TRICARE Standard option is long recognized as the entry to the
    DOD health care benefit per the earlier Civilian Health and Medical
    Program of the Uniformed Services (CHAMPUS) Program. Provisions of the
    NDAA for Fiscal Year 2006 address the needs of the 3.2 million TRICARE
    Standard beneficiaries, many of whom find it difficult or impossible to
    find a Standard provider. The FRA is firmly committed to working with
    Congress, DOD and the Manage Care Support Contractors (MCSCs) to
    facilitate prompt implementation of these provisions. DOD will be
    required to track provider participation (including willingness to
    accept new patients), appoint a specific official responsible for
    ensuring participation is sufficient to meet beneficiary needs,
    recommend other actions needed to ensure the viability of the Standard
    program, develop an outreach program to help beneficiaries find
    Standard providers, educate them about the benefit, and provide problem
    resolution services for those experiencing access problems or other
    difficulties.
        FRA believes one reason for provider non-participation is the lack
    of current information, or previous bad experience with TRICARE in
    areas that have subsequently seen substantial improvement. DOD is
    currently developing an annual newsletter for TRICARE Standard
    beneficiaries and FRA recommends the development of a similar
    newsletter to providers who have submitted claims to enhance provider
    education.
        Physicians consistently report that TRICARE is virtually the lowest
    paying insurance plan in the country. While TRICARE rates are tied to
    Medicare rates, the MCSCs make a concerted effort to persuade providers
    to participate in TRICARE Prime networks at a further discounted rate.
    Since this is the only information providers receive about TRICARE,
    they see TRICARE as even lower paying than Medicare. Congress has acted
    to avoid Medicare physician reimbursement cuts for the last 3 years,
    but the failure to provide a payment increase for 2006 is another step
    in the wrong direction. The underlying reimbursement determination
    formula requires a legislative fix.

              The FRA urges the subcommittee's continued oversight to
            ensure DOD is held accountable to promptly meet requirements
            for beneficiary education and support, and particularly for
            education and recruitment of sufficient providers to solve
            access problems, and to exert what influence it can to persuade
            the Ways and Means/Finance Committees to reform Medicare/
            TRICARE statutory payment formula.
                                pharmacy issues
        The current TRICARE Pharmacy co-pays are, Military Treatment
    Facility, no cost to any beneficiaries, TRICARE Mail-Order Pharmacy,
    generic $3, brand name $9 and non-formulary $22 (up to a 90-day
    supply), and TRICARE Retail Pharmacy, generic $3, brand name $9 and
    non-formulary $22 (up to a 30-day supply).
        As noted above, FRA vigorously opposes increasing retiree cost
    shares that were only recently established. The restoration of retiree
    pharmacy benefits helped restore Active-Duty and retired members' faith
    that their government's promises of health care for life would be
    honored.
        The FRA very much appreciated the efforts of the subcommittee to
    protect beneficiary interests by establishing a statutory requirement
    for a Beneficiary Advisory panel (BAP). A member of FRA's National
    Headquarters Staff (Bob Washington) serves on the panel which provides
    an opportunity for beneficiary representatives to voice concerns about
    any medications DOD proposes moving to the third tier ($22 co-pay). The
    Association was further reassured when, during implementation planning,
    Defense officials advised the BAP that they did not plan on moving many
    medications to the third tier.
        Unfortunately, this has not been the case. To date, DOD has moved
    28 medications to the third tier, with an additional 13 pending
    approval. While the BAP did not object to most of these, the BAP input
    has been universally ignored with regard to a small number of cases
    when it recommended against a proposed reclassification. In at least
    one instance, the medications moved to the third tier affected 98
    percent of the beneficiaries with prescriptions in that particular
    class of drug. The FRA is also concerned that the BAP has been denied
    access to information on relative costs of the drugs proposed for
    reclassification and the Defense Department has established no
    mechanism to provide feedback to the BAP on rationale for ignoring its
    recommendations.
        FRA believes the subcommittee envisioned that the BAP input would
    be given more serious consideration in the Department Uniform Formulary
    decision process, but that has not happened.

              The FRA urges the subcommittee to continue to reject
            imposition of cost shares in military pharmacies and oppose
            increasing other pharmacy cost shares that were recently
            established.
                          reserve health care benefits
        The extension of the TRICARE Reserve Select (TRS) coverage to all
    member of the Selected Reserve in the NDAA for Fiscal Year 2006 is very
    important particularly because DOD must rely more heavily upon the
    Guard and Reserve personnel to prosecute the war and sustain other
    operational commitments. Deployments are also becoming longer and more
    frequent and these personnel are indispensable to our Armed Forces and
    their benefits should reflect this.
        FRA has concerns regarding the manner by which TRS premiums are
    set. Currently, the Defense Department adjusts TRS premiums based on
    annual adjustments to the basic Federal Employees Health Benefit Plan
    (FEHBP) insurance option. The Association believes the Department has a
    higher obligation to restrain health cost increases for currently
    serving military members who are being asked to leave their families
    and lay their lives on the line for their country, and that their
    health premiums should be pegged to the level of the Consumer Price
    Index.
        We believe Congress is missing an opportunity to reduce its health
    care costs (for retired members as well as for Selected reservists) by
    failing to authorize eligible members the option of electing a partial
    subsidy of their civilian insurance premiums in lieu of TRICARE
    coverage. Many members would be motivated to elect this option,
    especially if their family's current health care provider is reluctant
    to participate in TRICARE. Rather than having to find a new provider
    who will accept TRICARE, many beneficiaries may prefer a partial
    subsidy (at lower cost to DOD) to preserve the convenience and
    continuity of their family's health care.

              FRA recommends development of a cost-effective option for DOD
            to subsidize premiums for member's private insurance as an
            alternative to TRICARE Reserve Select coverage, to ensure
            consistency of benefits and continuity of care for Guard and
            Reserve members and their families in an environment of lengthy
            and frequent deployments.
                                   conclusion
        As previously noted, FRA strongly supports the more extensive TMC
    statement and urges the distinguished subcommittee's attention therein
    to consistent benefit access, mental health, and DOD/VA transition
    which is especially important to injured service personnel returning
    from Iraq and Afghanistan.
        The Association reiterates its profound gratitude for the
    extraordinary progress this subcommittee has made in advancing a wide
    range of health care initiatives for all uniformed services personnel
    and their families and survivors. The FRA is eager to work with the
    subcommittee to further improve military health care for all
    beneficiaries. Thank you again for the opportunity to present the FRA'
    views on these critically important topics.

        Senator Graham. Thank you all. That was well done.
        Senator Nelson?
        Senator Ben Nelson. Admiral Ryan, you submitted this list
    of 16 suggestions about increasing efficiency within the
    program that would help reduce the costs. I wonder if any of
    the others of the panel might have a list or suggestions about
    improving the efficiency of the program to, once again, hold
    the line on cost increases or actually reduce the costs. Ms.
    Schmidli?
        Ms. Schmidli. Thank you. Our efficiencies are listed in our
    statement. Thank you.
        Senator Ben Nelson. Admiral McCarthy?
        General McCarthy. Senator Nelson, we commented specifically
    on the gains that we believe could be made in the pharmacy area
    and we certainly concur with that.
        Senator Ben Nelson. Admiral Ryan, you've already submitted
    yours. Mr. Zerr, do you have any particular thoughts?
        Mr. Zerr. We support the list that's in The Military
    Coalition statement.
        Senator Ben Nelson. Thank you. There's one nuance in the
    program that treats medically retired personnel and their
    families maybe inequitably. On the one hand, personnel who have
    been wounded in action will likely require costly medical
    attention throughout the course of their lives. On the other
    hand, these same personnel suffer their injuries through
    selfless service to the Nation and we owe them and their
    families an even greater level of care, yet the increased fees
    apply to those who are wounded in action to the same degree
    that they apply to all retirees. Should there be a different
    enrollment fee and deductibles for military personnel who are
    medically retired because of injuries versus those who retired
    from conditions not related to combat? That is somewhat of a
    loaded question, but I'm eager to get your answers.
        Admiral Ryan, do you have any thoughts?
        Admiral Ryan. Senator, it's a very good point. I think
    that's why some of the other panelists, in prior discussions
    that we had with Senator Graham and Dr. Chu, I thought NMFA
    elegantly stated why the three-tier system is not appropriate.
    Even officers, with folks that are medically retired, or even a
    widow that would come under this three-tier system and be
    listed as an officer, yet their income is a lot less.
        So the tiered system, I think, is one thing that should be
    different and certainly anything that impacts folks that have
    been retired with a disability, I think they have been
    frequently left behind, particularly those that don't earn a
    full retirement. We would have to look at that very carefully.
        Senator Ben Nelson. Mr. Zerr, do you have any particular
    thoughts?
        Mr. Zerr. Senator, the FRA believes that the enlisted
    personnel have served a career with great sacrifice and low pay
    and with the promise of being taken care of for their
    sacrifice. This is the reason we adamantly oppose an increase
    in fees.
        Senator Ben Nelson. Ms. Schmidli?
        Ms. Schmidli. Yes, thank you. To support wounded and
    injured servicemembers and their families, NMFA recommends that
    Congress extend the 3-year survivor health care benefit to
    servicemembers who are medically retired and their families,
    and direct DOD to establish a family assistance center at every
    MTF caring for wounded and servicemembers.
        Senator Ben Nelson. Those are my questions, Mr. Chairman,
    thank you.
        Senator Graham. Thank you all. Thank you, Senator Nelson. I
    thought we had a really good meeting a couple of weeks ago. I
    got a lot out of it. To give you some kind of overview of my
    thinking on this--I'll ask some specific questions here in a
    moment, and try to establish a baseline.
        Number one, the idea that this is a commercial transaction
    is not what I'm about. I don't consider our analysis here as to
    whether or not this is a viable commercial benefit. We're not
    talking about this in terms of working for a company, we're
    talking about serving your country. I consider it part of an
    overall national security program that we're trying to develop
    for the 21st century. Within that program you have several
    things you have to worry about. Recruiting and retention are of
    great concern to me, as they are to you, treating those who
    have gone before well, and having a sustainable program.
        Erosion of benefits is coming. The question is, will it
    come in a way that people can afford, and will we have a soft
    landing or will we have a hard landing? Because the growth in
    the health care budget in the DOD is exponential, according to
    them, the idea of having a third person look at it sounds
    pretty good to me. I'll sit down with Senator Nelson and see if
    we can get an independent third view on this.
        Four hundred people have told me Social Security is going
    broke--I just can't find anybody in Congress that believes it.
    When you ask the American Association of Retired Persons
    (AARP), they don't really believe it either, but I do. I'll
    just give you that as an example. I think it would be really
    good to have someone independent look at the actual nature of
    medical costs.
        Second, I think your suggestions about how to reform and
    bring efficiency about need to be a source of serious debate, a
    give and take with the DOD. I will suggest that Senator Nelson
    and I host another conference focusing on your list of
    suggestions on how to improve care and make the system more
    efficient. Every dollar you can save is one less dollar we have
    to worry about coming out of the operational budget or coming
    out of your pocket. I'm a big believer of cleaning up your act
    before you ask for more. We'll see what we can do there.
        The last thing is sustainability. I just turned 50 and I'm
    feeling it every day, but I've come to this conclusion: why
    should I ask someone coming after me to do something I'm
    unwilling to do on my watch? That includes Social Security,
    Medicare, military health care benefits--you name it. Our
    Nation has neglected many problems to the point that now
    they're consuming our budget. Fifty-three percent of the
    Federal budget is some form of entitlement. This is legally not
    an entitlement, but you have a right and every expectation to
    be treated fairly and honestly. The tie goes to the
    servicemember. As a Nation, we have to make some hard choices.
        I want to throw some numbers out and get everyone to
    respond to the numbers, if they can, just to see if we can
    define the problem. Do you agree with the idea that the
    military member, before TRICARE came along, was paying 27
    percent of their health care cost and now they're paying 12
    percent? Does anybody disagree with that? I've been told that.
    I don't know if it's true or not.
        General McCarthy. Sir, I'd take that on in the sense that I
    don't have, and I don't think very many of us have, the ability
    to really independently verify that. To me, those are some of
    the central questions--was it really 27 percent at the outset,
    was that the intent of Congress, and 27 percent of what? Until
    we really get our arms around that, I'm worried about the
    numbers.
        Senator Graham. I want to get my arms around the numbers--
    but the concept of post-1995, that the military health care
    budget has increased because the amount of out of pocket has
    decreased and see if that dynamic is real.
        I guess we'd have the same answer. Do you believe that the
    military health care budget is now $38 billion and 10 years ago
    it was 4 percent of the budget, and today it's 8 percent. Does
    anybody disagree with that?
        Admiral Ryan. Mr. Chairman, I think the bottom line on
    these questions about percentages--statistics--are kind of like
    bricks: you can use them to build a foundation or break a plate
    glass window.
        Senator Graham. Right.
        Admiral Ryan. We don't think there's enough granularity in
    their arguments, enough openness in what they're talking about
    when they compare a system in 1995 that was CHAMPUS to a system
    in 2005 that is TRICARE when they don't talk about the number
    of beneficiaries that have come into the system. That level of
    trust is not there on the openness of the DOD to explain how
    they got these numbers. We can't talk to our members or educate
    our members when we don't have trust in the granularity of
    their arguments.
        Senator Graham. What we're going to have to do is establish
    that trust and it'd be a great exercise because I'm pretty sure
    the numbers--$38 billion in last year's budget, right? There's
    not much debate about the number $38 billion and----
        Admiral Ryan. Well, it depends, sir, on what you counted in
    1995 versus what you count as the money.
        Senator Graham. Fair enough.
        Admiral Ryan. The other thing I would say in the costs that
    cause a lot of hardships and heartache with our members is when
    DOD talks about premiums and costs, they neglect to talk about
    the premiums paid upfront by all of these folks have testified
    to, in service. They say we're going to catch up, and we're
    going to norm these numbers. So they devalue the upfront
    premiums that, as you said, civilians don't pay.
        Senator Graham. I'm not going to devalue it, because it's
    real. It's not a commercial transaction, but I'm not going to
    sit here and tell you that I believe the Federal Government has
    promised every military retiree free health care, they don't
    have to pay a nickel for the rest of your life. There's two
    competing concepts here and, to me, the middle ground is the
    answer. This is not a commercial business transaction, for me,
    and I don't think it is for Senator Nelson. It's a sustainable
    program that will help recruiting, retention, and not unfairly
    compete with operational needs of the budgets to come, to win
    the wars to come.
        Do you all agree that retirement pay has increased about 32
    percent over the last decade?
        Mr. Zerr. Senator, we don't have the data to dispute that.
        Senator Graham. Do you all agree that they're asking for a
    115-percent increase in premiums?
        Admiral Ryan. Somewhere between 100 and 300.
        Senator Graham. I figured you might agree with that one.
    That's obviously something that I don't think's going to happen
    over a 2-year period. I threw out these numbers because that's
    what we're going to be working off here. Since 1995 there's
    been no premium increases in TRICARE Prime, is that correct?
    I'm trying to establish a baseline of what the real facts are
    in terms of operational pressure, what we can save through
    efficiency and reform, and disease management, best business
    practices. We're going to have a real serious discussion about
    how to extract savings, then we're going to turn to the groups
    and we're going to ask what's a fair way to manage this program
    not from commercial benefit comparisons, but from
    sustainability in terms of what's fair for the retired force
    and what's fair for those who are fighting the wars of the
    present and the future.
        I appreciate the comments you have all given to the
    subcommittee and I will end with this thought. I am convinced
    that adjustments need to be made across the board and if we
    don't do it now, it will be unbelievably difficult in the
    future. It's just not fair to those who are going to serve in
    the future and those retirees now, to have it fall on them all
    at once. Final plea: let's just work together.
        Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman. Let me suggest
    that the idea of a study makes a great deal of sense. I think
    we need to know the statistics here so we know what the
    percentages are to begin with. Then I think it's probably
    important to do some sort of an actuarial review of what the
    experience is so that we know what the base of losses are in
    terms of what is being calculated, so we know what we're
    dealing with. If we can get that kind of a study, I think we
    can satisfy ourselves that we're at least working with the base
    numbers to begin with.
        The second thing is your suggestions about how to adjust
    increases make a great deal of sense. I think we have to see
    what those translate to in terms of dollars, but stair-stepping
    increases is almost always better than a cliff-drop when you
    see it drop after 10 years. The suddenness of this, as well as
    the size of it, is enough to significantly impact retirement
    planning, and benefits, in reality of people being on retired
    income. We have to have a better way of dealing with any kind
    of cost increases or, if we should get so lucky with
    efficiencies, to have cost decreases, and that it's adequately
    reflected in real time over a period of time, rather than all
    at once with the suddenness that we've experienced at this
    time. I'm looking forward to working with all of you and with
    my colleagues to affect that kind of a study and get more
    information before any kind of decision is made.
        Senator Graham. I'll just bootstrap on what he said and
    open it up for any final comments here. Before you would ask
    for fee increases, you would want to go down the list of
    efficiencies and reforms first. I'm not so sure we've done that
    in a collaborative fashion, but we will, I promise you. Get
    some idea of what the real needs are after you scrub the system
    in a very serious manner. Then the next approach would be, if
    their fee increase is necessary, how do you fairly implement
    them without degrading retention and recruiting and overly
    burdening the retired force and making the program sustainable?
        Would you give us some names of independent groups that you
    would like to review the numbers? I would like your view of who
    would be an independent group to come in and look at all these
    budget numbers and see what's apples to apples and what's
    oranges to oranges.
        Any final comments?
        General McCarthy. Mr. Chairman, we mentioned in our written
    statement that we thought that the Government Accountability
    Office (GAO) could be the group that does a study or review.
    I'm sure there are others, but that was our suggestion.
        Senator Graham. Is that a consensus suggestion?
        Admiral Ryan. My government relations team has a lot of
    faith in the Congressional Research Service.
        Ms. Schmidli. We would also agree with looking at the GAO.
        Senator Graham. Two to one. Well, anyway, bottom line is
    that you're very open-minded about having someone within
    Congress looking at it. That's probably a good idea.
        Any other ideas?
        Ms. Schmidli. I would like to encourage you to look over
    NMFA's statement, because I believe they have addressed some of
    your thoughts and issues and laid out good proposals. Again, I
    thank you for this opportunity.
        Senator Graham. What we haven't done is gotten everybody in
    a room and gone over efficiencies. I want the DOD and all of
    you in a room, and I want the proposals out on the table so we
    can go through them, literally, one by one, and you can tell us
    why you can do that and why you can't do that. At the end of
    the day we'll have gone through the list and I hope you'll have
    some confidence that people like me and Senator Nelson want to
    make sure that fee increases, if they're to come, are looked at
    first.
        Admiral Ryan. Mr. Chairman and Senator Nelson, I want to
    thank you both for your leadership in taking this kind of time
    to look at this subject. It truly is important. I think as the
    months go on, it's going to become even more important because
    the risk to the All-Volunteer Force in this prolonged war is
    something that I do not believe the Defense Department has been
    articulate enough about the risks that we're incurring.
    Anything that sends this in the wrong direction would be
    critical to it. The fact that you've taken this amount of time
    to look at this subject that's so important to every segment of
    the military community sends a very encouraging signal to us in
    The Military Coalition.
        Senator Graham. I think it's the most important thing I'll
    do in my first term. If we don't get it done by my first term
    we've missed the window. I have 3 more years left, so that
    gives you the time frame, all right?
        Mr. Zerr. I'd like to thank the chairman for his service
    and for taking the time to hear our statements. Thank you also,
    Senator Nelson.
        Senator Graham. Anything else? This hearing is to be
    continued. We'll set up the next meeting to look at the
    efficiencies and reforms not only to save money but to improve
    service. The thing about TRICARE Prime that I think people like
    is that they're getting more services for their money and I
    want to continue down that road.
        At this point in time, I'd like to ask that the prepared
    statement of Richard M. Dean, Executive Director of the Air
    Force Sergeants Association, be submitted for the record.
        [The prepared statement of Mr. Dean follows:]

               Prepared Statement by CMSGT (Ret.) Richard M. Dean

        Mr. Chairman and distinguished subcommittee members, on behalf of
    the 130,000 members of the Air Force Sergeants Association (AFSA),
    thank you for this opportunity to offer the views of our members on the
    fiscal year 2007 priorities of the Department of Defense (DOD). This
    hearing will address issues critical to those serving and who have
    served our Nation. AFSA represents Active-Duty, Guard, Reserve,
    retired, and veteran enlisted Air Force members and their families.
    Your continuing efforts toward improving the quality of their lives has
    made a real difference, and our members are grateful. In this
    statement, I will list several specific goals that we hope this
    committee will pursue for fiscal year 2007 on behalf of current and
    past enlisted members and their families. The content of this statement
    reflects the views of our members as they have communicated them to us.
    As always, we are prepared to present more details and to discuss these
    issues with your staffs.
                               health care issues
    Defense Health Program Funding
        AFSA urges the subcommittee to ensure continued full funding for
    Defense Health Program needs. AFSA maintains that this nation can
    afford to and must be dedicated to funding the weapons systems and the
    military health care system. We strongly recommend against DOD's desire
    to establish an annual enrollment fee for TRICARE Standard. We urge the
    subcommittee to require DOD to pursue greater' efforts to improve
    TRICARE and find more effective and appropriate ways to make TRICARE
    more cost-efficient without seeking to shift the burden to those who
    have already paid a great price for their retirement health care
    benefits. Additionally, the DOD plan is based upon questionable
    assumptions of prospective changes in human behavior-a dangerous way to
    steer a fiscal course. Furthermore, if the assumptions upon which the
    DOD TRICARE plan is based are incorrect, military beneficiaries would
    likely face an ever-increasing cost for benefits they already paid for
    by facing unlimited liability for an entire career. We can tell you
    that when DOD broadcast that it can save retiree health care dollars by
    driving hundreds of thousands of retirees away from TRICARE, many heads
    were shaking in incredulity and disgust.
    Morale, Retention, and Recruiting is On the Line.
        AFSA representatives often visit Air Force bases. Since DOD's plans
    were ``leaked'' in November, then formally proposed coincident with the
    President's budget, we have witnessed an ever-growing furor among the
    currently serving members of the military. Frankly, those who are
    already career committed are disgusted and extremely upset about DOD's
    plans. The health care benefit is particularly important for enlisted
    (noncommissioned) retirees who generally have less education, lower
    retirement pay, and are more dependent on the value of their retirement
    benefit-particularly health care. The DOD TRICARE Plans have just let
    those who are already career-committed know that the value of their
    earned retirement will be dealt a severe blow if DOD has its way. Those
    who are at the mid-career point and making the very important
    reenlistment decision (the one that will lead to a career) are
    reassessing their plans. The feeling of many is that if DOD can make
    such a draconian change for those currently serving, there is no reason
    to believe that DOD will not assault other retirement benefits. Of
    course the lower-ranking soldiers, sailors, airmen, and marines see how
    their bosses are being treated, decreasing the probability that they
    will make the military a career. Finally, we anticipate a definite
    recruiting impact should the DOD plans be approved. It has been said
    that easily half of those who enter the military came from military
    families. That being the case, one can only imagine what advice the
    moms and dads will give their kids about serving in the military for a
    company that cannot be trusted and does not advocate in their best
    interests.
    Promoting TRICARE Standard Providers
        One of the great problems with TRICARE itself is that many doctors
    refuse to participate because it is not worth their while. AFSA urges
    this subcommittee to require DOD to eliminate TRICARE-unique
    administrative requirements that deter provider participation and thus
    contribute to denying beneficiaries access to care. Further, DOD should
    be instructed to launch a vigorous education outreach effort for
    providers who will not see TRICARE patients, highlighting specific
    improvements in claims/payment processing timeliness. Finally, it is
    extremely important that reimbursement rates for providers be increased
    to encourage provider participation.
    Range of Covered Services
        We urge the subcommittee to align TRICARE coverage to at least
    match that offered by Medicare in every area. The current system is
    confusing and very limiting for beneficiaries. Both Medicare and
    TRICARE are government health care programs, and it makes sense that
    both programs offer identical covered services.
    Pharmacy Copayments
        AFSA asks the subcommittee to prevent DOD plans to once again
    change the copayment rates for prescriptions until all medications are
    available in the mail order program and limiting any future pharmacy
    copayment increases to the lesser of the percentage increase in basic
    payor retired pay, rounded down to the next lower dollar. The coalition
    recommends eliminating beneficiary copayments in the mail-order
    pharmacy system for generic and brand name medications to incentivize
    use of this lowest-cost option and to generate substantial cost
    savings.
    Oldest Retirees
        Without question, for decades military career counselors enticed
    members into staying in the military by promising certain career
    benefits. DOD maintains that such promises were invalid and nobody was
    authorized to make these promises. One promise was free, lifetime
    health care for the retiree and spouse. While those promises were made
    and, subsequently unfulfilled, Congress' passage of TRICARE for Life in
    the National Defense Authorization Act (NDAA) for Fiscal Year 2001 was
    a major boon to military retirees, especially for the noncommissioned
    members we represent. However, as evidenced in Colonel Bud Day's
    lawsuit on the retiree health care promise, the courts agreed that
    while such promises were no doubt made, it would be up to Congress to
    remedy the situation. While not under the purview of this committee,
    AFSA supports the provisions of S. 407 and H.R. 602 which would exempt
    those retirees who entered military service prior to December 7, 1956,
    from having to pay Medicare Part B.
    Health Care Options
        An alternative way for DOD to reduce its health care mission
    expenses would be for Congress to open up the Federal Employees Health
    Benefits Plan coverage to military retirees. If this is done, however,
    in order to protect the earned military career benefit, military
    retirees and their families should be required to pay no more than they
    would for TRICARE.
    Dental Care Support
        AFSA asks this committee to take a serious look at the dental care
    program for military members and their families. Some members report
    that the reimbursement rates for providers are not adjusted to the
    various regions. That being the case, dentists avoid participation in
    the program. The situation in Alaska, in particular, has been brought
    to our attention; however, the situation needs to be examined across
    the board to determine where there are inadequate providers to support
    the families of military members and the retirees in each region.
    Optometry Benefit for Retirees
        The earned career military benefit does not include a funded
    retiree optometry benefit. This is certainly fundamental to the health
    and well-being of those who have served, and AFSA requests this
    subcommittee's consideration toward directing the implementation of
    such a benefit.
                                education issues
        A Montgomery G.I. Bill Enrollment Opportunity for Veterans
    Educational Assistance Program-Era Military Members. The education
    program for military members that preceded the Montgomery G.I. Bill
    (MGIB) was the Veterans Educational Assistance Program (VEAP). This was
    a program where you put in up to $2,700 and the government matched the
    amount you used for education on a two-for-one basis. The maximum
    government contribution was $5,400. Hundreds of thousands of military
    members declined enrollment in that program due to very poor
    educational counseling. Many tell us they were advised by education
    officials not to enroll in the VEAP since a better program was coming
    along. Unfortunately, when the MGIB came along, those who didn't enroll
    in the VEAP were not allowed to enroll in the far-more-beneficial MGIB.
    DOD estimates last year indicated that there are still serving between
    50,000 and 70,000 servicemembers who declined enrollment in VEAP. S.
    2091, sponsored by Senator Tim Johnson would correct this unfortunate
    situation. These members served since the mid 1980s, helped preserve
    peace, and deserve an opportunity to enroll in the MGIB program. AFSA
    urges the subcommittee to provide that opportunity.
    Correct MGIB Enrollment Procedures
        At basic military training or boot camp, new servicemembers must
    make a decision. If they want to enroll in the MGIB, they must agree to
    have $100 per month deducted from their pay for each of their first 12
    months of military service. This is twice as difficult for
    noncommissioned members because they make roughly half the pay of a
    newly commissioned officer. We urge the subcommittee to either
    eliminate the $1,200 user fee or allow enlisted members to make the
    payments over a 24-month period.
    Standardize the MGIB for all Enrollees
        Realizing the far-more-beneficial aspects of the MGIB, in recent
    years, Congress gave those who were once enrolled the VEAP an MGIB
    enrollment opportunity. Unfortunately, these former VEAPers were
    excluded from one aspect of MGIB enrollment: the ability to pay more to
    get more educational coverage. We urge the subcommittee to extend the
    ``buy up'' option to all MGIB enrollees.
    Allow Transferability of MGIB Benefits to Family Members
        AFSA believes the MGIB benefit is earned, and military members
    ought to also be able to share the benefit with their family members,
    if they chose to do so. It would certainly serve to improve the quality
    of the lives of noncommissioned families. Transferability could be
    offered as a career incentive, should the subcommittee choose to act on
    this. For example, transferability could become an aspect of the
    program for all enrollees after they complete 12 or 13 years in
    service.
    Full Impact Aid Funding
        Impact Aid is supplemental funding provided to local school
    districts to compensate for the impact of having military members in
    that community. Local schools are primarily funded through property
    taxes. Those military members who reside on base do not pay into the
    property tax base. Recognizing this, each year Congress has provided
    supplemental dollars to such school districts. This funding is critical
    to quality education and the protection of the finances of military
    families; AFSA urges the subcommittee to continue the great work it has
    done on this front in recent years.
    In-State Tuition Rates for Military Members
        Military members are relocated from one military reservation to
    another at the pleasure of the government. Of course, servicemembers
    serve the entire Nation, and every State benefits from their service.
    We urge the subcommittee to do what it can to urge States to provide
    immediate in-State tuition rates at State colleges and universities as
    soon as military members and their families are relocated into that
    State. This should apply to the military members, their spouses, and
    their children.
           compensation and permanent-change-of-station (pcs) issues
    Senior Noncommissioned Officer Pay Targeting
        AFSA urges the subcommittee to consider further pay targeting
    toward the senior noncommissioned ranks. These members are critical to
    the success of the military mission, and their roles and
    responsibilities have increased significantly in recent years. It is no
    exaggeration to state the many jobs formerly handled by commissioned
    officers are now handled by senior enlisted members. As such, it is
    important for the subcommittee to take a critical look at the military
    pay charts and increase the pay levels of senior noncommissioned
    officers (NCOs).
    Standard Reenlistment Bonus
        Each time military members reenlist, they commit to subjecting
    themselves to unlimited liability--putting their lives at risk, if need
    be, to defend the interests of this Nation. As all men and women, these
    people are choosing to devote a significant portion of their days on
    Earth to freedom. The current reenlistment bonus structure is strictly
    a force manipulation mechanism to adequately man hard-to- fill jobs.
    AFSA urges the subcommittee to consider a standard reenlistment bonus
    each time a military member extends their military commitment.
    Reform the Basic Allowance for Housing System
        DOD's current Basic Allowance for Housing (BAH) methodology is
    absolutely unfair to enlisted members. Those in the lower ranks are
    assigned a square-footage standard (regardless of their family status)
    which is used to determine what local properties are included in a
    housing survey to determine the various levels of BAR paid. The
    surveyed properties for lower-ranking servicemembers, therefore, are
    very small apartments--generally the type that do not appreciate in
    value at the same rate as the properties surveyed for higher-ranking
    military members. Therefore, as each new survey is conducted, those
    receiving the highest levels receive even greater amounts, while the
    lower ranking members do not see such appreciation and BAH increases.
    The BAR system was certainly designed to support the quality-of-life of
    those holding the highest ranks in our military. We are not talking
    about military pay, but rather the well-being of enlisted members.
    Therefore, AFSA urges the subcommittee to take a serious look at
    reforming the BAR system to protect the well-being of noncommissioned
    military members.
    Tax Exemption for Health Care and Child Care Fees
        Although not under the purview of this subcommittee AFSA urges that
    you act to influence the applicable committees to enact the required
    legislation to provide a tax exemption for fees, copayments; and
    deductibles military members pay for TRICARE Prime, TRICARE Standard,
    the Active-Duty and retiree dental plans, and long-term care.
    Additionally, the fees paid for child care (which is so critical to
    military members) should also be tax exempt. These changes would, in
    part, put military members in the same status as nonmilitary Federal
    employees.
    Increased Household Good Weight Allowances for Senior NCOs during Moves
        AFSA thanks this subcommittee for the modest increase in household
    goods (HHG) weight allowances for senior NCOs. However, we urge that
    you increase these allowances even further. Currently, the highest
    ranking enlisted members (E-9s) who are generally career-committed and
    have served the Nation for over two decades are afforded approximately
    the same HHO weight allowances as a commissioned officer who has served
    only 4 years. An E-7, probably at the average career point of 15 years,
    is given roughly the same HHG weight allowance as an O-1, just entering
    military service. HHG weight allowances should have some relation to
    average time in service, family size, probably accumulation of goods as
    a family grows, etc. It certainly should not be significantly different
    for commissioned and enlisted members. We believe the ethical, common-
    sense, way to provide this allowance would be parallel increases
    between the commissioned and enlisted rank charts with an E-1 and O-1
    receiving the same HHG Weight Allowance, an E-2 receiving the same
    allowance as an O-2, etc. Again, this is not a pay issue; it is a plea
    to this subcommittee to put some sanity into the assigning of HHG
    weight allowances during PCS moves.
                            guard and reserve issues
    Age-55 Retirement
        What has been true for years has become particularly evident in
    recent years--that members of the Guard and Reserve are full players in
    the defense of this Nation. Yet they are the only Federal employees
    that have to wait until age-60 to enjoy their retirement benefits. As
    it is, their retirement pay is a fraction of that received by retired
    Active-Duty members. Guard and Reserve retirement is based on an
    accumulation of service points. AFSA believes the right thing to do for
    the members of the Guard and Reserve is for this subcommittee to act to
    change the law and allow these members the receipt of their retirement
    pay at age-55.
    Health Care
        In recent years, this subcommittee has made great strides in
    address the Guard and Reserve health care situation. We urge that you
    continue along this path and provide a robust plan by expanding the
    current provisions and decreasing the fees for TRICARE Reserve Select.
    Tax Credits for Employers
        AFSA urges this subcommittee to influence the applicable committees
    that deal with taxation to provide tax credits to those who employ
    members of the Guard and Reserve. Also, such credits should be extended
    to self-employed citizens who serve in the Guard and Reserve. The
    impact of such service, and the willingness of employers to
    patriotically support the military duty of their employees should be
    rewarded.
    Change the Above-the-Line Deduction for Overnight Travel Expenses of
            Guard and Reserve Members
        Restoration of full tax-deductibility of non-reimbursable expenses
    related to military training was addressed in the NDAA for Fiscal Year
    2004 by setting the reimbursable travel distance at 100 miles. As other
    government agencies use 50 miles for travel compensation, AFSA believes
    that title 10 should be reworded so that ``the deductions allowed . . .
    for any period during which such individual is more than 50 miles away
    from home in connection with such services.'' AFSA urges the
    subcommittee to enact or move to influence this change during this
    Congress.
                       retirement/veteran/survivor issues
    Seamless DOD-Veterans' Administration Transition
        AFSA urges the subcommittee to continue to examine common use of
    medical records between DOD and the Veterans Administration (VA), and
    to support other aspects of the transition from military service to
    veteran status. You have made great strides in recent years, and AFSA
    appreciates them. The issue of a common-sense transition from one
    status to the other, and the funding of programs to support it, has
    become even more critical during the time of the global war on
    terrorism. AFSA offers the subcommittee its support of your important
    efforts in this regard.
    Concurrent Retirement and Disability Pay and Combat-Related Special
            Compensation
        This subcommittee has made progress on this matter in each of the
    last 5 or 6 years, and AFSA urges that it continue. We ask that you act
    to immediately provide full Concurrent Retirement and Disability Pay
    (CRDP) to those rated by the VA at 100 percent disabled due to
    unemployability. Also, we ask that you support Combat-Related Special
    Compensation (CRSC) for those Chapter 61 retirees (medically retired)
    who, through no fault of their own, were unable to complete 20 years of
    service. We recommend that you tie any such change to those with the
    highest disability ratings rather than years of service. This would
    most effectively address those with the most serious disabilities and
    help to serve those fighting in the current actions in Iraq and
    Afghanistan.
    Make the Survivor Benefit Plan Paid-up Feature Immediate for Those Who
            are age 70 and Have Been Enrolled in Survivor Benefit Plan for
            at Least 30 years
        This subcommittee acted on this several years ago by making this
    paid up feature effective in 2008. Some of these retirees have now been
    paying into Survivor Benefit Plan (SBP) for many more years than 30. We
    urge the subcommittee to implement the paid-up provision effective
    October 1, 2006.
    Eliminate the SBP--Dependency and Indemnity Compensation Offset
        Currently, survivors receiving Dependency and Indemnity
    Compensation (DIC) from the VA see a dollar-for-dollar reduction in
    their SBP payments (provided by DOD). Similar to the CRDP issue, this
    is a matter that we hope the subcommittee can address this year.
    Allow DIC Survivors to Remarry after age 55 Without Losing their DIC
            Entitlement
        Congress provided some relief to these survivors for setting the
    remarriage age without losing DIC entitlement at 57. To parallel other
    Federal programs, we urge the subcommittee to change the allowable
    remarriage age for these survivors at 55.
    Repeal or Greatly Modify the Uniformed Services Former Spouses
            Protection Act
        AFSA urges this subcommittee to support some fairness provisions
    for the Uniformed Services Former Spouses Protection Act (USFSPA)--P.L.
    97-252. While this law was passed with good intentions in the mid-
    1980s, the demographics of military service and their families have
    changed. As a result, military members are now the only U.S. citizens
    who are put at a significant disadvantage in divorce proceedings.
    Because of the USFSPA, the following situations now exist:

              1. A military member is subject to giving part of his/her
            military retirement pay (for the rest of his/her life) to
            anyone who was married to him/her during the military career
            regardless of the duration of the marriage.
              2. The divorce retirement pay separation is based on the
            military member's retirement pay--not what the member's pay was
            at the time of divorce (often many years later).
              3. A military retiree can be paying this ``award" to multiple
            former spouses.
              4. It takes a military member 20 years to earn a retirement;
            it takes a former spouse only having been married to the member
            (for any duration, no matter how brief) to get a portion of the
            member's retirement pay.
              5. Under this law, in practice judges award part of the
            member's retirement pay regardless of fault or circumstances.
              6. There is no statute of limitations on this law; i.e.,
            unless the original divorce decree explicitly waived separation
            of future retirement earnings, a former spouse who the military
            member has not seen for many years can have the original
            divorce decree amended and ``highjack'' part of the military
            member's retirement pay.
              7. The former spouse's ``award'' does not terminate upon
            remarriage of the former spouse.
              8. The ``award'' to a former spouse under this law is above
            and beyond child support and alimony.
              9. The law is unfair, illogical, and inconsistent. The
            member's military retired pay which the government refers to as
            ``deferred compensation'' is, under this law, treated as
            property rather than compensation. Additionally, the law is
            applied inconsistently from State to State.
              10. In most cases, the military retiree has no claim to part
            of the former spouse's retirement pay.
              11. Of all U.S. citizens, it is unconscionable that military
            members who put their lives on the line are uniquely subjected
            to such an unfair and discriminatory law.
              12. While there may be unique cases (which can be dealt with
            by the court on a case-by-case basis) where a long-term, very
            supported former spouse is the victim, in the vast majority of
            the cases we are talking about divorces that arise which are
            the fault of either or both parties--at least half of the time
            not the military member. In fact, with the current levels of
            military deployments, more and more military members are
            receiving ``Dear John'' and ``Dear Jane'' letters while they
            serve.
              13. This is not a male-vs-female issue. More and more female
            military members are falling victim to this law. These are just
            a few of the inequities of this law. We believe this law needs
            to be repealed or, at the least, greatly modified to be more
            fair to military members. We urge the subcommittee to take
            action on this unfair law--for the benefit of those men and
            women who are currently defending the interests of this nation
            and its freedom.

        Mr. Chairman and subcommittee members, we appreciate your
    contribution to the quality of the lives of those serving and who
    devoted their lives to military careers. We thank you for this
    opportunity to present the views of this association and ask that you
    seriously consider enacting some of the changes detailed in this
    statement.

        Senator Graham. God bless. Thank you for coming. We are
    adjourned.
        [Whereupon at 3:15 p.m., the subcommittee adjourned].

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2007

                                  ----------

                            THURSDAY, MARCH 30, 2006

                                   U.S. Senate,
                             Subcommittee on Personnel,
                                   Committee on Armed Services,
                                                        Washington, DC.

                      RESERVE COMPONENT PERSONNEL POLICIES

        The subcommittee met, pursuant to notice, at 2:00 p.m. in
    room SD-106, Dirksen Senate Office Building, Senator Lindsey O.
    Graham (chairman of the subcommittee) presiding.
        Committee members present: Senators Graham and E. Benjamin
    Nelson.
        Committee staff member present: Leah C. Brewer, nominations
    and hearings clerk.
        Majority staff members present: David M. Morriss, counsel;
    Diana G. Tabler, professional staff member; and Richard F.
    Walsh, counsel.
        Minority staff members present: Jonathan D. Clark, minority
    counsel; Gabriella Eisen, research assistant; and Gerald J.
    Leeling, minority counsel.
        Staff assistants present: Benjamin L. Rubin, Jill L.
    Simodejka, and Pendred K. Wilson.
        Committee members' assistants present: Christopher J. Paul,
    assistant to Senator McCain; Mackenzie M. Eaglen, assistant to
    Senator Collins; Clyde A. Taylor IV, assistant to Senator
    Chambliss; Meredith Beck, assistant to Senator Graham; and Eric
    Pierce, assistant to Senator Ben Nelson.

        OPENING STATEMENT OF SENATOR LINDSEY O. GRAHAM, CHAIRMAN

        Senator Graham. The committee will come to order. I
    apologize for being late. I apologize to Senator Nelson. I got
    held up, but we'll get the show on the road here.
        Good afternoon. The subcommittee meets today to receive
    testimony on Reserve component personnel policies and in review
    of the National Defense Authorization Request for Fiscal Year
    2007.
        We're now more than 4 years beyond the terrorist attacks of
    September 11, and our Guard and Reserve have been on a wartime
    footing for a period that is already longer than the period
    between Pearl Harbor and V-J Day in World War II. To those men
    and women in the Guard and Reserves, you could not have done
    better. You've given more than you've ever been asked to give.
    We all appreciate it.
        This is truly a long war. We're witnessing a historic time
    and a fundamental change in the way we think and use the Guard
    and Reserve.
        In terms of an overview of today's hearing, here are some
    of the issues before our subcommittee.
        Many of our Guard and Reserve units, and certainly
    individuals with highly sought after skills in civil affairs,
    military police (MPs), intelligence, translators,
    communications, combat engineers, logistics, and C-130 crews,
    have deployed in support of operations in Afghanistan and Iraq
    multiple times. The Department of Defense's (DOD) policy is not
    to involuntarily recall members of the Guard and Reserve for
    more than 24 months, cumulative. We would like to hear about
    the health of the Guard and Reserve under these strains and
    your ability to recruit and retain America's young men and
    women. How can we sustain our commitments and the rotation plan
    that will allow our Guard and Reserve to continue to play a
    major role in this long war?
        I must also say that I was surprised, along with Senator
    Nelson, by the recommendations of the Quadrennial Defense
    Review (QDR), the first undertaken during an ongoing war that
    is being fought with an All-Volunteer Force, that recommended
    major force-structure reductions in the Reserve components of
    both the Army and the Air Force. The QDR recommends cuts of
    17,000 in the National Guard, and 5,000 in the Army Reserve.
    The QDR also recommends cuts of 40,000 full-time equivalents
    across the total Air Force, which translates to about 22,000
    people cut from the Air National Guard and Air Force Reserves
    across the Future Years Defense Plan (FYDP).
        I would like for you to comment on this rationale, as you
    understand it. For those cuts to come at this time, when the
    Guard and Reserve has never been asked to do more, not only in
    war, but also in homeland defense, homeland security, and
    disaster response, I'm dying to hear your thoughts about that.
        I would also like to know what you're hearing about the new
    health care benefits for all members of the Guard and Selected
    Reserve. I really want to know about that, since we helped
    create it. How are we going to get the word out? Do people know
    the benefit exists? What effect is the benefit having among
    those who do know?
        I welcome our witnesses, beginning with our first panel,
    Secretary Tom Hall. Thank you for your dedicated service and
    for being here today, Mr. Secretary. We look forward to your
    testimony. I also welcome, as a member of our first panel, the
    Chief of the National Guard, Lieutenant General Steve Blum. You
    have been standing duty in tough, but exciting, times. Thank
    you both for your service and your testimony here today.
        The second panel we'll get to, just as soon as we're done
    with the first.
        So, without further ado, Senator Nelson?

                STATEMENT OF SENATOR E. BENJAMIN NELSON

        Senator Ben Nelson. Thank you, Mr. Chairman. I want to
    thank you for holding this very important hearing today. I join
    you in welcoming our witnesses, the civilian military
    leadership responsible for our Guard and Reserve Forces.
        I understand that two of our witnesses from the second
    panel, General Helmly and General James, will both be leaving
    their positions in the very near future. General Helmly will go
    to a new assignment overseas, and General James will retire.
    I'd like to take this opportunity to publicly thank them for
    their service to the Army Reserve and the Air National Guard,
    and for their candid testimony to this committee over the
    years. These have been trying times for our leaders of our
    Reserve components, and these officers have met the challenge.
        General Helmly and General James, I thank you for your
    service, and I wish you the best of luck in your new endeavors.
        Mr. Chairman, our Guard and Reserve Forces have responded
    magnificently in answering our Nation's call to service,
    despite some significant challenges. At one point, they
    constituted 46 percent of our troops in combat theaters. Most
    of our Reserve component personnel volunteered for service in
    the National Guard or Reserves with the understanding that they
    were joining a military force that would serve as a strategic
    reserve to be called upon only during a major war, when our
    Active Forces needed additional support and reinforcement. Over
    the last decade, as our Active-Duty Forces were downsized
    significantly, our Reserve component forces have gradually
    become part of the operational force, picking up many missions
    that Active Force was no longer able to accomplish. As a
    result, Reserve component personnel have been called upon for
    military service far more frequently than anyone ever
    anticipated.
        While we were mobilizing our Reserve components at an
    unanticipated rate, the DOD did not have the systems in place
    to support this increased usage of the National Guard and
    Reserve personnel. Our mobilization processes were not very
    effective at the beginning of the major troop call-ups. Many
    Reserve component personnel were ordered to Active-Duty with
    very short notice, sometimes just a matter of a few days. This
    obviously created havoc for military families and civilian
    employers.
        Our pay systems weren't designed for large numbers of
    activated Reserve and Guard personnel, and this resulted in
    numerous pay problems. The Government Accountability Office
    looked at this and concluded that the pay system for mobilized
    Guard and Reserve personnel was so cumbersome and complex that
    personnel ``could not be reasonably assured of timely and
    accurate payroll payments.''
        Support systems for the families of deployed Guard and
    Reserve personnel weren't in place when they started large-
    scale mobilization of the Reserve components. Although Guard
    and Reserve families have many of the same issues as Active-
    Duty families, they have unique needs, because they are less
    familiar with the military, and many live in civilian
    communities located some distance from support networks
    normally found around military installations.
        Medical care for the families of deployed Guard and Reserve
    personnel was problematic, because the families had difficulty
    navigating the TRICARE health care benefit. Many health care
    providers didn't accept TRICARE, and many families didn't want
    to interrupt their continuity of care by changing health care
    providers.
        Most of these problems have been successfully addressed
    over time, but we still have to keep our eyes on them to
    prevent them from recurring as we continue to use the Reserve
    components in new and creative ways.
        The recently completed QDR states, ``The Reserve component
    must be operationalized so that select reservists and units are
    more accessible and more readily deployable than today.'' If
    the Reserve components are even more accessible and
    deployable--more deployable than they are now, we have to be
    ever vigilant to ensure that the servicemembers and their
    families are paid on time, that they receive the quality health
    care they deserve, and that their families receive the support
    they need as the servicemembers continue to serve our Nation so
    magnificently.
        Mr. Chairman, I believe that the Nation has yet to answer
    the question about the future role of our Reserve components,
    and some of the questions that you've asked are similar to
    mine. What's the role of our National Guard and Reserve Forces
    in today's National Security Strategy? How should they be
    integrated into homeland security and homeland defense? Do we
    need to limit deployments, both in length and number? Just
    where should our Guard and Reserve Forces fit in the array of
    military forces available for deployment?
        I can say, as a former Governor, I understand the concerns
    of our current Governors about whether their National Guard
    personnel will be available to them to respond to State
    emergencies. States with a high risk of hurricanes, wildfires,
    and other natural disasters, including snowstorms in Nebraska,
    must have assurance that National Guard Forces will be
    available when they're needed.
        Two years ago, we authorized a Commission on the National
    Guard and Reserve to help us to understand and address issues
    like these. The members of this commission have just begun
    their task, and I'm hopeful that this commission will help us
    gain a better understanding of the role and needs of our Guard
    and Reserve Forces, and give us a roadmap for legislation to
    ensure they're fully supported.
        Mr. Chairman, we're all fully aware that our Nation cannot
    successfully conduct a significant military operation without
    the participation of our National Guard and Reserve personnel.
        I look forward to the testimony of our witnesses regarding
    the future of our Guard and Reserve units and how we can
    address the problems together that they are currently facing.
        Thank you very much.
        Senator Graham. Thank you, Senator Nelson. Well said.
        Secretary Hall.

       STATEMENT OF HON. THOMAS F. HALL, ASSISTANT SECRETARY OF
                      DEFENSE FOR RESERVE AFFAIRS

        Mr. Hall. Yes, sir. Thank you.
        Before I start my statement, I would like to recognize
    someone. I'd like for Command Sergeant Major Holland to please
    stand. He is my command sergeant major, and he is concluding 37
    years of service. He's going to retire this year. He's a combat
    veteran of Afghanistan, and a combat veteran of Iraq. We also
    deployed his wife. He's served with great distinction and
    honor, and I just wanted him recognized as he closes out a
    distinguished military career. [Applause.]
        Senator Graham. Thank you so much for your service. We're
    proud of you. I'll bet you support the age 55 Reserve
    retirement eligible bill. [Laughter.]
        Mr. Hall. Thank you.
        Chairman Graham and Senator Nelson, I want to thank you for
    this opportunity to offer my thoughts on our Reserve component
    personnel policies and the 2007 National Defense Authorization
    Request.
        I'd like to make an opening statement. Then General Blum
    has an opening statement. We would request that our written
    statements be entered into the record.
        The Secretary and I are deeply grateful for your strong
    support, which is crucial to sustaining a strong Guard and
    Reserve. The men and women of the Guard and Reserve know they
    can count on you for your continued assistance.
        As Assistant Secretary of Defense for Reserve Affairs, I
    consider it my personal responsibility to visit as many of the
    1.2 million Reserve component members in the field as I can.
    They are proudly and professionally performing vital national
    security missions at home and around the world in superb
    fashion. Their most urgent concerns are predictability and,
    when activated, parity with the Active Force concerning
    educational benefits, bonuses, and special pays.
        We're still in the midst of one of the longest periods of
    mobilization in our history, and we have worked diligently, and
    sought your assistance, to correct areas that need improvement.
    Our Reserve Forces are certainly stressed, as you would expect
    when our Nation is at war. We have reduced our Reserve
    component activation to, as of today, 110,000, a drop of 70,000
    since this time last year, which means 70,000 more guardsmen
    and reservists than at this time last year are at home, on the
    job, and with their families. We are, in fact, helping to
    reduce some of the stress on the force. I might add, that
    figure is going to go lower.
        Recruiting and retention are improving, but remain very
    demanding tasks, given today's environment. For this year to
    date, four of our six Reserve components are essentially on
    track with their recruiting objectives. The Naval Reserve and
    the Air Guard are lagging a bit in recruiting, and the chiefs
    of those components will discuss their improvement plans during
    the next panel.
        The changes you authorized to the Reserve enlistment and
    affiliation bonus in the National Defense Authorization Act for
    Fiscal Year 2006 are making a difference. Just as an aside,
    every trooper I re-enlisted in theater, everywhere I went, took
    the bonus, tax free. Personally, I think that's why we're
    retaining more people and our attrition rates are the lowest
    since 2000. People are staying, in ever-increasing numbers.
        Senator Graham. I hate to interrupt, but if you're
    enlisting and you don't take the money, we need to look at
    whether or not they should re-enlist. [Laughter.]
        Mr. Hall. I did--these are very smart troopers, and I
    didn't find one that did not do that, Senator.
        Through January 2006, enlisted attrition is on track to
    remain below the established ceilings.
        The Secretary of Defense expressed the need to promote
    careful use of Reserve components by rebalancing the force, and
    you mentioned this in your opening statement. We are
    simultaneously rebalancing and transforming the force to meet
    the challenges of the 21st century and still maintain a wartime
    footing. The Services continue to improve their Active and
    Reserve component mix by rebalancing approximately 29,000
    spaces in 2005, for a total of about 70,000. We have 55,000
    more to go between 2006 and 2011.
        We continue to closely monitor the impact of the ongoing
    mobilization of our Guard and Reserve members, their families,
    and employers. We are aggressively implementing bonus
    authorities, implementing the new TRICARE authorities,
    increasing efforts in recruiting and retention, using the new
    education benefit for the mobilized Guard and Reserve members,
    assisting our military families, and ensuring our employers are
    informed and aware of Reserve service. Legislative proposals we
    are submitting as part of this year's package will also help.
        Collectively, my colleagues and I look forward to your
    questions, and, again, thank both of you for the opportunity to
    appear here and for what you contribute, in your positions.
        Thank you.
        [The prepared statement of Mr. Hall follows:]

                   Prepared Statement by Hon. Thomas F. Hall

                                  introduction

        Chairman Graham, Senator Nelson, and members of the subcommittee:
    thank you for the invitation to offer my perspective on the status and
    ability of America's Reserve component forces to meet current and
    future operational requirements. This committee has always been very
    supportive of our National Guard and Reserve Forces. On behalf of those
    men and women, I want to publicly thank you for all your help in
    providing for our Reserve components. The Secretary and I are deeply
    grateful, our military personnel certainly appreciate it, and we know
    we can count on your continued support.
        duties of the assistant secretary of defense for reserve affairs
        The principal duty of the Assistant Secretary of Defense for
    Reserve Affairs, as stated in title 10 U.S.C., is the overall
    supervision of all Reserve components' affairs in the Department of
    Defense (DOD). I make it a priority, as does my staff, to visit with
    our Reserve component members in the field, and during those visits we
    see America's finest men and women serving their Nation with pride and
    professionalism. Our Guard and Reserve men and women perform, in a
    superb fashion, vital national security functions at home and around
    the world, and are closely interlocked with the States, cities, towns,
    and communities in America. Throughout my travels, I have personally
    seen the men and women in our Guard and Reserve at hundreds of sites
    throughout the world. In fact I have visited nearly 200 sites and
    spoken to over 205,000 personnel during my 3+ years in the job. During
    these visits my staff and I have spent time with members of the Guard
    and Reserve, and we have listened carefully to their comments,
    concerns, and suggestions, and have seen how heavily engaged they are.
    The stress on the force has been high but shows signs of lessening
    somewhat. We are continuing to monitor closely the impact of the stress
    that remains on our Guard and Reserve members, on their families, and
    their employers. In December 2004 there were just over 183,000
    reservists mobilized from all Services. Today that figure stands at
    118,000, a drop of 65,000. We are relieving stress on the force.
        In the 4\1/2\ years since September 11, 2001, our Reserve
    components have performed superbly in missions ranging from high
    intensity combat operations; to humanitarian assistance; to rescuing
    the victims of hurricanes; and in the case of the National Guard, other
    State missions, as well. At the same time, these operations have
    presented a number of challenges, particularly for our ground forces,
    who carry the weight of our security and stabilization efforts in
    Afghanistan and Iraq, as well as continuing to respond to the range of
    missions at home. The most pressing challenge is to sustain our
    military forces for the current operations while meeting our other
    worldwide commitments whatever and wherever they might be.
                       purpose of the reserve components
        Last year you modified the purpose of our Reserve components as
    defined in law to reflect more accurately the shift from a strategic
    reserve--one to be used only in the event of a major war; to an
    operational Reserve that supports day-to-day defense requirements. The
    QDR proposes a Reserve component that must be more accessible and more
    readily deployable. Becoming an operational Reserve is comprehensive in
    scope, and is empowering the Reserve components to make significant
    contributions to defense missions. They are now more relevant than ever
    to the warfight. Predictability is fundamental to sustaining an
    operational Reserve. To achieve this, we expect to utilize the Reserve
    components to support military mission requirements in a predictable,
    cyclic, or periodic manner. The transition to an operational Reserve
    began when we called Reserve component members up for Operations Desert
    Shield and Desert Storm. Since then, changes in force management have
    been made to reflect this transition toward an operational Reserve.
    Several legislative initiatives passed by this subcommittee have helped
    significantly in that transition. The objective remains the same; to
    recruit, train, equip, compensate, and employ Reserve component units
    and members for service in the Active component, wherever and whenever
    needed, in accordance with current laws and policies. This is an
    evolutionary effort and we will need your help and appreciate your
    continued support.
        We thank you for this committee's support for legislation you
    passed in the most recent National Defense Authorization Act:
    especially for expanding eligibility criteria and increasing the
    maximum allowable payments under many of the bonuses and special pays
    for Reserve component members; enhancing the TRICARE Reserve Select
    Program; allowing mobilized reservists to receive full housing
    allowance if called to Active-Duty for more than 30 days; increasing
    the number of Army Reserve and Army Guard Reserve Officer Training
    Corps scholarships; and improving the educational assistance program
    for activated Guard and Reserve members, just to mention a few.
                        reserve component missions today
        By far the most demanding operations continue to be Operation
    Enduring Freedom and Operation Iraqi Freedom. Reserve components
    currently furnish approximately 20 percent of the troops in theater.
    That is down from 30 percent just a year ago. The Reserve components
    remain an integral player in homeland defense, and in Operation Noble
    Eagle. They responded immediately and superbly to the Gulf Coast
    hurricane disasters, with the National Guard leading the way, having
    over 50,000 guardsmen providing needed assistance and support. The
    National Guard will remain a dual-missioned force performing both State
    and Federal missions
        The Reserve components continue to perform a variety of non-
    traditional missions in support of the global war on terror. One such
    mission is the training of the Iraqi and Afghan national armies. The
    Reserve components have provided command and control and advisory
    support teams in support of the training that will allow Iraqi and
    Afghan forces to assume a greater role in securing their own countries.
                                    policies
        Judicious and prudent use of the Reserve components in support of
    the global war on terror remains the cornerstone of our policy in that
    effort. Our personnel policies state those reservists:

             Be given a minimum of 30 days notice prior to
            mobilization. We try to give at least 90 days notice when
            possible, so they can take full advantage of the early
            eligibility for TRICARE benefit. (Today, early notifications
            are now the norm, not the exception.)
             Called to involuntary Active-Duty under the current
            partial mobilization authority shall serve no more than 24
            cumulative months on Active-Duty. There are no plans to expand
            the mobilization period to a policy of 24 consecutive months.
             May serve voluntarily for longer periods of time in
            accordance with Service policy. (Currently about 20,000 members
            are in a volunteer status.)
             May be released prior to the completion of the period
            of service for which ordered based on operational requirements.
             Should receive equitable treatment, when being
            considered for mobilization--considering the length and nature
            of previous service, family responsibilities, and civilian
            employment.* Are entitled management of individual
            expectations, considering morale and retention, by ensuring
            they: are performing essential and meaningful tasks; are
            provided as much predictability as possible.

