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


.                                   

                         [H.A.S.C. No. 114-28]

                       
                       
                       
                       
                       STAKEHOLDER'S VIEWS ON THE

                    RECOMMENDATIONS OF THE MILITARY

                      COMPENSATION AND RETIREMENT

                        MODERNIZATION COMMISSION

                               __________

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON MILITARY PERSONNEL

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                             MARCH 25, 2015

                                     
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                   SUBCOMMITTEE ON MILITARY PERSONNEL

                    JOSEPH J. HECK, Nevada, Chairman

WALTER B. JONES, North Carolina      SUSAN A. DAVIS, California
JOHN KLINE, Minnesota                ROBERT A. BRADY, Pennsylvania
MIKE COFFMAN, Colorado               NIKI TSONGAS, Massachusetts
THOMAS MacARTHUR, New Jersey, Vice   JACKIE SPEIER, California
    Chair                            TIMOTHY J. WALZ, Minnesota
ELISE M. STEFANIK, New York          BETO O'ROURKE, Texas
PAUL COOK, California
STEPHEN KNIGHT, California
               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

Davis, Hon. Susan A., a Representative from California, Ranking 
  Member, Subcommittee on Military Personnel.....................     2
Heck, Hon. Joseph J., a Representative from Nevada, Chairman, 
  Subcommittee on Military Personnel.............................     1

                               WITNESSES

Bousum, Scott, Legislative Director, Enlisted Association of the 
  National Guard of the United States............................     3
Gehrke, Brendon, Senior Legislative Associate, Veterans of 
  Foreign Wars of the United States..............................     4
Hayden, Col Michael, USAF (Ret.), Director, Government Relations, 
  Military Officers Association of America.......................     5
Neiweem, Chris, Legislative Associate, Iraq and Afghanistan 
  Veterans of America............................................     6
Ruedisueli, Karen, Government Relations Deputy Director, National 
  Military Family Association....................................     8
Stovall, John, Director of National Security, the American Legion     9

                                APPENDIX

Prepared Statements:

    Bousum, Scott................................................    40
    Gehrke, Brendon..............................................    52
    Hayden, Col Michael..........................................    66
    Heck, Hon. Joseph J..........................................    39
    Neiweem, Chris...............................................    82
    Ruedisueli, Karen............................................    88
    Stovall, John................................................   123

Documents Submitted for the Record:

    MAZON: A Jewish Response to Hunger, Statement for the Record.   151
    National Association of Drug Stores, Statement for the Record   157
    National Guard Association of the United States, Statement 
      for the Record.............................................   141

Witness Responses to Questions Asked During the Hearing:

    [There were no Questions submitted during the hearing.]

Questions Submitted by Members Post Hearing:

    [There were no Questions submitted post hearing.]
STAKEHOLDER'S VIEWS ON THE RECOMMENDATIONS OF THE MILITARY COMPENSATION 
                AND RETIREMENT MODERNIZATION COMMISSION

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                        Subcommittee on Military Personnel,
                         Washington, DC, Wednesday, March 25, 2015.
    The subcommittee met, pursuant to call, at 1:59 p.m., in 
room 2212, Rayburn House Office Building, Hon. Joseph J. Heck 
(chairman of the subcommittee) presiding.

OPENING STATEMENT OF HON. JOSEPH J. HECK, A REPRESENTATIVE FROM 
      NEVADA, CHAIRMAN, SUBCOMMITTEE ON MILITARY PERSONNEL

    Dr. Heck. I want to welcome everyone to a hearing of the 
Military Personnel Subcommittee on the stakeholders' views of 
the 15 recommendations to modernize the military compensation 
and retirement system suggested by the Military Compensation 
and Retirement Modernization Commission.
    As we continue to study the Commission's recommendations, 
we also need to consider the views of our current and retired 
service members through you, the organizations that represent 
them. We are committed to addressing the concerns and issues 
raised by members of the Military Coalition and others on the 
effects of the Commission's recommendations on service members' 
and their families' willingness to serve and the effects on 
their quality of life.
    I want to continue to assure everyone that the Military 
Personnel Subcommittee is taking every opportunity to 
thoroughly review and discuss the recommendations. We are fully 
committed to improving the welfare and quality of life for both 
current members of our armed services and our veterans while 
ensuring we keep our nation safe and secure.
    Our purpose today is to understand how current and retired 
service members are viewing and discussing the Commission's 
recommendations. The guiding consideration for our work is the 
viability of the All-Volunteer Force. Most importantly, we must 
not break faith with our service members and undermine our 
efforts to recruit and retain the best and brightest into our 
Armed Forces.
    Before I introduce our panel let me offer Congresswoman 
Davis, ranking member, an opportunity to make her opening 
remarks.
    [The prepared statement of Dr. Heck can be found in the 
Appendix on page 39.]

    STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE FROM 
 CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON MILITARY PERSONNEL

    Mrs. Davis. Thank you, Mr. Chairman.
    I also want to welcome our witnesses here today. Your 
perspective--those of you who are here to speak, and those in 
the audience, surely share the views from our constituents, and 
it is very important that we continue to discuss all of the 
Commission's recommendations.
    We have had the opportunity, as many of you know, to hear 
from the Commissioners twice and have had two very good 
roundtables with the Commission staff and outside experts to 
discuss the recommendations.
    I know that the organizations are certainly not all in 
agreement; that would be an unusual thing. But we also know 
that it is very important to hear the basis of your views, and 
also important to solicit your thoughts on how to improve the 
recommendations or provide solutions to the problems, 
especially when it comes to TRICARE.
    As I have mentioned in earlier hearings, we are truly 
entering a new reality of fiscal pressures with a new 
generation of citizens entering the military, and so we have to 
look at this responsibly. I don't believe that doing nothing 
will be an option for much longer, so how you come to frame 
these issues and help us to make some of the decisions in the 
future we value and we thank you for being here.
    Thank you, Mr. Chairman.
    Dr. Heck. Thank you, Mrs. Davis.
    We are joined today by an outstanding panel of 
stakeholders. We will give each witness the opportunity to 
present testimony and each member an opportunity to question 
the witnesses.
    We would respectfully remind the witnesses to summarize, to 
the greatest extent possible, the high points of your written 
testimony to 3 minutes because of the recent change in our vote 
schedule. Your written comments and statements will be made 
part of the hearing record.
    I understand the clocks may not be working in the countdown 
form for all of you, so we are going to go back to the old-
fashioned 2, 1, 30-second kind of cue cards behind me so that 
you know where we are at in the process.
    I ask unanimous consent to add written statements to the 
record from the National Guard Association of the United 
States, from MAZON: A Jewish Response to Hunger, and from the 
National Association of Drug Stores.
    Without objection, so ordered.
    [The information referred to can be found in the Appendix 
beginning on page 141.]
    Dr. Heck. Let me welcome our panel: Mr. Scott Bousum, 
Legislative Director for the Enlisted Association of the 
National Guard of the United States; Mr. Brendon Gehrke, Senior 
Legislative Associate, Veterans of Foreign Wars of the United 
States; Colonel Mike Hayden, United States Air Force, Retired, 
Director of Government Relations for the Military Officers 
Association of America; Mr. Chris Neiweem, Legislative 
Associate, Iraq and Afghanistan Veterans of America; Ms. Karen 
Ruedisueli, Government Relations Deputy Director of the 
National Military Family Association; and Mr. John Stovall, 
Director of National Security for the American Legion.
    With that, we will turn the clock over to Mr. Bousum, if 
you want to begin with your 3 minutes.

   STATEMENT OF SCOTT BOUSUM, LEGISLATIVE DIRECTOR, ENLISTED 
     ASSOCIATION OF THE NATIONAL GUARD OF THE UNITED STATES

    Mr. Bousum. Thank you.
    Chairman Heck, Ranking Member Davis, esteemed members of 
the subcommittee, on behalf of 42,000 members of the Enlisted 
Association of the National Guard of the United States 
representing over 114,000 enlisted men and women of the Army 
and Air National Guard, their families, survivors, and tens of 
thousands of National Guard retirees, we welcome this 
opportunity to submit testimony for the record regarding our 
views concerning the Military Compensation and Retirement 
Modernization Commission's recommendations.
    The report is public evidence that the Commissioners and 
their staff spent countless hours analyzing a gamut of military 
compensation issues, and they should be publicly commended for 
their efforts. The report will stimulate and has stimulated 
some meaningful discussions that need to take place that affect 
our National Guard members.
    Let me begin by stating that we believe the Commissioners 
set out to modernize systems currently in place. They did not 
look for ways to cut spending off the backs of service members 
and their families.
    The fact that the Commissioners' recommendations save $31 
billion from fiscal year 2016 to fiscal year 2020 by creating 
flexible mechanisms for future service members, current service 
members, and their families to choose health care and 
retirement packages that fit their individual needs means that 
success--means they successfully completed their mission.
    The fiscal environment currently faced in the Department 
[Department of Defense] puts Congress and the associations 
before you today in unfamiliar territory of late. We are no 
longer in a spend, spend, spend environment. Your colleagues on 
the Budget Committee appear to have set a new tone, at least 
for the time being.
    In the spirit of the--one of the Commission's core 
missions, retaining quality talent for 20 years, I would like 
to briefly state a growing concern that readiness shortfalls 
caused by less money toward training because of the budget 
control caps and sequestration directly relate to poor 
retention. If the service member does not get to do the job 
that he or she signed up to do or does not feel prepared for 
the fight, quality talent will leave the force.
    As the discussion continues in the committee and on the 
subcommittee, we look forward to working closely with you and 
your staff on these recommendations.
    Thank you.
    [The prepared statement of Mr. Bousum can be found in the 
Appendix on page 40.]
    Dr. Heck. Thank you.
    Mr. Gehrke.

