[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


 
                                
                          [H.A.S.C. No. 114-5]

                     FINAL RECOMMENDATIONS FROM THE

                   MILITARY COMPENSATION AND RETIRE-

                     MENT MODERNIZATION COMMISSION

                               __________

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                            FEBRUARY 4, 2015

                                     
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                   HOUSE COMMITTEE ON ARMED SERVICES
                    One Hundred Fourteenth Congress

             WILLIAM M. ``MAC'' THORNBERRY, Texas, Chairman

WALTER B. JONES, North Carolina      ADAM SMITH, Washington
J. RANDY FORBES, Virginia            LORETTA SANCHEZ, California
JEFF MILLER, Florida                 ROBERT A. BRADY, Pennsylvania
JOE WILSON, South Carolina           SUSAN A. DAVIS, California
FRANK A. LoBIONDO, New Jersey        JAMES R. LANGEVIN, Rhode Island
ROB BISHOP, Utah                     RICK LARSEN, Washington
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN KLINE, Minnesota                MADELEINE Z. BORDALLO, Guam
MIKE ROGERS, Alabama                 JOE COURTNEY, Connecticut
TRENT FRANKS, Arizona                NIKI TSONGAS, Massachusetts
BILL SHUSTER, Pennsylvania           JOHN GARAMENDI, California
K. MICHAEL CONAWAY, Texas            HENRY C. ``HANK'' JOHNSON, Jr., 
DOUG LAMBORN, Colorado                   Georgia
ROBERT J. WITTMAN, Virginia          JACKIE SPEIER, California
DUNCAN HUNTER, California            JOAQUIN CASTRO, Texas
JOHN FLEMING, Louisiana              TAMMY DUCKWORTH, Illinois
MIKE COFFMAN, Colorado               SCOTT H. PETERS, California
CHRISTOPHER P. GIBSON, New York      MARC A. VEASEY, Texas
VICKY HARTZLER, Missouri             TULSI GABBARD, Hawaii
JOSEPH J. HECK, Nevada               TIMOTHY J. WALZ, Minnesota
AUSTIN SCOTT, Georgia                BETO O'ROURKE, Texas
STEVEN M. PALAZZO, Mississippi       DONALD NORCROSS, New Jersey
MO BROOKS, Alabama                   RUBEN GALLEGO, Arizona
RICHARD B. NUGENT, Florida           MARK TAKAI, Hawaii
PAUL COOK, California                GWEN GRAHAM, Florida
JIM BRIDENSTINE, Oklahoma            BRAD ASHFORD, Nebraska
BRAD R. WENSTRUP, Ohio               SETH MOULTON, Massachusetts
JACKIE WALORSKI, Indiana             PETE AGUILAR, California
BRADLEY BYRNE, Alabama
SAM GRAVES, Missouri
RYAN K. ZINKE, Montana
ELISE M. STEFANIK, New York
MARTHA McSALLY, Arizona
STEPHEN KNIGHT, California
THOMAS MacARTHUR, New Jersey
                  Robert L. Simmons II, Staff Director
               Dave Giachetti, Professional Staff Member
                Craig Greene, Professional Staff Member
                           Colin Bosse, Clerk
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Smith, Hon. Adam, a Representative from Washington, Ranking 
  Member, Committee on Armed Services............................     2
Thornberry, Hon. William M. ``Mac,'' a Representative from Texas, 
  Chairman, Committee on Armed Services..........................     1

                               WITNESSES

Maldon, Hon. Alphonso, Jr., Chairman, Military Compensation and 
  Retirement Modernization Commission; accompanied by 
  Commissioners GEN Peter W. Chiarelli, USA (Ret.), ADM Edmund P. 
  Giambastiani, Jr., USN (Ret.), Hon. Stephen E. Buyer, and 
  Michael R. Higgins.............................................     4

                                APPENDIX

Prepared Statements:

    Maldon, Hon. Alphonso, Jr., joint with Hon. Larry L. 
      Pressler, Hon. Stephen E. Buyer, Hon. Dov S. Zakheim, 
      Michael R. Higgins, GEN Peter W. Chiarelli, ADM Edmund P. 
      Giambastiani, Jr., Hon. J. Robert Kerrey, and Hon. 
      Christopher P. Carney......................................    54
    Thornberry, Hon. William M. ``Mac''..........................    53

Documents Submitted for the Record:

    Fleet Reserve Association Statement for the Record...........    73
    Thirteen Commission charts displayed during hearing..........    83

Witness Responses to Questions Asked During the Hearing:

    Mr. Forbes...................................................    93
    Mrs. McSally.................................................    95
    Mr. O'Rourke.................................................    93
    Ms. Sanchez..................................................    93
    Mr. Takai....................................................    93

Questions Submitted by Members Post Hearing:

    Mr. Shuster..................................................    99
    Mr. Zinke....................................................   101
  FINAL RECOMMENDATIONS FROM THE MILITARY COMPENSATION AND RETIREMENT 
                        MODERNIZATION COMMISSION

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                       Washington, DC, Wednesday, February 4, 2015.
    The committee met, pursuant to call, at 10:01 a.m., in Room 
2118, Rayburn House Office Building, Hon. William M. ``Mac'' 
Thornberry (chairman of the committee) presiding.

  OPENING STATEMENT OF HON. WILLIAM M. ``MAC'' THORNBERRY, A 
    REPRESENTATIVE FROM TEXAS, CHAIRMAN, COMMITTEE ON ARMED 
                            SERVICES

    The Chairman. The committee will come to order.
    I am pleased to welcome our members, guests, and certainly 
our witnesses to today's hearing on the Military Compensation 
and Retirement Modernization Commission report. This is a very 
important issue for the committee and for our country.
    You know, it is often said that people are our most 
valuable resource. And just because we hear it a lot does not 
mean that it is not true. It is a central truth of our 
country's security that the men and women who serve are our 
most essential and valuable asset. And today we are asking more 
and more of those who serve, and various proposals and actions 
and inactions by Congresses and administrations over the years 
have certainly caused some of them at least to question our 
country's commitment to them.
    Congress decided that we needed to take a comprehensive 
look at our pay and benefit structure, see what was working, 
what wasn't working, and especially whether it will continue to 
be able to assist us in recruiting and retaining the high-
quality folks that we need to serve our country in the 
military.
    Last week, the Commission on Military Compensation and 
Retirement Modernization issued their report, and we are very 
pleased to have many of the commissioners before us to testify 
and explain the report before us today. And I particularly 
appreciate the Commission's work to help us understand what 
sorts of pay and benefits are most valued by the people who 
serve. Their proposals certainly deserve and will receive a 
thorough examination by this committee.
    As Congress reviews these recommendations, I think we will 
continue to ask what sorts of pay and benefits are working as 
intended, what sort are not working, and does this overall 
structure put the military in the best possible position to 
attract and keep the kind of top-quality people we need moving 
ahead. As we study the Commission's proposals and receive other 
opinions and suggestions, those will be the primary questions, 
at least on my mind.
    Let me turn to the distinguished ranking member, Mr. Smith.
    [The prepared statement of Mr. Thornberry can be found in 
the Appendix on page 53.]

STATEMENT OF HON. ADAM SMITH, A REPRESENTATIVE FROM WASHINGTON, 
          RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. Smith. Thank you, Mr. Chairman. I too want to thank our 
panel for taking on a very, very difficult task and doing an 
outstanding job. I think the proposals are thoughtful and 
really get into the difficulty of the issue, and I think it is 
good place to start for our committee.
    And really there are just two competing principles here. 
One, as the chairman noted, we need to take care of the men and 
women who serve in our military and their families. First of 
all, it is the right thing to do. Second of all, we have an 
All-Volunteer Force. We want to make sure that people join and 
stay, that we are able to attract the people we need and then 
to keep the people that we need.
    And obviously there are a lot of things that factor into 
that. But the compensation, pay, benefits, are a piece of it. 
And we want to make sure that we continue to be able to have 
that All-Volunteer Force, whatever debate one may have about 
whether or not we should have a draft or more people should be 
involved. We all know that is not happening. We are going to 
have an All-Volunteer Force, and we need to have a pay and 
benefit structure that attracts and retains them.
    At the same time, over the course of the last 20 years, the 
amount of money that we spend per service member, the personnel 
costs, has tripled. There is a very deceptive stat out there 
that shows that personnel costs as a percentage of the overall 
budget have stayed roughly the same, and that is true, but we 
have reduced the number of personnel, I think it is by roughly 
900,000. So the per-person cost has gone up and gone up 
significantly. Healthcare costs are a pretty significant driver 
of that.
    And as we look at where we are at with the budget, in 
trying to figure out what we are going to do over the course of 
the next decade with sequestration, if it comes, and even 
without sequestration, we have less money to spend in the 
Department of Defense [DOD] than 3, 4 years ago we thought we 
were going to have. How do you make those choices? Because for 
me, the number one overall obligation is to make sure that 
whatever it is that we ask the men and women in our Armed 
Forces to do, they are trained and equipped and ready to do it. 
Having a hollow force is the one completely unacceptable 
outcome.
    And if we wind up spending a whole bunch of money on 
personnel costs or on other things and we don't have the money 
for training, which is the situation we have been in for the 
last several years as readiness accounts have been raided to 
deal with, well, government shutdowns and CRs [continuing 
resolutions] and sequestration, then we wind up having a force 
that is not as trained and as ready as it needs to be.
    So when we look at the budget we need to consider all of 
those questions, and personnel costs are parts of it. Is there 
a way that we can save money in those areas and still meet the 
obligation that the chairman said that we should, first and 
foremost, have to the men and women who serve and to make sure 
we continue to have a very effective All-Volunteer Force?
    That is not an easy thing to take on. And I think the 
proposal that you have put before us is a very thoughtful and 
good start for this committee. And I hope this committee will 
take it seriously, and I think it is absolutely critical that 
we do some kind of personnel reform in this Congress that winds 
up saving us some money long term. So we are going to have to 
start that process, and today is a good day to do it.
    I thank the chairman. I yield back.
    The Chairman. I thank the gentleman.
    I ask unanimous consent that my full opening statement be 
made part of the record. And after consulting with Mr. Smith, I 
ask unanimous consent that the statement of the Fleet Reserve 
Association on the Commission's recommendations also be made a 
part of our record. Without objection, so ordered.
    [The information referred to can be found in the Appendix 
on page 73.]
    The Chairman. Let me now turn to our distinguished panel of 
witnesses.
    Honorable Alphonso Maldon, who has been chairman of the 
Compensation Commission.
    We also have with us Honorable Steve Buyer, who was once a 
member of this committee and I believe chaired our Personnel 
Subcommittee once upon a time.
    Mr. Michael Higgins, who has also been associated with this 
committee as one of our key staffers dealing with personnel as 
well.
    General Peter Chiarelli, who has not only a distinguished 
military record, but a distinguished record after he has 
retired from the military in dealing with some of the most 
difficult issues, including brain trauma, that our military 
folks have to endure.
    And Admiral Edmund Giambastiani, also someone I have known 
for a long time for whom I have tremendous respect.
    I also notice that our former colleague Chris Carney is 
sitting there, former Senator Larry Pressler, a commissioner is 
sitting there, all of whom served on the Commission.
    And you all know what thankless jobs in Washington are 
like. But know that your efforts here are not thankless, that 
they are very much appreciated. We needed this look. You all 
have done what we asked in coming up with serious proposals 
that, as Mr. Smith says, deserve our very serious 
consideration, and they are going to get it.
    So thank you all for your service. Thank you for being 
here.
    Mr. Chairman, the floor is yours.

  STATEMENT OF HON. ALPHONSO MALDON, JR., CHAIRMAN, MILITARY 
     COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION; 
   ACCOMPANIED BY COMMISSIONERS GEN PETER W. CHIARELLI, USA 
   (RET.), ADM EDMUND P. GIAMBASTIANI, JR., USN (RET.), HON. 
            STEPHEN E. BUYER, AND MICHAEL R. HIGGINS