        Within this framework, we will continue to manage the Reserve
    components, and assess the impact mobilization and deployments have on
    Guard and Reserve members, their families and employers, and adjust our
    policies as needed.
                              stress on the force
        Discussion continues about the stress that the global war on terror
    is placing on the force--both Active and Reserve. From my perspective,
    the dominant question still remains, ``How extensively can we use the
    Guard and Reserve and still maintain a viable long-term Reserve
    Force?''
        Answering this question involves a number of issues. But first it
    is necessary to quantify how much of the Reserve Force we have used as
    of January 2006 to support the global war on terror, and then describe
    the effect that this rate of utilization is having on the Reserve
    Force.
        The overwhelming majority of Guard and Reserve members want to
    serve, and they want to be part of the victory in this war on
    terrorism. That is why they joined the Guard or Reserve and that is why
    they serve this Nation. They consistently tell me this when I visit
    them in the field. But we must also be mindful not to over-commit them;
    we must use the Reserve Force wisely. We must be mindful of the
    additional responsibilities that National Guard members bear to their
    respective State or Territory.
    Reserve Utilization to Date
        There are two ways to look at rates of mobilization for the Guard
    and Reserve. The first is to look at all Reserve component members who
    have served since September 11, 2001--the cumulative approach.
        Under the cumulative approach, a total of more than 485,000 Guard
    and Reserve members (475,000 Selected Reserve members and approximately
    10,000 IRR members) were mobilized between September 11, 2001 and
    December 31, 2005. That means that about 39 percent of the 1,215,641
    members who have served in the Selected Reserve during this period were
    mobilized during the current contingency.
        The other way to look at mobilization is in terms of today's total
    Reserve component force--those who are currently serving in the
    Selected Reserve. Looking at today's Selected Reserve Force of 825,427
    serving, as of December 31, 2005, we have mobilized 381,311 Reserve
    component members, or 46 percent of the current force. Of this force,
    69,946 (or 8.5 percent of all members who are currently serving) have
    been mobilized more than once. Of the 69,946, a total of 53,763 (6.5
    percent) have been mobilized twice, 11,118 (1.4 percent) have been
    mobilized three times and 4,995 (0.6 of 1 percent) have been mobilized
    more than three times. No reservist has been involuntarily mobilized
    for more than 24 cumulative months, and nearly all (98.8 percent) of
    those remobilized were volunteers.
    Effects of Reserve Utilization
        The Department has monitored the effects of Reserve utilization and
    stress on the force since 1996. The key factors we track are: (1) end
    strength attainment; (2) recruiting results; (3) retention; (4)
    attrition; and (5) employer/reservist relations.
        End Strength Attainment
        From fiscal year 2000 (just before we entered the global war on
    terror) through 2003, the Reserve components in the aggregate were at
    or slightly above 100 percent of their authorized end strength. In
    fiscal year 2004 the Reserve components in the aggregate were slightly
    below their authorized end strength achieving 98.4 percent. That trend
    continued in fiscal year 2005 with end strength achievement at 95.2
    percent. In fiscal year 2006 we expect the end strength achievement to
    go up from the fiscal year 2005 levels.
        Recruiting Results
        In a very challenging recruiting environment, the DOD Reserve
    components cumulatively achieved 85 percent of their fiscal year 2005
    recruiting objectives, as compared to the 96 percent achievement in the
    previous year. Two of the six DOD Reserve components achieved their
    recruiting objectives--the Marine Corps Reserve and the Air Force
    Reserve. The Army National Guard fell short by 12,783 (achieving 80
    percent of its recruiting objective), the Army Reserve fell short by
    4,626 (achieving 84 percent), the Navy Reserve fell short by 1,703
    (achieving 85 percent), and the Air National Guard fell short by 1,413
    (achieving 86 percent). End strength results were better because of
    continued low attrition rates in the majority of the components.
        Fiscal year 2006 will continue to be a challenging year for Reserve
    recruiting--particularly in the Reserve components of the Army, but
    many initiatives have been undertaken to mitigate the challenges.
    During the first 4 months of fiscal year 2006, four of the six DOD
    Reserve components, including both the Army National Guard and the Army
    Reserve, met or exceeded their recruiting objectives. We continue to
    monitor the quality of our recruits against the goals we established.
    We see no indicators in the performance of young men and women being
    recruited today that concerns us. They remain America's finest. The
    changes you authorized to the Reserve enlistment and affiliation bonus
    in the National Defense Authorization Act for Fiscal Year 2006 should
    continue this upward trend. Thank you for your support!
        Retention
        The requirements to support the global war on terror--particularly
    our commitment in Iraq--have placed a strain on the Reserve Force.
    Nonetheless, measuring those who reenlist at the completion of their
    current contract, we find that reenlistments were higher (by over
    2,000) in fiscal year 2005 than they were in fiscal year 2004, up from
    95.5 percent of goal in fiscal year 2004 to 100.1 percent of goal in
    fiscal year 2005. This is a very positive trend over the past 2 years
    and we believe it will continue in fiscal year 2006. We are closely
    monitoring retention, particularly for those members who have been
    mobilized and deployed to support operations in Iraq and Afghanistan.
        Attrition
        Measuring all losses, regardless of reason, from the Reserve
    components, we are pleased to report that enlisted attrition generally
    remained below established ceilings throughout fiscal year 2005, also a
    very positive trend. Through December, 2005 enlisted attrition is on
    track to remain below the fiscal year 2006 ceiling established by each
    Reserve component.
    Mitigation Strategies
        Of all the strategies to help reduce the stress on the force, the
    first and perhaps most important is rebalancing. Its purpose is to
    adjust the force to be responsive and produce the capabilities needed
    in balanced portfolios across all components. The old force was
    balanced to respond to Cold War threats. Rebalancing improves
    responsiveness and eases stress on units and individuals by building up
    capabilities in high-demand units and skills. This is accomplished by
    decreasing capabilities in both the Active and Reserve components that
    are in lesser demand, and increasing them in areas of higher demand,
    changing lower priority structure to higher priority structure, and
    producing a new Active component/Reserve component mix. As outlined in
    the report Rebalancing Forces: Easing the Stress on the Guard and
    Reserve, January 15, 2004, the rebalancing effort also seeks to
    establish a limit on involuntary mobilizations to achieve a reasonable
    and sustainable rate. The force structure planning goal aims to limit
    the involuntary mobilization of individual reservists to 1 year out of
    every 6.
        The Services continued to improve their Active/Reserve component
    mix by rebalancing approximately 29,000 spaces in fiscal year 2005, for
    a total of about 70,000 to date. The Services have planned and
    programmed an additional 55,000 spaces for rebalancing between fiscal
    year 2006 and 2011. The amount and type of rebalancing varies by
    Service. By 2011 we expect to have rebalanced about 125,000 spaces. We
    expect the Services to revisit their rebalancing plans in response to
    directives from the Quadrennial Defense Review. The Department will
    continue to work closely with the Services as they review and modify
    their rebalancing plans. Easing stress on the force includes more than
    just rebalancing the military.
        A second initiative is the conversion of military spaces to DOD
    civilian positions or contractors. The purpose of this initiative is to
    move military personnel out of activities not ``military essential.''
    The military resources gained through this initiative are being
    converted to high demand/low density units and stressed career fields,
    which reduces stress on the force. The Services have an aggressive
    program to convert military-to-civilian over the next few years. The
    Services converted about 16,000 military spaces to civilian manning in
    fiscal year 2005 and plan to convert over 18,000 additional from fiscal
    year 2006 to fiscal year 2011. This greatly aids the ability of the
    Reserve components by providing more spaces for rebalancing.
        Third, to ease the burden on some high demand, low density units
    and skills, we have employed innovative joint concepts and technology
    to spread mission requirements across the entire force. For example,
    Navy and Air Force personnel now augment ground forces in Iraq and
    technology is now being used on Air force installations to replace the
    need to use military personnel to perform surveillance functions.
        A fourth area is innovative force management under our continuum of
    service construct. This approach maximizes the use of volunteers,
    provides greater opportunities for reservists who are able to
    contribute more, and offers innovative accession and affiliation
    programs to meet specialized skill requirements.
        Under the old rules, end strength and controlled grade accounting,
    and the requirement for officers to compete for promotion against
    Active-Duty personnel suppressed the number of volunteers and limited
    the length of their duty. reservists were reluctant to volunteer for
    extended periods of Active-Duty. We are extremely grateful to Congress
    for removing these barriers and adding more authorizations to the new
    Reserve component operational support strength accounting category.
        I want to take this opportunity to personally thank the committee
    for its support of our continuum of service initiatives. These policies
    and initiatives were developed to preserve the nature of the ``citizen
    soldier'' while still allowing us to meet operational requirements.
    Predictability and reasonable limits on frequency and duration of
    mobilization are key elements of our policies, which are designed to
    not only support reservists, but also sustain the support of employers
    and families, and ultimately enable the components to meet recruitment
    and retention objectives. Similarly, the emphasis on volunteerism is
    designed to allow servicemembers who want to contribute more to defense
    missions to do so.
    Meeting Future Requirements
        The Army's initiative to create provisional units--drawing upon
    underutilized skills to meet current mission requirements--and the DOD
    initiative to draw from skill sets in other components and Services--
    the joint solution--are the near-term strategies being employed today.
    We will continue to maximize the use of volunteers when possible.
    However, we must balance the use of volunteers from the Selected
    Reserve with pending unit deployments and the need for unit cohesion.
    Retiree and Individual Ready Reserve (IRR) members also provide sources
    of volunteers.
        Compared to Operation Desert Storm when we mobilized 30,000 IRR
    members, we have used fewer IRR members to support the global war on
    terror. In the past 4 years, we have mobilized about 10,000 IRR
    members. The further utilization of the IRR remains a viable option for
    meeting both near-term and long-term commitments. But, we must
    establish the proper expectations for our Reserve component members,
    their families, their employers, and the public in general. We have
    undertaken a program to establish the expectations of reasonable
    service requirements for the 21st century based on the frequency and
    duration of military duty, and predictability.
        For the long term, we will continue to energetically pursue these
    transformation strategies. Rebalancing the force will continue, as will
    the conversion of military to civilian positions. The Department's
    transformation to a capabilities-based force should help relieve stress
    on the force. The overall objective is to have an enduring flexible
    force, capable of meeting diverse mission requirements.
                           national guard utilization
        The National Guard is a vital and integral part of the Army and Air
    Force total force mission capability. As a dual-missioned force,
    fulfilling both Federal and State roles is vital to the National
    Security Strategy, Homeland Defense, and the survival of the Nation.
        Much has been said about the Army National Guard being cut, both
    end strength and units. While it is true the fiscal year 2007 budget
    submission reflects an actual number of troops on board, the Army
    leadership is on record in testimony before the House and Senate that
    they are committed to funding the Guard to the level to which they can
    recruit, up to their congressionally authorized end strength of
    350,000. The Guard will remain at 106 total brigades (28 brigade combat
    teams and 78 support brigades of varying types). For modernization
    alone, the Army has budgeted approximately $21 billion from 2005 to
    2011, a four-fold increase over the level of funding for equipment
    modernization from the 1999 period. This organization, manning, and
    funding will permit the Army National Guard to support the Nation's
    global operations, prevail in the global war on terror, and conduct
    expanded State and homeland security missions.
        The Army and Air National Guard will continue to have a prominent
    role in supporting local and State authorities in their efforts to
    manage the consequences of a domestic terrorist attack. An important
    part of this effort is the fielding of 55 Weapons of Mass Destruction
    Civil Support Teams (WMD CSTs), one in each State, Commonwealth, and
    the District of Columbia. These 55 teams are to support our Nation's
    local first responders as the initial State response in dealing with
    domestic chemical, biological, radiological, nuclear, or high-yield
    explosives (CBRNE) by identifying the agents/substances, assessing
    current and projected consequences, advising on response measures and
    assisting with appropriate requests for additional State support. Each
    team is comprised of 22 highly-skilled, full-time, well-trained, and
    equipped Army and Air National Guardsmen. To date, the Secretary of
    Defense has certified 36 of the 55 congressionally authorized WMD-CSTs
    as being operationally ready. The remainder of the teams should be
    certified by third quarter, fiscal year 2007.
        The Air National Guard will continue to consult with the Air Force
    to organize, train and equip their total forces more effectively and
    efficiently. The Air Force is developing new initiatives that will
    allow recapitalizing key weapons system capabilities and organizing the
    force to better support the combatant commanders. Participation of the
    Air National Guard in these discussions is critical to ensure an
    appropriate balance of capabilities in all components of our total
    force. Air Reserve component restructuring is part of the ongoing
    discussions in the development of the fiscal year 2008 budget.
        The response to the hurricanes on Gulf coast, the brush fires in
    the south central States, or the flooding throughout the United States,
    shows the National Guard is a crucial element in a Governor's response
    to natural disasters. The National Guard will continue to have a
    prominent role in supporting local and State authorities in their
    efforts to manage the consequences of a domestic terrorist attack or
    natural disaster.
                                family programs
        The Department is sensitive to the hardships and challenges that
    the families of Guard and Reserve members face, especially when the
    guardsman or reservist is away from home for an extended period. The
    better care we take of the family, the more likely the member will stay
    with us.
        We have taken an aggressive, total force approach to supporting
    military families. We recognize that many families of National Guard
    and Reserve members do not live close to a military installation where
    many of the traditional family support activities are located. To
    address this issue, the Department has established over 700 family
    support centers around the country. In fact, the National Guard alone
    has over 400 family support centers. These family support centers are
    not component or service specific, but rather they are available to the
    family of any servicemember.
        One way we are reaching out to families is with a 24-hour/7-day-a-
    week toll-free family assistance service--Military OneSource. Military
    OneSource can assist with referrals for every day problems such as
    childcare and how to obtain health care. Additionally, the Department
    has contracted with a health network of professional consultants
    available in local communities to assist military families with daily
    living challenges resulting from deployment and separation.
        We are also taking maximum advantage of technology--using the
    worldwide web to provide information that will help families cope with
    the mobilization and deployment of their spouse, son, daughter,
    brother, sister, relative, or friend. The website includes a family
    benefits guide and a tool kit to assist commanders, servicemembers,
    family members, and family program managers in preparing Guard and
    Reserve members, and their families, for mobilization, deployment,
    redeployment/demobilization, and family reunions.
        We are particularly concerned about post-deployment and we are
    focusing on enhancing support programs and services for Reserve
    component members and their families following mobilization with
    programs such as the Marriage Enrichment Program, and a non-sectarian
    Prevention and Relationship Enhancement Program conducted by trained
    chaplains. These and other programs are made available on weekends
    throughout the States and territories for returning Guard and Reserve
    military members and their spouses at no charge. Commands have been
    proactive in partnering with the VA and other State and Federal
    agencies to provide additional services to reservists and their
    families such as relationship/readjustment counseling.
                 reserve component health benefit enhancements
        The Department has fully implemented the premium-based ''TRICARE
    Reserve Select'' program, which offers TRICARE Standard and medical
    treatment facility space-available coverage to Selected Reserve members
    and their families following the member's service in support of a
    contingency operation. The member must commit to continued service in
    the Selected Reserve and agree to share the premium cost. We appreciate
    Congress's support in providing reservists' additional time after
    demobilization to make an enrollment decision and amending the program
    parameters so reservists can take advantage of the full period of
    earned benefit if they are subsequently called to Active-Duty. These
    changes make the program more attractive and allow reservists more time
    to consult with their spouse before making an enrollment decision.
        We are also developing implementing guidance for the new provision
    that gives all Selected Reserve members, and their families, access to
    TRICARE Standard, regardless of the member's duty status--the TRICARE
    Reserve Select 50/85 plans. Selected Reserve members who are self-
    employed, who are eligible unemployment compensation recipients or who
    are not eligible for health care under an employer-sponsored health
    benefit plan can enroll in TRICARE Reserve Select 50 plan, under which
    the member must pay 50 percent of the premium. Selected Reserve members
    who do not meet those eligibility criteria for the TRICARE Reserve 50
    plan and are not eligible for TRICARE Reserve Select, can enroll in the
    TRICARE Reserve Select 85 plan, under which the member must pay 85
    percent premium.
                          employer-reservist relations
        We respond to all inquiries we receive from an employer, family
    member, or individual guardsmen or reservist. Employer Support of the
    Guard and Reserve (ESGR) is the DOD's employer outreach agency tasked
    to gain and maintain support from all public and private employers for
    the men and women of the National Guard and Reserve. ESGR also reaches
    out to both employers and servicemembers to ensure the requirements of
    the Uniformed Services Employment and Reemployments Rights Act (USERRA)
    are both understood and applied. Service members and employers may
    resolve USERRA conflicts via free mediation and ombudsman services
    provided by ESGR. Since October 2003, ESGR shows a continuing decline
    in the number of cases opened (from 486 per month average in fiscal
    year 2004 to a 335 per month average for fiscal year 2005 to an average
    of 214 per month for first quarter fiscal year 2006).
                        equipment and facility readiness
    Equipment Readiness
        The Services are acquiring interoperable equipment needed to meet
    joint training and operational mission requirements; as necessary for a
    seamlessly integrated Total Force.
        The Reserve components were appropriated about $4.13 billion in
    fiscal year 2006 for equipment procurement, as compared to $2.4 billion
    on average in past years. The fiscal year 2007 President Budget request
    for Reserve components is $3.55 billion. The Army's Reserve components
    are resourced at approximately 70 percent of required equipment. Legacy
    equipment accounts for 30 percent of equipment on hand. The Army
    programmed $48 billion for the modularity initiative and includes $19.2
    billion for the Army National Guard (ARNG) and $3.7 billion for the
    U.S. Army Reserve over the fiscal years 2006-2011 time frame.
        In the short term, the Army's immediate requirements have been
    resolved by cross leveling equipment among units, or having units
    utilize equipment remaining in theater as Stay Behind Equipment (SBE).
    These actions have an equipment availability and training impact on the
    units remaining or returning to their home station.
        As a long-term goal, the Services' developed strategies that
    include development of blended or augment units to share modern
    equipment with the active components, like the Air Force's Total Force
    Integration and the Army's Modularity plan.
        The Army has developed a transformation strategy that establishes a
    means of providing force elements that are interchangeable, expandable,
    and tailored to meet the changing needs of the combatant commanders.
    This initiative, along with the global war on terror requirements,
    resulted in the Army's development of a new strategy that guarantees
    mobilized units to be equipped at 100 percent and non-mobilized Army
    Reserve and Army Guard units to be equipped with training sets, and
    identified ARNG units to meet the homeland defense requirements at
    higher equipping rates. This strategy is a unit rotation model called
    the Army Force Generation Model (ARFORGEN). ARFORGEN consists of
    progressive and sequential levels of increasing readiness from reset/
    train, to a ready force available to deploy. While the optimal rotation
    rates of Active component and Reserve component forces will differ
    (Active component=one deployment in 3 years, Reserve component=one
    deployment in 6 years), the necessary planning, resourcing, and
    training validation process is to be synchronized so that the Army can
    generate ready forces from both components to achieve a steady state
    deployment capability.
    Military Construction
        The Reserve components' military construction programs will provide
    new readiness centers, called Joint Armed Forces Reserve Centers,
    vehicle maintenance facilities, organizational maintenance shops, and
    aircraft maintenance facilities for Reserve component missions. Future
    budget requests will continue the Department's efforts to improve the
    quality of life for the Guard and Reserve, which for the non-mobilized
    reservist, is not normally housing and barracks, but rather where they
    work and train.
    Sustainment/Restoration and Modernization
        The Department is increasing the ``sustainment'' and ``restoration
    and modernization'' funding levels in order to ensure that facilities
    are available, and deliver full functionality over their expected
    service lives. Sustainment provides resources for maintenance and
    repair activities necessary to keep the facility inventory in proper
    working order. Restoration and modernization provides resources for
    improving facilities that have been damaged, need replacement due to
    excessive age, or need alteration to replace building components or
    accommodate new building functions. The Reserve component facility
    readiness ratings will continue to improve as funding is allocated to
    the most pressing requirements.
    Environmental Program
        The installation environmental programs managed by each Reserve
    component continue to be a good news story including efforts to
    protect, preserve, and enhance the properties entrusted to the Reserve
    Forces. All Reserve components are positively progressing on
    implementation of a new Environmental Management System.
    Joint Construction Initiatives
        Even prior to base realignment and closure requiring joint
    construction and basing, the Reserve components have been at the
    forefront of creating innovative ways to manage scarce military
    construction dollars. Joint construction is the practice of building
    one consolidated facility that fills the needs of two or more
    components. We have a Joint Construction Working Group to assist the
    Reserve components in identifying, planning, programming, and budgeting
    joint construction projects for future President's budgets. The goal is
    to secure a commitment by two or more components to pursue joint
    construction, identify a lead component, and prepare a memorandum of
    agreement to begin the process. Intuitively, most would agree one
    building costs less than two of similar size and function, but the
    benefits extend to reductions in force protection, sustainment dollars,
    contracting costs, and the additional benefits of cross-service
    cultural understanding. I thank Congress for their support of this
    effort, and we will continue to pursue more joint construction
    opportunities in the future.
                    fiscal year 2007 legislative initiatives
        The following legislative proposals are contained in the Omnibus
    bill submitted with the President's budget.
        A provision that raises from $10,000 to $25,000 the special pay for
    Reserve component health professionals who are on Active-Duty for at
    least 1 year. This increase in special pay for Selected Reserve health
    care professionals in critically short wartime specialties supports
    efforts to meet vitally important retention goals.
    Budget Impact
        The funding for this proposal is discretionary; the budget
    submission will contain the funds to support the programs envisioned.
    All special pay bonus authorities must stay within the original
    appropriation and require no extra funds. Other proposals are in final
    coordination/approval within the administration.
                                   conclusion
        The National Guard and Reserve continue to be a mission-ready
    critical element of our National Security Strategy. The requirement for
    our Reserve components has not, and will not lessen. Our Reserve
    components will continue with their expanded role as an operational
    reserve in all facets of the total force. The nation continues to call
    and the Reserve components continue to answer that call. But in
    answering that call, we cannot lose sight of the need to balance their
    commitment to country with their commitment to family and civilian
    employers. That is why our efforts to: relieve stress on the force is
    absolutely essential; continue to rebalance the force is so crucial;
    and ensure that utilization not turn into over-utilization is so
    critical. I am mindful that the path forward will not be easy, but
    together we will ensure operational, fully ready, and outstanding
    Reserve components. Thank you very much for this opportunity to testify
    on behalf of the greatest Guard and Reserve Force this Nation, and the
    world, has ever known.

        Senator Graham. Lieutenant General Blum.

      STATEMENT OF LTG H. STEVEN BLUM, USA, CHIEF, NATIONAL GUARD
                                 BUREAU

        General Blum. Chairman Graham, Senator Nelson, members of
    the subcommittee, thank you for the opportunity to discuss the
    status of personnel within the National Guard.
        Soldiers and airmen make up your Army and Air National
    Guard. Citizen soldiers and citizen airmen have once again
    demonstrated their ability to simultaneously operate across the
    entire spectrum of military operations, from close combat in
    Afghanistan and Iraq to a response to homeland security or
    homeland defense here, or natural disasters, such as you
    witnessed in the aftermath of Hurricane Katrina.
        I would now, with your permission, present 2 distinguished
    citizen soldiers and citizen airmen that are representative of
    the 460,000 citizen soldiers and airmen that make up your Army
    and Air National Guard.
        The first that I'd like to introduce this morning is Master
    Sergeant Kerry Miller. Please stand. Master Sergeant Miller is
    a pararescue team leader from Kentucky Air National Guard. He
    is married. He has two small children--Ian, 6, and Kirsten, 4.
    He's a family man, a citizen soldier activated and called to
    active duty in Afghanistan, pararescue man who went in at
    11,500 feet in the Hindukush Mountains to recover a special
    operations crew, CH-47, that was down. The crew was surrounded
    by hostiles. Without any regard to his personal safety, he flew
    in with a team of Rangers and other elements, went into the
    mountainous region of Afghanistan to save these people. Their
    helicopter was shot out from under them. We lost a second
    helicopter, CH-47. He fought on the ground. Almost immediately,
    seven Rangers were killed coming off of the crippled aircraft.
    He and a few others fought for 7 hours, an enemy that was
    determined to kill every one of them, in ranges as close as I
    am to you, for 7 hours, to include calling in close-air support
    as close as 50 feet away from their position. This bravery, his
    concern for his fellow men, his leadership, his courage under
    fire in saving his fellow soldiers that he was involved with,
    in motivating and leading those who were there, redistributing
    ammunition, coordinating close-air support, and getting the
    remainder of those bodies out, and those that were alive out,
    have resulted in him being awarded the Silver Star for Valor.
    We're very proud of him. [Applause.]
        Senator Graham. Very impressive, indeed.
        General Blum. The second citizen soldier is from Indiana,
    and he also found himself, the way we do business, not having
    full-up units and having to cross level, serving with the
    Kentucky National Guard in a military police unit--not in
    Afghanistan; this time, in Iraq. He and 9 other members of the
    Kentucky National Guard were riding around in 4 Humvees,
    patrolling their area, their sector in Iraq, when a convoy of
    over 30 foreign-national vehicles was ambushed by a determined
    anti-Iraqi coalition group of 50 insurgents, 50 attacking an
    unarmed convoy. The only thing that kept them from total
    annihilation was Sergeant Tim Nein, this individual standing
    before you. He's also married. He also has young children--Sam,
    10, and Ian, 5. He has a lot invested here. He, as a citizen
    solder, left his family to be called up for the global war on
    terrorism. He threw his MP squad between certain death for
    these foreign-national truck drivers and these 50 insurgents
    that had a determined attack with small arms, mortars, rocket-
    propelled grenades. This force of 10 took on 50 people, and,
    for the next period of intensive fighting, to include going
    back to vehicles, reloading, reallocating ammunition,
    evacuating the wounded, calling for reinforcements, he was the
    squad leader that was in charge of the ground force, and it
    resulted in 27 killed in action on the part of the enemy. It
    resulted in six wounded on the part of the enemy. It resulted
    in one combatant being captured and a total defeat of this
    determined ambush. He also was awarded the Silver Star for his
    courage under fire and his leadership and dedication. We have a
    lot to be proud of here, too. [Applause.]
        The Directors of the Army and Air National Guard, General
    Vaughn and General James, will, in the second panel, give you
    all of the detail that you may want as we peel back any issues
    that come up before this subcommittee, but I'd like to set the
    ground rules early on this, or at least set the stage for where
    we are in the Army and the Air National Guard.
        Both the Army and the Air National Guard face recruiting
    challenges. Admittedly, there are challenges, but I am
    absolutely confident that both the Army and the Air National
    Guard will achieve their end strength goals this year. There's
    no doubt in my mind. That is largely due to the fact that we're
    a word-of-mouth recruiting organization. Many of our troops are
    now back home. They are staying with us, and they are immensely
    proud of what they have accomplished. They thought what they
    did in Afghanistan and Iraq and around the world made a
    difference, and they want other members to be part of their
    team, because they never want to go to war again without a unit
    that's totally fully-manned. That means all of the positions
    filled.
        Recruiting and retention take on a much greater meaning
    once you've been to war and you understand what it means to
    fight shorthanded. They also understand what it means to fight
    under-equipped. So, it's very significant to us that these
    magnificent citizen soldiers and airmen have the equipment in
    their hands that they need to train with, because that is also
    a factor in retention and recruiting. It is very difficult to
    attract someone to a unit that doesn't have equipment or keep
    their interest when we have the kind of quality soldiers and
    airmen we have today. They have to have modern equipment in
    their hands if they're going to train on it and remain
    interested in what we expect them to do. They must have that
    equipment if the Governors call them out tonight or the
    President calls them out for next week.
        The issue of changes to Army end strength and force
    structure has received a great deal of attention by the Senate
    recently. There's been a lot of public discussion. General
    Vaughn will address this. I want to be clear on one issue right
    up front. We ask this body to again authorize and resource the
    Army National Guard at an end strength of 350,000. That's what
    this country needs. That's what the State Adjutants General and
    the Governors believe is the right size force. That's what the
    Adjutants General believe that we will achieve between now and
    the end of the year.
        The senior leadership of the Army has committed to fund the
    Army Guard up to that level, and I would like to make sure we
    all hold them to that promise.
        It is great that our Members of Congress understand that
    recruiting and retention are linked to equipment and the
    mission. Our people are more likely to stay in the Guard when
    they have a clear mission and they have quality equipment in
    the right quantities to do their missions. As we talk today
    about recruiting and retention, we should remain mindful that
    these equipment shortages in the aftermath of Base Realignment
    and Closure (BRAC)-related mission disruptions absolutely
    compounded our strength challenges and make what we're doing
    now even more difficult than it needed to be.
        Capability really comes from three things. It's having
    people that are trained, and it's having the equipment in the
    hands of these people that are trained to use that equipment.
    If either the people aren't there or the training isn't there
    or the equipment isn't there, the capability isn't there. We
    don't want to confuse, as General Schoomaker often says,
    enthusiasm with capability. We need to make sure we have
    capability.
        Our homeland capabilities must support the warfight, but
    they must also protect our citizens here at home. The National
    Guard has taken several initiatives to provide the Governors of
    the States with what we feel to be 10 critical or essential
    capabilities. Your National Guard's homeland readiness is
    rooted in these 10 essential capabilities. They're aviation,
    engineering, civil support teams, which Congress has provided,
    security forces, medical forces, transportation, maintenance,
    logistics, a command-and-control (C2) apparatus--which really
    isn't command and control, it's really coordination and
    communication when we're talking about a joint interagency
    effort here in the United States. You still need that C2 piece,
    however, and the joint force headquarters in each State
    absolutely do that superbly--and communications. You have to
    have the hardware to be able to communicate--the radios and the
    satellite phones and the satellite dishes and so forth.
        We are leveraging existing combat capabilities that are
    resident in the Army and the Air Guard, the units that we have,
    but we're also making them even better and more relevant to
    what we may be called upon, on no notice, here at home to do.
    We have established a Joint Force Headquarters and have a Joint
    Operations Center that operates 24/7, 365 days of the year, so
    that we can provide situational awareness immediately to the
    commanders in chief of the States and the Commander in Chief of
    the Nation, and to the combatant commanders, the Joint Staff,
    the Office of the Secretary of Defense (OSD), the Departments
    of the Army and the Air Force, and whoever else may need to
    share that information, to include the Department of Homeland
    Security.
        We also have weapons of mass destruction (WMD),
    counterterrorism, and consequence management response teams
    that we call chemical, biological, radiological, nuclear, or
    high-yield explosive enhanced response force package teams. As
    a matter of fact, on April 4, 2006, at the DC Armory, about 3
    miles from this location, we will be exercising one of those,
    and we invite your attendance. We will have three or four
    iterations of training. It will not be a demonstration; it will
    be truly watching these force packages absolutely go through
    the training that we put them through so that they're ready in
    case we need them. This will happen on April 4, 2006, at the DC
    Armory, between the hours of 11 a.m. and 1 p.m. We'd invite
    anyone's attendance who's interested.
        In closing, the successful integration of civilian and
    military organizations and their capability have long been a
    strength of the National Guard. Our members live in both
    worlds. Our forces operate in both worlds. We are proud to be
    able to bring these community organizations and capabilities
    together and render our fellow citizens essential help when
    it's needed most.
        Sir, I'll close now, and look forward to your questions.
        [The joint prepared statement of General Blum, General
    Vaughn, and General James follows:]

        Senator Graham. Thank you, General. Thank you, Secretary
    Hall.
        We're supposed to vote around 3:00, and I think we may have
    more than one vote, so we can stay until about 3:15. My goal is
    to ask meaningful questions, hear the testimony, and let you go
    on about your business, and see if we can get it all wrapped up
    by 3:15. I'm going to start and then let Senator Nelson take
    over.
        Let's get directly to the point, the bottom line of your
    testimony, in a couple of areas. Number one, money and benefits
    matter when it comes to recruiting and retention. Have we
    proved that if you increase the benefits and you increase the
    pay and the bonuses that it has a positive effect? Is that true
    or not?
        Mr. Hall. I think it's true if you increase them in the
    areas that you want to target them towards. I think we need to
    target the benefits towards those bearing the brunt today.
    Sometimes when we target the benefits that are deferred
    compensation, we're not focusing on that trooper and their
    families serving today. That's where it's making the
    difference.
        Senator Graham. General?
        General Blum. Sir, the money speaks for itself. You hit on
    it earlier. Those that are re-enlisting in record numbers are
    all taking advantage of this bonus. Because of that, they're
    re-enlisting for a longer period of time. So, what we are
    getting from these bonuses is the most experienced, committed
    force that this Nation has ever had in its Reserve component.
        Senator Graham. I would like to add to that, in terms of
    knowing where we'll be in the future--if you had asked anybody
    at this table 5 years ago, ``Would we have been at war for 4\1/
    2\ years? Would we have had multiple deployments? Would we have
    the Silver Star winners among the Guard and Reserve?'', most
    people wouldn't have anticipated the future and our needs. So,
    my comment to you, Secretary Hall, is, the one thing I've found
    is that money and benefits matter, and we don't know who we're
    going to need next, and we don't know how much we're going to
    use them. I'm going to try, while my time is here as a
    committee chairman, to spread the benefits around to the whole
    force, and focus them effectively on the people who are bearing
    the brunt. The people bearing the brunt of this war are those
    in uniform. Every member of the Guard and Reserve is subject to
    leaving their family, and subject to being called up,
    domestically and internationally. That's why I believe TRICARE
    eligibility for every guardsman and reservist who is subject to
    deployment is important.
        No one would argue that these two gentlemen you've just
    pointed out to us General Blum and their families should be
    denied the ability to have eligibility for full-time health
    care benefits, given their sacrifice to their country. They
    represent the best in us all. There a lot of people out there
    like me. I'm not deployable, so don't count me. There are a lot
    of people out there that haven't received Silver Stars, but
    they spend 1 weekend a month, 2 weeks a year, and who knows
    what comes their way? My message to the force at large is that
    you're appreciated, and the benefits need to be to the force at
    large, not just to a few who have sacrificed greatly.
        Now, about equipment, what effect has this war had on our
    equipment accounts? What do we need to do differently to make
    sure the Guard and Reserve have the equipment they need to meet
    their demands and to make sure that doesn't hurt us,
    recruiting-and-retention wise? Where are we on equipment?
        Mr. Hall. I'll start, and then turn to General Blum.
        You've hit it right on the head. We have at least five
    areas in which we have to have equipment addressed and that's
    the reset of equipment, the repair of equipment, the equipment
    for modularity, the equipment for homeland defense, and then
    the overall equipment for training for the Guard and Reserve.
    In fact, we will need to add more money. From testimony before
    there's $21 billion in the Guard account, which is
    unprecedented, to address those needs, but I would say,
    candidly, there needs to be more. The President's budget this
    year has about $1.5 billion more for equipment than last year.
    Along with supplementals, we have started the effort, but my
    testimony would be that we need to sustain that. We need to
    look in 2008, when the budget comes up, to see that that $21
    billion is added onto. General Schoomaker, before these
    committees, has stated that the goal now, as it has not been in
    the past, is to make sure that the Guard and Reserve are
    equipped with the same equipment and the same amounts of
    equipment as the Active-Duty Forces. That is his commitment.
        That statement carries a lot of money with it. I think
    that's our goal. Our challenge is to make sure that we follow
    through on that goal.
        Senator Graham. That is welcome news, and I really
    appreciate your candor. I couldn't agree with you more. We're
    going to have to find the money, because we're not going to
    send people to war without the best equipment possible. We're
    not going to have the redheaded-stepchild-approach anymore to
    the Guard and Reserve, because you're just as subject to
    getting killed in the Guard and Reserve as you are on Active-
    Duty.
        General Blum. Sir, there's another dimension to that. I,
    too, welcome that. That's an unprecedented, historic commitment
    on the part of the DOD and the Department of the Army and the
    Department of the Air Force to adequately resource their
    Reserve components. My concern is that the good intent of
    Congress and the good intention of the commitment of the senior
    leadership still has to go through that path, through that
    long, snakelike Pentagon process that is not built to make sure
    that the congressional intent actually gets in the hands of the
    people that the aid was supposed to get to. I have absolutely
    no confidence that I have a way to track the $21 billion and
    make that match a serial number on a truck that ends up in Iowa
    or it ends up in some readiness center around the country. If
    that could be addressed, as well as the commitment, that would
    be hugely helpful.
        Senator Graham. That's a great suggestion.
        I have one last question and I'll turn it over to Senator
    Nelson.
        You said that we need 350,000 Reserve component people
    funded, General Blum. The President's budget doesn't quite get
    there. Do you agree, Secretary Hall, that that's what we need?
        Mr. Hall. I do. After the budget was sent over, testimony
    from Secretary Harvey, General Schoomaker, and General Cody
    also agreed with the Secretary, that the Department is
    committed to funding a National Guard at the level they grow
    into including 350,000. That has developed since the budget was
    sent over. The number, as General Blum said, is 350,000. I
    think he's probably at about 337,000 right now, and growing. I
    am confident, also, with the incentives that they have put in,
    and that General Vaughn is pursuing, that they will get
    350,000. That is the number which is to be funded to.
        Senator Graham. Thank you very much.
        Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman.
        Secretary Hall, the recently released QDR concludes that,
    ``The Reserve component must be operationalized so that select
    reservists and units are more accessible and more readily
    deployable than today.'' To do this, the QDR proposes to
    increase the period authorized for the Presidential Reserve
    Call-up from 270 days to 365 days. What's the underlying
    rationale for extending the Presidential Reserve Call-up to 365
    days? The President already has authority to mobilize Guard and
    Reserve members up to 24 months under his partial-mobilization
    authority.
        Second, if this proposal is enacted, will you give us your
    assurance that the Department will not use it to circumvent the
    24-cumulative-month limit on mobilization under the President's
    partial-mobilization authority?
        Mr. Hall. I talked to all of the Guard and Reserve Chiefs
    before we came over, to get their view, and also to General
    Blum, because he has commanded under a Policy Review Committee.
    I asked each and every one of them, ``If you had the authority
    to have 365 days, rather than 270 days, what would that do for
    you in the field?'' In fact, I'll ask General Blum to tell you
    his experience in Bosnia and Kosovo. Each and every one of them
    said the same word, it gives more ``flexibility.'' Many times,
    270 does not fit the year that you need people. I think the
    short answer is, it provides more flexibility for all of them.
    I'll let them comment on that.
        On the second point, the commitment--and, by the way, my
    personal view is 24 cumulative months ought to be the time. I
    know the word is ``consecutive,'' but I think we need to track
    that, and that we do not have anybody serving involuntarily
    recalled beyond that 24-month cumulative months. That's my
    personal view.
        General Blum. Sir, I support expanding that authority to
    365 days. It doesn't mean you have to use the whole year, but I
    personally experienced a task force made up of personnel from
    21 States of multicomponent Active, Guard, and Reserve, and it
    would have been highly useful for me to have a slightly wider
    window to make all of those task forces that time-phase in.
    Everybody doesn't come in on the same day, and they don't all
    leave on the same day. You have elements of the task force that
    literally start months ahead, and some that come out months
    later, so it's very useful to have a couple of months on the
    end of 6 months, either way, so that you don't have risk for
    the ground commander, or the Joint Force Commander over there.
    He shouldn't have to assume risk because we're racing against
    the calendar. If we need a couple of more days, it is much more
    useful to provide those days. If it's not abused, I think it's
    a magnificent tool, or an additional arrow in the quiver of the
    Secretary of Defense and the President.
        Senator Ben Nelson. Thank you. General Blum, as we're all
    aware, the administration surprised us with the proposed
    authorized end strength of 350,000 soldiers for the Army
    National Guard, with funding for only 333,000 soldiers, all
    without coordination with the Governors who would be affected
    by this reduction in funding. In response to this proposal,
    Senator Graham and I introduced a resolution that was adopted
    by the Senate honoring the service of our National Guard
    members and requesting consultation by the Secretary of Defense
    with Congress and the State Governors prior to offering
    proposals to change the National Guard force structure. The
    Army has subsequently promised to fund whatever end strength
    the Army Guard achieves up to the authorized 350,000. The Army
    Guard is on a path to reach its authorized end strength.
        Are you confident that the Army can find the funds to
    support the end strength above 333,000? Has the Army made a
    commitment to provide the equipment needed for the increased
    Army Guard end strength?
        General Blum. Secretary Harvey and General Schoomaker
    personally have committed to me that it is their full intention
    to restore the full $788.8 million that was taken out of the
    2007 budget for the Army National Guard. That would be about
    $200 million, roughly, for personnel, a little over $200
    million for operation and maintenance, and about $62.5 million
    for the Defense Health Program. What I never understood, but
    they have demonstrated a commitment to restore, is the over-
    $318 million worth of equipment and procurement that were taken
    out as part of that personnel reduction. They all, together,
    add up to $788.8 million for 2007. That will fix 2007, but I am
    concerned that 2008 through 2011 need to be addressed, as well,
    because if we follow the programmatics through the FYDP, the
    National Guard does not stop at 342,000 or 333,000; it ends up
    going as low as 324,000 in 2011. I don't think anyone here
    foresees a National Guard the size of 324,000 5 years from now,
    so why would we fund it at that level? I would like that looked
    into, please, or addressed carefully.
        Senator Ben Nelson. Thank you.
        Senator Graham. Very good questions.
        I'd like to end on this note. The idea of reducing the
    Reserve component by--what is it? 20,000? 22,000?
        Mr. Hall. Well, it would be 17,000, and then 5,000 for the
    Army Reserve, for 22,000, total.
        Senator Graham. Does that make sense?
        Mr. Hall. I think the testimony by the Army leadership we
    have referenced shows, in retrospect, it does not, and their
    commitment is to fund it to what they grow to. You've heard the
    General say that he is absolutely convinced that they will grow
    to 350,000, and that's what needs to be funded.
        Senator Graham. What a great answer. A good way to end.
        Secretary Hall, thank you for your service. I know there's
    probably a lot of things you could do. You're a talented guy. I
    appreciate your helping us with our Reserve component issues
    and what you've done at the DOD.
        General Blum, thank you for your candor. We're going to
    follow the money, too. We're going to make sure the equipment
    gets to the people who would be subject to needing it.
        I feel pretty good, I really do. I think the money we've
    spent and the benefits we've redesigned are paying off. The
    challenges of this war are long from over. As a Nation, we've
    learned from this experience, and we're beginning to adapt.
    It's because of people's willingness to come up here and tell
    us the truth and provide us honest testimony about their needs.
    So, thank you both.
        Second panel, please come forward. [Pause.]
        Thank you all very much. Our second panel consists of
    Lieutenant Clyde A. Vaughn, Director of the Army National
    Guard; and Lieutenant General Daniel James III, Director of the
    Air National Guard.
        I want to add my congratulations to a long and
    distinguished career. I hate to see it come to an end, but you
    should be very proud of what you've done for our Nation. Thank
    you for your service, General James.
        Lieutenant General James R. Helmly, you're going on to
    something new, but you can be proud of what you've done here.
    You have been an honest broker, and I will be forever in your
    debt about coming up here and telling us the truth as you see
    it.
        Vice Admiral John G. Cotton, Chief, Navy Reserve;
    Lieutenant General John W. Bergman, Commander, Marine Force
    Reserve; and Lieutenant General John A. Bradley, Chief, Air
    Force Reserve, thank you all for coming, and we'll see if we
    can do this in 30 minutes.
        We'll start from my left and go to my right.

    STATEMENT OF LTG CLYDE A. VAUGHN, ARNG, DIRECTOR, ARMY NATIONAL
                                 GUARD

        General Vaughn. Thank you, Mr. Chairman and Senator Nelson.
        First of all, I'd like to introduce my Command Sergeant
    Major John Gipe, from Kentucky, sitting with two great Kentucky
    Silver Star winners, by the way. There's a deal going over
    there or something.
        Senator Graham. Anybody else in the Guard, other than
    people from Kentucky? [Laughter.]
        General Vaughn. If the rest of them are like that, that's
    what we need. [Laughter.]
        Senator Graham. There you go. It seems like they're pretty
    tough in Kentucky.
        General Vaughn. Sir, thanks for your great support. These
    States have met all mission requirements this year from the
    high of Iraq in combat, in combat support, and in combat
    service support. You've heard all the details, how many brigade
    combat teams and all that were downrange.
        We've had all these enduring requirements for some time in
    Kosovo, in Bosnia, and the Multinational Force and the
    observers in the Sinai, and it goes on and on and on, and, also
    with Hurricanes Katrina and Rita. Your great support for
    recruiting and retention initiatives and what you've done in
    this committee has made it possible for us to reach 350,000 end
    strength. I know we're in a hurry, but I really look forward to
    your questions, and I'd just like to thank you again for your
    great support.

      STATEMENT OF LT. GEN. DANIEL JAMES III, ANG, DIRECTOR, AIR
                             NATIONAL GUARD

        General James. I, too, would like to make my remarks brief.
    It has been quite a challenging tenure for the Air National
    Guard. We have been an operational Reserve, along with the Air
    Force Reserve. We've gone through that transition to
    operational Reserve. We've been funded at C-1 status, and we
    have very well-trained and very experienced units, but our
    equipment is getting a little old. Consequently, the Air Force
    would like to see it retired, and we're working very hard to
    replace older equipment with new missions or newer equipment.
    Recapitalization is important.
        I think one of my proudest moments in the Air National
    Guard occurred last year with Hurricane Katrina, when I, along
    with my colleague here to my right, General Vaughn, moved over
    40,000 soldiers and airmen into the New Orleans area. In 9
    days, we flew over 2,000 sorties, tens of thousands of tons of
    cargo, and, as I said, multiple thousands of soldiers. To me,
    those 9 days really proved the worth in the surge capability of
    the Guard. It didn't just stop right after that. We continued
    to supply that very much needed endeavor. I think it was a
    proud moment. Those 9 days reminded me of the Berlin airlift.
    We had tankers and 130s and all kinds of airplanes going in
    there. We had air-traffic controllers. We had people serving
    over 11,000 hot meals a day. We had civil engineers, security
    forces, communications specialists--everybody pitching in--and
    it was a proud moment.
        As was mentioned earlier, I am challenged by recruiting and
    retention, and I'll go into more depth on those areas after my
    colleagues have a chance to make their opening remarks and
    answer any questions.
        It has been my great privilege to serve this Nation, and I
    am very proud to be an American.
        Senator Graham. Thank you.

       STATEMENT OF LTG JAMES R. HELMLY, USA, CHIEF, ARMY RESERVE

        General Helmly. Chairman Graham, Senator Nelson, thank you
    very much for the opportunity to be with you today.
        I'm Ron Helmly. I'm an American soldier, and very proud of
    it. I thank you very much for your complimentary remarks. I've
    been proud to serve in this position.
        I wish to say, in front of the committee, that I could not
    be prouder were I to be an enlisted member of the Army Guard,
    Air Guard, or any of the other Services you see represented
    before you. You're correct, we are, indeed, privileged to have
    the magnificent young Americans who populate all of our Armed
    Forces. I'm very proud to be a member of that force.
        I wish to introduce to you two of our heroes from the
    United States Army Reserve today. With us today are Captain
    Jason Rawnsborg and Sergeant Jesse Smee. I'd ask them to stand,
    please.
        Captain Rawnsborg completed a tour as commander of a
    transportation truck company at al Asad, where his unit
    maintained--I did not believe this myself--in excess of a 90-
    percent operational readiness rate, riding the roads from al
    Asad to Jordan, and supporting our comrades in the United
    States Marine Corps out of al Asad Combat Base. That was true.
    I was fortunate to visit with his unit last summer. They are,
    indeed, magnificent Americans.
        Sergeant Smee was a truck driver out of Tikrit in Iraq,
    where he drove 5,000-gallon fuel tankers, a favorite target of
    the insurgents. We're privileged to have both of these
    noncommissioned officers (NCOs) and officers in our ranks. They
    represent the immensely strong, capable, character-strong
    Americans who populate our Services.
        Thank you very much. [Applause.]
        There is no doubt, Mr. Chairman, in my mind that our
    greatest challenge is manning the force. In fact, some years
    ago I was asked to speak at a breakfast here on Capitol Hill,
    and I remarked that I felt then that our three greatest
    challenges were manning the force, manning the force, and
    manning the force. That is simply because, in the some 33 years
    since we wisely moved to an All-Volunteer Recruited Force in
    our Armed Forces, this is the first extended-duration stress
    that we've placed on that force. Candidly, with regard to
    benefits and entitlements and those kind of things, in my own
    professional judgment, it is not so much the amount as the fact
    that we constantly are aware that it does play a role and that
    we move ahead of time to modernize those with the cost-of-
    living and with other entitlements and benefits provided to the
    Active Force, as well as in private life. What we found early
    in this conflict was that our recruitment and re-enlistment
    benefits, entitlements, educational benefits, TRICARE, et
    cetera, had not been modernized in over 5 years' time. They had
    been taken for granted, and they were not prepared to withstand
    the stress on the force.
        So, I look forward to your questions about such matters,
    and thank you very much for your interest and your leadership
    in addressing those very important matters.
        Thank you.
        [The prepared statement of General Helmly follows:]

      STATEMENT OF VADM JOHN G. COTTON, USNR, CHIEF, NAVY RESERVE

        Admiral Cotton. Chairman Graham and Senator Nelson, and, in
    particular, the hardworking staffers on the back wall--and a
    couple of them are actually busy reservists; they also serve
    our Nation, and we're proud of them. I don't know which
    reservist to bring here today, but I will tell you that we have
    over 22,000 Navy reservists fully integrated with the Navy, our
    fleets, and our combatant commanders on duty right now around
    the world. They're on either 1-day or 365-day orders. It
    doesn't matter. They're working for us somewhere deployed,
    fully integrated, and doing a great job.
        While it's true that the Navy Reserve might be a little
    understrength right now, we are emphasizing quality and global
    war on terrorism skill sets rather than just quantity. Our end
    strength today is slightly above the requested end strength for
    2007, so we do feel very comfortable, especially because we're
    working so closely with the United States Navy in Active/
    Reserve integration. We've never had such good working
    relationships, especially with the incentives, the sailor-for-
    life culture that we're borrowing from the Marines, and also a
    continuum of service. It's not about a race to get 20 years of
    perfect attendance. It could be 20 years of service over 40
    years, with on-ramps and off-ramps to service. We're bringing
    good skill sets back into the war right now, as you say, which
    is a long war.
        The Navy Reserve is adapting. At home, we quickly respond
    to disasters, to Northern Command requirements, as well as to
    Navy requirements. We deploy to support combatant commanders.
        We look forward to your questions, sir.
        [The prepared statement of Admiral Cotton follows:]

                Prepared Statement by VADM. John G. Cotton, USN

                                i. introduction

        Chairman Graham, Senator Nelson, distinguished members of the
    subcommittee, thank you for the opportunity to speak today about the
    Navy and its Navy Reserve.
        Our Navy Reserve continues its transformation to better support
    combat and combat service support missions throughout the world. Navy
    reservists are no longer solely a strategic force waiting for the call
    to mobilize in a war between nation-states. They are operational and
    forward, fighting the global war on terror as Seabees in Iraq, civil
    affairs sailors in Afghanistan, customs inspectors in Kuwait,
    logistical aircrew and Joint Task Force staff in the Horn of Africa,
    and as relief workers in disaster recovery operations in the United
    States and around the world.
        Your support in this transformation from a strategic reserve to an
    operational reserve is greatly appreciated. Congress passed legislation
    in the 2006 National Defense Authorization Act (NDAA) that provided
    force-shaping tools allowing the Navy to best distribute sailors within
    the Total Force. You authorized the flexibility to transfer funds from
    Reserve Annual Training (AT) accounts to Reserve Active-Duty (AD)
    accounts. These changes enable our sailors to spend more time at their
    supported operational commands and more time fighting the war on
    terror.
        Reserve component sailors are serving selflessly and are fully
    integrated throughout the Department of Defense (DOD), with our
    coalition partners and with every civil support agency. Our sailors and
    their families continue to earn our respect and gratitude for their
    service and their many sacrifices. As part of the All-Volunteer Force,
    they reserve again and again, freely giving of their skills and
    capabilities to enhance the Total Force team. On behalf of these brave
    men and women and their families, thank you for your continued support
    through legislation that improves benefits for their health and
    welfare.
    Single Manpower Resource Sponsor
        Navy is taking a Total Force approach to delivering the workforce
    of the 21st century. The Total Force consists of active and Reserve
    military, civil service, and contractors. The Total Force will deliver
    a more responsive workforce with new skills, improved integrated
    training and will be better prepared to meet the challenges of the Long
    War. As the Chief of Naval Personnel testified, the Navy is
    concentrating this effort in a single resource sponsor: the Manpower,
    Personnel, Training, and Education (MPT&E) enterprise. Our Navy Reserve
    is an integral part of the MPT&E and is working closely with the Chief
    of Naval Personnel to best leverage all Navy resources to produce the
    greatest warfighting capabilities possible.
        Our ``One Navy'' goal is to be better aligned to determine the
    future force (capabilities, number, size, and mix) based on DOD and
    Department of Navy (DON) strategic guidance and operational needs.
    Specifically, the new MPT&E domain will deliver:

             A Workforce Responsive to The Joint Mission: Derived
            from the needs of Joint Warfighters.
             A Total Force: Providing a flexible mix of manpower
            options to meet warfighting needs while managing risk.
             Cost Effectiveness: Delivering the best Navy workforce
            value within fiscal constraints and realities.

    Strategy for Our People
        To accomplish the optimal distribution of trained sailors
    throughout the Total Force, the MPT&E is developing a ``Strategy for
    Our People.'' This strategy will provide the guidance and tools to
    assess, train, distribute, and develop our manpower to become a
    mission-focused Total Force that meets the warfighting requirements of
    the Navy.
        Each Navy reservist fills a crucial role in the Total Force,
    providing skill sets and capabilities gained in both military service
    and civilian life. For example, a sailor who learned to operate heavy
    equipment on Active-Duty, and who is currently employed as a foreman in
    the construction industry, brings both military and civilian skill sets
    to his unit or individual augmentee assignment.
        Additionally, Reserve component sailors can perform the same
    mission while training at home as they do when deployed. For instance,
    harbor patrol sailors use the same core skill sets training in
    Portland, Boston, Charleston, and Jacksonville harbors as they use in
    Ash Shuaybah, Kuwait. Sailors also use these skill sets when acting as
    first responders within the United States. While Hurricane Katrina was
    still crossing Louisiana and Mississippi, Navy Reserve Seabees were
    driving their personal vehicles in the eye of the hurricane to provide
    search and rescue capabilities followed by their traditional ``can do''
    reconstruction efforts. After a tornado hit Evansville, Indiana, at
    night, the local Navy Operational Support Center served as a
    communications and emergency triage headquarters, and sailors
    immediately responded with search and rescue teams, saving lives.
    ``Continuum of Service'' and ``Sailor for Life''
        Our Active component and Reserve component sailors receive valuable
    experience and training throughout their careers, and our vision for
    the future is to create a ``Continuum of Service'' system that enables
    an easy transition between statuses. We are building a personnel system
    in which sailors can move between Active component and Reserve
    component based on the needs of the Service and availability of the
    member to support existing requirements. To make these transitions
    seamless, the Navy will develop smooth ``on ramp'' and ``off ramp''
    opportunities. Sailors will serve on Active-Duty for a period of time,
    then train and work in the Reserve Force and, with minimal
    administrative effort, return to Active-Duty. The Navy will offer
    experienced sailors the ability to transition between statuses when
    convenient, while incentivizing rate changes and service assignments at
    the right time and place, all in a ``Continuum of Service'' throughout
    their careers. All reservists, Full Time Support (FTS), Selected
    Reserve (SELRES) and even our important Individual Ready Reserve
    members, will benefit from increased opportunities to serve and re-
    serve.
          ii. changing demand signals--new and nontraditional missions
        Navy sailors continue to support the global war on terror in
    Southwest Asia, around the world and at home. Over 5,000 Reserve
    component sailors are currently mobilized and serving in various
    capability areas such as Navy Coastal Warfare, Seabees, Intelligence,
    cargo airlift, cargo handlers, customs inspectors, civil affairs, port
    security, medical (including doctors, nurses, and hospital corpsmen),
    and on the staff of every combatant commander (COCOM).
    Operational Support
        Mobilization alone does not reflect the total contribution of the
    Navy's Reserve. On any given day, an additional 15,000 Reserve
    component sailors are providing support to the Fleet, serving in a
    variety of capabilities, from flight instructor duties to counter
    narcotics operations, from standing watch with the Chief of Naval
    Operations staff to relief support for Hurricane's Katrina, Rita, and
    Wilma. Sailors have provided over 15,000 man-years of support to the
    Fleet during the past year. This support is the equivalent of 18 Naval
    Construction Battalions or 2 Carrier Strike Groups.
        To define the Total Force requirements and maximize operational
    support, Commander, Fleet Forces Command commenced a continuous Reserve
    Zero-Based Review process in 2004. Navy and joint mission requirements
    were prioritized, followed by a thorough analysis of Reserve component
    manpower available to meet those requirements. The ZBR continues to
    facilitate Active Reserve Integration (ARI), placing Reserve component
    billets in various Active component units where the requirement for
    surge capabilities and operational support is predictable and periodic.
    This capabilities-based review also enabled the Fleet to develop
    mission requirements that were inclusive and dependent upon skill sets
    and capabilities resident within its aligned Reserve component.
        The Navy supports 21 joint capability areas, built on the
    foundations of Sea Strike, Sea Shield, Sea Basing and FORCEnet, and the
    Navy Reserve component is fully integrated in all enterprises.
    Excellent examples of ARI are highlighted in Central Command, where 50
    percent of the Navy individual augmentee requirement is being met by
    Reserve component sailors. Operational Health Support Unit Dallas
    deployed with 460 medical and dental specialists for 11 months, during
    which the unit maintained health clinics in Iraq and hospitals in
    Kuwait. These sailors relieved an Army unit, set up their medical
    capabilities in the Army Camp, and provided integrated joint health
    care to all Services.
        Navy's newly established Navy Expeditionary Combat Command
    integrates the Reserve component expeditionary and combat service
    support capabilities into one Total Force command. The Naval
    Construction Force has 139 units comprised of Active component and
    Reserve component sailors, and Naval Coastal Warfare continues to
    rebalance Active and Reserve personnel to meet COCOM requirements.
        Fleet Response Units (FRU) are directly integrated with Active
    component aviation units. FRU sailors maintain and operate the same
    equipment as Fleet personnel, supporting the Fleet Response Plan by
    providing experienced personnel who are qualified and ready to rapidly
    surge to deployed Fleet units. This ARI initiative reduces training
    costs by having all sailors maintain and operate the same equipment. No
    longer are the Active and Reserve components using different
    configurations for different missions.
        Another ARI initiative is the Squadron Augmentation Unit, which
    provides experienced maintenance personnel and qualified flight
    instructors to Fleet Replacement Squadrons (FRS) and Training Commands.
    Experienced Reserve component technicians and aviators instruct both
    Active component and Reserve component sailors to maintain and fly
    current fleet aircraft at every FRS.
    The Reserve Order Process
        One constraint to these initiatives is the Reserve order processes.
    The current system has multiple types of Reserve orders: InActive-Duty
    for Training (IDT), InActive-Duty for Training-Travel (IDTT), Annual
    Training (AT), Active-Duty for Training (ADT), and Active-Duty for
    Special Work (ADSW).
        In addition to multiple types of orders, the funding process for
    these various types of orders can be equally complex. Navy is currently
    evaluating process options that will streamline the system and make
    support to the fleet more seamless. In fact, efforts such as the August
    2005 conversion of Navy Reserve Order Writing System to ADSW order
    writing have already improved the situation for sailors and the fleet
    by allowing the same order writing system to be used for both ADT/AT
    and ADSW. Additionally, the Navy Reserve is also addressing these
    issues by emphasizing and increasing ADSW usage, which is simply
    ``work'' funding for operational support to the Fleet, rather than the
    previous way of doing business with training orders for work. The
    baseline data call of required work was initiated in 2005 with an
    implementation goal of accurately funded ADSW accounting lines in
    fiscal year 2008. COCOMs continue to review operational support
    requirements and the appropriate level of funding for the global war on
    terror and surge operations. Emphasizing ADSW will be a significant
    evolution in the Navy's effort to integrate its Reserve Force
    capabilities by aligning funding sources and accurately resourcing the
    accounts responsible for Navy Reserve operational support.
                        iii. size and shape of the force
        The total number of Navy reservists, both SELRES and FTS, is
    requested to be 71,300 for fiscal year 2007. The ongoing ZBR and
    effective ARI continue to optimally integrate the capabilities of the
    Total Force, which optimizes the force mix of Active component and
    Reserve component sailors needed to support the Fleet while still
    providing effective surge operational support.
    Common Active Component/Reserve Component Pay System
        A common pay and personnel system that provides for a seamless
    transition from Active component to Reserve component is essential to
    the success of our ``Continuum of Service'' and ``Sailor for Life''
    programs. Ideally, manpower transactions will someday be accomplished
    on a laptop with a mouse click, and data will be shared through a
    common data repository with all DOD enterprises. Navy fully supports
    the vision of an integrated set of processes and tools to manage all
    pay and personnel needs for the individual, and provide necessary
    levels of personnel visibility to support joint warfighter
    requirements. The processes and tools should provide the ability for a
    clean financial audit of personnel costs and support accurate, agile
    decisionmakings at all levels of the DOD through a common system and
    standardized data structure.
        The Defense Integrated Manpower and Human Resource System (DIMHRS)
    is expected to be that system. A Deputy Secretary of Defense assessment
    is currently underway to determine the best course of action for the
    Department. The assessment will conclude in early summer.
                                 iv. recruiting
    Accessions
        Navy Reserve accessions are drawn from multiple sources, but we are
    increasingly focused on the trained and experienced Navy veteran. Our
    leadership is constantly emphasizing a ``Continuum of Service'' and
    ``Sailor for Life'' themes that enable sailors to more easily
    transition between components. The entire Total Force chain of command
    is committed to changing the culture of service and REservice by
    continually educating Active component sailors about the benefits of
    continued service as members of any of the Reserve components.
    National Call to Service
        A relatively new accession source is the National Call to Service
    (NCS), with contracts that include both Active component and Reserve
    component service as part of a recruit's initial military obligation.
    Congress first authorized this program in the NDAA 2003. The NCS
    program is enjoying considerable success, and is helping to mitigate
    some of the prior-service shortages in ratings that are critical to the
    prosecution of the global war on terror. Under this program, a recruit
    enlists for an Active-Duty commitment of 15 months after training. At
    the end of the commitment, the individual can either extend on Active-
    Duty or commit to 2 years of drilling in the SELRES. Navy has been
    particularly aggressive in recruiting Masters at Arms and Hospital
    Corpsmen for this program, and the first recruits are completing their
    Active component service and will begin drilling in the Navy Reserve
    this year. Navy's success in attracting recruits for this program is
    steadily growing. We assessed 998 recruits in 13 ratings in fiscal year
    2004, and 1,866 recruits in 23 ratings in fiscal year 2005. Navy has a
    goal of 2,340 NCS recruits in 45 different ratings this year, and will
    continue this successful program in fiscal year 2007.
    Attrition
        Attrition and recruiting are a crucial part of maintaining the
    Total Force. Fortunately, the global war on terror is not having an
    appreciable affect on attrition. Navy Reserve attrition is currently 27
    percent and has remained at approximately the same level for the past 5
    years.
    Enlisted Recruiting
        Fiscal Year 2006 Navy Reserve enlisted recruiting continues to be
    challenging, with 3,415 recruits attained out of a goal of 11,180 as of
    February 28, 2006. Although the Navy Recruiting Command has focused
    every Active and Reserve recruiter on the Reserve component mission, it
    only accessed 85 percent of the fiscal year 2005 Reserve component
    enlisted goal, recruiting 9,788 against a target of 11,491. Navy
    attributes the recruiting shortfalls to several causes, primarily the
    continued strong retention of Active component sailors. The global war
    on terror has caused an increase in the number of recruits needed by
    the Army and Marine Corps, with competitive bonuses offered by all
    services. Civilian unemployment rates remain low, and public opinion
    influencers, such as friends and family, are less likely to recommend
    military service as a career.
        To address Navy Reserve recruiting challenges and to promote
    continued success in recruiting the active force, Navy is increasing
    the amount of enlistment bonuses for both prior service and non-prior
    service Reserve accessions. Congress raised that legislative cap to
    $20,000 for the non-prior service program and $15,000 for the prior
    service program. These programs will enhance the attractiveness of
    service in the Reserve for those currently in our targeted ratings.
        Other measures being taken to address the Reserve recruiting
    shortfall include implementation of expanded authorities provided by
    Congress in the NDAA for Fiscal Year 2006. These include: authority to
    pay Reserve Affiliation Bonuses in lump sum, enhanced high-priority
    unit assignment pay, and increases in the amount of the Reserve
    Montgomery G.I. Bill. Navy is also applying force-shaping tools to
    attract non-rated Reserve sailors to undermanned ratings.
    Officer Recruiting
        Reserve officer recruiting continues to fall short, and the Navy
    has failed to meet its Reserve Officer Recruiting Goal since 2002. The
    primary market for Reserve component officers is Navy veterans and as
    in enlisted recruiting, high retention of Active component officers
    reduces the pool of available candidates. Reserve Medical Officer
    Programs are especially hard hit in today's environment, with multiple
    factors affecting recruiting:

             High competing civilian salaries
             Larger number of nontraditional students with a
            decreased propensity toward military service
             Long tours of duty overseas, 6-18 months, increase the
            risk of losing civilian practices while deployed
                                  v. readiness
        In addition to having the right sailor assigned to the right
    billet, all sailors must be ready to answer the call to serve. They
    must be medically, physically, and administratively ready to deploy.
    Medical Readiness
        Navy Reserve is a leader in medical readiness. In 2002, the Navy
    Reserve developed the Medical Readiness Reporting System (MRRS) as a
    comprehensive tracking system for Individual Medical Readiness (IMR).
    MRRS, a web-based application with a central aggregating database,
    links with existing authoritative data systems to reduce data input
    requirements and improve data accuracy. MRRS gives headquarters staffs
    and leadership a real-time view of force medical readiness, and
    received the 2005 DON CIO Information Management/IT Excellence Award
    for Innovation. It is being adopted throughout the Department of the
    Navy to give commanders the Web-based tool they need to more
    effectively and efficiently measure and predict IMR.
        Navy Reserve continues to be a DOD leader in percent of personnel
    who are fully medically ready (FMR). In October 2004, Navy Reserve
    reported 44 percent FMR personnel and, with an ongoing emphasis on MRRS
    utilization by all commands, showed a dramatic improvement in January
    2006 to 73 percent FMR per DOD IMR standards.
    Physical Readiness
        Navy Reserve is actively participating in Total Force solutions to
    address physical readiness. The CNO's ``Fitness Board of Advisors'' is
    exploring methodologies for changing the culture of fitness in the Navy
    to ensure a ready, fighting force. The Secretary of the Navy's ``Health
    and Productivity Management'' group is addressing the impact of a fit
    force on work productivity. Many participants are members of both
    groups in order to facilitate the exchange of good ideas. Further, Navy
    Reserve is working with BUPERS to revise the Physical Readiness
    Information Management System to more accurately capture fitness
    testing data.
    Administrative Readiness
        Navy Reserve tracks administrative readiness with the ``Type
    Commander Readiness Management System--Navy Reserve Readiness Module,''
    which provides a scalable view of readiness for the entire Force. This
    Navy Reserve developed system has served as the prototype for the
    ``Defense Readiness Reporting System,'' and links to many DOD systems.
    Navy Reserve leaders have utilized accurate data for all categories and
    elements since the first data call in 2003, and can quickly determine
    readiness information for individuals, units, activities, regions, and
    any other desired capability breakouts.
                               vi. transformation
        Navy Reserve continues to lead DOD Reserve component
    transformation. Through the Base Realignment and Closure process, Navy
    Reserve Centers are consolidating into larger, more centralized Navy
    Operational Support Centers on military bases, while maintaining
    presence in all 50 States and reducing excess capacity by 99 percent.
    Consolidation of smaller facilities provides a better return on
    investment of precious RPN and OM&NR funding, with better utilization
    of administration and staff support for SELRES, while aligning with
    Navy regional commanders instead of separate Reserve component Regions.
    Whenever possible, our Reserve component sailors have indicated a
    strong desire to ``flex drill'' at their Active component supported
    commands, which achieves a greater level of readiness and operational
    support, as well as Total Force integration.
                                  vii. summary
        Navy Reserve is evolving from a dispersed strategic force of the
    Cold War to an adaptive and responsive operational force that will be
    required to meet the surge requirements for future asymmetric threats.
    Change of this magnitude is not easy and challenges both Active
    component and Reserve component leadership to rapidly become more
    integrated while thoroughly communicating the vision to the Total
    Force. We greatly appreciate the full support of Congress as we
    implement initiatives that will better align Active component and
    Reserve component personnel and equipment, providing additional
    resources to recapitalize the Navy of the future.
        Our dedicated Reserve component sailors continue to volunteer to
    serve and re-serve, and we are developing a ``Continuum of Service''
    program to ensure that they can quickly support operational missions,
    with easy transitions on and off Active-Duty. We are simplifying the
    order writing and funding processes, while allowing the customers, the
    Fleet and COCOMs, to control the resources through their Operational
    Support Officers. These initiatives will greatly reduce the
    administrative burden on both the ready sailor and the chain of
    command, ensuring the right sailor is in the right place at the right
    time with the right skill sets. Navy will continue to improve readiness
    tracking and reporting systems so that the sailor will be ready to
    deploy when called, physically, medically, and administratively.
        The future success of our Navy and the Nation requires dominance of
    the maritime domain, and will be dependent upon a Reserve Force that is
    ready, relevant, and fully integrated. Our Navy Reserve is busy
    transforming its processes, becoming more integrated with both Navy and
    joint forces, and is more ready than ever for any tasking. We are
    providing global operational support, and our Reserve component sailors
    have and will continue to answer the call to ``be ready'' to support
    the combatant commanders and prevail in the Long War.