  STATEMENT OF BRENDON GEHRKE, SENIOR LEGISLATIVE ASSOCIATE, 
         VETERANS OF FOREIGN WARS OF THE UNITED STATES

    Mr. Gehrke. Chairman Heck, Ranking Member Davis, members of 
the subcommittee, thank you for inviting the VFW [Veterans of 
Foreign Wars] to testify today on the Commission's 
recommendations. My comments today will focus on recommendation 
one.
    While this recommendation is often misunderstood, we 
believe that it will dramatically improve the current 
retirement system. The impassioned debate on how to best 
compensate service members, veterans, their survivors is as old 
as the founding of this country.
    In 1919 the American Legion and Veterans of Foreign Wars 
argued that our members deserve separation pay to balance out 
the difference between their modest military compensation and 
the high compensation enjoyed by civilian industry workers. A 
compensation measure worked its way through Congress by the 
fall of 1922, but President Harding vetoed the bill to avoid 
unnecessary government cost.
    Undeterred, the Legion and VFW kept up the pressure and 
succeeded in gaining passage of the World War Adjusted 
Compensation Act of 1924. The Act was groundbreaking in that it 
completely ended the indigenous components of previous military 
pension legislation, and that it awarded all service members a 
pension in the form of a 20-year endowment.
    With the ending of two wars and DOD's [Department of 
Defense's] continuing efforts to reduce personnel expenses, the 
conversation about what it means to compensate and care for 
service members is just as important today as it has been at 
any other point in history.
    There is a common military phrase that summarizes our 
warrior ethos: Leave no man behind. Unfortunately, this ethos 
does not translate to the current military retirement system, 
which has left roughly 90 percent of all veterans behind their 
civilian counterparts in saving for retirement.
    Nearly 80 percent of full-time workers have access to 
employer-sponsored retirement plans, and 95 percent of 
employers with 401(k) plans made a matching contribution to 
their employees. Unfortunately, the government contributes 
nothing to the retirement of those who often are the most 
deserving--those who bore the burden of battle.
    Take, for example, Corporal Quentin Graves, from San Diego, 
California. Corporal Graves deployed twice to Iraq in a 4-year 
timeframe, earning a Purple Heart during each deployment. 
Corporal Graves thought about reenlisting but didn't think he 
would survive another tour.
    Despite his sacrifices, he didn't receive any retirement 
contribution from the government. However, if Corporal Graves 
would have been employed by the private sector or in the 
military under the Commission's proposed plan, he would have 
received approximately $6,500 in an employer-sponsored 
retirement plan. This relatively small investment by the 
government would have compounded to nearly $100,000 for Mr. 
Graves for when he reaches retirement age.
    Another example is Staff Sergeant Alex Marovski, from 
Norwich, Connecticut. Staff Sergeant Marovski enlisted in 1999. 
He deployed to Kosovo in 2000 and reenlisted for 3 years in 
2002.
    He deployed to Iraq during the invasion, was stop-lossed in 
2005, and deployed again to Iraq where he was catastrophically 
wounded by an IED [improvised explosive device] in 2006. After 
his release from stop-loss, Staff Sergeant Marovski was 
discharged with a metal rod and fresh stitches in his arms, but 
received nothing in the form of retirement compensation.
    However, if Alex would have been working for another 
government agency or in the military under the Commission's 
proposed plan, he would have received approximately $20,000 in 
retirement benefits, which would have compounded to over 
$211,000 by the time he hit retirement age.
    These examples show that if young service members aren't 
saving today, they are losing the benefit of time compounding 
the value of their money. That growth cannot be made up later.
    In closing, ask yourself, if your son or daughter was about 
to join the military and they had the choice between the 
current system and the Commission's proposed system, which 
system would you tell them to choose--a system that will 
definitely prepare them for retirement, or a rigged system 
where there is an 83 percent chance that they will receive 
nothing in retirement for their service?
    Thank you for your time, and I will gladly answer any 
questions the committee may have.
    [The prepared statement of Mr. Gehrke can be found in the 
Appendix on page 52.]
    Dr. Heck. Thank you.
    Colonel Hayden.

    STATEMENT OF COL MICHAEL HAYDEN, USAF (RET.), DIRECTOR, 
 GOVERNMENT RELATIONS, MILITARY OFFICERS ASSOCIATION OF AMERICA

    Colonel Hayden. Chairman Heck, Ranking Member Davis, 
members of the committee, on behalf of the over 380,000 members 
of the Military Officers Association of America [MOAA], we 
welcome this opportunity to provide our views concerning the 
Commission's report. MOAA sincerely appreciates the hard work 
and analysis that went into the Commission's report.
    We commend the Commissioners and their professional staff 
for their extensive efforts. Their product provides the country 
with an instrument that we can use as a catalyst to begin the 
important thought discussions, analysis, and debates on vital 
issues that directly affect our service men, women, retirees, 
veterans, and their families, and their ability to ensure our 
national security.
    MOAA has reviewed the 15 recommendations, and overall we 
support 10 with some varying degree of concern. Two we believe 
require further study, and three we do not support.
    In my statement I will focus on the ones we recommend for 
further study: the retirement and health care proposals. As for 
the retirement proposal, we are very concerned that the new 
system lacks the drawing power to sustain service members to 20 
years of service. As for the health care proposal, we are 
concerned that the new system proposed would negatively impact 
overall medical readiness.
    Both of those recommendations produce a negative effect on 
the pocketbook of those whom the government needs to serve for 
a career of 20 years or greater. The combined effects of the 
Commission's health care and retirement changes, if they were 
fully implemented today, on an E-7's annual retirement value is 
over $6,400 a year, for a loss of 27 percent, until they can 
start to draw from their thrift savings plan at age 59\1/2\.
    A complete overhaul of the retirement and health care 
system, which itself serves 9.6 million beneficiaries, deserves 
thoughtful and careful consideration. Some of the findings in 
the Commission's report align with concerns raised by MOAA and 
deserves addressing this expeditiously as possible, pending 
deeper consideration of the broader issues.
    Even so, the number one action Congress should take 
immediately is to demand that DOD, without delay, reform 
TRICARE under a truly unified military health care system, and 
not just the service members' share of it. We are not 
advocating usurping the Surgeon General's title 10 
responsibilities, but without a unified budget and oversight, 
TRICARE as we know it will remain administratively stovepiped 
and suboptimized.
    Service members stationed around the world should not have 
to worry if they have selected the appropriate retirement fund 
or the appropriate health care coverage for their families. 
Making radical changes to the core retention programs, military 
health care and retirement, carries a significant risk of 
causing unintended negative effects to retention.
    Our primary concern is the AVF's [All-Volunteer Force's] 
health, welfare, and sustainability, and most important element 
of the AVF is the experienced, high-quality, midgrade NCO 
[noncommissioned officer] and officer corps.
    Thank you, and I look forward to your questions.
    [The prepared statement of Colonel Hayden can be found in 
the Appendix on page 66.]
    Dr. Heck. Thank you.
    Mr. Neiweem.

  STATEMENT OF CHRIS NEIWEEM, LEGISLATIVE ASSOCIATE, IRAQ AND 
                AFGHANISTAN VETERANS OF AMERICA

    Mr. Neiweem. Chairman Heck, Ranking Member Davis, and 
distinguished members of the subcommittee, on behalf of Iraq 
and Afghanistan Veterans of America [IAVA] and our nearly 
400,000 members and supporters, thank you for the opportunity 
to share our views on the final report and recommendations of 
the Military Compensation and Retirement Modernization 
Commission.
    We applaud the Commission for putting forth some bold 
measures that merit serious consideration. However, we also 
look upon its report and recommendations as a mixed bag. Some 
of what is called for is consistent with recommendations we and 
other military and veterans service and advocacy groups have 
long supported, while others raise serious questions and 
concerns for IAVA and our members.
    First, an area in which we are in strong agreement with the 
Commission is the need for increased DOD-VA [Department of 
Veterans Affairs] cooperation up to and including the sharing 
of systems and information. The process of transitioning from 
Active Duty to veteran status is still disjointed, and OEF/OIF 
[Operation Enduring Freedom/Operation Iraqi Freedom] veterans 
often report gaps in care and assistance when leaving the DOD 
and entering the VA system.
    While the report cited increased interdepartmental 
information-sharing, it also acknowledged poor oversight and 
inadequate accountability. The situation not only negatively 
impacts the new veterans' health care experience, but it also 
prolongs the process of applying for disability compensation 
benefits after separation. Further, it frustrates the VA's 
ongoing efforts to process disability and compensation claims 
in a timely manner.
    There is no doubt to us that the goal of quality continuous 
care requires a fully interoperable--preferably joint, but at 
least fully interoperable--data record, as well as a joint DOD-
VA drug formulary, which I know the committee will be 
addressing at a later date.
    Additionally, we strongly agree with the Commission on the 
urgent need for increased financial literacy and benefit 
stewardship through education for service members and their 
families. We see the need is not only with countless examples 
of predatory lending targeting service members, but also some 
for-profit college institutions' laser-beam focus on service 
members' valuable post-9/11 G.I. Bill benefits.
    IAVA is continuing to take a deeper dive into the 
Commission's recommendations regarding alternate treatment plan 
packages. In a recent survey of our members, 36 percent of 
respondents felt the military retirement system should be 
reformed. Of those respondents, when allowed to select multiple 
options, 67 percent favored a 401(k)-style benefit for 
noncareerists, and 33 percent favored increasing the overall 
value of the current retirement benefit system, and 59 percent 
favored a partial early retirement benefit for 10 or 15 years 
of service.
    Of those IAVA members surveyed, who are, by definition, 
combat veterans, there is a fundamental belief that it is 
fundamentally unfair that one could serve 10 or 12 years with 
three, four, five, or more deployments and leave the military 
with absolutely no retirement benefit at all, yet a careerist, 
and possibly never even deployed, could be entitled to a full 
benefit package.
    Therefore, IAVA is open to reforms that would amend the 
current system to allow not-career troops the opportunity for 
some retirement benefits. We will continue to analyze and 
assess the potential value of the Commission's options while 
understanding and factoring in the long-term goal of 
maintaining a ready and relevant 21st century force.
    Mr. Chairman, I will just go ahead and close here. 
Apologize, this microphone doesn't work, so hopefully that was 
loud enough. Happy to answer any questions you may have for 
IAVA.
    [The prepared statement of Mr. Neiweem can be found in the 
Appendix on page 82.]
    Dr. Heck. Thank you.
    Ms. Ruedisueli.

