[Senate Hearing 114-28]
[From the U.S. Government Publishing Office]
S. Hrg. 114-28
TESTIMONY OF THE MILITARY COMPENSATION A
AND RETIREMENT MODERNIZATION COMMISSION
=======================================================================
HEARINGS
BEFORE THE
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
AND
BEFORE THE
SUBCOMMITTEE ON PERSONNEL
of the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
----------
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
----------
FEBRUARY 3, 11, 25, 2015
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Printed for the use of the Committee on Armed Services
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COMMITTEE ON ARMED SERVICES
JOHN McCAIN, Arizona, Chairman
JAMES M. INHOFE, Oklahoma JACK REED, Rhode Island
JEFF SESSIONS, Alabama BILL NELSON, Florida
ROGER F. WICKER, Mississippi CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire JOE MANCHIN III, West Virginia
DEB FISCHER, Nebraska JEANNE SHAHEEN, New Hampshire
TOM COTTON, Arkansas KIRSTEN E. GILLIBRAND, New York
MIKE ROUNDS, South Dakota RICHARD BLUMENTHAL, Connecticut
JONI ERNST, Iowa JOE DONNELLY, Indiana
THOM TILLIS, North Carolina MAZIE K. HIRONO, Hawaii
DAN SULLIVAN, Alaska TIM KAINE, Virginia
MIKE LEE, Utah ANGUS S. KING, JR., Maine
LINDSEY GRAHAM, South Carolina MARTIN HEINRICH, New Mexico
TED CRUZ, Texas
Christian D. Brose, Staff Director
Elizabeth L. King, Minority Staff Director
______
Subcommittee on Personnel
LINDSEY GRAHAM, South Carolina, Chairman
ROGER F. WICKER, Mississippi KIRSTEN E. GILLIBRAND, New York
TOM COTTON, Arkansas CLAIRE McCASKILL, Missouri
THOM TILLIS, North Carolina RICHARD BLUMENTHAL, Connecticut
DAN SULLIVAN, Alaska ANGUS S. KING, JR., Maine
(ii)
C O N T E N T S
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february 3, 2015
Page
The Findings of the Military Compensation and Retirement
Modernization Commission....................................... 1
Maldon, Hon. Alphonso Jr., Chairman, Military Compensation and
Retirement Modernization Commission; Accompanied by
Commissioners Hon. Larry L. Pressler, Hon. Stephen E. Buyer,
Hon. Dov S. Zakheim, Michael R. Higgins, GEN Peter W.
Chiarelli, USA (Ret.), Hon. J. Robert Kerrey, and Hon.
Christopher P. Carney.......................................... 4
Questions for the Record......................................... 57
Appendix A--Final Report of the Military Compensation and
Retirement Modernization Commission............................ 74
Appendix B--Legislative Proposals of the Military Compensation
and Retirement Modernization Commission........................ 366
Appendix C--Addendum to the Report of the Military Compensation
and Retirement Modernization Commission........................ 525
Appendix D--Statement of the Fleet Reserve Association........... 590
Appendix E--Statement of the Air Force Association............... 600
Appendix F--Statement of the Commissioned Officers Association... 604
Appendix G--Statement of the Concerned Veterans for America...... 616
Appendix H--Statement of the Enlisted Association of the National
Guard.......................................................... 622
Appendix I--Statement of the National Association for Uniformed
Services....................................................... 634
Appendix J--Statement of the National Defense Industrial
Association.................................................... 639
Appendix K--Statement by the Reserve Officers Association........ 646
Appendix L--Joint Letter......................................... 655
Appendix M--Statement of the Veterans of Foreign Wars of the
United States.................................................. 668
Appendix N--Statement of the Warrant Officers Association........ 680
Appendix O--Letter from the Conjoined Military/Veterans Service
Organization................................................... 683
february 11, 2015
The Retirement and Compensation Proposals of the Military
Compensation and Retirement Modernization Commission........... 695
Zakheim, Hon. Dov S., Commissioner, Military Compensation and
Retirement Modernization Commission; Accompanied by
Commissioners Hon. Larry L. Pressler, Hon. Dov S. Zakheim,
Michael R. Higgins, GEN Peter W. Chiarelli, USA (Ret.), and ADM
Edmund P. Giambastiani, Jr., USN (Ret.)........................ 696
Parke Holleman, Deirdre, Executive Director, The Retired Enlisted
Association.................................................... 714
Frank, Robert L., Chief Executive Officer, Air Force Sergeants
Association.................................................... 719
(iii)
Jones, Richard A., Legislative Director, National Association for