    STATEMENT OF LT. GEN. JOHN W. BERGMAN, USMCR, COMMANDER, MARINE
                             FORCES RESERVE

        General Bergman. Good afternoon, Mr. Chairman and Senator
    Nelson.
        It's an honor to be here today. This is my first time
    before this committee.
        Having taken command June 10, we almost got a few boxes
    unpacked before we evacuated out of New Orleans for Hurricane
    Dennis. Then we came back and unpacked a few more boxes before
    evacuating for Hurricane Katrina.
        Having said that, even though you evacuate, that doesn't
    mean Marine Forces Reserve and Marine Forces North stop doing
    business. Within about 5 or 6 days, we were operational, but
    displaced, between places such as Fort Worth, Kansas City, and
    Atlanta. By Thanksgiving, we were fully operational back in New
    Orleans, thanks to the great support of a lot of folks, but
    especially our brothers and sisters of the Navy, who really did
    spectacular work to get our facilities ready for us. We were
    fortunate in our particular geographical area. We were right
    next to devastation, but not necessarily affected by it, from a
    business standpoint, although several of our members, quite
    honestly, lost everything. Today we are down to two families
    who are in temporary motel lodging at this point, who have not
    secured future lodging.
        Marine Corps Reserve is 39,600, stable and strong. Ninety-
    seven percent of our units have been activated at least once
    since September 11. Seventy percent of our current members have
    been activated, and 30 percent are first-timers--their turn
    will come soon. There are thousands on second deployment.
    Retention is up. Recruiting is challenging, but it's on track.
    We probably spend about 12 hours with a young future potential
    marine and their influencers, as opposed to, historically,
    probably 4 to 5 hours in the past.
        I look forward to your questions, sir. Thank you.
        [The prepared statement of General Bergman follows:]

              Prepared Statement by Lt. Gen. Jack W. Bergman, USMC

                                  introduction
        Chairman Graham, Senator Nelson, and distinguished members of the
    subcommittee, it is my honor to report to you on the state of your
    Marine Corps Reserve as a partner in the Navy-Marine Corps team. Your
    Marine Corps Reserve remains firmly committed to warfighting
    excellence. The support of Congress and the American people has been
    indispensable to our success in the global war on terror. Your
    sustained commitment to care for and improve our Nation's Armed Forces
    in order to meet today's challenges, as well as those of tomorrow, is
    vital to our battlefield success. On behalf of all marines and their
    families, I would like to take this opportunity to thank Congress and
    this committee for your continued support.
                        your marine corps reserve today
        The last 5 years have demonstrated the Marine Corps Reserve is
    truly a full partner in the Total Force Marine Corps. I assumed the
    responsibility as the Commander of Marine Forces Reserve (MARFORRES) on
    June 10, 2005, and I can assure you the Marine Corps Reserve remains
    totally committed to continuing the rapid and efficient activation of
    combat-ready ground, air, and logistics units and individuals to
    augment and reinforce the Active component in the global war on terror.
    Marine Corps Reserve units, Individual Ready Reserve (IRR) marines,
    Individual Mobilization Augmentees (IMAs), and retired marines fill
    critical requirements in our Nation's defense and are deployed
    worldwide in Iraq, Afghanistan, Georgian Republic, Djibouti, Kuwait,
    and the United States, supporting all aspects of the global war on
    terror. At home, our Reserve marines are pre-positioned throughout the
    country, ready to defend the homeland or assist with civil-military
    missions such as the type of disaster relief conducted recently in the
    wake of hurricanes Katrina and Rita.
        Reserve marines understand the price of protecting our
    constitutional rights to freedom, and even though many have paid the
    ultimate price in Operations Enduring Freedom and Iraqi Freedom, they
    continue to step forward and volunteer to serve their fellow Americans.
    The Marine Reserve Force remains strong and constant due to the
    committed marines in our ranks, our high retention and recruiting
    rates, and the ever-increasing benefits that Reserve marines and their
    families enjoy.
        As the tactics and warfighting equipment continue to change and
    evolve, an ever-increasing level of readiness for future challenges
    needs to be maintained. Reserve ground combat units, aviation squadrons
    and combat service support elements are able to seamlessly integrate
    with their active component comrades in any Marine Air Ground Task
    Force (MAGTF) environment because they attend the same schools and are
    held to identical training standards. A strong inspector-instructor
    system and a demanding Mobilization and Operational Readiness
    Deployment Test program ensures Marine Corps Reserve units achieve a
    high level of pre-mobilization readiness. Marine Reserve units continue
    to train to challenging, improved readiness standards, reducing the
    need for post-mobilization certification. This ensures that these
    combat capable units undergo a seamless transition to the gaining force
    commander.
        As we progress into the 21st century, we have seen historic and
    tragic events that have impacted our country and MARFORRES in ways that
    will reverberate for years to come. When hurricanes Katrina and Rita
    battered the Gulf Coast, MARFORRES was part of both the evacuation and
    the relief efforts in the area. Due to the storms, MARFORRES
    Headquarters, along with our subordinate headquarters, were forced to
    evacuate the New Orleans area and set up temporary commands in Texas
    and Georgia. It was from these locations that we mobilized and deployed
    units to the affected areas to support the relief efforts. In some
    cases marines were serving in their own communities that were
    devastated by the storms.
        As of early February 2006, over 6,400 Reserve marines were
    activated in support of Operation Enduring Freedom, Operation Iraqi
    Freedom, and Horn of Africa operations. Of these marines, approximately
    5,400 were serving in combat-proven ground, aviation, and service
    support units led by Reserve marine officers and non-commissioned
    officers. The remaining 1,000+ Reserve marines were serving as
    individual augments in support of combatant commanders, the joint
    staff, and the Marine Corps. Since 11 September 2001, the Marine Corps
    has activated over 39,000 Reserve marines, and more than 97 percent of
    all MARFORRES units.
        Since the beginning of the global war on terror, it has become
    necessary for the Marine Corps Reserve to increase support required for
    operations against the backdrop of a rapidly changing world environment
    accented by asymmetrical warfare and continuing hostilities. As new
    warfighting requirements have emerged, we have adapted our units by
    creating Anti-Terrorism Battalions from existing infantry units, as
    well as provisional civil affairs groups (CAGs) in support of our
    efforts in Iraq. We continue to refine our Reserve capabilities.
    Through assessment, projection, and careful planning, we shift valuable
    resources to enhance our ability to provide required war fighting
    capabilities, intelligence gathering capabilities, homeland security
    efforts, and ongoing civil affairs missions.
                              return on investment
        The Marine Corps is committed to the Total Force Concept as
    evidenced by the overwhelming success of Marine Reserve units serving
    in support of the global war on terror. Activated Marine Reserve units
    and individuals are seamlessly integrating into forward deployed Marine
    Expeditionary Forces and regularly demonstrate their combat
    effectiveness. Since March 2005, approximately 8,500 Reserve marines
    have deployed in support of two troop rotations to Iraq. The combat
    effectiveness of all Reserve marines deployed in support of Operation
    Iraqi Freedom is best illustrated by the following examples of a few
    Reserve units:
    Force Units
        MARFORRES has provided Provisional Civil Affairs Units, Air and
    Naval Gunfire Liaison Company (ANGLICO) Detachments and
    Counterintelligence Teams in support of Operation Iraqi Freedom.
        The Marine Corps has two civil affairs units and, in 2005, formed
    two provisional CAGs. The decision was made to expand the Corps' civil
    affairs capability for the Iraqi conflict by creating a provisional 5th
    and 6th CAGs of nearly 200 marines each. The 5th and 6th CAGs were
    created to ease the deployment cycles of the 3rd and 4th CAGs and to
    create additional civil affairs assets. Fourth Combat Engineer
    Battalion from Baltimore provided the nucleus for the 5th CAG, which
    was established in late 2004. The unit was rounded out by marines from
    across the country, to include two previously retired marines.
        The 5th CAG began its tour of duty in Iraq when the commanding
    officer and sergeant major unfurled the unit's colors at a transfer of
    authority ceremony with the 4th CAG at Camp Fallujah on March 10, 2005.
    Col. Steve McKinley, 5th CAG commanding officer, and Sgt. Maj. John A.
    Ellis stood at attention as the 4th CAG commander and sergeant major
    cased their unit's colors. Lt. Gen. John F. Sattler, I Marine
    Expeditionary Force Commanding General, thanked the CAG marines and
    sailors for their accomplishments during their tour, such as helping to
    establish the Civil Military Operations Center in Fallujah. The 5th CAG
    assumed 4th CAG's area of responsibility and operated throughout Al-
    Anbar Province coordinating civil affairs projects with the goal of
    restoring critical infrastructure and facilitating the transition into
    a self-governing people. The 6th CAG, led by Col. Paul Brier and Sgt.
    Maj. Ronnie McClung, relieved 5th CAG in September 2005. After a
    successful 7-month tour, they are redeploying to the United States this
    month..
        In addition to the contribution of CAGs, MARFORRES has provided
    detachments from both 3d and 4th ANGLICO-based in Long Beach, CA, and
    West Palm Beach, FL, respectively--in support of Operation Iraqi
    Freedom. The last detachment returned mid-December 2005. During its
    tour, the unit supported the multinational division headed by the
    Polish Army and consisting of troops from 14 countries. The unit was
    involved in various missions in the three provinces south of Baghdad.
    Duties ranged from radioing in fire support for the coalition partners
    to providing protection for convoys. The marines were credited with
    rounding up 390 insurgents and criminals in addition to recovering
    50,000 pounds of ordnance.
    Fourth Marine Division
        The 3rd Battalion, 25th Marines, led by Lt. Col. Lionel B.
    Urquhart, USMCR, a manager for Roadway Transportation Services--and his
    senior enlisted advisor Sgt. Maj. Edward C. Wagner, USMCR, supported
    Regimental Combat Team 2 during Operation Iraqi Freedom 04-06.1. During
    this time, the battalion cleared the city of Hit, establishing two
    permanent firm-bases there and introduced Iraqi Armed Forces in the
    city to begin the process of independent Iraqi control. Hit was the
    only city to be liberated from anti-Iraqi forces control by the 2d
    Marine Division. In all, the battalion acted as the regimental main
    effort in 15 named combat operations and provided support to 5 more
    named operations in an area covering 4,200 square kilometers. The
    scheme of maneuver entering the town of Kubaysah employed the first
    heliborne and mechanized combined assault in Area of Operations
    ``Denver''. The battalion's efforts resulted in 46 detainees being
    convicted to confinement at Abu Grahb Prison, 160 confirmed enemy
    killed-in-action, and 25 confirmed enemy wounded-in-action. This
    battalion--which coalesced from reservists spread across more than
    seven States--acted as a center of gravity for RCT-2 during Operation
    Iraqi Freedom 04-06.1 enabling the regiment to achieve it's greatest
    successes.
        Fifth Battalion, 14th Marines (-) Reinforced, commanded by John C.
    Hemmerling, USMCR, an attorney for the City of San Diego, with Sergeant
    Major Jose Freire, a U.S. Postal Carrier, as his senior enlisted
    advisor, was assigned the mission as a provisional military police
    battalion in the Al Anbar Province of Iraq. The Marines of 5/14
    exemplified the total force concept as it transitioned from a Reserve
    artillery battalion into a composite battalion. The battalion was
    comprised of 15 Active and Reserve units and detachments and integrated
    Active and Reserve marines down to the fire team level that totaled
    more than 1,000 strong. Furthermore, drawing from its ranks of
    reservists in civilian law enforcement and Active-Duty military
    policemen at its core, the battalion was task organized to conduct
    military police missions of convoy security operations; law and order
    on the forward operating bases; operate five regional detention
    facilities; force protection of Camp Fallujah; conduct criminal
    investigations; recruit Iraqi security forces through the Police
    Partnership Program; and control 57 military working dog teams. The
    battalion is credited with processing over 6,000 detainees, without
    incident, consisting of suspected insurgents, terrorists and criminals;
    safely escorted over 300 convoys throughout the Multinational Force
    West area of operations; occupied and defended Camp Fallujah and
    approximately 100 square kilometers of battle space surrounding it; and
    recruited over 1,000 Iraqi Police candidates.
    Fourth Marine Logistics Group
        4th Marine Logistics Group (MLG) continued to provide the Active-
    Duty component and combatant commanders tactical logistics support
    throughout the six functional areas of Combat Service Support and the
    personnel necessary to sustain all elements of the operating force in
    multiple theaters and at various levels of war.
        4th MLG has a well-established reputation for providing
    professional, dedicated and highly skilled marines and sailors to
    augment and reinforce the active components in support of Operations
    Iraqi Freedom (OIF) and Enduring Freedom (OEF). During the past year's
    semi-annual relief of forces, 4th MLG deployed approximately 1,000
    Reserve marines and sailors to conduct tactical level logistics
    missions.
        Additionally, 4th MLG provided the following support to the
    operating forces when requested by combatant commanders:

              -  During January of 2005, 4th MLG deployed approximately 130
            marines and sailors to support Marine Forces Central Command's
            Logistics Command Element located aboard Camp Lemonier,
            Djibouti. These marines and sailors from various 4th MLG
            battalions provided vital logistical and operational support to
            a mission focused on detecting, disrupting, and ultimately
            defeating transnational terrorist groups operating in the Horn
            of Africa region.
              -  In April 2005, on short notice, 4th MLG deployed 13
            maintenance personnel in support of Marine Corps Systems
            Command (MARCORSYSCOM) to a forward operating base in Iraq to
            assist with the installation of armor kits on tactical
            vehicles. Their mission proved invaluable in mitigating the
            personnel and equipment loss attributed to an emergent IED
            threat.
              -  During May 2005, 4th MLG provided health services support
            consisting of 20 sailors from 4th Medical Battalion to II
            Marine Expeditionary Force (II MEF) for detainee operations in
            Iraq that included medical services for personnel in temporary
            detainee facilities; maintenance of medical supplies and
            equipment; health and sanitation inspections, pre- and post-
            interrogation health assessments; and coordination of medical
            evacuations in accordance with the Geneva Convention.
              -  June 2005 saw 4th MLG provide the nucleus staff for the
            provisional 6th CAG.

        Regardless of the mission, the Reserve marines and sailors of 4th
    MLG have proven to be both responsive and flexible. Their level of
    professionalism and training enabled them to easily integrate with
    their Active-Duty counterparts. Their contributions and sacrifices in
    the global war on terror are a testament of their value to our great
    Nation.
    Fourth Marine Aircraft Wing
        4th Marine Aircraft Wing (MAW) units participated in a wide variety
    of operations in locations across the country and around the world in
    support of the global war on terror.
        Operation Iraqi Freedom activations consisted of units in their
    entirety, detachments, as well as individual augments providing
    invaluable support to the Active component in the conduct of these
    operations. Marine Fighter/Attack Squadron 142 deployed 12 F/A-18 A+
    Hornet aircraft in support of OIF, where they accomplished 100 percent
    of their tasking sortie requirements. These assets were the first 4th
    MAW F/A-18s to deploy in support of OIF and the first Marine F/A-18s to
    deploy the Advanced Targeting Pod (LITENING) in a combat environment.
    Marine Medium Helicopter squadrons 764 and 774 deployed to Iraq in
    support of OIF for their second tour. The deployment of these units
    required the transfer of 19 aircraft from east to west coast to
    facilitate training of the unit that was continental United States
    (CONUS) based while the other deployed. This monumental task was
    accomplished safely and efficiently. Marine Light Attack Squadron
    (HMLA) 775 returned from Iraq and immediately went to work accepting 16
    AH-1N and 9 UH-1N aircraft from 3rd MAW. Immediately upon acceptance,
    they transferred 6 of the AH-1Ws and 4 of the UH-1Ns to HMLA-775
    Detachment A, which then repositioned all aircraft to Johnstown, PA.
    Additionally, Heavy Marine Helicopter (HMH) Squadron 772 was chosen to
    conduct the initial NVG flight training evolution designed for Navy MH-
    53E aircrew, allowing them to deploy in support of Operation Iraqi
    Freedom. This marked the first time Navy CH-53 pilots were trained on
    NVGs in a desert environment. Marine Air Control Group (MACG) 48
    provided numerous detachments, including Air Traffic Controllers, to
    support the OIF. Marine Wing Support Group (MWSG) 47 provided continual
    ground refueling support to OEF. They continue to provide detachments
    of engineers, refuelers, and firefighters to OIF.
        Hurricane Katrina made landfall on 29 August 2005 east of New
    Orleans. As a result of the ensuing devastation to the gulf coast
    region, HMH-772 was the first marine squadron to participate in the
    rescue efforts in New Orleans on August 31, 2005. The unit deployed
    four aircraft, which transported 348,000 pounds of cargo, 1,053
    passengers, and 720 evacuees. Marine Aerial Refueler Transport
    Squadrons (VMGR) 234 and 452 and their KC-130 aircraft provided direct
    support to Special Purpose Marine Air/Ground Task Force Katrina in the
    form of troop, cargo lift, and humanitarian assistance to the gulf
    coast region. 1,562 passengers and 1.5 million pounds of cargo were
    transported during 263 sorties totaling 535 hours. They also performed
    the same mission during the aftermath of Hurricanes Rita and Wilma. In
    addition to HMH-772, HMLA-773 provided direct support to SMAGTF Katrina
    in the form of civilian evacuation and humanitarian relief, operating
    out of Eglin AFB and JRB Belle Chasse. MACG-48 and MWSG-47 brought
    their own specialized assistance in the form of aircraft controllers
    and logistical support. 4th MAW continued to support Katrina relief
    efforts until October 2005.
                             activation philosophy
        Sustaining the force has been consistent with Total Force Marine
    Corps planning guidance. This guidance continues to be based on a 12-
    month involuntary activation with a 7-month deployment, followed by a
    period of dwell time and, if required and approved, a second 12-month
    involuntary reactivation and subsequent 7-month deployment. This force
    management practice has provided warfighting and sustainment capability
    within MARFORRES with well-balanced and cohesive units ready for
    combat. This activation philosophy has proved to be an efficient and
    effective use of our Reserve marines' 24-month cumulative activation
    time limit.
                               activation impact
        As of December 2005, the Marine Corps Reserve began activating
    approximately 2,200 Selected Marine Corps Reserve (SMCR) unit marines
    in support of the next Operation Iraqi Freedom rotation and 290 SMCR
    unit marines in support of Operation Enduring Freedom. Even with
    judicious use of our assets and coordinated planning, the personnel
    tempo has increased. As the members of this committee know, Reserve
    marines are students or have civilian occupations that are also very
    demanding, and are their primary careers. In total, approximately 4,790
    Reserve marines have been activated more than once; about 1,875 of whom
    are currently activated. We also know that, as of February 2006,
    approximately 65 percent of the current unit population and 72 percent
    of the current IMA population have been activated at least once. About
    1.5 percent of our current IRR population has deployed in support of
    OIF/OEF. If you include the number of marines who deployed in an Active
    or SMCR component and have since transferred to the IRR, the number
    reaches 61 percent. This is worth particular note as the IRR provides
    us needed depth--an added dimension to our capability. Volunteers from
    the IRR and from other Military Occupational Specialties, such as
    artillery, have been cross-trained to reinforce identified critical
    specialties such as civil affairs and linguists.
        Although supporting the global war on terror is the primary focus
    of the Marine Corps Reserve, other functions, such as pre-deployment
    preparation and maintenance, recruiting, training, facilities
    management, and long-term planning continue. The wise use of the
    Active-Duty Special Work Program allows the Marine Corps to fill these
    short-term, full-time requirements with Reserve marines. For example,
    as of this month we have almost 4,600 marines on Active-Duty under this
    program. Continued support and funding for this critical program will
    enhance flexibility thereby ensuring our Total Force requirements are
    met.
                            recruiting and retention
        Like the Active component, Marine Corps Reserve units primarily
    rely upon a first-term enlisted force. Currently, the Marine Corps
    Reserve continues to recruit and retain quality men and women willing
    to manage commitments to their families, their communities, their
    civilian careers, and the Corps. Recruiting and retention goals were
    met in fiscal year 2005, but the long-term impact of recent activations
    is not yet known. Despite the high operational tempo, the morale and
    patriotic spirit of Reserve marines, their families and employers
    remains extraordinarily high.
        At the end of fiscal year 2005, the Marine Corps' Selected Reserve
    was over 39,600 strong. Part of this population is comprised of Active
    Reserve marines, Individual Mobilization Augmentees, and Reserve
    marines in the training pipeline. Additionally, nearly 60,000 marines
    serve as part of the Individual Ready Reserve, representing a
    significant pool of trained and experienced prior service manpower.
    Reserve marines bring to the table not only their Marine Corps skills
    but also their civilian training and experience as well. The presence
    of police officers, engineers, lawyers, skilled craftsmen, business
    executives, and the college students who fill our Reserve ranks serves
    to enrich the Total Force. The Marine Corps appreciates the recognition
    given by Congress to employer relations, insurance benefits, and family
    support. Such programs should not be seen as ``rewards'' or
    ``bonuses,'' but as investment tools that will sustain the Force in the
    years ahead.
        Support to the global war on terror has reached the point where 70
    percent of the current Marine Corps Reserve officer leadership has
    deployed at least once. Nevertheless, the Marine Corps Reserve is
    currently achieving higher retention rates than the benchmark average
    from the last three fiscal years. As of January, the OSD attrition
    statistics for Marine Corps Selected Reserve officers is 8.4 percent
    compared to the current benchmark average of 11.7 percent. For the same
    time period, Reserve unit enlisted attrition is 6.2 percent compared to
    8.5 percent average.
        In fiscal year 2005, the Marine Corps Reserve achieved 100 percent
    of its recruiting goal for non-prior service recruiting (5,921) and
    exceeded its goal for prior service recruiting (3,132). For our Reserve
    component, junior officer recruiting remains the most challenging area.
    We are expanding Reserve commissioning opportunities for our prior-
    enlisted marines in order to grow some of our own officers from
    MARFORRES units and are exploring other methods to increase the
    participation of company grade officers in the Selective Marine Corps
    Reserve. We are also developing some bold new changes in our junior
    officer accession programs and expect to incorporate some of the
    changes during fiscal year 2007 and plan to fill 90 percent of our
    company grade officer billets by fiscal year 2011. We thank Congress
    for the continued support of legislation to allow bonuses for officers
    in the Selective Marine Corps Reserve who fill a critical skill or
    shortage. We are aggressively implementing the Selected Reserve Officer
    Affiliation Bonus program and expect it to fill 50 vacant billets this
    year, with plans to expand the program in the coming years. We
    appreciate your continued support and funding of incentives such as
    this, which offset the cost that officers must often incur in traveling
    to billets at Marine Corps Reserve locations nationwide.
                                quality of life
        Our future success will rely on the Marine Corps' most valuable
    asset--our marines and their families. We believe it is our obligation
    to arm our marines and their families with as much information as
    possible on the programs and resources available to them. Arming our
    marines and their families with information on their education
    benefits, available childcare programs, family readiness resources and
    the health care benefits available to them, provides them with
    unlimited potential for their quality of life.
                                   education
        Last year, you heard testimony from my predecessor that there were
    no laws offering academic and financial protections for Reserve
    military members who are college students. I am glad to see that there
    is movement in Congress to protect our college students and offer
    greater incentives for all servicemembers to attend colleges. I
    appreciate Congress's efforts in protecting a military member's college
    education investments and status when called to duty.
        More than 1,300 MARFORRES marines and sailors chose to use Tuition
    Assistance in fiscal year 2005 in order to help finance their
    education. This Tuition Assistance came to more than $3 million in
    fiscal year 2005 for more than 4,200 courses. Many of these marines
    were deployed to Afghanistan and Iraq, and took their courses via
    distance learning courses. In this way Tuition Assistance helped to
    mitigate the financial burden of education and maintained progress in
    the marine's planned education schedule. We support continued funding
    of Tuition Assistance as currently authorized for activated Reserves. I
    fully support initiatives that will increase G.I. Bill benefits for
    Reserve and National Guard service members, as it is a key retention
    and recruiting tool and an important part of our commandant's guidance
    to enhance the education of all marines. The National Defense
    Authorization Act for Fiscal Year 2005 included a new education
    assistance program for certain Reserve and National Guard
    servicemembers. I heartily thank you for this initiative and its
    implementation by the Department of Veterans Affairs, as it has
    positively impacted the quality of life for Marine reservists and other
    servicemembers.
                               childcare programs
        Marines and their families are often forced to make difficult
    choices in selecting childcare, before, during and after a marine's
    deployment in support of the global war on terror. We are deeply
    grateful for ``Operation Military Childcare,'' a joint initiative
    funded by the Department of Defense and operated through cooperative
    agreements with the Boys and Girls Clubs of America, and the National
    Association of Childcare Resource and Referral Agencies. Without the
    fiscal authorization provided by the Senate and House, these programs
    could not have been initiated or funded. These combined resources have
    immeasurably contributed to the quality of life of our marines' and
    their families. I thank you all for your support in the past and the
    future in providing sufficient funds for these key initiatives.
                                family readiness
        Everyone in MARFORRES recognizes the strategic role our families
    have in our mission readiness, particularly in our mobilization
    preparedness. We help our families to prepare for day-to-day military
    life and the deployment cycle (Pre-Deployment, Deployment, Post-
    Deployment, and Follow-On) by providing educational opportunities at
    unit Family Days, Pre-Deployment Briefs, Return and Reunions, Post-
    Deployment Briefs and through programs such as the Key Volunteer
    Network (KVN) and Lifestyle Insights, Networking, Knowledge, and Skills
    (L.I.N.K.S.). We also envision the creation of Regional Quality of Life
    Coordinators, similar to the Marine Corps Recruiting Command program,
    for our Reserve marines and their families.
        At each of our Reserve training centers, the KVN program serves as
    the link between the command and the family members, providing them
    with official communication, information and referrals. The Key
    Volunteers, many of whom are parents of young, unmarried marines,
    provide a means of proactively educating families on the military
    lifestyle and benefits, provide answers for individual questions and
    areas of concerns and, perhaps most importantly, enhance the sense of
    community within the unit. The L.I.N.K.S. program is a spouse-to-spouse
    orientation service offered to family members to acquaint them with the
    military lifestyle and the Marine Corps, including the challenges
    brought about by deployments. Online and CD-ROM versions of L.I.N.K.S
    makes this valuable tool more readily accessible to families of Reserve
    marines not located near Marine Corps installations.
        Military OneSource is another important tool that provides marines
    and their families with around-the-clock information and referral
    service for subjects such as parenting, childcare, education, finances,
    elder care, health, wellness, deployment, crisis support and relocation
    via toll-free telephone and Internet access.
        The Peacetime/Wartime Support Team and the support structure within
    the Inspector and Instructor staff uses all these tools to provide
    families of activated or deployed marines with assistance in developing
    proactive, prevention-oriented steps such as family care plans, powers
    of attorney, family financial planning, and enrollment in the Dependent
    Eligibility and Enrollment Reporting System.
        All of these programs depend on adequate funding of our manpower
    and O&M accounts.
                             managed health network
        Managed Health Network, through a contract with the Department of
    Defense, is providing specialized mental health support services to
    military personnel and their families. This unique program is designed
    to bring counselors onsite at Reserve Training Centers to support all
    phases of the deployment cycle. MARFORRES is incorporating this
    resource into Family Days, Pre-Deployment Briefs and Return & Reunion
    Briefs and further incorporating them in the unfortunate event of
    significant casualty situations. Follow-up services are further
    scheduled after marines return from combat at various intervals to
    facilitate onsite individual and group counseling.
                                    tricare
        Since September 11, Congress has gone to great lengths to improve
    TRICARE benefits available to the Guard and Reserve and we are very
    appreciative to Congress for all the recent changes to the program.
    Since April 2005, TRICARE Reserve Select has been providing eligible
    Guard and Reserve veterans with comprehensive health care. This new
    option, similar to TRICARE Standard, is designed specifically for
    Reserve members activated on or after September 11, 2001, who enter
    into an agreement to serve continuously in the Selected Reserve for a
    period of 1 or more years. Participation in the program has greatly
    benefited those Reserve marines who have served and who continue to
    serve. This provides optional coverage for Selected Reserves after an
    activation, at the rate of 1 year of coverage while in non-Active-Duty
    status for every 90 days of consecutive Active-Duty. The member must
    agree to remain in the Selected Reserve for 1 or more whole years.
    Also, a permanent earlier eligibility date for coverage due to
    activation has been established at up to 90 days before an Active-Duty
    reporting date for members and their families.
        The new legislation also waives certain deductibles for activated
    members' families. This reduces the potential double payment of health
    care deductibles by members' civilian coverage. Another provision
    allows the DOD to protect the beneficiary by paying the providers for
    charges above the maximum allowable charge. Transitional health care
    benefits have been established, regulating the requirements and
    benefits for members separating. We are thankful for these permanent
    changes that extend healthcare benefits to family members and extend
    benefits up to 90 days prior to their activation date and up to 180
    days after deactivation.
        Reserve members are also eligible for dental care under the Tri-
    Service Dental Plan for a moderate monthly fee. In an effort to
    increase awareness of the new benefits, Reserve members are now
    receiving more information regarding the changes through an aggressive
    education and marketing plan. These initiatives will further improve
    the healthcare benefits for our Reserves and National Guard members and
    families.
                              casualty assistance
        One of the most significant responsibilities of the site support
    staff is that of casualty assistance. Currently, MARFORRES conducts
    approximately 93 percent of all notifications and follow-on assistance
    for the families of our fallen Marine Corps brethren. In recognition of
    this greatest of sacrifices, there is no duty that we treat with more
    importance. However, the duties of our casualty assistance officers go
    well beyond notification. We ensure they are adequately trained,
    equipped, and supported by all levels of command. Once an officer or
    staff noncommissioned officer is designated as a casualty assistance
    officer, he or she assists the family members in every possible way,
    from planning the return and final rest of their marine, counseling
    them on benefits and entitlements, to providing a strong shoulder when
    needed. The casualty officer is the family's central point of contact,
    serving as a representative or liaison with the media, funeral home,
    government agencies or any other agency that may be involved. Every
    available asset is directed to our marine families to ensure they
    receive the utmost support. This support remains in place as long after
    the funeral and is maintained regardless of personnel turnover. The
    Marine Corps Reserve also provides support for military funerals for
    veterans of all Services. The marines at our Reserve sites performed
    more than 7,500 funerals in calendar year 2005.
                                marine for life
        Our commitment to take care of our own includes a marine's
    transition from honorable military service back to civilian life.
    Initiated in fiscal year 2002, the Marine For Life program is available
    to provide support for the approximately 27,000 marines transitioning
    from Active service back to civilian life each year. Built on the
    philosophy, ``Once a Marine, Always a Marine,'' Reserve marines in over
    80 cities help transitioning marines and their families to get settled
    in their new communities. Sponsorship includes assistance with
    employment, education, housing, childcare, veterans' benefits, and
    other support services needed to make a smooth transition. To provide
    this support, the Marine For Life program taps into a network of former
    marines and marine-friendly businesses, organizations, and individuals
    willing to lend a hand to a marine who has served honorably.
    Approximately 2,000 marines are logging onto the web-based electronic
    network for assistance each month, and more than 30,000 marines have
    been assisted since January 2004. Assistance from career retention
    specialists and transitional recruiters helps transitioning marines by
    getting the word out about the program.
                                employer support
        Members of the Guard and Reserve who choose to make a career must
    expect to be subject to multiple activations. Employer support of this
    fact is essential to a successful activation and directly effects
    retention and recruiting. With continuous rotation of Reserve marines,
    we recognize that the rapid deactivation process is a high priority to
    reintegrate marines back into their civilian lives quickly and properly
    in order to preserve the Reserve Force for the future. To that end we
    enthusiastically support the efforts of the National Committee of the
    Employer Support of the Guard and Reserve (ESGR) and have joined with
    them in Operation Pinnacle Advance, which seeks to further develop
    personal relationships with our marines' employers.
                                   equipment
        Our readiness priorities continue to be the support and sustainment
    of our forward deployed forces and, second, ensuring units slated to
    deploy in follow-on rotations possess adequate levels of equipment for
    training. Currently, the Marine Corps has approximately 30 percent of
    its ground equipment and 25 percent of its aviation equipment forward-
    deployed. In certain critical, low-density items, this percentage is
    closer to 50 percent. This equipment has been sourced from the active
    component, MARFORRES, MARCORSYSCOM procurements, the Maritime
    Prepositioned Force as well as equipment from Marine Corps Logistics
    Command stores and war Reserves. Our contributed major items of
    equipment (principally communications equipment, crew-served weapons,
    optics and a Reserve infantry battalion's equipment set) remain in
    theater in support of rotating Marine forces, which fall in on these
    assets in-theater.
        Maintaining current readiness levels will require continued support
    as our equipment continues to age at a pace exceeding peace time
    replacement rates. The global war on terror equipment usage rates
    average eight-to-one over normal peacetime usage due to continuous
    combat operations. This high usage rate in a harsh operating
    environment, coupled with the weight of added armor and unavoidable
    delays of scheduled maintenance due to combat, is degrading the Corps'
    equipment at an accelerated rate. If this equipment returns to CONUS,
    extensive service life extension and overhaul/rebuild programs will be
    required in order to bring this equipment back into satisfactory
    condition prior to re-issue to an operating force.
        As we continue to aggressively train and prepare our CONUS-based
    marines for possible future deployments, we have maintained ground
    equipment readiness rates exceeding 90 percent. The types of equipment
    held by Reserve Training Centers are the same as those held within the
    Active component. However, as a result of the aforementioned movement
    of equipment into theater as well as the Marine Corps' efforts to
    cross-level equipment inventories to support home station shortfalls
    (both Active and Reserve), MARFORRES will experience some equipment
    shortfalls of communication and electronic equipment. This specific
    equipment type shortfall will be approximately 10 percent across the
    Force in most areas, and somewhat greater for certain low density
    ``big-box'' type equipment sets. However, communications equipment
    procured by Headquarters, U.S. Marine Corps (HQMC) (fiscal year 2005
    supplemental funding) and National Guard and Reserve Equipment
    Appropriations (NGREA) (fiscal year 2005) are currently being fielded
    and mitigate many communications equipment shortfalls. Although the
    equipment shortfalls will not preclude sustainment training within the
    Force, this equipment availability is not optimal.
                    strategic ground equipment working group
        Due to global war on terrorism demands on the entire Marine Corps
    equipment inventory, HQMC established a Strategic Ground Equipment
    Working Group (SGEWG) with the mission to best position the Corps
    equipment to support the needs of the deployed global war on terrorism
    forces, the Corps' strategic programs, and training of non-deployed
    forces. My staff has been fully engaged in this process and the results
    have been encouraging for MARFORRES, leading to an increase in overall
    supply readiness of approximately 5 percent in most equipment
    categories. The efforts of the SGEWG, combined with the efforts of my
    staff to redistribute equipment to support non-deployed units, have
    resulted in continued training capability for the Reserve Forces here
    at home.
        individual combat clothing and equipment, individual protective
                                   equipment
        In order to continue seamless integration into the Active
    component, my ground component priorities are the sustained improvement
    of Individual Combat Clothing and Equipment, Individual Protective
    Equipment and overall equipment readiness. I am pleased to report that
    every member of MARFORRES deployed over the past year in support of the
    global war on terror, along with those currently deployed into harm's
    way, were fully equipped with the most current Individual Combat
    Clothing and Equipment and Individual Protective Equipment. Your
    continued support of current budget initiatives will ensure we are able
    to properly equip our most precious assets--our individual marines.
                   critical asset rapid distribution facility
        In order to ensure equipment is available to our deploying forces,
    we created the MARFORRES Materiel Prepositioning Program and designated
    my Special Training Allowance Pool (which traditionally held such items
    as cold weather gear) as the Critical Asset Rapid Distribution Facility
    (CARDF). The CARDF has been designated as the primary location for all
    newly fielded items of Individual Clothing and Combat Equipment for
    issue to MARFORRES. Equipment such as the Small Arms Protective Insert,
    Improved Load Bearing Equipment, Lightweight Helmet and Improved First
    Aid Kit has been sent to the CARDF for secondary distribution to
    deploying units. This system worked extremely well, and we plan to
    continue its use for the foreseeable future. Furthermore, as tactical
    clothing and equipment requirements continue to emerge, we have
    expanded the CARDF's inventory to stock additional OIF-related
    individual issue equipment items such as WILEY-X Ballistic goggles,
    Ballistic hearing protection, and balaclavas to better equip our
    deploying forces.
                               training allowance
        The total wartime equipment requirement for MARFORRES is called the
    Table of Equipment (T/E). For MARFORRES, the T/E consists of two parts:
    a Training Allowance (T/A) and In-Stores assets. The T/A is the
    equipment MARFORRES units maintain at their training sites. MARFORRES
    units have established T/As that is on average approximately 80 percent
    of the established T/E. This equipment represents the minimum needed by
    the unit to maintain the training readiness necessary to deploy, while
    at the same time is within their ability to maintain under routine
    conditions. The establishment of training allowances allows MARFORRES
    to better cross-level equipment to support CONUS training requirements
    of all units of the Force with a minimal overall equipment requirement.
    The amount of T/A each unit has is determined by training requirements,
    space limitations, and staffing levels at the unit training sites. Of
    course, this concept requires the support of the Service to ensure that
    the ``delta'' between a unit's T/A and T/E is available in the event of
    mobilization and deployment. The current Headquarters Marine Corps
    policy of retaining needed equipment in theater for use by deploying
    forces ensures that mobilized MARFORRES units will have the Primary End
    Items necessary to conduct their mission.
                                 modernization
        The Marine Corps Reserve remains currently engaged in a two-pronged
    programmatic requirement strategy--fine tuning force structure while
    simultaneously determining the corresponding equipment requirements.
    Our main effort consists of resetting today's Force with today's
    equipment while seeking to determine future equipment requirements--all
    with the goal of building the most lethal, and best protected, marine
    and Marine Corps. I am extremely pleased to report to you that your
    Marine Reserve component continues to evolve and adapt to best prepare
    and face the full spectrum of threats.
        As with all we do, our number one focus is the individual marine
    and sailor. Our efforts to equip and train our most valued resource
    have resulted in obtaining the most appropriate individual combat and
    protective equipment: M4 rifles, Advanced Combat Optic Gunsight 4X32
    scopes, Lower Body Armor, and Night Vision goggles, to name a few.
        Our most noteworthy structure-related accomplishments are those
    associated with the Marine Corps Force Structure Review Group (FSRG).
    As part of a Total Force effort, the Marine Corps Reserve is
    transforming underutilized legacy units into new units with higher
    threat-relevant capabilities while providing operational tempo relief
    in high-demand areas: Intelligence, Anti-Terrorism, and Light Armored
    Reconnaissance. In last year's testimony we reported the results of the
    2004 Force Structure Review Group, which called for decreasing
    artillery and tank capability while increasing civil affairs,
    intelligence, mortuary affairs, and light armored reconnaissance
    capabilities within the Reserve component over a 3-year period (fiscal
    years 2005-2007). With fiscal year 2005 actions largely complete and
    fiscal year 2006 actions well underway, the Reserve component is better
    postured to sustain the long war while simultaneously achieving a
    greater irregular warfare capability.
               national guard and reserve equipment appropriation
        The NGREA continues to provide invaluable procurement support to
    your Guard and Reserves. In fiscal year 2005, NGREA provided $50
    million ($10 million for OIF/OEF requirements, and $40 million for
    title III procurement requirements), enabling us to robustly respond to
    the pressing needs of the individual marine, total force, and combatant
    commanders. Fiscal year 2006 NGREA provided $30 million, which enabled
    us to craft a fiscal year 2006 procurement plan consistent with those
    of fiscal year 2005: tactical communications/power generating devices
    and training enhancements.
        Specifically, fiscal year 2006 NGREA will procure four Virtual
    Combat Convoy Trainers-Marine (VCCT-M) and two LAV Combat vehicle
    training simulators. These simulators provide realistic convoy crew
    training and incidental driver training to your marines. Two of these
    systems will be deployed to Camp Lejeune and two will be reserved for
    units in the pre-deployment pipeline.
        Additional items identified for fiscal year 2006 NGREA procurement
    include: the Integrated Intra Squad Radio, the Ground Laser Target
    Designator, Intransit Visibility Management Packages, the Defense
    Advanced GPS Receiver, Marine Expeditious Power Distribution Systems,
    and PRC-148 Radios. Each year, NGREA enables us to gain the necessary
    ground needed to establish and maintain interoperability and
    compatibility with the Active component.
        Looking forward, my top modernization priorities as described in
    the fiscal year 2007 National Guard and Reserve Equipment Report and
    other documents, remain the procurement of Light Armored Vehicles,
    tactical communications, initial issue equipment, and training
    enhancement devices.
                                 infrastructure
        MARFORRES is and will continue to be a community-based force. This
    is a fundamental strength of MARFORRES. Our long-range strategy is to
    retain that strength by maintaining our connection with communities in
    the most cost effective way. We are not, nor do we want to be, limited
    exclusively to large metropolitan areas nor consolidated into a few
    isolated enclaves, but rather we intend to divest Marine Corps-owned
    infrastructure and locate our units in Joint Reserve Training Centers
    throughout the country. MARFORRES units are currently located at 185
    sites in 48 States, the District of Columbia, and Puerto Rico; 34 sites
    are owned or leased by the Marine Corps Reserve, 151 are either tenant
    or joint sites. Fifty-four percent of the Reserve centers we occupy are
    more than 30 years old and of these, 46 are over 50 years old. The
    fiscal year 2007 budget fully funds sustainment of these facilities and
    we are working through a backlog of restoration and modernization
    projects at centers in several States.
        The age of our infrastructure means that much of it was built
    before Antiterrorism/Force Protection (AT/FP) was a major consideration
    in design and construction. These facilities require AT/FP resolution
    through structural improvements, relocation, replacement or the
    acquisition of additional stand-off distance. We appreciate the
    congressional support provided for our Military construction program in
    fiscal year 2006 as it provided for construction to replace the Reserve
    Center in Charleston, South Carolina, a complex of buildings dating to
    1942, and joint construction with the Alabama Army National Guard in
    Mobile, Alabama. While two Marine Corps owned Reserve centers,
    Lafayette, Louisiana and Galveston, Texas, sustained very minor damage
    from the Hurricanes Katrina and Rita, the hurricanes' impact on
    construction costs in the south has negatively affected our ability to
    award these two fiscal year 2006 projects. Absent fiscal relief, final
    completion of these projects will be delayed significantly.
        Maintaining adequate facilities is critical to training that
    supports our readiness and sends a strong message to our marines and
    sailors about the importance of their service. With the changes in
    Force structure resulting from the Marine Corps Force Structure Review
    in 2004, extensive facilities upgrades are required at a few locations.
    Our top priority sites are San Diego, California; Windy Hill
    (Marietta), Georgia; and Camp Upshur (Quantico), Virginia.
                                   brac 2005
        BRAC 2005 moved us toward our long-range strategic infrastructure
    goals through efficient joint ventures and increased training center
    utilization without jeopardizing our community presence. In cooperation
    with other Reserve components, notably the Army Reserve and the Army
    National Guard, we developed Reserve basing solutions that further
    reduce restoration and modernization backlogs and AT/FP vulnerability.
    Twenty-three of the 25 BRAC recommendations affecting the Marine Corps
    Reserve result in joint basing of our units. Implementation of these
    recommendations will be a challenge across the Future Year Development
    Plan. Of the other two, the Federal City in New Orleans appears both
    promising and challenging. We look forward to working with the State
    and local governments in this unique venture. The final BRAC-
    recommended move is from a Navy-hosted facility in Encino, CA, to a
    Marine Corps Reserve-owned facility in Pasadena, CA.
                                   conclusion
        As I have stated in the beginning of my testimony, your consistent
    and steadfast support of our marines and their families has directly
    contributed to our successes, both past and present, and I thank you
    for that support. As we push on into the future, your continued concern
    and efforts will play a vital role in the success of MARFORRES. Due to
    the dynamics of the era we live in, there is still much to be done.
        The Marine Corps Reserve continues to be a vital part of the Marine
    Corps Total Force Concept. Supporting your Reserve marines at the 185
    sites throughout the United States, by ensuring they have the proper
    facilities, equipment and training areas, enables their selfless
    dedication to our country. Since September 11, your Marine Corps
    Reserve has met every challenge and has fought side by side with our
    active counterparts. No one can tell the difference between the Active
    and Reserve--we are all marines.
        The consistent support from Congress for upgrades to our
    warfighting equipment has directly affected the American lives saved on
    the battlefield. However, as I stated earlier, much of the same
    equipment throughout the force has deteriorated rapidly due to our
    current operational tempo.
        Although we currently maintain a high level of readiness, we will
    need significant financial assistance to refresh and/or replace our
    warfighting equipment in the very near future. Also, as the MARFORRES
    adjusts its force structure over the next 2 years, several facilities
    will need conversions to create proper training environments for the
    new units. Funding for these conversions would greatly assist our
    warfighting capabilities.
        As I have stated earlier, NGREA continues to be extremely vital to
    the health of the Marine Corps Reserve, assisting us in staying on par
    with our Active component. We have seen how the NGREA directly improved
    our readiness in recent operations, and we look forward to your
    continued support of this key program.
        My final concerns are for Reserve and Guard members, their families
    and employers who are sacrificing so much in support of our Nation.
    Despite strong morale and good planning, we understand that activations
    and deployments place great stress on these praiseworthy Americans.
    Your continued backing of ``quality of life'' initiatives will help
    sustain Reserve marines in areas such as education benefits, medical
    care and family care.
        My time thus far leading MARFORRES has been tremendously rewarding.
    Testifying before congressional committees and subcommittees is a great
    pleasure, as it allows me the opportunity to let the American people
    know what an outstanding patriotic group of citizens we have in the
    Marine Corps Reserve. Thank you for your continued support.

     STATEMENT OF LT. GEN. JOHN A. BRADLEY, USAF, CHIEF, AIR FORCE
                                RESERVE

        General Bradley. Senator Graham, Senator Nelson, thank you
    for your hearing. Thank you for your leadership and all the
    help that you've given us over the last many years.
        You and your colleagues have provided our airmen in the Air
    Force Reserve, as well as our other servicemembers, many
    benefits, bonuses, and pay raises, which have had a huge impact
    on the lives of our people.
        I'm proud to represent our airmen in the Air Force Reserve,
    who are working very hard for this Nation. We're providing
    tactical and strategic airlifts through C-130s and C-17s by
    mobilizing people and sending them to the Central Command
    (CENTCOM) area of responsibility. We're providing close-air
    support for soldiers and marines frequently flying F-16s and A-
    10s in Iraq and Afghanistan. I've welcomed hundreds of people
    home from the war, and I'm very proud of what they've done.
    Those folks are doing it as volunteers; they're not mobilized.
    I love the way the Air Force has structured our deployments so
    that we can plan it, and people know what to expect, and they
    want to be a part of it. We have no shortage of volunteers.
        Our end strength is good. We're 102 percent manned. We are
    at about 103 percent of recruiting goal, year to date. I feel
    good about that. I worry all the time about retention. It's
    something always on my mind, but thanks to you and the many
    things that you provided us, the tools, in the way of bonuses
    and so forth, we are able to hold onto our people. I think even
    more than the money, it is just the pride in what they're doing
    and believing they're contributing to something important.
        I'm proud of our folks. Our response overseas has been
    tremendous. On the Gulf Coast, we had search-and-rescue folks
    save over 1,000 lives. We had hurricane hunters, whose homes
    were destroyed in Gulfport and Biloxi, continue to fly missions
    while their families were trying to get their lives back in
    order.
        We have a lot to be proud of in the Air Force Reserve, as
    all of my colleagues are proud of their soldiers, sailors,
    airmen, and marines.
        I'll look forward to your questions, sir.
        [The prepared statement of General Bradley follows:]

              Prepared Statement by Lt. Gen. John A. Bradley, USAF

        Mr. Chairman, and distinguished members of the subcommittee, I
    appreciate the opportunity to appear before you today. I want to thank
    you for the support you have shown us these past few years and I am
    happy to report it's making a difference. At a Reserve Chief's hearing,
    we were recently asked how Guard and Reserve members compare to Active-
    Duty when they were mobilized. Due to your committees continued
    legislative support, we unanimously replied that when a Guard or
    Reserve member is activated they are indistinguishable from the Active-
    Duty.
        We anticipate last year's provision to expand Selected Reserve
    member eligibility under TRICARE standard will increase medical
    readiness for mobilization. With so much attention on mobilization we
    appreciate the committee's interest in initiatives that encourage
    volunteerism because the Air Force Reserve relies heavily upon this
    means of support to meet contingency and operational requirements. In
    particular, eliminating Basic Allowance for Housing rate difference for
    orders greater than 30 days addresses a long-standing issue that
    Reserve members have identified as a deterrent to volunteerism. Another
    barrier was eliminated with support of authorized absences of members
    for which lodging expenses at temporary duty location must be paid.
    This change applied the Active-Duty standard to Guard and Reserve
    members when they are on Active-Duty orders. In the coming year we will
    continue to seek ways to facilitate volunteerism as the primary means
    of providing the unrivaled support on which the Air Force has come to
    rely.
                           mission contributions 2006
        Air Force Reserve accomplishments since September 11 and, more
    specifically, in the last fiscal year, clearly show that the Air Force
    Reserve is a critical component in the security of our Nation. The Air
    Force Reserve has made major contributions to the global war on terror
    with more than 80,000 sorties (360,000 flying hours) flown in support
    of Operations Noble Eagle, Enduring Freedom (OEF), and Iraqi Freedom
    (OIF). The Air Force Reserve has flown almost 52,000 sorties in support
    of OIF since 2003, with 14,658 of those (55,781 flying hours) in fiscal
    year 2005. Our Air Force Reserve members have flown more than 28,000
    sorties in support of OEF since 2002, contributing 5,328 sorties
    (25,409 flying hours) in fiscal year 2005. Here at home, the Air Force
    Reserve has flown more than 10,000 sorties supporting the vital
    Operation Noble Eagle mission since 2002; 150 sorties (906 flying
    hours) in fiscal year 2005. These contingency support missions fighter
    support, Combat Search and Rescue, Special Operations, Aerial Refueling
    and Tactical and Strategic Airlift--mirroring and in conjunction with
    Total Force operations. This past year, C-130 and C-17 aircraft flew
    the majority of Air Force Reserve missions in the area of
    responsibility (AOR). As you may know, 61 percent of the Air Force's C-
    130s are assigned to the Air Reserve component. In a recent trip,
    Senator Lindsey Graham witnessed this preponderance of Reserve
    component airlift first hand and mentioned it at the Guard and Reserve
    Commission hearing on March 8, 2005. Of the 20 sorties he flew in the
    OEF and OIF AOR, he stated Active-Duty crews only flew one.
                          homeland contingency support
        The onslaught of hurricane strikes to the coastal United States in
    2005 required a response unlike anything seen in our modern history.
    The Air Force Reserve was fully engaged in emergency efforts; from
    collecting weather intelligence on the storms to search and rescue,
    aeromedical and evacuation airlift. Hurricanes Katrina, Ophelia, Rita,
    and Wilma drew heavily on the expert resources of our component to
    assist in relief efforts. Almost 1,500 Air Force Reserve personnel
    responded to these efforts within 24 hours, with some of these members,
    from the 926th Fighter Wing at New Orleans, Louisiana, and the 403rd
    Airlift Wing at Keesler Air Force Base (AFB), Mississippi, struggling
    to protect their own unit's resources from storm damage.
        Two units that stood especially tall amongst our reservists were
    the 53rd Weather Reconnaissance Squadron also known as the Hurricane
    Hunters based at Keesler AFB and the 920th Rescue Wing based at Patrick
    AFB in Florida. The Hurricane Hunters flew 59 sorties with their new
    WC-130J aircraft into the eye of hurricanes and tropical storms to
    determine the strength and path of the weather systems even while their
    homes were being destroyed. Even after they had lost everything, they
    continued to perform their mission flawlessly from Dobbins, GA. The
    920th Rescue Wing, the first unit on the scene, flew more than 100
    sorties recovering 1,044 people who were threatened by the rising
    water.
        During the same time other Reserve airlift units from around the
    country were responding with medical and evacuation teams that assisted
    in the transfer of more than 5,414 passengers and patients within and
    from affected areas. In fact, the Air Force Reserve accounted for more
    than 80 percent of aeromedical evacuations. Combined rescue and airlift
    missions over the 60-day period of these storms surpassed 500 sorties
    and transported 3,321 tons of relief cargo. Additionally, to combat
    insect-borne illnesses such as malaria, West Nile virus and
    encephalitis that often gain footholds during natural disasters, our
    910th Airlift Wing from Youngstown, Ohio utilized their C-130s to spray
    10,746 gallons of insecticide across 2.9 million acres. This is an area
    roughly the size of the State of Connecticut and spanned locations from
    Texas to Florida. Interagency coordination with State and Federal
    organizations also resulted in the Air Force Reserve assisting in the
    areas of communications, civil engineering, security forces, food
    services, public affairs, and chaplaincy support to aid in overall
    relief efforts.
                   our people: mobilization vs. volunteerism
        The backbone of the Air Force Reserve is our people because they
    enable our mission accomplishment. These patriots, comprised of unit
    reservists, individual mobility augmentees, Air Reserve technicians,
    Active guard reservists, and civilians, continue to dedicate themselves
    to protecting the freedoms of the American people. The operations tempo
    to meet the combatant commanders' requirements since September 11
    remains high and is not expected to decrease significantly in the near
    future. A key metric that reflects this reality is the number of days
    our Reserve aircrew members are performing military duty. In calendar
    year 2005, each of our aircrew members served an average of 91 days of
    military duty. This is a significant increase compared to an average 43
    days of military duty per aircrew member in calendar year 2000, the
    last full calendar year before the start of the global war on
    terrorism.
        In order to meet the continuing Air Force requirements since
    September 11 and having maximized the use of the President's Partial
    Mobilization Authority, the Air Force Reserve has begun to rely more
    heavily on volunteerism versus significant additional mobilization.
    There are several critical operational units and military functional
    areas that must have volunteers to meet ensuing mission requirements
    because they are near the 24-month mobilization authority. These
    include C-130, MC-130, 8-52, HH-60, HC-130, E-3 AWACS, and Security
    Forces. Over calendar year 2005, the Air Force Reserve had 6,453
    members mobilized and another 3,296 volunteers who serve in lieu of
    mobilization to support global war on terror. As the 2005 calendar year
    closed, the Air Force Reserve had 2,770 volunteers serving full-time to
    meet global war on terror requirements and 2,553 reservists mobilized
    for contingency operations. We expect this balance to become
    increasingly volunteer-based as this ``Long War'' continues.
        Flexibility is the key to increased volunteerism and will enable us
    to bring more to the fight. To eliminate barriers to volunteerism, the
    Air Force Reserve has several ongoing initiatives to better match
    volunteers' desires and skill sets against the combatant commanders'
    mission requirements. For example, the Integration Process Team we
    chartered to improve our volunteer process recently developed a
    prototype Web-based tool. It gives the reservist the ability to see all
    the positions validated for the combatant commanders and allows the Air
    Force Reserve to see all qualified volunteers for placement. We must
    have the core capability to always match the right person to the right
    job at the right time. We also expect to positively affect volunteerism
    as a result of the National Defense Authorization Act of Fiscal Year
    2005. This Act fosters more continuity in volunteerism because it
    liberated end strength rules and provided equal benefits for mobilized
    personnel. Facilitating the reservists' ability to volunteer provides
    more control not only for the military member, but also for their
    family, employer, and commander. The predictability, in turn, allows
    for more advanced planning, the least amount of disruption, and,
    eventually, more volunteer opportunities.
                           shaping the reserve force
        As an equal partner in the Air Force Transformation Flight Plan
    (PBD720), the Air Force Reserve plans to realign resources so it can
    transform to a more lethal, more agile, streamlined force with an
    increased emphasis on the warfighter. In this process, we plan to
    eliminate redundancies and streamline organizations, which will enable
    a more capable force of military, civilians, and contractors while
    freeing up resources for Total Force recapitalization. There will be no
    personnel reductions as a result of Air Force Transformation Flight
    Plan in fiscal year 2007. Our reductions begin in fiscal year 2008.
    Over the FYDP the Air Force Reserve is planning for an end strength
    reduction so that at the end of fiscal year 2011, the end strength will
    be 67,800 personnel.
                            recruiting and retention
        The Air Force Reserve has enjoyed unprecedented levels of
    retention, while simultaneously meeting our recruiting goals, for a
    fifth consecutive year. I am proud of the fact that our reservists are
    directly contributing to the warfighting effort every day. When our
    Reserve airmen are engaged in operations that employ their skills and
    training, there is a sense of reward and satisfaction that is not
    quantifiable. I attribute much of the success of our recruiting and
    retention to the meaningful participation of our airmen.
        That being said, the 10 percent reduction in personnel planned over
    the FYDP, coupled with the impact of BRAG initiatives, may present
    significant future recruiting and retention challenges to the Air Force
    Reserve. With the personnel reductions beginning in fiscal year 2008
    and the realignment and closure of Reserve installations due to Base
    Realignment and Closure (BRAC), approximately 20 percent of our force
    will be directly impacted by the planned changes through new and
    emerging missions as well as mission adjustments to satisfy Air Force
    requirements. In light of all these challenges, we expect the
    recruiting and retention environment will be turbulent and dynamic.
        Unlike the Active-Duty, the Air Force Reserve does not have a
    robust assignment capability with command-leveling mechanisms that
    would assist in the smooth transition of forces from drawdown
    organizations into expanding organizations. In drawdown organizations,
    the focus will be on maintaining mission capability until the last day
    of operations, while also trying to retain as much of the force as
    possible and placing them in other Air Force Reserve organizations. At
    the same time, we will need to employ some transition assistance
    measures, which will provide our affected units with options to retain
    our highly trained personnel. This contrasts greatly with the
    organizations gaining new missions and/or authorizations. We need to
    remember that the Air Force Reserve is a local force and that growing
    units will face significant recruiting challenges when considering the
    availability of adequately qualified and trained personnel. As has
    always been the case, we will focus on maximizing prior service
    accessions. Regular Air Force reductions over the FYDP could prove to
    be beneficial since the regular component critical skills closely match
    those in the Reserve. Other prior service individuals accessed by the
    Reserve will inevitably require extensive retraining which could prove
    costly. The bottom line is that retaining highly trained individuals is
    paramount. Retention must be considered from a total force perspective,
    and any force drawdown incentives should include Selected Reserve
    participation as a viable option. Legislation should not include any
    disincentives to affiliate with the Reserve component.
                          base realignment and closure
        Recruiting and retention are particularly important when
    considering the significant impact of the 2005 BRAC Commission
    recommendations. We had seven bases realigned and one, General Billy
    Mitchell Field in Milwaukee, Wisconsin, closed. To our Reserve airmen,
    a base realignment, in many cases, is essentially a closure. When BRAC
    recommended the realignment of our wing at Naval Air Station New
    Orleans, our airplanes were distributed to Barksdale AFB, Louisiana and
    Whiteman AFB, Missouri, while the remaining Expeditionary Combat
    Support was sent to Buckley AFB, Colorado. In another example, BRAC
    recommended the realignment of our wing at Selfridge Army National
    Guard Base, Michigan and directed the manpower be moved to MacDill AFB,
    Florida to associate with the Regular Air Force. Selfridge, Michigan to
    Tampa, Florida, is a challenging commute for even the most dedicated
    person. These are just a few examples of the impact base realignments
    can have on our reservists. In the majority of the realignments, their
    ability to serve is hindered due to the distances they must travel to
    participate. In this post-BRAC environment, we continue to strive to
    retain the experience of as many of our highly-trained personnel as
    possible. We are working closely with the Air Force and the Office of
    the Secretary of Defense on initiatives, which will encourage those who
    were impacted by BRAC decisions to continue to serve.
                             one tier of readiness
        We, in the Air Force Reserve, pride ourselves in our ability to
    respond to any global crisis within 72 hours. In many cases, including
    our response to the devastation during the hurricane season, we are
    able to respond within 24 hours. We train to the same standards as the
    Active-Duty for a reason. We are one Air Force in the same fight. With
    a single level of readiness, we are able to seamlessly operate side-by-
    side with the Regular Air Force and Air National Guard in the full
    spectrum of combat operations. As an equal partner in day-to-day combat
    operations, it is critical we remain ready, resourced, and relevant.
                                 family support
        The military commitment that reservists make has a profound effect
    on their families. There is no denying the military lifestyle; the
    possibility of unexpected deployments, often into areas where there is
    unrest, can play havoc on a family unit. Family Readiness offers a
    variety of services to support military families during these stressful
    times. Family Readiness offices provide the following services for the
    families of deployed reservists:

             Family Readiness Data Card completed by member at
            deployment for special needs
             Information and Referral services to appropriate
            support agencies
             Video Telephones available at deployed site and unit
            site
             Assistance with financial questions and concerns
             FAMNET (Family Support global communication network)
            available at 63 countries (Internet access not required)
             Telephone Tree Roster for communication to the
            families from the unit
             Joint interservice family assistance services
             Family Support Groups
             Crisis Intervention Assistance
             Morale Calls
             Volunteer opportunities
             Letter Writing kits for Children
             Reunion activities
             E-mail

        What is amazing is that there are 21 full-time positions throughout
    the Air Force Reserve to handle all these responsibilities. Family
    Readiness offices support Reserve component members during times of
    mobilization but also with operational missions. In May 2005, Dobbins
    Air Reserve Base, Georgia, held a recognition event for family members
    and brought agencies from across the spectrum to answer questions. A
    few months later they found themselves playing host to displaced
    Reserve component members and their family from Hurricane Katrina.
        In 2005 there was a 12-percent increase in usage of Air Force
    Reserve Family Readiness support. According to the Family Readiness
    Office at Headquarters Air Force Reserve Command (AFRC), family members
    are displaying the effects of mobilization and seeking assistance from
    readiness offices and organizations like OneSource.
    AFRC Top Issues:
             Emotional well-being
             Stress from repeated deployments and length
    OneSource Top Issues:
             Emotional well-being
             Financial
             Personal and family readiness issues
             Parenting and everyday issues
             Education (suddenly being military)

        The command has seen a 38-percent usage of face-to-face counseling
    service through free developmental counseling of six sessions offered
    per issue at no cost. The provider is found within 30 miles of
    residence rather then just at the closest military installation. In
    these sessions there is a focus on grief and loss, reintegrating
    couples in their relationship and achieving work/life balance.
        Improving family readiness programs by making connections with the
    family stronger, helping them become better prepared, and having a
    proactive outreach program to ensure both unit and individual and
    family readiness are a few of the necessary developments.
        Just as Reserve component members are participating at far greater
    rates, our Family Readiness is a 365-day a year program. We now have
    demobilization training and that is harder to get our arms around
    because members want to get home. When they finally recognize they need
    help, we are left scrambling for providing assistance. This is
    additionally harder in places like Peterson AFB, Colorado and Maxwell
    AFB, Alabama, where Family Readiness is an additional duty. The command
    is currently working on how best to help meet these growing
    requirements. One thing that hasn't changed is that families are proud
    of the military member's role in fighting the war on terrorism.
    New Mission Areas:
        The Air Force Reserve will continue to transform into a full
    spectrum force for the 21st century by integrating across all roles and
    missions throughout the Air, Space, and Cyberspace domains. Our roles
    and missions are mirror images of the Active component. Bringing Air
    Force frontline weapon systems to the Reserve allows force unification
    at both the strategic and tactical levels. Indeed, we are a unified,
    total force.
        Sharing the tip of the spear, our focus is on maximizing warfighter
    effects by taking on new and emerging missions that are consistent with
    Reserve participation. Reachback capabilities enable Reserve Forces to
    train for and execute operational missions in support of the combatant
    commander from home station. In many cases, this eliminates the need
    for deployments. The Associate Unit construct will see growth in
    emerging operational missions such as: Unmanned Aerial Systems, Space
    and Information Operations, Air Operations Centers, Battlefield Airmen
    and Contingency Response Groups. The Active/Air Reserve component mix
    must keep pace with emerging missions to allow the Air Force to operate
    seamlessly as a Total Force. This concurrent development will provide
    greater efficiency in peacetime, and increased capability in wartime.
    Transforming and Modernizing the Air Force Reserve:
        Equipment modernization is our lifeline to readiness. The United
    States military has become increasingly dependent on the Reserve to
    conduct operational and support missions around the globe. Effective
    modernization of Reserve assets is key to remaining a relevant and
    capable combat ready force. While the Air Force recognizes this fact
    and has made significant improvement in modernizing and equipping the
    Reserve, the reality of fiscal constraints still results in shortfalls
    in our modernization and equipage. While a few of our unfunded
    priorities are included on the Air Force Unfunded Priorities List, most
    are not, creating significant shortfalls. These items are critical to
    push combat capability to the warfighter and meet the challenges of
    combat survival and employment for the next 20 years. Funding our
    modernization enhances availability, reliability, maintainability, and
    sustainability of aircraft weapon systems; strengthening our ability to
    ensure the success of our warfighting commanders and laying the
    foundation for tomorrow's readiness.
     fiscal year 2006 national guard and reserve equipment account (ngrea)
        We appreciate the support provided in the 2006 NGREA. In fiscal
    year 2006 the Air Force Reserve is spending $30 million on critical
    aircraft modernization and miscellaneous equipment to help fulfill our
    Nation's air, space, and cyberspace peacetime and wartime requirements.
    The items we purchase this year are prioritized from the airmen in the
    field up to the Air Force Reserve Command Headquarters and vetted
    through the Air Staff. These items run the gamut from multi-function
    aircraft displays, security forces night vision devices, defensive
    systems, aircraft radar upgrades and enhanced strike capabilities.
        The Air Force Reserve is spending $3.21 million on modernizing the
    A-10 aircraft Litening AT POD interface. Use of a Multi-Function Color
    Display (MFCD) provides additional capability, including data link
    integration, machine-to-machine image transfer, moving map, cursor-on-
    target and ARC-210 integration. We are also completing our buy of 23
    additional Situational Awareness Data Link radios for the A-10 at a
    cost of $920,000. We are continuing our support for the radar test
    stand modification and the Joint Helmet Mounted Cueing System with $1.3
    million. We continue to purchase Litening AT Pods; this year we have
    added $9.688 million to the conference appropriation of $12.4 million
    for a total of $22.088 million. This 15-pod procurement completes the
    current total validated command pod requirement. Additionally this
    procures spares, support equipment and required warranties.
        Upgrading the C-130 fleet with all-weather color radar has been an
    Air Force Reserve priority for the last several years. This year we
    continue our dedication to the program by adding $4.75 million to the
    conference appropriated $7.5 million for a total of $12.25 million to
    purchase 14 radars. This means 60 percent of the Air Force Reserve C-
    130 fleet will have the APN-241 radar. We are also spending $1.8
    million to begin installing the capability for both C-130 pilots to
    dispense chaff and flares to enhance survivability in a combat
    environment. Previously, aircrews had to rely on crew positions other
    than the pilots to react to threats. Adding this capability doubles the
    number of crewmembers who can effectively counter threats in a timely
    manner.
        The Air Force Reserve also has a need for Defensive Systems
    testers, specifically, an end-to-end ground-based tester for the AAR-47
    missile detection system and an ALE-47 IR countermeasures dispensing
    system. The desired capability will allow testing of the complete
    system while it is in normal operation mode by transmitting
    independent, external signals to the AAR-47, rather than using built in
    testing routines that are not comprehensive.
        On our B-52s we are installing Smart MFCD and Digital/Analog
    Integrated Track Handle which will provide the most cost effective
    solution to resolve a critical shortage with B-52 Targeting Pod
    controllers. Along those same lines we are also installing a MFCD to
    enhance our search and rescue capabilities on the HH-60 helicopter. The
    combat rescue mission requires increased computer processing capability
    and color displays to enhance target identification and moving map
    capability.
        Night vision operations continue to be at the forefront in the Air
    Force Reserve. We rely on our Security Forces in all aspects of the
    battle and depend on our Pararescue personnel, Pararescue Jumpers
    (PJs), for personnel recovery. To that end we are spending $330,000 to
    outfit our Security Forces Personnel with Night Vision Devices and
    laser sights. Since our PJs have long operated with outdated Night
    Vision Goggles, $2.1 million is being spent this year to upgrade the
    PJs capabilities, both in the air and on the ground via acquisition of
    advanced night vision devices.
                                 reconstitution
        Reconstitution is a planning process with the purpose of restoring
    ``units back to their full combat capability in a short period of
    time.'' The Global War on Terror is having a significant and long-term
    impact on the readiness of our Air Force Reserve units to train
    personnel and conduct missions. The goal must be to bring our people
    and equipment back up to full warfighting capability.
        The rotational nature of our units preclude shipping equipment and
    vehicles back and forth due to cost and time constraints, therefore,
    equipment is kept in the AOR to allow quick transition of personnel and
    mission effectiveness. After September 11, 2001, and during OIF and
    OEF, units returning back to the continental United States returned
    without the same level of equipment as when they deployed. Equipment
    and vehicles have remained in the AOR to support rotations and mission
    requirements, which has a negative impact on readiness for the Total
    Force.
        To preclude mission degradation, reconstitution plays a vitally
    important role for the returning unit. Air Force Reserve Command,
    working with the Air Staff, has put together a Memorandum of Agreement
    to replace approximately $2.2 million in transferred, withdrawn, or
    diverted assets that were used in support of OIF/OEF. Our Air Force
    Reserve units need this equipment to train and perform their mission.
                                    closing
        I would like to close by offering my sincere thanks to each member
    of this committee for their continued support and interest in the men
    and women of your Air Force Reserve. Recruiting and retaining our
    experienced members is the best investment the country can make because
    it ensures a force that is ready and able to go to war at any time. The
    Air Force Reserve continues its heritage of providing operational
    support while maintaining a strategic reserve capability. Our vision is
    to provide the world's best mutual support to the Air Force and our
    joint partners and we appreciate your continued support in helping us
    defend this Nation in our role as an unrivaled wingman.