  STATEMENT OF KAREN RUEDISUELI, GOVERNMENT RELATIONS DEPUTY 
         DIRECTOR, NATIONAL MILITARY FAMILY ASSOCIATION

    Ms. Ruedisueli. Chairman Heck, Ranking Member Davis, and 
members of the subcommittee, thank you for inviting me to speak 
on behalf of the National Military Family Association [NMFA] 
and the families we serve about the Commission's 
recommendations. While our written statement addresses several 
recommendations in detail, today I will focus primarily on the 
Commission's TRICARE Choice proposal.
    Any changes to the military health care benefit must 
address the unique conditions of service and the extraordinary 
sacrifices demanded of service members and their families. With 
this guiding principle in mind, we believe the Commission's 
TRICARE Choice proposal merits further study and serious 
consideration.
    The Commission's health care proposal has the potential to 
provide military families with a more robust and valuable 
health care benefit than one that would address many 
beneficiary complaints about the current system. To achieve 
these benefits, we believe a lengthy implementation period is 
vital and must include mechanisms for readily adjusting 
policies, processes, and commercial plans to ensure TRICARE 
Choice achieves the desired outcomes.
    While we support in principle the concept of moving 
families to high-quality commercial plans, there are three 
areas where more information and analysis are needed before we 
can fully endorse the Commission's proposal. First and most 
importantly, we believe a change of this magnitude demands a 
more thorough analysis of the potential impact on military 
treatment facilities to avoid unintended consequences for 
beneficiaries and military medical readiness.
    Second, military families are concerned about out-of-pocket 
costs under TRICARE Choice. Active Duty families worry how a 
health care allowance based on averages will support larger-
than-average families or those with special needs.
    Third, TRICARE Choice implementation details are lacking in 
the Commission's proposal, and we need assurances on the 
specifics.
    Before I wrap up, I would like to briefly address a non-
health care issue that many military families find concerning: 
the Commission's proposal regarding G.I. Bill transferability. 
The Commission recommends eliminating the housing stipend for 
dependents starting in 2017.
    Our association understands and appreciates that G.I. Bill 
transferability is a retention tool and must be optimized for 
greater effectiveness and modified as retention goals change, 
and we support changes on a forward basis. However, reducing 
the value of the transferred G.I. Bill benefit after extracting 
the wartime service commitment is unacceptable. Service members 
with existing G.I. Bill transferability contracts must be 
grandfathered in at the full benefit value.
    In an era of budget constraints, when military families see 
any proposed changes in benefits as just another attempt to cut 
costs, it is important to rebuild their trust and show them 
their service is valued. We hope the Commission's proposals 
prompt a thorough discussion on military compensation and 
benefits, including the best way to deliver the health care 
benefit to military families.
    Thank you, and I look forward to taking your questions.
    [The prepared statement of Ms. Ruedisueli can be found in 
the Appendix on page 88.]
    Dr. Heck. Thank you.
    Mr. Stovall.

