[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]

                                 
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