        Senator Graham. That's a good way to begin the questions.
    We are all very proud of what you've done and the people you
    represent.
        To those who have been called here as an example of service
    and sacrifice, the captains and the sergeants, thank you all
    very much for what you've done. They are all amazing and very
    encouraging stories.
        Do the benefit packages that we've tried to design based on
    higher levels of stress that we didn't anticipate--as you said,
    General Helmly, we have changed those benefits, in terms of pay
    and bonuses and health care--is there general consensus that
    this is working, when it comes to recruiting and retention? If
    you don't think it's working, speak up.
        General Helmly. Mr. Chairman, in my judgment it is helpful.
    I believe the other part that must be addressed is
    communications. I know that when I took office, most of our ads
    emphasized 1 weekend a month, and 2 weeks in the summer.
        Senator Graham. You don't do that anymore, do you?
        General Helmly. Frankly, they were broken expectations that
    have created a large part of our challenge. Our ads now
    emphasize, ``Honor is never off duty. This is not your everyday
    job.'' We're very frank upfront. We have put forth initiatives
    to remind folks, ``This is more than money and benefits. This
    is all about service to the Nation.'' I'm always cautious that
    money is not the be-all and end-all in a benefits package. We
    must provide our soldiers, sailors, airmen, and marines, Active
    and Reserve components, with a standard of living commensurate
    with their sacrifice for our Nation. I don't believe we want
    the kind of force that money will buy.
        Senator Graham. Right. You will never get people to do what
    you do for the money. I don't care how much money you put on
    the table. We're not hiring Hessians here. We're trying to get
    Americans to come forward and say, ``All right, count me in.''
        Along the benefits line, has TRICARE eligibility for the
    deployable Guard and Reserves been well received?
        Admiral Cotton. Mr. Chairman, I'd like to comment on that.
    Yes, sir, it has most assuredly, especially this TRICARE
    Reserve Select Program. I'd like to add one further comment on
    that. Right now, it is for people who have served in support of
    a contingency for 90 consecutive days. We send some great folks
    over to CENTCOM, and they serve. However, we have people
    serving around the globe in many other actions, who might not
    be part of a designated contingency, who are accumulating, over
    many kinds of sets of orders, greater than 90 days. For
    example, an Air Force or a Navy C-130 pilot that flies 120 days
    a year, but not consecutive, might not eligible for this
    benefit. As we all know, health care is very important. This is
    just a small change to that, that we might look at, to reward
    those people that are doing many things every single day, but
    maybe not 90 consecutive days, in support of a contingency.
        Senator Graham. This is a good exchange, because we have
    recently, along with Senator Nelson and others, fixed that. In
    October, it's for anybody in the Selected Reserves.
        Now, here's what I've learned from this exchange. Nobody
    knows that. We need to get the message out. Coming this
    October--am I right about that?--that the 90-day requirement's
    going to be replaced? If you're a member of the Selected
    Reserves, there will be a three-tiered system, in addition to
    the 90 days. Everybody will have access to health care at
    different levels, but the entire deployable Selected Reserve
    Force will be able to sign up for one of three levels. Let's do
    all we can to get that out.
        General Bradley. Yes, sir, that's exactly right. I think
    it's a good system. It offers options for people that will help
    them greatly. It's a great benefit. Thanks for the change.
        Senator Graham. I appreciate this exchange. It's helped us
    all understand that the three-tier system needs to be better
    advertised.
        General James. I concur. The feedback I get from my folks
    is that they're really appreciative of what you're doing for
    them, because of the new nature of our commitment.
        I failed to introduce my senior NCO representative here
    today, Command Chief Master Sergeant Laurie Casucci. She is
    representing the over 90,000 enlisted men and women in the
    great Air National Guard. Chief Casucci, my apologies. She is a
    wonderful, professional command chief, and she's representing
    Command Chief Dick Smith, who couldn't be with us today.
        Senator Graham. Thank you, Chief, for your service.
        Let's go on to the next benefit question. The brewing
    desire of Congress, slowly but surely, is to allow people to
    retire at 55, rather than 60, if they'll serve from 20 to 30
    years. You need to lose sleep about that. I do. I know you all
    do. The one thing I worry about is not only retention, but also
    how do you keep this force together, given the demands on it?
    We're losing a lot of people--or at least I believe we're
    losing people at the 20-year point who may have stayed longer,
    because it's getting tough. Senator Chambliss, Senator Nelson,
    others, and I have been working to come up with a package that,
    for every 2 years you serve past 20 years, you would be
    eligible to retire a year earlier. That's another way of doing
    it, where all the points you accumulate allow you to retire at
    a faster pace. There are two or three different ways of doing
    this. The bottom line is, what effect do you believe it would
    have on retaining people from the 20- or 30-year point if we
    had an incentive system so you could retire earlier than 60?
        General Helmly. Mr. Chairman, I have no empirical data to
    support my argument, so I will give you my professional
    judgment. I believe we would see a spike, or an increase in
    retention beyond 20 years. We have seen, as the stress of the
    war continued, an increase in the number of those willing to
    leave us at the 20-year mark. That's grown by about 15 to 20
    percent per annum over the last couple or 3 years. In the kind
    of force that we fight with today, which is skill-intensive in
    all Services, vice numbers-intensive, retention only makes good
    sense.
        Senator Graham. Very quickly--the vote started at 3:05
    p.m., so I'll move on here--the 365-day call-up, versus 270, do
    you support that concept?
        Admiral Cotton. Mr. Chairman, I have a comment on that.
        Senator Graham. Yes.
        Admiral Cotton. I think we should ask the customer and
    that's the combatant commander. Once you train someone for duty
    and get them into theater, you want to use them a little bit
    longer. This would give them the flexibility to train en route,
    deploy for 6, 7, or 8 months, and then have downtime
    afterwards. I think we'd increase the flexibility of our
    customers if we did 365 days.
        Senator Graham. Does anyone disagree with the idea of going
    from 270 to 365 days?
        General Helmly. Mr. Chairman, I don't. I'm mindful of the
    fact that we have to look at the entire mobilization call-to-
    duty process. The 270-day was built for the Cold War. It was
    built to prime the pump for, then, a partial mob. I'm mindful
    that the current partial mob law was written in about 1953, for
    an entirely different kind of force than we have today, and an
    entirely different kind of threat, and certainly not for a long
    war.
        Senator Graham. The numbers of the Marine Corps are just
    astounding. You described it very well. This is a Reserve
    Force, in name only, really. You're all playing in the war.
    When you have 97 percent of the people activated, or 70 percent
    of the force activated, it's just clear that if you join up,
    you're going to be called on to serve. Our benefits and
    equipment need to reflect that.
        I have one last thing, and then I'll turn it over to
    Senator Nelson. The equipment accounts. We're very sensitive
    here that we're leaving equipment behind, and the units are
    being underfunded when it comes to equipment, and you don't
    have what you need. Could you all briefly comment on how you
    see the state of the equipment and what we need to do?
        Admiral Cotton. Mr. Chairman, I'd like to say that it's not
    just the equipment we have now, it's also the Navy growing into
    some new missions. We've just recently established the Navy
    Expeditionary Combat Command, and bringing back riverine for
    missions. So, it'll be dollars for some new equipment, too, and
    some new missions, in support of the long war.
        Senator Graham. General?
        General Bergman. Sir, the cyclic rate of the equipment, as
    we all know, is astronomical. It is a 1-year-in-1-month type of
    thing. Some smart decisions need to be made, and I know all the
    Services are looking at: Where do we stop repairing, and where
    do we just buy new? It has its challenges. In the end, as long
    as the Reserve components have the equipment to train with, we
    know that, when they get into theater, the equipment will be
    there to fight with.
        General Vaughn. Mr. Chairman, General Blum hit this. For
    us, it's really about transparency. It's going to take a while
    to get back over this. I think if we have full faith and
    confidence that we're going to get it back, and we have
    training sets out there, and then you all are in a position to
    watch this thing all the way through, if you can see it flow
    all the way from the appropriations down to the end user, and
    it is transparent all the way through, just like our National
    Guard and Reserve equipment accounts, then we'll be in good
    shape. The Army is working in that direction. We just need to
    all be vigilant.
        General Helmly. Mr. Chairman, it would be, frankly,
    unprofessional if I said that we didn't get here because the
    Army didn't like us. The Army was $96 billion short, coming
    into 2000, on equipment. Our equipment's procured, in the main,
    by Army procurement dollars, Active, Guard, and Reserve. We
    find ourselves in a very deep hole. Our chief calls it ``holes
    in the yard.'' In our case, we're about $10 billion short. The
    wear and tear, as the Marine Corps Commandant mentioned, and
    the shortage, have only exacerbated that. Now we find ourselves
    at about a 75-percent level of fill.
        The last point I'll make is that the Army Reserves skill
    set is such that the kinds of equipment we use, while not
    capital-intensive, is normally in low density in the support
    items--cranes, dozers. Because of that, it doesn't make the
    high-visibility part of the equipment requirements. We have to
    pay close attention to it. It's going to take a long time, as
    General Vaughn said in the National Guard, to fix that.
        General Bradley. Senator Graham and Senator Nelson, I
    wouldn't compare our problem to that of the Marines or the
    Army. But, for equipment, we're flying our airplanes a lot
    harder and a lot more often than our projections would have
    predicted for us. So, our aircraft are going to wear out. Our
    C-17s are performing magnificently, but we are using them at a
    much greater rate than we had planned. We will have some
    definite aircraft equipment needs down the road.
        Also, in our other types of airplanes, like fighters, we
    need to continue to do some modernization, some small things on
    the airplanes that we have, that will carry us out until we
    have replacement airplanes through our recapitalization
    program. We will have some needs there, as well.
        Senator Graham. Senator Nelson?
        Senator Ben Nelson. Thank you.
        General Bradley, when BRAC realigns or closes a base, there
    can be some disruption to your personnel in that particular
    area. Some choose not to go with the change. Do you have the
    force management tools necessary to deal with BRAC and end
    strength reductions to ensure that your units and personnel
    maintain their mission capacity?
        General Bradley. No, sir, we don't. In the 1990s, when we
    went through base closure actions, we had some tools, such as
    Reserve Transition Assistance Programs, that helped us with
    people who had served us well and faithfully, but just couldn't
    move several thousand miles, or hundreds of miles, to a new
    unit. As you point out, our reservists, when their bases are
    closed or their units are closed--and we're going to close five
    wings in the Air Force Reserve, due to base closure, many
    times, those positions are going to go hundreds or thousands of
    miles away. In the Active Air Force, they'll move those folks.
    We don't move them. People have served us 15 years or more, and
    can't continue. Now, we'll try to assist them to find another
    way to serve. We'll try to accommodate them in the Air Force
    Reserve or the Air National Guard or in the Army. Some people
    just can't continue. The Transition Assistance Program, such as
    the ones that we had in the 1990s, would be very helpful. I'd
    be very glad to provide your staff, if you'd like, some
    specific items that would be particularly helpful, that we had
    in the past.
        [The information referred to follows:]

        Senator Ben Nelson. That would be particularly helpful,
    because, obviously, we have to be prepared for it. So, thank
    you.
        General Bradley. Yes, sir. Thank you for your question.
        Senator Ben Nelson. General Vaughn, part of the
    reorganization of the Army Guard is to replace several of the
    combat brigades with Combat Support Brigades. Can you assure us
    that the personnel assigned to the Combat Support Brigades will
    be properly trained for their new missions?
        General Vaughn. Senator Nelson, as we work through this--
    this gets back to how we're organized, how many brigades--the
    Adjutants General now are involved in a collaborative process
    with the Army to figure out just what that really is. From the
    28 Brigade Combat Teams (BCTs) we talked to, I can tell you
    that those BCTs were a good structure, because they had combat
    support and combat service support sunk in them. They're going
    to be trained. What we have to watch for, and what the
    Adjutants General are going to watch for, is turbulence out
    there, because as you well know, the best thing we can do is
    keep people long-term in the same kinds of jobs. We're engaged,
    and the Army's now engaged with us in figuring out this issue
    that we ran into some 4 or 5 months ago, and we're doing it the
    right way now, collaboratively.
        Senator Ben Nelson. General James, I know the Air National
    Guard has picked up some missions from the Active-Duty Air
    Force. Will you or your successor have the personnel needed for
    the missions if they're reduced by over 14,000 air men and
    women?
        General James. It'll be quite a challenge. Because of the
    new missions we have picked up, we will be challenged. We're
    going to have to look at the missions that we have been asked
    to do, as General Blum asked me to take a look at anything past
    2001 that we've taken on that as additive mission to do in the
    Air National Guard without additive manpower. I think it'll be
    quite a challenge.
        I think the way to approach this, Senator, is instead of
    looking at a bill that was handed to us, we need to look at
    these missions that the Air Force wants us to do, missions that
    they want us to continue in, determine what the manpower
    requirement is going to be for the Air National Guard as a
    whole, and that should be our end strength target.
        I realize that the Air Force has to recapitalize. I realize
    there's a big bill for that. However, what's going to have to
    happen to us if we are forced to take these cuts is that we're
    going to have to start doing less with less.
        Senator Ben Nelson. I think that makes a great deal of
    sense. Thank you.
        Thank you very much, Mr. Chairman. Thank you, everyone, for
    your presentations. I appreciate it.
        Senator Graham. Thank you very much.
        I'm going to follow up on Senator Nelson's question. I've
    been told that if the Air Force Reserve is going to do all the
    things in the Air Guard that's been asked of it, you're going
    to need more people, not fewer. That's just the honest answer,
    isn't it, General James?
        General James. I've had my folks--my planners,
    programmers--run three different scenarios, depending on
    whether we did everything, whether we did X percentage or X
    percentage. Every time, we've come out with a number higher
    than 106,800.
        Senator Graham. I appreciate your testimony. We have to run
    and vote. We got the message. I hope we keep this partnership
    going. It think it's paid dividends for our troops to have a
    good relationship between Congress and the leadership of the
    Guard and Reserves. You represent that leadership, and we're
    proud of you.
        To the people who have served overseas and abroad that were
    identified today, we're very proud of you, and we know you
    represent the best in our country. God bless. Until next time,
    be careful. Be safe.
        Thank you. We are adjourned.
        [Questions for the record with answers supplied follow:]

                Questions Submitted by Senator Lindsey O. Graham

                  end strength for the army reserve components

        1. Senator Graham. Secretary Hall and General Blum, the President's
    fiscal year 2007 budget is consistent with the Quadrennial Defense
    Review's (QDR) recommendation to reduce the Army's Reserve component to
    533,000 personnel by fiscal year 2011 from the currently authorized
    levels of 350,000 in the Army National Guard (ARNG) and 205,000 in the
    Army Reserve. This is a cut of 22,000 across the Future Years Defense
    Plan (FYDP) from the levels currently authorized for the ARNG and Army
    Reserve.
        Please explain the rationale behind the QDR's recommendation to
    reduce the Army Reserve component when we are relying on the ARNG and
    Army Reserve more than anytime in recent memory and we are asking them
    to take on more new missions?
        Mr. Hall. Prior to the 2005 QDR the Army had developed a plan for
    34 combat brigades and 72 support brigades in the ARNG, and 43 combat
    brigades and 75 support brigades in the Active component. This provided
    up to 20 combat brigades for steady state operations. The QDR showed a
    lower requirement for combat brigades but a greater requirement for
    brigades able to respond more immediately to meet homeland defense/
    civil support. Therefore, the Army elected to increase the ARNG
    domestic capability by rebalancing six brigade combat teams (BCTs) and
    one combat aviation brigade to seven support brigades. These brigades
    provide engineering, communications, transportation, logistical,
    chemical, and medical capabilities critical to homeland defense and
    civil support. Modernization, coupled with the civilianization of
    nonmilitary essential functions, resulted in a reduction of military
    manpower requirements, although the total number of brigades remained
    at 106.
        Much has been said about the ARNG being cut, both end strength and
    units. While it is true that the fiscal year 2007 budget submission
    reflects an actual number of troops on board, the Army leadership is on
    record in testimony before the House and Senate that they are committed
    to funding the Guard to the level to which they can recruit, up to
    their congressionally authorized end strength of 350,000. For
    modernization alone, the Army has budgeted approximately $21 billion
    from 2005 to 2011, a four-fold increase over the level of funding for
    equipment modernization from the 1999 period. This organization,
    manning, and funding will permit the ARNG to support the Nation's
    global operations, prevail in the global war on terror, and conduct
    expanded State and homeland security missions.
        General Blum. The reduction in ARNG forces was based on the
    assumption that the United States Army had sufficient land forces to
    sustain the ``Long War.''

        2. Senator Graham. Secretary Hall and General Blum, how were the
    recommendations of the QDR coordinated with The Adjutants General
    (TAGs) and Governors of the States?
        Mr. Hall. I will defer to the Chief of the National Guard Bureau.
    Any QDR coordination would have been provided through the National
    Guard Bureau.
        General Blum. There was initially no coordination with TAGs or
    Governors on the QDR recommendations. Prior to the release of the QDR
    on 30 January 2006, the Secretary of the Army and the Chief of Staff of
    the Army briefed the 54 Adjutants General of the States, Territories,
    and the District of Columbia on the recommendation to reduce the ARNG
    force structure from 34 to 28 BCTs. TAGs of the United States, as a
    corporate body, nonconcurred with the proposal to reduce force
    structure. Subsequently, the Army has incorporated TAGs into a Force
    Structure Steering Committee to work the issue of the 28 BCTs.
    Currently, the Army plans to keep the end strength of the ARNG at
    350,000 and to leave the Force Structure Allowance at 348,000 in fiscal
    year 2008 working toward 342,000 in fiscal year 2011. This General
    Officer Steering Committee reports back to the Governors on the status
    of their deliberations in keeping with the statutory responsibility of
    the Governor to consent and approve of units being withdrawn or changed
    from a State.

        3. Senator Graham. Secretary Hall and General Blum, given the
    tremendous effort of the Army Guard and Reserve and the strain on those
    forces to support combat operations in Afghanistan and Iraq, what
    assumptions did the QDR make that led to a recommendation to reduce the
    size of the ARNG and Army Reserve by 22,000 people?
        Mr. Hall. Prior to the 2005 QDR, the Army had developed a plan for
    34 combat brigades and 72 support brigades in the ARNG and 43 combat
    brigades and 75 support brigades in the Active component. This provided
    up to 20 combat brigades for steady state operations. The QDR showed a
    lower requirement for combat brigades but a greater requirement for
    brigades able to respond more immediately to meet homeland defense/
    civil support. Therefore, the Army elected to increase the ARNG
    domestic capability by rebalancing six BCTs and one combat aviation
    brigade to seven support brigades. These brigades provide engineering,
    communications, transportation, logistical, chemical, and medical
    capabilities critical to homeland defense and civil support.
    Modernization, coupled with the civilianization of nonmilitary
    essential functions, resulted in a reduction of military manpower
    requirements, not people, while at the same time maintaining the total
    number of brigades at 106.
        The Army will resource the troop strength of all three components
    to their actual strengths. Resourcing troop levels at their actual
    strength, combined with force rebalancing efforts, will provide our
    Nation and its Governors with the necessary resources to accomplish
    their homeland defense requirements as well as our worldwide
    operational needs.
        General Blum. The reduction in Reserve component forces was based
    on the assumption that the United States Army had sufficient land
    forces to sustain the ``Long War.''

                 budget cuts impacting the army national guard
        4. Senator Graham. General Blum, in addition to the QDR, the ARNG
    was also impacted by budget decisions that were made late in 2005. How
    did budget decisions impact the National Guard force structure,
    including its personnel end strength levels?
        General Blum. While the President's budget was sent to Congress
    proposing an ARNG end strength of 332,900, that request was
    subsequently revised to 350,000. The future structure of the force will
    be determined through a collaborative process involving the Army, the
    National Guard Bureau, and the State TAGs.

        5. Senator Graham. General Blum, how does the Department of Defense
    (DOD) intend to address the funding levels for the ARNG and Army
    Reserve given recent statements by the Army's leadership that end
    strength levels will be maintained, and that the Army will fund the
    National Guard and Army Reserve based on its success in recruiting up
    to their authorized end strengths, and that the Army will fund to fully
    equip the Guard and Reserve Force structure?
        General Blum. The Army is committed to funding the ARNG up to the
    350,000 strength level in fiscal year 2007 and is in the process of
    identifying sources to meet this commitment. Efforts are ongoing
    regarding the equipment/investment (procurement) restoral and the total
    dollar amount depends on the final outcome of force structure
    adjustments.

                    end strength for the air national guard
        6. Senator Graham. Secretary Hall and General Blum, following
    recommendations made in the QDR, the President's budget for fiscal year
    2007 begins the process of reducing Air Force manpower by 40,000 full-
    time equivalents across the Total Force. In order to achieve a cut of
    5,000 full-time equivalents from its Reserve components, the Air Force
    will have to cut over 22,000 Air National Guard (ANG) and Air Force
    Reserve positions over the FYDP. The cuts are expected to start in
    fiscal year 2008. These cuts are about 12 percent of the Air Force
    Reserve component force structure.
        How can the Air Force cut so much of its Reserve component force
    structure given the demands we have seen during operations in
    Afghanistan and Iraq?
        Mr. Hall. The reduction of Air Force manpower is based on the
    restructuring/reorganizing centered around 86 combat wings. It
    leverages reachback capabilities and minimizes the forward footprint.
    The balanced reductions across the force--Active component, ANG, Air
    Force Reserve, and civilians--are facilitated by modernization and a
    reduction of aircraft. The Air Force proposal streamlines organizations
    to a smaller, more agile force and transforms its organizational
    structures with an increased emphasis on supporting the warfighter.
    This includes, but is not limited to, completing and aligning the Air
    Force's Warfighting Headquarters transformation in order to support the
    combatant commanders (CCDRs) and Joint Task Forces (JTFs). These
    organizational restructuring actions will result in a more streamlined
    structure with an enhanced ability to employ air, space, and cyberspace
    power in support of CCDRs and JTFs. Eliminating redundancies and
    streamlining organizations will make it possible to field a more
    capable force of military, civilians, and contractors while freeing up
    resources for recapitalizion.
        General Blum. The ANG understands the compelling issues behind the
    Air Force's need to modernize and recapitalize the Total Air Force.
    Accomplishing this task in today's budgetary environment, operating
    efficiencies will have to be found through rebalancing among
    components, reducing redundancies and inefficient business practices,
    and maybe targeted end strength reductions.
        We also agree the Reserve components are in demand more than ever.
    In fact, our figures show the ANG commitment has more than tripled
    since 1991. This level of commitment, combined with the increased
    demand of the new and emerging mission areas, has forced us to review
    all of our programs to ensure we continue to provide trained units and
    qualified persons available to support the Air Force in its mission to
    deliver sovereign options for the defense of the United States and its
    global interests--to fly and fight in air, space, and cyberspace.
    Additionally, we consider it our duty to make sure the Air Force
    understands our dual responsibility to provide trained and equipped
    units to protect life and property and to preserve peace, order, and
    public safety within the State or territory.
        General Moseley has asked the Air Reserve components to look
    internally to locate efficiencies and assist the Air Force in meeting
    its goal. As we do so, I've instructed the ANG to follow these guiding
    principles:
    Guiding Principles
             Flying mission in every State
             Proportionality--share skill sets
             Retain surge capability with approximately 60 percent
            part-time, ``Traditional''
             Maintain regional capability in support of disaster
            response
             Priority to dual-use (Federal and State) capability,
            weigh against ``how much capability is enough?''

        7. Senator Graham. Secretary Hall and General Blum, will personnel
    cuts of this size require disestablishment of squadrons and other
    units?
        Mr. Hall. Air Force transformation will allow for a more capable,
    but smaller Air Force. There will be increases in joint enablers and
    networked and integrated systems. At this time, there are only a few
    units that have been identified to be disestablished as the Air Force
    transforms. Most of the restructuring is taking place within existing
    units. Many of the units will simply convert to a new structure, an
    associate unit concept. Associate units merge Active and Reserve
    component assets into one organization. This allows for superior
    capabilities, with generally more experienced Reserve component airmen
    working side-by-side with their Active component counterparts, flying
    better aircraft armed with improved precision-guided munitions. This
    allows for a reduction in end strength with a comparatively small
    corresponding disestablishment of units.
        General Blum. Our analysis of the proposed cuts is not complete. We
    are still attempting to determine how best we can pay the bill. In
    other words, will we use manpower, mission divestment, or a combination
    of both? In every previous round of cuts to the Active component there
    has been an increase of requirements and commitment required by the
    Reserve component. Additionally, the capabilities required of the ANG,
    as well as the Total Force, combined with new and emergent needs in
    homeland defense/civil support lead us to believe a slightly larger ANG
    may be required in the future.

        8. Senator Graham. Secretary Hall and General Blum, have such
    reductions been worked out with TAGs and Governors of the States
    involved?
        Mr. Hall. I will defer to the Chief of the National Guard Bureau.
    since coordination of such reductions with the States would have been
    accomplished through the National Guard Bureau as the channel of
    communication between the Air Force and the States.
        General Blum. No, the reductions have not been worked out with the
    TAGs. As already stated, we are still investigating how best we can pay
    the bill. The National Guard Bureau informed the TAGs of the contents
    of PBD 720 during the January 30 TAG meeting and we will continue to
    keep them involved as we analyze this issue.

        9. Senator Graham. Secretary Hall and General Blum, given the
    growth of missions assigned to the Reserve components, including
    homeland defense and support of homeland security, as well as growth in
    non-traditional missions for the Air Force in support of the Army and
    Marine Corps in civil affairs, ground-based logistics, force
    protection, and military police, do such large cuts in personnel mean
    that some missions of the Air Force Reserve components will be reduced
    or eliminated and if so, which missions and functions are being cut?
        Mr. Hall. While working in partnership with the ANG and the Air
    Force Reserve, the Air Force will become a numerically smaller, yet a
    more capable force through modernization and recapitalization of
    selected weapons systems. This effort will enable the Air Force to meet
    the challenges of a shrinking budget, and an aging aircraft inventory
    as well as to leverage emerging missions. The goal is to improve
    operating efficiencies, reduce redundancies and inefficient business
    practices, as well as target end strength reductions. In order to
    ensure correct actions are implemented, a comprehensive process that
    includes collaboration with all stakeholders is underway. The plan for
    the Total Force integration will guide the decisions made so that
    implementation can begin. These efforts will be carried out over the
    next 12 months. At this time, there are only a few units that have been
    identified to be disestablished. Many of the units will convert to a
    new structure, an associate unit concept--Active and Reserve component
    assets merging into one organization. One example is the initiative at
    Langley Air Force Base where the Virginia Air National Guard's 192nd
    Fighter Wing will fly the F/A-22 at the same time as the active duty in
    an associate unit arrangement with the 1st Fighter Wing. In addition,
    the Reserves will see a growth in emerging missions such as unmanned
    aerial vehicles. As the Air Force transforms from a Cold War force
    posture to a structure that supports expeditionary warfare, more
    efficient use of the ANG and the Air Force Reserve assets will enhance
    flexibility and the capacity to be a more agile and lethal combat
    force, and a more vigilant homeland defender.
        General Blum. Our analysis of the proposed cuts is not complete. We
    are still attempting to determine how best we can pay the bill. In
    other words, will we use manpower, mission divestment, or a combination
    of both.

           guard and reserve rotation policy and strain on the force
        10. Senator Graham. Secretary Hall and General Blum, we are now
    more than 4 years beyond September 11 and the Guard and Reserve have
    been on a wartime footing for this entire period. Could you please give
    me a snapshot of recruiting and retention?
        Mr. Hall. Recruiting Results: In a very challenging recruiting
    environment, the DOD Reserve components' cumulative achievement of
    recruiting objectives has declined over the past 3 years from 105
    percent in fiscal year 2002, to 98 percent in fiscal year 2003, to 96
    percent in fiscal year 2004, to 85 percent in fiscal year 2005, with
    only two of the six DOD Reserve components, the Marine Corps Reserve
    and the Air Force Reserve, achieving or exceeding their recruiting
    objectives each year. The most significant shortfalls have been in the
    ARNG, and most recently in the Army Reserve. In fiscal year 2005, only
    two components met their goals--the Marine Corps Reserve and the Air
    Force Reserve. We expected that fiscal year 2006 would continue to be
    challenging for Reserve recruiting, particularly in the Reserve
    components of the Army, but many initiatives have been undertaken to
    mitigate the challenges. As of the end of March 2006, three of the six
    Reserve components met or exceeded their accession goals and a fourth
    is within acceptable limits. Both Reserve components of the Army are in
    this successful group. Some of the Reserve components have not met the
    Department's goals for high school graduates and mental groups I-III;
    however, recent efforts appear to have reversed that trend.
        Retention: The requirements to support the global war on terror,
    particularly our commitment in Iraq, have placed a strain on the
    Reserve Force. Nonetheless, measuring those who reenlist at the
    completion of their current contract, we find that reenlistments were
    higher (by more than 2,000) in fiscal year 2005 than they were in
    fiscal year 2004, up from 95.5 percent of goal in fiscal year 2004 to
    100.1 percent of goal in fiscal year 2005. Reenlistments have exhibited
    a positive trend since fiscal year 2002, and indications are that it
    will continue through fiscal year 2006. Additionally, we believe the
    best measure of Reserve component continuation is attrition, and
    overall attrition rates remain near historically (last 15 years) low
    levels. Enlisted attrition through February 2006 is generally lower
    than the same period reported last year and in the base year of fiscal
    year 2000. We expect that attrition rates will continue at these low
    levels, including those members who have been mobilized and deployed to
    support operations in Iraq and Afghanistan.
        General Blum. As I stated in my verbal testimony, I recognize that
    both the Army and the ANG face recruiting and retention challenges.
    However, I also believe that with the current incentives in the form of
    bonuses and additional duty pay that has been authorized by Congress
    recently, both recruiting and retention have met, will continue to
    meet, and possibly even exceed, expectations.

        11. Senator Graham. Secretary Hall and General Blum, as a
    percentage, how much of the ARNG and Army Selected Reserve has deployed
    in support of combat operations in Afghanistan and Iraq?
        Mr. Hall. Between September 11, 2001, and February 28, 2006, 29.8
    percent of the members who served in the ARNG during that period were
    deployed to areas that warrant receipt of Imminent Danger Pay and/or
    the Combat Zone Tax Exclusion benefit. Similarly, during that same time
    period, 29.6 percent of the members who served in the Selected Reserve
    of the Army Reserve deployed to those zones that warrant receipt of
    Imminent Danger Pay and/or the Combat Zone Tax Exclusion benefit.
        Today, 8.5 percent of the members serving in the ARNG, and 7.4
    percent of the members serving in the Selected Reserve of the Army
    Reserve, are currently deployed to these regions.
        General Blum. 32 percent of the ARNG and 29 percent of the Army
    Selected Reserve have been deployed in support of combat operations in
    Afghanistan and Iraq.

        12. Senator Graham. Secretary Hall and General Blum, in terms of a
    number by component, how many people have deployed?
        Mr. Hall. Between September 11, 2001, and February 28, 2006, a
    total of 361,274 Reserve component members have been deployed outside
    the continental United States to areas that warrant receipt of Imminent
    Danger Pay and/or the Combat Zone Tax Exclusion benefit. There are
    53,430 Reserve component members who are currently deployed to these
    regions. The chart below provides the breakout of the deployed Reserve
    members by component.

    ------------------------------------------------------------------------
                                                             Total Number of
                                           Total Number of       Members
                                            Members Ever        Currently
                                          Deployed  (since  Deployed  (2-28-
                                              9-11-01)             06)
    ------------------------------------------------------------------------
    Army National Guard.................           156,067            28,568
    Army Reserve........................            91,097            13,778
    Navy Reserve........................            18,102             3,265
    Marine Corps Reserve................            49,323             3,110
    Air National Guard..................            27,903             2,105
    Air Force Reserve...................            18,782             2,604
                                         -----------------------------------
      Total DOD Reserve Components......           361,274            53,430
    ------------------------------------------------------------------------

        General Blum. Since September 2001 approximately 170,000 individual
    ARNG soldiers and more than 50,000 ANG personnel have been deployed one
    or more times.

        13. Senator Graham. Secretary Hall and General Blum, how is the 24-
    cumulative-month limit on involuntary recall impacting units and
    individuals in the Guard and Reserve who have high-demand skills?
        Mr. Hall. The Department's implementation of the partial
    mobilization authority is more restrictive than the law by limiting the
    period of involuntary mobilization for this contingency to 24
    cumulative months rather that the 24 consecutive months authorized by
    law. This protects individuals with high demand skills, and low
    density/high demand units, from being overused involuntarily. The 24-
    cumulative-month policy was carefully crafted to help ensure prudent
    and judicious use of Reserve component members, thereby supporting the
    Department's ability to sustain a robust Reserve component force. To
    address the problem of high demand units and skills, the Services are
    rebalancing and the Department is using other mitigation strategies
    such as using joint solutions and in-lieu-of forces to meet operational
    requirements. The Department's policy protects against repeated,
    extended periods of involuntary activation which would more than likely
    have a detrimental effect on the retention of Guard and Reserve members
    and would probably undermine support from families and employers of
    Reserve component members.
        General Blum. Yes, the 24-cumulative-month limit does have an
    impact on both units and individuals who have high-demand skills;
    however, again, thanks to Congress, there are a number of bonuses and
    incentives available that encourage volunteers to fill these units,
    thus ensuring that we are able to continue to meet the mission
    requirements.

        14. Senator Graham. Secretary Hall and General Blum, how are we
    going to be able to keep up our commitments without breaking the force?
        Mr. Hall. Through careful management of the force, the Department
    and the Services will continue to transform and meet the demands of our
    combatant commanders. From fiscal year 2004 to fiscal year 2005, the
    Services rebalanced about 70,000 spaces of structure in low demand into
    structure that is in high demand. They have plans to rebalance about
    55,000 additional spaces from fiscal year 2006 to fiscal year 2011. At
    the same time, many of our members are volunteering to serve on Active-
    Duty. Providing more members in these high demand skills and the use of
    volunteers, helps us meet our commitments while reducing stress on the
    force. There are a number of other initiatives that seek to enhance our
    ability to meet our commitments while reducing stress on the force.
    These initiatives include technology insertions, organizational
    changes, use of civilians, reachback operations, and other initiatives
    that will allow for a continuum of service for our Total Force. Taken
    together, this suite of initiatives, coupled with careful force
    management practices, should allow us to continue to meet the combatant
    commanders' requirements in the long war on terrorism while
    transforming to meet the threats of the future.
        General Blum. We are thankful of the commitment and sacrifices that
    our men and women in the National Guard and all Reserve components have
    made to fight the global war on terrorism. We also know that we have to
    continue to do all we can to compensate our National Guard members with
    the entitlements and benefits which reflect their level of service. We
    appreciate the congressional support for all the benefits which have
    been provided to our National Guard and Reserve members during the last
    several National Defense Authorization Acts (NDAAs). Now we need to
    focus on the actual delivery system to provide all these benefits to
    our members. Some of the benefits such as TRICARE Reserve Select (TRS)
    and Income Replacement are complex and will require dedicated effort to
    ensure all eligible members are aware of the new benefits and can
    participate as they choose.

                  commission on the national guard and reserve
        15. Senator Graham. Secretary Hall, General Blum, General Vaughn,
    General James, General Helmly, Admiral Cotton, General Bergman, and
    General Bradley, the congressionally chartered Commission on the
    National Guard and Reserve began hearings this month focusing on a
    broad range of issues, including the future roles and missions of the
    Guard and Reserve, rotation policies, training, equipping,
    compensation, and benefits. The Commission is required to provide
    Congress with an interim report within 90 days of its first meeting,
    which will be in June. What issues have you highlighted for the
    Commission?
        Mr. Hall. The overarching issue has been the transition from a
    strategic reserve to an operational reserve. All aspects of this
    transition from training, recruiting/retention, equipment, facilities,
    readiness, and mobilization have been discussed. Limiting mobilization
    periods to not more than 12 months every 6 years has been highlighted.
    The more than 120 provisions in law over the past 2 years passed by
    Congress have improved the Reserve component capability in the global
    war on terror. Military OneSource and over 700 family support centers
    have benefited Reserve component members and their families. All
    aspects of TRICARE for reservists have been discussed.
        General Blum. I have not testified to the Commission.
        General Vaughn. As of today I have not formally highlighted any
    issues for the Commission.
        General James. The ANG fully supports the important work underway
    by the Commission on the National Guard and Reserve. Our hope is the
    Commission will focus on such issues as the role of the ANG in homeland
    defense and civil support, the legislative challenges posed by U.S.C.
    title 10/32 in today's environment, the future roles and missions of
    the ANG.
        General Helmly. Today's Army Reserve is no longer a strategic
    reserve; it is a complementary, operational force undergoing the
    largest change in its history. The Army Reserve is an integral part of
    the United States Army, providing combat support and combat service
    support to the joint force. Major issues for the Army Reserve are:
    delineating roles and missions for a Federal Reserve Force; recruiting
    quality soldiers; developing a cyclic rotation plan to provide a
    sustainable pool of ready units; focusing training on preparing Army
    Reserve soldiers for Active Service; personnel compensation and
    benefits; equipment availability and readiness; and reducing support
    structure to increase readiness of deployable units. These changes are
    necessary to sustain the Army Reserve's relevancy to the National
    Defense Strategy.
        Admiral Cotton. In a request for a written response to the
    Commission, Navy Reserve highlighted the following issues:
    Recruiting and Retention:
    a. Expand the Army Guard pilot program that offers a recruiting
            referral bonus of $1,000 to all Services.
    b. Provide TRS for all reservists performing operational support.
    c. Enhance Navy Reserve medical readiness.
    d. Improve recruiting and retention incentives by indexing the
            Montgomery G.I. Bill--Selected Reserve (MGIBSR) to the Active
            component MGIB rate.
    Structural Enhancements:
    a. Simplify Selected Reserve orders to two types: Inactive-Duty (for
            training) and Active-Duty (for work).
    b. Allow Reserve component personnel to attain and retain Joint Service
            Officer qualifications.
    c. Apply NDAA for Fiscal Year 2005 rules to enable Reserve component
            flag officers to serve greater than 179 days on active duty to
            accommodate global war on terror operational support, Joint
            Service, and Joint Professional Military Education
            requirements.
    d. Authorize full time support reservists, Active Guard and Reserve,
            and technicians to perform any mission deemed appropriate by
            the Service Secretary.
    e. Change current Reserve flag officer designator limits to enable more
            flexibility in meeting operational support requirements.
    f. Remove limits on moving funds between budget activity accounts.

        General Bergman. The Marine Corps has identified several issues for
    the Commission on the National Guard and Reserve. Our main concern is
    the policy regarding one mobilization and volunteerism for subsequent
    mobilizations. The policy has adversely impacted the Marine Corps
    because it puts the onus for deploying service capabilities on the back
    of the individual marine and sailor. Family and employers know the
    marine's second activation is voluntary. Additionally, the policy
    creates a morale problem in deploying units. An emotional wedge is
    driven between the marines that volunteer for reactivation and those
    that do not. Finally, the policy disrupts unit cohesion and limits unit
    training prior to activation, while earlier activation for training
    uses cumulative activation time. The Marine Corps recommends changing
    the policy to authorize involuntary activations for up to the full 24
    months, even with prior activation; including recall of the Individual
    Ready Reserve.
        The Assistant Commandant for the Marine Corps testified before the
    Commission on March 15, 2006. A number of issues were also highlighted
    that centered on the need to maintain readiness, take care of our
    marines and their families, and posture the Corps to meet future
    national security requirements. These include the continuing need for
    the Selected Reserve Officer Affiliation Bonus to aid recruiting and
    retention efforts; possible changes in legislation to address the
    increasingly unsustainable cost of health care; optimizing Active and
    Reserve capabilities to mitigate unit and personnel operational tempo
    and support irregular warfare; providing adequate resources to conduct
    predeployment training and enhanced training in support of irregular
    warfare; higher than planned equipment utilization rates affecting
    equipment readiness and availability for predeployment training and
    employment in theater; and the challenge of resetting our ground and
    aviation forces which is additive to the ongoing cost of war
    requirement and requires continued supplemental funding.
        General Bradley. Formally to this point in time, we have provided
    inputs only to the Vice Chief of Staff for the Air Force for his
    testimony before the Commission on March 9 and to the Assistant
    Secretary of the Air Force for Manpower and Reserve Affairs in
    developing a paper on the Operational Reserve. I will testify before
    the Commission in July.
        Informally, when the Commission was being formed, my staff provided
    the Commission's staff with issues for consideration during their
    review. These included the following:

             Define strategic and operational missions as they
            apply to the Reserve components.
             Define what percentage of the contributions the
            Reserve components should provide but consider the needs of
            each Service as being different.
             Examine the degree to which the Reserve components
            should train versus provide operational support.
             Examine the Abram's Doctrine and discuss if it is
            still relevant, should it be updated, should it be scrapped and
            replaced with a new doctrine.
             Are the current accessibility statutes adequate to
            meet global war on terror and the new steady state
            requirements.
             What can be done to improve employer support of the
            Reserve components.

        16. Senator Graham. Secretary Hall, General Blum, General Vaughn,
    General James, General Helmly, Admiral Cotton, General Bergman, and
    General Bradley, what would you want to have the Commission take on as
    the top priorities in its 90-day interim report?
        Mr. Hall. Transformation from a strategic to an operational Reserve
    in all Service branches is the top priority and with it comes issues in
    manpower and personnel, materiel and facilities, financial resources,
    readiness, training, and mobilization. A recommendation from the
    Commission could be most beneficial.
        General Blum. The National Guard shifted from being primarily a
    strategic reserve to an operational force. This means that we see more
    frequent calls to Active-Duty than in decades past and that we provide
    a much more accessible operational depth than the Total Force. The
    Commission's views on the all around impact of this shift should be
    valuable.
        Additionally, the heightened domestic security environment since
    September 11, 2001, and the experience of Hurricane Katrina have all
    underscored the importance of the National Guard as a force readily
    available to respond to State Governors. Consequently, it will be
    helpful to hear the Commission's ideas on ways to improve integration
    of the National Guard into America's emergency response capabilities,
    particularly into the joint provision of defense support to civil
    authorities without degrading our readiness to mobilize and deploy for
    combat overseas.
        General Vaughn. For the interim report I would want only that the
    Commission acknowledge the scope and importance of the issues facing
    the Reserve component and formulate a plan to examine those challenges
    in detail in their final report.
        General James. The most important issues in today's environment are
    the future roles and missions of the ANG. What is the appropriate full-
    time/part-time mix, and what is the role in homeland defense and civil
    support.
        General Helmly. The Army Reserve recommends the following as top
    priorities.

              (1) Expedite the review of the roles and missions of the
            National Guard versus the Federal forces in the DOD, in order
            to begin required restructuring as soon as is fiscally prudent.
            In addition, recommend that as the Army Reserve continues to
            streamline its command and control structure, it be permitted
            to reinvest the savings in personnel and other resources back
            into its operational force to increase readiness.
              (2) That the Commission validate the unique capabilities of
            the Army Reserve in achieving the national security objective
            of establishing security conditions conducive to a favorable
            international order through its competencies in civil affairs,
            medical, engineer, etc. That the Army Reserve functions in a
            complementary domestic support role and validate their mission
            and force structure as having a lead DOD role in stability,
            security, transition, and reconstruction operations (SSTRO).
              (3) That the Commission evaluate the cost-effectiveness of
            expanding the military's funding, recognition, and use of
            civilian education and certifications to reduce military
            training time for our soldiers while enhancing capabilities in
            their military and civilian jobs. Recognition of skills and
            education acquired through civilian institutions could decrease
            time required for military training, as well as provide
            recruiting and retention incentive.
              Legislation. Recommend a review of policies such as
            mobilization for training (MFT), so the Army Reserve has
            maximum flexibility in methods of bringing soldiers onto active
            duty, for training. Further that the Commission review past
            resourcing paradigms (12 monthly drills/14 days annual
            training) and support increases in annual training days to
            realize the operational role of the Army Reserve and the
            current Train-Alert-Deploy processes of today.
              (4) Provide congressional support for the Army Force
            Generation (ARFORGEN) readiness model, in order to provide
            stability and predictability for soldiers and employers, while
            improving recruiting and retention. Study service equipment
            distribution patterns and methodologies, in order to leverage
            joint and component capabilities, and improve readiness across
            DOD.
              Legislation. Revise policy, so that the Army Reserve is able
            to mobilize soldiers in high demand/low density (HD/LD)
            military occupational specialties (MOSs) for a second time for
            up to 24 months of component chiefs to shift funds among the
            programs and appropriations to meet year of execution
            realities. The Army Reserve has proven to be a very cost-
            effective force. Funds should be increased to maximize the
            significant return on investment produced by the Army Reserve
            in global war on terrorism.

        Admiral Cotton. Our top priorities are: expanding the Army pilot
    program that offers a recruiting referral bonus of $1,000 to all
    Services, providing TRS for all reservists performing operational
    support, enhancing Navy Reserve medical readiness, and simplifying
    Selected Reserve orders to two types: Inactive-Duty (for training) and
    Active-Duty (for work).
        General Bergman. All the issues outlined in our response to
    question 15 are priorities; however, achieving successful outcomes
    hinge on one overarching priority: adequately resourcing the Marine
    Corps Reserve to facilitate sustained support to the war on terrorism
    at an acceptable level of risk.
        General Bradley. Priorities that warrant your attention:

              1) Policies and legislation that enhance, enable, and protect
            volunteerism to minimize the need for mobilization in order to
            support steady-state daily operations.
              2) A review of the number of duty statuses required to move
            reservists on and off of Active-Duty status and between Service
            components.
              3) Align force development between Reserve and regular
            components ensuring equal professional/career development
            opportunities (one standard for all components).
              4) A review, and possible revision, of the definitions for
            strategic reserve and operational reserve.

                         presidential recall authority
        17. Senator Graham. Secretary Hall and General Blum, I understand
    the DOD is requesting a change in the presidential recall authority--
    that authority to involuntarily recall the Guard and Selected Reserve
    to Active-Duty in times other than during war or national emergency.
    The intent is to expand the time for such a recall from 270 to 365
    days. Please explain why this expansion of authority is needed,
    particularly now when Guard and Reserve Forces can already be
    involuntarily recalled to Active-Duty because we are in a period of
    national emergency?
        Mr. Hall. The Total Force has changed significantly over the past 2
    decades, with the Reserve components becoming integral to conducting
    military operations. Certain capabilities are appropriately assigned to
    the Reserve components and there have been a number of operations for
    which the President has used the Reserve Call-up Authority to meet
    emerging operational demands. These include operations in Haiti,
    Bosnia, Kosovo, and Southwest Asia. Although the President declared a
    national emergency following the terrorist attacks on September 11 and
    authorized the Department to use the partial mobilization authority for
    the global war on terror, there will be operations in the future that
    will not require the declaration of war or a national emergency, but
    will, nonetheless, require the employment of the Reserve components to
    support the operation. In assessing the optimal troop rotation under
    its force generation model, the Army has found that the 270 day limit
    under the Presidential Reserve Call-up Authority is not sufficient to
    complete pre-deployment training, a 6-month deployment, and all post-
    deployment screening and processing. Increasing the maximum
    Presidential Reserve Call-up Authority to 365 days will provide
    sufficient time to complete the entire deployment cycle without having
    to create ``work-arounds,'' which typically are disruptive for
    reservists, their families, and their civilian employers. This will
    provide members with greater certainty with respect to operational
    rotations and periods of Active-Duty, as well as provide sufficient
    time to build the necessary level of unit cohesion for deploying units.
        General Blum. As I stated in my verbal testimony on 30 March 2006,
    I support expanding the Presidential Reserve Call-up to 365 days as it
    allows more flexibility for commanders in all phases of a mobilization.

        18. Senator Graham. Secretary Hall and General Blum, I also
    understand the DOD wants to expand this authority to include the
    ability to execute such recalls in response to a natural disaster, in
    addition to the current authority to recall in situations involving a
    weapons of mass destruction (WMD) attack or a terrorist attack. Please
    explain the expansion of recall authority the DOD plans to request.
        Mr. Hall. The Department is requesting that the Presidential
    Reserve Call-up Authority be expanded to allow Selected Reserve members
    of the Army Reserve, Navy Reserve, Marine Corps Reserve, and Air Force
    Reserve to be called to active duty in response to a natural or manmade
    disaster, accident, or catastrophe. In most circumstances, the Governor
    of an affected State will use his or her resources, including the
    National Guard, to deal with the aftermath of hurricanes, floods,
    tornadoes, wildfires, and similar disasters. However, the recent
    devastating effect of Hurricane Katrina demonstrated that there may be
    occasions when a Governor may need Federal assistance and makes such a
    request. Many of the capabilities within the Defense Department that
    could be useful in responding to these types of catastrophes are in the
    Army Reserve, Navy Reserve, Marine Corps Reserve, and Air Force
    Reserve. Such capabilities include search and rescue, water
    purification units, construction battalions, and others. While
    reservists may volunteer to assist, there is no assurance that all the
    personnel in the types of units that may be needed will volunteer. The
    Department believes it would be prudent to be able to have access to
    all available forces, including those in the Reserves, if there are
    capabilities that those forces can provide to assist the Governor in
    coping with a disaster. This expansion of authority is not intended to
    replace the National Guard's role in responding to the call of a
    Governor in anticipation of or in the aftermath of a disaster, but
    merely compliments National Guard capabilities that may occasionally
    require augmentation with other DOD assets.
        General Blum. The expansion of recall authority is not intended to
    replace the Governor's flexibility to incorporate their National
    Guard's role in responding to the aftermath of a disaster, but merely
    compliments National Guard capabilities that may occasionally require
    augmentation with other DOD assets. The Governor of an affected State
    will use his or her resources, including the National Guard, to deal
    with most types of catastrophic events. If and when the Governor of the
    affected State feels internal assets have been overwhelmed by the
    incident, he or she can then request Federal assistance. This outside
    assistance may come from capabilities within the Defense Department
    that could be useful in responding to these types of catastrophes. When
    these additional resources are called upon, it would be beneficial to
    the relief effort to have Selected Reserve members be called to Active-
    Duty in response to natural disasters as well as terrorist attacks
    involving WMD.

            national guard and reserve support to civil authorities
        19. Senator Graham. Secretary Hall and General Blum, Hurricanes
    Katrina and Rita have focused national attention on the Guard and
    Reserve's role in responding to major national disasters. There has
    been a lot of talk about putting the National Guard in the lead,
    whether the Guard ought to be put in Federal status quickly, or whether
    the Governors ought to continue to take the lead with the Guard in
    State status. There is an ongoing debate about how to achieve ``unity
    of effort,'' meaning everyone is working for the same objective, and
    whether that requires ``unity of command,'' meaning everyone working in
    the same status for one boss. What do you think we have learned from
    Hurricane Katrina and Hurricane Rita?
        Mr. Hall. The military focuses on achieving maximum operational
    effectiveness. To do this, they attempt to achieve at least two things:
    unity of command and unity of effort. The Constitution of the United
    States was not written to support maximum effectiveness in military
    operations. The Constitution was written to establish a Federal system
    of government and that means that, at the beginning of a domestic
    military mission, the Governors, pursuant to their authorities under
    the Constitution, will have command and control of their State National
    Guard forces. The President and the Secretary of Defense, under Article
    II of the Constitution, will command the Federal forces. So, we begin
    any domestic mission with a breach in the principle of unity of
    command. The way in which that breach is addressed in a crisis
    circumstance is through the Federalization of the Guard, combined with
    an invocation of the Insurrection Act by the President.
        In the case of Hurricane Katrina, we respected the normal
    constitutional paradigm and insisted upon close coordination among
    those forces. Throughout the course of the execution of the mission,
    the Secretary of Defense was in daily contact with General Honore and
    Admiral Keating to ask how that coordinating relationship was working
    with the National Guard. General Honore gave repeated assurances that
    the relationship was working well; that he and General Landreneau had a
    good relationship, and, although there was not technically unity of
    command, there was unity of effort.
        If that relationship had broken down, the Secretary of Defense
    would have known about it immediately and an appropriate recommendation
    could have been made to the President. But, in light of the assurances
    that that relationship was working, achieving unity of command, one
    person in charge, stripping the Governor involuntarily of her command
    and control was not the right course of action.
        What we have learned from Hurricanes Katrina and Rita is that the
    constitutional separation of Federal and State authorities is still
    valid today and that close coordination between State and Federal
    military forces is essential for unity of effort.
        General Blum. Hurricanes Katrina and Rita taught us, first, that
    unity of effort can be achieved without the formal ``unity of command''
    defined above as everyone working in the same status for the same boss.
    Unity of effort is best achieved by shared goals and shared operational
    picture, maximizing the utility of the particular capabilities of each
    component of the total DOD force, and mitigating each component's
    restrictions of action and capability through coordination and
    information sharing among title 10 forces, title 32 forces, and/or
    State Active-Duty Forces. In catastrophic situations, the nature of the
    mission should drive a determination of the best command and control,
    whether parallel or single. For Tier III major disaster events such as
    Hurricanes Rita and Katrina, when the specific capabilities and legal
    constraints of both Federal and non-Federal forces must be considered,
    placing all available forces into a fully-federalized title 10 model
    would provide less overall response capability, as National Guard
    Forces formerly under control of the Governor(s) become subject to the
    same legal constraints as their Active-Duty Federal counterparts.
        We learned that without proper coordination within DOD and between
    other government agencies duplication of effort and lack of information
    sharing inhibit a swift and fully effective response. We are looking at
    various command, control, and communications architects that are best
    suited for the unique challenges of integrating and unifying title 10
    and title 32 forces to conduct homeland security missions whether they
    are in response to a natural disaster or another threat.