 STATEMENT OF JOHN STOVALL, DIRECTOR OF NATIONAL SECURITY, THE 
                        AMERICAN LEGION

    Mr. Stovall. Chairman Heck, Ranking Member Davis, and 
distinguished members of the subcommittee, on behalf of the 2.3 
million members of the American Legion I appreciate the 
opportunity to provide our views on the Military Compensation 
and Retirement Modernization Commission's recently released 
recommendations.
    The Commission put many months of hard work into developing 
and refining the 15 proposals, and reviewing these proposals, 
the American Legion was chiefly mindful of three guiding 
concerns: first, to preserve and to protect the integrity and 
strength of the All-Volunteer Force; second, to recognize that 
many of these recommendations are interconnected by their very 
nature, and considering reform means to consider the impact 
that they will have not solely on the force, but on the other 
recommendations; and finally, that while it is easy to think of 
these recommendations in terms of their impact on the DOD, some 
proposals will have profound impacts on other agencies of the 
government, especially the VA.
    The American Legion believes strongly in protecting the 
integrity of the All-Volunteer Force. As such, the American 
Legion is concerned by any changes to the military system which 
would reduce the incentive to enlist or reenlist.
    The American Legion urges Congress to maintain continuous 
oversight of DOD personnel policies to ensure satisfactory 
retention, recruitment, morale, health, and effectiveness of 
the Armed Forces. The American Legion is committed to ensuring 
that any benefit in force at the time of initial enlistment is 
a sacred promise that must remain in force throughout the 
entire military career and retirement of a service member.
    Within the scope of those guidelines set forth to protect 
the morale and motivation of those who serve, there is still 
room for reform of benefits within the military.
    Where is there redundancy? How can efficiency be improved 
without sacrificing vital programs? Where programs appear to 
overlap, can the individual components of those programs be 
protected through any merger so critical functions are not 
lost?
    These are difficult questions and are unlikely to be 
answered in a few simple weeks of analysis.
    The American Legion is diligently working to evaluate the 
proposals of the Commission, to use the proposals as a jumping 
off point for discussion, and to try to tackle the thorny 
problems planners face preparing the military for 21st century 
operations. We look forward to continued discussion with 
Congress, the DOD, and other stakeholders to work toward a 
solution.
    And finally, because of the interconnected nature of the 
military and veterans side of the equation, the American Legion 
would call on this committee to reach out to and conduct joint 
hearings with their counterparts on Veterans Affairs to explore 
the impact of these changes both to the Active Duty service 
members as well as the veterans who will benefit from future 
programs.
    And to wrap up, Mr. Chairman, the American Legion is an 
eager participant in this discussion and forthcoming 
discussions, and we are happy to answer any questions you might 
have.
    [The prepared statement of Mr. Stovall can be found in the 
Appendix on page 123.]
    Dr. Heck. Great.
    Thank you all for your testimony. Again, I apologize for 
the short 3 minutes each of you were provided, but we really 
want to make sure we allowed enough time to get to the 
questions of the members.
    So we will begin a 5-minute round of questioning by the 
members. We have been joined by the gentleman from Oklahoma, 
Mr. Russell.
    I ask unanimous consent that he be allowed to participate 
and ask questions after all the members of the subcommittee 
have had an opportunity to ask questions.
    Without objection, so ordered.
    Okay, so I will start--put myself on the clock. So again, 
appreciate all of you and your testimony.
    You know, in looking through the 15 recommendations I 
think, you know, in my view there are 3 that are the real heavy 
lift: the retirement, the health care, and the commissary 
exchange issues. The rest probably to some degree or another, 
with some minor modification, make reasonable sense.
    So I would like to, one, talk a little bit about the 
retirement recommendation. It seemed that obviously there is 
some differing of opinion amongst the members of the panel, 
which is to be expected.
    But I guess it is all about how you look at the benefit and 
how you calculate and make sure--we have all got to make sure 
that we are looking at the same numbers. And so again, 
remembering that this is prospective, so nobody who is 
currently retired is going to be affected, and one of the 
Commission's charges was to look at how the millennials, those 
folks coming into the service, what are they looking for, in 
order to try to attract people to come into the service.
    So, yes, so you get 40 percent of your annuity going 
forward, as opposed to the 50 percent at 20 years, and you 
start to build up your 401(k), vesting after 2 years, and 1 
percent automatic matching up to 5. And yes, as Colonel Hayden 
pointed out, when you retire at 20 the amount that you are 
going to get paid from year 20 till you have reached full 
retirement age is going to be less than you otherwise would 
get--in some cases significantly less.
    But if you look at what your lifetime--if you go out to, 
like, age 85 and you kick in the 401(k), overall it seems to 
appear, using conservative TSP [Thrift Savings Plan] numbers, 
that you are actually making more money when you go out over 
your lifetime, from age 65 to, let's say, age 85.
    Colonel Hayden, your response to the idea that in the long 
term you might be making more even though in the short term you 
might be getting less when--and I hate to use this phrase 
because a lot of folks have used it--but while you are 
considered a working-age retiree and expected to actually have 
another job after you leave at, let's say, age 38 or age 40?
    Colonel Hayden. We have done quite a bit of analysis, and 
actually in conjunction with the Commission back and forth, 
taking a look at the variables. The one aspect associated with 
the current retirement system is it is extremely predictable.
    You can go out to the calculators that are on the DOD Web 
site and see exactly what the paycheck is going to be. And you 
true it in terms of a paycheck, what the retirement check will 
be and what it will provide.
    But under this proposal, it depends on variables. It 
depends exactly on what the service member is going to 
contribute. Will they be making the--we know that they get a 1 
percent government contribution, if you would, but will they 
also be getting, if you would, the--will they be making the 3 
percent match, they make the 5 percent match?
    Will they be doing it at the very beginning on the onset 
when they first come into the service, and then carry that out 
until they retire, or until they leave the service?
    So the question is how that value will grow and, of course, 
it depends on the economic aspects along with it. Mentioned, 
for instance, the average TSP. If they get a 7.3 percent rate 
of return, that is wonderful and it will be a richer benefit at 
the time they leave at age 85, if you would, when the actuaries 
say you are not supposed to be around after that.
    But what it really comes down to is if you only get a 5 
percent rate of return you will never make up the difference. 
There will still be a gap.
    There are other proponents associated with this. The little 
components associated with the proposal, the first this is for 
those that stay beyond 20 years of service, they don't make up 
the difference.
    So there is that portion that would have to be fixed if you 
were looking at the retirement proposals to continue doing 
dollar matching beyond 20 years of service. And then the other 
piece is to take a hard look at the disability aspects.
    Those that receive a disability compensation under this 
proposal--disability retirement, that they are now going to be 
receiving a 20 percent less if--when you look at the 
differences between that in currency and the values that then 
come into play. So that, because the multiplier is less, they 
are going to be seeing a less of income, if you would, the net, 
based on this type of retirement proposal.
    Yes, they will have some type of transportable career 
device, but our bigger concern is by providing a transportable 
career device, does it incentivize more people to leave or more 
people to stay?
    Dr. Heck. Well, I think the Commission tried to, you know, 
look at that with the idea of the continuation pay is at 
roughly year 12, again, giving some leeway to the Secretary to 
slide that either right or left depending upon the shaping of 
the force and what was necessary. So, you know, as the 
retention tool, let's say at 12 you get, you know, a 
significant amount of continuation pay; if you agree to serve 4 
more that puts you at 16, when most people will say, ``Okay, 
now I am within 4 of 20. I might as well stay.''
    I am going to stop there because my time is almost up. 
Hopefully we will get around to a second round of questions.
    And I will recognize the ranking member, Mrs. Davis.
    Mrs. Davis. Thank you, Mr. Chairman.
    And perhaps to just ask all of you whether--it's the 
discussions that we are going to be having of trying to really 
get more detail and more study, is that something that you feel 
comfortable with generally, as opposed to, you know, basically 
saying that the provisions that are included within the 
Commission report are things that you just really don't want to 
go beyond? Is it fair to say that you are comfortable with the 
discussions going forward with more detail?
    Mr. Gehrke. We would encourage Congress to move forward 
this year with the retirement portion. We think it is high time 
for a change, and that there is some modernization and really 
that the current system is unfair.
    By not providing retirement parity between civilian and 
military sectors, we fear that we are sending a message to the 
troops that the country does not value their military service. 
And if you look at how troops are rating their pay now compared 
to how they are rating it 5, 6 years ago, when they were 
getting tax exemptions and large bonuses and incentive pays, 
they are rating it much lower at 44 percent.
    In addition, you are seeing a 10 percent drop in people's 
desire to reenlist. A lot of that is due to lack of pay raises, 
to perception that Congress and DOD is taking them for granted 
and trying to lower their personnel experiences.
    We feel that if there is--start to be a retirement 
contribution immediately, or as soon as possible, that service 
members will get that TSP annual statement and see what the 
government is contributing and see that the government values 
their service, and see the long-term value of staying in that 
service watching that interest compound, as well as set them on 
a retirement path.
    As for the health care portion, we feel that needs to move 
forward but it is going to need a lot of thorough study to 
understand any unintended consequences.
    Mrs. Davis. Thank you.
    You know, rather than maybe trying to hear from everybody, 
I will go on to the health care. I am sure we will have a 
chance to double back on the retirement, as well.
    But I think in many ways,--I--we all know that there are 
challenges in TRICARE, and I wonder if you could speak to what 
you see needs to be changed or improved--not necessarily 
focusing on the Commission recommendations per se, but where do 
you see the problems? What would you like to see come forward, 
really, as a way to change the system?
    I think that there is a need to possibly have retirees pay 
more than the low premiums that they are paying now. That might 
be something that people have talked about in the past.
    But what areas of that do you think actually you would like 
to see more improvements in the TRICARE system itself?
    Mr. Bousum. Ranking Member Davis, if I may, from the 
Guard's perspective who are currently serving, there is a lot 
of friction when they are called to Active Duty and having to 
get off of, say, their employer-sponsored health care plan or--
and they are mostly concerned about their dependents, so when 
they move over their--say their child can no longer see the 
same doctor that he or she saw before, and so that stoppage of 
service that they are looking for is--that is problematic. That 
is something that our currently-serving would like to see 
changed.
    Colonel Hayden. One of the things that we are--we have been 
looking at is that we believe that the health care delivery 
should actually change its entire model for TRICARE, going more 
to, if you would, value-based type of delivery of health care 
versus the fee-for-service that we have, if you would, just 
kind of the volume--the way providers are actually reimbursed.
    And we have created within TRICARE is we have created 
incentives, if you would, where, because we have undercut, if 
you would, the way we are providing payments back to the 
providers, we are actually limiting the network. We are going 
to constrict it.
    We have also done it with the--limiting the prime service 
areas. We have restricted the benefits, so it becomes, as some 
have said, instead of TRICARE it is try-to-find-care, and that 
becomes the problem.
    Once you have access, once you have found the care, it is--
people have--at least what we are getting from our own members 
is that they are very satisfied with the care once they have 
gotten it. But it is the actual access to the care that is the 
major problem.
    And part of it is that the Department itself has done it to 
themselves. And even the Commission highlighted this, that they 
have done it to themselves.
    So what we have been doing is the way to find the--to try 
to improve the benefit has been to try to shift more cost onto 
the beneficiaries, have them pay for more, and they are getting 
less of a benefit at the end of the day. From what we are 
seeing, the one positive aspect associated with the Commissions 
is they are asking you to pay more but you are going to 
supposedly get better access at the end of the day.
    What we need to do is to take a look at TRICARE and see if 
we can get rid of some of the policy aspect that they are 
doing, come up with a unified what we think is a central budget 
authority that is looking at that enterprise completely and not 
this stovepipe--the services are going to restrict this, they 
are going to turn a MTF [military treatment facility] and shut 
it down, or constrict it, and they are not looking at what it 
does to the enterprise overall. And we can see some savings 
there.
    Mrs. Davis. Thank you.