    Mr. Maldon. Thank you, Mr. Chairman. Chairman Thornberry, 
Ranking Member Smith, distinguished members of the committee, 
my fellow commissioners and I are honored to be here today, and 
we thank you for this opportunity to testify before the House 
Armed Services Committee. We also thank you for your support of 
the Commission during the last 18 months and for your 
leadership in protecting service members' compensation and 
benefits.
    I would like to request that our final report be entered 
into the record, Mr. Chairman.
    The Chairman. Without objection.
    [The Commission final report is retained in the committee 
files and can be viewed upon request.] 
---------------------------------------------------------------------------
     The Commission final report is also available online at 
http://docs.house.gov/meetings/AS/AS00/20150204/102859/HHRG-114-AS00-
20150204-SD001.pdf.
---------------------------------------------------------------------------
    Mr. Maldon. The All-Volunteer Force is without peer. Their 
unwavering commitment to excellence in the service of our 
Nation has never been clearer than during the past 13 years of 
war. As commissioners, we recognize our obligation is to craft 
a valued compensation system that is both relevant to the 
contemporary service members and able to operate in a modern 
and efficient manner.
    We are unanimous in our belief that the recommendations we 
offer in our report strengthen the foundation of the All-
Volunteer Force, ensures our national security, and truly honor 
those who served and the families who support them now and in 
the future.
    Our report is, of course, informed by our own lifelong 
experiences with military service, public policy, and as public 
servants. However, our recommendations are most informed by the 
insights of the service members, the veterans, retirees, and 
their families.
    The Commission and staff visited 55 military installations 
worldwide, listening to the views and preferences of hundreds 
along the way. More than 150,000 current and retired service 
members provided thoughts, very thoughtful responses to the 
Commission's surveys, and we developed working relationships 
with more than 30 military and veterans service organizations.
    Additionally, the Commission received input from more than 
20 Federal agencies, several Department of Defense working 
groups, and numerous research institutions, private firms, and 
not-for-profit organizations.
    The results of this process, including 18 months of 
comprehensive independent research, review, and analysis, are 
15 unanimous recommendations that will improve choice, access, 
quality, and value within the compensation system.
    Our work represents the most comprehensive review of the 
military compensation and benefits program since the inception 
of the All-Volunteer Force. Consistent with our congressional 
mandate, we reviewed each program to determine if and how 
modernization might ensure the long-term viability of the All-
Volunteer Force, enable the quality of life for service members 
and families, and achieve greater fiscal sustainability for 
compensation and retirement systems.
    Our recommendations do this and more, improving choice, 
access, quality, and value within the compensation system. Our 
retirement recommendations propose a blended plan that extends 
retirement benefits from 17 percent to 75 percent of the force, 
leveraging the retention power of traditional military 
retirement to maintain the current force profiles, protect the 
assets of service members who retire at 20 years of service, 
and reduces annual Federal outlays by $4.7 billion.
    Our health benefit recommendations improve access, choice, 
and value of health care for Active Duty family members, 
Reserve Component members, and retirees, while reducing outlays 
by $3.2 billion. Our recommendation on commissaries maintains 
patrons' grocery discounts, while also reducing the cost of 
delivering those benefits by more than $500 million annually.
    While these savings to the taxpayer are significant, the 
Commission did not engage in a cost-cutting drill. In fact, our 
recommendations to improve joint readiness, service members' 
financial literacy, support for exceptional families, and 
transition assistance require additional funding to ensure 
program efficacy.
    In summary, our recommendations represent a holistic 
package of reforms that modernize the structure of compensation 
programs rather than adjust the level of benefits delivered to 
the service members. They sustain the All-Volunteer Force by 
maintaining or increasing the overall value of compensation and 
benefits for service members and their families. And they 
provide additional options for service personnel managers to 
design and manage a balanced force.
    This approach creates an effective and efficient 
compensation and benefit system that after full implementation 
saves taxpayers more than $12 billion annually, while 
sustaining the overall value of compensation and benefits to 
those who serve, have served, and the families who support 
them.
    Mr. Chairman, my fellow commissioners and I thank you again 
for the opportunity to testify before this committee, and we 
are honored to present our unanimous recommendation. And we now 
stand ready for your questions.
    Thank you, Mr. Chairman.
    [The joint prepared statement of the commissioners can be 
found in the Appendix on page 54.]
    [Commission charts displayed during the hearing can be 
found in the Appendix beginning on page 83.]
    The Chairman. Thank you, sir. And, again, I appreciate the 
work of all the commissioners.
    I am going to yield my time to the distinguished Personnel 
Subcommittee chairman, the gentleman from Nevada, Mr. Heck, who 
is recognized for 5 minutes.
    Dr. Heck. Thank you, Mr. Chair. Likewise, I thank all the 
commissioners for the incredible effort you put forth in 
developing this product.
    Some of the recommendations may be considered earth-
shaking, maybe even seismic shifts. And what we have heard a 
lot in the past is this idea of making sure that we don't break 
the faith with either former or current service members.
    In fact, Michele Flournoy, who was the former Under 
Secretary of Defense for Policy before the HASC [House Armed 
Services Committee] roundtable last September, in a review on 
the QDR [Quadrennial Defense Review] had brought up the 
question, how do you define breaking the faith? Is it benefits, 
making sure that we keep a paying compensation program? Or is 
it about readiness and making sure that those that are serving 
are actually manned, trained, and equipped?
    Interestingly, just yesterday, Todd Harrison, in an article 
in Forbes, brought up that same question, stating, ``Keeping 
faith with troops means more than protecting the existing 
compensation system. It means ensuring our military remains the 
best trained and equipped force in the world. Breaking faith 
with the troops is sending them into battle understaffed, 
undertrained, or with inferior equipment.''
    I would ask the Commission, in looking at the 
recommendations made, how did you balance or how do you view 
the balance between keeping the faith with those that are 
serving and have served with some of the recommendations that 
are generated by the report?
    Mr. Maldon. Thank you, Congressman, for that question.
    We spent quite a bit of time discussing just that. We know 
that there are competing interests here. And we have dealt with 
those, we believe, in a very thoughtful manner.
    Before we actually get into talking a little bit more 
specifically, Congressman, about the question that you have 
raised, I have asked my colleague here, Commissioner Buyer, to 
actually respond by reading to you a statement here that we had 
talked about in some of our sessions that we have had. So with 
that, I am going to ask Commissioner Buyer to please respond to 
that.
    Dr. Heck. As long as he can do that and get to my question 
within the 3 remaining minutes.
    Mr. Maldon. I promise you, Congressman, we will do that.
    Mr. Buyer. It should not be lost on the committee that of 
the five commissioners, and actually the commissioners also 
sitting behind me, all of us have had military service, we are 
military retirees, we have served this Nation in war and in 
peace. And that this question about keeping the faith, for me 
and for my commissioners, it comes down to two questions. Will 
the recommendations keep the faith with the men and women who 
have served in the past and who are presently serving?
    The second question would be, do these recommendations in 
this report enable us to recruit and retain the force in a 
manner that the benefits will be sustainable and that will be 
structured in a manner that can ease return to civilian life.
    The answer to both of those questions is yes, and we 
enthusiastically support these recommendations to you.
    Dr. Heck. I am going to keep the real detailed questions 
for when we see you in subcommittee. But from the kind of 
strategic view, the 30,000-foot view, can you give some 
specific examples where you looked at the balance between 
keeping the faith and making some changes?
    I mean, I think the idea between retirement with a 
grandfather clause shows some thought. But when you get into 
the healthcare issue and moving currently serving dependents 
out of the current system, some may argue that that is breaking 
faith, it is not what they signed up for.
    Mr. Maldon. Congressman, I am going to have Commissioner 
Giambastiani respond to that question next.
    Admiral Giambastiani. I am going to give you a top-level 
answer. As you said, in the subcommittee we can spend time 
drilling down into the details. I learned as a young junior 
officer, and I have lived by it for four decades of service, if 
you take care of your people they will take care of you. That 
is number one. And that goes to the chairman and the ranking 
member's comments along with yours, sir.
    But we came up over a period of time to try to describe, 
for example, in the Navy, in my years when I was resourcing 
both personnel and modernization in combat programs, how can we 
describe what we are doing to support our soldiers, sailors, 
airmen, and marines? Most people talk about quality of life, 
but that mainly happens to be the types of things that we 
addressed here.
    Our view was that quality of service was the penultimate 
measure. Quality of life was part of that. All of these 
compensation programs, health care, et cetera, were a subset. 
But quality of service included all those things. Weapons 
systems, anything to prevent casualties, anything to lower 
combat casualties, anything to bring our soldiers, sailors, 
airmen, and marines home fell into that quality of service.
    And we can get into more detail at a different time. But I 
would just tell you that quality of service is how we as a 
Commission looked at this.
    Dr. Heck. All right. Thank you all very much. Again, I 
appreciate your efforts. Look forward to getting into the 
details with you in subcommittee.
    And I yield back, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman. I will yield my time to 
Mrs. Davis, who is the ranking member on the Personnel 
Subcommittee.
    Mrs. Davis. Thank you, Mr. Chairman.
    And thank you to all of you. I know this has become very 
personal to you, the fact that you worked so diligently on this 
and came to these conclusions.
    And I wanted to perhaps follow up with Dr. Heck's question 
as well. And maybe, because we are taking this larger look 
right now before we get into so many of the details, I wonder 
if and perhaps, Mr. Chairman, but the others as well could help 
us take us into the room, let us be a fly on the wall for a 
minute to a breakthrough time when you really sort of had one 
of those ``aha'' moments, this is the best way that we can come 
to that balance, that tension that we know exists and that we 
will have much testimony to deal with. I wonder if you could 
sort of let us in on that, what was key in that.
    And the other question is, what would you be the most 
disappointed about if we are not able to kind of come together 
as a committee and deal with this issue?
    Mr. Maldon. Congresswoman, thank you very much for your 
question. Quickly, let me just mention to you, everything that 
we did, people that we met with, first of all, we had town hall 
meetings across the country, we actually had public hearings, 
we had sensing sessions. We talked extensively to families, to 
service members, Active, Reserve Component, and retirees, and 
we listened very carefully to what they had to say.
    We heard them express to us their concern for choice, 
wanting to have more choice, wanting more access. We heard them 
talk about what their preferences were. We received responses 
from the survey that we sent out where they actually told us, 
here is what we prefer as a value.
    And so what we did in our deliberation and spent lots of 
time, many discussions going through, discussing how we should 
be aligning compensation benefits to the preferences that the 
service members told us about. And so everything that we did, 
we ran it through that thread.
    We had 80 percent of the people told us they like the 
solutions of what we were doing, where we were going with this, 
providing more value, providing more access, more choice for 
them, which is very different from what we have done before.
    Mr. Buyer. Ma'am, there were three ``aha'' moments, if that 
is what you are asking for, for me. One was we had pretty 
extensive debates over BAH [basic allowance for housing]. And I 
know you have had them. And the Pentagon year after year will 
send over cuts or they will send over--we decided we would jump 
into that issue and we would debate it and we would try to 
figure out a new way of doing it and debate it again and again 
and again.
    And in the end, the ``aha'' moment came out of Mr. Higgins, 
not surprising to the committee, when he said, you know, I do 
believe that over the years that this compromise is founded 
about just right. And that is why we did not make any of the 
changes on BAH.
    So I want you to know, Chairwoman, we went into it 
extensively, drilled down to a level that has never been really 
done before.
    With regard to health care, an ``aha'' moment was how can 
you really create a health system that will increase the 
quality, give choice to the beneficiaries, improve access, 
improve quality, hit the value proposition. And we could do 
that when Admiral Giambastiani and General Chiarelli gave the 
recommendation to create this Joint Medical Command. And that 
was an ``aha'' moment.
    Mrs. Davis. Thank you.
    Anybody else want to----
    Mr. Maldon. Could I have Commissioner Giambastiani to 
follow up, and then one more from my left, General Chiarelli.
    Admiral Giambastiani. This may surprise you, but my ``aha'' 
moment came when we transitioned from the draft to the All-
Volunteer Force.
    General Chiarelli and I are kind of old geezers here, 
serving a hell of a lot of years, myself 41 years in uniform. 
And I came in during the draft era, went to the Naval Academy. 
But I served with that draft force, fine individuals, men and 
women. But I have to tell you, this All-Volunteer Force is 
absolutely the best I have ever served with in my entire 
career.
    And that is the ``aha'' moment on how to maintain that All-
Volunteer Force, maintain that professionalism, the training, 
but continue to bring in quality people. That has been a 
lifetime of ``aha'' moments on how we maintain that.
    And I would just tell you, I am impressed, there is no peer 
out there. And as a NATO [North Atlantic Treaty Organization] 
Supreme Allied Commander, I used to give talks around Europe to 
other NATO allies about the All-Volunteer Force. Many of them, 
including the Germans, would push back and say, our system is 
good. And I would say, fine, you do what you need to do.
    If you look at Europe today, even though their militaries 
are small, they have all moved to a professional force, just 
like us, because they understand how effective it is. So 
maintaining that is so important.
    The Chairman. Thank the gentlelady.
    Mr. Forbes.
    Mr. Forbes. The chairman has eloquently thanked and 
expressed the appreciation of this committee for your work. But 
I think your work merits an appreciation from all of us. So 
thank you both for what you have done on this Commission, but 
also what you have done and continue to do outside the 
Commission.
    General, you mentioned that one of the comments you 
consistently received from individuals was more choice. And so 
just two questions for you. One, did the Commission give any 
thought to making the new retirement system optional for 
everyone, even new people? If the system is as attractive as 
your research and analysis suggest, it does seem like most 
service men and women would opt in voluntary. And if it doesn't 
get us all the way home, does it get us part of the way home? 
One.
    Second, the Fleet Reserve Association [FRA] put out a quote 
that said shifting benefits from 20-year career service members 
to service members with as little as 2 years of service with 
portable benefit is laying the groundwork for a catastrophic 
retention crisis.
    How do you respond to that? And what are your thoughts on 
that issue?
    Mr. Maldon. Congressman, thank you for the question.
    We spent a lot of time talking about and thinking about 
retention and recruiting and what does that mean, what do we 
have to do to make sure that we can ensure an All-Volunteer 
Force. I am going to have Commissioner Chiarelli to talk 
specific to that question.
    General Chiarelli. I guess the kind of an ``aha'' moment 
for me is when we went to San Antonio and saw new medics and 
corpsmen who were at the beginning of their basic training to 
become medics. And, you know, that MOS [military occupational 
specialty] is not filled with a lot of lower GT [general 
technical] score people. These are all bright young men and 
women. And we asked the question to them, would you please 
raise your hand, if you stay in the military for 20 years, will 
you receive 25, 50, or 75 percent of your base pay in 
retirement? And we had two people, I think, get it right out of 
a crowd of about 100.
    And it was clear to me at that moment that as a young 
medical corpsman, you are not necessarily joining the service 
and making the best decisions about your retirement plan. It is 
going to become important to you later on. And that really 
drove home to me the importance of what we are doing.
    If you look at the chart you will provide us, you will see 
that an E7 [enlisted grade] in any one of the services under 
this current plan, using the best financial estimates that we 
can make, not high, not low, will make more in the long run 
than he would have under the current system.
    [The chart referred to can be found in the Appendix on page 
84.]
    General Chiarelli. So I am totally comfortable that this 
retirement system that we have crafted is absolutely essential 
as we move forward and takes the best interests of our service 
men and women into account at all pay grades and ranges of 
service.
    Mr. Forbes. And, General, nobody could question your 
commitment to your troops and your service to them. Can you 
just elaborate a little bit on what it would do if we did make 
it optional? If it is that attractive, would that be a 
possibility if we did that?
    Mr. Maldon. Thank you. Congressman, I am going to have 
Commissioner Higgins to respond to that.
    Mr. Forbes. Yes, please. Thank you.
    Mr. Higgins. Thank you, Mr. Chairman.
    Congressman, we absolutely will make the new proposal 
optional for currently serving service members. And we believe 
that there will be a significant number of those service 
members, largely service members with less than 10 years of 
service, because as you grow closer to the defined benefit that 
we have today, of course, the draw there is very strong. But 
for those with less than 10 years of service, and particularly 
those with less than 5 years of service, we believe that the 
opt-in rate is going to be very high, very high indeed, perhaps 
in the range of 90 percent.
    Mr. Forbes. So everybody would have the option?
    Mr. Higgins. Yes, sir. That is correct. Everybody would.
    Now, regarding the FRA comment, we would disagree with the 
premise of their comment, because I think what they are 
suggesting is that people that stay for 20 years are going to 
pay for these new benefits that are not currently provided to 
service members in the Thrift Savings Plan [TSP]. And the 
answer is that we believe, and our analysis strongly supports, 
that these benefits for the 20-year retiree are going to be 
every bit as good as they have today, or better, and that we 
are still going to deliver this interim benefit for those that 
don't choose to stay.
    Mr. Forbes. Thank you.
    My time is up. And I yield back, Mr. Chairman.
    The Chairman. Thank you.
    Ms. Sanchez.
    Ms. Sanchez. Thank you, Mr. Chairman.
    And thank you all on the Commission for doing what is 
basically a very difficult job.
    I have three questions. The first has to deal with, I know 
in your report you mention that you weren't necessarily looking 
at cost savings, you were looking at what it would take to 
retain, what military compensation and the retirement system 
would look like to be effective for us.
    But I think since we are going through this whole issue of 
taking a look at everything, that cost should be an important 
piece of this, especially when we are bumping up against this 
whole issue of maybe a hollow force and making sure we have the 
money for not only future systems, but also for training our 
military.
    So my questions go to, first of all, TRICARE. The 
Commission recommends essentially replacing TRICARE with a 
selection of commercial plans in order to provide more option 
and accessibility. And in terms of the level of service and 
cost efficiency, how is replacing TRICARE better than 
essentially expanding health care?
    My second question is with respect to the consolidation of 
all the GI [government issue] Bills and educational issues. I 
am worried that if we go to that and we are in the transition 
period of what might be less than 1 year, but could be 3, 4, 5 
years as we consolidate everything, that some of these benefits 
might fall under or really impact the soldier or the airman or 
what have you who are trying to get an education. So can you 
comment on how we might restructure that?
    And then the third issue goes back to the base housing 
allowance. And I just heard you all say that we looked at it, 
we looked at it, and pretty much we ended up with the same. But 
when we began with base housing allowance way back when it was 
at 80 percent and now it is at a full 100 percent. And this is 