        20. Senator Graham. Secretary Hall and General Blum, what does this
    mean for the way the Guard is organized, trained, and equipped?
        Mr. Hall. The National Guard has a multifaceted role in Homeland
    America. As evident by our recent glut of hurricanes in the Gulf Coast,
    wildfires in the west, and floods in the northeast, the National Guard
    is a crucial element in a Governor's response to natural disasters. The
    National Guard will also play a prominent role in supporting local and
    State authorities in their efforts to manage the consequences of a
    domestic terrorist attack.
        There has been no change in our national strategy to justify the
    need to establish a separate role for the National Guard under which it
    only performs homeland security related missions. Thus, there is no
    need to make major adjustments in how our National Guard is organized,
    trained, and equipped. What changes are necessary should simply be on
    the margins. There are already sufficient legal mechanisms in place
    that enable State and territorial Governors to employ their National
    Guard forces in support of local authorities to meet a wide range of
    existing homeland security missions. Likewise, the Department does not
    envision requesting legislative relief for existing Posse Comitatus
    restrictions on the domestic use of Federal troops.
        The National Guard remains an integral part of the Air Force and
    Army total force mission capability, both overseas and here at home.
    Their roles are vital to the survival of the Nation.
        General Blum. When you speak of the way the National Guard is
    organized, trained, and equipped, you are really speaking of a
    capability and you must remember this capability comes from three
    things--having people organized in the correct units, having people in
    those units who are trained, and having the proper equipment in the
    hands of these trained people. If either the people aren't there or the
    training is not there or the equipment is not there, the capability is
    not there. This capability enables National Guard units to support the
    overseas warfight as well as protecting our citizens at home. In the
    case of homeland security and homeland defense, National Guard
    readiness is rooted in the essential capabilities which we strive to
    maintain in our States and territories. These capabilities are
    aviation, engineering, civil support teams, security forces, medical
    forces, transportation, maintenance, logistics, and command and control
    (which is really coordination and communication as applied to joint
    interagency efforts in the U.S). National Guard organizations must
    continue to transform in order to maintain our status as a fully
    operational Reserve of the Army and Air Force, while at the same time
    increasing our ability to respond to terrorist attack or natural
    disaster at home. The Guard has been well-equipped for its overseas
    missions, but the response to Hurricanes Katrina and Rita revealed
    serious shortcomings in the equipping of Guard units for homeland
    security and defense missions. Guard units returning from the overseas
    warfight retained an average of less than 35 percent of the equipment
    with which they deployed, leaving them far less capable of meeting
    training requirements, or more importantly, fulfilling their missions
    here at home. The majority of this missing equipment represents
    satellite and tactical communications equipment, medical equipment,
    utility helicopters, high-water capable military trucks, and engineer
    equipment. We must ensure this equipment is identical to that required
    for wartime use, so that Guard units remain interoperable with their
    Active component counterparts for both homeland security and defense
    missions, including investment in an extensive nonlethal weapons
    capability for use in both domestic and overseas contingencies.
    Additionally, consideration should be given to Hepatitis B immunization
    of all Guard personnel, not just those about to deploy to the forward
    areas.

       national guard seats on the joint chiefs of staff and at northern
                                    command
        21. Senator Graham. Secretary Hall and General Blum, the National
    Guard Caucus has endorsed the idea that the National Guard should be
    represented by a four-star officer assigned as a member of the Joint
    Chiefs of Staff. In addition, they think a three-star officer from the
    National Guard should be the Deputy of U.S. Northern Command. What are
    your views on this topic?
        Mr. Hall. Neither the Secretary of Defense nor the Chairman of the
    Joint Chiefs of Staff has indicated a need to assign a National Guard
    officer as a member of the Joint Chiefs of Staff. The Chief of the
    National Guard Bureau has been very effective in interacting with the
    Secretary of Defense on matters involving the National Guard and, in
    fact, he accompanied the Secretary to meet with the President to
    discuss the National Guard response to Hurricane Katrina. Assigning a
    National Guard officer as a member of the Joint Chiefs of Staff will
    not guarantee more effective communication with the Chairman or the
    Secretary.
        The Commander, U.S. Northern Command, makes a recommendation to the
    Chairman of the Joint Chiefs of Staff and the Secretary of Defense
    regarding the officer who would be best suited to serve as Deputy
    Commander for Northern Command. After reviewing a slate of potential
    officers to fill the position of Deputy Commander of U.S. Northern
    Command and considering the recommendation of the combatant commander
    and Chairman, the Secretary forwards his recommendation to the
    President. The President makes the selection and sends his nomination
    to the Senate for confirmation. If the Secretary determines that a
    National Guard officer would be best suited to serve as the Deputy
    Commander of U.S. Northern Command, he will make that recommendation to
    the President.
        General Blum. It would be inappropriate for me to comment on
    proposals affecting my position while I am holding it. These proposals
    may be worthy of examination but several factors should be considered.
        First, while the history of the Guard and Reserve is filled with
    examples in which the Reserve components had to contend with limited
    resources and participation in Service and Department decisions, the
    current DOD and Service leadership has frequently stated their
    dedication to a strong Guard and Reserve.
        Second, the Emergency Management Assistance Compact provides States
    with the capability to rapidly and independently employ National Guard
    Forces from multiple States in a military response to any emergency. In
    the joint operational arena, we are working to bridge the gap and
    strengthen DOD understanding of State and Federal roles and
    responsibilities regarding the nature and extent of National Guard
    operations being conducted by the several States. The National Guard
    Bureau and 5th Army/U.S. Army North are helping Northern Command obtain
    a greater situational awareness in the future.

                    mobilization of air force reserve crews
        22. Senator Graham. General Bradley, last year at this hearing you
    told me that about two-thirds of the C-130 and C-17 crews in the Air
    Force Reserve had served a full 24 months of mobilization and were out
    of the fight unless they volunteered for more Active-Duty service.
    Please update me on this situation this year.
        General Bradley. By the end of 2005, about two-thirds of our C-130
    and C-17 units had been under mobilization orders for 2 years.
    Currently 32 percent of the C-17 and 32 percent of the C-130 Air Force
    Reserve aircrew members have burned out the 24-month mobilization
    authority. The message I wanted to convey is that most of our C-130 and
    C-17 units and many of our aircrew members had been under 2 years of
    mobilization. However, this did not constitute two-thirds of our
    aircrew members.
        While we still have C-130 and C-17 aircrew members who can be
    mobilized, we will have to rely more and more on volunteers as time
    passes. The Air Force Reserve C-17 crew member availability has
    improved since last year with the conversion from the C-141 to C-17 at
    McGuire AFB, New Jersey, and March Air Reserve Base, California.
    Additionally, C-130 and C-17 crew members have been accessed to replace
    retirees and other losses (many of whom had been mobilized).

        23. Senator Graham. General Bradley, how are you meeting
    requirements for C-130 and C-17 crews?
        General Bradley. The Air Force Reserve currently has three C-130
    units (Niagara Falls, Peterson, and Willow Grove) that were remobilized
    for 1 year in the fall 2005. Those will start demobilizing late this
    summer.
        Our C-130J and WC-130J squadrons at Keesler AFB have been
    converting from the C130H and have not yet mobilized. Their possible
    mobilization has been pushed back due to the after-effects of Hurricane
    Katrina.
        Our C-130 reservists continue to provide valuable support through
    volunteerism, though few volunteer to deploy to CENTCOM.
        No Air Force Reserve C-17 crews are currently mobilized--we're
    filling all our mission requirements through volunteerism.
        The nature of the C-17 and C-130 missions is different. C-17s
    typically fly missions of relatively short duration, perhaps 1 to 2
    weeks, and return to home station (some crews have recently been out
    for 3 weeks). C-130s fly missions of that duration, too, but extended
    deployments to the Middle East, Europe, and elsewhere can limit
    volunteerism. It's much easier for reservists to work shorter missions
    into their civilian schedules.

        24. Senator Graham. General Bradley, what will you do if there is a
    surge and we need more people than are willing to volunteer?
        General Bradley. The Air Force works hard to maximize the use of
    voluntary members for deployments versus implementation of involuntary
    mobilizations. As you all know, this eases the stress on the member,
    the member's family, and the member's employer. That being said, should
    we have to surge and there are less volunteers than requirements, then
    we will have to conduct an involuntary mobilization. With regard to our
    C-130 aircrew members, we still have more than 63 percent of our folks
    with mobilization authority remaining from the President's Partial
    Mobilization for Operation Enduring Freedom. More than 46 percent of
    our C-17 aircrew members have some mobilization authority remaining.
    After September 11, 2001, the men and women of the Air Force Reserve
    Command (AFRC) were proud to serve and answer our Nation's call. I am
    confident that should the need arise, our citizen airmen will again
    step forward.

                        marine corps reserve air assets
        25. Senator Graham. General Bergman, I understand that Marine Corps
    Reserve air assets are being integrated with those of the Active-Duty
    Marine Corps. If you are providing aircraft to the Active-Duty marines,
    what does that do to your units, command structure, and readiness in
    the Marine Corps Reserve?
        General Bergman. The Marine Corps employs its combat capabilities
    as a Total Force. As an integral part of that Total Force, the primary
    mission of Marine Forces Reserve is to augment and reinforce the Active
    component in time of war and national emergency. To that end, activated
    Marine Reserve squadrons have seamlessly integrated into Active
    component Marine Air Ground Task Forces (MAGTFs) in support of
    Operations Iraqi Freedom and Enduring Freedom since 2001. These Reserve
    squadrons, alongside their Active component counterparts, have
    repeatedly demonstrated their combat effectiveness during missions on
    the battlefields of Iraq and Afghanistan. As a rule, squadrons
    belonging to the Marine Corps only Reserve air wing, 4th Marine
    Aircraft Wing, deploy as a unit and maintain their integrity within the
    assigned MAGTF ACE. In only a few instances have we sent detachments
    from squadrons to augment MAGTFs.
        Our procedures for integrating aviation assets into the MAGTF are
    the same as the Active-Duty procedures and the impact on our command
    structure has been negligible. In fact, we find that readiness is
    enhanced overall due to the integration. Reserve marines have
    contributed greatly to the MAGTF with knowledge and experience while
    updating their own knowledge and understanding of new tactics and
    skills. It is always a win-win experience for both Reserve and Active
    component marines.

                       increased reliance on volunteerism
        26. Senator Graham. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, in your written
    statements you indicated that congressional action in eliminating the
    basic allowance for housing rate difference for orders greater than 30
    days addressed a longstanding issue that was a deterrent to
    volunteerism. That's an important point. We're all interested in
    proposals that may make a positive difference in retention and in
    encouraging reservists and guardsmen to volunteer for mobilization.
    What are your ideas for creating new programs or policies that will
    increase volunteerism?
        General Vaughn. The ARNG has implemented several initiatives to
    promote retention and volunteerism for military service, including:
    Vehicle Voucher Initiative; transferable education benefits to ARNG
    family members; multiple, variable term reenlistment bonuses through 30
    years of service; Health Professional Loan Repayment Program (HPLRP);
    tuition reimbursement for medical and dental students; tax exemptions
    for National Guard officers taking part in the Health Professional Loan
    Repayment (HPLR) program; TRICARE for all ARNG members regardless of
    duty status; tax-free incentives program; employer recognition
    incentives for hiring of Reserve component members; and increase of
    Montgomery GI Bill rates to parity with Active component members.
        General James. It is important to note that the ANG has
    historically been a volunteer force and has always been ready and
    reliable to respond to our Nation's call. Nonetheless there are some
    things that bear study. We should examine those benefits or measures
    that may provide greater predictability of duty for the member,
    employer, and family. We must ensure that we listen to our Nation's
    employers because they are a major influence in the availability of
    those volunteers. Similarly, we must properly resource those
    organizations, such as the Department of Labor and the Employer Support
    of the Guard and Reserve, which help maintain a positive relationship
    between the employer and servicemember. Finally, we must maintain
    equality of benefits between our Guard and Reserve personnel and their
    Active-Duty counterparts. It is difficult to ask Reserve component
    volunteers to bear an increasing burden when some benefits are still
    not on par with the Active-Duty. The elimination of the basic allowance
    for housing rate difference was a welcome step in remedying that
    problem.
        We have to be careful though, if we decide that we will rely solely
    or at least primarily on volunteerism. A key issue is the fact that we
    are a force of units and not individuals. It is more difficult to
    fulfill combatant commander needs with individual volunteers when
    requirements are established for units. Indeed, when members are
    allowed to volunteer based on individual needs, we find that unit
    readiness may be affected should members be unavailable when their unit
    is tasked. Another problem is that the current system of laws and
    policies is geared toward the use of mobilization, for short-term surge
    utilization of the Reserve components, vice extended use as an
    operational reserve. We need to change those laws to make volunteerism
    more inviting for the individual and functional for mission
    requirements. As an example, the 2006 NDAA now authorizes compensation
    to offset a pay differential encountered by mobilized personnel. While
    that benefit is certainly beneficial to those mobilized, it may
    actually be a disincentive to volunteerism. Until this paradigm is
    changed, a wholesale reliance on volunteerism is difficult.
        General Helmly. For the past 2 years, the Army Reserve has relied
    very heavily on our mid-grade, noncommissioned officers, warrant
    officers, and officers to continually step forward and volunteer for
    mobilization. Under the current mobilization authorities and
    restrictions on involuntary remobilization, we will continue to rely on
    our leaders lo answer the call. Our leaders at all levels from squad
    leader to battalion commander are strong, dedicated, warriors. They all
    volunteered when they entered the Service and continue to serve
    voluntarily. There is no direct need, by program or policy, to increase
    that willingness to serve.
        Even so, the Army Reserve, and groups associated with the Army
    Reserve, continue to make strides in addressing issues that influence a
    soldier's decision to volunteer. Soldiers want to be recognized for
    answering that call to duty. The Army Reserve makes every effort to
    ensure each soldier feels appreciated for sacrificing time from their
    homes and civilian lives. Our Welcome Home Warrior Citizen Award
    program not only recognizes the soldier, but also recognizes the spouse
    and invites civilian employers to the ceremony to be recognized.
    Soldiers do not want to feel ``punished,'' for answering the call. The
    Army Reserve took steps to remove the mandate that soldiers be in the
    next higher ranking position in order to be promoted. Soldiers who were
    mobilized formerly had to wait until they returned home in order to be
    promoted. In another instance, soldiers asked for unlimited commissary
    usage as an incentive. The Army Family Action Plan succeeded in that
    endeavor. We continue to search for new ways to acknowledge our
    soldiers' answering the call to duty.
        Admiral Cotton. One proposal that may encourage volunteerism is to
    expand the TRS program. The current eligibility is:

    ----------------------------------------------------------------------------------------------------------------
                    Terms                           Tier 1                   Tier 2                   Tier 3
    ----------------------------------------------------------------------------------------------------------------
    Eligibility..........................  Recalled to active duty  Unemployment             Selected reservist
                                            in support of            compensation recipient   desiring health care
                                            contingency operations   or not eligible for      coverage.
                                            for >90 consecutive      employer-sponsored
                                            days.                    health care.
    Selected Reserve Service Commitment..  Required...............  Required...............  Required.
    Premium..............................  28 percent.............  50 percent.............  85 percent.
    Period of Coverage...................  1 year for every 90      Only while meeting       Only while meeting
                                            days served.             eligibility criteria.    eligibility criteria.
    ----------------------------------------------------------------------------------------------------------------

        The Tier 1 requirement for 90 consecutive days in support of
    contingency operations does not recognize the service of thousands of
    other reservists who provide operational support daily. Reservists are
    supporting the global war on terror in numerous places beyond just
    those designated as contingency operations.
        A significant percentage of reservists perform more than 90 days of
    nonconsecutive operational support in a year. Changing the 90
    consecutive day requirement in contingency operations to 90 cumulative
    days per year in contingency operations or operational support would
    more fairly recognize all contributions to the global war on terror and
    lower attrition.
        Additionally, if the Selected Reservist is removed from a pay
    billet, the TRS coverage is terminated. By modifying the requirement to
    permit a Selected Reservist who is removed by the Service from a pay
    billet and transferred to the Individual Ready Reserve, through no
    fault of his or her own, to retain TRS coverage is a more fair and
    equitable way to recognize service.
        General Bergman. The steps Congress has taken over the past few
    years to transition to an operational Reserve are greatly appreciated.
    Of note, is the NDAA for 2005 which removed the 180-day barrier to
    participation by exempting cumulative periods of Active-Duty not
    exceeding 3 years in a 4-year period and allowed 2,500 marines to serve
    on full-time operational support. Subsequently, the NDAA for Fiscal
    Year 2006 increased this number to 3,000. Additional changes to health
    care and education benefits have eased the transition to and from
    Active-Duty, while making operational support more attractive to our
    Reserve marines.
        The Marine Corps considers all members of the Selected Reserve as
    volunteers for activation by virtue of their agreement to serve in
    either an SMCR unit or IMA billet. Since the declaration of a Partial
    Mobilization (EO 12223 of 14 Sep 01), the Marine Corps planning
    guidance called for a 12-month activation period with a 7-month
    deployment followed by deactivation, a period of dwell time, and if
    required, a second subsequent 12-month activation. The only exception
    in the Marine Corps was the need to activate aviation units for 2-year
    increments. This plan was designed to enhance the Marine Corps'
    warfighting capabilities through maximum integration with the Active
    component 7-month rotation schedule while additionally focusing on
    minimizing Reserve attrition and increasing retention. The policy
    regarding one mobilization and volunteerism for subsequent
    mobilizations has adversely impacted the Marine Corps ability to meet
    the demand of current operations.
        General Bradley. The new threshold for the basic allowance for
    housing is one of several legislative enhancements that helps encourage
    volunteerism. Certainly, TRS and the Reserve Education Assistance
    Program are also programs that will help our volunteerism rates, and we
    appreciate the emphasis Congress has placed in providing these
    benefits.
        The members of the Air Force Reserve have raised their hand time
    and again to meet the Total Force requirements of the global war on
    terror. The expectation of our activated members is they should be
    entitled to the same benefits as their Active-Duty counterparts while
    serving on their respective orders. More importantly, I believe we need
    to ensure entitlements are applied the same whether a member is
    supporting the global war on terror involuntarily on mobilization
    orders or on voluntary orders.

                    junior officers in the reserve and guard
        27. Senator Graham. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, you raise the
    problem of filling company grade or junior officer billets in your
    written statement. Because all the Reserve component forces rely so
    heavily on prior Active-Duty personnel to fill billets, I would expect
    that all of you would have challenges recruiting sufficient numbers of
    qualified second and first lieutenants, ensigns, and lieutenants
    (junior grade). What are the shortfalls you have in the company grade
    officer ranks and the steps you are taking to address this problem?
        General Vaughn. The ARNG has proposed several initiatives to
    address the shortfall in company grade officer ranks, including:
    Vehicle Voucher Initiative for American Automotive Industry (provides
    direct vehicle voucher instead of a cash bonus. Our studies have found
    much more positive impact in the vehicle voucher over the traditional
    cash bonus); Transferable Education Benefits to ARNG family members
    (allows immediate family members to use any unused SM educational
    benefits up to the maximum of the eligible amount); Multiple, variable
    term reenlistment bonuses through 30 years of service (allows a career
    bonus plan to be developed that would increase retention rates beyond
    the traditional 20 years of service); HPLRP (expansion of the Reserve
    component HPLRP to address the immediate crisis in ARNG medical
    positions); Tuition Reimbursement for Medical and Dental Students
    (allows medical and dental students to receive tuition assistance while
    in school prior to accession); Tax Exemptions for National Guard
    officers receiving HPLRP payments with an extended military service
    obligation possible today; a version of TRICARE that covers the
    servicemembers and family is critical to our ability to meet our end
    strength; Tax-free incentives program (provides increased incentive
    power to potential enlistees by allowing them to receive a true bonus
    of the amount for which they enlisted); Employer Recognition Incentives
    for hiring of Reserve component members (program to reward employers
    who agree to hire a Reserve component member, incentives range from
    $1,000 per year to tax incentives); Increase of Montgomery GI Bill
    rates to parity with Active component members (raises the payment rates
    to 60 percent of the Active component rates to provide fairness to
    these soldiers); and TRICARE for all ARNG members regardless of duty
    status.
        General James. Internal issues affect the ANG's ability to accept
    Reserve Officer Training Corps (ROTC) transfers. We would need the Air
    Force to waive the ROTC graduates' 1-year commitment in the Air Force,
    as well as waive the initial skills training. Bottom line, we would
    want them to have the ability to go right from ROTC graduation to the
    Reserve component.
        General Helmly. If we only compare the number of assigned
    lieutenants to the number of lieutenant positions, the Army Reserve is
    currently healthy. When we expand the scope to include the grade of O-
    3/Captain, there is a dramatic difference. This shortage of junior
    officers is not a recent phenomenon. The Army Reserve has been faced
    with this issue for at least the last 7 years.
        The Army Reserve, like many of its sister Services, regularly
    assigns officers of a grade to a position rated at the next higher
    level. Traditionally, almost half of the assigned lieutenants are
    filling positions rated higher then their current rank. From this
    perspective, the Army Reserve has 18,000 lieutenant and captain
    positions. The number of assigned lieutenants and captains is 13,117
    for a shortage of over 4,800 junior officers. This is further
    exacerbated by the number of captains who are assigned to O-4 positions
    due to the growing shortage of majors. The Army Reserve continues to be
    proactive in developing incentives and other sources of junior grade
    officers, to include advertising and encouraging the direct commission
    process. This fiscal year, the Army Reserve has increased its
    commissioned officer accession bonus from $6,000 to $10,000. An
    affiliation bonus of $10,000 is awarded to an officer upon transition
    from the Active component to the Selected Reserve. The Army Reserve is
    turning to the U.S. Army Recruiting Command to increase its mission to
    recruit officers through a direct appointment program and recruit
    candidates for the Army's Officer Candidate School (OCS). Additionally,
    the Army Reserve's Retention and Transition Division is focused on
    recruitment of enlisted soldiers to accept a commission either through
    direct appointment or OCS. The Army Reserve supports any legislation
    that would provide a 4-year scholarship option for cadets in the ROTC.
    This scholarship is currently limited to 2 years and does not provide
    an incentive for college students to consider service in the Army
    Reserve. Fully funding our officers to attend their initial training,
    their Officer Basic Course (OBC), also affects our junior officer
    strength. The Army Reserve lost a number of junior officers in 2004-
    2005 because they were not able to get a seat in their course. There
    were not enough school seats procured during that time to facilitate
    every lieutenant receiving a school quota. Further, the lieutenants
    were not intensively managed, as they are today. Thus, many ran out of
    available time in which to complete this mandatory school. Officers
    must complete their OBC prior to advancement to first lieutenant.
    Without the school, they are considered a two-time non-select for
    promotion and discharged. The Army Reserve assumed command of these new
    officers and their initial development. Under the new management
    system, cadets receive notification of school dates prior to their
    commissioning. Additionally, they are intensively managed to ensure
    they arrive, and graduate from, their initial military training as an
    officer.
        Army Reserve manning and structure is dependant on a viable Active
    component to Reserve component accession program. Officers migrating
    from the Active component to the Reserve component, provide a valuable
    source of experience and leadership. That mission (Active component to
    Reserve component) is currently under performing and should be
    invigorated. Officers from the Active component are looking for
    stability. The Army Reserve has offered them 24 months stability--no
    mobilization--dependent upon their previous deployment history.
        Since 2002 the Active component to Reserve component transfers has
    decreased at the same time the Reserve component to Active component
    transfers has significantly increased. This trend benefits the overall
    Army, but exaggerates the Army Reserve challenge to maintain our
    required leadership strength. The commission should support policies
    that reduce barriers for Active component to Reserve component
    assessions. Due in part to increased Active component retention goals
    and fewer eligible soldiers coming off Active Duty, the Army Reserve
    requests commission support to increase visibility and commitment to
    this important personnel mission.
        The Army Reserve is heartily embracing the new Officer Professional
    Management System (OPMS) management program, with members of our staff
    serving on the working group and being an active voice for the Army
    Reserve. This reinvigoration of the officer management program moves
    officers away from being specialists, towards more generalists. This
    grows the desired end state of the officer being more of a
    ``pentathlete,'' being able to perform many different functions, as
    opposed to just one area of concentration. We support the
    recommendation in OPMS to offer ``Below the Zone'' promotions for Army
    Reserve officers.
        Continued focus on incentives and scholarships coupled with
    programs and incentives to retain qualified officers beyond their
    mandatory service obligation (MSO) will be necessary to correct the
    shortages of junior officers that Army Reserve is currently
    experiencing.
        Admiral Cotton. The Navy Reserve currently has critical shortfalls
    across the Special Warfare (SEAL), Special Operations (EOD), General
    Aviation, Engineering Duty Officer, Information Professional, and
    Medical Corps designators. In order to address those shortfalls, the
    Navy Reserve has fully leveraged the new NDAA for Fiscal Year 2006
    incentive authorities by increasing the Selected Reserve Officer
    Affiliation bonus from $6,000 to $10,000. The Navy has enhanced Navy
    Veteran recruiting efforts to better inform Active component officers,
    transitioning off Active Duty, on Navy Reserve affiliation
    opportunities. These initiatives include release of the Selected
    Reserve bonus NAVADMIN, providing contact information on Leave and
    Earning Statements, and both CNO and Chief of Navy Reserve video
    messages to the fleet.
        General Bergman. The Marine Corps is developing systematic long-
    term programming and management solutions to improve company grade
    officer manning levels in the Reserve component. Programs that can be
    enhanced/implemented as early as fiscal year 2007 include the
    following: (1) extending eligibility for our Reserve Enlisted
    Commissioning Program (RECP) to Active component enlisted marines, (2)
    direct accession of officer candidates' to the Reserve component, (3)
    meritorious commissioning program for marines with an Associates degree
    or equivalent, (4) National Call to Service--Enlisted Commissioning
    Option (NCS-ECO), (5) capitalizing on Reduction in Force (RIF)
    initiatives through the interservice transfer program, (6) use of the
    Selected Reserve Officer Affiliation Bonus, and (7) encouraging
    affiliation by deferring mobilization (operational time-out) for Active
    component officers transitioning to the Selected Reserve.
        General Bradley. Actually, the Air Force Reserve has done well in
    accessing officers. We have limited numbers of company grade officer
    positions throughout the Selected Reserve, and we have not had any
    significant difficulties in meeting our officer requirements through
    both prior service and non-prior service avenues. Our only exception is
    a few health professions specialties, and we focus a great deal of our
    recruiters' attention in this area. Overall, during the past 5 years,
    our officer manning has ranged from a low of 98.7 percent to a high of
    104.4 percent. Officer accessions represent about 16 percent of our
    annual recruiting requirements, and we are currently achieving our goal
    for fiscal year 2006. In the out years, especially following the
    Active-Duty Air Force drawdown, we anticipate a more challenging
    recruiting environment, with fewer qualified separatees from which to
    draw.

        28. Senator Graham. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, do you think that
    additional flexibility is needed in the manner in which the ROTC, or
    even Service Academy graduates, may fulfill their military service
    obligations?
        General Vaughn. There is no need to change the way officers
    commissioned through ROTC are required to fulfill their obligation. The
    methods of fulfilling their obligations are clear for both scholarship
    and nonscholarship graduates. The Army recently made a change to the
    fulfillment requirement which was designed to increase the
    participation rate of ROTC graduates in the Selected Reserve following
    the completion of their Active-Duty service obligation. The ARNG does
    not see a need to change.
        General James. Yes, flexibility would benefit the appointment of
    ROTC graduates into the Reserve component. As mentioned in question for
    the record number 27 above, by waiving the 1-year commitment and the
    initial skills training requirement, ROTC graduates would be able to
    easily be streamlined into the Reserve component.
        General Helmly. The manner in which officers (from any
    commissioning source) fulfill their obligation requires more
    accountability, not flexibility. Emphasis is needed on how officers
    ROTC, USMA, Officer Direct Commission, and Officer Candidate Schools
    fulfill their MSO. Current contracts state than an officer agrees to
    complete his MSO (after his Active-Duty obligation is met) in the Ready
    Reserve. The Ready Reserve consists of the Selected Reserve and the
    Individual Ready Reserve. Though technically obligated officers can
    serve their remaining time in the Individual Ready Reserve, it should
    strongly be discouraged, especially at the transition station. We are a
    nation at war. As such, we should exercise every available option to
    ensure we provide trained units and qualified soldiers. This is an
    available, trained pool of personnel who have an immediate impact on
    the readiness of a unit. Officers should not be allowed to meet their
    MSO through duty as a member of the Individual Ready Reserve. The key
    is enforcing the contract we have established and encouraging officers
    to serve their remaining time in the Selected Reserve. The commission
    should support measures that prevent obligated officers from
    transferring to the Individual Ready Reserve.
        We must mentor our officers to serve in the Active component or the
    Selected Reserve. We must promote Continuum of Service within the Army.
    This will enable the Army components to fully man the force, meet end
    strength, and even provide some predictability.
        Admiral Cotton. Generally, the Navy's Reserve component tends to be
    a senior and more experienced partner in the Total Force. Most of our
    sailors have served in the Active component and made a decision to
    transition to the Reserve component. The Navy Reserve is open to
    innovative detailing of newly commissioned officers if it supports the
    mission, the needs of the Navy, and allows for a viable career path in
    either component for the individual. An example is the 38 newly winged
    aviators who will be directly detailed to one of the Navy Reserve's 15
    Fleet Logistics Support Squadrons (VR). After 2 years, the officer will
    be allowed to apply for an Active-Duty assignment, a Full Time Support
    assignment, or accept a pay billet as a Selected reservist. We are
    working to build a Continuum of Service that provides ``on-ramps'' and
    ``off-ramps'' between the Active component, Reserve component, and
    civilian careers.
        General Bergman. The Marine Corps does not see a need at this time
    to add additional flexibility in which the ROTC, or Service Academy
    graduates, fulfill their military service obligations pending
    implementation, study, and review of the before mentioned steps to
    address the shortfalls in our company grade officer ranks.
        General Bradley. On the surface, this would appear to be an Active-
    Duty issue, since the intent of the Service Academies and the ROTC is
    to provide officers for Active-Duty service. We already access officers
    from these sources in the rare cases when they are overage to Active-
    Duty requirements. From our perspective, the current system ensures the
    Reserve component has the needed visibility to interact with officers
    leaving Active-Duty service with remaining military service
    obligations. Our in-service recruiters work diligently to access these
    experienced officers into the Selected Reserve. I believe ongoing
    Continuum of Service initiatives can offer additional flexibility for
    these officers in fulfilling their obligation. Ensuring barriers to
    this continuum are reduced to the maximum extent possible is the key to
    success in this endeavor. Also, it is important to note that while the
    Active-Duty Air Force is going through its force shaping initiatives,
    especially with junior officers, any additional leverage we have in
    guiding qualified individuals towards the Reserve component for
    continued participation in the Service is an obvious benefit for the
    Total Force.
        As I have indicated in the other question for the record concerning
    company grade officer recruiting, we have limited numbers of junior
    officer positions. One of our main methods of filling these positions
    is through our Deserving Airmen Program, in which our best enlisted
    personnel who qualify for a commission can become officers. This
    program, coupled with our excellent recruiting rate, results in our
    maintaining a healthy company grade officer posture.

                      selected reserve montgomery gi bill
        29. Senator Graham. Secretary Hall, the Selected Reserve Montgomery
    GI Bill (MGIB) under chapter 1606 of title 10, U.S.C., pays a monthly
    stipend that presently is only about 20 percent of the MGIB. The amount
    of the benefit is indexed to the consumer price index and has not risen
    significantly in recent years. Do you think that this benefit is still
    adequate?
        Mr. Hall. The gap between the benefit levels of the Montgomery GI
    Bill-Selected Reserve (MGIB-SR) and the Active-Duty MGIB has increased
    over time. Historically, the Reserve benefit was approximately 48
    percent of the Active-Duty benefit level. The current Reserve benefit
    of $297 for a full-time student is 28 percent of the current benefit
    level of $1,034 for a full-time student under the Active-Duty MGIB
    program. This widening gap represents an erosion in the education
    purchasing power of the Reserve benefit. More important, the benefit
    level for the Reserve program has not kept pace with the rising cost of
    education which diminishes the effectiveness of the program in
    recruiting and retaining reservists.

        30. Senator Graham. Secretary Hall, what are the cost implications
    of increasing this benefit for the Services and do you think that's
    necessary?
        Mr. Hall. Today, over 366,000 Selected Reserve members are eligible
    for benefits under this program with approximately 30 percent currently
    using the benefit. The DOD actuaries have estimated that increasing the
    Reserve benefit to 50 percent of the Active-Duty benefit level would
    increase defense outlays by approximately $5 billion through 2013, and
    would increase program participation by 28 percent. The MGIB-SR has
    proven to be an extremely valuable recruiting tool and a highly
    effective retention tool for the Services, but the increase in benefit
    level has not kept pace with the rising cost of education, thus the
    relative value of the benefit has eroded since the inception of the
    program.

       effects of the base realignment and closure on reserve and guard
                             manning and readiness
        31. Senator Graham. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, the decisions of
    the Base Realignment and Closure (BRAC) Commission helped you in some
    ways in achieving greater efficiencies and shedding unnecessary
    infrastructure. But these decisions have also presented enormous
    challenges for you in how to preserve the talents and experience of
    reservists and guardsmen whose missions have moved long distances and
    who may no longer be able to actively participate. Would you each
    summarize the challenges--from a manning and readiness perspective--
    that you and your personnel face in implementing the BRAC decisions?
        General Vaughn. The BRAC process has not presented any overly
    daunting challenges to the ARNG. The realignment of armories and
    Reserve centers in some States will need to be worked in a
    collaborative way with TAGs of the States affected, but this will not
    pose an insurmountable issue for us.
        General James. There are four areas of challenges facing the ANG as
    a result of BRAC implementation dealing with the manning and readiness
    perspective. First is the training piece. BRAC's funding will only pay
    for half the training requirements from the fallout of BRAC. The
    training pipeline cannot handle the throughput required by BRAC.
    Another example is BRAC directed Predator unit's training is being
    taken out of hide because Predator is a nonexistent program. Second is
    that ANG does not PCS our personnel. Certain new missions are requiring
    higher security requirements or higher ASVAB scores meaning that some
    remaining personnel will not be able to retrain into the new mission.
    Third is our concern that units might lose their readiness C-rating
    since personnel are leaving due to no identified follow-on mission
    (i.e. enclaves) and some units retain their mission until fiscal year
    2010 or fiscal year 2011. ANG recruiters are finding it very difficult
    to recruit to positions that are due to be taken off the books in a
    couple of years. Forth is that ANG members must be involuntarily
    separated under current policies due to deactivation of a unit. Current
    Air Force policy dictates that members must be discharged if the unit
    is deactivated and another vacancy does not exist in which the member
    can be assigned or reclassified. Retraining opportunities will be
    nonexistent in some cases. A large amount of guardsmen are retirement
    eligible, yet continue to serve. Premature retirements and involuntary
    separations will strip the ANG of years of experience that cannot be
    easily replaced.
        General Helmly. One of our biggest challenges is the process of
    keeping our soldiers informed. It has a direct effect on retention.
    Information on BRAC decisions, implementation plans, funding for those
    plans, and how it will affect soldiers is a factor many judge when
    looking to decide on reenlistment and continued service in the Selected
    Reserve. Soldiers need reassurance that there is a place for them and
    that movement into another unit and/or location will not damage career
    path choices or incentives received.
        Readiness may be affected if each command is not fully engaged.
    Each command must support Continuum of Service within all three Army
    components. This is done by keeping information lines open and
    mentoring our soldiers to select the best options for their career
    progression, even if it means the Army Reserve loses a soldier to the
    Active Army or ARNG. The bottom line is they remain an asset in the
    total Army end strength.
        The Army Reserve has engaged in the BRAC process. Further, emphasis
    is placed on sharing information about BRAC implementation throughout
    all levels of our organization. The BRAC Commission should support full
    funding for BRAC so Reserve soldiers and their families know that BRAC
    actions will improve their quality of training and quality of life.
    Otherwise, there may be an adverse impact on retention.
        Admiral Cotton. The Navy did a comprehensive study in preparation
    for BRAC 2005 to identify excess capacity and how to geographically
    disburse our Navy Operational Support Centers (NOSC), formerly titled
    as Naval Reserve Centers, to best utilize our people and provide
    support to the fleet. The recommendations that have been accepted by
    the BRAC Commission are the most efficient use of remaining facilities
    and will allow us to maintain our commitment to have a Navy presence in
    every State.
        BRAC 2005 also afforded DOD enhanced joint opportunities through
    consolidation with other Services in Joint Operational Support Centers
    and Armed Forces Reserve Centers.
        As expected, some selected reservists may find it more difficult to
    remain in an active drill status because their NOSC has closed and
    their units have moved to another location. In order to relieve this
    burden and preserve critical skill sets, the Navy is expanding travel
    compensation options. The Inactive Duty Training Travel (IDTT) PRIMAN
    program pays travel to certain individuals with critical skill sets who
    are geographically displaced from their units to quarterly travel to
    their drill location. Congress also granted DOD the authority to
    increase the High Priority Unit (HPU) pay for IDT drills in NDAA for
    Fiscal Year 2006. At present, we have piloted a program that pays $10
    per IDT HPU drill. We plan to increase this amount to $25 and
    significantly increase the number of sailors eligible for this special
    pay.
        General Bergman. The Marine Corps Reserve has 25 BRAC actions
    affecting Reserve centers, air stations, and the headquarters of Marine
    Forces Reserve (MARFORRES). The decision to move/consolidate Reserve
    centers was made with input from Marine Corps Recruiting Command's
    estimate of supportability to recruit to the new location. The movement
    of Mobilization Command involves relocating Active-Duty and civilian
    personnel from Kansas City to New Orleans. MARFORRES remains in New
    Orleans. There is virtually no impact to Reserve Forces for this move.
    In three cases--Moundsville, Reading, and Rome--the units are
    relocating closer to where the marines live. All other Reserve center
    moves occur within 50 miles of the existing location. There will be
    very little impact to the Reserve units from these moves and readiness
    will not be affected. Marines who travel 50 miles from home to drill
    are provided billeting for the drill weekend and that policy will
    continue. We do not anticipate a reduction in readiness from these
    moves.
        General Bradley. We, in the Air Force Reserve, are deeply concerned
    with maximizing actions that benefit our people and mission. To that
    end, we established a BRAC working group as soon as the initial
    realignment and closure listing was published. Our group is working
    closely with those identified organizations, both losing and gaining,
    on any foreseeable issues in an effort to minimize the impact to
    mission and personnel readiness. Two initiatives that have been
    implemented are our ``Personnel SATAF Teams'' and our ``Reserve
    Transition Clearinghouse Program.'' Both of these initiatives are
    focused on helping our military members. The SATAF teams are mobile
    teams that visit those installations identified for realignment/closure
    to help answer our members concerns. The Clearinghouse program is a
    web-based system that enables military and civilian personnel affected
    by BRAC to volunteer for other positions within AFRC. We make every
    effort to marriage the request with the vacancy. Both of these programs
    have become highly successful in our endeavor to facilitate the
    transition and to minimize any impact on our most valued resource--our
    Air Force personnel.

                                  pay systems
        32. Senator Graham. Secretary Hall, while progress has been made
    through the dedicated efforts of many Guard and Reserve members, we
    continue to hear complaints about pay problems--particularly from
    soldiers in the ARNG. What steps are you taking and what needs to be
    done to ensure that the incidence of nonpayment, overpayment, and
    counter-productive methods for responding to pay problems are used?
        Mr. Hall. The Department is committed to ensuring that all
    servicemembers are paid accurately and in a timely manner. The long-
    term solution to pay problems associated with the mobilization of
    Reserve and Guard members is a fully integrated pay and personnel
    system that ensures changes in a servicemember's status which impact
    pay simultaneously update personnel accountability and pay records. The
    Department is developing the Defense Integrated Military Human
    Resources System (DIMHRS) which will provide that capability. In the
    meantime, the Army has worked closely with the Defense Finance and
    Accounting Service (DFAS) to significantly reduce the incidence of pay
    problems caused by inaccurate documentation of mobilization start and
    stop dates. Monthly audits indicate a 99 percent accuracy rate since
    August 2005 and an average overpayment of $140 per incident, compared
    with $350 per incident in July 2003. While these statistics are
    encouraging, we must do better. Additional resources are being
    marshaled to complete the necessary tasks.
        One example of positive actions being taken is the ARNG Pay
    Ombudsman program with a toll-free call center that provides answers
    and assistance if the pay problems cannot be resolved in a timely
    manner through normal pay systems. In addition, the Army and DFAS have
    partnered to develop a database that draws from multiple medical
    systems and personnel and pay systems to provide a workable solution
    for providing accurate pay to personnel who become injured or ill while
    serving in a combat zone. These and other short-term actions are being
    taken while we move toward longer-term strategic improvements.

        33. Senator Graham. General Blum, while progress has been made
    through the dedicated efforts of many Guard and Reserve members, we
    continue to hear complaints about pay problems--particularly from
    soldiers in the ARNG. What is your assessment of this situation and in
    your interaction with the DFAS and with the State TAGs--do you see
    recurrent themes that need to be addressed legislatively?
        General Blum. We have made tremendous efforts to eliminate
    soldiers' pay issues. Most pay problems are system issues that could be
    resolved by the next generation pay/personnel system. The ARNG is
    working closely with the Army and DFAS in the development of the
    DIMHRS. The deployment of DIMHRS should significantly reduce the
    instances of pay-related problems for our soldiers. Currently, our
    efforts are focused on preventing pay problems and correcting any pay
    problem immediately after it is identified. The ARNG has established an
    Ombudsman Program to aggressively resolve outstanding pay problems and
    develop solutions to prevent future occurrences. Our improvement
    efforts are ongoing and we continue to improve everything we do every
    day. We are aware that pay problems still occur and we are working
    diligently to ensure ARNG soldiers are paid timely and accurately.

                          navy reserve and recruiting
        34. Senator Graham. Admiral Cotton, the Navy Reserve problems with
    recruiting are troubling--and seemingly chronic. It's difficult to
    discern, however, whether shortfalls in recruiting are helping--or
    hurting--the Navy in other areas, such as recapitalization. What is the
    impact on readiness and on the future of the Navy Reserve of the
    present day recruiting shortfalls?
        Admiral Cotton. Although Navy Recruiting Command's performance has
    not met our aggregate goals for the last several years, the impact of
    that under-achievement of goals has been principally offset by our
    planned decrease in Navy Reserve strength as a result of the Zero Based
    Review. The Navy Reserve is now at the end strength we requested for
    fiscal year 2007. In general, no significant force-wide readiness
    problems exist across the Reserve Force, but there are shortfalls in
    critical high demand/low density communities, such as Medical,
    Construction Battalions, Intelligence, and Force Protection. The Navy
    Manpower, Personnel, and Training Enterprise has aggressively examined
    these strength challenges and has already executed numerous mitigating
    actions and decisions to improve Navy Reserve recruiting performance
    and ensure continued capability to fulfill global war on terror
    requirements. These actions include:

    (1) Evaluating current stress on the force and ensuring the best
            distribution of global war on terror requirements between the
            Active and Reserve component.
    (2) Aggressively pursuing and executing robust, targeted enlistment
            bonuses, keyed to influence and stimulate an improvement in
            accessions to critical Reserve component global war on terror
            ratings.
    (3) Targeted Retention Bonuses to critical skill ratings.
    (4) Modified our Reserve mobilization procedure to defer mobilization
            for up to 1 year for selected Navy Veterans affiliating with
            the Reserve component within 6 months of transition from the
            Active component. We anticipate that a ``break'' in personal
            tempo of operations will entice potential Navy veterans who are
            considering active participation in the Navy Reserve.
    (6) Attacked first year attrition of non-prior service Reserve sailors
            by closing the Navy Reserve Accession Course in favor of having
            all sailors (Active component and Reserve component) attend
            full boot camp and receive primary specialty training
            immediately.
    (7) Taking advantage of a congressionally directed National Call To
            Service program, Navy maximized our accessions (well ahead of
            the other Services) with specific targeting of global war on
            terror critical skills with planned and guaranteed addition to
            Reserve strength.
    (8) Navy Recruiting Command continues to improve and refine the
            alignment of Active and Reserve recruiting efforts initiated in
            2003 and completed in 2004.

        35. Senator Graham. Admiral Cotton, both the Active-Duty Navy and
    the Navy Reserve are experiencing severe shortages in medical
    personnel. What is your understanding of the plan of action to correct
    this?
        Admiral Cotton. The Navy is executing a Total Force plan to correct
    medical personnel shortages through a coordinated effort by Chief of
    Navy Personnel, the Surgeon General, Commander Navy Recruiting Command,
    and the Chief of Navy Reserve. We have recently reemphasized recruiting
    those critical medical specialties through expanded bonus programs,
    education loan relief programs, and medical specialty pays. The Navy is
    identifying the challenges and adjusting compensation packages to
    increase recruiting and retention in these critical areas.
    Additionally, Navy has just implemented a mobilization deferment
    process whereby an Active component officer transitioning to the
    Reserve component may qualify for deferment from mobilization for up to
    1 year. This initiative is aimed at those separating Active component
    officers who have recently deployed and may opt to not immediately
    transition to the Reserve component for fear of immediate deployments.
    Finally, the Navy is considering an option for medical professionals
    that would permit shorter, predictable, and periodic mobilization
    periods to limit ``time away from practice,'' a common reason for both
    medical attrition and shortages in accession.

                 navy reserve integration with the active navy
        36. Senator Graham. Admiral Cotton, the Navy has been aggressively
    pursuing a strategy of Active-Reserve Integration (ARI) to reshape and
    realign the Navy Reserve Force structure with the Active Navy. While
    closer coordination between the Navy Reserve and Active Navy has many
    benefits, some have voiced concern that the Navy Reserve is losing
    hardware to the Active Navy because of budget pressures.
        What are the major achievements of ARI in the Navy and how do you
    answer concerns that the Navy Reserve is losing its hardware,
    particularly aviation assets, to fill shortages in the Active Navy?
        Admiral Cotton. ARI, at the strategic level, is about aligning
    Active component, and Reserve component units, personnel and equipment
    into a single, integrated fighting force. ARI optimizes combat
    readiness, training, and warfighting wholeness across the Total Navy.
        As an example, the Navy's maritime patrol community is facing
    extreme shortages of aircraft to conduct its wide range of missions due
    to airframe fatigue life issues. As a part of ARI, three Reserve VP
    squadrons have been transformed into Fleet Response Units. I integrated
    into the Active component numbered wings and provided access to the
    latest equipment and training. ARI integrated the Reserve component
    capabilities into the Navy's maritime patrol operational concept.
        To date there are over 105 Reserve component operational and
    training units that are fully integrated and providing both frontline
    and logistical support to the fleet both in homeland defense/security
    and the global war on terrorism. In most cases, such as Naval Coastal
    Warfare and Naval Construction Force Seabee units, these commands are
    totally integrated from the bottom up.
        Some claim that ARI has arbitrarily reduced the number of Reserve
    squadrons and limited the number and type of opportunities for
    reservists. We disagree. ARI provides each reservist access to the
    latest equipment, common training and tactics, and operational
    experience.

        37. Senator Graham. Admiral Cotton, when Navy Reserve commands and
    organizations have been moved in order to achieve better alignment with
    the Active Force, what has been the reaction by affected Navy Reserve
    members?
        Admiral Cotton. Reserve component commands have been moved to
    achieve operational, administrative, and training alignment with the
    Active component forces. The reaction by Reserve component sailors has
    been overwhelmingly positive. They fully understand that a more
    integrated Active component and Reserve component serves the Total
    Navy, Joint Force, and combatant commanders more effectively, and
    better positions the Reserve component to provide meaningful and
    predictable operational support to the fleet.

             navy reserve contributions to non-traditional missions
        38. Senator Graham. Admiral Cotton, I understand the Navy Reserve
    has been asked to take on a number of nontraditional missions to help
    out the Army and Marine Corps in support of Operation Iraqi Freedom and
    Operation Enduring Freedom. What is the Navy Reserve being asked to do?
        Admiral Cotton. Active and Reserve components of the Navy have been
    tasked to contribute to global war on terror in many nontraditional
    mission areas, such as customs inspections, provincial reconstruction,
    civil affairs, military police, and prisoner detainee guards. The Navy
    Reserve has met this tasking with outstanding success. In many cases
    these new missions are comprised exclusively of volunteers from many
    communities brought together and fully trained prior to deployment.

        39. Senator Graham. Admiral Cotton, will these new missions be a
    continuing role for the Navy Reserve?
        Admiral Cotton. Yes, we fully expect these missions to continue for
    the foreseeable future. The global war on terror has been referred to
    as ``the long war,'' and we have postured our forces to sustain future
    rotations in these nontraditional mission areas. Many of these missions
    are performed by volunteers from other communities and capability areas
    and we expect that to continue. If Navy accepts other nontraditional
    missions, the Navy Reserve is ready to meet these requirements as a
    full partner in the Total Navy.

        40. Senator Graham. Admiral Cotton, how will this impact the
    careers of Navy Reserve members?
        Admiral Cotton. Sailors who deploy in traditional or nontraditional
    roles to support the global war on terror are and will be recognized
    for their service. Promotion and selection boards are briefed to
    recognize these contributions and reward performance and volunteerism.

                           navy reserve end strength
        41. Senator Graham. Admiral Cotton, in terms of end strength, the
    Navy Reserve has fallen from nearly 88,000 in fiscal year 2003 to an
    anticipated request of just over 71,000 for fiscal year 2007. That is a
    reduction of about 17,000 over 5 years. Where is the bottom in terms of
    end strength reductions?
        Admiral Cotton. Navy Reserve end strength will reach approximately
    70,000. This level was determined through the Fleet Forces Command Zero
    Base Review, conducted to analyze the entire Reserve component
    inventory with requirements. Navy is also smaller, going from
    approximately 382,000 in fiscal year 2003 to 341,000 in fiscal year
    2007, and total Navy has realized great savings in process
    improvements, alignment of capabilities, and better utilization of
    every sailor to provide integrated operational support to the fleet and
    combatant commanders.

                              tricare for reserves
        42. Senator Graham. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, more than 41,000
    members of the Selected Reserve have signed agreements for TRICARE
    benefits when they return to drilling status. To me, that's good news.
    Last year we were able to expand access to TRICARE to every member of
    the Selected Reserve, even those who have not served on extended
    Active-Duty since September 11, 2001. What is your assessment of how
    the DOD is getting the word out on these new benefits?
        General Vaughn. Expanded TRICARE benefits are very well-received by
    our soldiers, but are extremely challenging to convert into policy.
    Particularly challenging is establishing eligibility. Education is also
    problematic because the TRICARE benefit is different in each of the
    phases (alert, mob, refrad) and the soldier/unit needs to take active
    steps each time to ensure the soldier/family can access coverage.
    Health insurance tends to be complex at any time, but our soldiers have
    to learn multiple programs to make decisions for their family's health
    care at one of the most stressful times in their lives.
        DOD is still in the early stages of educating National Guard
    members on the NDAA of 2006 benefits, so we are unable to determine the
    effectiveness. Members of the Guard and Reserve have participated in
    focus groups sponsored by the TRICARE Management Activity (TMA). We
    believe involvement early in the process will produce a better product
    for all Guard and Reserve members.
        General James. DOD has done an excellent job of getting the word
    out. Dr. Chu signed the Personnel Policy regarding section 701 of the
    NDAA for Fiscal Year 2005, outlining the requirements for eligibility
    into the TRS program on 30 March 2005. Since the policy was released,
    the Office of the Secretary of Defense (OSD) has made a concerted and
    broadbased effort to spread.
        General Helmly. The NDAA for Fiscal Year 2006 enhanced the TRS
    program with two additional tiers which will allow all Selected Reserve
    members to purchase TRICARE coverage. It is currently scheduled for
    implementation sometime during summer 2006. Expanded eligibility of
    members of the Selected Reserve under the TRICARE Program allows all
    Selected reservists to purchase TRS-type coverage, but there will be
    three tiers of premium sharing. The statutory effective date is October
    1, 2006.
        It is difficult to make an assessment on publicity as the
    implementation plan is still being drafted.
        TMA has begun work and development of this new benefit. Details on
    the TRS program (to include start date, eligibility, benefits and
    premiums) will be posted on the TRICARE Web site later this spring. To
    receive future TRS updates by e-mail as the information becomes
    available, members and family members may subscribe to that Web site.
        Presently, TRICARE Communications Directorate, Public Affairs
    Office, is responsible for getting out the word on the TRS and the
    associated products. They're writing the communications plan and
    conducting the planning meetings with the offices involved in their
    directorate, as well as with personnel from Policy and Reserve Affairs.
    Currently, they are precluded from publishing anything until the
    Interim Final Rule is posted and approved. A publish date is expected
    sometime after May 2006.
        The TRS Training Conference on May 23, 2006, in Lansdowne, VA, will
    provide an opportunity to preview proposed TRS marketing products and
    Web sites as well as provide feedback on those products.
        Admiral Cotton. Our assessment is that communications with our
    force has been effective. The Navy Reserve produces a magazine, The
    Navy reservist, that is mailed every month to every reservist's home.
    Our Force Public Affairs Officer also maintains e-mail distribution
    lists for Reserve flag officers, Reserve unit commanding officers, and
    ad hoc lists for over 6,000 Navy Reserve leaders. We constantly push
    information through both the magazine and e-mail distributions on
    various issues, and future issues will highlight TRS. Additionally, the
    TMA is working closely with the Services to develop and execute an
    effective communication plan to advertise the expanded benefits of the
    TRS program that includes identification of a subject matter specialist
    at each NOSC.
        General Bergman. The Marine Corps has identified and trained over
    384 TRS representatives. This includes assignment of a primary and
    alternate representative to each company-level command and higher. We
    have integrated mandatory briefings during the deactivation process and
    require all eligible marines to elect or decline coverage.
    Additionally, the Marine Corps is prepared to brief the entire Selected
    Reserve on the new expanded TRICARE benefits signed into law on January
    6, 2006, during the DOD designated open season for enrollment in these
    benefits.
        General Bradley. It is my understanding that OASD/RA is still
    putting together the policy guidance for the NDAA 2006 TRICARE changes.
    There have been several joint working group meetings and new guidance
    should be coming out soon. The implementation plan for certifying
    eligibility should be ready in late June or early July 2006. Military
    members must then be certified and enrolled with health care
    contractors by September 8, 2006, in order for coverage to begin
    October 1, 2006, for TRS Tiers 2 and 3. If members are not enrolled by
    September 8, 2006, then the earliest coverage will begin is January 1,
    2007.

                       medical readiness of the reserves
        43. Senator Graham. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, when OIF and OEF
    began, we heard that Reserve units were sometimes unable to deploy due
    to medical and dental conditions of its members. Units would arrive
    whole at the mobilization stations, but sometimes as many as 25 percent
    of the members could not deploy. Has this situation gotten any better?
        General Vaughn. We have no evidence that 25 percent of guardsmen
    were unable to deploy because of medical or dental reasons. A snapshot
    of Camp Shelby data that shows the nondeployable rate in the first 25
    days has decreased from 8.04 percent to 2.84 percent. The ``treated and
    deployed'' information is misleading because we have no visibility of
    the types of services provided. Given that the brigades were at the
    mobilization site for approximately 6 months, the treatment provided
    could have been sick call services for the normal wear and tear
    expected for this type of training, or even something as simple as a
    missing panograph from the dental record.
        General James. The ANG does not put anyone on orders that is not
    Individual Medical Readiness (IMR) qualified. The ANG does not utilize
    mobilization stations to deploy our members. We prepare/deploy members
    from their home base. Therefore, ANG members that are not IMR qualified
    do not deploy.
        General Helmly. Yes. According to the First U.S. Army Surgeon,
    currently, less than 10 percent of the Army Reserve soldiers could not
    deploy after arriving with their units at the mobilization station.
    This improvement is the result of refining the processes that support
    the mobilization effort. Today, we have a better way to track these
    soldiers through MEDPROS. The Federal Strategic Health Alliance (FEDS-
    HEAL) program has also helped increase soldier readiness through pre-
    deployment Soldier Readiness Process reviews. The Surgeon General's
    policy (February 2006) of appointing medical directors at the
    mobilization stations to increase consistency of the application of
    medical fitness standards has also contributed to improving medical
    readiness in the Army Reserve.
        Admiral Cotton. Yes, readiness has improved significantly. Since
    September 12, 2001, the Navy Reserve has experienced approximately a 2-
    percent fallout rate for medical or dental deferments and exemptions.
        In 2002, the Navy Reserve developed a Web-based application, the
    Medical Readiness Reporting System (MRRS) to track IMR. As the 2005 DoN
    CIO IM/IT Excellence Award winner for Innovation, MRRS provides
    Commanders visibility of IMR data for the individual, unit, and force
    wide. Navy and Marine Reserve component and Marine Active component use
    MRRS and it is currently in testing for further deployments worldwide
    in support of global war on terror forces.
        General Bergman. There are 185 Reserve Training Centers (RTCs)
    around the country. These RTCs have very limited or no medical and
    dental screening capabilities. However, once mobilized, a reservist has
    a 90-day access to TRICARE facilities to get their readiness status up
    to standard. If there is no medical support, medical and dental
    readiness conditions of reservists are mitigated at the Intermediate
    Locations (ILOC). We believe the nondeployable rate for MFR marines is
    lower than 25 percent and not an issue. The sole exception is
    relatively high dental class 3 status among MFR marines. Most of these
    MFR marines are treated at ILOC in Lejeune and Pendleton; and as a
    result, very few are declared nondeployable.
        General Bradley. The situation you describe did not occur in the
    Air Force Reserve. The Air Force Reserve maintains the same medical
    readiness requirements as our Active-Duty counterparts. This includes
    annual medical and dental assessments. In addition, we do not mobilize
    whole units. We mobilize tailored packages within our units. Because of
    this, only those airmen who are fully medically ready are selected for
    mobilization. Since Operations Enduring Freedom and Iraqi Freedom, less
    than 1 percent of Air Force Reserve was actually mobilized and then
    could not deploy for medical/dental reasons.

        44. Senator Graham. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, what kinds of
    reports do you get on the medical and dental status of Reserve units
    and individuals, and what trends have you observed in the past 2 years?
        General Vaughn. We have conducted an epidemiologic study of
    hospitalizations of all soldiers in Iraq and Afghanistan from September
    11, 2001, through November 30, 2005. We have clear data that shows ARNG
    soldiers are hospitalized at no greater frequency than their Active-
    Duty counterparts, and in many instances less frequently. This is
    despite the fact that ARNG soldiers are approximately 5 years older
    than their Active component counterparts. This data demonstrates that
    ARNG soldiers are healthy when they arrive at the mobilization site,
    and retain their health as well, or better, than either of the other
    two Army components while deployed.
        General James. The ANG has been steadily increasing the IMR rate of
    its members as compiled in the Air Force Preventive Health and
    Individual Medical Readiness (PIMR) database. With an added emphasis on
    IMR requirements, the ANG has fully complied with DODI 6025.19,
    Indvidual Medical Readiness, and currently the ANG is 70.4 percent
    fully medically ready using the DOD standards. (Annual PHA must be
    accomplished within 3 months following the due month.) Hep A, Hep B (if
    series began after September 1, 2002), tetanus, MMR, polio, and
    influenza vaccination status must be current.
        Required labs consist of: HIV within past 24 months and DNA on
    file. Dental class must be 1 or 2, and last annual dental exam must be
    within 3 months following the due month. The servicemember should have
    been issued gas mask inserts (if required based on DVA) and should be
    free of deployment limiting conditions.
        General Helmly. Army Reserve Major Subordinate Commands report the
    medical and dental readiness of their commands through Unit Status
    Reports and Battle Focus Readiness Reviews. The trends over the past 2
    years have improved through better tracking medical protection system
    (MEDPROS), the FEDS-HEAL program and the pre-deployment Soldier
    Readiness Process. Through these initiatives and the hard work from the
    commands, the medical readiness of the Army Reserve has improved by 6
    percent over the past 12 months, which represents an increase in
    approximately 20,000 fully medically-deployable soldiers.
        Admiral Cotton. In 2002, the Navy Reserve developed a Web-based
    application, the MRRS to track IMR. As the 2005 DoN CIO IM/IT
    Excellence Award winner for Innovation, MRRS provides commanders
    visibility of IMR data for the individual, unit, and forcewide. Navy
    and Marine Reserve component and Marine Active component use MRRS and
    it is currently in testing for further deployments worldwide in support
    of global war on terror forces.
        During the Commander Navy Reserve Forces Command biweekly video
    teleconference, medical readiness statistics generated by MRRS for the
    entire Navy Reserve are reviewed and readiness commanders are held
    accountable for readiness improvement. This leadership focus on medical
    readiness has led to Reserve Force medical readiness improvement from
    35 percent in 2003 to 50 percent in 2005. Even though 50 percent of the
    Reserve component is fully medically ready, leadership accountability
    and development of the MRRS has allowed the Navy Reserve Force to more
    closely manage the mobilization process and preclude significant
    fallout due to medical or dental issues.
        General Bergman. We were not able to observe the trend the past 2
    years because of the inadequacy of an available database system. In
    previous years, medical and dental data for the reservists were entered
    into Shipboard Nontactical Automated Processing Program Automated
    Medical Systems (SAMS). SAMS is an archaic, stand alone system that has
    no central database to track trends. In order to fill this void, last
    year, MARFORRES was the first among the MARFORs to migrate into the
    MRRS. This system provides IMR as well as anthrax, immunization,
    medical, and dental readiness reports. With these data input we should
    be able to provide a 2-year trend next fall.
        General Bradley. AFRC and all subordinate units have 24/7 access to
    reports on IMR. Commanders, at all levels, can view the health status
    of entire units or individuals. These reports are in consonance with
    DOD reporting criteria. In addition to reports that are purely medical
    in nature, I also receive operational reports that indicate when
    specific capabilities are decreased due to medical issues.
        Over the past 2 years, the Air Force Reserve has seen a slow but
    steady improvement in our medical and dental fitness. This improvement
    is primarily the result of command driven special interest to ensure a
    fit and ready Air Force Reserve. Medically, we currently estimate that
    93 percent of the Air Force Reserve could be deployed if called to
    action.
        Dental readiness continues to be problematic for the Air Force
    Reserve. Of the approximately 14,000 individuals who have delinquent
    readiness requirements, 13,500 can be attributed to dental readiness. A
    critical shortage of dental professionals within the Air Force Reserve
    has not helped this unfortunate statistic. The Air Force Reserve is now
    employing contracts with civilian dentists to provide required exams
    and improve the backlog. Reserve members are also allowed to utilize
    exams provided by their own civilian dentist to satisfy military
    requirements. Also contributing to the dental deficiency is that new
    recruits are not provided dental examinations at the military entrance
    processing stations before entering the military and being sent to
    basic training. Once in the basic training and technical school
    pipeline, training schedules do not allow for dental examinations or
    treatment except in cases of emergency. Also, while in the training
    pipeline, which for some career fields can be a year or longer, these
    recruits continue to be reported as delinquent. Finally, there is no
    mechanism for the Air Force Reserve to ensure that individuals with
    readiness limiting dental issues receive the proper corrective
    attention. Air Force reservists are not entitled to dental treatment
    when not on military orders. As with other medical issues, once the Air
    Force Reserve identifies a dental issue, the reservist is required to
    coordinate their own treatment at their own expense. Because of the
    extraordinary cost of dental services, many Reserve members are unable
    to meet the demands of dental readiness once problems are identified.