Uniformed Services............................................. 723
Nicholson, Alexander, Legislative Director, Iraq and Afghanistan
Veterans of America............................................ 727
Questions for the Record......................................... 736
february 25, 2015
The Healthcare Recommendations of the Military Compensation and
Retirement Modernization Commission............................ 741
Maldon, Hon. Alphonso, Jr., Chairman, Military Compensation and
Retirement Modernization Commission; Accompanied by
Commissioners Hon. Stephen E. Buyer, Michael R. Higgins, GEN
Peter W. Chiarelli, USA (Ret.), and ADM Edmund P. Giambastiani,
Jr., USN (Ret.)................................................ 742
Raezer, Joyce W., Executive Director, National Military Family
Association.................................................... 770
Ryan, VADM Norbert R., Jr., USN (Ret.), President and Chief
Executive Officer, Military Officers Association of America.... 795
Snee, Thomas J., National Executive Director, Fleet Reserve
Association.................................................... 802
Hargett, Major General Gus L., Jr., ARNG (Ret.), President,
National Guard Association of the United States................ 807
Questions for the Record......................................... 818
THE FINDINGS OF THE MILITARY COMPENSATION AND RETIREMENT MODERNIZATION
COMMISSION
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TUESDAY, FEBRUARY 3, 2015
U.S. Senate,
Committee on Armed Services,
Washington, DC.
The committee met, pursuant to notice, at 9:33 a.m. in room
SD-G50, Dirksen Senate Office Building, Senator John McCain
(chairman) presiding.
Committee members present: Senators McCain, Inhofe,
Sessions, Wicker, Ayotte, Fischer, Cotton, Rounds, Ernst,
Tillis, Sullivan, Lee, Graham, Reed, McCaskill, Manchin,
Gillibrand, Donnelly, Hirono, Kaine, King, and Heinrich.
OPENING STATEMENT OF SENATOR JOHN McCAIN, CHAIRMAN
Chairman McCain. Good morning. The committee meets this
morning to receive testimony from the commissioners of the
Military Compensation and Retirement Modernization Commission.
I want to thank each commissioner for your diligence and
hard work over many months to develop the recommendations you
will present to us today. Our witnesses today are the
commission chairman, the Honorable Alphonso Maldon, Jr., the
Honorable Larry Pressler, the Honorable Stephen Buyer, the
Honorable Dov Zakheim, Mr. Michael Higgins, General Peter
Chiarelli--and I understand that Senator Bob Kerrey is snowed
in, in New York--and the Honorable Christopher Carney.
This year, a signature issue for this committee will be
thoughtful consideration of the commission's recommendations to
modernize military compensation and retirement benefits. As we
do, I encourage the members of this committee and my colleagues
in the House and the Senate to keep an open mind.
We are also eager to hear from any military or other
organizations that have constructive ideas to improve the
current system. No one has a monopoly on good ideas, and we all
come to this debate as patriots who love our Nation's Armed
Forces and want to improve the quality of life for all who
serve and their families.
We honor the service and sacrifices of servicemembers and
their families, Active Duty, Guard, and Reserve. We pledge to
keep their well-being foremost in our thoughts as we deliberate
the commission's recommendations.
But upholding our sacred obligation to them does not mean
resisting change at every turn. We must not shrink from the
opportunity before us to create a modern system of compensation
and retirement benefits that would provide greater value and
choice for those it serves.
Congress established the commission in the National Defense
Authorization Act for the Fiscal Year 2013 to conduct a review
of the military compensation and retirement systems, and to
make recommendations for modernization. We asked the commission
to develop recommendations that would, one, ensure the long-
term viability of the All-Volunteer Force during all levels of
conflict and economic conditions; two, improve the quality of
life for servicemembers and their families to ensure successful
recruitment, retention, and careers for those members; and
three, modernize and achieve fiscal sustainability for the
compensation and retirement systems in the 21st century.
The military's current compensation and retirement systems
are decades old and in their current form may be less than
suitable for modern-day military members. Today, we have a
nearly 70-year-old military retirement system and TRICARE, the
military's health program, was implemented in the mid-1990s.