    Dr. Heck. Thank you.
    Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    I just have a question on the quality of life programs, 
some of them, and one is the consolidation of commissary and 
exchange systems into one entity. Many of the veterans service 
organizations cite concerns over the potential of diminished 
access to savings if the Defense Commissary Agency and the 
various military exchange systems are consolidated into one 
organization.
    If combining these organizations achieves overall 
efficiencies and cost savings to the DOD and the current level 
of savings are realized by service members and retirees, then 
would this reform continue--then would you continue to oppose 
this reform? And if so, why?
    Would anybody like to comment on that?
    Mr. Gehrke. The VFW does not oppose the reform, and, in 
fact, we support it so our--so much as we can retain the 
overall value of the commissary savings. If we can do that we 
are all for finding efficiencies and merging the two, is 
ensuring that the savings stay there for the service member.
    Mr. Bousum. For brevity's sake, I agree.
    Mr. Coffman. Anyone else?
    Ms. Ruedisueli. We have some concerns about the 
consolidation. Specifically, it seems to eliminate the 
assurances of the 30 percent savings, which is a critical 
component of non-cash compensation for military families.
    And we are also concerned because the--changes to the 
commissary and exchange, the consolidation, if it doesn't go 
well it has the potential to impact so many military families 
that rely not only on the savings, but also on the access to 
groceries in remote and isolated areas as well as overseas.
    Mr. Coffman. But simply by merely consolidating and 
creating administrative savings from that, you have concerns 
about that?
    Ms. Ruedisueli. Well, we do feel that it introduces risk 
that the 30 percent savings might be eroded or that the access 
might be eroded.
    Mr. Coffman. Okay.
    Anyone else?
    Mr. Stovall. Congressman, I would echo Ms. Ruedisueli's 
concerns. However, to your point, if efficiencies could be 
realized through a consolidation without a net negative impact 
to military families, either in terms of payment or 
accessibility, it is not something that we would oppose.
    Mr. Coffman. Okay.
    Anyone else?
    Colonel Hayden. We are also in support of the same comments 
out of NMFA and Karen. I think the bigger issue also that you 
have to look at is the--what we also put at risk with this is 
the possibility of the MWR [Morale, Welfare, and Recreation] 
funds, and that is another piece that we think needs to be 
reviewed.
    We know that there is a study that has been directed in the 
defense bill this year, so would like to see what the outcome 
of that study is also, before jumping into this proposal.
    Mr. Coffman. Okay.
    Many of the veterans service organizations on the 
retirement issue have raised several relevant concerns 
regarding the proposed retirement restructure and presented to 
the Commission. That said, maybe somebody can identify what--
and I think a lot of you said it, but if we could summarize it 
by going just down in order, let's start left--my left to 
right, as to what you agree with in terms of the Commission's 
recommendations about reforming the retirement system. And name 
the most salient issue that you agree with the Commission's 
report, if there is one.
    Yes?
    Mr. Bousum. Yes, sir.
    We agree with it. Actually, I would like to answer the one 
thing that we have a concern about, and that is the remoteness 
of readiness centers and armories, as far as the financial 
literacy piece, that the guardsman may not have the access he 
or she needs to make the decisions--the recommendations with 
input on the family.
    Mr. Coffman. Okay.
    Mr. Gehrke. We agree with the recommendation in its 
entirety, recognizing that you can't contribute to a service 
member's TSP account without lowering that 50 percent to the 40 
percent, as well as you can't give guardsmen the option of 
receiving a lump sum retirement package immediately when they 
retire from service without making the changes.
    So we feel one begets the other, and I think what makes us 
feel comfortable with supporting the entire recommendation is, 
as the chairman alluded to, is that the overall value of that 
individual's retirement is not hurt, as well as they are 
grandfathered, whoever is in the current system. So with those 
two things being said, we support the recommendation in its 
entirety.
    Mr. Coffman. Real quick I will let you go, right down the 
line real fast.
    Colonel Hayden. Then only thing that--you have heard a 
couple of my concerns, but if there was one thing that we do 
see in this, and something that we will--we also support, is 
that this does address the fairness issue, and it does provide 
something to those that leave short of 20 years some type of 
transportable benefit.
    Mr. Neiweem. And so I would say, you know 67 percent of our 
members support a 401(k) style. I think if out of these 15 
recommendations if one is going to be prioritized, it should be 
compensation or retirement reform.
    And frankly, many of our members, by 11 or 12 years, are a 
little bit banged up from deployments, from fighting the wars 
or being out there at the front lines. And the pull of the 20 
years, they are just not in that position to get that far, so 
having some sort of opportunity there. And, you know, the 
debate about whether reducing 50 percent investing to 40 
percent, you know, I don't think that we believe that is going 
to end retention, as many folks that retire are still working 
age.
    Ms. Ruedisueli. We do have some concerns, but focusing on 
what we agree with, we do agree that it addresses the fairness 
issue. We also feel that it encourages a very positive habit 
early in life--that is, saving for retirement.
    Mr. Stovall. I would agree with the other witnesses that we 
need to address the roughly 80 percent of people who get out 
without a transportable retirement benefit. However, we would 
caution that it is critical if we go that route that we invest 
in financial literacy for service members.
    Mr. Coffman. Mr. Chairman, thank you so much for the 
additional time. I think it speaks to the subordinate 
relationship between the Army and the Marine Corps, and I yield 
back.
    Dr. Heck. Thank you, Mr. Coffman.
    In that regard, Sergeant Major, you are recognized.
    [Laughter.]
    Mr. Walz. Thank you, Chairman. And I do want to take a 
moment and thank the chairman and the ranking member for a very 
fair and thoughtful approach to an issue that is very--it is a 
big lift, and you have both done it in a manner that is very 
much appreciated.
    And that leads me to having you here. I think this is an 
incredibly important panel. I thank all of you.
    You are literally representing millions of folks and the 
families of our warriors, and we must get this right, first and 
foremost for national security, to maintain the All-Volunteer 
Force, and to keep faith with those warriors, both past, 
present, and future. And so the thoughtfulness--and I want to 
thank all of you--that you put into your testimony and as we 
are starting to get this feedback is absolutely critical.
    This could very well have profound impacts, which I think 
it will; but it also has the potential to show how democracy 
should work correctly. And so I am, I think cautiously 
optimistic, as all of you. I think change is always difficult 
for all of us, but I think we need to have these discussions.
    And I think a couple things, if I could point out, some of 
you mentioned on this. And I don't--while they are not 
necessarily hard-core, these--the big three, if you will, of 
recommendations, I would argue that the long-term impact might 
be even greater.
    This issue of collaboration of DOD and VA--I have spoken 
about this 'til I am blue in the face for decades. It is still 
promoting inefficiencies. It is wasting taxpayer dollars. It is 
causing undue angst for us.
    And I think to not look at that in greater detail is a lost 
opportunity. And I say that with the sense of a little bit of a 
chip on the shoulder that when they are coming for reforms, 
perhaps you need to reform the bigger system first before you 
look at the E-5s.
    And that is the thing that I think we need to be very 
clear--and I have said it in here, and again, I applaud all of 
you on this--my concern is as much cultural as anything. When 
the representative of the family says, ``We have got a little 
bit of concern,'' that is a big red flag that people are 
talking about it amongst themselves.
    And so when you mentioned, ma'am, this idea of the 
transferability of G.I. Bill, I have said it in here before, 
taking that guarantee away once it was promised is an absolute 
nonstarter. Do not do this. Do not break faith. Go back and 
rethink that one through. Those are the types of things that 
have profound cultural impact.
    So that brings me to some of the things that you have 
mentioned, and my colleagues have asked wonderful questions. 
Mr. Coffman's question was one where I was getting at on this.
    The thing I would ask all of you is, is it an accepted 
frame that we have to take from the 20-year folks to make the 
transferability a part of this? Is that just an absolute given? 
We can't do both? We can't retain the mid-career folks and have 
the 20 years and do something on portability?
    And I ask this just to put it out there. I know the 
Commission has done incredibly thoughtful work and thought it 
through, but it seems to me now we have pitted 20-year career 
folks against others and that was never anyone's thought.
    So do you think that is--that has to be the way it has to 
be done?
    Colonel Hayden. Personally, I don't. The question is what 
is it that you need in order to sustain the force and meet the 
force profiles? And the current retirement system has done 
that.
    As an old assignments guy, I enjoyed having the retirement 
system the way it was. I could put people on remote assignments 
and these other types of things late in their career, and I 
knew I had them to take them to 20.
    There is a course of nature associated with it, but it does 
really tend to see who is going to be able to stick around. It 
gave you that flexibility, if you would, as the services. Some 
think of it as very rigid, the current----
    Mr. Walz. There is a strange mindset in the military, too, 
of a bunch of people who have to be incredibly flexible and 
have their lives ripped out from under them at any given moment 
really like stability, risk aversion, and assurances. And so I 
come back again to this issue.
    We are framing this entire issue that it has already been 
determined--and I absolutely agree that it is unfair for 
someone to do tours and not get there. That is an absolute 
given.
    But I also have deep concerns that we are changing it on 
that other end that has been a great way to maintain and hold 
folks who could do better in the private sector but choose to 
stay.
    So, anybody else comments on that? If that frame is set, if 
this cake is baked already, and our choice is now either to not 
do anything and keep this current system or to go with the 
proposal alone, I am not certain that is it.
    Mr. Gehrke. So I guess it is not either/or in theory. You 
could contribute to a 401(k) for every service member, as the 
Commission recommended, and keep the 50 percent system, 
realizing that the costs are going to skyrocket, and that is 
great by us if you want to make that decision. If you don't 
want to make that decision, we think the Commission's 
recommendations is the next best alternative.
    With that being said, the Commission also used a proven 
model by RAND in order to calculate what the force structure 
needs were. So it wasn't necessarily an arbitrary decision by 
the Commission. They used a scientific model, and I think that 
needs to be taken into consideration.
    However, again, if you guys want to contribute to the TSP 
accounts for every service member, and why not bump it up even 
higher and keep this same 50 percent, we--the VFW would 
strongly support----
    Mr. Walz. I want people to think, as I give back my time, 
to think of the frame that we have been putting on this. Our 
greatest asset is our fighting force, and if someone says that 
is the cost, we need to assume and talk amongst ourselves, is 
that a cost we are willing to absorb or are they telling us 
that.
    So I yield back.
    Mr. MacArthur. Thank you, Mr. Chairman.
    And I also want to thank all of you for being here. I agree 
with my colleague, this is a very important hearing because you 
do represent millions of stakeholders, and certainly part of 
this deliberation is what is important in the--on the military 
side and what we can afford and all of that, but it is equally 
important on the side of the people that you represent, the 
other stakeholders. So I appreciate you being here.
    Uncertainty and fear of change are two big drivers of human 
behavior. And of all these recommendations, it seems to me that 
the TRICARE recommendations are the most fraught with 
uncertainty, fear of change--how it affects cost, how it 
affects access, choice, all of those things.
    So I want to stay there for just a couple of minutes.
    Mr. Stovall, you laid out some--sort of a framework for 
evaluating this, and you mentioned three things: preserve and 
protect the strength of an All-Volunteer Force, the 
interconnectivity of the recommendations, and the impact on 
other agencies. And I think those are important.
    I might add a couple, and that would be optimizing the 
service member experience, which may be different than just 
protecting the strength of the force. And I would also add 
sustainability, because whatever we do has to be done in the 
context of finite budgets, and so we have to create something 
sustainable.
    Recommendation six, the TRICARE that we have talked a lot 
about, calls for increased use of commercial insurance plans. 
It gives choice to Active Duty members, not so much choice for 
non-Active Duty.
    And there are things I like about it: its access to larger 
panels of doctors; increased choice; the ability to move and 
flex and adjust the plans without an act of Congress, 
literally, which TRICARE requires.
    And yet, a number of you have expressed a concern about it, 
and I would just ask you to--particularly Colonel Hayden and 
Ms. Ruedisueli, you have both spoken about concerns with it, 
and I would like you just to develop those a little bit more 
for the panel--or for the hearing.
    Ms. Ruedisueli. You know, military families understand that 
military medical readiness is critical. I mean, we are sending 
our service members out there and we want to know that the 
military medical personnel are appropriately trained to respond 