one of the largest areas of escalating cost for us.
    So would you speak please to the review of that and why we 
might not scale it back to, for example, 80 instead of 100? 
Thank you.
    Mr. Maldon. Congresswoman, thank you very much for the 
question. I am going to do a couple things here. We will try to 
break this out and respond to your question with regard to 
TRICARE, with regard to the BAH, and the GI Bill, the 
educational benefit piece of this.
    But let me first say that we took a very, very extensive 
look at the overall benefits here for the service members in 
terms of what they told us that they wanted, what they needed 
in order for us to be able to ensure an All-Volunteer Force. So 
as we looked at each one of these, we approached it in a way of 
wanting to achieve efficiencies wherever there is an 
opportunity to achieve those efficiencies. And so then cost 
came later. But we were totally not driven by cost.
    I want to start with having Commissioner Buyer to talk 
about the TRICARE piece. And then I will have him followed by 
Commissioner Higgins on the GI Bill piece and the BAH.
    Ms. Sanchez. Great. And when I am talking about costs, I 
mean, you really have to just oppose that against what is 
happening to the American public at large. And that means that 
many of them have lost higher-paying jobs. They are making less 
either for the same job with respect to what it costs to live 
or they have gone and found other jobs that don't have 
benefits. Nobody has a pension, et cetera, et cetera.
    So we are asking taxpayers to pay for our military when our 
taxpayers are not in the same position they might have been 
from a monetary and quality-of-life perspective of 20 years 
ago.
    Mr. Maldon. Commissioner Buyer.
    Mr. Buyer. Health care is a tremendous value benefit not 
only to the men and women who wear the uniform, but their 
families, and then the retirees, and then those of whom are 
disabled. So how do we now improve that benefit? At the same 
time, when we talk about cost or savings, it is not only to the 
beneficiary, but also to the taxpayer. And how can we do this?
    So we looked at TRICARE and said every year as the budgets 
come over, why are you dealing with these issues on TRICARE? 
Because when TRICARE was first installed, where it was then 
compared to where it is today, it has diminished in its value, 
diminished because it is now a very limited provider network. 
It is limited why? Because of the pressures that have been also 
placed upon the TRICARE contractors to go out there and get 
providers into the system and you pay below Medicare rates.
    So I will give you as an example, pick a specialty, 
orthopedics, Fort Bragg. Those of whom that are in the TRICARE, 
have signed up for TRICARE to do orthopedics at Fort Bragg, 
there are 12. If you look at the government employees health 
plan, there are 43 in that one. If you look at Blue Cross/Blue 
Shield at Fort Bragg, there are 163 orthopedics that are in it. 
Why only 12 of them if there are 163 in Blue Cross/Blue Shield? 
It is because they don't want to sign up for TRICARE because 
the reimbursement rates are so very, very low.
    Now I will ask you, of those 12, do you think they are at 
the top of that 163 that are in Blue Cross/Blue Shield? I think 
you know the answer to the question.
    So with regard to the quality----
    The Chairman. I apologize for interrupting. But with the 
largest committee in Congress, we have to have some time----
    Ms. Sanchez. Thank you, Mr. Chair. I will take those 
answers to those questions in writing, please.
    The Chairman. Well, I hope other folks will ask about the 
other issues too, because I think they are important and I 
would like to hear----
    Mr. Buyer. We can answer for the record, Mr. Chairman.
    [The information referred to can be found in the Appendix 
on page 93.]
    The Chairman. And I appreciate that.
    Mr. Maldon. Thank you, Mr. Chairman.
    The Chairman. Chairman Miller.
    Mr. Miller. I can't believe you gaveled down Chairman 
Buyer.
    The Chairman. Note that for the record, please.
    Mr. Miller. Again, thank you very much for the hard work 
that you have all done. I have one question. But I want to 
yield back to my colleague, Mr. Forbes, who wants to ask a 
clarification for the record.
    Mr. Forbes. Mr. Chairman, obviously you guys are the 
experts. I just want to make sure we have the record right. I 
think several of us misread the report. But I want to make sure 
that this new retirement system, as I understood the testimony, 
was that it would be optional for everyone, even new people. 
Did we misread that? Because I know some writers have misread 
it too. And we just want to make sure everybody is on the same 
sheet of music.
    Mr. Maldon. Of course, Congressman.
    Commissioner Higgins, could you please respond specifically 
to that question?
    Mr. Higgins. Thank you, Mr. Chairman.
    We only envision the opt-in provision in terms of those 
that were currently serving when the law is adopted. New 
entries would be brought into the service under our proposal. 
There wouldn't be an opt-in to the old system that currently 
exists today.
    Mr. Forbes. And that was what we had thought. At some point 
in time, just for the record, if you would give us your 
thoughts about making that optional as well.
    [The information referred to can be found in the Appendix 
on page 93.]
    Mr. Forbes. But I want to yield back to Chairman Miller for 
his questioning.
    Mr. Miller. Thank you very much.
    We are all looking for efficiencies and the proper delivery 
of health care. And I just want to talk about the Military 
Readiness Command just a little bit. This is something that I 
think the Joint Staff should already be doing.
    So my concern is, do you foresee this creating another 
layer of bureaucracy within an already bloated system, if you 
will? And the question basically is, how will this help improve 
readiness, especially medical readiness?
    Mr. Maldon. Thank you very much, Congressman, for your 
question here. I am going to ask Commissioner Giambastiani to 
lead that for us.
    Admiral Giambastiani. Thank you, Chairman Miller. Great 
question.
    As we went through and debated the phenomenal medical 
success that we have had during this last 13 years of war and 
we looked at how overall the services have reduced combat 
casualties to a record low compared to World War II, Vietnam, 
even Desert Storm, down to about a death rate of about 10 
percent of those very serious casualties, we looked at what did 
it take to do this.
    And medical care, combat medical readiness is much more 
than just doctors, nurses, corpsmen, medics on the battlefield. 
It happens to be the transportation systems, medevac 
helicopters, aircraft, the logistics and systems that allow 
them to do that, and all of those supporting structures out 
there that are beyond any medical command.
    Now, there have probably been 14 commissions over the 
years, 30, 40 years, that have recommended establishing a Joint 
Medical Command. We looked at that. And this is the most 
contentious topic that we debated and discussed within our 
Commission.
    And unanimously we came out to the conclusion that the best 
way to deal with this is to embed a joint medical unit, if you 
will, a command unit within a Joint Readiness Command, and also 
create on the Joint Staff a significant structure called a J10, 
that was just solely medical as opposed to having it buried 
underneath transportation and the rest.
    It is probably more than we can discuss in this forum 
during this timeline. And I would be happy to do that offline 
with you, as I know General Chiarelli would. But I think that 
we have come up with the right solution.
    Finally, although our report says that the costs in there 
are just under $300 million a year, frankly, all of the people 
pretty much have been transferred from the old Joint Forces 
Command to the Joint Staff, and that is the reason why the 
Joint Staff has about quadrupled in size.
    Mr. Maldon. Mr. Chairman, if you don't mind, I would really 
like to have Commissioner Chiarelli to follow up on that very 
quickly. I am certainly concerned about the time. But I would 
love to have him say a few words.
    The Chairman. Sure.
    General Chiarelli. Whatever you want, Mr. Chairman.
    The Chairman. Well, If you have a brief comment, General, 
because you have done so much work in this healthcare area.
    General Chiarelli. The number one requirement for our 
health care in the military is to take care of deployed 
soldiers. Period. I mean, that is what makes it different. And 
we have to ensure that as we reorganize and look to make our 
MTFs [military treatment facilities] be able to be better 
training grounds, as the force gets smaller for our physicians 
and entire medical team.
    It is absolutely essential that somebody be able to go into 
the Tank, along with the Chairman of the Joint Chiefs of Staff, 
and make the argument for the tough decisions that are going to 
have to be made in order to maintain that capability. And I can 
go into that in great detail.
    The Chairman. That is helpful. Thank you.
    Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Mr. Higgins, I will just ask you directly on the retirement 
questions. Can you clarify for me, again, I think what Mr. 
Forbes was trying to get at, if the new law passes, this 
proposal passes, I am a new service member, I am immediately 
enrolled into the TSP as the Commission envisions it?
    Mr. Higgins. That is correct.
    Mr. Larsen. And then what is my vesting period under the 
Commission's plan?
    Mr. Higgins. It would be 2 complete years of service and 
your first day of your third year, you are vested.
    Mr. Larsen. And then what percentage of my salary, what is 
the maximum percentage of my salary that I would be able to put 
into this TSP plan envisioned by the Commission?
    Mr. Higgins. Five percent would be the maximum matching at 
that time. Your automatic enrollment would be at the 3 percent 
of salary point.
    Mr. Larsen. Automatically enrolled at 3 percent of salary?
    Mr. Higgins. Base pay to be specific.
    Mr. Larsen. Base pay. And then my employer, the Department 
of Defense, would put in what?
    Mr. Higgins. After 2 years, they would match 3.
    Mr. Larsen. After 2.
    Mr. Higgins. Or if you invested 5 yourself, they would 
match 5. The 1 percent, the base amount that the government 
would contribute regardless of what the individual does, would 
always be there. So, in essence, it is 6 percent----
    Mr. Larsen. Right.
    Mr. Higgins [continuing]. For a service member who invests 
up to 5 percent of base pay.
    Mr. Larsen. Does the Commission envision that this would be 
separate from the Federal employee TSP, this would be internal 
to the DOD?
    Mr. Higgins. No. This would be Thrift Saving Plan as 
currently used within FERS [Federal Employees Retirement 
System].
    Mr. Larsen. And it would become part of the existing TSP?
    Mr. Higgins. That is correct.
    Mr. Larsen. And then just to clarify, I would not have the 
option to opt out of that as a new service member. I would be 
required.
    Mr. Higgins. Of the 3 percent on automatic enrollment?
    Mr. Larsen. Yes.
    Mr. Higgins. No. They could the very next day go down to 
their finance office, not a very great hardship procedure, and 
remove themselves from the program. However, we believe that 
studies would indicate 97 percent of people would not do that.
    Mr. Larsen. Right.
    Mr. Higgins. And I think that is healthy in terms of 
encouraging service members to think about financial matters.
    Mr. Larsen. So just on the flip side, in the testimony 
provided by the Commission, 83 percent of enlisted folks 
receive no retirement savings currently. And if I am enlisted 
and served 2 years, get vested, I would at least start to have 
something, and 100 percent of my enlisted friends would start 
to have something.
    Mr. Higgins. That is correct.
    Mr. Larsen. There are probably other questions to ask on 
that that others may have.
    I want to move to health care quickly. It seems that what 
you are proposing is more along the lines of where the rest of 
the world--not the rest of the world, maybe the rest of the 
country is going--but that DOD to me seems headed the other 
direction. They would rather consolidate, keep health care 
consolidated.
    And the Commission is essentially recommending health care 
should be distributed, healthcare provisions should be 
distributed, that is, commercial choice, see doctors of your 
choice within parameters in the individual plan.
    Have you received input at all from the Department on that 
particular recommendation?
    Mr. Maldon. Congressman, the thing that we focused on here 
after hearing from people across the country again and also 
just the overwhelming support that we got from people with 
regard to their responses to the commissioners' survey, people 
kept saying to us that they wanted more choice. They wanted 
access to health care. They wanted increased value in terms of 
them being able to make the decision what was best for them.
    And let me just ask Commissioner Buyer if he would talk 
just specifically to that question also.
    Mr. Buyer. We are trying to capture the trends of where the 
demographics are going. So not only are we doing it being 
responsive with regard to the TSP, we are also doing that with 
health care.
    At our opening meeting, it was Commissioner Higgins that 
said, let's get to the question of paternalism. How 
paternalistic do we want to be? How paternalistic has the 
military always been? And where is America? And where is 
America going? Because that is what you have asked us to do, 
can we modernize and prepare for into the future. And that is 
what we are doing with health care too.
    So part of that empowerment is also an education piece, not 
only financial literacy, but also the literacy on how to make 
good choices for your family with health care.
    Mr. Larsen. Thanks, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman.
    Mr. Buyer, I am glad that you just ended on that comment 
because my question is for you. I remember serving on the VA 
[Veterans' Affairs] Committee when you were the chairman of the 
VA Committee, you were always an impassioned advocate for 
TRICARE and one of the Members of Congress that I would say was 
probably the most knowledgeable of it.
    Now as we are looking at these recommendations, I thought 
you might want to give us some additional insight as to your 
thoughts on this, how it relates to your work in Congress, and 
how you see the evolution of this occurring.
    Mr. Buyer. Well, thank you very much. And thanks for your 
service. And congratulations with your new assignment.
    I look back, and personally I made some mistakes. We should 
have indexed the premiums on TRICARE for the gray area 
retirees. We should have done that. I remember the staff coming 
to me and asking me should we index it. And I said, you know, I 
want Congress to take an active role in these programs, and I 
believe that year after year, when Congress takes an active 
role, that they will do the right thing.
    It has not happened. The pressures on Congress to actually 
increase those premiums or copays or deductibles, when we first 
instituted TRICARE, that premium was 27 percent. It has eroded 
over time now to 5 percent. And the TRICARE as a network 
themselves has become so limited, bureaucratic, cumbersome, it 
has diminished its quality. And just trying to even perfect 
those contracts has become incredibly costly. To manage it, 
costly. You don't have utilization management that can actually 
perfect savings. It is not really a good program at the moment.
    So the question, Congressman Turner, is can we do better? I 
mean, that is sort of the mandate that you have said to us, 
look at these things, let us know what you believe and what you 
think. And in the end, yes, we can do better.
    When you look at FEHBP [Federal Employees Health Benefits 
Program] and how OPM [Office of Personnel Management], with 100 
people, manage a program of similar size to what DOD is, with 
100 people, at $47 million, TRICARE takes almost 3,000 people 
at $350 million approximately.
    And going to this selection of plans, it is not FEHBP. It 
is kind of like it. It is a variant. We actually take away some 
of the successes. We did that when we created Medicare Part D 
also.
    But the most important thing is our military medical 
readiness. How do we maintain the sharp edge of that readiness 
that has been perfected in 13 years of war and maintain that 
and sustain it?
    And we said, if you take the MTFs and we roll them as part 
of the network of the plans, utilizing this Medical Readiness 
Command to oversee, we can actually attract good procedures 
into the MTFs. Because when you look at the MTFs today, some of 
the procedures that they are doing, it will surprise America. 
When you look at some of our charts and figures, you will see 
that a lot of it has to do with delivery of babies, which is 
great. It is great for the perfecting of the cohesion of the 
medical team. But that is not what is happening on the 
battlefield.
    So attracting procedures into the MTF can be done as part 
of the network when we give them the ability to have different 
cost shares and provide those incentives.
    Am I being responsive to you, Mr. Turner? I hope so.
    Mr. Turner. Yes. Thank you for your insight.
    And also for each of you, thank you for your service. And 
certainly this is going to be a very spirited discussion, but 
you certainly have started off well.
    And, Mr. Buyer, thank you for your context.
    Mr. Buyer. Thank you.
    The Chairman. Mr. Veasey.
    Mr. O'Rourke.
    Mr. O'Rourke. Thank you, Mr. Chairman.
    To the chairman of the Commission, can you talk a little 
bit about the recommendation to improve collaboration between 
the Department of Defense and the VA [Department of Veterans 
Affairs]? And I am specifically interested in the 
recommendation that there is a unified health record. And I 
think your recommendation is to use the VA's healthcare record 
through their VistA system. But if that is not the case, 
correct me.
    And tell me whether that is going to require an act of 
Congress or whether DOD and VA could administratively implement 
that recommendation. Because, along with other members here, I 
serve on the VA Committee, and that has been a significant 
frustration for us, the disconnect between DOD and VA on this.
    Mr. Maldon. Congressman, thank you for the question.
    We spent an inordinate amount of time amongst ourselves 
discussing the benefit of having better collaboration between 
DOD and VA. We have actually spent time talking to the 
Secretary of VA. We have spent time talking to the people 
within the Department of Defense regarding the position that 
they have taken on moving forward with their health care, 
electronic healthcare records, the way they want to approach 
it.
    We know that there is a lot of money that is spent between 
DOD and VA on how they do business. We believe that we can take 
better advantage of the taxpayers' resources if, in fact, we 
had better standardization, shared services, we had better ways 
of actually conducting business between the two.
    I am going to ask, because we spent so much time on this, 
and I know that Commissioner Buyer spent a lot of time when he 
was here and since that time he has been one of our lead in 
following through on these things in our discussion, so I am 
going to ask him if he would please respond briefly to that as 
well.
    Mr. O'Rourke. Thank you.
    Mr. Buyer. Thank you for your service on the Veterans' 
Affairs Committee, along with Sergeant Major and Chairman 
Miller for your years and your eyes on recommendation 8, on the 
collaboration.
    We looked into this on the JEC, so the Joint Executive 
Committee. We didn't put it in our recommendation, but after 
having met with Secretary McDonald, I do believe they are 
correct, try to achieve parity there at the committee. Right 
now you have the Deputy Secretary of the VA meets with the 
Under Secretary for Personnel. It really should be the Deputy 
Secretary at DOD meeting with the Deputy Secretary of the VA. 
So I would ask that that establish a parity and put it in 
statute.
    And the other is with the Joint Executive Committee, it is 
what we talked about on the committee, about heterodox, when 
someone, you have given them a position, they have the 
authority, but they have no power to perfect or implement. And 
that is exactly what the Joint Executive Committee is.
    So we try to get these two Departments, the VA and DOD, to 
collaborate. But they can come up with great policy, they can 
come up with great recommendations, but they have no power to 
implement it.
    So what we are asking, Chairman Miller, is--I am sorry, I 
am talking to him because he can get this done, and you are 
also on the committee--pass it and make it law that they can 
actually implement. So in the areas on mental health, that you 
can actually blend those mental health drugs. We are not going 
to dictate to you, nor should you dictate to them what 
antipsychotics, antidepressants, pain medications, let the 
experts, let science lead, but then let's make sure that that 
can happen.
    With regard to capital projects, never again should there 
be that situation down in El Paso where the Army builds an Army 
hospital and VA builds a hospital and they won't put it on the 
same timeline.
    Mr. O'Rourke. Let me apologize for interrupting.
    Mr. Buyer. So making sure that that committee has the power 
is important.
    Mr. O'Rourke. I represent the community of El Paso and I 
wish they were building a VA hospital there. But it is alarming 
that we are spending $1.1 billion for an Army medical center, 
state of the art, with no provision made for the 80,000 
veterans who live in that community who are going to be 
stranded at an existing clinic that today is collocated with 
the Army hospital, the new one is being built 9 miles away.
    So the benefits of these recommendations are obvious. Is 
there a specific number in terms of the savings of using a 
single medical record, collaborating when it comes to 
purchasing for medication and pharmaceuticals? Is there a 
dollar amount associated with this recommendation?
    Mr. Maldon. Sir, the answer to the question is we don't 
know exactly what that dollar amount is, Congressman. We didn't 
go that far. That is not the kind of thing that we really 
looked into that deeply. We had discussions about it. We know 
that there would be some savings there if their processes were 
more streamlined. But we don't know the extent of that. We 
would be happy to look into that for the record.
    [The information referred to can be found in the Appendix 
on page 93.]
    Mr. O'Rourke. Thank you for the recommendation.
    Thank you, Mr. Chair.
    The Chairman. Thank you.
    Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman.
    And I want to thank all of you for your service to the 
country, including your work on this Commission.
    And, Chairman Buyer, I enjoyed working with you on the VA 
Committee when you were ranking member there. And I am so glad 
that you are working on, among other things, collaboration 
between the Department of Defense and the VA.
    In my district in Colorado Springs there are about 100,000 
veterans and about 40,000 Active Duty personnel, plus many, 
many thousands of dependents. So this issue of a better 
transition from DOD to VA is very important. And I am so glad 
to hear of the work you have done on this.
    And of course we have referenced recommendation number 8, 
and there is also number 12: Better prepare service members for 
transition to civilian life.
    What would you say there--and I will start with you, 
Chairman Buyer--would be your recommendation specifically on 
how to better prepare service members for a transition to 
civilian life?
    Mr. Buyer. I think Congress did a wonderful thing with the 
new GI Bill. It really did. That is a tremendous valuable 
product that helps prepare them. The recommendations, we 
enthusiastically support.
    I would like you to know that there are Governors out there 
that are frustrated with the Department of Labor, with regard 
to their vets program. So the DVOPs [Disabled Veterans Outreach 
Programs] and LVERs [Local Veteran's Employment 
Representatives], if you were Governor of Colorado and your 
Department of Veterans Affairs--your State Department of 
Veterans Affairs, those DVOPs and LVERs, is a State grant that 
goes to the State Department of Labor. And the Governors were 
telling us that it is very challenging for their Department of 
Veterans Affairs to actually get them to work collaboratively 
together.
    And so we want to make sure that these grants that get to 
the States, if you have got your director of State Veterans 
Affairs who is responsible for that seamless transition that he 
can actually perfect and get his job done. You know, this idea 
of, well, this is my job and this is all I am going to do, I 
don't do any other duties as assigned, that has got to end. And 
that is part of the genesis.
    Pete, do you have a--pardon me, Ed.
    Admiral Giambastiani. I would just say that General 
Chiarelli and I, having experience with numerous organizations, 
trying to work the unemployment problem with veterans is a 
serious issue because of the disconnect between what we would 
call and what we think should be one-stop centers, where you 
have got Department of Labor, DOD, VA. Where they are working 
together in one-stop centers is probably the single most 
important thing to force in this area.
    Mr. Lamborn. Well, thank you so much.
    And back to health care, and one idea I had that I put into 
the NDAA [National Defense Authorization Act] last year was a 
pilot project to be investigated on a joint DOD/VA healthcare 
facility in Colorado Springs, because there is such a need 
there with Active Duty and veterans, and we are behind the 
curve in supplying that health care that is much needed. What 
kind of collaboration has worked and that you would like to see 
working better together in the future?
    Mr. Buyer. You know, Congressman Lamborn, with your 
experience and what you have seen, I think members of the 
committee have, a lot of these collaborations are personality 
driven in particular localities. And those crucibles produce 
great ideas. Those great ideas don't necessarily disseminate 
across the health system. When you have a joint executive 
committee [JEC] that has the power to implement, you take that 
crucible of an idea that was borne out of Colorado Springs and 
you send that to the JEC, the JEC can actually then move it 
centralized, and we get greater perfection and clarity across 
the system.
    Mr. Lamborn. Mr. Chairman.
    Mr. Maldon. Yes, Congressman, let me just say very quickly, 
the recommendations that we have provided here, we are 
proposing, the ones on TSP itself, that helps prepare service 
members as they transition from the military to civilian life.
    The ones that we have made with regard to health care, the 
insurance plan itself, that is more like--more closely 
associated with the kind of things they would experience as 
they go into civilian life from the military. So those are some 
of the things that we have done.
    And I would like to ask Commissioner Chiarelli to just 
speak briefly on that as well.
    General Chiarelli. Well, I would like to tell you one thing 
you could do, and that is rationalizing the drug formularies 
between DOD and VA. I mean, it is absolutely unbelievable to me 
that we have soldiers--and I was a Vice [Vice Chief of Staff of 
the Army] for 4 years and did not know this--that we have 
soldiers that we put on antidepressants, antipsychotics, and 
pain medications. We give them 90 days' supply. They show up at 
their VA on day 89. They ask to get their medications refilled 
and the doctor looks at them and says, I can't refill that 
medication.
    Now, that is wrong. And quite frankly, I think that is 
breaking faith, breaking faith with those who have served and 
those who are in need of those medications, medications that 
have worked. And that would be a huge, huge thing that this 
committee could help us do.
    Mr. Lamborn. Well, I will work with all my committee 
members on this and the VA Committee as well.
    Thank you for your good ideas and your work.
    I yield back.
    The Chairman. As a matter of fact, there is a Member of 
Congress who is a practicing psychologist who has made this 
exact point to me. He tries to help people and they can't keep 
them on the same medicine when they do this transition, and the 
enormous problems that come from that is unbelievable.
    Mr. Aguilar. No.
    Mr. Takai.
    Mr. Takai. Thank you, Mr. Chairman.
    And thank you, distinguished panel of commissioners. I 
appreciate your work.
    You know, it has been said before, but the services have 
been able to meet and exceed their recruitment and retention 
goals over the last 13 years while in war with our current 
compensation system in place. I am assuming we are here today 
because there is now a need or it is the right time to take a 
look at this and to change it, despite the fact that we have 
been successful in maintaining a significant, viable, All-
Voluntary Force.
    So my question to you is, what are the impacts of your 
recommendations, changes to the future of this All-Volunteer 
Force in terms of recruitment and retention, and how were these 
impacts assessed?
    Mr. Maldon. Thank you, Congressman, for your question.
    Congressman, we believe that, and we believe this 
unanimously, that the recommendations that we have made are 
going to have a very positive effect on recruiting and 
retention.
    We have taken a look at what service members have told us 
that they want, what the senior enlisted advisors--as we talk 
to people across the country, they have been completely making 
us aware of the fact that things that they want, that they 
prefer are very different than what they were before, because, 
one, there is a totally different generation here. The 
contemporary workforce is changing and the environment is 
changing.
    The very people that we would be interested in recruiting 
and retaining in the military are the same kind of people that 
the industry are looking at. And so we wanted to make sure that 
we can provide benefits and meet the preferences that they have 
told us that they were concerned about so that we can compete 
against the industry for the same people.
    Commissioner Giambastiani, would you like to add to that?
    Admiral Giambastiani. Yeah. If I could just--thank you, Mr. 
Chairman.
    If I could just add that if I go back and look at our 
transition from the draft era to the All-Volunteer Force, many 
thought that that would not work. I was a submarine officer who 
was serving and was sent to Navy Recruiting Command as a 
recruiter, and on the staff there back in 1975 to help make 
that work. And I have to tell you that we have looked--and the 
reason why I give you this perspective is there were a lot of 
people who thought it wouldn't work.
    What we have looked at here is 350 personnel programs that 
we have provided you in this interim report before, and yet, we 
have only made 15 general recommendations, which I think are 
important. We looked at 350 separate programs across health 
care, quality of life, everything else, and we have made 15 
recommendations. And behind those 15 recommendations are 
substantive surveys--as we have already mentioned--studies, and 
analysis.
    And all of that is referenced in footnotes and the rest in 
here. We have talked to a significant amount of people. We have 
talked to the personnel people, the personnel chiefs in the 
services. We have tried to use the extensive experience of us 
nine commissioners. And I think we have looked at how this 
impacts and how we assessed that we would have a positive 
impact. And we try to say the positive impacts that we would 
bring by the value of these programs in here. So that is a 
general answer, but I would just give you some historical 
perspective.
    Mr. Takai. Thank you.
    And I do appreciate the long, hard look that the Commission 
has done in regards to Guard and Reserve members, Drill Status 
Guard and Reserve members, and determining that the traditional 
methodology still works. So I appreciate that.
    My last question is in regards to TRICARE. As a former 
member of TRICARE, I do understand the challenges that we have 
facing us in terms of the number of providers accessible for 
TRICARE. Everything you say about this new program sounds good, 
but to me, it just sounds like it is going to cost a lot more 
money, because increased provider pay and other things. Can you 
just elaborate a little bit on what the cost is going to be, or 
if, in fact, there are savings and what specifically they are.
    And now that I am short of time, maybe if you could just 
prepare a response to us.
    Mr. Maldon. Yes, we will take that for the record and get 
back to you, Congressman.
    Mr. Takai. Okay. Thank you.
    Mr. Chair, I yield back.
    [The information referred to can be found in the Appendix 
on page 93.]
    The Chairman. Thank you.
    Dr. Wenstrup.
    Dr. Wenstrup. Well, thank you, Mr. Chairman.
    And I want to thank all of you for your devotion to this 
country and to our troops. It is greatly appreciated.
    And in this particular realm today, I want to thank you for 
addressing the medical readiness of our providers, not only 
enhancing their skills but maintaining the skills that they 
have acquired over time and recognizing ways that we can and 
should do things better.
    I think as you look through this and you have the top 10 
things that are taking place as far as treatments in a garrison 
medical treatment facility, it is pretty telling to what I 
found. I served in a CSH [combat support hospital] in Iraq in 
2005, 2006, Reserve Component.
    Most of our surgeons were coming from Philadelphia, New 
York, Detroit, used to high levels of trauma. And then we get 
an Active Component coming in following us and they were deer 
in the headlights with what was going on, because they were 
doing things like appendectomies, which is not what was taking 
place in the battlefield. So I really appreciate you addressing 
that and the need that we have to maintain that high level of 
training.
    And of course, we have programs like C-STARS, Center for 
Sustainment of Trauma and Readiness Skills. As a reservist, I 
participated with the Air Force a couple of years ago in 
Cincinnati, so those are some good opportunities. What we see 
at SAMMC [San Antonio Military Medical Center] in San Antonio, 
the opportunity to provide care with trauma. This is what we 
need more of, and I appreciate that you are addressing that. 
You have simulation training, but you have got real-time 
training too, and there is nothing better than the real-time 
training that takes place.
    So as a reservist still, I go to Walter Reed, and that is 
where I am honored to serve. Some of the surgeons there, now 
they are having their outside employment limited. They were 
going to Baltimore Shock Trauma, now they can't go. They are 
losing their skills and a couple of them are getting out, 
because they said, you know, I am used to this high tempo of 
trauma. It slowed down. I have nowhere to practice these 
skills. We have got to maintain this at a high level, and I 
can't tell you, again, how grateful I am.
    A friend of mine, Air Force trauma surgeon, reservist, 
deployed several times, both to Iraq and Afghanistan, and he 
brought up this point when I heard him speaking at one time, he 
said, ``I used to, at the very beginning of these wars, tell 
our troops, `I am going to try and get you everything that you 
would have at home.' '' He said, ``Now it is just the opposite. 
I tell them, `I want to make sure people at home get everything 
that you are getting here at Bagram because of how far we have 
come.' ''
    And so this partnership between civilian and military has 
got to exist at a greater level if we are going to be 
successful, because we never know when we have to turn that 
tempo up and be ready. And I think that the people are crying 
for it. So if you can address what you might see are some of 
the best practices as we move forward, both for Active and 
Reserve, to be able to participate in those types of scenarios, 
I would appreciate it, and try and drive that message.
    General Chiarelli, I know I have worked with you in uniform 
and out on many medical issues.
    I don't know who would want to----
    Mr. Maldon. Congressman, thank you very much. You know, you 
are hitting at the heart of something that we care dearly about 
and we heard quite a bit about as we travel extensively. In San 
Antonio, Texas, as an example, and Pensacola, Florida, we 
looked at the partnerships that were existing. In Chicago we 
looked at the partnerships that were existing, and so forth.
    I would like to have Commissioner Chiarelli talk to that 
because there was some very real lessons to learn there.
    General Chiarelli. This was the toughest thing for me. I go 
through two combat tours in my time as Vice Chief of Staff of 
the Army, and you are trying to tell me that we need to change 
the way we deliver medical care in order to keep up the skills 
of our doctors and our medical teams. That was hard for me to 
take, and I was the one that was the hardest to convince. But I 
am absolutely convinced that our MTFs are on a death spiral 
right now.
    What no one has talked about is we are also lowering the 
number of people we have in the force. So even when you see the 
numbers up there, that was with a much larger force, the number 
of caseloads they are going to see are going to be even fewer 
as the force gets smaller. And our recommendations don't negate 
the MTFs; they give the MTFs the ability to attract and bring 
in the kind of cases that will do exactly what you have 
indicated, sir.
    And I applaud you, because that is what makes us different. 
You know, no one at Mass [Massachusetts] General is told on a 
moment's notice to deploy a combat hospital to Iraq or 
Afghanistan, but all these armed services are. And it is 
absolutely critical that if your son or daughter is wounded on 
the 1st day of battle that they get the same kind of care that 
is being able to be delivered on the 13th year of battle. And 
that is what our recommendations are focused on.
    Dr. Wenstrup. Well, that was very well put, 1st day and 
13th year. It is very well put. So we will continue to drive 
that message and do all we can to work with you on that. Thank 
you.
    The Chairman. Thank you.
    Ranking Member.
    Mr. Smith. Thank you, Mr. Chairman.
    First of all, I welcome the panel but I was remiss in not 
pointing out that General Chiarelli is actually a constituent, 
so I definitely want to welcome you. And as a fellow 
Seattleite, we just won't talk about the Super Bowl. That is 
the way the ball bounces sometimes. And the guys from New 
England are smiling up here, and it is just, you know.
    But welcome. And I really appreciate your work in 
particular, I know the brain science work that you have done 
since you got out of the military, and the foundation you 
formed, the people you have worked with in the Seattle area. 
That is a great group of folks who I think are really making 
progress on a critical, critical area that affects so many 
diseases and so many injuries that impact people.
    And I want to talk about health care, so we will go to Mr. 
Buyer again. And health care is critically, critically 
important. And I had hip surgery about 3 months ago now. I had 
no idea how important it was until after that, and my level of 
appreciation and respect for the men and women who serve and 
the injuries they go through and what surgery really means--and 
I had, you know, relatively minor surgery--you know, the pain, 
the suffering, the difficulties, the, you know, medicinal 
choices that have to be made. It is an enormously important 
aspect of the military. It is also enormously expensive.
    And, I guess, the one thing that we really haven't talked 
to--Mr. Takai made the allusion to it there and was going to go 
for the record, but--is the cost. Because what basically has 
happened, what has driven up the cost so much in health care is 
that--and I forget the exact statistic, but I think in 1997 the 
average service member paid about 27 percent of the cost of 
their health care. So whatever they paid for health care for a 
given year, 27 percent came out of their own pocket.
    By last year, that number was down to 10 percent. And what 
had happened was copays and premiums did not go up, but the 
cost of health care did. And that is an enormous difference. 
And I know we had our health care changed as Members of 
Congress, and we are now paying a lot more for it because we 
went to a higher deductible plan, and this is what is happening 
all across the country.
    And bottom line is, copays and premiums and deductibles are 
higher. So there is more coming out of my family's pocket, 
coincidentally had to be the year that we had massive amounts 
of health care needs, you know, before you get to that point. 
And I guess the question that isn't answered here, and I 
guarantee you what we are going to get asked and the pressure 
that is going to be put on us by both retired and Active Duty, 
is what is coming out of my pocket.
    And, I frankly--and I think some of the changes you are 
talking about are great. The way you reform it gives more 
choice, does a bunch of different things that I think will 
improve the quality of health care. But at the end of the day, 
this really doesn't work if there isn't a little bit more 
coming out of the pocket of the average Active Duty and 
retiree.
    And just one example, we went through this with the TRICARE 
for Life folks. When we raised the premium, I think, I forget 
if it was like from $450 a year to $550 a year, and, you know, 
there was the huge revolt over that; $100 a year, most of us 
pay $500, $600 a month.
    But the bottom line is, as you restructure this and as we 
find savings within the healthcare system, is there going to be 
more coming out of the pocket of either retirees on TRICARE or 
on this new system or Active Duty folks in terms of copays and 
premiums and higher deductibles?
    Mr. Maldon. Ranking Member Smith, let me just say a couple 
words here, then I will have my colleagues to follow on here. 
First of all, nothing changes with regard to our Active Duty 
military. That stays the same.
    And on the readiness issue, as I am going to ask 
Commissioner Buyer, as he speaks to this, to also cover 
readiness a little bit too, and then I would like to have 
again, I would really like to have General Chiarelli talk a 
little bit more about this as it relates to the readiness 
piece.
    But Commissioner Buyer, will you please take the first 
piece of that?
    Mr. Buyer. I think because of your surgery, you had to get 
up and walk around a little bit and you weren't in the room 
when Congressman Turner asked me some of the questions about 
what have been the lessons learned over the years when we first 
created TRICARE, and I chaired the personnel committee to 
today. And I gave the admission that I made an error, and the 
error was that we did not index those premiums. And we should 
have done that. And that is my fault. Because Congress is----
    Mr. Smith. No, I heard that, but that doesn't answer----
    Mr. Buyer. Oh, okay. Well, but it goes to the heart of it. 
The present TRICARE system does not have utilization management 
ability. And that utilization management, the private sector 
does that with copays and deductibles. And when you go to the 
private plan--when you go to TRICARE Choice, when they have 
selection of plans, giving the ability to use utilization 
management, our modeling, we feel that the savings can come 
from better utilization management practices being implemented 
and the program management, just restructuring it, that is 
about $5.2 billion in savings.
    The cost share increases----
    Mr. Smith. Just so I can be clear on that, by utilization 
management, you are saying that the service members will use 
health care less?
    Mr. Buyer. That is correct.
    Mr. Smith. They will choose to use it less.
    Mr. Buyer. That is correct. Because now when you do the 
comparison between the utilization in the military versus an 
HMO [health management organization], a PPO [preferred provider 
organization] versus the HMO, you know, it is for in-patient 
versus out of patient. Gosh, it is almost a 73 percent 
increase, and for outpatient they utilize it 55 percent more 
than civilian.
    Mr. Smith. How do you deal with the troubling aspect of 
whether or not that is a good thing? Because sometimes--you are 
absolutely right, I mean, you look at our healthcare system, we 
have more MRI [magnetic resonance imaging], we do more tests. 
And because we have a fee-for-service system, you are paid to 
do stuff, not necessarily to make health care better.
    But on the other hand, you can argue that, you know, if 
someone chooses not to get an MRI or chooses not to get an x-
ray because of the cost and they miss a problem that they could 
have solved earlier, and believe me, I went through the health 
care debate more than I ever really wanted to, but I just, I 
never really saw the stat that sort of showed how you balance 
that.
    How do you know when over-utilization is a simple cost as 
opposed to a smart, preventive step? I guess, I am looking at 
you as the oracle to answer that impossible question.
    General Chiarelli. I would argue----
    Mr. Smith. Go ahead.
    General Chiarelli. I would argue you go to an emergency 