                          support for reserve families
        45. Senator Graham. Secretary Hall and General Blum, family support
    is critical for our deploying reservists, whether they live near a
    military installation or not, and whether they deploy with their unit
    or deploy alone to augment another unit. Please tell me what you have
    done about improving support for our Reserve families--in childcare,
    counseling, communications, and family assistance?
        Mr. Hall. The Department has partnered with many other governmental
    agencies and organizations to establish or expand many successful
    programs to ensure that National Guard and Reserve families have access
    to the support services they require when their military family member
    is deployed. Operation Military Childcare and Military Childcare in
    Your Neighborhood provide childcare services to Guard and Reserve
    families when deployment impacts their normal childcare opportunities.
    These spaces are provided at reduced costs that are comparable to what
    Active-Duty families pay for childcare at a Child Development Center on
    a military installation. Military OneSource provides counseling and
    education services 24 hours a day, 7 days a week, year round for
    families in need of quality of life and other life challenging
    assistance. These services are provided at no cost. The services are
    available through a toll-free 800 number as well as via the Internet.
        The Department has also established the Troop and Family Counseling
    Services for National Guard and Reserves. This program provides
    informal individual and group coaching as well as formal training and
    education to assist members and their families to prepare for and cope
    during deployments, reunions, and other times of change. This program
    is also available at no expense to the Service, component, member, or
    family. Communications and contact with family members of deployed
    Guard and Reserve members have increased and been enhanced. Each
    component family program is seeking to achieve 100 percent contact with
    families of deployed Guard and Reserve members. The primary means is
    with monthly telephone calls, but methods also include home visits,
    family readiness and support group meetings, and training, as well as
    newsletters, Web sites, and e-mail messages.
        The Army has developed a Virtual Family Readiness Group (FRG) that
    provides all FRG functions on the Internet. This new initiative has
    received wide acclaim from those in geographically dispersed and
    isolated areas. Family assistance has been enhanced through a number of
    initiatives including the more than 400 Family Assistance Centers
    (FACs) established by the National Guard in communities where there are
    a significant number of military members deployed or where there are
    significant numbers of families of deployed Guard and Reserve members.
    These family centers are very flexible and can be relocated, as
    necessary, when troop rotations occur. Many of them also serve multiple
    locations in a geographic area using a publicized schedule to be
    available at one location or another on certain days of the week. The
    greatest improvement to family assistance has occurred as a result of
    the Department sponsored and funded pilot program for Multi-Component
    Family Support Networks. This pilot has resulted in expanded and robust
    InterService Family Assistance/Support Networks around the Nation. This
    expanded service capability is designed for any military member or
    family to access and receive services at any location or facility
    providing family services regardless of Service or component
    affiliation.
        General Blum. The National Guard has never been in a better posture
    for supporting families across our organization. Our system is strong,
    our personnel are trained and skilled, and our partnerships with
    Veterans Service Organizations, Volunteer Service Organizations, and
    Community Based Organizations are closer than ever and expanding.
    Through over 1,000 Family Support staff members and with approximately
    12,000 volunteers in our units and armories in all 54 States and
    territories, we reach out to spouses and families of deployed members
    and to children and youth who courageously face the challenges of
    service of their parent to our Nation.
        We currently have over 350 (352) FACs strategically placed in
    communities all across the continental U.S. and its territories. The
    FACs use the new Guard Family Management System, which is an automated
    case management tool, to track the number and type of cases handled in
    support of families. This helps us to prioritize resources in those
    areas. The trained staffs in the FACs provide expert support,
    information, and referral to our military families.
        An extensive pre- and post-mobilization education system is in
    place called Guard Family Team Building (GFTB). These training
    resources are at the grassroots level in each of our units. The family
    support staff and volunteers in each unit work with and educate
    families about support resources and benefits. Families and FRGs also
    receive computer-based training and onsite education to sustain them
    during deployments. The GFTB staffs and the FRG Deployment Assistants
    who are located at every Joint Forces Headquarters give this training.
        The State Family Program Director and their extensive network of
    committed family support workers actively assess family needs and make
    referrals whenever needed to chaplains, Military OneSource, and to the
    counselors who are part of the Soldier and Family Life Consultants
    network.
        The National Guard has conducted extensive research on childcare
    needs of our military families and has partnered with Army Community
    Services through several child initiatives (i.e.: Operation Military
    Childcare) to provide subsidies to deployed families and to achieve
    parity of service with Active component counterparts. The National
    Guard has also educated family support personnel so they are prepared
    to make effective community referrals for families with long- or short-
    term childcare needs. As one example of partnering with the community
    on childcare issues, we have linked with the National Association of
    Childcare Resource and Referral Agencies and in March 2006 applications
    from National Guard and Army families seeking childcare assistance
    increased by 21 percent.

    post-traumatic stress and other mental health disorders among returning
                                   reservists
        46. Senator Graham. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, my concern about
    the problem of post-traumatic stress disorder and other mental health
    problems was heightened recently when I learned that as few as 22
    percent of returning members who were at risk for deployment-related
    mental health problems were referred for treatment. I think there is a
    flaw in the system of post-deployment health assessments (PDHA) and
    receiving needed care. What do you think about the effectiveness of
    that system?
        General Vaughn. The National Guard is prohibited from providing
    health care. Knowing that, and knowing that our soldiers were heavily
    engaged in the global war on terror and would experience very stressful
    circumstances, the National Guard entered into a formal agreement with
    the Department of Veterans Affairs (VA) in 2005. In support of this
    agreement, the National Guard included the placement of 54 benefit
    advisors in the States to facilitate any necessary health care (or
    other veteran benefits). To date this arrangement has worked very well,
    and in conjunction with the current post-deployment health reassessment
    (PDHRA) we are providing through the VA timely and professional mental
    health support for our soldiers. Also, for completeness, the National
    Guard vision for these 54 benefits advisors is that they provide
    support for any soldier, sailor, airman, or marine, regardless of
    component, in any of the States. We believe that the Joint Force
    Headquarters can and should provide this service to any servicemember
    in need.
        Regarding the PDHRA, the ARNG moved out to implement the program
    and have already screened over 4,000 eligible soldiers. Referral data
    demonstrates that a much smaller percentage of our soldiers need to be
    evaluated for behavioral/mental health issues than for other medical
    issues.
        General James. Post-Traumatic Stress Disorder (PTSD) and some other
    mental health disorders may not be readily apparent either to the
    member or to those around him or her when they first return from
    combat. As such, the previous ``Post Deployment Screening,'' (DD Form
    2796) which is an invaluable tool to identify many other medical
    issues, is not capable of identifying many of those at risk for PTSD.
    To fix this, the Services have been developing a new and additional
    tool, the PDHRA (DD Form 2900), which is designed to be administered
    90-180 days after re-deployment.
        General Helmly. This is a new system. As with all new systems/
    programs, issues probably will arise with its implementation. The
    service provided will increase once the issues are resolved.
        The Army Reserve understands its soldiers may face incredible
    pressures upon return from a combat zone. We are committed to ensuring
    our soldiers receive the best care possible upon return from theater
    and that issues be addressed immediately. There are three categories
    for Post Deployment Health Assessments (PDHAs), with an emphasis on
    detecting possible mental health issues: 3 to 6 months post deployment
    to a combat zone, 3 to 6 months after discharge from a medical
    treatment facility as an inpatient if evacuated from a combat zone, and
    3 to 6 months from the date of medical evacuation from a combat zone,
    if never an inpatient. Completing the PDHRA screening process is a
    command responsibility at all levels.
        Soldiers have to be willing to admit to any possible problems. In
    many occupations within the military, it is still considered a weakness
    to admit to a possible mental health issue, combat zone exposure or
    not. Part of our suicide prevention program addresses the stigma that
    is still attached to possible mental illness and depression. Another
    part of the solution is leaders ensuring soldiers know that seeking
    treatment is a positive step, and is encouraged. All of these actions
    and programs are facilitating a smoother transition and support network
    as the soldier returns to civilian life.
        Admiral Cotton. Any Navy reservist who reports any deployment-
    related mental health issue is automatically granted a line-of-duty
    determination and provided necessary medical support.
        General Bergman. There are two occasions for the conduct of PDHAs
    on marines and sailors serving with Marine Reserve units. It is the
    responsibilities of the Employing Force Commander to ensure all marines
    and sailors (whether Active component or Reserve component) complete
    their first PDHA before leaving the combat theater, which asks if they
    have had certain experiences or symptoms within the past 30 days.
    Licensed clinicians review the completed PDHA forms and conduct face-
    to-face interviews with the servicemembers. If the servicemember
    affirms three or more of four questions on the PDHA, the clinician
    reviewing the form and conducting a face-to-face interview uses their
    clinical judgment to refer the marine for a mental health evaluation or
    if symptoms have subsided or are moving toward resolution by the time
    the interview occurs, recommend no further evaluation. It is not
    unusual that 78 percent of those who initially affirmed symptoms would
    improve. As deployment health concerns may not be noticed immediately
    after deployment, the second assessment, a PDHRA, is conducted 90-180
    days after return from deployment. The PDHRA program provides another
    opportunity to access care and is offered to all servicemembers who
    have returned from operational deployment, including Reserve members.
        The PDHRA system is a maturing process where the different parts of
    the process are being refined for effectiveness. Particularly regarding
    reservists, since we have 185 Training Centers (RTCs) that are
    decentralized and with no requisite health providers, the Federal
    Occupational Health Services (FOHS) system currently in place by DOD
    provides site visits to the different sites as recommended by the unit
    commanders of post deployed units. FOHS teams usually consist of six
    members to include a mental health professional, health benefit
    counselor, etc. FOHS teams also bring laptops with them to capture data
    gathered from these assessments. These site visits are beneficial
    because they provide face-to-face contact with the servicemembers for
    follow-on care including the identification of mental health issues and
    servicemembers are educated on their follow on health care benefits. To
    further enhance the effectiveness of the system, if site visits are not
    feasible, a phone bank system is also established for reservists to
    call a health care provider on the other end for any questions and to
    help the member complete the DD2900 extensive health surveillance
    document. The system in place is only effective if the servicemember
    completes this document. We will continue to monitor the performance of
    our PDHRA process.
        General Bradley. Improvements have been made with regard to PTSD
    and associated mental health issues. Last year, the DOD expanded post
    deployment mental health screening. Now, in addition to a PDHA that is
    conducted immediately upon the member's return, the Air Force Reserve
    conducts a repeat assessment 90 days following the deployment. This
    time frame coincides with the typical onset of PTSD and associated
    symptoms. The Air Force Reserve has an automated Web-based system to
    track compliance and ensure that appropriate referrals are made. Air
    Force reservists also have access to military mental health
    professionals regardless of their current orders status. This, along
    with programs such as Air Force OneSource and improved DOD/VA
    partnerships, ensure that Air Force reservists have access to the full
    range of military mental health services.

                              care for the wounded
        47. Senator Graham. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, there is no
    higher priority among members of this committee than care for our
    wounded members. Complex wounds caused by improvised explosive devices,
    result in extended periods of rehabilitation for thousands of wounded
    members who are still in our system. I am concerned that some have--or
    will--fall between the cracks.
        How do you track the progress of wounded reservists, whether they
    are in the DOD or the VA medical system, and how can you be assured
    that the care they need is accessible to them from every source--the
    DOD, the VA, or civilian care, if necessary?
        General Vaughn. We share your concern and work to keep that from
    happening. The National Guard Bureau closely tracks the status of
    wounded/ill ARNG soldiers worldwide. We compile information found on
    several Army Medical Department information systems--Joint Patient
    Tracking Application and the Patient Accounting Reporting Real-time
    Tracking System--and from the Army Operations Center LN12 Report.
        We also support the Wounded Warrior Project (WWP). This project was
    founded on the principle that veterans are our Nation's greatest
    citizens. The WWP seeks to assist those men and women of our Armed
    Forces who have been severely injured during the conflicts in Iraq,
    Afghanistan, and other locations around the world. Many of the injuries
    are traumatic amputations, gunshot wounds, burns, and blast injuries
    that will retire these brave warriors from military service. The WWP
    provides programs and services designed to ease the burdens of the
    wounded and their families, aid in the recovery process, and smooth
    their transition back to civilian life. The WWP work begins at the
    bedside of the severely wounded, where they provide comfort items and
    necessities, counseling, and support for families. They speed
    rehabilitation and recovery through adaptive sports and recreation
    programs, raising patients' morale, and exposing them to the endless
    possibilities of life after an injury. Finally, they provide a support
    mechanism for those who have returned home by providing outreach and
    advocacy on issues like debt and disability payments that will affect
    their families' future.
        General James. Wounded reservists are tracked through their
    applicable service casualty office. The casualty office works in
    conjunction with the Family Liaison Officer (FLO). A FLO is assigned to
    each wounded member and their family upon notification. The FLO in
    conjunction with the casualty office assists the member with any needed
    medical attention, benefits, and entitlements they may need for the
    member or the family. A positive effect of an unfortunate situation has
    been an improved and well-orchestrated working relationship with the
    DOD, the VA, and civilian health care.
        General Helmly. There are approximately 1,169 soldiers in the Army
    Wounded Warrior system as of 01 April 2006. The commission must support
    the opportunity to monitor this population very closely and make
    immediate improvements in service delivery that will positively impact
    their future. The Department of Army, the Reserve components, the VA
    along with the Community Based Health Care Organizations have developed
    a network to provide comprehensive services to this population while
    they are in the Army Medical Treatment Facilities, VA Rehabilitative
    Centers, and hometown locations across America. Personnel at all levels
    are working vigorously to provide quality medical care, ensure access
    to non-medical support services for soldiers and their families through
    rehabilitation, and monitor the progress of the soldiers for up to 5
    years following retirement.
        The Army has good situational awareness of the primary and
    secondary categories of injuries, treatment, and outreach services
    required for an effective quality of life measurement system. Reserve
    soldiers have no requirement to participate in Battle Drill Assemblies
    within the first 90 days of returning from their deployment. This may
    present a challenge to Army Reserve leaders who are expected to monitor
    and provide support to returning soldiers.
        Admiral Cotton. Critically injured Navy Active and Reserve
    personnel are tracked through Navy's Safe Harbor program. Upon return
    from theater or Landstuhl Army Medical Center in Germany, Navy
    personnel are hospitalized in the National Capital Region where they
    are entered into the Safe Harbor program. When members are transferred
    from the National Capital Region, the Navy Region Commanders assume
    responsibility for oversight of the member by assigning a Navy Command
    proximal to the member's treatment facility (DOD, VA, or civilian) or
    home to assist the member and family with any nonmedical support and
    report back to the Safe Harbor program. In addition to nonmedical
    support from the Safe Harbor program, Reserve members receive medical
    monitoring and support from Navy Personnel Command's Medical Hold
    program.
        General Bergman. Marine Corps reservists who are injured are either
    retained on Active-Duty in a medical hold status, or are released from
    Active-Duty and request line-of-duty (LOD) benefits. Once Headquarters,
    U.S. Marine Corps (HQMC) is made aware of either the medical hold or
    LOD status, the injured marine reservist's case is entered into the
    Marine Corps Medical Entitlements Data System. It is incumbent on the
    MARFORRES unit that owns the injured marine to inform HQMC (M4L-RMED)
    of the marine's condition to initiate proper accountability/reporting,
    and to prevent administrative omissions.
        Local Limited Duty Coordinators (LDCs) act as the liaison between
    the individual injured marine reservist and higher headquarters. Bureau
    of Medicine personnel assist LDCs in case management and ensuring that
    injured Marine reservists receive the necessary treatment/timely
    processing through the Disability Evaluation System.
        MARFORRES has ensured that every Marine Corps Reserve unit has at
    least one LDC assigned. Vigilance on the part of LDCs and commanders is
    required to ensure marines attend appointments, as well as promptly
    submit complete command documentation for medical board proceedings, in
    order to assist in the timely processing of marines for medical
    discharge or return to full duty.
        General Bradley. The Air Force has systems that track individuals
    as soon as they show up in one of our deployed field hospitals, through
    the aeromedical evacuation system and back in the United States. Once
    released from the hospital, the Reserve medical unit tracks their
    progress and rehabilitation until such time as they are well and can
    return to duty, or they are processed through the disability evaluation
    system and are medically retired/separated. There are multiple systems
    in place that require periodic review to ensure the Air Force reservist
    does not fall through the cracks. In addition to established positions
    within DOD and TRICARE networks, the Air Force Reserve has created
    positions with the primary mission of ensuring injured reservists have
    access to the care that they need.
                                     ______

                   Questions Submitted by Senator John McCain

                           reductions in end strength

        48. Senator McCain. Secretary Hall, General Helmly, and General
    Bergman, in the QDR, under the heading ``Reconfiguring the Total
    Force'', DOD plans on cutting 55,000 servicemembers over the next 3
    years. Worldwide deployments and disaster relief missions here at home
    continue to tax the Services. Yet the QDR and the current budget
    request recommend reductions in end strength DOD-wide. What are your
    views concerning this issue?
        Mr. Hall. To date, the National Guard has only been able to recruit
    to a level of 336,000 soldiers and the Army Reserve to 187,000
    soldiers, both of which are below the current authorized end strengths
    of 350,000 and 205,000, respectively. However, since December 2004, we
    have increased the number of ARNG recruiters by over 1,100 and the
    number of Army Reserve recruiters by almost 800, as well as provided
    funds for recruiting costs and advertising to assist the Reserve
    components in meeting their recruiting goals. Finally, the Army still
    plans to program for up to 350,000 National Guard and 200,000 for the
    Army Reserve.
        Resourcing troop levels at their actual strength, combined with the
    force rebalancing efforts, and the civilianization of nonmilitary
    essential functions will provide our Nation and its Governors with the
    necessary forces at their disposal to accomplish their homeland defense
    requirements, as well as our worldwide operational needs.
        General Helmly. The Army Reserve is not reducing its size, but
    rather restructuring spaces and placing soldiers into warfighting
    units. To use the QDR ``Reconfiguring the Total Force'' vernacular, the
    Army Reserve is being ``operationalized'' so that select reservists and
    units are more accessible and more readily deployable than ever before.
        The Army Reserve Force contributes to the accomplishment of every
    Army mission, and it complements the joint force with the skills that
    warrior citizens bring from their civilian professions for less of the
    Army's total obligation authority. Army Reserve transformation is about
    taking the lead in organizing and fielding a gap capability that makes
    a fiscally prudent full-time force fully capable in times of need. The
    Army Reserve has consistently provided operational depth and operations
    tempo relief on a rotational basis that is not only cost effective but
    uses the technical expertise these units are organized to provide, thus
    enhancing their readiness for the global war on terror.
        General Bergman. The Marine Corps Reserve current authorized end
    strength remains unchanged in the 2007 President's budget request,
    steady at 39,600. The 2006 QDR calls for an end strength of 39,000 by
    fiscal year 2011. In our assessment, the current end strength level is
    sustainable from a recruiting and retention vantage point. However, any
    growth in end strength is viewed as problematic due to the potential
    for a decline in the quality of the applicant pool, and the rising cost
    of manpower that challenges the Services' ability to adequately fund
    the warfighting investment account.

                      stop-loss and the reserve component
        49. Senator McCain. General Helmly, please explain why the Army has
    utilized stop-loss on more than 50,000 soldiers while the QDR and the
    budget plan to draw down the Reserve component.
        General Helmly. The QDR directs DOD to rebalance Active component
    and Reserve component forces across all components. In fact, the Army
    Reserve will have an increase in authorized end strength of 1,000 (to
    206,000) by fiscal year 2013. DOD structure rebalancing initiatives do
    not have a direct impact on the operational requirement for the use of
    stop loss. The Army Reserve has mobilized over 145,000 soldiers in
    support of the global war on terrorism. Unit stabilization (stop loss)
    is necessary to ensure unit leadership is stabilized (at any given time
    only about 20 percent of all Army Reserve officers have a remaining
    service obligation) and to reduce the need for last minute personnel
    reassignments. The recommended plan in the future is to offer
    compensation to soldiers who fall under unit stabilization
    requirements. Further, the goal is to reduce or eliminate the need for
    unit stabilization with full implementation of Army Force Generation
    lifecycle management.

                              reserve deployments
        50. Senator McCain. Secretary Hall and General Blum, we are already
    hearing from many reservists and their employers about deployments
    which are neither periodic nor predictable. Are these policies in the
    best interests of our Total Force? Please explain.
        Mr. Hall. The Department agrees that predictability of mobilization
    is a very important quality of life issue for Reserve component
    members. The Department policy that established a goal of no more than
    1 year of mobilization in every 6 years of service is designed to
    provide that predictability. The military departments are actively
    implementing that policy. In addition, our policy establishes a goal of
    providing all Reserve component members with orders at least 30 days
    prior to their mobilization date to facilitate members' dealings with
    their employers, families, and other issues. We also attempt to provide
    written notification as early as possible to afford members and their
    families the early eligibility for TRICARE benefits, because we
    understand the criticality of medical coverage during this period. We
    also attempt to provide verbal notification as early as possible in
    advance of the written notification.
        General Blum. Today's National Guard is not the Guard of the past.
    Throughout our Nation's history, National Guard service has always been
    honorable. But today, the Guard's mission has shifted from a strategic
    reserve, built on a Cold War construct, to an operational reserve that
    must be capable of joint and expeditionary operations.
        We are balancing our forces, focusing on the right capabilities in
    every State and territory. We are effectively leveraging existing
    forces and capabilities. We are streamlining forces and organizations,
    and as a result will create or change forces to meet today's reality
    and tomorrow's threats.
        We have developed a predictive deployment model with an end state
    goal that ensures the force is managed to permit approximately 25
    percent to be deployed to the warfight; with up to another 25 percent
    training to replace those already deployed; and ensuring that a minimum
    of 50 percent (and up to 75 percent) remains available for State
    missions, homeland defense, and support for homeland security
    operations. For our soldiers, our families, and our employers, this
    model will establish a goal of no more than one substantial deployment
    every 5 or 6 years, and for our airmen, one deployment every 15 months.
    This is important to maintaining a ready, reliable, and accessible
    National Guard for State or Federal missions now and in the future.
        The increased use of the National Guard and Reserve impacts our
    future human resource requirements. It is unclear, at this point, what
    long-term effects this increased use may have. Experience demonstrates
    that highly motivated Reserve component personnel will continue to
    serve if they are provided predictable expectations of service and are
    treated with dignity and respect when mobilized. Our experience, to
    date, is the Nation's employer community is overwhelmingly supportive
    of their employees who have been mobilized for State or Federal
    missions. The implementation of a predictive deployment model will
    positively impact their continued support.
        We are working closely with TAGs, and the Army and Air Force to
    transform the National Guard for the future and to execute a predictive
    deployment model.

        51. Senator McCain. General Vaughn, General James, General Helmly,
    Admiral Cotton, General Bergman, and General Bradley, the QDR
    recommends:

              1. Increasing Presidential Reserve Call-up from 270 to 365
            days;
              2. Seeking legislation to improve access to Guard and Reserve
            in support of civil authorities;
              3. Seeking legislative relief of Presidential Reserve Call-up
            statute to activate reservists for natural disasters; and
              4. Developing Reserve units that train more intensively and
            require shorter notice for deployment.

        We are already hearing from many reservists and their employers
    about deployments which are neither periodic nor predictable. Are these
    new policy initiatives in the best interests of our Total Force? Please
    fully explain your response with regards to the QDR Reserve Force
    initiatives listed above.
        General Vaughn. The impact of these policy initiatives on the
    interests of the Total Force will largely be positive but will, of
    course, depend on the details of implementation.
        The ARNG supports increasing Presidential Reserve Call-up from 270
    to 365 days. For some missions, the current window is a little too
    short to mobilize, deploy, redeploy, and demobilize a Reserve component
    unit. As a result, it would be helpful to have authority for up to 365
    days. Some missions may not require that length of call-up but the
    higher cap will provide flexibility that would be helpful.
        As a general matter, the National Guard Bureau supports seeking
    legislation to improve access to Guard and Reserve in support of civil
    authorities, but would need to see details of any specific proposals.
        The National Guard experience has been that, as a general matter,
    disaster response operations are best executed at the State level.
    These governments have extensive emergency experience, powers, and
    capabilities. Emergency Management Assistance Compacts allow State
    governments to rapidly access disaster response resources--including
    National Guard forces--from all over the Nation. The need to supplement
    this capability with other Federal Reserve component forces is not
    obvious. While this could make more forces available for disaster
    response, it might also further stress the Reserve components
    unnecessarily. Also, because State governments might view such a change
    in the Presidential Reserve Call-up statute negatively, the details of
    such an initiative would likely best be crafted through a State-Federal
    dialogue.
        Developing Reserve units that train more intensively and require
    shorter notice for deployment is a recommendation worthy of
    examination. The challenge will be to develop a means for structuring
    such units which would still remain consistent with the nature of the
    Reserve components (i.e., citizen-soldiers maintaining a viable full-
    time civilian career and commitments in the community). Having a well-
    defined structure and mission may make this a viable option.
        General James. (a) While this proposal may allow for slightly
    increased longevity, it does not provide increased flexibility or
    delegation authority in the utilization of this statute (10 U.S.C.
    12304), with the exception of enhancing command and control between
    Guard and Active-Duty Forces. Additionally, it could be construed as an
    attempt to circumvent use of Partial Mobilization (10 U.S.C. 12302).
    While it seems this proposal coincides with Army global war on terror
    overseas rotation requirements and may be helpful for the Army, the ANG
    does not currently anticipate using the authority.
        (b) We encourage continued exploration of innovative ways to
    increase access to and flexible use of the Reserve components, but new
    legislation may be unnecessary in light of the additional flexibility
    gained by passage of chapter 9 of title 32, in the 2005 NDAA. Chapter 9
    provides for the Secretary of Defense to make available funding to
    Governors to employ National Guard members to conduct homeland defense
    activities for 180 days, with the ability to extend members for an
    additional 90 days. Further, section 502(f) of title 32 provides
    similar authority and National Guard members can also support civil
    authorities under State control. Accordingly, we would recommend a
    thorough review of titles 10 and 32 to ensure that new legislation is
    actually necessary. We would also recommend close coordination with the
    States to ensure critical utilization and command and control issues
    are resolved.
        (c) We question whether additional legislation is necessary in this
    regard. Section 502(f) of title 32 currently provides the authority to
    use National Guard members for natural disasters and was used
    extensively during Hurricane Katrina. Moreover, the National Guard can
    also be ordered to duty under State law to respond. Together with the
    additional flexibility gained by passage of chapter 9 of title 32, in
    the 2005 NDAA, it would seem this initiative may be unnecessary. As
    mentioned earlier, chapter 9 provides for the Secretary of Defense to
    make available funding to Governors to employ National Guard members to
    conduct homeland defense activities for 180 days, with the ability to
    extend members for an additional 90 days. If it is believed that these
    statutes are not sufficient, we would recommend an exceptionally
    thorough review of titles 10 and 32, and close coordination with the
    States to ensure critical utilization and command and control issues
    are resolved.
        (d) The ANG welcomes the exploration of ways to enhance mission
    readiness and predictability. However, unless current laws are changed,
    we must ensure that training and employment for any such units can be
    conducted under existing authorities. We must also consider the
    implications of recruiting and retaining members for such units.
    Additionally, there are currently multiple studies underway, including
    the Congressional Commission on Roles and Missions of the National
    Guard, which may potentially impact National Guard utilization.
        General Helmly.
        1. Increasing Presidential Reserve Call-up from 270-365 days;
        Yes, this initiative is in the best interest to the Total Force.
        The Army Reserve supports the request to increase Presidential
    Reserve Call-Up (PRC) from 270 to 365 days as it will provide
    flexibility to support the combatant commanders. The great majority of
    the Army Reserve's units will not require the full 365 days to alert/
    mobilize/deploy/redeploy/demobilize if the mobilization process is
    effectively streamlined to minimize post-mobilization training
    requirements.
        Existing alert and mobilization policy and Partial Mobilization
    Authority and PRC Mobilization Authority law were written for a
    strategic reserve not an operational reserve.
        PRC and partial mobilization are based on named operations rather
    than recurring use of a rotational force over some horizon. The
    implication is that no ``refresh'' of access is required because the
    named operation will not last for an extended period.
        For ARFORGEN to be operational it assumes assured access to Reserve
    component units; however this is not the case under current policy/law.
        The existing body of law and policy limits the use of Reserve
    component forces and was designed under the presumption that Reserve
    component forces would only be used for limited periods of time under
    PRC/partial mobilization as part of a stair-step while the executive
    and congressional branches of government move to full mobilization, if
    required.
        With a rotational force, there is a requirement to adjust
    mobilization laws and procedures to improve our capability to support
    the long war, while providing stabilization and predictability to our
    soldiers. Crafting a new mobilization law that guarantees access to
    some specified quantity of Reserve component forces on a cyclic/self-
    renewing horizon might be of value.
        The new law would also have to allow for alert of the Reserve
    component unit upon missioning to mitigate attrition during the ready/
    available years and allow the unit to complete the ARFORGEN readiness
    gate training requirements.
        2. Seeking legislation to improve access to Guard and Reserve in
    support of civil authorities;
        Yes, this initiative is in the best interest to the Total Force.
        Under title 10, section 12304 identifies support in the event of a
    terrorist attack. No moblization/activation authorities support natural
    disaster assistance.
        The United States Army Reserve supports legislation to improve the
    Army Reserve's ability to support domestic operations involving the
    results of natural disasters. Improving how civil authorities can
    access the Army Reserve with a more rapid process could help mitigate
    the loss of life and property. Pre-established funding streams and easy
    to understand ``activation and employment instructions'' regarding
    assistance to civil authorities would expedite the initial phases of
    organizing a response after an event occurs.
        The Army Reserve has talented soldiers with diverse skills who are
    willing to support the State or the Nation in a homeland disaster
    whether called on orders as AT, ADT, IDT, and ADSW. Any such laws which
    would facilitate the use of Reserve component personnel should also
    provide support for the soldiers' families (TRICARE issues) called for
    duty less then a 30-day period. Under today's statutes, soldiers
    families are without benefits during the first 30 days unless on ADT,
    ADSW orders whose duration is longer than 30 days.
        3. Seeking legislative relief of Presidential Reserve Call-up (PRC)
    statute to activate reservists for natural disasters;
        Yes, this initiative is in the best interest to the Total Force.
        The Army Reserve supports the request to modify PRC to allow
    Federal forces to respond to natural disasters. Currently Federal
    forces are allowed to provide support to civil authorities for disaster
    relief under limited immediate response circumstances under PRC
    Mobilization Authority. The first mobilization authority where this is
    currently allowed is under Partial Mobilization Authority.
        As occurred with the Louisiana National Guard and Hurricanes
    Katrina and Rita, if a large part of a State's National Guard force is
    deployed/obligated under ARFORGEN requirements the local authorities
    may lack sufficient resources to respond to a natural disaster.
        The Army Reserve has units geographically dispersed throughout the
    country just like the National Guard with the same equipment as the
    National Guard has identified HLD/HLS useful equipment.
        4. Developing Reserve units that train more intensively and require
    shorter notice for deployment;
        The Army Reserve believes this issue may have value, but needs
    further study. How to adequately provide predictability to soldiers in
    units that will be mobilized for longer periods of time needs to be
    explored. Implementing a program before identifying and working through
    all issues may result in false expectations, cause damage, and disrupt
    morale.
        Admiral Cotton. These QDR initiatives are in the best interests of
    our national defense as they enhance the warfighting capability of our
    Total Force. The transnational, asymmetric threats posed by terrorism
    require a Reserve component that is adaptive, flexible, and ready to
    fight our Nation's wars. Balancing the need for an agile and accessible
    force with a predictable and periodic operational tempo is the
    challenge for Navy leadership. We recognize the impact of supporting
    the global war on terror and day-to-day operational requirements upon
    our reservists, their families, and their employers. We are committed
    to supporting our citizen sailors as they answer our Nation's call to
    arms in this long war of our generation.
    Increasing Presidential Reserve Call-Up Authority from 270-365 days
        The operational rotation cycles currently used by the United States
    Marine Corps and the United States Army relative to deployments for
    their Active and Reserve components vary from 6 to 12 months ``boots on
    the ground,'' which they deem to be the most efficient and effective
    length for tours of duty in their respective Services. A maximum
    duration equal to 270 days does not readily support those cycles when
    pre-deployment training and post-deployment deactivation are taken into
    account. Expanding that duration to 365 days will facilitate greater
    ``boots on the ground'' time for Reserve component deployments.
        As our Reserve component changes from a strategic to an operational
    reserve, we must increase accessibility of our reservists. Increasing
    PRC authority in title 10, section 12304, to 365 days will provide more
    critical skill sets to the supported command during a national
    emergency. This increased authority would allow the Services to meet
    emerging requirements with fewer rotations of recalled servicemembers.
    Seeks legislation to improve access to Guard and Reserve in support of
            civil authorities and natural disasters (Initiatives (2) and
            (3))
        Hurricane Katrina revealed once again that the heart and soul of
    our national response to such crises is our Guard and Reserve.
    Supporting homeland defense/homeland security and providing
    humanitarian assistance/disaster relief are important roles for the
    Reserve component that must be enabled by legislation. These
    nontraditional missions are especially suited for the Guard and Reserve
    because of the diverse skill sets resident within these organizations.
    More importantly, our guardsmen and reservists live in the communities
    impacted by such events. Although we cannot predict the occurrence of
    these crises, we can predict the strong and unselfish desire of our
    citizen soldiers and sailors to protect and render assistance to their
    friends and neighbors. The Navy Reserve will remain a ``ready and
    relevant'' contributor to civil authorities and disaster relief
    efforts.
    Develop Reserve units that train more intensely and require shorter
            notice for deployment
        As previously stated, today's Reserve component is a critical
    component of the Total Force. As such, the Reserve component must be
    responsive to the changing demand signals sent by combatant commanders
    who require rapidly deployable, flexible warfighting capabilities.
    Initiatives such as Active Reserve Integration (ARI) allow Active
    component and Reserve component to work side-by-side in support of 21
    joint capability areas and to do so seamlessly. They enable a Reserve
    component that is trained and ready in fleet compatible equipment,
    systems, and functions. This ARI training is more effective and
    efficient, and has resulted in a Navy Reserve that is ready, relevant,
    and fully integrated. Recent examples include forward-deployed
    helicopter combat support detachments comprised of integrated Active
    and Reserve component warfighters.
        General Bergman. Marine Corps force management practices are
    designed to enhance the warfighting capability and long-term
    sustainability of the Marine Corps Reserve by providing trained,
    cohesive, combat-ready units, efficiently using Reserve marines 24
    months of cumulative activation, preserving Selected Reserve units for
    subsequent requirements, improving predictability of subsequent
    activations, and permitting reconstitution of previously activated
    units. The QDR recommendations to modify PRC authority provide further
    flexibility for utilization of our operational Reserve within the
    confines of current Marine Corps force management practices.
        General Bradley. We have worked closely with the Active-Duty Air
    Force to develop a means by which we can provide a more predictable and
    periodic deployment schedule for our personnel. It helps that we have
    experience with our deployments using the Air Expeditionary Force
    construct. Periodic and predictable deployments make it easier on
    everyone: our reservists, their families, as well as their employers.
    We will continue to improve our deployment processes.
    Increasing PRC from 270 to 365 days
        An increase to the PRC from 270 to 365 days would certainly
    increase the flexibility of the combatant commanders.
    Seeking legislation to improve access to Guard and Reserve in support
            of civil authorities; Seeking legislative relief of
            Presidential Reserve Call-up statute to activate reservists for
            natural disasters
        When it comes to using the Air Force Reserve to support civil
    authorities, we do that every day. Our response to Hurricane Katrina is
    a great example of how our reservists voluntarily step up to support
    civil authorities in times of need. Our Air Force reservists saved over
    1,000 people on the Gulf Coast after the storm. I'm not sure if any
    legislative relief is necessary to call upon the Reserve, whether it is
    to support civil authorities or to support in times of natural
    disaster. Regardless of the situation we are ready and available today.
    Developing Reserve units that train more intensively and require
            shorter notice for deployment
        The Air Force Reserve is not tiered in our readiness. We maintain a
    trained and ready force at all times. We are ready to deploy beside the
    Active-Duty no matter what the mission.

        52. Senator McCain. Admiral Cotton, in your prepared remarks, you
    state ``Navy reservists are no longer solely a strategic force waiting
    for a call to mobilize  . . [t]hey are operational and forward. . .'' I
    fully agree with your statement. We fund Reserve training and support
    in many different ways. In your view are we maximizing our Reserve
    training dollars to the fullest extent to enable our sailors to spend
    more time at their supported operational commands, including even in
    Japan where we have a bilateral and very close relationship? Please
    fully explain.
        Admiral Cotton. The Navy Reserve's motto is ``support to the fleet
    . . . ready and fully integrated.'' We have set a benchmark for all
    reservists to maximize operational support to the supported command. Of
    the basic 38 days (14 days of annual training and 24 days of drills) a
    reservist is ``on duty'' each year, we have set a goal to have each
    reservist at his or her supported command approximately 30 days.
        However, there still exists a myriad training requirements that
    need to be accomplished on a one-time or periodic basis. The Navy
    Reserve has transformed how we accomplish this training by finding more
    efficient methods for training delivery. One great example of this is
    the disestablishment of the traditional ``brick and mortar'' classrooms
    in favor of blended delivery methods that leverage and combine computer
    based training (CBT) with a shortened classroom portion. Training and
    education can be accomplished wherever the reservist has computer
    access. This method increases the member's flexibility by not
    necessarily requiring additional time away from his civilian work or
    the operational supported command. This has dramatically increased
    Navy's ability to provide current, just-in-time training for our
    sailors.
        Our sailors are accomplishing Joint Professional Military Education
    through CD ROM, Fleet Seminar, and Web-enabled access delivery methods.
    The approximate cost/seat is $3,000 versus $145,000-$165,000 required
    to send a member in person to the Navy War College for 10.5 months.
        Another example is the use of knowledge portals such as Navy
    Knowledge Online (NKO) to provide ready access to a large repository of
    training and educational products. NKO supports the sailor overseas
    through centralized access to training products. The only requirements
    for access are a Common Access Card and a Web-enabled computer.
        One area in which we working to enhance the utilization of our
    training dollars is development of a strategy to provide Tuition
    Assistance funding for our Selected Reserve. With this tool, our
    members can accomplish advanced education requirements to meet
    professional requirements such as the new requirement for an Associates
    Degree for Senior Chiefs.
        Navy Reserve is maximizing use of training dollars by leveraging
    technology and blended delivery methods. This approach optimizes a
    Reserve component member's ability to accomplish training and education
    requirements while balancing operational support commitments.
        To address the specific question of maximizing training dollars and
    operational support at the supported command in Japan, Commander, Navy
    Reserve Forces Command, has recently modified policy to permit IDT
    utilization anywhere overseas as long as not in an area prohibited by
    other instruction, such as hostile fire or imminent danger areas. This
    will permit the reservist to provide operational support while training
    with his or her supported command.

        53. Senator McCain. Admiral Cotton, I want to congratulate you on
    your outstanding support to the National Call to Service (NCS) program.
    Soon, NCS recruits will be ending their Active-Duty service and
    continuing their naval service as drilling reservists. What ratings or
    skill sets do you expect to see joining the Navy Reserves from these
    NCS recruits?
        Admiral Cotton. NCS sailors are serving in high demand/low density
    ratings critical to the global war on terror. Specifically, sailors are
    transitioning to the Navy Reserve after serving on Active-Duty as
    master-at-arms, corpsmen, intelligence specialists, and SeaBees.

        54. Senator McCain. Admiral Cotton, will there be opportunities for
    these NCS recruits in the ratings they were recruited for to advance in
    the Reserves?
        Admiral Cotton. Absolutely. NCS sailors transitioning to the
    Reserve component will fill critical billets and have the same
    promotion opportunities within their ratings as any other reservist. We
    value these sailors' contributions while on Active-Duty and we will
    continue to value their service to our Nation as dedicated reservists.

        55. Senator McCain. Admiral Cotton, at this time do you see this
    recruitment program continuing in fiscal year 2007 and in the future?
        Admiral Cotton. Yes, this program provides an important accession
    source that develops fleet-experienced sailors who can then transition
    to the Reserve component. The NCS program is delivering a core of
    junior, qualified sailors to the Navy Reserve and we wholeheartedly
    support continuation of this valuable and effective program.

        56. Senator McCain. Admiral Cotton, Congress provided several new
    force shaping initiatives and expanded other authorities to address the
    Reserve recruiting shortfall in the NDAA for Fiscal Year 2006. Are all
    these force shaping tools, both new authorities provided by Congress
    and existing authorities which were expanded, fully funded in the
    National Defense Authorization Request for Fiscal Year 2007? Please
    explain your response.
        Admiral Cotton. The NDAA for Fiscal Year 2006 new and expanded
    force shaping tool authorities are not fully funded in the National
    Defense Authorization Request for Fiscal Year 2007. The NDAA for Fiscal
    Year 2006 was signed after the annual Navy/OSD/Office of Management and
    Budget budget cycle was complete. This occurred too late to rebuild the
    budget to accommodate the new authorities. Fiscal year 2007 funding
    levels for force shaping tools will be addressed through consideration
    of in-year execution realignments and via the Department's supplemental
    requests. For fiscal year 2008 and future years, resourcing for new
    authorities are being reviewed during the Department's fiscal year 2008
    program/budget build process.
                                     ______

                 Question Submitted by Senator Saxby Chambliss

               joint surveillance and target attack radar system

        57. Senator Chambliss. General James, I understand that Air Combat
    Command might be trying to ``pull back'' $526 million in funding for
    the Joint Surveillance and Target Attack Radar System (JSTARS) re-
    engining which is currently funded in the fiscal year 2007 budget
    request in order to pay other Air Force bills. Since this is an issue I
    have followed extremely closely for the past several years, I would be
    very disappointed if the Air Force were reneging on their promise to
    re-engine these aircraft. Can you comment on this issue and ensure me
    that the JSTARS re-engining effort remains funded in the way which the
    fiscal year 2007 budget request and FYDP outlined?
        General James. The ANG is extremely proud of the contribution it is
    able to make to the JSTARS mission and have been assured that the Air
    Force remains committed to the long-term health of the JSTARS program.
    This will include the planned re-engining of those aircraft in the
    FYDP. This is included in the budget request submitted to Congress for
    fiscal year 2007. This summer as we begin departmental fiscal year 2008
    deliberations, we are faced with increasing fiscal challenges; these
    challenges will force tough programmatic decisions in a period of
    potential negative real growth. The fiscal year 2008 budget submission
    will balance the best capabilities across the entire departmental
    portfolios within Total Obligation Authority limits to provide for our
    Nation's defense.
                                     ______

                 Questions Submitted by Senator Daniel K. Akaka

                      mental health of returning soldiers

        58. Senator Akaka. General Blum, just this month, approximately
    2,300 Hawaii National Guardsmen returned home from deployment.
    According to a recent article by the Pacific Business News, a number of
    these soldiers are experiencing some difficulty readjusting to civilian
    life. I believe that we have an obligation to assist these dedicated
    guardsmen in their efforts to resume the lives they left behind in
    order to keep our country safe. I am particularly concerned about the
    mental health of our returning guardsmen.
        Could you provide me more details on the ways in which you are
    partnering with the VA and other State and Federal agencies to provide
    additional services to reservists, particularly mental health related
    services?
        General Blum. In May 2005, the National Guard Bureau signed a
    memorandum of agreement with the VA that defines the mutually agreed
    upon requirements, expectations, and obligations of the two
    organizations. To support this agreement at the State level, the
    National Guard Bureau has hired State Benefits Advisors and placed them
    at each State Joint Forces Headquarters to act as liaisons with State
    and Federal agencies that can provide support to returning
    servicemembers. In February 2006, the State Benefits Advisors received
    training provided by the VA, Department of Labor, and DOD. The State
    Benefits Advisors work with the State Director of Veterans Affairs and
    other VA personnel to educate servicemembers, their families, and Guard
    leadership on veteran benefits, and act as the servicemembers' advocate
    when necessary. Additionally, State Benefit Advisors are working with
    State Department of Labor to provide career and job placement
    assistance.

                                equipment needs
        59. Senator Akaka. General Blum, according to an October 2005
    Government Accountability Office (GAO) report, one of the challenges
    facing the ARNG has been an inability to effectively identify and
    communicate a unit's equipment needs until just before their scheduled
    deployment. As a result, the Guard is forced to quickly transfer the
    necessary equipment. What efforts has the Army and National Guard made
    to remedy this situation?
        General Blum. The ARNG continues to monitor the Department of the
    Army's Theater Force Tracker database. We are involved in the
    development and fielding of the Equipment Common Operating Picture
    information system which should provide to more timely information on
    the equipping of the deploying forces to Southwest Asia. In addition,
    we have embedded personnel in the major headquarters in Iraq,
    Afghanistan, and Kuwait to work these issues in the event information
    is not provided in a timely manner. We communicate with U.S. Army
    Forces Command and the Department of Army to obtain equipment
    information for deployment when it is not made available in sufficient
    time to allow early and organized equipment fieldings.

                                    tricare
        60. Senator Akaka. Secretary Hall and General Blum, the
    administration's proposed budget would introduce a new fee schedule
    which would raise the annual enrollment fees for retirees under age 65.
    It would also raise the annual enrollment fee for TRICARE Prime and
    introduce a new annual enrollment fee for TRICARE Standard as well as
    increasing TRICARE Standard's annual deductible. In what way would
    these proposed changes impact your recruiting and retention efforts?
        Mr. Hall. We anticipate an insignificant effect on recruiting, and
    minimal effect on retention. We feel that even with the rate increase,
    this is still an excellent value.
        General Blum. We would not expect these changes in TRICARE
    enrollment fees and deductibles to have a significant impact on our
    recruiting and retention efforts. On a related note, we appreciate
    congressional support so that we now have TRICARE availability for the
    entire Selected Reserve Force through the three tiers of TRS. We will
    advertise to the maximum extent possible to ensure National Guardsmen
    are informed of this new TRS benefit.

                    national guard's equipment requirements
        61. Senator Akaka. Secretary Hall, in your testimony, you state
    that, for modernization alone, the Army has budgeted approximately $21
    billion from 2005 to 2011. Moreover, you state that this budgeted
    amount will permit the ARNG to support the Nation's global operations.
    I am concerned, however, that the Army has not provided a detailed plan
    that specifies the National Guard's equipment requirements. Without
    this plan, what assurances can you give me that this amount will be
    sufficient to modernize the Guard while supporting current operations?
        Mr. Hall. The Army is currently working their ARFORGEN
    Implementation Plan. The Secretary of the Army and the Chief of Staff
    of the Army are scheduled to be briefed in June and the plan approved
    by July 1, 2006.
        I have requested that the Army provide two detailed plans for
    equipping the ARNG and the Army Reserve in response to recommendations
    contained in two GAO audits addressing equipping concerns for these
    components. Due to the timing of the release of the ARFORGEN
    Implementation Plan, the suspense date for their input to the Office of
    the Assistant Secretary of Defense for Reserve Affairs has been
    extended to June 15, 2006. I will forward the plan to the GAO for
    delivery to your committee as soon as it is received by my staff.

                          national guard end strength
        62. Senator Akaka. Secretary Hall, you stated in your testimony
    that the Army leadership is committed to funding the Guard up to their
    congressionally authorized end strength of 350,000. However, funding
    cuts reduced the ARNG's budget by $789 million in fiscal year 2007
    budget. How, specifically, does the Army plan to make up for this
    shortfall in order to fully fund the authorized 350,000 end strength?
        Mr. Hall. The Army is committed to funding the ARNG up to the
    350,000 end strength level in fiscal year 2007 and is in the process of
    identifying sources to meet this commitment which includes a
    supplemental request and closely monitoring the recruiting efforts.
    Efforts are ongoing regarding the equipment/investment (procurement)
    restoral and the total dollar amount depends on the final outcome of
    force structure adjustments.

        [Whereupon, at 3:17 p.m, the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2007

                                  ----------

                             TUESDAY, APRIL 4, 2006

                                   U.S. Senate,
                             Subcommittee on Personnel,
                                   Committee on Armed Services,
                                                         Washington DC.

                  CONTINUATION OF HEALTH BENEFITS AND PROGRAMS

        The subcommittee met, pursuant to notice, at 2:34 p.m. in
    room SR-232A, Russell Senate Office Building, Senator Lindsey
    O. Graham (chairman of the subcommittee) presiding.
        Committee members present: Senators Graham and E. Benjamin
    Nelson.
        Committee staff member present: Charles S. Abell, staff
    director.
        Majority staff members present: David M. Morriss, counsel;
    Diana G. Tabler, professional staff member; and Richard F.
    Walsh, counsel.
        Minority staff members present: Jonathan D. Clark, minority
    counsel; Gabriella Eisen, research assistant; and Gerald J.
    Leeling, minority counsel.
        Staff assistants present: Benjamin L. Rubin and Pendred K.
    Wilson.
        Committee members' assistants present: Meredith Beck,
    assistant to Senator Graham; Greg Riels, assistant to Senator
    Dole; and Eric Pierce, assistant to Senator Ben Nelson.

            OPENING STATEMENT OF SENATOR E. BENJAMIN NELSON

        Senator Ben Nelson [presiding]. As you might have observed,
    I'm not Senator Graham, I'm Ben Nelson. Senator Graham has been
    delayed for a few minutes and he's asked me to go ahead and
    start the hearing today.
        This is the continuation of the hearing on military health
    care. As I indicated in the first session of this hearing, one
    of the most significant issues the Personnel Subcommittee will
    address this year is the Department of Defense (DOD) proposal
    to increase health care premiums and annual deductibles for
    retirees who are not yet eligible for TRICARE for Life.
        This is an emotional issue for many military retirees.
    Throughout their military careers they were told a significant
    portion of their compensation for service was a generous health
    care benefit during their retired years. They based career
    plans, as well as retirement plans, on the promise of an
    affordable health care benefit based on the fee structure in
    existence for the last decade.
        Now that doesn't mean that reasonable adjustments can't be
    accommodated. While we can't dismiss legitimate concerns of our
    military retirees, we do have an obligation to make sure that
    we can sustain this excellent health care benefit for those who
    have already retired, for those who are serving now, and for
    those who are yet to serve. This will require a careful
    balancing of interests.
        I share the Department's concern about the increasing cost
    of health care. This is also a concern for our society at
    large. However, the DOD has some special considerations to take
    into account when attempting to change a health care benefit
    during a time of war. If we don't do this right, the increases
    will be perceived as a reduction, not an earned benefit, and
    may adversely affect recruiting and retention. This is a
    consequence that would be extremely difficult to reverse and
    one we cannot afford.
        Service Personnel Chiefs have been telling us for some time
    that one of the main challenges to successful recruiting is the
    lack of support for military service by influencers. These
    influencers include parents, teachers, guidance counselors, and
    coaches. Those who have served in the military, especially
    retirees, are very significant influencers. If military
    retirees believe that the government has reneged on a promise,
    an earned benefit, can we count on them to promote military
    service by the young people and in their sphere of influence?
        I think we also need to understand the impact these
    proposed increases will have on those who are serving today.
    Will these proposed increases, if enacted, have an effect on
    the family decision to remain in the military? Will they start
    to question what other benefits might be changed that would
    have an impact on their retirement plans? Among other things, I
    plan to ask the military leaders whether they've attempted to
    ascertain how this proposal is viewed by currently serving
    military personnel and their families.
        I support the call and the conclusion by Senator Graham for
    an audit by an independent agency to make sure that we're all
    working from a common understanding of the true cost of the
    current health care system before we start changing it. I'm
    concerned about singling out retirees under the age of 65 to
    carry the full burden of controlling cost without considering
    cost increases attributed to other categories of beneficiaries
    of the benefit. I also agree that we should carefully examine
    the feasibility of the many ideas for efficiency presented by
    witnesses at the last session of this hearing.
        So, with that, I'm eager to hear what our witnesses have to
    say this afternoon. We will hear the chairman's opening
    statement when he arrives here in the next 10 or 15 minutes.
        Dr. Chu.

    STATEMENT OF DR. DAVID S.C. CHU, UNDER SECRETARY OF DEFENSE FOR
                        PERSONNEL AND READINESS

        Dr. Chu. Senator Nelson, it's a privilege to be here this
    afternoon and have this opportunity for dialogue on the
    military health system (MHS), its performance and,
    specifically, our proposal to ensure that its excellence can be
    sustained in the years ahead. The country, in my judgment, has
    every reason to be proud of its MHS. It's a system that has
    transformed itself over the last decade or so. You can see the
    product of that transformation, the extraordinary care given
    those who were wounded in the current conflicts in Iraq and
    Afghanistan. You can see the outcomes that system produces in
    the high survival rate of those who do receive wounds. You can
    see that outcome also in the record low of disease and non-
    battle injury rate among our troops. That is an extraordinary
    set of accomplishments.
        Our health benefit has been transformed as well in terms of
    the quality of product that it delivers. I can remember a
    period when TRICARE was not a brand name to be proud of. It is
    now a brand name that we can take great pride in. Indeed, it is
    a vote of confidence that Congress has been insistent in adding
    communities to this benefit over the last 2 years. It has been
    voted, as you may be aware, by an independent survey of
    beneficiaries themselves, as the best health care plan of its
    type in the country and it has won that accolade over the last
    3 years.
        The issue before us is how do we sustain that success? This
    has been a costly trajectory. Health care in the DOD consumed
    about 4.5 percent of the Department's budget in the early
    1990s. In the President's budget request in front of Congress
    this year for fiscal year 2007 it will, if you enact it as
    proposed, consume about 7.5 percent of that total. Our
    projection is that by 2015, if we leave the rules of the game
    as they now exist in place, health care will consume 12 percent
    of the Department's budget. We do not believe that is
    sustainable. I don't think any external budget expert would
    agree that that is sustainable. Something will give, something
    will break, and what will break most likely is the quality of
    the program that we deliver.
        We are committed to making the program more efficient. A
    great deal has already been done in that regard and Dr.
    Winkenwerder is prepared to address those issues as are my
    fellow witnesses. We would look forward to further discussion
    of how we plan on further efficiency improvements--challenges
    we have given the medical establishment in terms of doing
    things better, doing things at lower cost, while maintaining
    the quality of the outcome that is achieved.
        The Department has already had to transfer, in the last two
    budgets, substantial resources from elsewhere within its total
    top line to the MHS in order to sustain this program and much
    more will be needed if the budgetary figures I described a
    moment ago were in fact to pertain. In our judgment we have the
    chance, or a window of opportunity, to put the program on a
    basis that is sustainable for the long run. It is not really to
    change what was promised to our beneficiaries 10 or 15 years
    ago when TRICARE was inaugurated. It was with a premium for
    TRICARE Prime. At that time, beneficiaries bore over a quarter
    of the total cost faced by the system. Because we have kept
    those rates near constant or have reduced them in this period
    of time, the typical beneficiary now pays only 12 percent of
    the total cost of the program.
        If we were to proceed with the changes that have been
    outlined we would change it only to 14 percent or so of the
    cost of the program. We think that's a modest change. It is in
    percentage terms a significant change and we can understand the
    reactions that, therefore, occur. We think it is affordable in
    the larger context. We try to make sure it is affordable by
    differentiating for the first time the fees charged to officers
    from those charged to more senior enlisted retirees from those
    charged to retire at the grade of E-6 or below.
        We focused on the under-65 retirees because when you look
    at the entire picture that seemed the fairest way to go about
    it. We are troubled, frankly, by the trend that has developed
    in the last several years in which private institutions and
    State and local governments are encouraging the migration of
    their employees away from their own health insurance programs
    toward TRICARE, shifting costs to the DOD. It's not clear to us
    that that is intended by the country as the purpose of the
    TRICARE program--essentially to subsidize these other
    organizations.
        We believe sustaining the quality of the benefit--and that
    truly what's at issue is sustaining the quality of the benefit
    over time by ensuring it has adequate financial resources to
    carry out its mandate--is a critical retention issue. If our
    Active Force believes that because of the financial constraints
    that would otherwise be imposed, we cannot sustain the quality
    of health care to which they have properly become accustomed,
    that will be a retention issue. So this is an immediate
    retention problem for us to get this right, to be sure that
    each community bears its share of the burdens that are involved
    and put the program on a sustainable basis for the long run.
        Dr. Winkenwerder.

        STATEMENT OF WILLIAM WINKENWERDER, JR., M.D., ASSISTANT
                SECRETARY OF DEFENSE FOR HEALTH AFFAIRS

        Dr. Winkenwerder. Thank you, Dr. Chu, and thank you,
    Senator Nelson. I appreciate your leadership and your very
    close attention and interest to this issue.
        The performance of the military medical personnel in
    battlefield medicine and our hospitals and clinics around the
    world has been inspirational. It's really been an incredible
    experience for me as a physician, and former practitioner, to
    go out and visit with our people and to see the really great
    work that they're doing and the impact that that is having on
    so many lives, including so many families. As the principal
    manager and fiduciary for this program, as I've shared with my
    surgeon general colleagues and other leaders across the
    Department, that is what I want to see continue for the long
    term. I want to see that great capability and all the things
    that are needed to continue to improve it, like electronic
    health records, advanced research, and new treatments and new
    drugs and so forth continue.
        At the same time, we have a great health benefit as has
    been noted, and that's important to sustain as well for the
    family members, for the servicemembers themselves, and for our
    retirees, who deserve an absolutely outstanding benefit. It has
    indeed been a real sense of satisfaction to see that benefit in
    the performance and the quality, and the service and
    satisfaction and really very quantifiable measures continue to
    improve, so that I know that we're getting a better and better
    result with each year that passes.
        However, as Dr. Chu has noted, we are challenged by a
    really major issue looking out into the long term and that has
    already begun to have some impact now, and our budget has
    doubled from roughly $19 billion in 2001 to $38 billion this
    year. If we do nothing to change our current trajectory, which
    obviously we do not want to do, we would reach $64 billion by
    2015. That is just eight budget cycles away.
        The principal drivers of this trend are the expansion of
    benefit and expanded TRICARE coverage to more groups and
    populations. Overall health care inflation has been significant
    and we don't see that slowing significantly. It has slowed some
    the last couple of years, but I think the prudent projector of
    the future says that this is going to continue. We've also had
    reduced out-of-pocket cost shares and, of course, the increased
    number of military retirees who have chosen, for great value,
    to return to the MHS.
        You've received the Department's recommendations to address
    this issue. They're focused on adjustments to TRICARE cost
    shares. I understand that is not a popular or easy thing to do.
    But I have received a sense of satisfaction and gratification
    from working together with people around this table, with the
    leaders of the Services, with General Pace, then Vice Chairman
    Giambastiani, and other leaders to put this together. We think
    this is our best proposal. We certainly are open to ideas and
    have met even with many groups, many individuals, and Members
    of Congress since introducing the proposal. So we look forward
    to continuing that dialogue. We believe that what we have put
    forward is a good proposal. I also appreciate the time you and
    Senator Graham invested in this issue, because your leadership
    on this is important to help us get moving and moving forward.
        We are projecting about $11 billion in savings over the 5-
    year period from 2007 to 2011. About $2 billion of that is
    increased revenue, if you will, about $1 billion is in
    reductions in utilization that we can safely project from
    studies. Another $300 million is the change in patterns in
    terms of using more generics and mail-order pharmaceuticals.
    The third source, and a significant source, about $7 or $7.5
    billion is on assumptions that have been made with regard to
    the numbers of people, retirees that would use the system
    versus the current numbers. I know those projections are open
    to scrutiny. We would encourage that, we have nothing to hide.
    We believe they're conservative and we welcome that look from
    as many as would like to see about the realism of those
    projections.
        Let me mention one other thing in terms of the actions
    we're taking. We will talk today and be glad to answer
    questions about all the different things we're doing to save
    money and to manage efficiently and there are some real
    opportunities there going forward that I want to emphasize. One
    area that is important that we would appreciate support from
    Congress is in the area of pharmaceuticals and the Federal
    pricing issue.
        I want to emphasize that, because the cost impact is so
    considerable. Unfortunately, the pharmaceutical industry and
    their representatives have refused to provide discounts to the
    Department on drugs dispensed in the retail sector and they
    filed suit against the Department, challenging our clear
    authority. We're currently owed, today, over $450 million in
    discounts. In other words, our budget issues would be relieved
    by that much today if we had what we think is due to us. We are
    accruing bills, so to speak, that we believe are due to us to
    the tune of about $400 million a year. That is a considerable
    amount of money. While this is all tied up in court, this makes
    our challenge even more considerable.
        So let me just close by saying our system has and continues
    to deliver superlative care to servicemembers, their families,
    and our retirees and citizens around the globe. We're committed
    to sustaining this great benefit for generations to come. I
    look forward to questions. Thank you very much.
        [The joint prepared statement of Dr. Chu and Dr.
    Winkenwerder follows:]

       Joint Prepared Statement by Hon. David S.C. Chu and Hon. William
                               Winkenwerder, Jr.