to battlefield injuries, so that is one of our--we understand 
that that must come first. And if this plan were to compromise 
military medical readiness, it would be a show stopper.
    Mr. MacArthur. Well, let's stay there for a moment, because 
you both mentioned that. And I understand that you don't want 
to have military medical facilities sitting unused during 
normal times, but are they really doing the same kinds of 
things? Is the normal day-to-day care of a military family 
commensurate with battlefield care and the kind of readiness 
that you are talking about?
    Ms. Ruedisueli. You know, the report and I think common 
sense would suggest no; that, you know, care for ear infections 
and strep throat and delivering babies probably doesn't 
contribute as much as it should to military medical readiness.
    I think our concern is that, you know, what happens if 
there is a mass exodus of beneficiaries from the direct care 
system once you throw open the doors and, you know, provide 
unlimited access to civilian care, as well as introducing 
copays within the MTFs, which has not been done before. That is 
our concern is, you know, will the MTFs be viable if the bulk 
of their core business walks away?
    We also have concerns kind of on the flip side of that from 
the military family perspective. What happens if the services 
decide that some of these MTFs that are located in remote areas 
like Fort Polk, Louisiana, or Fort Riley, Kansas--what if they 
are not necessary for military medical readiness anymore and 
those are shut down and our families are left? Well, you have 
got your commercial health insurance, but unfortunately, the 
civilian provider assets aren't sufficient to treat our 
military families.
    Those are our two main concerns.
    Mr. MacArthur. And, Colonel Hayden.
    Colonel Hayden. And I will piggyback on that because part 
of it is that the MTFs provide the family readiness aspect 
along with it, not just the military member readiness piece and 
their medical care and treatment, but also for the families, 
especially in those remote areas.
    And the thing that TRICARE does also right now is it 
provides predictability for that care, where a family would go 
from one location to the next with the multiple PCS [permanent 
change of station] moves and things that take place over a 
career. So that has some predictability along with it, where 
under this you are going to be shopping for what would be that 
insurance product in that new area, and some--and that is kind 
of where we look at the ECHO [Extended Care Health Option] 
proposal that is in there along with it. Is that proposal going 
to be there? Is that same ECHO program or the autism program 
that you were with at Base X going to be at Base Y?
    And so that is the other readiness piece that you have to 
look at. From our perspective, the current system actually 
tends to capture that retiree population and even some of 
that--the medical treatment that is done for families, and it 
uses that towards medical readiness. And that captured 
population is available, then, under the current TRICARE--
under----
    Mr. MacArthur. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Dr. Heck. Ms. Stefanik.
    Ms. Stefanik. Thank you, Mr. Chairman.
    And thank you, to all of our witnesses today for the work 
that you do representing the millions of stakeholders, whether 
they be service men and women, veterans, military retirees, or 
military families.
    My question actually adds onto Congressman MacArthur's 
notes about health care quality and your comments, Ms. 
Ruedisueli--that is--I have a tough name too. That is okay.
    I represent Fort Drum, which is in New York's 21st District 
in northern New York in Jefferson County, and our health care 
is provided off post to our service men and women. We have a 
very unique partnership with Samaritan Hospital, and it is 
unlike any other Army installation across the country.
    The same goes for our education system. Our military 
families aren't educated on post; they go to school in the 
public school system, along with other members of the broader 
community.
    My question is, how do the recommendations regarding the 
Federal Employee Health Benefit program--how would that have an 
effect specifically on soldiers who are serving at Fort Drum in 
the 10th Mountain Division because of the unique relationship 
we have with hospitals?
    Ms. Ruedisueli. I never thought I would feel so fortunate 
to have spent a few years at Fort Drum, but I am very familiar 
with what you are talking about. You know, I don't see that it 
would have that much of an impact. I mean, right now, as you 
mentioned, there is a very strong relationship. Most families 
receive the bulk of their care out in the civilian network.
    I think where the changes would occur is families would 
still have to, under the new plan, be educated to pick the 
right commercial health plan so that they have got the 
appropriate coverage that fits their family's needs. I think 
that would be more complicated than it is now, where because 
the bulk of the medical care is automatically provided off 
post, families are simply--they are considered TRICARE Prime, 
they realize there will be no out-of-pocket expenses. As long 
as they follow the referral and authorization rules it is very 
straightforward.
    Under the commercial plans there would be more education 
needed, but I think people could achieve pretty much the same 
results by picking the right plans.
    Ms. Stefanik. And then my follow-up is on the education 
system. So the report discusses a military dependent student 
identifier. How would that be utilized for an installation like 
Fort Drum, where students go to school off post in a non-
military school?
    Ms. Ruedisueli. One of the benefits of the military student 
identifier is that it allows aggregate reporting of military 
student performance. So it would allow us to track how military 
students are doing on standard measures of academic 
performance, whether it be graduation rates, absenteeism, 
college acceptance.
    Those would all be valuable information to have as we 
decided where to direct resources to installations that do 
educate their students on post, but it would also be helpful to 
understand how the local communities are doing with our 
military students, as well.
    Ms. Stefanik. Great. Thank you for the answers.
    I think that Fort Drum's model is quite unique, and it is 
actually a model for other military installations across the 
country in terms of the high quality of health care provided 
and the--how intertwined our community is with Fort Drum. And 
thank you for your time at Fort Drum.
    I yield back.
    Dr. Heck. Mr. Russell, recognized for 5 minutes.
    Mr. Russell. Thank you, Mr. Chairman, and thank you for 
your indulgence in letting me join you today.
    And thanks, for the panelists, for all that you represent.
    I guess a couple of important questions come to my mind.
    One, when the draft was eliminated, part of the retention 
to get people to 20 was to provide good incentives. And I have 
not heard any discussion addressing the retirements as being 
retainer pay. They are not property.
    We, when we retire from the service, are on half rations 
for half duty and are subject to recall until the day we die. 
During the Gulf War I recall a 67-year-old pharmacist who had 
served in World War II being recalled back to duty, quite to 
his surprise.
    And so I have not heard anyone in any of these proposals 
address the retainer pay issue and what that means. Would 
someone care to address that?
    Colonel Hayden. You are absolutely right. There is still 
that retainer aspect associated with the current retirement 
system, that you can still be recalled and brought back.
    And we actually used that during my time on the Joint Staff 
on the Air Staff. We used it for the most recent conflicts 
after 9/11. We are bringing people back on and out of 
retirement status and back on Active Duty in order to meet some 
of the critical skills that the Air Force needed at the time.
    So it is an element that is important to remember. What we 
are doing with this proposal, there is that portion that is 
being devalued. It is providing, if you would, what would be a 
401(k) that is more of that transportable career device.
    But our concern is is that--still that draw, that whole 
aspect of drawing people out to 20. I would be more than happy 
to give a transportable career device to everybody who leaves, 
and that is one of the things that we----
    Mr. Russell. Well, and I think we have to address the 
issue, because it gets into not only retention of the force, 
but it gets into retention of skills in times of national 
emergency. And I have not heard anyone in any of the reports or 
looking at any of these things that addresses the issue, and I 
think it is vital.
    A second one that I have not heard addressed is because 
retirements are retainer pay, they hold certain legal 
differences over a 401(k). Now, the Uniformed Spouse Protection 
Act, in the early--late 1980s, I guess, it tried to address 
some of that to compare it more towards property, but it left 
certain provisions still unique to what retainer was.
    And that may not sound like something understandable, but 
what it means is this, is that if you serve 3 years--and I know 
a constituent who lives in Edmond, Oklahoma. He was the--one of 
the sergeant--the chief master sergeants of the Air Force.
    He married within 2 years. By the third year, as a young 
buck sergeant, his wife left him. Two years later he married a 
bride that he had for the next 30 years.
    However, when he retired with 35 years service from the Air 
Force, wife number one came knocking at the door for 50 percent 
of his retirement. That is a problem.
    And so, you know, we are digging into things that it sounds 
good--we talk about portability, we talk about 401(k), and all 
of that is appreciated. But there are some serious retention 
issues here that we have to address before I am ready to dive 
onto any of this.
    As a military retiree, I get it, having raised five kids in 
uniform--I should say my spouse, as I was gone on multiple 
deployments. And I do share your concerns on the military docs 
and the readiness. I know our chairman appreciates much of 
that, as well, in his capacity.
    Those are important factors for readiness, and I would hope 
that as we look at these things that we could address that.
    And the last question I have for whoever would like to 
answer it, you know, pays are set by law. Having pushed 
infantry soldiers for much of my adult life, you know, if you 
give Joe the choice between $35 or $75 to buy the best 
retirement plan for the end of his career, I can tell you what 
he is going to do. He is going to opt for the cheapest plan if 
he is forced to take a plan at all.
    And so how will you address--do you envision any penalties 
that will come about if you leave before 20 years service? Is 
there benefit if you stay longer? Because if you make this 
transportable before 10 years, I fear that our already 
dwindling force will get very much smaller.
    And I yield to whoever would like to answer that.
    Mr. Gehrke. So I think, as the Commission pointed out, that 
it would be an automatically opt-in for the 401(k), so they 
would be contributing automatically, immediately from day one. 
And I think with the financial literacy, being a dumb Marine 
myself, enlisted type who served with a light armored 
reconnaissance, same unit as Congressman Coffman, I can still 
do my numbers and I can understand the compounding interest of 
that 401(k) and the long-term benefit that it would have for 
me.
    But that financial literacy part is crucial, because they 
have to understand that that is part of the benefit.
    And then I think the retention pay is also a crucial part, 
which Congress or the Department should be able to lower 
whenever they want, and that should be able to keep people in 
and pull them to those 10 years.
    Mr. Russell. Thank you.
    Mr. Chairman, I yield back my time.
    Dr. Heck. Mr. Knight.
    All right, well they haven't rung the bell yet so we will 
continue.
    One of the Commissioners during their presentation when 
talking about the health care proposal basically said that 
TRICARE was broken and that it couldn't be fixed. Kind of 
scorched earth, come on in and start from the ground and build 
something up.
    Real quick, this is a simple yes or no: Do you believe that 
TRICARE is that broken that it cannot be fixed and it needs to 
be replaced with something else?
    Mr. Bousum.
    Mr. Bousum. The majority of members of my association would 
say no, it is not broken.
    Dr. Heck. Okay.
    Mr. Gehrke.
    Mr. Gehrke. TRICARE is in a death spiral.
    Dr. Heck. Okay. Yes or no? Come on, Marine.
    [Laughter.]
    Mr. Gehrke. The VFW does not have a resolution on that 
proposal----
    Dr. Heck. Okay.
    Colonel Hayden.
    Colonel Hayden. No, TRICARE is not broken.
    Dr. Heck. Okay.
    Mr. Neiweem.
    Mr. Neiweem. We would say no.
    Ms. Ruedisueli. We would say yes.
    Mr. Stovall. No.
    Dr. Heck. Okay. Thank you.
    Mrs. Davis.
    Mrs. Davis. Let me go back to the issues that we are 
talking about in terms of the retirement for a second, with 
skill sets that people have and the opportunities to continue 
them. One of the issues that is combined with that but maybe we 
don't state it as clearly has to do with leadership. And I know 
that when we have spoken particularly with the Marines, that 
tends to be perhaps more of an issue that was raised.
    I wonder if in your opinion that is something that we would 
essentially lose, perhaps--I don't even want to use the word 
``lose'' as much as not be able to capitalize on as much in the 
services after--if the 12 years somehow signaled that people 
were ready to leave. I think it is that midlevel leadership 
that actually is a hallmark of our military.
    Where do you place that, or do you think it is not as big 
an issue as perhaps some would suggest?
    Mr. Bousum. Well, I will take a stab. I think that even in 
the current environment that there are people who get between 
12 and 16 years who actually no longer want to be serving, but 
that they know that they need to get to 20 to get the 
retirement. And so I would actually ask open-endedly, does the 
Department actually want those individuals?
    Mr. Gehrke. So I was in the Reserves, and at 6 years after 
I had done--already done a deployment to Iraq I was able to get 
out. I did not get out.
    I postponed my discharge for another 2 years so I could go 
to Afghanistan. I had nothing in mind except the welfare of the 
Marine next to me when I was choosing to go to Afghanistan and 
reenlist in that contract. Twenty years did not enter my mind.
    In hindsight, I realize that I financially would have been 