room and any one of our MTFs any night and you will see the 
over-utilization of health care.
    You will find an emergency room that is absolutely crammed 
full of people who could not get an appointment when they 
wanted to have an appointment, so they go and camp out in an 
emergency room--and I am not kidding you--for 8, 9, and 10 
hours, absolutely filled. And it causes a triage to take place 
of patients that I would argue is probably not the smartest 
thing we could do. And I think this is going to reverse that in 
a huge, huge way.
    Mr. Smith. And I think that all makes sense, but I guess I 
will come back to the final question, you know, what I opened 
with: What is going to be the out-of-pocket increase when it 
comes to higher deductibles, copays, and premiums of the 
proposal you are putting on the table?
    Mr. Maldon. Commissioner Higgins, would you respond to that 
question, please?
    Mr. Higgins. Thank you, Mr. Chairman.
    Congressman, I think I would start by saying that the basic 
allowance for health care is going to cover for Active Duty 
service members many of those out-of-pocket costs that you are 
referring to. And when those out-of-pocket costs become--from 
some catastrophic injury or illness become greater, the top 5 
percent, if you will, there will be a fund to help those 
families pay for those out-of-pocket costs. And those plans 
that we sign them into, that they are going to choose 
themselves, all are going to have some kind of a cap on 
catastrophic costs. And we are going to bridge them over those 
families that are severely----
    Mr. Smith. Okay.
    Mr. Higgins. Now--I am sorry, did you want to----
    Mr. Smith. Go ahead.
    Mr. Higgins. We are going to derive a lot of savings from 
this greater management arena. I will take myself for an 
example. I went to the emergency room one night and I had a 
call 2 days later from a nurse in my health plan wanting to 
know what she could do to help me prevent that emergency room 
stop in the future. And it made a huge difference in my life. 
That is management. That is management of utilization. It 
works, I believe.
    We see, and our analysts would see, and our analysts 
include people outside the committee staff, see savings--and I 
will just give you the rough numbers from the health care--
$11.2 billion in savings. But what you are seeing in savings is 
the net, because there is a portion of that $11.2 billion that 
we are plowing back in and taking advantage of those health 
plans, better utilization----
    Mr. Smith. Right.
    Mr. Higgins [continuing]. Better network.
    Mr. Smith. There are others who want to get in here, so I 
will stop at that. I think that is all very good.
    But one of the things that I mentioned to some of you who 
we met with privately before this, I think we have to be 
really, really honest up front about some of the costs. And I 
appreciate what you say about, you know, should it index the 
premiums. I mean, that is part of it.
    And I, you know, gave a speech to MOAA [Military Officers 
Association of America] a year or so ago in which I said the 
people who serve in the military absolutely should have the 
best, cheapest health care that you can get in this country on 
the job, and they will and they should and even after that 
proposal they will. But it can't be what it was in 1997. We 
just can't afford to keep doing that. So it is going to have to 
be a little bit more that comes out of the pocket. I think we 
have to be up front and honest about that if we are going to be 
successful.
    Mr. Buyer. It will be the gray area retirees will see the 
higher deductibles, and the premiums will walk up 1 percent per 
year to the 20 percent, which doesn't even get them to where we 
started at the 27 percent premium back in the 1993, 1994 
timeframe.
    Mr. Smith. Thank you.
    And thank you, Mr. Chairman. You have been very generous 
with the time. Thank you.
    The Chairman. I appreciate those insights.
    Mr. MacArthur.
    Mr. MacArthur. Thank you, Mr. Chairman.
    You know, I recognize that proposing sea change is much 
more challenging than incremental change. And as I read your 
report, I was struck that you have a balance of both. You 
propose incremental change in some spots and sea change in 
others. And so I just wanted to acknowledge that because that 
is hard work to do that.
    It also struck me, as I read your recommendations, that 
your work is really about a key human process. The men and 
women that volunteer for our armed services have choices, and I 
wondered to what degree--and I wanted to ask you to talk about 
how you looked at the other environment that they have choices 
in, and that is the private sector. Because when men and women 
are thinking about their life, just like you and I thinking 
about our life, we look at all of our options, and that 
includes a pay and retirement and health care and quality of 
life and training and all of the different elements of thinking 
through a life.
    And so I just wanted to ask if you could talk about whether 
you went out to some of the larger private-sector companies and 
evaluated how they think about these same issues, about 
providing benefits and quality of life and a real future for 
people.
    Mr. Maldon. Congressman, thank you for the question.
    We did indeed do that. We spent an inordinate amount of 
time, again, bringing in people, bringing in the experts. We 
brought people, for example, in to talk to us about the 
millennials so that we could understand better what millennials 
value, what kind of things were important to them, and because 
that is important to recruitment in terms of who we need to go 
after and what it was going to take to be able to compete for 
those very people.
    We brought in other people from the healthcare side of 
things and talked to them to better understand the commercial 
healthcare insurance plans. We talked to the OPM people who 
would be managing such plans; Thrift Savings Plan people that 
have a better understanding of the health plans, the finances 
around that; what it is going to take with regard to financial 
literacy training to make sure that the service members had a 
better understanding of how to and knowledge of what it is 
going to take to be able to truly understand those plans.
    Everything that we did with regard to our recommendations, 
we did it, one, with an understanding that it must be the 
support readiness overall; and number two, we wanted to make 
sure that we address all of the preferences that the service 
members told us that they were interested in from the survey 
results that we got back and the people that we talked to. So 
we did this in kind of a holistic way. We wanted to make sure 
that we would understand what the second- and third-order 
effect was, so anything that we were to do in all of the 350-
plus programs, benefit, compensation programs that we looked at 
as we went through them.
    So we think we took a very, very holistic approach to 
looking at that, and we believe that these 15 recommendations 
that we made took all of that into consideration. And these 
were the areas that we thought that we could achieve 
efficiencies in these areas without taking away any benefit 
from the service members but, in fact, to even improve upon 
those benefits in certain areas. And at the same time, we could 
actually maximize the cost effectiveness of those programs, 
which resulted into some significant savings.
    Mr. Buyer. Congressman, we spoke with the TRICARE 
contractors also. And take United and Humana as an example. 
They are operating plans in the private sector, yet they are 
also managing this very restricted, limited contract, and they 
are very challenged and frustrated because these are two 
different worlds. So there are monetary and non-monetary 
incentives they can do in the private sector to affect human 
behavior when it comes to health care. They cannot do those 
things in the TRICARE contract.
    General Chiarelli. And because the TRICARE contract is 5 
years, it usually ends up being 8 years after somebody 
protests. We end up with a situation where today we are sending 
people to National Intrepid Center of Excellence for the 
treatment of traumatic brain injury and post-traumatic stress, 
giving them a treatment plan. They go back to the United States 
Military Academy. They don't have people that are trained in 
those skills, instructors, and now they go out on the outside 
to try to get their TRICARE benefit and they won't cover 50 
percent of the treatment plan we told them they needed to do in 
order to get better. And this will solve that problem.
    Mr. MacArthur. Well, my time is expired, but I applaud you 
for that. Thank you.
    The Chairman. Thank you.
    Mrs. Davis, do you have other questions?
    Mrs. Davis. Yes, thank you, Mr. Chairman.
    If I could just follow up, because General Chiarelli, I 
think what you were talking about are the two worlds. And by, I 
guess, basically creating a military Federal employee health 
benefit plan, what if we didn't do that? I mean, did you have 
that discussion of whether the military folded into the 
existing robust plan that you keep talking about? Where was 
that in the discussion and what are the downsides, upsides to 
doing that?
    General Chiarelli. We did consider that, but for a whole 
bunch of reasons that would probably be best taken offline, I 
can tell you we came up with the solution that we did. I 
absolutely think we have come up with the best solution. But 
the real thing that we have to ensure is the robustness of the 
MTFs [military treatment facilities]. And there will be a 
tendency, as we do this, as we go to those plans, because 
everybody is looking for savings, to only do that in the MTF 
which takes care of the Active Component individual who relies 
on an MTF. We can't allow that to happen in every instance.
    What we have to be driven by in our MTFs is to maintain 
that combat medical readiness. And that is the reason why, we 
really feel, that this readiness command is so absolutely 
essential. Someone who can advocate to ensure that we don't end 
up in the medical field the same way we ended up in the dentist 
field.
    I used to tell my fellow commissioners, in my entire 40 
years in the United States Army, I was told that my dependents 
could get dental care as available, okay, and they never were 
able to do that. I think my wife told me, she said, ``I was 
given one appointment from 6:00 to 7:00 in the morning at Fort 
Hood, Texas, because that is when the soldiers were running PT 
[physical training].'' We downsized the dental corps only to 
take care of the Active Component, and there was none left for 
dependents, nor was there any left, as we all know, for 
National Guard, as we had to work so hard to get that fixed.
    Mr. Buyer. Congresswoman Davis, this idea of rolling 
everyone into FEHBP does not work for several reasons: Number 
one, we had to figure out how do we preserve the MTFs. And by 
making them part of the risk pool, that is why our proposal is 
a variant of the FEHBP.
    They are also two completely different risk pools. So the 
risk pool that would be with DOD that is a much younger 
population, addressing different types of sicknesses and 
diseases, is far different than a much older population. So 
from the government standpoint, it doesn't cost us as much as 
it would be enrolling in the FEHBP.
    Mrs. Davis. Although, some of those costs would be greater 
as well, I would think. But thank you very much.
    Thank you for your work, General Chiarelli. The formulary 
piece, yeah, we have got to fix that one.
    Thank you.
    General Chiarelli. Please.
    The Chairman. Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    I want to thank you all for your work in this area. And I 
want to address one part of it specifically, and that is the 
reform of the modernization of our military retirement system, 
and I want to commend you at least on the direction. I mean, I 
think it is inequitable that we have a young person that comes 
to the military and doesn't complete the 20 years and 
essentially walks with nothing. And I just don't think that is 
appropriate, and I think that there ought to be something 
there, and in your plan you do recognize that.
    And I would also urge you to--my late father retired from 
the Army, Active Duty, I retired combination of 21 years 
between the Army, the Army Reserve, the Marine Corps, the 
Marine Corps Reserve, and some of the same problems existed. If 
I, in Colorado, went skiing and approaching my 20th year and 
was injured and then reported in for weekend drill and I was 
unable to perform the physical requirements in the Marine Corps 
Reserve, then I was ordered to go to a medical review board, 
and then if I was deemed unqualified at the 19th year mark in 
something that wasn't service-related, I got zero. And so I 
think that the Reserve Component needs to be looked at as well. 
Some of the same considerations exist there that exist on the 
Active Duty side.
    But I just think, you know, we have a system that 
desperately needs to be updated. I was a young, enlisted Army 
soldier on Active Duty and a junior officer in the Marine Corps 
on Active Duty and then filled in the rest of the time in 
Reserves. But I would think that in both of those times I would 
have opted in for a system that would have enabled me to walk 
with something short of 20 years rather than roll the dice and 
say, do I really know as a young person that I am going to be 
around for 20 years.
    And so I think it is so important to update the system. And 
I just thank you for coming up with some solutions to begin a 
discussion in terms of modernizing our system and to make sure 
that it fits the needs of the young people coming into the 
military today and who are serving in the military today to 
provide them that option to opt into the system.
    And but let me ask the question: Did you all consider the 
Reserve Component as well as the Active Duty Component when it 
came to retirement? And can you tell me what your 
recommendation is for the Reserve Component?
    Mr. Maldon. Yes, Congressman. I am going to have 
Commissioner Buyer to talk to that as--with his Reserve 
experience specifically.
    Mr. Buyer. A lot of the benefits as we reviewed this, when 
it comes to the Reserve Components, was responsive to the, 
quote, ``Strategic Reserve,'' end quote. And, you know, when 
you want to bring in the chiefs, you want to talk with them and 
say, so this Reserve Component we have today, is it an 
Operational Reserve or is it the Strategic Reserve? Because 
when I looked back at that last 13 years of war, that was an 
Operational Reserve. Well, they don't want to call it the 
Operational Reserve because they don't want to fund it as an 
Operational Reserve.
    So when it comes to the benefits though, we felt it 
extremely important to be responsive. And so we are 
recommending on the health piece--and I will let someone else 
address the retirement piece--but on the health piece, yes, we 
want the reservists to have access to health care and the 
Reserve Components. And now what we are recommending, though, 
that they pay a 25 percent premium share into that plan.
    What that is going to do is perfect the continuity of care, 
because, as we know, with all these different types of duty 
status and being called Active Duty and not Active Duty and the 
impact upon family and out-of-pocket costs, we want to perfect 
that continuity of care, and we can do that by availing this 
opportunity to participate in the plans TRICARE Choice to the 
Reserve Components.
    Mr. Maldon. And Congressman, if I might, please, I am going 
to ask Commissioner Higgins to talk to the other piece of that.
    Mr. Higgins. Thank you, Mr. Chairman.
    Congressman, yes, we integrated the Reserve Components into 
our proposal, and, in fact, technically, it will operate in the 
same way for a reservist. And the service chiefs directed that 
we match the force profiles, and in our analysis the Reserve 
Component with our proposal, we are going to be exactly on 
target in terms of force profile. So recruiting, retention, and 
that force, the Reserve Components is going to be just as good 
as it is today.
    General Chiarelli. If I can make one other point here. How 
better off would we be today after 13, 14 years of war asking 
young men and women to go on three, four, and five deployments, 
how better off would we be today that when we gave them the 
pink slip and said your service is no longer needed short of 20 
years, that they had something that they left with? And that is 
really the sad thing, that we didn't think about this a long 
time ago before we got into this 13-year conflict. Because 
literally, we are asking these young men and women to leave 
today, some of them while they are still deployed, and they 
leave with nothing if they have served short of 20 years.
    Admiral Giambastiani. The Commission listened to these 
young men and women talk to us about leaving with something. 
And obviously the force planners, the service chiefs, and the 
personnel heads would be very interested in making sure that we 
can retain the right balance of people even for those who leave 
with something. And we have spent a lot of time, as our 
chairman has said, working these proposals to make sure we 
balance retention along with allowing people to leave with 
something. And I think we have designed this program in such a 
way to meet both demands.
    Mr. Coffman. Thank you, Mr. Chairman. I yield back.
    The Chairman. Thank you. Ms. Gabbard.
    Ms. Gabbard. Thank you, Mr. Chairman.
    Good morning, gentlemen, and thank you all for your service 
on so many fronts and for being here today.
    There has been some mention about some of the contracts 
that are currently in place with TRICARE and this idea of 
opening it up to provide more options is something I think that 
is very interesting and necessary, especially in some places 
where access really is an issue.
    Over the last couple of years, we had an issue in my 
district in Hawaii where military families and retirees who 
lived on islands other than Oahu were outside of the TRICARE 
prime jurisdiction and were then left with very little access 
other than to jump on a plane and travel to Oahu, which is cost 
prohibitive for a lot of people. So opening that up for more 
options, I think, is something that would be very interesting 
to families like those.
    My question is about implementation, though. Given the 
current construct you mentioned, Mr. Buyer, the bureaucracy 
that exists within TRICARE now, what kind of timeline are we 
looking at should this proposal go through and continue to get 
to a point where these families would have these options?
    Mr. Buyer. The way the contracts are structured, I believe 
that we could actually bring those TRICARE contracts to 
fruition and move to implementation. Anytime you move these big 
programs you need glide paths, that is what I have learned. And 
I believe, you know, you can't just say let's do this next 
year. So wind these contracts down. You can do that here over 
the next 2 to 3 years and then move to this new plan model. But 
do this in a glide----
    Ms. Gabbard. I ask specifically because the TRICARE 
contract that has made this change and that covers the 
jurisdiction in Hawaii will be up, I believe, in about a year. 
So my concern would be that, we would get locked into something 
else that would continue that limitation.
    General Chiarelli. And make no doubt about it, the services 
have in fact, everyone has, in fact, used access as a way to 
control cost. The more pressure you put on to control health 
care costs, access becomes more difficult because the number of 
providers that are part of the network become fewer.
    Admiral Giambastiani. We also----
    Mr. Maldon. We have a 2-year implementation timeframe here 
from the time that the recommendations would be adopted.
    Admiral Giambastiani. If I could just add one other piece 
too. I think it is important for members here to understand 
that we have worked very closely with the current OPM [Office 
of Personnel Management] director and his staff of which a 
former deputy director of TRICARE, Rear Admiral Christine 
Hunter, now retired, is working in OPM. So she's seen the best 
of both worlds on each side and that really has brought a 
tremendous amount of assistance to us as a Commission and 
working not only to transition but how to structure the 
program.
    Ms. Gabbard. Right.
    My next question that no one has brought up yet today is 
one that is core to all military families and that is the 
proposal to consolidate the commissary and exchanges. And I 
would like you to comment on how that change will affect them 
as well as the MWR [Moral, Welfare and Recreation] funds that 
the services currently receive through the exchanges.
    Mr. Maldon. Thank you, Congresswoman, for that--for your 
question.
    You know, we gave a lot of thought to this. We heard a lot 
about the commissaries. We had people all over the map, quite 
honestly, that when we traveled across the country and talked 
to people about their perceived value of the groceries 
discount. You know, the bottom line is after having looked at 
it carefully and talked to people, we had overwhelming support 
at the end of the day, where people said, you know, they 
believe there was a real value here in the commissary.
    So that is why we made the recommendation that we did in 
terms of just consolidating it back in operations for those--
for the exchanges, the three exchanges and their commissaries. 
And we believe that we could, by doing that, we were going to 
continue to meet those needs of what the service members and 
the families said that they preferred here with regard to 
commissaries.
    So we are going to continue to meet that need that they 
have. And the culture belief is that there are some real 
savings there in the commissaries, and we did not want to take 
away from that.
    We also believe that we could bring about some 
efficiencies, though, by consolidating the exchanges and the 
commissaries, the back-office operations type, because you are 
going to take out a lot of the costs in logistics, the IT 
[information technology] training, and that kind of thing.
    The other piece of this, I think, with regard to cost, you 
know, we were going to be able to really deliver these goods 
still and take out $500 million of costs in that on an annual 
basis, and we thought that was a pretty good place to be.
    I am going to ask Commissioner Higgins if he'll follow up 
too with some comments on the commissaries.
    Mr. Higgins. Thank you, Mr. Chairman.
    Congresswoman, I think what I would emphasize to you is 
that the core of our proposal is to preserve food, groceries, 
meats, produce at cost plus the surcharge. We are going to 
preserve that value. When we went around and talked to people, 
the response from the force was very mixed. The retirees are 