        Mr. Chairman, distinguished members of this committee, thank you
    for the opportunity to discuss the Military Health System (MHS). Today,
    the Armed Forces of the United States have more than 275,000 service
    men and women deployed around the world in support of our national
    security commitments, including those serving in Afghanistan and Iraq.
    The Department of Defense (DOD) is firmly committed to protecting the
    health of these and all servicemembers, before, during and after their
    deployment and to our other health care beneficiaries, who now number
    more than 9 million.
        The Fiscal Year 2007 Defense Health Program (DHP) funding request
    is $21.4 billion for Operation and Maintenance (O&M), Procurement and
    Research, Development, and Test and Evaluation Appropriations to
    finance the MHS mission. We project total military health spending to
    pay for all health-related costs including personnel expenses, and
    contribution to fund retiree health costs, to be $39 billion for fiscal
    year 2007.
                                 transformation
        Given the complexities we face, and the nature of our national
    security threats, we must embark on transformational change--
    specifically, we must transform our forces, the way we conduct
    business, our medical benefit, and our facilities and information
    infrastructure. The transformation process is designed to provide the
    Armed Forces with world-class operational medicine capabilities while
    delivering the outstanding TRICARE benefit to our beneficiaries.
    Secretary Rumsfeld has described transformation as ``a process that
    shapes the changing nature of military competition and cooperation
    through new combinations of concepts, capabilities, people and
    organizations that exploit our Nation's advantages and protect against
    our asymmetric vulnerabilities to sustain our strategic positions,
    which underpin peace and stability.'' The entire Department is
    participating in a transformation process to make the U.S. military an
    elite fighting force that is both efficient and effective.
        Military medical transformation is shaped by the recommendations
    for the MHS contained in the Quadrennial Defense Review (QDR), Medical
    Readiness Review (MRR), and the Base Realignment and Closure Commission
    (BRAC). In addition, we also must address a health benefit whose long
    term costs may risk our ability to deliver high quality and customer
    focused health services.
        The QDR is conducted every 4 years to evaluate the strategies and
    processes of the DOD. For the MHS, it gave us the unique opportunity to
    review our medical mission and determine how we can better support the
    Department and our beneficiaries. In this process, we reviewed our
    manpower, infrastructure, business practices, and our health care
    benefit. We have been provided a once in a lifetime opportunity to
    refine the MHS and shape the future MHS into the premier health care
    system in the world. The QDR allows us to address the shortcomings of
    the MHS, and sustain the TRICARE benefit over the long term.
        We have established the Military Health System Office of
    Transformation to help guide and coordinate efforts through this
    dynamic period of change. This office is providing leadership, advice,
    and direction to those who are implementing our transformation
    objectives. Admiral John Mateczun, the deputy Navy Surgeon General
    serves as the director of this office. Representatives from each of the
    Services have joined him. This team will have a 2-year tenure to
    oversee and guide MHS transformation efforts at which time we
    anticipate that efforts will be undertaken by our Office of Strategic
    Planning and normal administrative structure.
                             transforming the force
        The MRR is the component of the QDR that reviewed our medical
    readiness posture and options for our future force structure. The three
    pillars of Force Health Protection drive the assessment of capability
    required for a future force that will possess the following: Service
    capability, interdependent and integrated forces, and joint options for
    operational medical requirements. The Medical Readiness Capabilities
    Group developed a current `as-is' inventory of Departmental medical
    readiness capability and identified future capabilities to support the
    comprehensive concept of joint force health protection. The Casualty
    Estimation and Medical Risks Group performed war time casualty modeling
    using the Department's approved scenarios. The Metrics and Capability
    Needs Group has developed an analytical framework to support the
    determination of capability needs for resource programming. The Medical
    Readiness Resources Group analyzed and developed resource requirements
    from peacetime transition to contingency operations. The results of
    these reviews call for us to develop and adopt minimum standards across
    the Services for personnel, training, and capabilities. We are looking
    to shape our medical force to be more joint and interdependent as it
    supports the 21st century missions of our military.
                           transforming the business
        Our new health care contracts, which we fully implemented in fiscal
    year 2005, use best-practice principles to enhance quality of care,
    emphasize patient safety, improve beneficiary satisfaction and control
    private sector costs. Civilian contract partners must manage enrollee
    health care and can reduce their costs by referring more care to
    medical treatment facilities (MTFs). In concert with these new
    contracts, and the implementation of the prospective payment system for
    military facilities, we need the flexibility to move funds between
    direct care and private sector care. Current restrictions on funding,
    imposed by Congress, adversely affect MTFs as well as care in the
    private sector. We urge members of Congress to authorize the MHS to
    manage our funds as an integrated system, which will allow funds to
    flow on a timely basis to where care is delivered.
        With this flexibility in funding, we intend to set the budgets of
    MTFs on workload output such as hospital admissions, prescriptions
    filled and clinic visits, rather than on historical resource levels
    such as number of staff employed, supply costs, and other materials. In
    addition, our hospitals will manage their force health protection and
    health care delivery missions as a comprehensive whole using a single
    set of performance measures. We are in the second year of a planned 4-
    year transition to this new prospective payment system. It provides
    incentives and financial rewards for efficient management. Underpinning
    all of the transformation of the business effort is our evolving MTFs
    business planning process being implemented by the Services.
        Finally, all of our activities in the MHS are continually
    prioritized, evaluated, and measured through a constructive process
    using the balanced scorecard. The Services' medical leaders together
    with senior staff from TRICARE and Health Affairs work together to
    manage this process.
                        transforming the infrastructure
        Three significant initiatives, BRAC, DOD/Department of Veterans'
    Affairs (VA) Sharing, and the United States Army Medical Research
    Institute of Infectious Diseases (USAMRIID) recapitalization, will
    allow us to transform our infrastructure. The BRAC recommendations will
    improve use and distribution of our facilities nationwide, and affect
    health care delivery and medical training across the MHS. The
    consolidation of medical centers in the National Capital Area and San
    Antonio will improve operations by reducing unnecessary infrastructure,
    rationalizing staff, and providing more robust environments to support
    graduate medical education. In some areas, we expect to significantly
    enhance care by providing services closer to where our beneficiaries
    reside, like at Fort Belvoir, Virginia. By contrast, in smaller
    markets, MHS facilities will cease to provide inpatient services and
    instead focus on the delivery of high quality ambulatory care. The
    consolidation of medical centers and the elimination of inpatient
    services at smaller facilities will produce a stronger and more
    efficient MHS. The BRAC recommendations will bring most medical
    enlisted training programs to Fort Sam Houston. As a result, the MHS
    will reduce its overall technical training infrastructure while
    strengthening the consistency and quality-of-training across the
    Services. BRAC is a forcing function for us. Key to our success in BRAC
    is the creation of sound planning principles to shape these new
    structures in ways that are joint, interoperable, non-redundant, and
    effective. We are truly shaping our infrastructure and our future.
        Another substantial change to the MHS infrastructure is the
    development of joint facilities as a result of increased collaboration
    with the VA. The most visible example today is at Naval Hospital Great
    Lakes, where the pressing requirement to replace an aging and oversized
    hospital has been met by building a new outpatient facility at nearby
    North Chicago VA Medical Center. This facility will have an innovative
    governance and integration plan, which was developed locally, and will
    allow both Departments to become more efficient and cost effective
    while improving services to beneficiaries of both systems.
        Finally, the aging and overcrowded facilities at USAMRIID will be
    replaced with a cutting edge, modern research facility that will
    continue to produce medical countermeasures to the world's deadliest
    diseases. The new USAMRIID will serve as the cornerstone of the
    emerging National Biodefense Campus at Fort Detrick, Maryland, which is
    currently under development with the Department of Homeland Security
    and the National Institute of Allergy and Infectious Diseases. We are
    also planning for a replacement facility to support the U.S. Army
    Institute of Chemical Defense at Aberdeen, MD, the Nation's premier
    center of excellence to identify and develop medical countermeasures
    for chemical warfare agents. The transformation of our physical
    infrastructure will help us meet the demands of the evolving war on
    terrorism and the potential threats we face today.
                            transforming the benefit
        An issue we must address is the rising costs of health care. Put
    directly, we need help from Congress to sustain our benefit over the
    long term. Our program has essentially doubled in size in the past 5
    years, from about $19 billion in 2001 to $38 billion in 2006. Further,
    we estimate that our expenditures for health care could be $64 billion
    in 2015, approximately 12 percent of the Department's budget. This
    rapid growth in cost clearly puts the sustainability of our health
    benefit at risk. The facts show that the expansion of TRICARE, high
    health inflation, the reduction in beneficiary cost shares, and sharp
    increase of usage by our retirees under 65 is responsible for this
    growth.
        In 1995, beneficiaries paid 27 percent of total health costs; today
    they pay 12 percent of total health costs. We believe that it is
    absolutely essential to achieve a financial balance between the
    government and individual's care contributions closer to when TRICARE
    was inaugurated 11 years ago. Our plan to increase cost sharing would
    ask retirees under 65 to pay higher premiums and co-payments for health
    care coverage. These plans would have three tiers with increases for
    junior enlisted retirees substantially less than those for officers.
    Furthermore, after a 2-year transition, beginning in fiscal year 2009,
    these increases would be indexed to the average percentage increase in
    the Federal Employees Health Benefit Program (FEHBP) premiums. In
    addition, we propose to also change pharmacy co-payments, for all
    beneficiaries except Active-Duty members, to encourage use of mail-
    order and MTF pharmacy refills and generic products, when appropriate.
    We also ask that Congress clarify to those who oppose the Department
    our legal authority to obtain Federal pricing discounts for
    prescriptions obtained at retail pharmacies. To implement these changes
    to sustain our invaluable benefit, we need help from Congress.
        We estimate that if our proposed changes are implemented the
    department will reduce costs a total of $735 million in fiscal year
    2007, and a total of $11.2 billion from fiscal years 2007-2011. The
    total includes both premium/deductible changes and the pharmacy program
    adjustments.
        We will have $249 million in expected cost reduction in fiscal year
    2007 from increasing deductibles and from instituting annual enrollment
    fees for TRICARE Extra and Standard and indexed to the annual rate of
    change in average premiums of the FEHBP. Another $329 million is from
    increased annual enrollment fees for TRICARE Prime, also indexed to the
    annual rate of change in average premiums of the FEHBP.. There is $157
    million in expected savings from the Pharmacy co-payment adjustments.
    Of these proposed benefit changes, we believe that only the
    implementation of the annual TRICARE Extra/Standard enrollment fees and
    increased deductibles require legislation.
        In the ongoing discussions with the beneficiary organizations
    regarding our recommendations to increase select cost-shares, they have
    voiced concern that our initial focus should first be on ``internal
    efficiencies'' that can be gained before measures are taken to increase
    cost-shares. They are correct that this should be the first step. We
    have implemented a number of actions in the last several years designed
    to slow the health care cost increases. These cost saving initiatives
    have been very successful, and yet they are insufficient in addressing
    all of our cost drivers. We will detail these initiatives in this
    statement, and also discuss our additional recommendations to sustain
    quality and the overall health benefit while properly managing costs.
        Our primary cost savings initiatives reduced defense health care
    costs by $419.1 million in 2002, and we target savings of $973.3
    million in 2007. The key program initiatives that have led to these
    savings are:

              1. the use of the Federal supply schedule to lower pharmacy
            costs,
              2. new private sector care TRICARE contracts that reduced
            administrative costs,
              3. an increase in VA and the DOD sharing of facilities,
            capabilities, and joint procurements.
              4. the implementation of business planning tools to help
            local military hospital and clinic commanders identify
            efficiencies and optimize their facilities, and
              5. the introduction of new prime vendor agreements to lower
            costs of MTF medical and surgical supplies.

        As we continue these cost reduction efforts, we have established
    annual saving targets of 3-5 percent of our annual O&M budget.
                           pharmaceutical management
        In June 2004, the Department redesigned our pharmacy programs into
    a single, integrated program. This reorganization allows us to more
    efficiently and effectively manage this $5 billion per year program. We
    have achieved prescription drug cost savings through a number of means:
    Joint DOD/VA Purchasing
        We have successfully partnered with the VA in an ever-expanding
    joint purchase program for prescription drugs. In 2004, this program
    saved more than $138 million; and we project savings of almost $200
    million in 2007.
    Administrative Efficiencies
        We have a single contractor providing both mail-order and retail
    pharmacy network services to our beneficiaries.
    Federal Pricing
        We currently use Federal pricing for mail-order and MTF pharmacy
    services, which provides DOD with the lowest prices for prescription
    drugs. We strongly believe Federal pricing authority extends to the
    prescription drugs dispensed to military beneficiaries through our
    pharmacy retail network. The pharmaceutical industry disagrees, and has
    worked to deny us this potent cost saving tool. This issue is now in
    the courts; we hope to have a decision later this year. We estimate
    that we would save an additional $251 million in 2007 based on the
    extension of Federal pricing to our retail network, assuming the court
    agrees with our argument.
        In our fiscal year 2007 budget, we propose to adjust beneficiary
    cost-sharing for certain categories. Specifically, we propose to
    eliminate patient cost-shares for generic drugs obtained through our
    mail-order pharmacy (the current cost-share is $3); and to increase
    cost-shares for generic and brand-name formulary drugs obtained through
    the retail network (generic cost-shares are proposed to increase from
    $3 to $5; brand-name drugs from $9 to $15). Our objective is to provide
    our beneficiaries with a greater economic incentive to use the mail-
    order venue, where costs are lower.
        We will continue to look for ways to improve DHP cost savings in
    the pharmacy program, and we are now developing utilization management
    programs that can further increase our annual DHP savings.
                        tricare contracting initiatives
        In 2005, we implemented the new TRICARE contracts, reducing 7
    contracts to 3, reducing 12 geographic regions to 3, and reducing the
    number of contractors from 4 to 3. This program simplification led to
    significant administrative savings, and streamlined the bureaucracy. In
    fiscal year 2005, we saved $190 million from these efforts, and we
    forecast savings of $198 million for fiscal year 2007.
        We added financial incentives for improving beneficiary
    satisfaction for the contractors, and ensured contractors are
    financially rewarded for care delivered in the private sector.
        One source of the savings was to reduce administrative costs in our
    TRICARE contracts, over $125 million saved in fiscal year 2005, and we
    project this trend to continue throughout the life of these contracts.
        We have undertaken a benchmark analysis of our administrative costs
    to administer the TRICARE program, and our ``per member per year''
    administrative cost compares very favorably with private sector
    experience--approximately $225 per member per year. For the next series
    of TRICARE contracts, we will build upon these efficiencies and
    continue to achieve greater administrative and utilization savings.
              military treatment facilities efficiency initiatives
        We also changed how local military medical commanders are
    incentivized by providing them with the responsibility for cost-
    effectively managing care delivered to patients in military hospitals
    and clinics. We have further established a performance-based model,
    assessing patient outcomes and provider productivity against private
    sector benchmarks (adjusted for military readiness requirements). This
    year--fiscal year 2006--represents our first year under this model and
    we have targeted savings at $94 million in 2006, followed by savings of
    $259 million in 2007.
        In addition to implementing more efficient practices within MTFs,
    we will also begin to bear savings from the BRAC activities with an
    estimated savings of $40 million in 2007.
        Of course, we maintain that even greater resource savings can be
    achieved through a ``military-to-civilian conversion'' for thousands of
    medical positions that are needed but can be performed by civilian
    employees. We have presented this plan to Congress, and are hopeful for
    your support of that plan this year.
                        regional supply standardization
        The MHS has worked aggressively to negotiate preferential pricings
    with preferred medical supply vendors across the country. Our savings
    continue to grow from $9 million in 2002 to a projected savings of
    $28.3 million in 2007.
        In addition to these efforts, we have also begun several innovative
    pilot programs using private sector disease management and behavioral
    health to further reduce costs and utilization. These programs are in
    their early stages, and we cannot project savings at this moment.
                              cost savings summary
        In 2007, the sum total of our major cost savings initiatives will
    total $973.3 million or approximately 4.5 percent of our O&M budget.
        Although we are pleased with the actions we have undertaken to
    reduce inefficiencies and incentivize both military and private sector
    contractors to delivery quality, cost-effective care, these actions
    alone are not sufficient to reduce the explosive cost growth the
    Department has experienced over the last 5 years or the expected future
    cost growth.
        We recognize that ours is a complex system with many variables, and
    that savings estimates, though conservative, cannot be predicted
    precisely. But not addressing the growing differential between private
    sector and DOD out-of-pocket cost shares will certainly increase future
    costs to the Department.
        We have solicited the input and recommendations of the beneficiary
    organizations who serve our military families and retirees. We welcome
    their engagement with us on the best approaches to reduce our cost
    growth. They have certainly identified additional areas for us to
    investigate for cost savings, and we are committed to evaluating their
    proposals.
        The retired military servicemembers have indeed earned their health
    care benefits. We are committed to ensuring that TRICARE remains the
    finest health plan in the country. Our MHS has and continues to deliver
    superlative care to our servicemembers, their families, our retirees,
    and citizens around the globe in their hour of need. In order to
    sustain this benefit, we must ensure resources are available for
    continued investment; aggressive actions are continued to achieve
    internal cost savings; and the cost-sharing provisions are adjusted to
    reflect the cost of health coverage in 2007, not 1995.
        We are committed to sustaining this great system for generations to
    come, and with this combination of internal efforts and rebalanced
    cost-shares, we believe that we will place the MHS on a firm, long-term
    foundation for continued success.
                       reserve components health benefits
        At your direction, we are implementing the new health benefits that
    extend coverage to members of the Guard and Reserve. We have been
    providing and will continue to provide a great benefit to them. We have
    made permanent their early access to TRICARE upon notification of call-
    up, and their continued access to TRICARE for 6 months following
    Active-Duty service for both individuals and their families. We
    implemented the TRICARE Reserve Select (TRS) coverage for Reserve
    component personnel and their families mandated in the National Defense
    Authorization Act (NDAA) for Fiscal Year 2005, and over 26,000
    reservists and their families are enrolled. We are now working to
    implement the expanded TRS 50/85, as mandated in the NDAA for Fiscal
    Year 2006, which will be effected on October 1, 2006.
                         battlefield healthcare success
        As health care providers to the men and women of our Armed Forces,
    we are continually looking for medical advances that can save lives,
    especially in combat. Today, military medical personnel are saving
    hundreds of lives that previously would have been lost on the
    battlefield. Better training, advanced equipment, and talented
    soldiers, sailors, airmen, and marines also contribute to this success.
    Fewer than 3 percent of wounded servicemembers who make it to a source
    of medical care, die of their wounds. This is the lowest figure in the
    history of warfare. On its own, this milestone is a remarkable
    accomplishment. This success is achieved by the proficiency and
    professionalism of our medical personnel who have advanced battlefield
    medicine and medical transportation to new levels of capability. Our
    people likewise do an extraordinary job preventing illnesses and
    maintaining health. This progress is mirrored in our disease and non-
    battle injury rate that is about 4 percent in Iraq--rates which also
    are the lowest in military history.
                        improving mental health services
        Despite these historically low rates, the DOD continues to seek
    better ways to care for our servicemembers. During the past decade, we
    have learned valuable lessons. Among these lessons we include
    identifying and gaining a better understanding of the health effects of
    deployments and operations; we are happy to report that the Department
    has made great progress in these important areas. To date in the
    current conflict, servicemembers have completed more than 1 million
    pre- and post-deployment health assessments. Nearly 90 percent of this
    information is collected and transmitted to an electronic database.
    This information helps us to focus individuals' follow-up care and
    treatment, ensures our people get the care they need, and assists the
    Department with its medical planning efforts.
        Another important lesson is that the period of greatest need for
    mental and family readjustment support may be weeks after returning
    home. With this in mind and in consideration of the potential for
    physical health issues to arise once servicemembers return, we directed
    an additional post-deployment health assessment--a follow-up program
    that expands upon our previous efforts. We recognize that no one who
    goes to war remains unchanged. However, not everyone is affected in the
    same way and not everyone has mental health or readjustment issues. But
    some, a minority, do have health issues, and their health is our
    concern. This new assessment includes a short questionnaire to be
    filled out by all servicemembers--including reservists and guardsmen, 2
    to 6 months after they have returned home. Servicemembers with health
    concerns are referred to a health care provider for evaluation and
    assistance. The intent of this program is to help determine the health
    status or personal situation of the servicemember with a focus on
    discovering any readjustment issues or problems. To get to the heart of
    issues, counselors ask such questions as: ``How are you doing''? ``How
    is your family''? If things are not well, we want our servicemembers to
    know that help is available. We believe that with this new disciplined
    and caring process, we can reach those who may need help and make a
    real difference in their recovery and reorientation to home life. There
    remains a common, perception by some in our country--a stigma--
    regarding those who seek mental health services. We believe that
    through this new, follow-on reassessment tool, we reduce this
    ``stigma'' as an issue or barrier to needed care.
        To ensure program success and smooth integration into existing
    processes, small scale implementation at high-deployment platforms
    began in June 2005. Lessons learned from that small scale
    implementation served to inform our successful program deployment,
    which began in January 2006. We continue implementation with units
    scheduled for return deployments and also based on Service
    identification of highest needs.
                            military vaccine program
        The Department has programs to protect our servicemembers against a
    variety of illnesses. One important program is the military vaccine
    program; we believe there is a real threat of smallpox and anthrax used
    as potential bioterrorism weapons against our soldiers, sailors,
    airmen, and marines. To date, with vaccines we have protected more than
    1.3 million Department members against anthrax spores and over 875,000
    against the smallpox virus. These programs have an unparalleled safety
    record and are setting the standard for others in the civilian sector.
    We worked with the Department of Health and Human Services, the Food
    and Drug Administration (FDA) and the Court to restart the important
    anthrax program, after it had been temporarily halted by a Federal
    judge. Our servicemembers deserve the protection the FDA-licensed
    anthrax vaccine provides, due to the ongoing, real threat posed by
    anthrax.
                          sharing initiatives with va
        As we continue to seek ways to improve the health care for our
    beneficiaries, we constantly explore new avenues of partnership with
    the VA. We have established 446 sharing agreements covering 2,298
    health services with the VA and in fiscal year 2005, 136 VA Medical
    Centers reported reimbursable earnings during the year as TRICARE
    Network providers. This is an increase of 59 percent over the previous
    year. Every day we collaborate to further improve the health care
    system for our servicemembers; we have substantially increased joint
    procurement, we are working to publish jointly used evidence-based
    clinical practice guidelines for disease management to improve patient
    outcomes. As I mentioned, we are also working to establish the first
    Federal health care facility with a single management structure in
    North Chicago.
        We are committed to working with the VA on appropriate electronic
    health information exchanges to support our veterans. The Federal
    Health Information Exchange (FHIE) is an important capability that
    enables the transfer of protected electronic health information from
    DOD to VA at the time of a servicemember's separation. We have
    transmitted messages to the FHIE data repository on more than 3.2
    million unique retired or discharged servicemembers. Building on the
    success of FHIE, we are now sending electronic pre- and post-deployment
    health assessment information to the VA. Monthly transmission of
    electronic pre- and post-deployment health assessment data to the FHIE
    data repository began in September 2005 and has continued each month
    since then. More than 515,000 pre- and post-deployment health
    assessments on over 266,000 individuals are available to VA. VA
    providers began accessing the data in December 2005. DOD plans to add
    post-deployment health reassessment information later this year.
        Both the VA and DOD are committed to providing our servicemembers a
    seamless transition from the MHS to the Veterans Health Administration.
    DOD implemented a policy entitled ``Expediting Veterans Benefits to
    Members with Serious Injuries and Illness,'' which provides guidance on
    the collection and transmission of critical data elements for
    servicemembers involved in a medical or physical evaluation board. DOD
    began transmitting pertinent data to VA in September 2005, and has
    since provided five lists with a total of 5,177 servicemembers while
    they are still on Active-Duty. Receiving this data directly from DOD
    before these servicemembers separate eliminates potential delays in
    developing a claim for benefits by ensuring that VA has all the
    necessary information to award all appropriate benefits and services at
    the earliest possible time.
                                     ahlta
        DOD continues to build on the long history of transforming health
    care delivery through the use of information technology. After nearly a
    decade of investment, research, development, and pilot testing, a
    collection of leading edge health information technology applications
    are being fielded and implemented around the world to support all
    facets of the MHS. Our vision is to completely digitize our health care
    system. AHLTA was publicly unveiled in November 2005, marking a
    significant new era in health care for the MHS and the Nation. AHLTA is
    the DOD's global electronic health record and clinical data repository.
    It creates a comprehensive, life-long, computer-based patient record
    for each and every military health beneficiary regardless of their
    location. AHLTA provides seamless visibility of health information
    across our entire continuum of medical care, giving our providers
    unprecedented access to critical health information whenever and
    wherever care is provided to our servicemembers and beneficiaries.
        The system is secure, standards based, and patient centric, for use
    in our garrison based medical facilities and our forward deployed
    medical units. AHLTA provides our physicians with decision support and
    builds a single encounter document out of a team effort--linking
    diagnoses, procedures, and orders into one record.
        AHLTA has been implemented at 87 of 140 planned MTF sites spanning
    11 time zones worldwide, with 39,773 of 63,000 total users fully
    trained, to include 13,756 health care providers. DOD's Clinical Data
    Repository is operational, and currently contains electronic clinical
    records for over 7.50 million beneficiaries. AHLTA use continues to
    grow at a significant pace. To date, AHLTA has processed 15,005,274
    outpatient encounters and is currently processing over 75,400 patient
    encounters per workday. Worldwide deployment is expected to be
    completed by the end of calendar year 2006.
                            humanitarian operations
        The Department's medical assets provide unique capabilities not
    found elsewhere in the world. Our resources are critical in response to
    natural disasters and humanitarian issues that are a constant challenge
    to the world. We have been involved in humanitarian assistance in South
    Asia following the devastating tsunami, in Guatemala for landslides,
    and also very recently in the Philippines for landslides, and Pakistan
    to assist with the relief following their earthquake. The result of our
    collaborative humanitarian assistance is strengthened good will and
    trust between our Nation and those we assisted. Improving the image of
    the United States abroad through these efforts has been invaluable,
    especially in areas where negative images and propaganda have been
    widespread.
                                hurricane relief
        We also support disaster relief in the United States, in accordance
    with Emergency Support Function number eight of the National Response
    Plan. Under this support function, the Department of Health and Human
    Services is the lead agency, and when State and local resources request
    Federal assistance, we provide the assistance we have available in
    consideration of our other military missions. Our capabilities to
    provide support include health assessment, surveillance, personnel,
    supplies, patient evacuations, and delivery of emergency health care.
    Military medicine, because of our ability to provide health care and
    health-related activities in a very mobile fashion represent a vital
    part of this plan and its implementation operations. We coordinate and
    collaborate with our Federal partners to ensure the safety of the
    individuals involved in a national emergency and to provide health care
    to those affected by the devastation.
        After Hurricane Katrina's landfall and breach of the levees, our
    Gulf Coast region faced an unparalleled and crippling disaster. In
    coordination with other Federal agencies, State and local governments,
    the capabilities of military medicine assisted in both Louisiana and
    Mississippi. We deployed over 2,000 medical personnel to the area. We
    moved more than 10,000 patients including more than 2,600 by air
    evacuation. Our medical personnel treated more than 5,500 people. We
    opened field hospitals and we sailed the U.S.N.S. Comfort to aid in the
    relief operation. Our medical personnel in coordination with the
    Department of Health and Human Services and the Centers for Disease
    Control and Prevention were heavily involved in monitoring the public
    health situation.
        In addition to our support on the ground, we immediately considered
    how to ensure that our military beneficiaries who lived in the disaster
    areas and were displaced or adversely affected by Hurricane Katrina
    still receive their health benefits, especially chronic medications and
    recurring treatment procedures.
        For Hurricane Rita, the lessons of Katrina were fresh and
    communication at all levels occurred 2 days before the storm hit.
    Jointly, we were able to assess capabilities and identify needed
    assistance. This analysis via teleconferences resulted in the military
    evacuating over 3,000 sick, infirm, and elderly individuals by military
    aircraft in less than 24 hours. The men and women of the MHS
    accomplished unprecedented work to save lives and help rescue those in
    need in the Gulf Coast region. I am very proud of these men and women
    who do so very much for this country.
                                   conclusion
        The MHS has experienced another extraordinary year. We provided
    world-class health care to our deployed forces, particularly in Iraq
    and Afghanistan, we launched our new electronic health record AHLTA, we
    improved collaboration with the VA, we achieved clinical and quality
    improvements, we established new measures for protecting the force, we
    implemented a new TRICARE benefit for reservists, and we came to the
    aid of our countrymen and world neighbors in moments of disaster.
    Looking to the future, we will adapt to new challenges that face our
    Nation and our national security by building on today's achievements.
    Our future relies on the transformation efforts now underway to sustain
    our comprehensive benefit and to deliver the best health care in the
    world to the men and women who serve in our Armed Forces.
    Transformation will take years of hard work and dedication from every
    member of the MHS. We also require assistance from our military and
    civilian leaders as well as from Members of Congress if we are to place
    the military health benefit on a sound financial foundation, thereby
    assuring its availability for future generations of military men and
    women and their families.
        Our MHS--its personnel, health care capabilities, research,
    education, and training--is a national asset, and we are pleased to
    have the opportunity to shape and lead it. The men and women of the MHS
    work hard to protect, care for, treat, manage, and lead; their efforts
    reflect the American strength of will and character. Theirs is a most
    noble calling, the profession of medicine and the profession of the
    military; both professions of service and sacrifice. We must assist
    them by ensuring that the military health benefit, on the battlefield,
    in the air, at sea and at home, continues long into the future.

        Senator Ben Nelson. The chairman has arrived.

            STATEMENT OF SENATOR LINDSEY O. GRAHAM, CHAIRMAN

        Senator Graham [presiding]. Thank you, Senator Nelson. I
    apologize, it's one of those days. There are more things to do
    that you can get done. But you all never experience that, do
    you? [Laughter.]
        Let's just start with this: I know what the hurdles are to
    go forward. We're trying to find a way to take care of the
    uniformed service problem, and that is you're competing between
    health care dollars and operational needs. I think most
    Americans understand we're not dealing with unlimited funds.
    The reason they understand that is because the money for State,
    local, and Federal Government comes from the same wallet. I
    think most Americans agree with the concept. If anybody
    deserves good quality health care, everybody deserves it, but
    if you're going to have to pick people that you really want to
    make sure are well taken care of medically, those who served in
    the military deserve the best we can provide them and because
    they have done some unique things for the country.
        Now I would like, if you could, to address the idea that
    the health care escalation in terms of cost is real, is not
    going to stop, and will get worse, not better. I would like
    you, if you could, to address the idea that we're looking at
    making the program more efficient, because I don't want to ask
    for more money from our service retirees and other
    servicemembers until we've made this program efficient. If you
    could comment on those two concepts that would be a good place
    for us to start, then we'll get into specific details.
        Everyone hasn't testified? I apologize. Who has testified?
        Senator Ben Nelson. The two secretaries.
        Senator Graham. Let's hear from the people fighting the
    war, alright?
        [The prepared statement of Senator Graham follows:]

                Prepared Statement by Senator Lindsey O. Graham

        Good afternoon. The subcommittee meets today to resume
    consideration of defense medical programs for the men and women in our
    Armed Forces.
        Our panel today is comprised of the Honorable Dr. David S.C. Chu,
    Under Secretary of Defense for Personnel and Readiness; the Honorable
    Dr. William Winkenwerder, Jr., Assistant Secretary of Defense for
    Health Affairs; General Richard A. Cody, Vice Chief of Staff of the
    United States Army; Admiral Robert F. Willard, Vice Chief of Naval
    Operations; General Robert Magnus, Assistant Commandant of the Marine
    Corps; and General John D.W. Corley, Vice Chief of Staff of the United
    States Air Force.
        Gentlemen, we welcome all of you and look forward to your
    statements.
        I am a believer in reform in order to sustain the highest quality
    health care benefit in the world for the brave men and women who
    volunteer to wear the uniform, for retirees, and for their families.
    This is a national commitment, and not a commercial insurance program.
        We are faced with growing health care costs that could--if left
    unchecked--force decision makers to choose between operational needs
    and meeting our obligation to military retirees.
        Our Government will spend $39 billion for health care benefits for
    military members and their families in fiscal year 2007.
        According to the Department of Defense (DOD), health care costs
    have doubled in the past 5 years, and are projected to grow from 8
    percent of the DOD budget today to 12 percent of the DOD budget by
    2015.
        According to DOD, in 1995, beneficiaries paid 27 percent of total
    health care costs, and today they pay 12 percent.
        Fees for enrollment in TRICARE have not changed since TRICARE began
    more than 10 years ago--prompting at least one of our panel members,
    General Magnus, to testify: ``DOD should have asked for congressional
    assistance much sooner.''
        I believe that we have to reconcile the exponential growth in
    health care costs with our responsibilities to our people and their
    families.
        I also believe that we have to reconcile the numbers. As a starting
    point, we are going to ask the Comptroller General to audit the health
    care costs in the DOD to make sure we are all on the same sheet of
    music before we decide what the appropriate increases--if any--will be.
        I believe that we can get started with reform this year, if we
    concentrate on the building blocks--understanding the numbers, agreeing
    on an index, and phasing in solutions that are fair.
        You have my pledge--I will work to achieve these objectives,
    working together, with the senior military leadership and beneficiary
    organizations that are committed to constructive participation.
        Gentlemen, all your prepared statements will be entered into the
    record.

        Senator Graham. The Army's the oldest Service, I guess
    we'll start with you.

      STATEMENT OF GEN RICHARD A. CODY, USA, VICE CHIEF OF STAFF,
                           UNITED STATES ARMY

        General Cody. But I'm the youngest here, Mr. Chairman.
    [Laughter].
        Thank you, Mr. Chairman, Senator Nelson.
        I appreciate the opportunity to testify today about the
    DOD's sustaining the benefit proposal. On behalf of our
    Secretary, Dr. Harvey, and our Chief of Staff, General Pete
    Schoomaker, and approximately 1 million Reserve and Active
    component soldiers that compose our Army, more than 120,000 of
    them serving today in Afghanistan and Iraq, let me say I look
    forward to relating the Army's vision for protecting the
    tremendous health care entitlement we enjoy today and ensuring
    that the quality of health care will continue to be available
    to our retirees. I ask that my full written statement be
    submitted for the record and I'll keep my opening remarks short
    so we can focus on your questions.
        The Army requires a robust military medical system to meet
    the medical readiness needs of Active-Duty servicemembers in
    both war and in peace, and to train and sustain the scope of
    our uniform physicians, our nurses, and our combat medics as
    they care for family members, retirees, and retiree family
    members. Therefore, we share the DOD's concern that the
    explosive growth and the health care costs jeopardize our
    resources not only to the MHS, but in other operational areas
    as well, especially while we are fighting this long war.
        Let me emphasize that the service and the sacrifice of our
    soldiers and their families cannot be measured with dollars and
    cents. The truth is that we owe far more than we can ever pay
    those who have served, been wounded, and to those who have
    suffered a loss. But what we can honor is their commitment to
    our Nation by providing them a world-class medical system. Our
    promise to our retirees is the same, a lifelong health benefit
    that is worthy of their career of selfless service and the call
    to duty.
        The Army believes that sustaining the benefit proposal
    allows us to sustain our medical readiness programs, continue
    to offer the best health care to our soldiers and their
    families, and fulfill our commitment to provide an affordable
    health care option to our military retirees while maintaining
    an operational Army. I want to emphasize that our soldiers--
    Active, Guard, and Reserve--continue to serve magnificently. On
    any given day approximately 12,000 Army medical department
    personnel are deployed around the world in support of the
    global war on terrorism, serving as goodwill ambassadors in
    humanitarian assistance, like we see in Pakistan, and training
    to support our Army for a variety of missions.
        Our combat casualty care systems have performed remarkably
    well. We have the lowest died-of-wounds rate in this war than
    we've had in any other war. Ninety percent of those wounded
    survived and many returned to the Army fully fit for continued
    service. Our investments in medical training, medical
    equipment, facilities, and research, which you have strongly
    supported, have paid tremendous dividends in terms of preparing
    soldiers for the medical threats on the modern battlefield, to
    restoring their health and functionality to the maximum extent
    possible, and reassuring them that the health of their families
    is secure. In short, military medicine is absolutely an
    essential readiness program and an integral part of the
    quality-of-life for the United States Army.
        I assure you, our soldiers, and our retirees and their
    families that the U.S. Army is committed to protecting the
    tremendous health care benefit we enjoy today and that quality
    health care will continue to be available to our retirees. With
    your help it will remain the peerless military force protection
    asset that it is today.
        I look forward to your questions.
        [The prepared statement of General Cody follows:]

                 Prepared Statement by GEN Richard A. Cody, USA

        Mr. Chairman, Senator Nelson, and distinguished members of the
    committee, thank you for the opportunity to testify today on the
    Department of Defense's (DOD) Sustaining the Benefit proposal. Military
    medicine is absolutely critical to the United States Army. During the
    past 5 years, military medicine has consistently exceeded all
    established measures of success--we have recorded the highest casualty
    survivability rate in modern history during combat operations in
    Afghanistan and Iraq.
        The Army requires a robust military medical system to meet the
    medical readiness needs of Active-Duty servicemembers in both war and
    peace, and to train and sustain the skills of our uniformed physicians,
    nurses, and combat medics as they care for family members, retirees,
    and retiree family members. Therefore we share the DOD's concern that
    the explosive growth in our health care costs jeopardizes our
    resources, not only to the military health system but in other
    operational areas as well.
        Let me emphasize that the service and sacrifice of our soldiers--
    and their families--can not be measured with dollars and cents. The
    truth is that we owe far more than we can ever pay to those who have
    served, been wounded, and to those who have suffered loss. We honor
    their commitment to our Nation by providing them with world-class
    medical care.
        Expansion of TRICARE to the Selected Reserve in the National
    Defense Authorization Acts for Fiscal Year 2005 and Fiscal Year 2006
    highlights the challenge presented to DOD by expanding benefits with
    limited resources. We are very concerned by the projections of cost
    growth in the Defense Health Program (DHP) over the next 10 years. This
    growth represents a very real threat to military readiness. Without
    addressing the issues, our health care costs will total approximately
    12 percent of the DOD budget by 2015.
        The Army fully supports the sustaining the benefit proposal for
    working age retirees, as it represents a reasonable approach to meeting
    the challenge of providing for our soldiers and the future of our
    force. After the proposal is fully implemented, TRICARE will still
    remain a very affordable option for our military retirees under the age
    of 65, with out-of-pocket costs for retirees still projected to be
    little more than half of the costs for members of the Federal Employee
    Health Benefits Program. The change merely begins to bring the cost
    share for working age military retirees in line with the same
    proportion it was when Congress created TRICARE.
        The Army believes sustaining the benefit allows us to sustain our
    medical readiness programs; continue to offer the best available health
    care to soldiers and their families; and fulfill our commitment to
    provide an affordable health care option to military retirees. We
    applaud Dr. Winkenwerder's willingness to reach out to members of the
    military coalition to explore other alternatives to improve these
    proposals.
        The Department has and continues to explore other opportunities to
    help control costs within the DHP. The 2005 Base Realignment and
    Closure decisions demonstrates action to improve the joint delivery of
    health care in both the National Capital Area and San Antonio, Texas.
    Recommendations to collocate medical training for all three Services at
    Fort Sam Houston, Texas and to collocate a number of medical research
    and development activities at Fort Detrick will allow for enhanced
    synergy, collaboration and cost effectiveness. The next step is to move
    beyond a collocation of these activities to implementation of a
    business plan that realizes a true integration of DOD's medical
    training and research activities.
        The Army continues to support the development of a Unified Medical
    Command and is working closely with our sister Services and the Joint
    Staff to examine the full potential of this initiative. A fully
    functional unified command represents an opportunity to reduce multiple
    management layers within DOD's medical structure, inspire collaboration
    in medical training and research, and gain true efficiencies in health
    care delivery. These and other suitable changes that may be identified
    need to be made in conjunction with the sustaining the benefit proposal
    to ensure continued quality health care that is commensurate with the
    service and sacrifice of soldiers and their families.
        Let me close by saying that our Army is an Army at war. On any
    given day, approximately 12,000 Army Medical Department personnel are
    deployed around the world in support of the global war on terrorism,
    serving as goodwill ambassadors in humanitarian assistance, and
    training to support our Army for a variety of missions. In the past 6
    months Army medics have cared for approximately 2,825 combat casualties
    evacuated from Iraq and Afghanistan; deployed a combat support
    hospital, a medical logistics company, and several preventive medicine
    and veterinary teams in support of Gulf Coast hurricane relief
    operations; and deployed the Army's last remaining Mobile Army Surgical
    Hospital to support earthquake relief operations in Pakistan.
        Our combat casualty care systems have performed remarkably. Ninety
    percent of those wounded survive and many return to the Army fully fit
    for continued service. Our investments in medical training, equipment,
    facilities, and research--which you have strongly supported--have paid
    tremendous dividends in terms of preparing soldiers for the medical
    threats of the modern battlefield; restoring their health and
    functionality to the maximum extent possible; and reassuring them that
    the health of their families is secure. We continue to care for nearly
    400 amputees at Walter Reed and Brooke Army Medical Centers. Technology
    and medical care for amputees has advanced so much in the past 10 years
    that many of these soldiers, marines, sailors, and airmen will be able
    to remain on Active-Duty if they desire. In many cases, military
    medicine has been out in front of her civilian counterparts and is
    benefiting this Nation as a whole in the advances military doctors and
    technicians make. In short, military medicine is absolutely an
    essential readiness program and an integral quality of life program for
    the United States Army.
        I assure you, our soldiers, and our retirees and their families,
    that the United States Army is committed to sustaining the tremendous
    health care benefit we enjoy today and that quality health care will
    continue to be available to our retirees. With your help it will remain
    the peerless military force protection asset that it is today.
        Thank you again for inviting me to participate in this discussion
    today. I look forward to answering your questions.

     STATEMENT OF ADM ROBERT F. WILLARD, USN, VICE CHIEF OF NAVAL
                     OPERATIONS, UNITED STATES NAVY

        Admiral Willard. Mr. Chairman and Senator Nelson, good
    afternoon and thank you for this opportunity to testify on our
    proposal to control the rising cost of health care. I, too,
    have a more lengthy written statement that I ask be submitted
    for the record and I'll keep my remarks short as well.
        Navy medicine plays a multifaceted and integral role in the
    defense of this Nation. Our hospital ships are critical first
    responders to natural disasters, providing humanitarian relief
    both overseas and here at home. Navy medicine provides our
    warfighters with the best combat casualty care in our history,
    beginning with Navy corpsmen who, alongside marines in Iraq and
    Afghanistan and inside ships all over the globe, are treating
    and saving marines and sailors as we speak. Lastly, Navy
    medicine continues to provide the exceptional health care
    benefit for our servicemembers and for their families.
        Since TRICARE's inception in 1995, Congress and the DOD
    have expanded upon and improved our benefit and health care
    delivery system. Initiatives closed gaps in program coverage
    and improved access to care for millions of military
    beneficiaries. In so doing, contributed to the Department's
    recruitment and retention efforts.
        However, while the benefit has expanded and improved, we
    have not evolved the cost-sharing that was fundamental to its
    long-term sustainment. As health care costs have grown
    dramatically for both DOD and the private sector, an
    unsustainable portion of the costs have been borne by DOD. Navy
    strongly supports the Department's effort to protect this vital
    program by making it fiscally sustainable for the long-term.
        We assert the time to do so is now. For 11 years we have
    permitted beneficiary cost-sharing to remain static while we've
    attempted to find program efficiencies in TRICARE contracts,
    joint consolidations, millitary-to-civilian conversions within
    the medical community and administration. In the meantime,
    rising health care costs erode into Navy's readiness.
        We're proud of and committed to world-class Navy medicine.
    A vital part of that program is the health care provision to
    our Navy retirees. We desire to continue to work with you to
    place their benefits back on sound fiscal footing in order to
    continue this service to meet the needs and the medical needs
    of generations of sailors to come.
        Thank you for your time today and for your upcoming
    questions and I'll look forward to participating.
        [The prepared statement of Admiral Willard follows:]

                Prepared Statement by ADM Robert F. Willard, USN

                                  introduction

        Chairman Graham, Senator Nelson, and distinguished members of the
    subcommittee, thank you for this opportunity to testify about Navy
    Medicine and our exceptional health care benefit.
        Navy Medicine's mission is multi-faceted. It is deployed globally,
    providing heath care in support of combat operations. It stands ready
    to respond to any number of humanitarian crises and natural disasters,
    and it continues to provide our sailors and their families with world-
    class heath care.
                             sustaining the benefit
        The Navy is proud of the exceptional health benefit and health care
    delivery system that Congress and the Department of Defense (DOD) have
    built and improved upon throughout the years. Since TRICARE's inception
    in 1995, both congressional and departmental initiatives have
    introduced significant program enhancements, including elimination of
    co-pays for Active-Duty families, reduction in retiree catastrophic
    caps from $7,500 to $3,000, and implementation of new prescription drug
    coverage. Thanks to improved care and access for millions of
    beneficiaries, these new benefits have made a positive contribution to
    our recruitment and retention efforts, and we wish to sustain them for
    the long-term.
        In order for the Department to sustain the benefits that so many
    deserve, the long-term costs of the program must be contained. TRICARE
    benefits have been expanded and implemented, however, there has been no
    change in beneficiary cost shares since 1995.
        The DOD proposes to re-norm beneficiary contributions to
    proportions similar to when TRICARE was established. These changes will
    ensure continued access and quality of care enjoyed by our
    beneficiaries today. As Chairman Pace testified earlier this year, the
    Joint Chiefs have unanimously recommended that we re-norm the cost
    sharing for the health care benefit.
                               health care costs
        As overall health care costs have grown for both the Department and
    the private sector, the expanding disparity in out-of-pocket costs
    between TRICARE and civilian health plans has led to a significant
    increase the overall proportion of costs borne by DOD.
        In many respects, the rising costs in TRICARE are caused by factors
    that also affect the private sector--a sharp increase in the use and
    costs of prescription drugs; a corresponding rise in the use of new and
    expensive medical technology; and an increasingly aging population. Yet
    there are factors unique to TRICARE that have brought this problem to
    the forefront:

             Benefit expansion. While the private sector has curbed
            benefits and reduced obligations, TRICARE has moved in the
            opposite direction. We have added TRICARE benefits secondary to
            Medicare; added a prescription drug benefit for Medicare-
            eligible beneficiaries; reduced co-payments for Active-Duty
            families; reduced catastrophic caps for retirees; introduced a
            subsidized benefit for reservists and their families; and
            lowered costs for Active families in remote areas.
             Unchanged Out-of-Pocket Costs for Beneficiaries. While
            private sector and other government agencies have asked
            employees to cost-share, TRICARE has not. As a percent of
            health care costs per family, out-of-pocket costs for military
            families (Active and retired) have dropped over the last 11
            years. Plus, in the case of Active-Duty families, we reduced
            costs in actual dollars by eliminating co-pays for outpatient
            care.
             Migration to TRICARE Coverage. For most of the 1980s
            and 1990s, the percent of retirees who used TRICARE as their
            primary source of health coverage remained relatively constant.
            However, we have witnessed a steady increase in the number of
            retirees and their families selecting TRICARE over other health
            insurance plans. In some instances, employers and State
            governments offer to pay TRICARE enrollment fees in lieu of
            enrolling these employees in their own plans--thereby providing
            substantial savings to the employer and significant cost
            increases to TRICARE.

        The combination of the above factors has resulted in a dramatic
    increase in the health care costs borne by DOD. Those costs have
    doubled from $19 billion in fiscal year 2001 to $38 billion in fiscal
    year 2006. Analysts assigned to the Office of the Assistant Secretary
    Defense (Health Affairs) project these costs will reach $64 billion by
    2015, about 12 percent of the Department's budget. This current rate of
    medical cost growth is unsustainable.
                                   solutions
        In the interests of stemming the tide of rising health care costs,
    DOD and Navy have introduced more efficient practices within the
    Military Health System. Recent actions include a reduction in
    administrative costs through renegotiation of TRICARE contracts,
    standardization of medical supply requirements among the three
    services, closure of specialty clinics where there was insufficient
    patient population to maintain clinical skills, and pursuit of joint
    activities with the Department of Veterans' Affairs (VA). Though we
    will continue to seek such efficiencies, ultimately they will not be
    enough to sustain the military health care benefit.
        In order to preserve that benefit for all of our deserving members,
    the Department is proposing that beneficiaries help share costs in the
    form of increased TRICARE enrollment fees. Current TRICARE Prime annual
    enrollment fees of $230 per individual and $460 per family have not
    changed since 1995. The Department proposes to increase these fees for
    retired officers to $700 per individual and $1,400 per family by 2008.
    In keeping with the general payscale, the increase for enlisted
    retirees would be less. Retired E-7 and above would pay $475 per
    individual and $950 per family, and retired E-6 and below would pay
    $325 per individual and $650 per family. Further increases in
    enrollment fees would be indexed to Federal Employee Health Benefits
    Plan (FEHBP) rates.
        In addition to proposed cost sharing, we are incentivizing all
    TRICARE beneficiaries to obtain their prescriptions from the TRICARE
    Mail-Order Pharmacy Program by reducing co-pays for generic drugs and
    increasing co-pays for drugs in the retail pharmacy program.
        Importantly, our proposal will not impact Active-Duty troops or
    retirees over age 65, nor will it alter the annual catastrophic cap
    from $1,000 for Active-Duty family members and $3,000 for retirees.
    Furthermore, what we are creating with these proposed changes is a more
    predictable and certain future for military healthcare, which should
    enhance recruiting and retention.
                 continuing health care for our nation's heroes
        The proposed increases in TRICARE fees reflect the Department's
    interest in sustaining the comprehensive health benefit we have today,
    while also ensuring the continued readiness, quality and outstanding
    customer service of the military health care system. Since we propose
    these changes during a time of war, we understand that we will be
    asking wounded and medically retired personnel to pay increased
    enrollment fees.
        There is no way to put a dollar value on the sacrifice of those who
    have been killed or wounded in action, nor can we put a price tag on
    the sacrifices of their families. Yet we can value our commitment to
    these heroes, by continuing to provide them with a superior and
    lifelong health benefit. Our proposal is consistent with that
    commitment, and that commitment will never change.
        That same commitment applies to our retirees. While it is possible
    that some of our retirees will opt for employer-provided insurance over
    TRICARE, the intent of our cost-sharing proposal should not discourage
    them from using the benefit they rightfully earned. Yet, over 80
    percent of retirees under the age of 65 are employed, and more than
    two-thirds report access to employer insurance. Meanwhile the greatest
    area of program growth--namely, the increase in retirees electing
    TRICARE as their primary health coverage--has produced costs that are
    unsustainable to DOD. By re-norming costs between TRICARE and private
    health care plans, we aim to reduce what amounts to government
    subsidization of private employers.
        Lastly, our proposal is based upon principles endorsed by the
    President, the Joint Chiefs of Staff, and military leadership. Foremost
    among them--Active-Duty members will not be charged for the health care
    services they receive. Also in keeping with those principles are
    proposed changes in enrollment fees and co-payments designed to help
    guide beneficiaries in their selection of the most appropriate, and
    most cost-effective health care options.
                                    summary
        Chairman Graham, Senator Nelson, and distinguished members of the
    subcommittee, on behalf of the men and women in uniform, I thank you
    for your commitment, your service and your continued support of the
    Armed Forces.
        Navy honors the service and sacrifice of our Active-Duty members
    and retirees, as well as their families. Because of their service and
    sacrifice the Navy will continue to provide a truly outstanding health
    benefit for them, and we strongly support your efforts toward this
    shared goal. By guaranteeing the viability and affordability of that
    benefit far into the future, we will best serve those who protect our
    freedoms with their lives.

    STATEMENT OF GEN. ROBERT MAGNUS, USMC, ASSISTANT COMMANDANT OF
              THE MARINE CORPS, UNITED STATES MARINE CORPS

        General Magnus. Mr. Chairman, Senator Nelson, on behalf of
    the Commandant, General Mike Hagee, and the over 225,000 men
    and women in the Total Marine Corps Force, it is my pleasure to
    appear before you today, especially now that your marines,
    sailors, soldiers, and airmen that support them are at war.
        Today we have over 30,000 in the combat zone in Operation
    Iraqi Freedom and Operation Enduring Freedom, of the 39,000
    Active and over 2,500 Reserve marines deployed overseas. Your
    marines are performing magnificently due to your support and
    the continuing support of the American people. The costs are
    not measured in dollars alone.
        From March 2003 until today the Marine Corps has sustained
    over 660 killed in action and over 6,500 wounded in action. The
    outstanding medical support provided by sailors, airmen, and
    soldiers to our warfighters provides the best operational and
    combat medicine care that they could have possibly expected.
    It's resulted in the lowest disease, non-battle injury rate,
    and most importantly, the lowest death-to-casualty ratio in the
    history of warfare. Marines who are treated by our forward
    surgical companies have a 97-percent survival rate. It is
    unparalleled in the history of war and medicine.
        A few points of emphasis I'd like to make to the
    subcommittee: The DOD does provide the finest health care in
    the world to our military, their family members, and to our
    retirees. It is a commitment that is important to them and one
    that we can and must sustain. To sustain this commitment we
    must address cost and how we finance it. As you have heard, the
    costs have increased markedly over the past 5 years,
    projections indicate that they will increase to over 12 percent
    of the budget by 2015.
        I was privileged not too many days ago to listen to Panel I
    before this subcommittee, and Mr. Chairman, you were right.
    This is not just a business case problem. This health care
    issue is something that must be addressed. The care that we
    provide our Active-Duty, our Reserve, their dependents, and our
    retirees and dependents must be protected. To protect that we
    have to ensure that it is sustainable.
        We know the Department should have updated the fee schedule
    many years ago. It has now become an urgent issue because we're
    seeing that without adjustment of fees, much as the rest of
    America is seeing with its health care costs, the support
    benefit will continue to require additional financing,
    financing requirements that are growing at a rate that far
    outstrips the real growth in the defense budgets that we have
    seen or that can be reasonably expected in the future.
        The cost impacts of not being able to address the fee
    schedule will simply be borne by other areas of the defense
    budget. Those other areas include, literally, our manpower and
    our strength. That includes our investments in infrastructure
    such as barracks and in warfighting equipment. So both the
    current and future readiness of the force are dependent largely
    upon ensuring that this commitment that we must sustain and we
    will sustain is adequately financed.
        This benefit is incredibly important to recruiting and
    retaining the young men and women in the Marine Corps. I know
    close up and personal it's important to the sailors who receive
    most of their care in garrison and to the soldiers and the
    airmen that help support them overseas. It is the number-one
    reason in a survey of our first-term marines for reasons that
    they will reenlist.
        The expansion of TRICARE benefits to our Reserve component
    is a part of the expansion of benefits that has occurred in the
    last 10 years. There's been a marked expansion in the benefits
    package that is provided to Active-Duty, Reserve, and retirees,
    and yet the proportion of the fees has not shifted in the same
    direction. Reserve marines and their families are now better
    able to prepare for the transition to Active-Duty and mobilized
    Reserve service through these enhanced TRICARE benefits. This
    allows them to access TRICARE benefits 90 days prior to
    activation and to continue to receive those benefits 180 days
    after deactivation. Not only because we're at war, but this is
    the right thing to do. Portability of the TRICARE benefit
    across the regions has made this TRICARE benefit even easier on
    our activated families. The benefit is the same, regardless of
    where they are when their marine deploys.
        Let me reassure you of the following: The Marine Corps,
    like the rest of our Service comrades, is committed to taking
    care of our marines and their family needs. We will sustain our
    commitment to the finest health care for those in uniform,
    their family members, and our retirees. The Commandant is also
    committed to keeping those qualified marines who have been
    injured and who want to stay a marine.
        Marine Sergeant Chris Chandler, in December 2001, suffered
    severe injuries due to a landmine explosion. After treatment at
    Walter Reed and the support of numerous people, to include
    Members of Congress, Sergeant Chandler was found fit for duty
    and returned to the First Light Armored Infantry Battalion. He
    went to jump school in the Army and finished number one in his
    class. He deployed and redeployed from another tour of duty in
    Iraq. He is currently serving as the Battalion Chief Scout on
    his third tour of duty in combat in Iraq. Upon his return he
    has requested an assignment as a hospital liaison for our
    injured marines and will report to Balboa Navy Regional Medical
    Center in June.
        ``Once a Marine, Always a Marine''--another commitment to
    those leaving Active-Duty is our Marine-for-Life Program, built
    on the philosophy that after leaving Active-Duty there is
    support that can be rendered to marines as they transition from
    the Active service to civilian life. In 2005, the Marine-for-
    Life Injury Support Program was created by expanding Marine-
    for-Life to assist marines in bridging the gap between military
    medical care and the Department of Veteran Affairs (VA). We
    have a great partnership with the VA now and have provided two
    marines full time, Colonel Franks and Major Wright, to assist
    the VA with those marines who are transitioning to their
    facilities.
        We support DOD's efforts concerning military health care
    and we want to work closely with Congress to sustain this
    outstanding health benefit for the men and women of our Armed
    Forces and our retired community. It is the right thing to do.
    It is also important that it helps us to sustain the vital
    needs of our military to recruit, train, equip, and protect our
    servicemembers who daily support our national security
    responsibilities throughout the world. They are the finest
    force, they deserve the finest care. It is our commitment to
    them. Thank you for your continuing commitment to ``take care
    of your marines.'' I look forward to answering your questions.
        [The prepared statement of General Magnus follows:]

                 Prepared Statement by Gen. Robert Magnus, USMC

        Chairman Graham, Senator Nelson, and distinguished members of the
    subcommittee, it is my privilege to appear before you today to provide
    an overview of the Defense Health Program. We remain a Corps of Marines
    at war with a Total Force of 179,193 in the Active component and 39,600
    in the Reserve component. Today, 39,572 Active and 2,592 Reserve
    marines are deployed overseas, including nearly 34,000 with Multi-
    National Forces West/I Marine Expeditionary Force (Fwd) in Al Anbar,
    Iraq and nearly 1,000 with 1st Battalion, 3rd Marines in Jalalabad,
    Afghanistan. The military health system, which Congress has strongly
    supported, has developed into the finest preventative and treatment
    system of its kind, caring at home for our troops and families and,
    when marines go to war as they have today, delivering the most awesome
    care to our wounded. Your marines are performing magnificently in no
    small part due to your support and the realization that they have the
    support of the American people.
        Today, we find ourselves transforming a superb health benefit that
    has been characterized by tremendous adaptability and one that is
    exceptionally responsive to a very complex and changing national
    security environment. For Marine units in the combat zone, care is
    provided by Active-Duty and Reserve Navy physicians, nurses and
    corpsmen, as well as Army and Air Force doctors, nurses, and medics.
    This positively impacts the morale of our troops because they know the
    care is great, with a 97-percent survival rate for those treated by
    forward surgical company teams. We recognize that a crucial part of
    operational and family readiness, and to our continuing ability to
    recruit and retain marines, depends heavily on our commitment to this
    world-class health care benefit for those currently serving and to our
    retirees. This commitment to our troops will be kept. To keep this
    commitment, we must ensure that it is sustained and financially sound.
    That is our stewardship responsibility to Congress and the taxpayers.
        The Military Health System (MHS) provides the Nation's best health
    benefit program for those who continue to wear the uniform, retirees
    and their families. TRICARE is the ``gold standard'' health care
    benefit, which must be sustained. Health care is not without cost.
    Military Health Program costs have doubled from $19 billion in fiscal
    year 2001 to $38 billion in fiscal year 2006, representing an increase
    from 6 percent to 8 percent of total Department of Defense (DOD)
    spending. Estimates indicate these costs could reach $64 billion in
    2015, more than 12 percent of the DOD budget, an increase that is
    unsustainable without major impacts in other areas of current and
    future force readiness. Such growth is clearly faster than overall
    budget growth and would affect future investments in manpower end
    strength, readiness, warfighting and infrastructure. By not changing
    TRICARE premiums and co-pays since 1995, despite increases in health
    care costs as well as increases in pay, the Department has been remiss.
        The growth in health care costs is attributable to several factors:

              1. TRICARE premiums and co-pays have not changed since the
            program was inaugurated in 1995. Therefore, total beneficiary
            cost share has declined substantially. In 1995, the
            beneficiaries paid 27 percent of the total benefit cost while
            in 2005, as pay increased while premiums and co-pays stayed
            flat, the beneficiaries share dropped to 12 percent. In sharp
            contrast to this, Federal Employees Health Benefit Plan (FEHBP)
            premiums rose about 113 percent over the same timeframe, and
            now an average non-military Federal employee pays an average of
            28 percent of their health care premium costs, plus pharmacy
            and other related co-pays. Additionally, the catastrophic cap
            for military beneficiaries remains significantly lower than
            civilian health plans.
              2. According to various reports, medical costs in the U.S.
            have grown between 8 percent and 20 percent each year, with
            even higher growth in the cost of pharmaceuticals. DOD budgets
            have grown 4 percent per year since 2000, somewhat above the
            national inflation rate, but far below soaring medical costs.
              3. Expansion of the TRICARE benefits to include TRICARE for
            Life and Reserve members in a drilling status and their
            families contributes to increased utilization by retirees under
            age 65. TRICARE was expanded in 2001 to cover all out-of-pocket
            costs not paid by Medicare, including prescription drugs for
            those 65 and older, increasing benefits but reducing their
            costs. In addition, prescription co-payments were eliminated
            for active duty, reducing their costs. In fiscal year 2006,
            reservists and their family members, representing approximately
            9 percent of DOD health care beneficiaries, are eligible for
            TRICARE participation. In fiscal year 2006, retirees and their
            family members represented 60 percent of DOD health care
            beneficiaries, with 27 percent of those eligible for TRICARE
            for Life. The retiree portion of our beneficiary population is
            projected to grow to about 65 percent by 2011 with almost 30
            percent of those people eligible for TRICARE for Life.

        TRICARE is a success story. When TRICARE for Life was developed for
    the 2001 National Defense Authorization Act, no one anticipated the
    growing number of retirees and their family members, not yet Medicare
    eligible, who would choose to switch from their private/commercial
    health care plans to TRICARE in order to cope with the rising costs of
    health care. Controlling health care costs is a national concern
    forcing Federal, State, and local governments and businesses throughout
    the country to attempt to shift costs in order to decrease their
    financial burden. This shift of medical costs to DOD results in an
    unplanned and unexpected effective health care subsidy to local
    governments and businesses of American taxpayer dollars.
        Even with efficiencies currently being leveraged throughout the
    MHS, in order to sustain the current military health benefit and ensure
    warfighting capabilities into the future, portions of TRICARE must be
    readjusted. There are approximately 76,000 retired Active-Duty and
    Reserve marines under the age of 65 who potentially would be affected
    by the proposed adjustments. Of these, approximately 24,000 are E6 and
    below, 37,000 are E7 and above and 15,000 are officers.
        We strongly support the DOD recommended changes and want to work
    closely with you, the distinguished members of this committee and all
    of Congress, to obtain the management tools that are needed for us to
    sustain this great health benefit for all of our men and women in the
    Armed Forces. Our commitment is to maintain the TRICARE ``gold
    standard'' health care benefit by placing the program on a fiscally
    sound foundation for the long-term.
        The DOD should have asked for congressional assistance much sooner.
    We are now coming to a point where we will be faced with a ``Hobson's
    Choice'' making increasingly huge subsidies for the increasing costs of
    health care from other required programs. We cannot reasonably expect
    that Congress will add these increases ``on top'' of our fiscally
    constrained Defense budgets without impact to other needs. One thing is
    certain: We will not break our commitment to the highest quality health
    care for those still in uniform and for our retirees. With your help,
    we can avoid having to cut programs for manpower, readiness and
    investments that support those in uniform now and in the future, and
    are the basis for the defense of our Nation.
        It is critically important that we place the health program on a
    sound fiscal foundation for the long term, so that we can sustain the
    benefit and the vital needs of our military to recruit, train, equip,
    and protect our servicemembers who support daily our national security
    responsibilities throughout the world.

    STATEMENT OF GEN. JOHN D.W. CORLEY, USAF, VICE CHIEF OF STAFF,
                        UNITED STATES AIR FORCE

        General Corley. Mr. Chairman, Senator Nelson, thank you sir
    for the opportunity to speak with you today about health care
    for the brave men and women of our Armed Forces. On behalf of
    Secretary of the Air Force Wynne and Chief of Staff Moseley, as
    well as importantly the men and women of the United States Air
    Force, first let me express our gratitude for your guidance, as
    well as the important work of this subcommittee. We will look
    forward and continue to look forward to working with you as we
    tackle this important matter and try to find the right balance.
        I want to state up front, sir, that the Air Force agrees
    with the Department that a sustainable health care system is a
    priority. It has to be a critical priority for us. A
    sustainable system, in my mind, is crucial to maintaining a
    sustainable force. Is the Air Force concerned about ensuring
    that our airmen have the quality health care that is going to
    be essential for continuing to fight and win this global war on
    terrorism? Absolutely, sir. Are we concerned about their
    families that their needs are going to be met while those
    airmen are deployed? Without question. Are we concerned about
    increasing health care costs and the potential effects on
    recruiting, retention, and on modernization? Most definitely,
    sir. Of course, we are concerned about maintaining the goodwill
    of the retirees that have bravely served this country. Without
    a doubt, those sacrifices should be honored.
        Underlying all of these concerns, sir, we're committed to
    delivering air and space power for the United States Air Force,
    and we believe to do so, we need the sustainable force. That
    sustainable force is not possible without a sustainable health
    care system.
        The proposed plan moves us toward that sustainable system,
    and today I look forward to answering your questions, sir, and
    we look forward to continuing to work with you so we can have
    both an effective and an efficient system, that is both
    responsive and responsible.
        [The prepared statement of General Corley follows:]

               Prepared Statement by Gen. John D.W. Corley, USAF

                                  introduction

        Mr. Chairman and distinguished members of the committee, the
    Secretary of the Air Force and Chief Moseley welcome this opportunity
    to outline the Air Force's concerns regarding this critical issue. The
    Air Force appreciates your outstanding efforts in support of our airmen
    and their families. Their sacrifices deserve a first class health care
    system and it is a moral imperative that we provide it for them. Having
    a sustainable health care system is a priority for the Air Force and it
    is an important element in maintaining a sustainable force.
        The challenge faced by the Department is experienced across the
    Nation--delivering a cost effective yet equitable health care system.
    The Air Force is concerned about ensuring that our airmen have quality
    health care especially while fighting the global war on terror. We are
    concerned that their families' needs are met while they are deployed.
    We are concerned about increasing health care costs and their potential
    effects on retention, recruiting, and modernization efforts. We are
    concerned about maintaining the goodwill of the men and women that have
    bravely served their country.
        The numbers tell the story: Department of Defense (DOD) health care
    costs have doubled in 5 years--from $19 billion to $38 billion this
    year. We agree with Secretary Rumsfeld's comment that, ``Indeed, if
    current trends continue, health funding pressures will soon cut into
    budgets for training, equipment, and a range of other investments vital
    to winning the war on terrorism and maintaining the quality-of-life for
    our troops and their families.''
        Clearly, we must provide for our military members and their
    families, but we must find the right balance among our investments in
    global war on terrorism operations, our dedicated and brave airmen, and
    the critically important need to recapitalize our air and space assets.
    The Air Force believes the proposals before you will help us achieve
    this balance and we fully support them.
        Secretary Rumsfeld stated that ``We have a terrific health care
    system, and we want to keep it. The only way we can keep it is to put
    it on a basis that's sustainable.'' The Joint Chiefs of Staff
    unanimously support these statements. By ``re-norming'' beneficiary
    contributions to TRICARE, we can help assure the continued high level
    of access to care and quality enjoyed today, second to none in the
    health care industry. Under the proposed changes, TRICARE will remain
    the best value in health care insurance in terms of cost, quality and
    access.
        The Air Force agrees that it is appropriate that Active-Duty troops
    and their families only be minimally affected by new legislation. The
    Air Force is working diligently to protect our deploying troops through
    many highly acclaimed force protection efforts, to include screening
    them before, during and after deployments. We've recently added post-
    deployment health reassessments that follow-up with our troops several
    months after re-deployment to assess both their physical and mental
    health.
        We are grateful to Congress for their efforts in supporting our
    troops, and in strengthening the military health care system. The
    recent TRICARE Reserve Select legislation was the right thing to do for
    our Reserve component personnel who play such a significant role in our
    defense. Our Active-Duty airmen, Air National guardsmen, Air Force
    reservists, soldiers, sailors, marines, retirees, and all of our
    military family members deserve an outstanding medical benefit. The
    proposals being presented are fiscally sound and the right thing to do.
    They are based on the best possible estimates of health consumption
    dynamics and places the DOD on a solid approach to creating a fiscally
    responsible yet equitable military health care system. We look forward
    to working with this committee as we strive to create the right balance
    between the critically important investments in military health care
    with the equally important investments in operations and
    recapitalization that serve to protect our Nation.