better off if I would have continued in my civilian occupation 
in the long term because my civilian occupation at that time 
was matching my 401(k).
    Colonel Hayden. It is an interesting question, and one of 
the things, as a former chief of military personnel policy, 
what we would look at is how do you retain the force. And the 
thing is you also have to take a look at it just--you can't 
look at it just as the retirement benefit; you have to also 
then start looking at all the personnel policy aspects 
associated with how you retain a force. What is the profiles 
that you need?
    It has always been a little bit better to have maybe too 
many people at that midlevel NCO and officer corps to draw 
from, and you use the promotion system many times to, if you 
would, try to determine who are the leaders that you are going 
to go ahead and continue on to try to make that career. So you 
have to look at how you play both of them--the promotion system 
as well as the retirement system, in order to draw the people 
that you really need out there to that 20-year point.
    The problem is that in difficult budget times that we are 
in right now, sometimes we don't use the tools to our advantage 
or actually we do drawdowns like we are right now with what we 
consider with dignity. And what I would like to, you know--the 
one thing that the Army is, if you would, right now, instead of 
using the tools that you have provided them--temporary early 
retirement authority, voluntary separation pay--where you could 
incentivize people to step aside, we have continued to kind of 
use what is more the budget-driven aspects and use the cuts of 
RIFs [reductions in force] and SERBs [Selective Early 
Retirement Boards] and other things like this to get people to 
move to the side, or we just denied reenlistments.
    And those are the kind of what I consider draconian tools, 
where we really had strong tools available to recognize 
people's service, allow them to leave even with a 15-year 
retirement, but we haven't been able to do that.
    Mr. Gehrke. If I can say something real quick, piggybacking 
on what Colonel Hayden said, right now we are pushing people 
out at the 8- and 12-year point. We want them to get out. We 
are pushing good Marines. We are pushing good captains and good 
staff sergeants out of service after 8, 10, and 12 years, and 
we are pushing them out with nothing.
    So I would consider that when we are talking about force 
structure and retaining that force structure. Right now we are 
acting--the Department of Defense is saying it is too big for 
our current mission; we need to push these guys out. And they 
are pushing them out with nothing.
    Colonel Hayden. And if I could just piggyback on that, I 
would say that once you get to the 6-year point there is such a 
thing as called involuntary separation pay, so if people are 
being forced at that point in time, there is a years-of-service 
element. For instance, if you are at 10 years of service you 
get 1 year of your base pay as an involuntary separation pay.
    Now, I would think that if you are involuntarily letting 
people go one of the things we could look at is allow them to 
take that involuntary separation pay and invest that into a--
into the TSP or a 401(k), change the IRS [Internal Revenue 
Service] rules to allow that to happen, and then recognize that 
as some type of transportable career device along with it.
    Mr. Coffman. Thank you, Mr. Chairman.
    Let me just raise one point that has not been addressed in 
all of this when we talk about reforming the system that, well, 
first of all, I--let me just say to the retirement system that, 
I mean, it is antiquated, and I get the point about 
incentivizing people to stay for 20 years. But this is my 
father's retirement system.
    My father retired from the United States Army in 1964, 
where prior to I think when I came in in 1972, the system had 
dramatically changed when they went to an all--when they were 
transitioning to an all-volunteer system, where they 
dramatically increased the pay from what it was.
    And so the system really was designed initially as a--
basically you got low pay, but significant benefits, you know, 
utilizing the PX [Post Exchange] and the commissary, those 
discounts, but relatively low pay prior to being an All-
Volunteer Force. And the compensation at the back end--the 
compensation was at the back end in terms of 20 years being at 
50 percent.
    We are living longer now. The pay is much more competitive 
with that of the private sector.
    One thing that amazes me now, with retention where it is--
retention is very high right now--is that we still have a 
promotion system that is tied to basically a lower retention 
system--I mean, a lower retention rate, whereby people are, in 
fact, being forced out, that if you come up for promotion, you 
are passed over a couple times, you are out.
    And it is different when we started that, where the quality 
wasn't what the quality is today. The quality today of the men 
and women who serve this country is the highest that it has 
ever been historically in this country. And we are forcing 
people--good people that want to stay in--we are forcing them 
out with a promotion system that doesn't reflect the fact that 
we have high retention.
    No organization outside the military would ever have--would 
ever do what we are doing now, in terms of if they had a very 
high retention system they would slow down the promotion rate, 
and by slowing down the promotion rate we are giving people 
more time to increase their technical proficiency within their 
military occupational specialties. And we are, in fact, we are 
reducing the pipeline in terms of training costs to replace 
them.
    So I think one of the things that we need to look at--and I 
know it is painful and it doesn't sound good, but is slowing 
down the promotion system so we stop pushing people out at the 
rate that we are.
    I don't know, does--would anybody like to comment on that?
    Colonel Hayden. We couldn't agree more. It would be nice to 
be able to retain even some of the great folks that we are 
forcing out of the system right now.
    It is not always just with the promotion system. We are 
also doing it with what we would call in the Air Force ``career 
job reservations.'' These are when you come up on career points 
on the enlisted side of the house, denying reenlistments or 
forcing them to retrain in the other types of aspect.
    But what we have got right now with the--with 
sequestration, the difficulties that that has put the service 
chiefs in, especially in the Army and the Marine Corps to start 
bringing down the forces associated with it, we are using end 
strength as an offset to--to bring down personnel costs. And we 
have been doing other things like capping pay and changing the 
commissary benefit or the housing allowance, and things like 
this, that is now going to cause even more what I think is more 
of a retention problem.
    I personally believe that what you see right now is the 
true retention of the force is being masked. It is because we 
are in the drawdown. When you take a look at the DEP [Delayed 
Enlistment/Entry Program] bank for the Army last year, I think 
it was in testimony that instead of entering the year with 
about a 50 percent of their DEP bank, they entered the year at 
about 33 percent of their DEP that was ready to ship in the 
next year.
    And so with those kind of indicators, the true retention is 
being masked as we draw down the force. I think once we get 
through this and now that the economy is coming back, and I am 
hearing that the recruiting numbers are starting to go up for 
the Army and the Marine Corps, that we may have a little bit 
more of a difficult time meeting the recruiting as well as the 
retention numbers once we are past this drawdown.
    Mr. Coffman. Well, I would argue--I would agree with you 
that it does mask--the reduction in force that is currently 
ongoing to reduce end strength does, in fact, mask the 
retention problem. But I think it is still--I think we are so 
slow to update policies in the military, whether it is the 
retirement system, and we are debating that today, an 
antiquated system of--that was there in I think the Second 
World War, to the rate of promotion that we have that doesn't 
reflect retention.
    With that, Mr. Chairman, I yield back.
    Mr. MacArthur. I am going to stay on health care, although 
I am interested in all 15 of these and they all could have 
hearings all of their own, frankly.
    I have noticed in all of the hearings that we tend to look 
at TRICARE in a very binary way. It is either good or bad. It 
is either broken in a death spiral or it is the, you know, the 
greatest thing and our service members love it.
    And even going down the panel, when you were given the 
opportunity to give a one-word answer, the yeses and the noes 
were equally emphatic. And that fact is, we will never know, as 
decisions are made, how it is going to flow and what the 
unintended consequences are and how it will be--we are simply 
not going to know.
    I come out of the business world and I would never, ever do 
something in my company that affected thousands of people 
without piloting it, testing it. We are talking about something 
here that affects millions of people.
    And I know this is a better question for probably the heads 
of our military services, but from your perspective, is there 
any way that you can conceive of piloting some of these changes 
to TRICARE so that we can actually assess--not study, not 
consider how it might go, but actually do it and assess how it 
goes? Be curious for any of you to respond to that.
    Colonel Hayden. First of all, I think that there is an 
opportunity with the FEHBP [Federal Employee Health Benefit 
Plan]-like system proposed by the Commission and with--where I 
look and see that the Guard and Reserve has had a very 
difficult time of access, is potentially looking at a pilot for 
this FEHBP-like system for the Guard and Reserve and try to 
look to expand that area associated with it.
    The other thing that we would recommend as an association 
is to at least use these multi-service areas that are out there 
the Defense Health Agency [DHA] has and look to at least pilot 
there, where you have a single budget authority, that one of 
the commands, if you would, one of the services is the 
executive agent and would then have oversight of that budget 
for that multi-service area.
    DHA says that they wish to go to that, but we believe it 
has been a little bit more of a snail's pace and we should look 
to try to do that and use those at least as a pilot to see if 
you can gain efficiencies within those multi-service areas.
    Mr. Bousum. Representative MacArthur, just as Colonel 
Hayden had said, I--while it is not a question I have asked of 
my members to weigh in on when I--when we talked about these 15 
recommendations, I think that the Guard would actually--the 
Active members would welcome being kind of the guinea pig for 
something like that.
    Mr. MacArthur. Any others?
    Ms. Ruedisueli. We have talked about it internally. I think 
there would be a lot of challenges with doing a pilot.
    The plans that are suggested by the Commission are not 
exactly like FEHBP. They would have to be customized for our 
risk pool, for the benefits that are specific and necessary for 
military families. So it is not like you could just offer them 
FEHBP and expect to have, you know, a legitimate pilot. I think 
there would be a lot of challenges.
    But we do appreciate the idea of testing this out before 
doing a full rollout plan.
    Mr. Gehrke. I think that the challenges of a pilot is the 
civilian health care industry or economy is not a national 
economy. It can be in a localized economy, whereas TRICARE is 
pretty much national more or less. It is a national plan.
    And what I am alluding to is your FEHB plan in California 
is going to be different than what a plan looks like in 
Oklahoma. And the costs are going to be associated different.
    So you may not get a fair analysis of what the future of 
that health care is going to be unless you do it countrywide in 
different locations to gauge what the true costs are.
    Mr. MacArthur. All right. Thank you.
    I yield back.
    Ms. Stefanik. Thank you, Mr. Chairman.
    I want to touch on a recommendation that I don't think has 
been raised yet, and that is improving access to childcare on 
installations. And as I am reading and going through the report 
it says that the Commission found that the demand for military 
childcare often exceeds availability, resulting in more than 
11,000 children on waiting lists as of September 2014.
    Can you talk about why access to high-quality childcare is 
an important aspect of readiness and whether or not you agree 
with the Commission's recommendation that Congress reestablish 
the authority to use operating funds for construction projects 
for expanding and modifying child develop program facilities on 
installations?
    Ms. Ruedisueli. You know, I think there is the very obvious 
link to readiness when you are talking about dual-military 
families, when you are talking about single-parent military 
families, where their ability to do their jobs is directly 
linked to the availability of childcare. I think if you take a 
little step away from that, though, there are other links to 
readiness.
    You know, spouse employment in general is very linked to 
the availability of childcare. It undermines readiness if you 
have people leaving the force because their spouse cannot 
maintain employment, and that is a driver for leaving.
    Furthermore, there is the link to readiness during 
deployments. Childcare during deployment is critical for 
families, for the stay-at-home--the at-home parent to have some 
respite from childcare to be able to do basic things like go to 
doctor's appointments.
    So I think there are many ways that the availability of 
childcare links to readiness.
    We agree with the Commission's report. There doesn't seem 
to be a lot of accurate data out there, but anecdotally we hear 
virtually everywhere that there are wait lists for childcare.
    We appreciate the fact that they are talking about 
expanding child development centers, but we would point out 
that 70 percent of military families live off the installation 
and the child development center might not be the best solution 
for them or the only solution for them. And so we would 
encourage decisionmakers to look beyond just expanding CDCs 
[child development centers] into programs like the childcare 
fee assistance programs and other innovative solutions that 
might help to address this issue.
    Ms. Stefanik. Thank you.
    Any other comments on that subject area?
    Colonel Hayden. Actually, we are in full support of what 
NMFA had to say.
    Ms. Stefanik. Thank you very much.
    I yield back.