steadfastly very supportive of commissaries. The force is 
changing a lot, I believe, over my experience talking to the 
force over 30 years. There is a lot of mixed reviews.
    There should be no illusions that DOD is not going to come 
after commissary money year after year after year. They are 
going to target commissaries. You are going to have a very 
difficult time here in the Congress protecting commissary 
funding. That means services are going to erode. What we offer 
will preserve services, and if you erode services in the 
commissary, hours, store-day openings, that kind of thing, if 
you erode those in a retail environment, people are going to 
find other places to shop.
    When they do that in commissaries, the exchanges are going 
to take a terrible hit. We need to reform single manager. We 
can cross over those cultures, negotiate deals, the deals to 
protect MWR funding. We can do that. Absolutely, we can 
negotiate and protect that. We can protect some of the cultural 
service interests that they have and the coordination. For 
instance, the Marine Corps is very heavily invested in manpower 
and coordinating their family programs as well as the exchange. 
The same people do both. We can work through all those things.
    Ms. Gabbard. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Ms. McSally.
    Ms. McSally. Thank you, Mr. Chairman.
    And thank you, gentlemen, for your work on this issue. I do 
want to comment on just even the opening remarks where we 
talked about how the cost of personnel has gone up over the 
last several years, especially with 13 years of war. I think we 
are all aware of that. We can see the math. But as we all know 
in this room and you all who served, we can't be at war for 13 
years and expect those costs not to go up.
    And the constant deployments, the health care 
responsibilities, when the men and women in uniform raise their 
right hand to serve and put their lives on the line, we have a 
covenant with them. And although I appreciate the work you are 
doing to try and see where we can gain efficiencies, I do want 
to just be on the record to say we can't find those 
efficiencies on the backs, you know, of those who have served. 
And I know that is the work that you are trying to do, because 
we can't do that on the cheap.
    You know, a lot of those costs have gone up because the 
compensation did not match what was happening in the private 
sector, again, increased health costs related to the 
deployments and the wounds of war, both physical and mental. 
And so we just need to make sure--and even with all that, we 
still have troops on food stamps, right. So we still have a 
problem here. And we have got to make sure that we recruit, 
retain the best and brightest, because freedom isn't free and 
we know that.
    So I appreciate the work that you guys are doing in a very 
tough situation, but I am committed to make sure that there are 
no cuts to those who have served and those who are continuing 
to serve.
    And I appreciate the work you have done specifically 
related to access to child care. The unique concerns of women 
in uniform, especially those who might be a single parent, and 
the challenges that they have with the duty hours and the 
dynamics they have. I mean, child care is the number-one 
issue--not number one, but a top issue that I am hearing from 
many service men and women who are trying to serve and still be 
parenting with all the challenges. So I appreciate that work in 
your report.
    I will confess that I was one of the people who took your 
survey, since I am a retiree, so it is a little bit of 
undercover boss here. I will tell you I have some concerns with 
the survey having taken it. The way things were questioned, you 
know, and I am paraphrasing a little bit: You know, do you 
prefer the commissary or access to health care? Which is more 
important to you? And the reaction of any retiree, I think, is 
like, yes, yes, all of the above, and then firewall to the 
right. And then like, no, you can't firewall to the right, 
okay. 100 and 99, 99, 99.
    So, I mean, I was a flawed data point to your survey, but I 
think I represent many retirees who just feel like even the 
questions being asked create concern that, oh, my gosh, what 
are you going to make us have to choose between based on our 
commitment to serve and the commitment to us to serve.
    So how much of your recommendations came from that survey? 
Because I have deep concerns about that survey, is my first 
question. And what is the feedback you have gotten from 
veterans service organizations so far on your recommendations?
    Mr. Maldon. Congresswoman, let me take your latter two 
questions here, and we will get some of the other commissioners 
to respond as well.
    First of all, with regard to the survey, you know, this 
survey was intended to really provide us with a point of data. 
It was not the only point of data that we were using in making 
our recommendations. Of course, it did, in fact, stack order 
one benefit against the other, and we needed that. That really 
kind of gave us a good indication of what service members 
really prefer in terms of value, so that was important to us.
    And then, you know, I will tell you that truthfully 
everything that you have said here we totally agree with, and 
that is the way we actually approach this. We took a lot of 
time looking at every program and trying to figure out what is 
the second- and third-order effect? If we made a recommendation 
on one program, one benefit, looking at one benefit, what did 
it do for the other five benefits? And so we took that holistic 
approach in going through it, whether it was health care, it 
was pay, it was retirement, and quality-of-life programs, the 
commissaries and the other programs and ECHO [Extended Care 
Health Option], the Space-Available travel, whatever the case 
might have been with regard to quality of life. Every one of 
those recommendations were made in the support of an All-
Volunteer Force.
    We made sure as we went through this process that whatever 
we did we would either maintain those benefits for the service 
members--we all agreed to that early on--or we would improve 
those benefits. So I can assure you that we took that in 
consideration, and I hope that will address your concern in 
that regard.
    I am going to ask Commissioner Giambastiani to respond as 
well.
    Admiral Giambastiani. I would just say to you that I think 
we agree with the vast majority of your comments. I don't think 
the survey was a flawed one because I know all surveys are 
flawed. And the problem is, is that you try to achieve the best 
balance of how to get input from the surveys. But more 
importantly, if you are smart, you not only do paper surveys or 
computer surveys but you go out and talk with people.
    And this Commission spent a huge amount of time engaging 
with the lowest enlisted up to the most senior officers, from 
the Joint Chiefs on down, up and down. And I have to tell you, 
our travels around the world and around the country really made 
a difference and had a substantial impact. Also, with the 
family associations, if you will, wives' clubs, you name it----
    Ms. McSally. Spouses' clubs.
    Admiral Giambastiani [continuing]. Spouses' clubs, you name 
it, and it just depends on where you go----
    Ms. McSally. Right.
    Admiral Giambastiani [continuing]. I would tell you that 
the input we received across the board was exceptionally 
helpful to help us temper these recommendations.
    Ms. McSally. Great. Thanks. My time is expired.
    If you don't mind in writing, your veterans service 
organizations, if you could get back on that, where they are, 
because my time is expired.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Maldon. We will.
    [The information referred to can be found in the Appendix 
on page 95.]
    The Chairman. Mr. Walz.
    Mr. Walz. Thank you, Mr. Chairman.
    And thank all of you for the incredible work you put in on 
this.
    To Colonel Buyer and Commander Carney, it is great to see 
both of you again. Thank you for your continued service.
    And I know how hard this was, and I know how difficult. 
This is the starting point of the discussion, and it is 
critically important. I think the gentlelady from Arizona's 
point was right on and spoken as someone with experience, and I 
am grateful for that.
    We know and, again, some of the things you tackled, the 
DOD-VA collaboration, brilliant. We know that is where we need 
to go.
    And, General, your point was right on dental. I would add 
that I went down as a first sergeant the last year before an 
ETS [end term of service]. I couldn't get a troop in because 
they knew VA would pay for it, and then that is the problem we 
come in. So you are right. Those are the things.
    Looking at SBP [Survivor Benefit Plan] offset, you tackled 
one that is tough. No one wants to grab this one. You did it. 
You offered up a suggestion, which I am grateful for. I think 
that premium, I don't think anyone will take it, but you know 
what, it brought to light what it costs to do this. So, please, 
know that I approach it like this, and I am not coming at this 
as the caricature of the senior enlisted guy, but that little 
chip is on my shoulder. I don't see any on the Commission.
    And what I am saying is, I hear you going out and talking, 
and the surveys, and the gentlelady brought up--oh there he is, 
yeah--brought up a good point in that the surveys are tough, 
because keep in mind that prior to last April the VA in Arizona 
had a 94 percent approval rating in Phoenix. We as soldiers, 
how is the chow hall? Compared to what? It is good; that is the 
only place I go. And so keep in mind when they are asking this, 
those they are going to get.
    I say this out of reality because this is first and 
foremost, and I hear you echoing this, and this makes me feel 
confident, readiness and national security, those are our 
priorities, readiness and national security. But keep in mind 
what those troops are out there. And I was with a group of 25 
sergeant majors, none have any idea what was in this.
    And when I started to say some of those things, here is the 
things they come back to me with: Where's the Commission on the 
700,000 civilian employees? Have we got any recommendations 
here of that? Of course, they are going to come to this: How 
big have the command staffs gotten and the support there? What 
have you guys done there? They ask me, what about weapons 
systems acquisitions and procurements? Have we looked at any 
waste there?
    Those are things they are asking for in saying we will make 
the hard choices, but we are not convinced everyone else has 
been asked. So I say this more to, not as a question because 
you have done the hard work and you have teed it up for us. We 
have got to get out there and make the case because this has to 
be buy-in, as you said. You are talking to a very small 
universe.
    If you go out and sell this to the American public, 90 
percent have no idea and they will probably agree with you. If 
it saves money and you tell them it keeps them safe, they will 
agree with it. The problem that we have is most of our warriors 
come from the same families. And if there is a break in trust 
in those families, you break the system.
    And I say this only because, a small one, but I heard it 
and heard it and we are going to hear it, the transferability 
on the post-9/11 housing. Granted, it is huge. If my daughter, 
I have benefits, she's 14, she comes to DC to go to school, 
that is $85,000. That gets expensive and it gets expensive 
fast, but that is phasing out.
    So what I heard was this is, what about the promise made 
and the promise broken? So I said, when I tee this up, and it 
is more of a statement and asking all my colleagues here, we 
have got to get out and make the case on national security. We 
have got to see our veterans service organizations that the 
gentlewoman asked about not as a detriment that they are going 
to come in and protect their own and say, no. They want to have 
a solution because they care first and foremost about national 
security. They care about the warriors and they want to get 
this right.
    So I guess to my colleagues I say, we have been given a lot 
of thoughtful work and some very bold suggestions. Our job now 
is to see how it fits in the entire process and to get that 
buy-in, especially from that very small segment of the 
population that absorbs the huge brunt of this.
    So I would just--any feelings or comments or as you hear 
this, I know I am speaking to a group, but perceptions do 
matter and we have got to get that.
    Mr. Buyer. [Off mike.]
    Mr. Walz. Thank you. We have been down this road a few 
times, Colonel Buyer.
    Mr. Maldon. Congressman, yes. Let me have Commissioner 
Chiarelli to respond specifically here, then we will have a 
couple more comments as well, if that is okay.
    General Chiarelli. Sir, I would just ask you to realize 
that this is a package of recommendations. And any one of these 
recommendations, as you start to paramount and change them in 
any way, there was going to be second- and third-order effects. 
And I would really ask that you work with us to understand what 
those second- and third-order effects are, because that is the 
thing that scares me the most.
    If you pull away a readiness command, I think that that 
causes some real issues as we look at how we are going to 
change the medical system, is an example.
    Mr. Walz. Our stakeholders have to know this.
    General Chiarelli. And I think it is just key that you work 
with us and our staff if at any time you feel that those kinds 
of adjustments need to be made.
    Mr. Walz. Appreciate it.
    Thank you, Chairman.
    The Chairman. Taking the general's point, I think it is a 
good point, but let me reassure the gentleman that a major part 
of the agenda of this committee is dealing with civilian 
overhead, bloated command staffs, and acquisition reform. I 
think the things the gentleman lists are exactly right. We may 
not be able to solve it all in a single swoop, but it is 
absolutely part of the agenda of this committee.
    One of the reasons I appreciate what this Commission did is 
they weren't just out to find money to cut. They were there to 
see what works and what we need going into the future, and that 
to me is the heart of the matter that our committee has to look 
at, too.
    So I appreciate the gentleman and also the work that has 
gone on.
    Mr. Nugent.
    Mr. Nugent. Thank you, Mr. Chairman.
    And I want to thank the Commission. And I have three sons 
that are currently serving, two Active Duty and one Army 
National Guard pilot. And they ask, Dad, what are you all 
doing? Are you cutting our benefits? I have one that is 
midrange, he is a major, one that is just captain, and they 
want to know what the future holds for them. And I think the 
general hit it.
    There are a lot of parallels between law enforcement, which 
I was 39 years, and then the military. When I first went in law 
enforcement, I didn't care about retirement and I didn't care 
about medical, I mean, because I was invincible, I was young. 
But when I got married and had a family, all of a sudden 
medical became a real big deal in regards to starting a family 
and all those types of things.
    Then as I got midterm and you start to decide, hey, listen, 
do I really want to continue doing this or can I make more 
money on the outside? And that is what I get hit with, two of 
my sons, I could make more money on the outside. So why should 
I stay?
    Do we care about those guys and gals? Is it important 
enough for us to look at their benefits? Because at that 
midrange level the benefits become more and more important to 
them than the recruit, at least in my experience.
    Just on the Reserve side of it, the TRICARE, I will tell 
you, is terrible, because my son, they were going to have a 
baby, and they had, guess what, that slice of physicians that 
were available was, like, zero compared to--unless they wanted 
to drive three counties away to get to that physician. There 
was none within that area. And so that was a huge problem, and 
I couldn't believe it, but that was the case.
    Even though the insurance was, you know, I think it was, I 
forget what company it was, but that doctor did it on the 
normal, but not on TRICARE, wouldn't see them because, hey, you 
are not on the normal insurance, even though it is the same 
company that was handling it. Big problem.
    What you are trying to do I think is commendable. I am 
concerned, and I think those that you heard from, others that 
are retired, is that you can't change the plan of those that 
signed up. When my kids raised their hand, you can't change it 
midstream for somebody. And I think you have accomplished that, 
from at least what I have read, is that that is not in the mix, 
it is not changing.
    Now, the healthcare portion does change. And I am concerned 
about, Colonel; you said we made a mistake back then. I just 
hope we are not making the same mistake this time. And I think 
you have given it a lot of thought because you were down that 
road.
    Mr. Buyer. Absolutely.
    Mr. Nugent. But I just want to make sure, because I have 
100,000-plus retirees in my district and they are pretty vocal. 
So I want to make sure that when I actually meet with some this 
Saturday at one of the vet fairs that we are doing, health 
fair, that I can say listen, you know--I want to have a better 
idea because I really don't have a good handle on what it does, 
what it changes for those retirees.
    Your recommendation?
    Mr. Maldon. Congressman Nugent, let me just respond real 
quickly here to your question.
    First of all, I would separate the Active Duty military out 
because nothing changed there. Because of operation readiness, 
we made sure, we want to protect that industrial base of the 
MTFs, getting services there, and so forth. Nothing changes for 
the Active Duty service members.
    Let's go to the other end of the spectrum. Nothing changes 
for those retirees that are Medicare eligible. They still have 
TRICARE for Life as we knew it.
    The TRICARE for Choice, the new proposal that we are making 
here, it really includes those people in between. Those are the 
retirees that are non-Medicare eligible with regard to cost 
sharing. People we have talked to have indicated to us that 
they understand that the timing is such that you can't continue 
to stay at that 5 percent cost-share level. We have been very 
comfortable there for a long time, and that has been a great 
thing, but people really knew that a time was coming when you 
have got to do a little bit more.
    What we have tried to do is take that into consideration 
and say, we are going to do a slow ramp-up of that in our 
proposal that goes from that 5 percent to 20 percent over a 15-
year period of time. That is still a better deal than what the 
Federal employees get in their insurance plan. So they still 
would be paying a little bit less for health care than what a 
Federal employee would be paying, a nonmilitary person.
    Mr. Nugent. Just one last question quickly on the Reserve 
Component. The TSP match that you are talking about, is that 
also for Reserve Component?
    Mr. Maldon. It is.
    Mr. Nugent. Okay.
    Mr. Maldon. It is.
    Mr. Nugent. Because currently, you know, I talk to my son 
and say, listen, if you can put 20 bucks away, whatever it is. 
But if you are a Member of Congress or staff, they get a match 
to it and currently our Active Duty folks don't get a match. So 
I think that is an excellent idea moving forward.
    Thank you. I appreciate it.
    Mr. Maldon. Thank you.
    The Chairman. Ms. Speier.
    Ms. Speier. Thank you, Mr. Chairman.
    And to the Chairman and members of the Commission, can I 
just say how remarkable your presentation has been. And while 
you have all given service to this country I believe on one 
level or another, I think your service that you have provided 
by virtue of this Commission is priceless.
    Your recommendations are bold. They are thorough. As I have 
listened to many of my colleagues push back on you, you had the 
answers. And I am just, I am wowed by it.
    Now, I just hope that we as members of this committee will 
emulate the boldness and the thoughtfulness that you have shown 
in your recommendations.
    One of the things that really amazed me was to hear that 
TRICARE--I have a brother who is retired, TRICARE, and we go 
into fisticuffs on holidays because he thinks I am trying to 
take something away from him. But what was most impressive to 
me was your representation, Congressman Buyer, that, in fact, 
TRICARE is not as good as----
    Mr. Buyer. That is right.
    Ms. Speier [continuing]. What would be offered or what 
could be offered because the network is so small.
    And I think part of what we need to do, and maybe you will 
join us in doing so, is educate military retirees and military 
personnel on the myths that have kind of grown up with the 
expectation that somehow this was better than what they could 
be getting and, in fact, it is not.
    The fact that only 17 percent of those who serve actually 
retire in the military should give us also reason to pause 
because so much of those who have served to date in this 13-
year war have been reservists. And I heard loud and clear from 
many of you that they want something out of this. So a TSP, 
some kind of a healthcare benefit, I think all of those things 
should, in fact, be factored in as well.
    I am also reminded, and it should be not lost on any of us 
as members of this committee, that if we do not act, and act 
soon, the cost of military personnel and retirees will gobble 
up the entire defense budget I believe by 2039. So we have I 
think a responsibility that is grave to address this and 
address it now so it can be phased in appropriately.
    And I think for any of us who have served in any other 
level of government, having tiers of retirement benefits and 
health care is reality. Those who have retired get to keep it. 
Those who are newly employed are in oftentimes a second tier, a 
third tier, even a fourth tier. And I think that is something 
that we have got to come to grips with.
    I don't recall whether or not you addressed the issue of 
the pensions that were offered up a few years ago for the 
three- and four-star generals who we were told should have 
their pensions bumped to keep them on Active Duty. And as I 
understand it now, those pensions exceed the pension of the 
Commander in Chief by about 50 percent.
    Did you address that issue at all? And I don't know exactly 
how much money that would accrue, but I would be interested in 
anything you have to say on that.
    Mr. Maldon. Congresswoman, thank you for the question. We 
have two retired four-stars here on this Commission, and I am 
sure they are waiting to answer that question. I am going to 
start with Commissioner Chiarelli first.