        Senator Graham. Thank you very much. We'll get right into
    it. I'll make sure Senator Nelson has time to ask his
    questions. Where our staffs are coming from, the building
    blocks of reform as I see it, are cost controls, efficiencies
    to be achieved, and at all costs, protect the benefit because
    it is not very reassuring to have a benefit on paper if it
    can't be sustained over time. The worst thing I think you could
    do to the retired community and to all those serving is to make
    promises you can't keep and we need to make sure that doesn't
    happen. I'd like to throw some numbers out and see if this is
    your position--does anyone on the panel believe that the number
    $39 billion for health care benefits in 2007 is wrong?
        Let the record reflect that everyone agrees that that is
    the number in their view. Does anyone disagree with the
    proposition that beneficiaries are paying 12 percent of the
    bill today instead of 27 percent of a bill they paid 11 years
    ago?
        Everyone agrees in the affirmative that they believe that
    that is a correct statement. Does everyone agree that 8 percent
    of the military budget today is for health care and in 2015 its
    projected to be 12 percent?
        Let the record reflect agreement on those concepts. Now,
    what we're going to do is have some independent group look at
    this. We've also had some of our retiree veterans, Reserve
    component groups question that so we're going to have an
    independent look and see where the numbers actually come out.
        Efficiencies. We've been given a list of suggested
    efficiency reforms in addition to the ones you have proposed.
    Will everyone pledge to me that you will work with this
    committee and the groups to try to find future efficiencies?
    The answer is yes. All right.
        Now, Dr. Chu, could you very distinctly describe to me and
    Senator Nelson what we face as a Nation if we allow this
    problem to go unchecked? Also comment, if you could, about the
    disturbing trend where private sector employers are pushing
    people into TRICARE through economic incentives and the actions
    that you see by certain States out there to do the same thing
    with State employees who happen to be military retirees and
    what that trend will do for the country if it continues?
        Dr. Chu. Yes, sir. Let me start with the second part first.
    That is, in fact, an important development just within the last
    3 years or so, substantial migration of individuals who have
    access to private sector health insurance to the TRICARE
    program away from private sector and State and local government
    programs. Importantly, due to the incentives being offered by
    those elements, sometimes quite substantial incentives are
    taken in the form of cash payments.
        Senator Graham. Are you familiar with the Boeing example?
        Dr. Chu. Broadly. Sir, I don't have the numbers off the top
    of my head.
        Senator Graham. Generally, what's happening in the private
    sector?
        Dr. Chu. Generally what's happening in the private sector
    is that the employers offer the individual on the corporate
    side a cash payment to decline the employer's program and take
    TRICARE instead. Those payments may exceed $1,000 a year in
    some cases. In addition, State and local governments are
    typically offering a wraparound policy if you'll decline their
    policy, and I think we're close to a dozen States now that now
    do this. They say, ``We will give you this to take TRICARE
    instead, here are some extra benefits that you will get from
    the State coffers'' because, of course, the State is saving the
    full cost of the TRICARE program. Further, in the private
    sector, and there has been for some time, a tendency to define
    categories of employees who don't receive health care benefits.
    Having been in the private sector myself, I know this tool. We
    call them consultants, they don't get benefits. That way you
    stay on the right side of the Employee Retirement Income
    Security Act (ERISA) and no one in that category is offered
    benefits. Of course, that's a preferential tool for hiring
    military retirees because they come with benefits, they come
    with retirement programs, they come with health care benefits.
    They don't need additional benefits from the private sector
    employer. To your first question what will happen----
        Senator Graham. Let's stop there for just a moment. I'd
    like to make a statement. I'm speaking only for myself. I find
    it disturbing that we're going to add a cost to the military
    defense budget at a time when we're strapped and we're
    squeezing every dollar we can. I understand what companies who
    do this from the investor point of view and I can understand
    why some States would want to save money, but here's my
    message. We should all agree that our national defense needs
    are paramount and the practice of dumping people into TRICARE
    through economic incentives in the private sector and at the
    State level has to be checked because we're beginning to erode
    the ability to take care of our troops and meet our operational
    needs unless you believe in unlimited money, which I don't.
        Dr. Chu. Yes, sir. That sums up our concern as well. On the
    second element of your question, what will happen if we fail to
    act, if these costs continue to balloon, and the defense budget
    is maintained in real terms which is, I think, a relatively
    optimistic view of the likely future? What will happen, in our
    judgment, is, I think, slowly the quality of the benefit will
    erode. That means that for those who use TRICARE Prime or
    TRICARE Extra, the network of physicians that is maintained
    will get thinner, and there will be fewer from which to choose.
    There may not be as many physicians or clinicians as you would
    like to go to in your community. For those who use TRICARE
    standard they may find themselves with physicians and clinical
    providers who decline to accept them as patients. Now, on the
    Active side, in the short run they are the most likely to be
    affected by a shortage of funds because the other elements of
    the program are either de jure or de facto entitlements--de
    jure, TRICARE for Life--we have no choice about that, de facto
    I think for those who are retired benefitting from TRICARE
    Prime, TRICARE Extra, and TRICARE standard. So if we came to a
    short run budget crunch, what would happen? Not that we wish to
    do this, but what would happen is we would start to cut corners
    on the medical establishment and the fine record that has been
    established--and in our judgment, must be sustained or the
    health and the readiness of our force--would start to erode. We
    would not buy the replacement equipment in a timely way, we
    would not buy the kinds of new gear that we ought to have for
    the medics in a proper way, we would not be investing in their
    training and their preparations as we should. You would then be
    holding hearings to demand why aren't we deploying the latest
    gear to the combat theater. We would plead budget
    insufficiency, budget difficulties, et cetera, as our
    rationale. So I'm very concerned about our ability to sustain
    what has become a first-rate program either in terms of
    deployed medicine, what we're doing in the field, or what we
    should do back here for the servicemembers and their families.
    That's our agenda. This isn't even a reestablishment of an
    equilibrium that we had at the start of the program, but we
    need to move back towards it. We're not proposing to go all the
    way back in terms of things we ask retired military families to
    bear but a modest step in that direction.
        Senator Graham. Some would say that your fee increase
    proposal over 2 years is a bit more than modest and I would
    tend to agree with them.
        Senator Nelson.
        Senator Ben Nelson. Thank you, Mr. Chairman. In terms of a
    study, I'm sure that something was done internally within DOD
    to determine the size and the adequacy of the increases for
    sustainability. Was there any outside study, or any outside
    group brought in?
        Dr. Chu. Let me describe very briefly the process that led
    us to these conclusions. We first began with defining the
    issue, what is the likely future trajectory of MHS costs, why
    does it look that way, what are the contributing factors? We
    have our monthly meeting joined by our colleagues, the vice
    chiefs, for what we call the Military Health System Executive
    Review, in which issues of this sort are considered. We have,
    over the last 2 years, been through these numbers in
    considerable detail and with careful debate. Having established
    what we think is the likely future under the current rules of
    the game, we then looked at a range of alternatives and we came
    to this set of proposals after considerable internal debate,
    weighing the pros and cons of alternative courses of action.
        We used important external advisors in actually
    constructing the estimates, and in determining the effects of
    different choices. Dr. Winkenwerder, would you like to say a
    word or two about how that was done?
        Dr. Winkenwerder. That's a very good question. We worked
    with several different groups from the outside--one group was
    the RAND Corporation--to look at the broader spectrum of what's
    going on with health benefits and the proportionality of cost
    sharing and so forth and have benchmarked with the Federal
    Employees Health Benefits Program. What these other programs do
    that was never the aim is to inform all of us what is going on
    in the universe. We work within a broader health care world.
    It's important to understand those trends and what is
    happening, when it came to cost estimates and estimates of
    changes in utilization or behavior if you change a cost
    sharing. Those were derived through some consultation with
    outside firms, actuarial firms that are health actuarial firms
    and they do consulting work for us and could check the record I
    believe for others outside of the DOD. We think that those are
    conservative. We all said those estimates are conservative,
    they're certainly open to scrutiny, and so we would welcome the
    idea that others would take a look at that for their realism.
        Senator Ben Nelson. In doing that, of course, utilization
    is a key element in any insurance product. Did you look at what
    you might do to change the nature of coverage towards wellcare,
    towards more preventive and early detection type of coverages?
        Dr. Winkenwerder. Yes, and ironically you might argue that
    our current benefit is very much oriented in that direction
    because there is low first dollar coverage. It has what's known
    as low first dollar coverage--you would know from your prior
    experience--and so we encourage people to come in for
    preventive services and to do preventive things. We think
    there's more that we can do, particularly for those who have
    chronic diseases such as diabetes, congestive heart failure,
    and asthma, where we actually proactively reach out to those
    people, and don't just wait for them to come in, and make sure
    that we're individually case managing those individuals.
        We started in that area about a year ago working with our
    three contractors and with the Army, Navy, and Air Force
    branches to begin to implement programs like that. We think
    there's some opportunity for savings from some of those
    initiatives and that's part of what we're putting forward, is
    what we would estimate for the future.
        Senator Ben Nelson. This question is for the service vice
    chiefs: will these changes, the size of the changes in
    particular, not the fact of a change but the size of the
    change, have an effect in your opinion on recruitment or
    retention?
        General Cody. I don't believe we know just yet whether or
    not it is or it isn't. What we do know, Senator Nelson, is if
    we do not fix this and we have to fix it later or we delay it
    and we have a sizeable rise, it will have an effect. The other
    piece of this in terms of reenlistments and maintaining the
    All-Volunteer Force is if we don't fix this the drain on our
    budgets will be such that, we will not be able to provide child
    development care centers, we will not be able to execute base
    realignment and closure (BRAC) the way we need to, and we will
    not be able to execute the modernization and reset of our
    equipment. Let me give you an example. This year, because of
    the projected cost growth in the accounts just for TRICARE
    Select program and Reserve Select program, the Office of the
    Secretary of Defense (OSD) gave each one of our Services, and
    rightfully so, a program budget decision that equated to the
    Army's fair share of that for fiscal year 2006 of $348 million.
    We had to pay for the cost grown, that is the operational cost
    of one infantry division for a year and these are the types of
    growth don't deal with this I think it's going to add second
    and third to order effects to what you ask.
        Senator Ben Nelson. Admiral?
        Admiral Willard. With regard to recruitment and retention,
    we discussed this and believe that the risk is associated with
    influencers, mainly of those choosing to enlist in our military
    or those choosing to consider reenlistment, the parents, or the
    veteran uncle. So the issue is, are we truly at risk and taking
    the corrective actions that we desire to take in this program
    in the near-term and in the long-term with regard to the effect
    that it may have on the influencers? I think the answer lies in
    educating them. For those of us that have dealt with this issue
    over time and for our surgeons general who have looked into
    this issue at great length over time, the facts are
    irrefutable. The consequences that General Cody talks about are
    looming now and the impact of what has happened to TRICARE and
    health care costs in general are already affecting us or
    already taking effect. Most important is to get the facts on
    the table, to get the facts in front of our veterans, and to
    get the facts in front of the influencers, so that we are able
    to alleviate their concerns and make them understand that it's
    in the long-term interest of our health care program that we do
    these things.
        Senator Ben Nelson. General?
        General Magnus. Sir, I agree with my comrades here on
    recruitment, excepting what Admiral Willard said about the
    influencers in the community. The answer is no, only if the
    benefit itself which we are committed to will seem to be
    eroding would that be an issue.
        Regarding retention, as I said earlier, it's the number one
    consideration among many on staying in service to the Nation. I
    do not believe that the effect is likely. While it is true that
    the updated fees and copays appear striking to some,
    particularly depending upon the time-frame of implementation,
    when one considers what's happened over the past 10 years where
    the beneficiary's share has dropped from 27 percent to 12
    percent and yet at the same time both our Active-Duty, Reserve,
    and our retiree compensation has markedly increased, a
    reasonable updating of the fees and the copays might seem to be
    in order particularly since it protects the first thing, which
    is sustaining this benefit from erosion. Thank you, sir.
        Senator Ben Nelson. Thank you.
        General Corley. Sir, with regards to recruiting and impact
    I would say I scrutinize that daily and I especially want to
    look for trends. I probably open up the lense in terms of both
    influences and influencers, not just the retired population but
    what I know will be a substantive influence is if we don't have
    a sustainable military health care system, and I have an airman
    overseas who has a sick wife or a sick child at home and that
    wife can't get that child to care. That will have a substantive
    impact on our ability to both recruit and then retain those
    fine armed services members.
        If we can't get the right spare parts for the tools they
    need to continue to prosecute this war on terrorism that too
    would be a huge influence on whether or not they want to be
    retained in the Service or whether they want to be recruited in
    the first place. If we begin to compromise their training or
    compromise the tools that they need to use with the training to
    prosecute and defend this Nation those would be influencers
    that are, of course, extremely important to me as well. So do I
    look at this one, sir? Yes. Am I worried about recruiting and
    retention? Yes. But with that aperture fully opened, I look at
    this both as a parent or a young lieutenant who is in the
    military service. As a parent, my wife and I have two sons at
    the University of Nebraska in Lincoln and Reserve Officers'
    Training Corps (ROTC) programs getting ready to come onboard
    the military. I also look at it as the son of a 26-year veteran
    in our armed service, and also as a husband to my wife who's
    served for 26 years in the military, so my perspective is
    pretty broad on this one, sir.
        Senator Ben Nelson. That's a wide aperture. [Laughter].
        Thank you. One final question, Mr. Chairman. General Cody,
    in your prepared statement you expressed strong support for the
    creation of a unified medical command. Dr. Chu, you've also
    indicated that the Department is looking into how to shape the
    medical force to be more joint and interdependent for the 21st
    century. Is there a possibility of something in the form of a
    joint or unified medical command that would make sense here,
    that would help reduce cost and avoid redundancy that might
    exist within the various commands today?
        Dr. Chu. We're looking at that energetically. We have
    already changed the structure by which we govern the military
    medical system to emphasize the regional and major market
    responsibilities. There is a regional officer for the three big
    regions in the United States and there is a market manager for
    each of the significant markets, San Diego, Norfolk, and
    Washington, DC metropolitan area, et cetera, where we have
    large numbers of people, because we recognize all three
    military departments contribute to the outcome and we need to
    coordinate the resources and applications so we get the most
    effective approach as well as the most efficient approach in
    each. Can we do more? Yes. We are actually counting on those
    savings in our future budget plans. We have placed a challenge
    in front of the military departments in every case, a challenge
    that they're going to have to work hard to meet, of
    improvements in how we deliver the care ourselves for the part
    that we do. We already made those changes. We are committed to
    looking at further changes in that regard. They are part of our
    forward budget picture of how we think we ought to meet this
    challenge with growing costs.
        By themselves, I would emphasize they cannot meet the
    magnitude of challenge that we face. We have to do something
    more and hence the proposal that we have put on the table with
    Congress.
        Senator Ben Nelson. Have we already taken into account the
    potential savings in these projected increases for the retiree
    benefits?
        Dr. Chu. Yes, sir. In the Future Year Defense Program, we
    have budgeted on the basis that the changes are in force so if
    they do not pertain, we will have to take money out of other
    accounts and move it into the health account in an attempt to
    sustain this--but at the price that General Cody and Admiral
    Willard and General Magnus and General Corley described. So,
    yes, we have already programmed on the assumption of success.
    Both success, in terms of acceptance of a change of the nature
    we have recommended, as well as success on the efficiency
    front. In other words, we have assumed we will be successful
    not only in sustaining the efficiencies already achieved but
    further increasing those efficiencies in the years ahead.
    There's a whole host of specific actions that lie behind it,
    ranging from the market management as I described, to what we
    call prospective budgeting, to which we're in the midst of
    transitioning all of our facilities, through the military-to-
    civilian conversions that Admiral Willard mentioned in his
    testimony. There's a long list of specific things we are doing.
    We are taking those into account. They are already assumed in
    our baseline.
        Senator Ben Nelson. Thank you very much, gentlemen.
        Senator Graham. Let's have one quick additional round of
    questions. I really appreciate your testimony and your candor.
    I think we need to put in perspective what we're asking the
    adjustment to be. If the Department proposal was adopted, what
    fee increase would we have over the next couple of years?
        Dr. Chu. We would see an increase that, as I said, would
    for the first time be parsed among officers, enlisted greater
    than grade E-7, or enlisted and below.
        Senator Graham. What would be the percentage increase?
        Dr. Chu. In current structure, the individual pays $230 a
    year and a family pays $460 a year. For an officer over a 2-
    year period that would go to $1,440.
        Senator Graham. What increase would that be?
        Dr. Chu. That's an increase for the officer community on
    the order of 200 percent.
        Senator Graham. How about the enlisted person?
        Dr. Chu. For an enlisted person, E-7 and above--let me
    quote the family rates, that's most applicable--it would go to
    $950 a year, so that's on the order of $80 a month.
        Senator Graham. What percentage would that be?
        Dr. Chu. That's approximately a doubling of those numbers.
    Then for an E-6 and below, it would go over a 2-year period to
    $650 a year. That is a change as you can appreciate on the
    order of $20 a month. While these are large percentage changes,
    they are large in percentage terms because the base is so
    modest, as an absolute charge for what I think everyone agrees
    is a far better product than we had 10-12 years ago.
        Senator Graham. Thank you, Doctor. Therein lies our dilemma
    because I've been told that the military pay raise is 3.1
    percent, retiree cost-of-living increase for 2005 was 4.1
    percent, and that the national medical consumer price index for
    2004 grew at 5.2 percent. Congress increased the rates and
    premiums in Medicare there, by 1.6 percent, and a retiree
    benefit pay is increased by 32 percent over a 10-year period.
    Here's our dilemma. We have an incredibly good deal to the
    point that it is an unsustainable deal and the idea that you're
    entitled to health care for life once you've served 20 years
    without cost is an attractive concept but I've never believed
    that once since I've been in the military. I have never been
    told that but it's often said and it needs to be understood
    that it is not a reality. It cannot be the reality because then
    you will really start diminishing the operational needs of the
    military. I don't think any retiree wants to do that.
        They want to be treated fairly and the question of these
    big jumps in percentage increases, they've made a very good
    case that's too much too quickly and I'm very sensitive to
    that. However, once you look at the total dollar of what you're
    paying, it is a very good deal, given what the private sector
    would cost. I think you've earned that very good deal and so
    what Senator Nelson and I along with our staffs, are going to
    try to do is try to get as much input as we can about
    efficiencies, look at how to make the system more efficient.
    Dr. Winkenwerder, we talked a year ago about a constituent of
    mine at Laurel Hill, who had a TRICARE bill for nursing care
    services and TRICARE paid twice the amount and it's still
    happening a year later.
        We have to get a grip on that. These are real dollars and
    we just can't have a system that pays twice what the bill is
    and nobody catches it until a year after we've identified it.
    The efficiencies we're talking about--stimulating the use of
    mail-order pharmacy for refills, urgent care instead of
    emergency room care, simplifying the claims process,
    establishing effective disease management, a unified medical
    command, universal enrollment system for users of all the
    options under TRICARE--all of these efficiencies. I think we
    need to be insistent, and it needs to be looked at hard, before
    we ask for new money. But at the end of the day, once we get
    the independent review about what the numbers are in terms of
    the third party, we need to look at the numbers. I think we're
    going to come down with the idea that static benefits over time
    are impossible to sustain unless you want to tremendously erode
    the benefit over time.
        That's not a dilemma we need to put ourselves or our
    retirees in and so I look forward to working with the groups to
    find a way to bring this program into some cost efficiency
    model, humanely, and not asking more than can be given but at
    the same time improve the quality of the program. If you're
    going to pay more, I think we should try and do all we can to
    make sure you get more.
        Dr. Chu. If I may, Senator, on this issue of the rate of
    increase, there is another way to look at that--and this is how
    the Department came to its conclusions--not in percentage terms
    but in terms of what the absolute change is and in the end
    that's what counts. How much do I take out of my pocket and pay
    for the premium and over the same period of time? That is of
    concern here. In other words, since 1995, an officer who
    retires at the grade of O-5, commander or lieutenant colonel,
    has seen his or her annuity--and this is assuming retirement at
    20 years of service--increased by $8,700, and so you put the
    kind of change we're asking for in that context and that is how
    we conclude this is a reasonable amount to ask. An E-8 who
    retires at 28 years of service has seen his or her annuity
    increase by $7,600 in that period of time, and an E-6 who
    retires at 20 years of service--for which we're asking only
    $200 or so more a year--has seen an increase in the absolute
    amount of the annuity of $3,600 over that period of time.
    Viewed against the absolute level--and this is why I think
    percentages are a bit misleading in terms of how we think about
    the burdens. We think these are reasonable proposals. That's
    how we came to look at this problem, looking at the absolute
    numbers.
        Senator Graham. Reasonable people may disagree, too.
        Dr. Chu. I understand that.
        Senator Graham. The net effect of all of this will be that
    whatever increase in retirement pay you've gotten will
    certainly be eroded by this fee increase and I have to somehow
    figure out, along with Senator Nelson, what is right and what
    is fair and I guess the two extremes are going to be rejected.
    Just speaking for myself, a major league increase just because
    we haven't done it right for 10 years, is of no use just to
    throw everybody overboard for a 2-year period, and the idea
    that it's free for life that there's never going to be an
    increase in what I think is a very fine program to me just
    seems to be off the table. As a Nation we have to deal with
    this and I think we can.
        We have 17,000 wounded soldiers, airmen, marines, sailors,
    and coastguardsmen. We've really taken a hit in this work. Most
    of us have been slightly inconvenienced. If you're not in the
    military maybe that might even be a stretch, but those wearing
    the uniform and their families have been put through the
    wringer and, men, you have done a great job and we're all proud
    of you and that is why we're going to make sure you have good
    health care and also your operational needs are going to be
    met. What are we doing to make sure that the 17,000 wounded,
    once they get off the battlefield with the best medicine known
    in the history of warfare, don't fall through the cracks and
    they get the continued health care they need?
        Dr. Chu. Let me start and ask Dr. Winkenwerder to continue.
    First of all, I should emphasize--a tribute to both them and
    the quality of the MHS--half of that total returned to duty in
    72 hours. You may have enduring issues but we're prepared to
    take care of those. Then you have the remainder who range
    across the spectrum in terms of the severity of the injury, et
    cetera. As I think General Magnus testified, there has been an
    extraordinary effort by the military departments, both to
    rehabilitate those who suffered injuries and to rethink what
    fit for duty might mean in this contemporary society, and a
    willingness to accept accommodations that we perhaps might not
    have countenanced in years past. I think it's a terrific
    outlook. The Air Force, for example, as an indication of the
    difference, accepted for flight duty a pilot who has lost a
    portion of his leg due to disease, in this case, below the
    knee. That is an extraordinary change in our outlook and our
    willingness to rethink how we do business. For those with the
    most severe injuries--General Magnus mentioned the Marines for
    Life Program, the Army has a similar program, the Army Wounded
    Warrior Program, each Service has a program that is intended to
    be sure we put those images on the right course of action. To
    provide an umbrella for the DOD as a whole, we've established a
    severely injured center right down the road here in Northern
    Virginia. Its responsibility is importantly this issue of
    liaison with the other departments, to provide benefits:
    Veterans Affairs, Labor, Transportation Security
    Administration, so on and so forth. There is a holistic
    approach for caring for these individuals.
        Dr. Winkenwerder. Let me just add that I think our
    relationship with the VA is better than it has ever been. We
    are really working together with the VA and that has not been
    easy. To be honest, if you go back 4 or 5 years, it was like
    getting the polar magnets to come together but we're way past
    that now and we have taken a holistic approach and looked at
    this as a continuum from somebody that's on the battlefield
    that comes back, who may or may not be in the Service, they
    separate and they're out. One of the ways in which there is
    cooperation--there are multiple ways and I'll just hit on a
    couple of them. The information about what has gone on with the
    servicemember, we're now moving the information electronically
    because we both have, I think, world-class electronic health-
    record systems, electronic medical record systems. We look at
    people's health before they deploy and after they deploy and
    document all of that and move that information. We have
    clinical practice guidelines. We have been very forward leaning
    and I want to commend the Services and the line of leadership
    on this whole issue of mental health.
        I think we are moving past the days when it is just an
    untouchable stigma to talk about mental health. We're checking
    people after they come back for mental health and now we're
    even checking them 4 to 6 months after they come back and
    working with the VA and we have already moved through or we
    will be moving through hundreds of thousands. We've already
    checked about 20,000 individuals, and that new program is
    working well.
        So I think there's just a variety of ways that we're really
    focused on the care of that person that comes back who has made
    such a huge sacrifice and their family, because their family
    may need some support, too, and holding people together because
    there is no question but that these events create stress and
    they're issues that people take with them inside their heads if
    not their bodies when they come back.
        Senator Graham. If you could, give a report to the
    committee about how we're going to make sure they don't fall
    through the cracks. I'm very impressed with what you're doing.
    Is there anything else?
        Dr. Winkenwerder. I have one more thing to add. I did not
    want to leave your issue about savings and administrative
    savings unanswered. I want to show you, hopefully here later
    today at your convenience, the whole list of savings. Just for
    the record in 2003, for example, if you add up all of those
    savings initiatives it came to about $136 million. It's not
    insubstantial. This year we think that number's going to be
    about $725 million for this year and next year it's going to
    $975 million, and these are real things, they're joint
    procurement of pharmaceuticals with the VA, joint contracts,
    some administrative cost savings, and some elimination of
    things. We hope to achieve some savings with the BRAC.
        Senator Graham. Maybe some best practices could be
    implemented?
        Dr. Winkenwerder. Absolutely. We will take you through all
    of that at your convenience. We did want to just say for the
    record that we're committed to that. We also think there have
    been some good ideas that have come up from the associations
    and from the groups and we want to talk about that and how we
    think we can move forward.
        Senator Graham. Thank you all for your time and we
    appreciate your service, Dr. Chu and Dr. Winkenwerder, thank
    you very much. To those in uniform, we don't have enough money
    to pay you what you're worth, we don't have enough money to
    reward those who are serving, but I'm sure you do it for more
    than the money but we're going to make sure we're there for
    you. God bless. Thank you.
        We are adjourned.
        [Questions for the record with answers supplied follow:]

                   Questions Submitted by Senator John McCain

                                    tricare

        1. Senator McCain. Secretary Chu and Secretary Winkenwerder, aside
    from proposing to significantly increase the premiums paid by retirees
    under the age of 65, how is the Department of Defense (DOD) addressing
    the problem of corporate industry using incentives to encourage its
    employees to use TRICARE vice corporate health care plans?
        Dr. Chu and Dr. Winkenwerder. Currently, there is no legal recourse
    for the Department to limit or deter corporate industry from using
    incentives to encourage its employees to use TRICARE. There is such a
    prohibition for Medicare and we are recommending similar legislation
    for TRICARE.

        2. Senator McCain. Secretary Chu and Secretary Winkenwerder, what
    is the DOD doing to stimulate the use of the low-cost mail-order
    pharmacy program?
        Dr. Chu and Dr. Winkenwerder. TRICARE Management Activity has
    recently launched very aggressive communication efforts to reach users
    of retail pharmacies to provide them with information about the
    advantages associated with mail-order and detailed information on how
    to participate in the program. This education outreach will focus
    initially on the South Region so that we can evaluate the success of
    the communication effort before expanding across the Nation. The
    outreach includes extensive information about the program mailed
    directly to homes, heavy saturation of articles in local media venues
    (including print and broadcast media), and specialty media such as
    retiree and beneficiary association publications. Customer service
    representatives in the Military Health System and contractor partners
    will have additional information to provide when contacted by
    beneficiaries. Commanders and other DOD leaders have been provided
    talking points for use when holding meetings with staff, beneficiaries,
    members of the press, and community leaders.
        TRICARE pharmacy copayments are structured to incentivize the use
    of the mail-order program. In the mail-order program, beneficiaries can
    receive up to a 90-day supply of medication mailed to their home for
    the same cost as a 30-day supply from the TRICARE retail network.
    During interviews and meetings with beneficiary organizations, senior
    DOD leadership continues to stress the point that using the mail-order
    pharmacy is not only convenient, but that their members save 66 percent
    on their copayments. The recent focus has been to further delineate the
    differences in copayments in order to encourage more use of the mail-
    order program, as we have testified to Congress.

        3. Senator McCain. Secretary Chu and Secretary Winkenwerder, what
    is the DOD doing to educate beneficiaries and providers on the
    advantages of the mail-order pharmacy?
        Dr. Chu and Dr. Winkenwerder. Recently, the DOD embarked on a
    campaign to educate beneficiaries about their pharmacy benefits and the
    various options to help them decide which are best for them. We believe
    that, through this educational campaign, beneficiaries will have a
    better understanding of their prescription drug benefit. This will not
    only help them save money, but it will help us to maintain their
    benefit. The TRICARE Mail-Order Educational Program is designed to
    explain to our beneficiaries the convenience, savings, and safety of
    the mail-order pharmacy. It explains how eligible beneficiaries may
    enroll with the mail-order pharmacy by mail or via the Web, and once
    enrolled, how patients may send their prescriptions to the pharmacy.
    Patients are told that they will get their medications usually within
    14 days after our contractor, Express Scripts, Inc., receives the
    order. Each prescription also includes a reorder date, so that
    beneficiaries will know when to place a refill order. Beneficiaries
    have access to a registered pharmacist at any time via a toll-free
    number to answer questions.
        We will continue to use different avenues to explain to
    beneficiaries how they save money by using the mail-order pharmacy and
    that, by doing so, they are helping DOD contain the rising costs of
    prescription drugs. We will explain how the DOD currently pays much
    more for prescriptions filled through a retail pharmacy versus a mail-
    order pharmacy, and that these costs threaten the sustainability of the
    TRICARE pharmacy benefit. The DOD continues to examine ways to enhance
    the pharmacy benefit while reducing its costs. Some proposals to
    encourage beneficiaries to use the mail-order service include
    eliminating the copay requirement for generic drugs filled through the
    mail-order program and raising the price of both generic and brand-name
    drugs at the retail pharmacy.
        TRICARE Management Activity also has ongoing communication efforts
    with providers to ensure they understand the advantages of mail order
    for their patients and to educate them on the processes for faxing
    prescriptions to the mail-order contractor. Information about the mail-
    order program is included in all provider and beneficiary handbooks,
    periodic news releases, factsheets, and other documents on the TRICARE
    Web site, in addition to monthly bulletins and newsletters mailed to
    Prime households, and in an annual newsletter mailed to Standard/Extra
    households.

        4. Senator McCain. Secretary Chu and Secretary Winkenwerder, what
    is the DOD doing to secure discounts from drug manufacturers for the
    TRICARE retail pharmacy network?
        Dr. Chu and Dr. Winkenwerder. While the DOD must await the decision
    of the United States Court of Appeals for the Federal Circuit regarding
    DOD access to Federal pricing at network retail pharmacies, we have
    been actively seeking ways to reduce our retail acquisition costs. We
    are currently developing a proposal to pursue voluntary pricing
    agreements with pharmaceutical manufacturers for prescription
    medications purchased by DOD beneficiaries in the retail pharmacy
    network. These agreements, if entered into by pharmaceutical
    manufacturers, will represent a significant step forward to reducing
    DOD retail drug costs.

        5. Senator McCain. Secretary Chu and Secretary Winkenwerder, what
    is the DOD doing to streamline the electronic claim system?
        Dr. Chu and Dr. Winkenwerder. Historically, TRICARE contracts have
    required our managed care support contractors to promote a system for
    accepting electronic media claims: ``The Electronic Media Claims (EMC)
    system shall be able to receive Medicare's data set for the revised
    Health Care Financing Administration Form 1500 and Medicare's data set
    for the 0092 . . . and shall be able to accept any form of cost
    effective ``paperless claims'' submission, i.e., disk, tape, etc. . .
    .'' This historical basis is critical in that it demonstrates that
    TRICARE EMC requirements are based upon the Medicare requirements.
    Medicare is the most successful insurer in terms of EMC receipts.
        In the current contracts, TRICARE continues to comply with the
    Medicare/Health Insurance Portability and Accountability Act (HIPAA)
    EMC submission requirements, the nationally mandated streamlining
    approach to electronic claims submission. Our contracts state that
    standardized electronic transactions and code sets, as required by the
    Administrative Simplification section of the HIPAA, shall be accepted.
    TRICARE is in full compliance with the provisions of HIPAA today, and
    will continue to implement these national streamlining initiatives as
    they are issued by Medicare. In addition, TRICARE became an industry
    leader with Web-based technology. Our TRICARE claims processors have,
    since the implementation of their contracts, offered streamlined two-
    way, real time interactive Internet Based Claims Processing (IBCP) by
    providing Web-based connectivity to the claims/encounter processing
    system for both institutional and non-institutional claims processing.
    This IBCP system provides immediate eligibility verification by
    connectivity to Defense Enrollment Eligibility Reporting System and
    provides current deductible, Catastrophic Cap, and cost-share/copayment
    information to the provider. Compliance with HIPAA, enhanced by our
    Web-based EMC submission opportunities, has moved TRICARE to the
    forefront of the industry in our ongoing drive to achieve 100 percent
    EMC submissions and avoid the high costs associated with the processing
    of paper claims.
        Currently, over 60 percent of all non-pharmacy TRICARE claims (over
    72 percent of network provider claims) are successfully filed
    electronically through a variety of methods, from a wide variety of
    providers throughout the United States, clearly demonstrating that
    there is nothing inherent in TRICARE claims submission requirements to
    prevent claims from being filed electronically.
        Our TRICARE contractors will work with individual providers to
    overcome any difficulties they encounter in claims filing, and the
    TRICARE Management Activity is prepared to work with the contractors to
    address any particular circumstances that can be brought to our
    attention. System edits on electronic claims are real time. Submission
    errors not clearing initial screens are returned immediately.

        6. Senator McCain. Secretary Chu and Secretary Winkenwerder, what
    is the DOD doing to simplify the TRICARE prime referral system?
        Dr. Chu and Dr. Winkenwerder. Action has been taken to allow for
    urgent referral appointments to be made for the beneficiary prior to
    leaving the Military Treatment Facility (MTF) or the beneficiary may
    make an appointment at their convenience. We have also begun to use a
    unique referral tracking number for all referrals and authorizations as
    part of an automated tracking system. This initiative will help to
    expedite answering beneficiary questions or concerns.
        The requirement to include clinical information in letters
    currently sent to beneficiaries to authorize care to the network has
    been removed. Beneficiaries will no longer be responsible for hand
    carrying clinical information, helping to prevent sensitive clinical
    information from potentially being mailed to incorrect Defense
    Enrollment Eligibility Reporting System addresses. The use of Episodes
    of Care has been standardized, eliminating the current requirement for
    the beneficiary to go back to the Primary Care Provider numerous times
    to get individual authorizations for the same episode of care. Policy
    guidance has been developed to simplify the Right of First Refusal
    process in an effort to expedite patient care and reduce the
    frustration of network providers.

        7. Senator McCain. Secretary Chu and Secretary Winkenwerder, what
    is the DOD doing to reduce TRICARE Reserve Select costs?
        Dr. Chu and Dr. Winkenwerder. The Department is delivering the
    TRICARE Standard and Extra benefit to Reserve members and their
    families covered under TRICARE Reserve Select (TRS). We are offering
    them space-available access to MTFs on the same basis as Active-Duty
    family members who have not enrolled in TRICARE Prime. They may also
    use MTF pharmacies. TRICARE Network providers and hospitals charge
    rates negotiated with TRICARE regional contractors that are less than
    or equal to the TRICARE maximum allowable charge.
        The Reserve components are validating Guard and Reserve members'
    qualifications and recording them in the Defense Eligibility Enrollment
    Reporting System so that only qualified members can purchase TRS
    coverage. We have implemented sound billing and collection procedures
    for premium payments. We have employed the enrollment information
    systems and standard claims processing procedures that are familiar to
    our TRICARE regional contractors. In short, the Department is acting as
    efficiently as possible, consistent with ensuring that reservists are
    given full opportunity to participate in TRS.
                                     ______

                 Questions Submitted by Senator Elizabeth Dole

                             mental health services

        8. Senator Dole. Secretary Winkenwerder, I understand you are
    seeing positive results from a pilot program called ``Re-engineering
    Systems of Primary Care Treatment of Mental Illness in the Military''
    (RESPeCT-Mil), launched at the Deployment Health Clinical Center at
    Walter Reed Army Medical Center, that is currently being tested at the
    82nd Airborne Troop Medical Clinic in Fort Bragg, North Carolina. I
    also understand that Phase II of this pilot program is funded by the
    Deployment Health Clinical Center, but Phase III, which would allow for
    similar programs at approximately half of our demobilization sites, is
    still unfunded. What are your plans for Phase III?
        Dr. Winkenwerder. RESPeCT-Mil is an innovative primary care program
    headquartered at Fort Bragg. The goal of this program is to empower
    primary care providers to recognize and manage the mental health
    consequences of their wartime service to our Nation. Thus far, we have
    screened over 2,000 soldiers receiving primary care and the experience,
    to date, suggests that soldiers find it a helpful, acceptable, and
    nonstigmatizing way to get their mental health needs met. Over 20
    primary care providers have used the approach and they find it makes
    them more effective when helping soldiers with mental health needs.
        We believe the RESPeCT-Mil program holds great promise as a way to
    assist our soldiers with mental health issues. It involves provider
    education, a prepared practice that makes best use of new electronic
    medical record systems, and the use of a nurse care manager to ensure
    continuity of care. We are finding that providers like it, soldiers
    like it, and, in our pilot efforts, it appears to be the right thing to
    do. We expect that the pilot will be completed by the end of the fiscal
    year, but we are flexible if there is a sense that the program should
    be implemented more broadly before the pilot ends.

        9. Senator Dole. Secretary Winkenwerder, if this program proves to
    be a success, do you plan to ask for funding to expand this concept to
    include other services?
        Dr. Winkenwerder. We are evaluating funding sources to expand the
    pilot program if we deem it successful. We will consider applying for
    research grant funding for an implementation study at primary care
    sites supporting a number of demobilization sites.

        10. Senator Dole. General Magnus, please outline what the Marine
    Corps is doing to recognize and treat mental health problems among
    marines who have served in combat?
        General Magnus. The Marine Corps developed an integrated program of
    deployment cycle educational briefs and health assessments (from pre-
    deployment through post deployment) called the Marine Operational
    Stress Surveillance and Training (MOSST) program. The primary
    objectives of the educational briefs are to increase awareness of
    marines and their leaders of the symptoms and behaviors that may be
    associated with stress injuries during each phase of deployment and to
    increase the likelihood that marines suffering from stress problems
    will get the help they need. The health assessments will allow us to:
    detect mental health conditions, including conditions that may emerge
    over a sustained period of time; study the validity/effectiveness of
    the assessments; conduct trend analysis; and determine the efficacy of
    tracking and treating positive responses. In conjunction with MOSST,
    medical and religious ministry personnel embedded with operational
    Marine units, including mental health professionals assigned to our
    Operational Stress Control Readiness (OSCAR) teams, also help to
    decrease the stigma associated with asking for help and to increase the
    availability of that help everywhere marines train and fight. The
    attitude we repeatedly communicate to all marines is that ``it is OK to
    ask for help.''

        11. Senator Dole. General Magnus, I know the Army is making great
    progress in this area with their RESPeCT-Mil pilot program and the more
    than 200 Army mental health providers who deployed in Operations
    Enduring Freedom and Iraqi Freedom to provide early intervention in
    theater. The U.S. Army Medical Command is also augmenting medical
    treatment facilities with care managers to help support returning
    soldiers and their families. What is the Marine Corps doing to enhance
    mental health services for marines and their families?
        General Magnus. The Marine Corps is making significant progress in
    developing programs to deliver behavioral health services to marines
    and their families in settings that reduce stigma and other barriers to
    care. In garrison and forward deployed, marines receive their primary
    health care from Navy medical officers and corpsmen that are embedded
    in their operational units full time. These embedded medical personnel
    are in the best position to appreciate the challenges faced by every
    member of a unit. New programs have been implemented to train Navy
    medical officers and corpsmen supporting Marine units in the
    prevention, early identification, and optimal management of deployment
    related stress problems, including post traumatic stress disorder
    (PTSD). Our OSCAR program also embeds mental health professionals in
    operational Marine units both in garrison and in theater, which
    promotes an optimal partnership between Marine leaders, primary health
    care providers, and specialty mental health personnel. Since Operation
    Iraqi Freedom began, we have deployed over 60 mental health
    professionals to Iraq to support Marine operating forces. This number
    is roughly equal to the Army's in proportion to servicemembers
    supported in theater. The Marine Corps also makes use of its intrinsic
    nonmedical support capability resources in the identification and
    management of stress problems, including unit Chaplains, both in
    garrison and forward deployed, and Marine Corps Community Services
    counseling centers on Marine Corps bases.

        12. Senator Dole. General Magnus, should the Marine Corps implement
    a program like RESPeCT-Mil?
        General Magnus. RESPeCT-Mil is a pilot project based on the
    recognition that most medical treatment of behavioral problems, both in
    the military and in civilian communities in the U.S., is delivered in
    primary care settings. Primary care providers have many advantages over
    specialty mental health providers in reaching out to servicemembers in
    distress, including their numbers and availability, and the lower
    burden of stigma associated with primary care treatment of behavioral
    problems. However, the RESPeCT-Mil program is less suited to the Marine
    Corps than it is to the Army because Marine units are expeditionary.
    Therefore, our health service delivery programs must also be
    expeditionary. The combat/operational stress management partnership in
    the Marine Corps between Marine leaders and embedded Chaplains, medical
    officers, corpsmen, and OSCAR mental health providers offer an
    integrated, community-based behavioral health service capability in the
    Marine Corps that is flexible and expeditionary and maintains
    continuity of care.

        13. Senator Dole. General Magnus, do you face additional challenges
    in this area with Navy doctors and corpsmen treating Marine Corps
    ground troops?
        General Magnus. No. Navy doctors and corpsmen have always been
    integral to the Fleet Marine Forces and are considered full members of
    the Marine Corps team.

                                    tricare
        14. Senator Dole. Secretary Winkenwerder, a number of my
    constituents have contacted me stating that they are facing challenges
    in accessing TRICARE services. For example, certain medical facilities
    and hospitals refuse to accept TRICARE, or they will see TRICARE
    patients but they apply the DOD TRICARE billing rate. In these
    circumstances, these individuals become lower priority patients, and
    experience increased wait times. I understand that many doctors,
    including rural providers, would like to provide care under TRICARE,
    but cannot afford to do so--TRICARE rates do not make the effort cost
    effective for the medical provider. Would you please explain how
    TRICARE reimbursement rates compare with Medicare reimbursement rates,
    and provide us with a recommendation on reconciling these for improved
    military health care?
        Dr. Winkenwerder. The vast majority of TRICARE beneficiaries do not
    have difficulty in accessing health care, but it is true that access is
    a challenge in some locations. Under 42 United States Code
    1395cc(a)(1)(J), hospitals that participate in Medicare are required,
    under their participation agreement, to participate in TRICARE and
    accept the institutional participating provider reimbursement as
    payment in full.
        The TRICARE Diagnosis-Related Group (DRG) payment system was
    implemented in 1987, and is modeled upon the Medicare Prospective
    Payment System (PPS). Both payment systems pay hospitals a fixed amount
    per admission based upon the patient's diagnosis. Under both the
    TRICARE DRG system and the Medicare PPS, each patient is classified
    into a DRG which has a weight. In general, this weight is then
    multiplied by an Adjusted Standardized Amount (ASA), depending upon
    whether the hospital is located in a large urban area or not. The
    product of this calculation (the diagnosis-group-specific weight
    multiplied by the ASA) equals the hospital's payment for that patient.
    There are variations in this amount if the patient has unusually high
    costs or if the hospital has a medical education program. The payment
    also varies geographically to reflect the cost of labor.
        There are some differences between the Medicare and TRICARE
    reimbursement systems. The TRICARE DRG weights are based upon the
    characteristics of the TRICARE population. In contrast to the Medicare
    population which is predominantly age 65 and over, the TRICARE
    population is generally under age 65 and healthier. The weights reflect
    the relative level of charges from hospitals for patients in each DRG.
    As a consequence, the TRICARE DRG weights differ from the Medicare
    weights because of differences in the two populations. The TRICARE DRG
    system also has a number of DRGs that Medicare does not have to reflect
    the unique characteristics of the TRICARE population. One key
    difference in the two populations is that TRICARE has more obstetric
    and pediatric cases than Medicare. In April 1989, TRICARE added 36
    neonatal DRG categories that Medicare does not have. Five of the top 10
    DRGs in TRICARE are for pediatric or obstetric cases.
        The TRICARE DRG system also differs slightly from the Medicare PPS
    because TRICARE pays hospitals a separate amount for each hospital's
    capital and direct medical education costs. Medicare includes these
    amounts in the basic DRG payment. Total compensation is the sum of the
    TRICARE payments compared to the single Medicare payment. In addition,
    TRICARE pays an additional amount to children's hospitals (referred to
    as the ``differential''). TRICARE also pays hospitals a lower amount if
    the patient has an unusually short stay, while Medicare does not.
        In accordance with section 723 of the National Defense
    Authorization Act for Fiscal Year 2004, we are working closely with our
    beneficiaries in surveying doctors across the country to determine
    where access issues exist, and supporting the Government Accountability
    Office (GAO) as they assess TRICARE Standard effectiveness.

                      water contamination at camp lejeune
        15. Senator Dole. General Magnus, I continue to be concerned about
    the Camp Lejeune water contamination problem. I know the Marine Corps
    has made an effort in the past to notify servicemembers and their
    families who may have been affected by the tainted water on base. Are
    there further notification plans in the works, and how is the Marine
    Corps cooperating with the Agency for Toxic Substances and Disease
    Registry (ATSDR) water modeling project and the GAO report?
        General Magnus. Be assured that the Marine Corps takes this issue
    seriously and is diligently preparing to support potential future
    initiatives that may include other studies and additional notification
    to former Camp Lejeune residents and employees. We believe the best way
    to get answers about the historic water quality conditions at Camp
    Lejeune and potential health effects is through continued cooperation
    with the ATSDR and GAO. We are funding the ATSDR's activities to
    include the ongoing health study, the water model that supports the
    study, by estimating when and where on the base the water was impacted,
    and the Community Assistance Panel, which is examining the feasibility
    of additional studies. We continue to provide requested data and
    respond to inquiries from both the ATSDR and the GAO.

                         post traumatic stress disorder
        16. Senator Dole. General Magnus, I am very concerned about the
    incidence of PTSD in our servicemembers and the major stress on their
    families associated with long deployments. When I led the American Red
    Cross, I created Mental Health Teams that were dispatched to provide
    help for those affected by trauma. Please update me on your OSCAR
    program where you have mental health professionals at aid stations.
    What results are you seeing and how effective do you feel this program
    has been?
        General Magnus. A preliminary review of the OSCAR pilot project
    recently completed by the Center for Naval Analyses confirmed the
    potential benefits of the OSCAR model, and recommended it be
    established as a program of record and eventually expanded to serve all
    Fleet Marine Forces. The OSCAR program embeds teams of mental health
    professionals, Chaplains, psychiatric corpsmen, and specially trained
    senior noncommissioned officers in ground units. The OSCAR model is to
    assign one mental health professional and trained staff Noncommissioned
    Officer at the level of each regiment or equivalently-sized unit
    throughout training and deployment cycles. The function of these OSCAR
    personnel is to provide preventive outreach services to the many firm
    and forward operating bases from which battalion- and company-level
    operations are conducted. By becoming known to their marines and by
    sharing adversity with them, OSCAR team members help break down the
    barriers to mental health care.

        17. Senator Dole. General Cody, does the Army have a similar
    program to the Marine Corps OSCAR program?
        General Cody. The Army has taken great effort to ensure mental
    health treatment is readily accessible to soldiers before, during, and
    after deployment. The Army's Combat Operational Stress Control program
    has existed for more than 20 years and includes positioning mental
    health professionals far forward on the battlefield where they can best
    provide help for those affected by trauma. Each Army brigade combat
    team (BCT) has behavioral health professionals assigned. Combat stress
    detachments and combat stress companies provide forward mental health
    support on an area basis and can directly augment BCT behavioral health
    sections when necessary. Additionally, the Army is conducting a pilot
    program to train primary health providers to diagnose and treat PTSD
    symptoms with the goal of significantly increasing mental health
    treatment coverage. These forward focused programs are just one aspect
    of the Army's comprehensive effort to address mental heath challenges
    as rapidly and thoroughly as possible.
                                     ______

                Questions Submitted by Senator Edward M. Kennedy

                     mental health self-assessment program

        18. Senator Kennedy. Secretary Winkenwerder, I was pleased to hear
    about the new, voluntary Mental Health Self-Assessment Program. This
    certainly is a good start in meeting the mental health needs of
    servicemembers and families affected by mobilization and deployment.
    It's available any time. It also helps the DOD meet the requirement of
    the National Defense Authorization Act for Fiscal Year 2006 for a
    program for family mental health.
        I believe the program is a vital part of the overall health and
    well-being of our deploying forces and their families. I'd like to see
    more people take advantage of the program. What are your plans to
    ensure its continuation in future years?
        Dr. Winkenwerder. I share your belief that this program is an
    important part of supporting the mental health and well-being of troops
    and families affected by deployment. The Mental Health Self-Assessment
    Program was launched in January 2006. It is fully funded for fiscal
    year 2006, and we have projected funding for next year as well. The
    program has been an immediate success. In the first 2 months, 160
    installations registered to receive materials to conduct alcohol
    screening and 160 installations registered to receive materials to
    conduct depression and general mental health screening onsite, while
    thousands of participants have used the online format.

        19. Senator Kennedy. Secretary Winkenwerder, what plans do you have
    to notify all Active-Duty, Guard, and Reserve units that the program is
    available to their families and servicemembers?
        Dr. Winkenwerder. We have developed and fielded a robust
    communications plan, to include electronic notification through
    established e-mail listings, placement on key Web sites that serve
    families as well as Reserve component personnel, and a wide variety of
    media outlets. We have formed partnerships with Veterans Service
    Organizations, such as the National Military Family Association, and
    with our other support programs, such as Military OneSource, to ensure
    the widest possible exposure to the total military community. In
    addition, the program has been nationally recognized in Parade
    Magazine, as well as on our Armed Forces news and television channels,
    as being important in the education and caring for both our
    servicemembers who return from deployment as well as their families.
    The program has been so successful that we are producing additional
    kits for onsite mental health screening events specifically for Guard
    and Reserve units to be used during regularly scheduled Family Days. We
    are encouraged by the participation we have seen so far in this
    important education and outreach program, and hope our continued
    support provides a solid foundation of information to our military
    community in the area of mental health.

                         post traumatic stress disorder
        20. Senator Kennedy. Secretary Winkenwerder, the mental health of
    our servicemembers while they are deployed, or at home, or even when
    they are retired is of great importance. The stress they endure to
    protect our country can be huge. What other mental health measures are
    you preparing for troops returning home from Iraq and Afghanistan?
        Dr. Winkenwerder.
    Post Deployment Health Assessments
        Within 7 days of redeploying home, or after arriving home,
    servicemembers receive global health assessments regarding in-theater
    environmental and trauma exposures, physical symptoms, and mental
    health concerns. Each assessment is privately reviewed with the member
    by a medical provider who determines whether further specialized
    evaluation/care is indicated for any health concern. Referrals are made
    to specialists, as indicated, which may include mental health
    providers.
        An integral part of the demobilization process is a series of
    briefings to servicemembers and their families about reintegrating into
    their home environment and transitioning from a combat mentality.
    Briefings for members prior to coming home and family briefings address
    potential reunion challenges, helping servicemembers and their families
    to adopt realistic and flexible transition approaches.
    Post Deployment Health Reassessments
        Servicemembers may develop physical symptoms or mental health
    concerns several months after returning home from a deployment;
    therefore, a Post Deployment Health Reassessment is conducted 3 to 6
    months after returning from combat theaters. In addition to documenting
    exposures and physical symptoms, assessments include those for mental
    health concerns (e.g., PTSD). The results are privately reviewed by a
    provider with the patient to determine whether further evaluation and
    referral for specialty care is indicated. Ongoing family support
    services are readily available throughout the post deployment period,
    in addition to chaplain, mental health, and medical resources.
    Seamless Transition of Care to the Veterans Health Administration
        Servicemembers leaving Active-Duty after combat service in either
    Operation Enduring Freedom or Operation Iraqi Freedom, whether by
    completing their Active-Duty commitment or by deactivating from the
    Reserves or National Guard, are entitled to priority care from the
    Veterans Health Administration for 2 years. The DOD and Department of
    Veterans' Affairs (VA) Offices of Seamless Transition work to ensure
    servicemembers do not experience a gap in care during what can be a
    vulnerable period, especially for those with psychological symptoms as
    a result of their experiences. The VA/DOD Mental Health Work Group of
    mental health experts is chartered to increase levels of collaboration
    and to ensure a strong safety net for those suffering mental health
    disorders. Essential to the smooth flow of veterans' care is transfer
    of medical records for separating personnel to the VA, including
    deployment exposures documented in Post Deployment Health Assessments.
    Extensive work interfacing medical information technology systems has
    enabled the transfer of post deployment health data, allowing accurate
    line-of-duty determinations. In addition, military and VA health
    systems at many locations now share real time medical data, such as lab
    and other clinical test results. At a few locations, all medical data
    are visible on both military and VA systems. In addition to these
    efficiencies, current development of a common military separation
    process, including exams, will obviate the need for two assessments for
    the same condition, one by the military and one by the VA. The VA and
    the DOD collaborated to develop common Clinical Practice Guidelines,
    including those for management of PTSD, Post Deployment Health
    Evaluation and Management, and psychosis. Additionally, for some
    Reserve and National Guard units, VA mental health staff members
    conduct onsite post deployment briefings for servicemembers and their
    families, with a special emphasis on mental health issues and available
    benefits.
    Additional Mental Health Care Benefits after Discharge/Deactivation
        Servicemembers and their families also receive TRICARE benefits for
    180 days after the member leaves Active-Duty, a benefit made permanent
    by the National Defense Authorization Act for Fiscal Year 2005. Family
    members do not need a specialty referral for mental health care.

        21. Senator Kennedy. Secretary Winkenwerder, record numbers of
    these troops are being diagnosed with PTSD. We haven't seen this type
    of mental health situation in our troops and veterans since the Vietnam
    War. The disorder can be life-threatening for our troops and completely
    debilitating for veterans in the workforce or seeking employment. What
    steps are you taking to mitigate the negative effects of PTSD in our
    servicemembers and veterans?
        Dr. Winkenwerder. Some servicemembers returning from Operation
    Enduring Freedom and Operation Iraqi Freedom are at increased risk for
    trauma-related symptoms. Servicemembers who are exposed to violence or
    the possibility of death or serious injury are at increased risk for
    PTSD. Our approach to mitigating the negative effects of trauma is to
    prevent them, if possible, identify symptoms early, and treat affected
    servicemembers before the symptoms meet criteria for actually
    diagnosing PTSD. Some of our servicemembers may go on to develop this
    disorder and are treated using the clinical practice guidelines
    developed by the VA and DOD in collaboration. Treatment may include
    both psychotherapy and medication.
        The first step in preventing PTSD is recruiting mentally fit
    servicemembers. Military training then provides realistic scenarios and
    rigorous challenges to offer a form of ``stress inoculation'' that
    accustoms servicemembers to combat threats and potential trauma. For
    many of our troops, realistic training is provided by actually
    simulating what they can expect in current theaters of operation,
    including the use of low-potency improvised explosive devices. This
    kind of training better enables servicemembers to cope with the
    challenges of combat.
        Those affected in the field by their traumatic exposures have
    opportunities with embedded and circulating chaplains and mental health
    personnel to process their experiences and come to terms with grief
    when a colleague is injured or killed. Those who do not recover with
    extra support in a few days may leave the theater for more intensive
    treatment, if indicated.
        Programs for returning soldiers and their families emphasize the
    importance and normality of ``resetting'' after returning home from a
    war zone. This is done by focusing on some of the adaptive aspects of
    PTSD in a war zone (for example, hyperarousal and hypervigilance) that
    can be ``reset'' in the safety of life at home. Parallel member and
    family preparation programs help both to adjust to each other upon
    return, as well as inform them of numerous resources available to them
    for help, as needed.
        For servicemembers who are not sure whether they should get help
    for some of their mental health concerns or who are concerned about
    stigma, they can anonymously take an online screening for PTSD at
    www.militarymentalhealth.org. Depending upon their indicated symptoms,
    this Web site may recommend they seek help. If they are still concerned
    about anonymity and stigma, servicemembers and their families can sign
    on to www.militaryonesource.com, e-mail, and/or call Military OneSource
    counselors. Masters level counselors are available 24-hours a day, free
    of charge to help service and family members to have some sense of the
    seriousness of their symptoms and provide the full range of referral
    options for appropriate care, as indicated by their status as Active-
    Duty, reservists, Guard, or deactivated members. These services may be
    provided by military medical facilities, TRICARE, or the VA, depending
    upon the status of the member and their location. Military OneSource
    counselors can also meet with members and/or their families to provide
    face-to-face family support sessions, up to six for each identified
    problem.
        As with physical illnesses, not every person with a mental health
    problem will be fit for military duty, but the vast majority will
    recover and continue performing their duties well. For them, and even
    for those who leave the military, life is much better when they receive
    help.

        22. Senator Kennedy. Secretary Winkenwerder, to what extent is the
    Mental Health Self Assessment Program used to mitigate the negative
    effects of PTSD?
        Dr. Winkenwerder. The Mental Health Self Assessment Program is
    designed to help educate servicemembers and their families about the
    signs and symptoms associated with some of the commonly occurring
    mental health concerns associated with deployment. In society in
    general, there has been an overall lack of good information about
    mental health concerns such as PTSD. This program will benefit the
    mental health of our servicemembers and their concerned family members
    in three basic ways. First, it provides a safe and secure way to get
    solid personalized information about the signs and symptoms of PTSD.
    Second, it serves to encourage those who experience early symptoms to
    seek treatment. Third, it provides vital information on counseling and
    mental health treatment options available to our servicemembers and
    their families.
        We know that when symptoms are identified early, treatment is more
    effective. We also know that treatment is more effective when the
    individual self-refers for care rather than being compelled into
    treatment. By providing easily assessable, anonymous symptom checklists
    along with solid information and benefits information, we hope to see
    more of our men and women in uniform and their family members entering
    into treatment, returning them to the high quality-of-life they
    deserve.
                                     ______

                 Questions Submitted by Senator Daniel K. Akaka

                             military health system

        23. Senator Akaka. Secretary Chu, in your testimony you state that
    the DOD's military medical transformation is shaped by the
    recommendations for the Military Health System (MHS) contained in the
    Quadrennial Defense Review, Medical Readiness Review, and the Base
    Realignment and Closure (BRAC) Commission.
        Does the DOD have any plans to conduct an independent audit of its
    MHS? If no, why? If yes, what is the time frame for the audit?
        Dr. Chu. The MHS has been the subject of a multitude of independent
    studies by the GAO, the DOD Inspector General, as well as Service-
    specific audit agencies. GAO audits have already begun on the BRAC
    process. We carefully review all audits and studies and use their
    recommendations to constantly improve our processes.

                         post traumatic stress disorder
        24. Senator Akaka. Secretary Chu, your testimony suggests that only
    a minority of servicemembers returning home require mental health
    services yet, according to recent Army statistics, 35 percent of
    soldiers and marines returning from Iraq sought mental health care and
    19 percent were diagnosed with a mental disorder like PTSD, depression,
    or anxiety within a year of coming home.
        Does the DOD currently have a sufficient number of mental health
    professionals and facilities to ensure that all servicemembers who
    require mental health care receive adequate treatment? If no, what
    plans does the DOD have to increase this capacity?
        Dr. Chu. The Service branches have been resourced to provide the
    care our servicemembers require. They formulate staffing solutions that
    work best for their branch and existing military mental health
    resources. This may include contracting providers either for full-time
    staffing or for surge evaluations that may be associated with
    demobilizations or post deployment reassessments. VA mental health
    professionals play a vital role supporting post deployment health
    reassessments, and the 2-year VA entitlement available to Reserve,
    Guard, and separating Active-Duty members provides a substantial boost
    in capacity.

                                    tricare
        25. Senator Akaka. Secretary Chu and Secretary Winkenwerder, the
    proposed changes to TRICARE benefits would introduce a three-tier fee
    structure for retirees under age 65 based on their retired rank. This
    type of fee structure could cause undue hardship for retired officer or
    senior enlisted without the necessary financial resources. Has there
    been any discussion of means testing the proposed fee changes?
        Dr. Chu and Dr. Winkenwerder. We considered and decided against a
    means test. The three-tier system we are proposing already reflects the
    differences in retiree pay that retired officers and retired senior and
    junior enlisted members receive.

        26. Senator Akaka. Secretary Chu and Secretary Winkenwerder, access
    to TRICARE for reservists is an important recruitment tool. In addition
    to introducing a new fee schedule which would raise the annual
    enrollment fees for retirees under age 65, the proposed TRICARE changes
    would also would raise the annual enrollment fee for TRICARE Prime and
    introduce a new annual enrollment fee for TRICARE Standard as well as
    increasing TRICARE Standard's annual deductible. In what way would
    these proposed changes impact DOD recruiting and retention efforts?
        Dr. Chu and Dr. Winkenwerder. If the TRICARE program is not on firm
    financial footing, the benefit will erode, which will adversely affect
    recruiting and retention. Fee increases for retirees under the age of
    65 are essential to sustaining the benefit and protecting recruiting
    and retention.

        [Whereupon at 3:45 p.m., the subcommittee adjourned]