    Mr. Knight. Now I am up.
    You know, I would like to talk just about a couple areas. I 
know that when we went down the row about the TRICARE there was 
a little bit of difference there, and that seems to be the 
biggest sticking point with me on this subject, and I will talk 
about the other part here in a minute.
    But if we can talk about TRICARE and basically talk about 
the people who think it is broken--if it is not broken, do we 
think that this will work, that this will continue to move 
forward for the next 15 or 20 years without us doing anything 
to it? And if you do think it is broken, where do you see it 
going?
    Ms. Ruedisueli. Well, we are one of the organizations that 
thinks that it is broken, and, you know, our concerns basically 
are that, yes, you can continue to deliver the benefit as it 
looks today, but it will be eroded. You know, over the years 
there have been increasing pressures to increase fees and out-
of-pocket costs for families. Our concern is that even in the 
things that people can't see, like provider networks, that 
those would be eroded because we are cutting reimbursement 
rates.
    So our concern is that you can't really compare the TRICARE 
of today to TRICARE Choice, what is proposed, because the 
TRICARE of today is not going to exist 5 years down the road; 
it will have been chipped away by these various budgetary 
pressures.
    Mr. Gehrke. I think the VA health care system may be a good 
analogy. If you look at where VA was 5, 7, 10 years ago, you 
were seeing then access issues--same type of access issues that 
you are seeing now: long appointment wait times, not being able 
to get in to see the doctor when you needed to or when you 
wanted to.
    If TRICARE keeps on its path you are going to see the same 
thing that happened, you know, in Phoenix, last year, the 
difference being is that there is no real accountability in the 
same way that there is accountability for the VA health care 
system. When doctors aren't seeing their patients and denying 
patients, there are going to be no lists at all. They are just 
going to be denied and the military health care beneficiary is 
going to have to keep on looking somewhere else.
    I think a good example is I called up the top 20 hospitals 
in the country. Eleven of them accepted--did not accept TRICARE 
at all. Three of them only accepted TRICARE Standard; and I 
think one of them only accepted Prime, Standard, and all the 
different TRICAREs.
    I imagined that if TRICARE goes down the same path in 5, 10 
years you are going to be at zero. Will the proposed plan be 
better? I guess I can't say.
    Mr. Knight. Okay. Well, you know, I am going to agree with 
most of those comments.
    I think that, you know, not just TRICARE but in the medical 
industry we see that across the board, where a lot of things 
are not accepted anymore and they are just not being provided 
or they are not being accepted by a lot of the industry. And I 
am afraid that that is where TRICARE is going.
    I will go on to my second. We talk about this kind of 2-
year vesting period, where you are 2 years and a day through 
your enlistment or un-enlistment, and then you are kind of 
through a vesting period.
    You know, that was one of my first questions is, I don't 
know of anything that you get vested after 2 years except for 
California teachers get tenure. Outside of that, vesting is 
typically a 5-year or 10-year period because that is kind of 
the retainment and that is a commitment that we have accepted, 
and that is where your--you get that level of commitment.
    Is that a problem for any of your organizations, or is that 
something that is accepted, that we love the 2 years? Or do you 
think that that is going to be an issue?
    Mr. Bousum. Actually, it is funny you mentioned that. Your 
staffer actually vested after 2 years. Staff members on the 
House side actually have that because of the election cycle.
    Mr. Knight. I am a long way away from California so I can 
talk about them instead of talking about these.
    Mr. Bousum. Understood.
    I don't think that our associate would have a problem.
    Colonel Hayden. It is an interesting twist because 
truthfully, when you take a look at the MCRMC's [Military 
Compensation and Retirement Modernization Commission's] 
proposal, there are a lot of variables. And so one of the 
variables is just the vesting piece.
    One of the things we would say is that if you get the--you 
know, we have just gone through and provided the post-9/11 G.I. 
Bill--a wonderful, wonderful benefit that we have--that now 
service members get just at the 3-year point. So you could 
easily see that the vesting could actually shift to somewhere 
after the first term of enlistment, after the initial Active 
Duty service commitment, which typically is around the 4-year 
point--4- or 5-year point--and then start to look at 
potentially doing more of a match, if you would, beyond that.
    Mr. Knight. Sure.
    Colonel Hayden. Because at that point now you have gone 
through, you have done what you have signed up for; we have 
provided the post-9/11 G.I. Bill as a service, if you would, 
for that first term. And then beyond that, if you are staying 
with the company, now it is up to the company to start to 
investing back in you, and that is another one way of taking a 
look at it.
    Mr. Gehrke. I asked the Commission the exact same thing, 
actually, and the premise of my question was, you know, if I 
leave any company that offers a 401(k) match after a year I 
would keep that 401(k). Why shouldn't service members?
    Their response, which I think is in line with my 
experience, is that usually the washed-out point of service 
members, when you find out that they cannot transition into 
military service, is that 2 years. So people who you know are 
not going to fulfill their obligation usually wash out by 2 
years, and that is why they chose that.
    Mr. Knight. Thank you, Mr. Chair. I yield back.
    Mr. Russell. Thank you, Mr. Chairman.
    Go to an issue maybe a little more lighthearted, one we can 
all relate to. The Army and the Air Force have been sharing 
commissaries for a long time. The Navy and the Marines, despite 
their love for one another, have also done the same.
    Why would it not be possible to combine the two without 
efficiencies? As a career soldier, you know, I don't advocate 
necessarily that posts and bases need to be anything but self-
contained. We have done that since the days of, you know, 
Vauban forts and stockade outposts. You know, we have to be 
self-contained, both electricity, with provisions, all of that. 
So I would never really advocate their privatization.
    But why could we not combine two services with two services 
and make it more effective? Be interested in your views.
    Mr. Neiweem. Sir, if I could just say----
    Mr. Russell. Oft times you get overlapping circles and you 
go where the overlaps are. And, you know, the gulf is not as 
wide.
    I would be curious, yes, Mr. Gehrke?
    Mr. Gehrke. I understand that the Marines were opposed to 
merging these systems. Being the few and the proud, I can 
respect that.
    However, I think they may have changed their tone or it 
changed my mind when I found out that the commissary system in 
its current form has more SCS [stock control system] staff than 
the entire Marine Corps has SCS staff. So when you look at 
those numbers you think there is room to merge and to create 
some synergies there.
    Mr. Russell. Yes. I would agree.
    Ms. Ruedisueli. You know, we are not opposed to the idea of 
consolidation, and we acknowledge there probably would be 
efficiencies there. I think our concern is that with the 
reduction in the appropriations for the commissary, you are 
expecting these efficiencies to then be able to pay for all the 
operating costs, and I think that is where the risk comes in. 
If that doesn't pan out that way, you are probably talking 
about the death of a benefit that is very important to a lot of 
military families.
    Mr. Russell. Yes. And I would agree, it is very important, 
which is why I was smart enough to retire near an Air Force 
base, being an Army retiree.
    But on that line, has there been any study to show that 
maybe there is not a benefit to their combination, that there 
is efficiency already and their combination would not create it 
because--you know, I am just curious.
    Colonel Hayden. There have been studies at least to look 
and combine, if you would, the exchange systems. And it is--
there has been pushback on several of those studies, and we are 
still where we are even though that the Army and the Air Force 
were able to merge, if you would, their exchange systems.
    But you have to take a look at the exchange systems on what 
they actually do. The Navy, for instance, has their lodging 
associated with the way they do the Navy exchange.
    And so it is a business model that is, if you would, that 
is built on profit, and that is the way the exchange systems 
are now. And then the commissary is actually an appropriated 
more of a----
    Mr. Russell. So you think that the circle could go wider 
and get the MWR on the Army and----
    Colonel Hayden. Well, I think----
    Mr. Russell [continuing]. The Air Force side, or----
    Colonel Hayden. I think the important thing is that when 
you look at a consolidation of this, you have to see the 
business models that are out there with the different services 
and why the consolidation may not be in the best interest of 
all unless you are trying to bring in what would be the lodging 
model and all these other types of aspects along with it.
    But I am, along with Karen, the question really comes back 
is now you are end up taking away, if you would, the subsidy 
that was associated with the operation of the commissary, and 
you are introducing this business model. And is that business 
model really going to save, in the end of the day, are the--you 
are still going to see the 30 percent savings when you are at 
the commissary, and are you going to get the MWR funds that you 
need in order to----
    Mr. Russell. Put money back in, rather than take----
    Colonel Hayden. So I think you end up robbing Peter to pay 
Paul on this.
    Mr. Russell. And thank you.
    Thank you, Mr. Chairman.
    Dr. Heck. So one thing we haven't talked about probably on 
purpose is SBP [Survivor Benefit Plan]. And really, you know, 
so the Commission makes a recommendation on how to potentially 
move forward and address the SBP-DIC [Dependency and Indemnity 
Compensation] offset--again, prospectively, fully recognizes it 
is not going to do anything for anybody who is currently 
impacted by the offset.
    As you may recall, the recommendation is that for those 
individuals who want to get full SBP if they also receive DIC 
is that they would pay an increased premium annuity--roughly 11 
percent, as opposed to the lower premium annuity at I think 6 
percent, and not have the offset.
    Thoughts? I mean, I--to me it seems--I don't know. I have 
already filled out my election notice when I hit 20 years so it 
is not going to affect me, but, you know--and again, realizing 
that we are not talking about the more strategic issue of 
whether or not there should be an offset to begin with, but any 
ideas of whether or not that is something that is worthwhile, 
something opposed? I mean, is that one of the, you know, easy 
yes, check the box, that should be an easy one to do?
    Colonel Hayden. Well, MOAA actually opposes the proposal. 
What we see is, like you had mentioned, sir, is that it doesn't 
do anything for the 60,000 survivors that are out there right 
now that are affected by the SBP-DIC offset.
    But the other thing is is because of the way that the 
premium is set up, what you are doing is really--the people who 
would take advantage of the higher-paying premium are those 
that are the most disadvantaged. The ones who would look at the 
SBP-DIC--the higher-paying premium for SBP--are the ones who 
are actually what I would think are the 100 percent disabled 
right now. They themselves are going to think that, ``Oh, yes. 
When I die I am going to die of a service-connected 
disability.''
    And if you are 100 percent and you go through that--there 
is that period of window that if you get I think it is the 10-
year point, you are automatically--whatever you die of, you are 
going to die of a service connection.
    The idea is that you are going to prey on the ones who have 
the most severe disabilities. They are the ones who are going 
to find it to their financial advantage to try to provide for 
their survivors that way, and they are the ones who probably 
are unable, then, to work--or the majority of them maybe have 
difficulties working then when they get out of the services.
    So for our perspective, it is nice to give an option like 
that, but it is only to the advantage of those that actually 
think they are going to die of service connection.
    Mr. Gehrke. The VFW would agree with everything Mike said. 
We really need to do something about the current beneficiaries 
who are eligible.
    But the current SBP-DIC is certainly untenable. I think the 
SSIA [Special Survivor Indemnity Allowance] ends within the 
next year or two, so you do need to find some alternative to 
that. And we think the current plan--or the proposed plan is 
the best thing that has been proposed other than completely 
eliminating the offset.
    So we think the service members do need a--some sort of 
better option than what they are provided now.
    Dr. Heck. Okay.
    Anyone else?
    Mr. Stovall.
    Mr. Stovall. Mr. Chairman, this is something that the 
American Legion opposes. One, like as mentioned before, it 
doesn't address the current injustice facing the tens of 
thousands of beneficiaries.
    And then lifting the offset for those who follow on only to 
charge a higher premium is a nonstarter for us. We feel that 
this recommendation doesn't solve the problem.
    Dr. Heck. All right.
    This is the first time we have ever exhausted the panel--
the members of questions.
    I want to thank you all for taking the time to be here, for 
giving us your insights. Obviously it has been mentioned by 
several of the members, just the sheer breadth of your 
membership and the folks that you represent--you know, in 
disclosure, I belong to three of your organizations seated at 
the table--really means a lot to us.
    And I want to assure all of you that are here today and 
those who may be seeing the hearing or listening that we will 
be very deliberative in this process as we review the 
recommendations of the Commission before we make 
recommendations to move forward to the full committee.
    So again, thank you for your time today.
    There being no further business, the hearing is adjourned.
    [Whereupon, at 3:38 p.m., the subcommittee was adjourned.]
    
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