    General Chiarelli. We looked at it. I think someone is 
giving you an inflated figure, to say that my pension is 50 
percent greater than the Commander in Chief. I don't have his 
numbers at hand right now, but I doubt that very seriously.
    Ms. Speier. The President of the United States will receive 
$200,000 a year in retirement benefits. We gave a particular 
bump I believe in 2008 or 2009 to three- and four-star 
generals, and their pensions now I think are at $270,000, 
something like that.
    General Chiarelli. I can't tell you the exact number. I 
don't know it. But I can tell you that it is one of the things 
that got me and other folks to remain in the service throughout 
a 40-year career. You know, one way or the other, for those of 
us who served a long time, we looked at it and we left it where 
it is.
    Admiral Giambastiani. If I could jump in here, I would just 
like to put some perspective on this. What happened back in the 
2006 timeframe, since I happened to work on this, is that we 
were trying to encourage senior officers and senior enlisted to 
remain in the service beyond 30 years.
    Everybody thinks this is all about flag and general 
officers. But what we did is we started paying for retirement 
beyond 30 years for these senior enlisted and senior officers. 
And by senior officers, I am talking about warrants and LDOs, 
limited duty officers and warrant officers, senior enlisted, 
for example, Sergeant Major of the Army, Sergeant Major of the 
Marine Corps, Master Chief Petty Officer of the Navy, if you 
will, force and fleet master chiefs, these very senior guys.
    And let me give you perspective. There are 4,000 people in 
2006 who were serving greater than 30 years of service. Of that 
4,000, 3,000 were senior enlisted and senior officers below 
flag and general officer rank. And there are 1,000 of that 
4,000. And this encouraged these very senior people to stick 
around. Having a command sergeant major who has been in for 36 
years who will stay for another 4 really makes a huge 
difference. Tremendous amount of experience.
    So please don't think this was all about flag and general 
officers. They happened to be on the high end of this, as 
opposed to the other 3,000 who were being left behind.
    Ms. Speier. All right. My time has expired. Thank you.
    The Chairman. Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Gentlemen, I have been thinking over old stories, and I 
won't call them war stories because I never served in the 
military, but I majored in risk management, insurance, and I 
was an insurance broker for 20 years. And so I sat on that side 
of the table many times explaining to employees benefit 
changes.
    And we all know that protecting the current system is not 
in the best interest of the men and women in our military or 
this country. And yet there seems to be the perception that any 
change is a takeaway. And I think it is probably harder here 
than anywhere else because of the politics of it.
    And I will tell you, I will just give you a perfect 
example. The House voted several months ago to make a minor 
change in cost-of-living adjustments. And we certainly had our 
colleagues on the other side of the Capitol, told a lot of 
stories, and there was the perception that people's check was 
actually going to go down instead of not going up as fast.
    This has got to be done. And changes have to be made. And I 
think the financial literacy training is one of the most 
important aspects of anything that you can do in this. And we 
need people to know what the cost of the healthcare benefits 
are.
    And, General, as I heard you talking about the formulary 
for what in most cases would be antidepressants and the 
situation that you briefly described, that is a complex 
purchasing decision where we have hired a pharmacy benefit 
manager who has got different contracts with different drug 
manufacturers that, quite honestly, we need to have 
transparency there. And maybe we should have one pharmacy 
benefit manager for all of the, instead of multiples so that 
that formulary stays the same regardless of which agency or 
division or whatever we want to call it is providing the 
service. But there should also be transparency in those 
contracts so that we get to see what is being paid for it.
    And I want to give you just a great example of how paying 
more and getting more are two totally different things in 
health care. I have taken Zyrtec for probably 20 years now. I 
used to pay $10 for it. After the drug manufacturer continued 
to go up on its prices, the insurance carrier I was covered 
under said, no more, you are going to have to pay $40 for it. 
And that was for 1 month. Today I can buy a 90-day supply for 
$19. And until the consumer becomes responsible for paying more 
of the cost, the more we end up paying for it in the end 
because those costs are hidden.
    Now, I say that to get to the fact that I believe these 
changes have to be made. But I wonder if bumping the base pay 
of our people so that they know that there is not a dollar 
being taken away from them, that we are shifting the purchasing 
decision to them of what they do with their dollar, how much 
consideration there was given to that, and how much 
consideration was given to allowing somebody who is 2 or 3 
years into their service to choose to move to the new benefit 
plan instead of being forced to stay in the old one, at their 
choice, if they chose to move.
    Mr. Maldon. Congressman Scott, let me respond to the first 
part of your question, then I will have one of the other 
members on the Commission to respond to the second part of it.
    We looked at the pay table. We talked about the 350-plus 
programs that we looked at. This is part of it. The pay table 
was one of the first places that we went to. And having looked 
at it very carefully, we realized that it had served us very 
well over the last 42 years, plus during the last 13 years of 
war especially, a sound structure.
    We didn't think there was a need to go there to make any 
changes in that because that would have been a major overhaul 
of the compensation benefit system and we didn't think that was 
necessary. What we wanted to do is to look for those 
opportunities to modernize the compensation program and the 
systems and that is what we did, that is what our 
recommendations provide here.
    I am going to also ask Commissioner Higgins to talk to the 
latter part of your question.
    If you would, Commissioner Higgins.
    Mr. Higgins. Thank you, Mr. Chairman.
    Mr. Scott, good to see you again, sir. And I believe you 
are referring to the retirement, about the choice, the 2, 3 
years?
    Mr. Scott. If I am, I am referring to pretty much the 
retirement, but making sure that somebody who is just a couple 
of years in, if they so chose, none of them would be forced 
into the new system, but they could choose to go into the new 
system if they wanted to.
    Mr. Higgins. Oh, I see. The concern there is I think for 
the services, their observation would be that it would make 
their job a lot more complex with the uncertainty as to the 
choices that people would make. From a management standpoint, I 
think they would have concerns.
    Certainly from our position on the Commission, we would 
have concerns about how the cost of that could be modeled. We 
delivered modernization. We believe we have stepped up and 
given people precisely what they are looking for in their 
retirement plan. And we believe that we understand the 
implications on retention, recruiting, and cost.
    To open up that aperture soon after the individual arrives 
on Active Duty and give people the choice to stay in the old 
system versus entering our solution, our proposal, that would 
be very difficult to understand the implications of that on 
force structure and cost, and that would be a concern of ours, 
and why, frankly, we discussed that, but could not see a path 
forward to deliver what we think was necessary and include that 
kind of a proposal.
    Mr. Buyer. Mr. Scott, on health care, with regard to the 
retirees, we wanted to be very holistic in our approach. 
TRICARE for Life is preserved. The pharmacy benefit is 
preserved. For the gray area retirees, as their premiums 
increase, I am sure you will hear someone say, oh, my gosh, I 
am paying more, you are breaking the faith, how can you break 
my promise? Wait. Time-out. You are tangled right now in a 
subpar health system.
    You are delivering to them a better health system, that 
they can choose a plan that best fits their family's needs, 
right, that is what you sell when you talk to your employers, 
improve their access, improve their quality, and they have got 
their choice, and there are utilization management tools that 
benefit the employer. And with regard to the pharmacy benefit, 
we are going to protect that because we are going to recommend 
that that be rolled into the fund. So they are getting a 
tremendous bump up for a slight bump in cost.
    Admiral Giambastiani. I would also add that we are going to 
be in a long-term death spiral on TRICARE if we just stick the 
way we are and not change to this, if you will, smarter way to 
go. Why? Because as the amount of noncopayment or premium 
changes for these individuals, all the DOD can continue to do 
is either, one, put more money into the pot, which drives their 
costs up, or they will figure out ways to cut back on service, 
cut back on benefits continuously, and it is a death spiral. 
You just can't sustain this program to the manner to which we 
think we won't break faith with these individuals.
    Mr. Scott. Thank you. Thank you, Mr. Chairman.
    The Chairman. Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman. I apologize for 
being the last one between you and lunch, but I will be quick.
    Thank you all. This is really just an impressive effort. 
And I want to also give a shout-out to my friend Chris Carney 
back there who I know helped with the effort here. Again, this 
is really important work that you are doing.
    Admiral, you were just talking about the bad choices if we 
don't do anything, and the narrowing of the networks, which Mr. 
Buyer referred to. I mean, in Groton most of the docs in that 
area treat TRICARE as charity care and just roll their eyes 
when they talk about dealing with the system. And L+M 
[Lawrence+Memorial] Hospital ends up being sort of the 
provider, default provider, because, again, there is just so 
little acceptance of TRICARE. So doing nothing really is not a 
solution to anything here.
    And, Mr. Higgins, maybe just walk me through again one more 
time real quick, and I will stop there, just the basic 
allowance for health care, just so if a sailor asks me about it 
back home I can kind of have some way to respond to it.
    Assuming, again, we have this new structure, they pick Blue 
Cross, there is a premium, there is a copayment, there is a 
deductible, I mean, how does the basic allowance, I mean, does 
that cover all of it? Does it cover part of it? And family size 
we have already heard some rumblings about as an issue. So 
maybe you could just address that.
    Mr. Higgins. I think what we are looking at here is trying 
for Active Duty family members, we want to make certain that 
their costs, their copays are covered as well as their premium 
amount that they would have to contribute to the health plan 
effort.
    Now, the big part of the health plan purchase is going to 
be paid by the government. It is the 28 percent that falls to 
the family. And they would receive that 28 percent, whatever 
that plan cost may be. The beauty of the proposal is that there 
would be a variety of plan costs out there to choose from. 
Whatever that 28 percent is, we are going to pick up the 
average of those selected plans by the population, and they are 
going to receive that in their paycheck every month. It is 
going to be transferred immediately to the health insurance 
plan, that 28 percent.
    But on top of that, there will be a calculation of what the 
average out-of-pocket costs would be for the plan selected by 
the people in our system. And those out-of-pocket costs, we 
would believe, we have analyzed, would cover 85 percent of the 
out-of-pocket costs that could be expected. That means there is 
going to be some percentage of people that would have out-of-
pocket costs, due to maybe events, illnesses, injury, that are 
greater than what would be provided to them. The important 
ingredient here is, if it is not higher, they get to keep that 
money that they received in their paycheck.
    Now, if it is higher, there is going to be some percentage 
that may have additional out-of-pocket costs. But we do 
protect, we have a cap where we can ensure that those that are 
stricken by catastrophic illness, injury, and indeed face very 
high, extreme out-of-pocket costs, will have a fund, we would 
propose that a fund be established that would afford those 
families additional assistance to gap them from their extreme 
cost level from what they received in their paycheck to the 
catastrophic caps in the individual plans.
    Mr. Courtney. Okay. So this network or exchange or whatever 
you want to call it where plans are going to be offered----
    Mr. Higgins. Yes, sir.
    Mr. Courtney [continuing]. Is that going to be a national 
array of carriers or is it going to be sort of regionalized or 
localized?
    Mr. Higgins. It would be a mix. And I would defer to my 
colleague, Commissioner Buyer, to perhaps clarify on that.
    Mr. Chairman, with your permission.
    Mr. Maldon. Yes. Let me just say, number one, just on the 
BAHC [basic allowance for health care] itself, that is set 
regionally based on the average plan selected by the services, 
not the average plans that are out there on all of them, but 
the plans that are selected by the services. That is the 
answer. I just want to cover that.
    Mr. Courtney. Thank you for pointing that out.
    Mr. Buyer. And, yes, like at the FEHBP, you get that choice 
of national plans, regional plans, same type of thing that we 
would recommend. So, say, you are in a particular service and 
you are doing a lot of moving, you want to be in a national 
plan. I am in the Navy and I know I am going to be in San Diego 
for the next 10 years, I probably am going to be on a local 
plan.
    But one thing that is really powerful about our holistic 
recommendations, it goes back to, I hate to be redundant, Mr. 
Chairman, but we are trying to empower the individual, whether 
it is in the financial literacy, about making those right 
judgments which would help them transition to civilian life, 
but also what are the best judgments for you with regard to 
your family on the health care. And that also helps them 
transition also to civilian life. So when we do that, it will 
have a tremendous impact upon our society also.
    Mr. Courtney. Thank you, Mr. Chairman.
    The Chairman. Just to take the burden off Mr. Courtney, I 
want to detain you just a moment longer and ask just a couple 
things.
    Mr. Chairman, a lot of what you all have to do is estimates 
of costs, of how people are going to react to various 
incentives, and so forth. Can you just give me a feel for your 
confidence in the estimates and modeling approach that you all 
used in understanding what the consequences of various 
proposals would be?
    Mr. Maldon. Thank you, Mr. Chairman.
    Yes, Mr. Chairman, we did our own analysis, of course. We 
had others that came in and we asked them to assist us with 
that. We used a company like RAND. RAND did on our retention, 
all of our retention stuff, they did the modeling for us there. 
On our health care, we had IDA [Institute for Defense Analyses] 
that actually provided a lot of modeling and analysis for us on 
the healthcare pieces of things. And there may have been some 
others here that----
    Admiral Giambastiani. I think DOD Actuary, for example----
    Mr. Maldon. Exactly.
    Admiral Giambastiani [continuing]. Is a place where we 
spent a lot of time, and they are well respected in this area. 
We have had staff engagement with the Office of Management and 
Budget, CBO [Congressional Budget Office]. This has really been 
quite across the board. And we have tried to reference, the 
staff has done a very good job of referencing where the 
analysis and data has come from and who did the analysis and 
who looked at the data for us. Obviously we are ultimately 
responsible for it.
    Mr. Buyer. Mr. Chairman, our confidence is high, but we 
welcome constructive critique.
    The Chairman. I think it is just important for us to know 
that you and the people who have helped you have done the 
homework. Nobody is perfect in predicting the future, but 
trying to understand as best we can what is going to happen.
    I guess the last thing I would do is just offer each of you 
an opportunity to mention either--Mrs. Davis asked about 
``aha'' moment--but a key insight or a key consideration you 
think we need to keep in mind as we move forward on examining 
and considering the recommendations that you have made. And I 
would appreciate it if each of you could, if you have 
something, could share that with us.
    Mr. Maldon. Thank you, Mr. Chairman.
    Mr. Chairman, I think the ``aha'' moment here for me, and I 
believe I speak for the whole Commission when I say this, these 
recommendations we proposed, we proposed them in a holistic way 
and believing that they are best done or adopted as a whole as 
opposed to doing some of them separately, because they all are 
interrelated in a way.
    For example, financial literacy training, we actually put 
that recommendation in there because just the changes that we 
are proposing here with regard to health care and with pay, 
retirement, one needs to really understand what that means and 
how they can best benefit from those programs or take advantage 
of the benefits that are offered in those programs. So having 
financial literacy training, as an example, would be very 
important to the totality of those recommendations that we 
offered, as an example.
    For me, personally, we actually did 15 as opposed to doing 
150 recommendations because we really looked at this and felt 
like these 15 recommendations were absolutely important to 
actually modernizing the system, the pay and compensation 
system, so that it would be in the best interests of the 
service members.
    And I will now yield to, let me start with Commissioner 
Chiarelli to my left.
    General Chiarelli. I will tell you, I really believe that 
these recommendations are interrelated and so much of it is 
interrelated. I entered into the Commission thinking that it 
was Congress that had messed up TRICARE, that it was Congress 
who directed DOD to charge 10 to 15 percent below Medicare 
rates, only to find out that it wasn't. Congress told DOD to 
come closer to Medicare rates and DOD kept going.
    I didn't know that we used TRICARE certification of 
provider to control the network. You can control costs two 
ways. You can control cost by price and you can control cost by 
the size of the network and what is available for people to 
use.
    And that is one of the reasons why, if you get into the 
details of what we did in health care, we took very careful 
steps to ensure that people can't get in and do the same thing 
with this benefit that we have laid out that they have done 
with other benefits in the past. And to me, that is a critical 
piece, and I think it demonstrates the interrelationship of a 
lot of what we have done and how complicated it really is.
    Mr. Maldon. Commissioner Higgins.
    Mr. Higgins. I can certainly tell you the happiest moment 
was very early in the process when we were sitting with 
Chairman Maldon and it became very clear that we were not going 
to be a cost-cutting drill. That was a very important moment to 
me. And I think we lived that spirit literally in everything we 
have done and I was most impressed with that.
    The second happiest moment I would say was when we began to 
formulate our proposals, that we found that we could deliver as 
good and better benefits to people and feel good about what we 
had done and still demonstrate that those proposals could be 
more efficient than what we are doing today.
    Thank you, Mr. Chairman.
    Mr. Maldon. Commissioner Buyer.
    Mr. Buyer. I think mine was on health care, Mr. Chairman, 
to answer the question, can we do better?
    And so when we looked at it and said, well, if we go to 
this TRICARE Choice and we bring the MTFs in and we want to 
preserve that high quality and the combat medical readiness at 
the MTF, what impact really is there going to be if we have 
better utilization management, better program management, there 
will be an increase in the cost shares for the gray area 
retirees, and if we then shift to an accrual funding for the 
non-Medicare-eligible retirees? Do the math. What is that 
really going to be? And when we did the math, we said, that is 
about $11.2 billion in savings and delivering a better quality 
product for all? That is an ``aha'' moment.
    Mr. Maldon. Commissioner Giambastiani.
    Admiral Giambastiani. As the anchorman here, let me say 
that I think if the House Armed Services Committee, you, 
Chairman, and all the members could take away, this is a 100 
percent unanimous report. I know that doesn't happen all the 
time. And if you could remember one thing, that it is a 
unanimous report.
    The second item I would tell you is that in my four decades 
in the military and since retirement I have not seen any study 
or survey, and I am not saying this because I am on this 
Commission, but I have not seen anything anywhere that has been 
as comprehensive and all-encompassing as this.
    Now, I have to commend you and the Senate for giving us the 
tools and the funding to hire an incredibly professional staff 
to support these nine commissioners in coming up with this very 
significant look, the first real look at how the All-Volunteer 
Force has done over the years. It has confirmed the structure 
of a lot of it. But we hope we have given you the kind of 
recommendations that will sustain us into the future.
    The Chairman. Well, all of us have seen lots of reports in 
this town, some of which are less than helpful. But I just want 
to repeat what I said at the beginning, you all have done what 
we asked you to do.
    And, Mr. Chairman, you have been blessed, as I am sure you 
know, with some outstanding folks who have worked with you on 
this Commission. And we are incredibly grateful for the work 
that each of you have contributed.
    This committee is going to work on the proposals you have 
made very seriously. And I am sure that we will continue to 
draw upon you, both at the subcommittee level and as we work 
with the Senate, to see exactly what we move ahead with in 
legislation.
    So, again, thank you all for being here. Thank you for your 
work.
    And with that, the hearing stands adjourned.
    [Whereupon, at 12:37 p.m., the committee was adjourned.]

      
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                            A P P E N D I X

                            February 4, 2015
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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                            February 4, 2015

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                   DOCUMENTS SUBMITTED FOR THE RECORD

                            February 4, 2015

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                            February 4, 2015

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             RESPONSE TO QUESTIONS SUBMITTED BY MS. SANCHEZ

    Mr. Maldon. The Commission's recommendations do not ask taxpayers 
to pay more. The Commission's health care recommendations, taken in 
their entirety, save taxpayers more than $2.7 billion annually, in 
FY2016 dollars, once they have been fully implemented. These savings do 
not diminish quality of care, but actually improve it by offering 
greater choice and access for the beneficiaries.   [See page 12.]
                                 ______
                                 
             RESPONSE TO QUESTIONS SUBMITTED BY MR. FORBES
    Mr. Maldon. Offering Service members who join after the new 
retirement system is implemented the option of selecting the current 
retirement system would be problematic in that it would create 
inequities and pragmatic issues. People who opted in to the old 
retirement system and then left service before retirement would lose, 
relative to their peers, because they would not have received any 
government-funded retirement savings. Those who opted for the old 
system and then stayed to retirement would have differing retirement 
values, and ultimately would be compensated differently for their 
service than their peers. New Service members could also select 
retirement systems based on the cultural difference of their respective 
Service, creating an inequitable system among Services. Offering this 
option also would create a long-term issue of different normal cost 
contributions into the Military Retirement Fund and might make 
retention analysis more difficult because retention models are based on 
a standardized retirement system.   [See page 13.]
                                 ______
                                 
            RESPONSE TO QUESTIONS SUBMITTED BY MR. O'ROURKE
    Mr. Maldon. It is difficult to determine a specific dollar amount 
associated with this recommendation. The GAO Electronic Health Record 
report (February 2014) indicated there is no evidence of DOD/VA 
collective cost analysis of the abandoned iEHR compared to the separate 
VA (VistA evolution) and DOD (Commercial Acquisition) course of action 
currently in progress. A strategic uniform formulary would likely 
translate to increased costs for VA; however, the costs can be off-set 
by using joint contracting with DOD, prime vendor contracts, Federal 
Supply Schedule (FSS), and Federal Ceiling Price (FCP). Adding 
pharmaceuticals to the formulary does not require actually purchasing 
and having an inventory on hand. VA could use the Pharmaceutical Prime 
Vendor (PPV) contracting mechanism for real-time ordering and 
inventory. The Commission was unable to determine the costs of a 
strategic uniform formulary. This cost can only be determined when the 
formulary has been developed jointly by DOD and VA and all procurement 
options have been explored. For resource sharing in general, the VA and 
DOD do not have a centralized tracking mechanism for resource-sharing 
generated savings. It is difficult to estimate future savings without a 
baseline or agreement on a standardized way to measure savings.   [See 
page 19.]
                                 ______
                                 
             RESPONSES TO QUESTIONS SUBMITTED BY MR. TAKAI
    Mr. Maldon. The Commission made four health care recommendations. 
Taxpayer outlays for the health care recommendations would be $0.3 
billion for Recommendation 5 (joint readiness), -$3.2 billion for 
Recommendation 6 (health care), and $0.2 billion for Recommendation 7 
(ECHO). Net funding changes for Recommendation 8 (DOD-VA collaboration) 
are dependent upon the initiatives that are pursued by the Departments 
and were not included in the Commission's cost estimates, although the 
Commission anticipates this recommendation would create a net reduction 
in federal outlays. The Commission's health care recommendations, taken 
in their entirety, save the taxpayers more than $2.7 billion annually, 
in FY2016 dollars, once they have been fully implemented. The effect on 
the defense budget of each recommendation is provided in the table 
below (values in parentheses indicate savings):
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 


   For federal outlays (as opposed to budget authority), the costs 
(savings) are provided in the table below:
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 

                                 ______
                                 
            RESPONSE TO QUESTIONS SUBMITTED BY MRS. McSALLY
    Mr. Maldon. The Commission recognizes the value of feedback from 
Veterans' Service Organizations (VSOs), and engaged in extensive 
conversations with the Military and Veteran Service Organizations 
during the last 2 years. However, the Commission feels that the VSOs 
are in the best position to express their positions and thoughts on the 
recommendations.   [See page 36.]


      
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                            February 4, 2015

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                   QUESTIONS SUBMITTED BY MR. SHUSTER

    Mr. Shuster. To what degree did your survey conclude that issues 
pertaining to health and benefits are a primary driver for people to 
leave the military?
    Mr. Maldon. Although survey results clearly showed Service members 
view various aspects of health care benefits for their families as 
important, it is not possible from the data collected to measure 
Service member intentions to stay or leave military service. The 
Commission's survey measured the degree to which Service members prefer 
alternative features and levels of particular pay, retirement, health 
care, and other compensation benefits. For example, the survey showed 
strong preferences for an expanded health care benefit for family 
members, along the lines of the Commission's recommendations. Active 
Component (AC), Reserve Component (RC), and retirees all identified 
choice of health care provider as the highest valued attribute from a 
list of six health care attributes. Access to a large network of 
providers was the second most valued attribute for AC and RC members 
and third for retirees.
    Mr. Shuster. Do you believe that this package of recommendations 
will slow the loss of top talent from the military?
    Mr. Maldon. Yes, the Commission's recommendations enable the 
Services to maintain current force profiles as reflected in retention 
modeling by RAND. They also provide additional flexibility that enables 
the Services to adjust force profiles based on their respective 
personnel requirements. For example, the Commission recommends a new 
Continuation Pay at 12 years of service (YOS) that would provide 
additional mid-career retention incentives. The recommendations also 
would allow the Services to adjust YOS requirements to qualify for the 
defined benefit portion of the retirement plan, which in turn could 
allow the Services to retain members longer in key career fields and 
slow the loss of top talent from the military.
    Mr. Shuster. You state that more than 150,000 current and retired 
Service members responded to the Commission's survey. What where the 
most common items of concern raised by survey respondents pertaining to 
the changes the commission is suggesting?
    Mr. Maldon. The Commission's survey did not explicitly probe for 
areas of concern, but instead explored Service members' preferences for 
current and alternative features of various components of their 
compensation. For example, the survey asked about various levels of 
health insurance premiums and copayments compared to what Service 
members currently pay. It also asked about automatic enrollment in the 
Thrift Savings Plan and possible government matching contributions. The 
information gathered by the survey enabled the Commission to better 
understand the features of a compensation system that Service members 
would most prefer. Although the survey provided important insights into 
Service member preferences for various alternative features and levels 
of pay, retirement, health care, and other compensation benefits, it 
was only one of several sources of information the Commission relied on 
to inform its deliberations and decision making.
    Mr. Shuster. Do you believe these changes will disproportionately 
affect any specific element of the Active Duty, Reserve, or retired 
force?
    Mr. Maldon. The Commissions' retirement recommendation will have a 
positive effect on junior Service members and those who do not reach 20 
years of service. These Service members will receive a benefit 
(retirement funds) for which they are ineligible under the current 
system. The Commission's recommendation also will have a positive 
effect on Active Component (AC) family members and members of the 
Reserve Component (RC) by offering them more choice, access, and value 
in their health care options without additional costs. Retirees also 
receive additional choice, access, and value in their health care, but 
the Commission recommends the premium cost share of retirees increase 
1% per year over 15 years. Additionally, the Commission's 
recommendations will benefit AC and RC members, retirees, and their 
families by protecting access to and savings at commissaries and 
exchanges, improving access to DOD-sponsored child care, safeguarding 
education benefits, better preparing Service members for transition to 
civilian life, ensuring Service members' nutritional needs are met, 
expanding Space A travel, and tracking the effects of military life on 
children's school work. The Commission is confident that its 
recommendations maintain or improve the overall value of the current 
benefits package.
    Mr. Shuster. You cite utilization management as a way to achieve 
some degree of cost savings. Do you foresee any negative effects on 
preventative health as a result of these anticipated lower utilization 
rates? How do you define ``overutilization''?
    Mr. Maldon. The Commission does not foresee a negative effect on 
preventative health as a result of any reduction in beneficiaries' 
utilization of health care services. Under the proposed TRICARE Choice 
model, the Commission anticipates health care plans would fully 
capitalize on available techniques for improved care management, which 
would in turn reduce over-utilization of health care and improve health 
outcomes. Over-utilization occurs when health care resources and 
procedures are used even when the care is not warranted on medical 
grounds, the care could produce greater harm than benefit, or the 
additional expense of a more costly service outweighs the added 
benefits the service was intended to provide. Currently, TRICARE 
beneficiaries use health care services at a substantially greater rate 
than civilian health insurance beneficiaries. Enrollees in TRICARE 
Prime used inpatient services 73 percent more than civilians with HMOs 
during FY 2013. Similarly, TRICARE Prime outpatient utilization rates 
were 55 percent higher than those for civilians. The design of the 
current TRICARE system does not allow for effective management of the 
rate at which users consume health care because it has limited use of 
monetary and nonmonetary incentives to influence beneficiaries' 
behavior and promote better health outcomes. The relatively low out-of-
pocket expenses--deductibles, copayments, and coinsurance--experienced 
by TRICARE beneficiaries compared to their civilian counterparts 
encourage over-utilization in the TRICARE system. TRICARE does not 
employ nonmonetary tools available in the private sector, such as 
identifying high-risk patients, managing complex cases, keeping chronic 
diseases under control, and promoting wellness and preventative 
services. These tools lower utilization by reducing avoidable emergency 
room and urgent care visits, addressing health care needs before a 
hospital admission becomes necessary, shortening inpatient stays, and 
avoiding readmission. Additionally, many argue that nonmonetary 
techniques also lead to better health care outcomes. Under the proposed 
TRICARE Choice model, the Commission anticipates health care plans 
would use the complete range of both monetary and nonmonetary 
techniques to affect beneficiary behavior and improve health care 
outcomes through disease management, wellness, and better coordination 
of care.
    Mr. Shuster. The many different Reserve statuses were formed over 
time to differentiate between changing authorities and funding 
requirements. Would the reduced number of statuses restrict any State 
or Federal authorities? Further, did the services express any concerns 
with their ability to implement these changes such as significant 
changes to information technology infrastructure?
    Mr. Maldon. The reduced number of statuses would not restrict any 
state or federal authorities. Before making its recommendation, the 
Commission consulted extensively with leadership of the Reserve 
Component, human resource specialists in the different Services, and 
reserve members who would be affected by the change. The Commission 
received consistent support for its proposed changes, especially since 
consolidating statuses would improve the consistency of Service 
members' benefits. The proposed system would also alleviate RC member 
mobilization difficulties. While there may be some associated 
information technology and training costs, the Commission believes that 
they are worthwhile given the advantages of streamlining RC statuses.
    Mr. Shuster. Medical billing and insurance oversight are not 
current core competencies of our military medical providers. In your 
opinion, what actions must the services first take before they would be 
able to implement the types of changes you've provided in medical care? 
Information technologies, training programs, personnel increases, etc.?
    Mr. Maldon. In the civilian sector, medical providers do not 
typically handle medical billing or insurance. These functions are 
usually handled by administrative or support services. There are 
companies that provide billing services to major health systems in the 
United States today. The companies also provide training for coding, 
billing procedures, collections, and related processes. The Military 
Health System (MHS) could use such a professional service. 
Alternatively, the MHS could expand its current third-party billing 
activities to handle the medical billing. If this approach were taken, 
the MHS would need to ensure that existing administrative personnel 
were trained to perform such duties and that efforts currently underway 
to modernize MHS information technology (IT) would support this task. 
In 2014, DOD awarded a contract to General Dynamics to build the Armed 
Forces Billing and Collection Utilization Solution (ABACUS) to generate 
medical claims, pharmacy claims, invoices, and governmental billing 
forms at 136 military medical treatment facilities globally. ABACUS 
will replace legacy IT systems and automate, consolidate, and 
centralize the Army, Navy, and Air Force's separate health billing and 
collection IT systems. Regardless of which approach to billing is 
chosen, adequate time will be required to set in place coding, billing, 
collections, and related systems, which is, in part, why the 
Commission's proposed legislation includes a 2-year implementation 
period before moving beneficiaries into the new system.
    Mr. Shuster. I recently received a constituent complaint regarding 
the inconsistency in care the member has experienced while 
transitioning from active service to the care of the VA. If the 
committee's recommendations were accepted, how long do you think it 
would take to reach the level of collaboration and standardization 
required to prevent these types of issues?
    Mr. Maldon. The transition from DOD health care to VA health care 
presents challenges on many fronts. The DOD-VA Joint Executive 
Committee (JEC) already exists to coordinate efforts between the two 
agencies. The Commission recommended the JEC be granted additional 
authorities and responsibilities to standardize and enforce 
collaboration. The JEC should develop a strategic plan for DOD-VA 
collaboration and require certification for common services and planned 
expenditures. Creating a stronger JEC requires on-going implementation 
and may take 2 to 3 years.
    The Commission recommended the JEC be given authority to create a 
process by which a strategic uniform formulary is developed to include 
all drugs determined by the JEC to be critical for transition from the 
DOD health care system to the VA system. It is important that the JEC 
begin immediately with aligning DOD and VA drug formularies for the 
pain and psychiatric classes of drugs. The Commission views the uniform 
strategic formulary as a relatively easy means to implement 
improvement, and believes it could be accomplished within 6 months.
    The Commission also found that a single electronic health record 
(EHR) system is the ideal solution for improving Service member health 
care and minimizing overall EHR costs. To that end the Commission 
recommended the JEC require VA to establish health care records for all 
current military members. The legislative language proposed by the 
Commission indicates this record should be created within 180 days of 
enactment of the recommendation. The Commission also recommended that 
the JEC require EHR compliance with national Health Information 
Technology standards for both DOD and VA. The standardization of data 
transfer between DOD and VA EHRs is likely to take longer to implement.
    An electronic health care record compliant with national data 
standards, a uniform formulary, and healthcare resource sharing between 
DOD and VA are critical to an initial framework, but are not a final 
solution in delivering seamless health care.
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. ZINKE
    Mr. Zinke. Under the fifth recommendation, it states ``Congress 
should establish a four-star command to oversee all joint readiness, 
especially medical readiness.'' How does the establishment of another 
four-star command decrease the bureaucracy and lower the cost to DOD?
    Mr. Buyer. The establishment of a four-star Joint Readiness Command 
(JRC) to oversee joint readiness, especially medical readiness, is 
intended to fill a critical gap, rather than increase bureaucracy. 
Currently, joint medical requirements generation and service medical 
requirements validation; joint and service medical readiness monitoring 
and reporting; and joint medical sourcing and standardization do not 
fall under any DOD entity's responsibility. This situation presents a 
critical gap in operational medicine. In addition to filling the gap, 
the concept of Essential Medical Capabilities (EMCs) warrants a four-
star champion who can elevate joint medical readiness and training to 
the level of readiness and training of the line components. The cost 
estimate of standing up a four-star command presented by the Commission 
is conservative, in that it assumes no use of already designated funds. 
Some of the functions and personnel resources of the disestablished 
Joint Forces Command exist in J7, J7-Suffolk, J4, and TRANSCOM and, 
along with combat service support functions from the Defense Health 
Agency, could be reorganized into the proposed JRC, thus reducing 
costs.
    Mr. Zinke. If these recommendations were to be adopted with no 
changes, would any existing member (active or retiree) be forced to 
change anything in their plans in the immediate? In other words, if a 
member and their family are completely satisfied with their current 
coverage, retirement and/or compensation package would they be allowed 
to keep everything the same or would they be forced to make any changes 
in the immediate?
    Mr. Buyer. The retirement pay of those who are currently serving 
and those who have already retired will not be affected by the 
Commission's recommendations; as required by NDAA FY 2013 it is 
``grandfathered.'' Individuals serving at the time the recommendations 
are enacted will have the option to switch to the new retirement plan 
if they prefer. Similarly, the Commission's Survivor Benefit Plan (SBP) 
recommendation would give members an additional SBP option, but would 
also offer the opportunity to choose the present plan. The Commission's 
health care recommendations will require Service member's families, 
Reserve Component members, and non-Medicare-eligible retirees to decide 
on a health insurance plan offered in TRICARE Choice. Health care for 
active-duty Service members and Medicare-eligible retirees will not 
change, nor will pharmacy benefits change for any beneficiaries. The 
proposal for nutrition assistance will sunset the FSSA program (which 
only enrolled 285 Service members in 2013) in the United States and 
other territories. The Commission expects and encourages eligible 
beneficiaries in the United States to apply to the Supplemental 
Nutrition Assistance Program (SNAP), which is typically more generous. 
The Commission's recommendations would also sunset the housing stipend 
for dependents using transferred post-9/11 GI Bill benefits starting in 
2017. The Commission's recommendations for joint readiness, DOD-VA 
collaboration, commissaries and exchanges, family members with special 
needs, Reserve Component statuses, financial literacy, transition 
assistance, the military student identifier, space available travel, 
and child care maintain or improve Service member benefits while 
reforming the programs to make them more effective and efficient.

                                  [all]