Both the retirement system and TRICARE were appropriate for
their time, but clearly, times have changed. We are here today
to learn how the commission's recommendations could make
compensation and benefits better for the military members and
families of our current forces and forces of the future.
Moreover, in a world of multiple threats and increasing
danger, we count on young Americans to enlist or commit to
serve in an All-Volunteer Force that protects us and our
families. As this committee evaluates the commission's
recommendations to modernize military compensation and
benefits, we must carefully consider how any changes in
compensation and benefits will motivate young people of today
to serve in the 21st century.
In a constrained fiscal environment, we must consider how
best to achieve the proper balance between providing attractive
compensation and benefits for our troops and paying for
military modernization and readiness, effective equipment, and
advanced training that will enable our military to respond in
moments of crisis and keep our citizens safe.
We can meet both of these objectives, and we must. Clearly,
we will not have enough time today for a complete and thorough
review of every recommendation the commission has made. That is
why I've asked Senator Graham, chairman of our Personnel
Subcommittee, to hold a series of hearings in the near future
to explore all of the commission's recommendations in greater
depth, especially in those areas of retirement and health care.
I thank Senator Graham and Senator Gillibrand for their
leadership on these critically important issues.
Finally, we look forward to the testimony from the
commission today. Their recommendations come to us unanimously
after nearly 2 years of hard work, research, and debate. I
encourage the commissioners to speak freely without
reservations. Some of them I know and I'm sure will do that.
Thank you again, commissioners, for your extraordinary
efforts.
Senator Reed?
Oh, Senator Kerrey arrived.
Thank you, Senator Kerrey, for arriving. [Laughter.]
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you, Mr. Chairman. Let me join you in
welcoming the witnesses and commending them for a job well
done. Thank you very, very much.
I think it is extremely important to have this hearing
today for the reasons the chairman outlined, and I thank him
for holding the hearing.
This hearing comes as the Department of Defense (DOD)
yesterday formally submitted its budget for fiscal year 2016.
While we await the full details of the department's proposals,
there are a few immediate notable aspects of the request.
First, the requested top line is some $35 billion above the
Budget Control Act of 2011 spending caps for defense. The
spending cap, which for fiscal year 2016 was $499.8 billion,
represents no growth in real terms. That the department has
requested $35 billion more than current law allows shows how
deep the funding shortfalls run, particularly with respect to
force structure and the training and the modernization
accounts.
Second, the department has again requested measures to slow
the growth of personnel costs. The department submitted these
proposals last year. Congress supported some and elected to
defer others until after this commission reported its
recommendations. Many members on both sides of the aisle have
been reluctant to support compensation and benefit reforms
requested by the department in the past several years while
this commission deliberated and suggested that we should wait
until this report is submitted.
This is the context in which today we hear from this very
distinguished panel. These issues are of paramount importance
to the Nation and to the military members and their families.
We charge the military with fighting and winning the Nation's
wars. Implicit in that responsibility is recruiting and
retaining the very best in Military Service in sufficient
quantities and ensuring that they are trained and equipped for
their mission, prepared for the arduous duty we ask of them.
Usually when we talk about caring for our men and women in
uniform, the discussion is focused entirely on their pay. But
these other elements are equally important if we want our
servicemembers to accomplish the mission and come home alive.
It is important to state from the outset that the goal of
the commission is not to save money. It is to strengthen the
All-Volunteer Force. It is to modernize a retirement system
that is 70 years old. Importantly, it is to ensure that
servicemembers and their families enjoy a quality of life and a
quality of service that will enable the Services to recruit and
retain the very best men and women for military service needed
to meet national defense objectives.
Under the current budget situation, I fear we are quickly
pricing ourselves out of having a military sufficiently sized
and adequately trained to meet the myriad tasks and threats we
face all over the world. As we heard last week from the Service
Chiefs, the budget caps currently in law do not allow the
Services to meet their national defense objectives.
Now if these recommendations that you are making are
enacted and they do provide savings, such savings should be
used to address force structure shortfalls and to reinvest in
readiness and modernization.
Finally, I would like to highlight one inequity in the
current system that the commission has pointed out. Only 17
percent of all servicemembers will leave with any retirement
benefit under the current system, with officers more than twice
as likely to leave with these benefits than enlisted personnel,
even while enlisted personnel have always, including in the
most recent conflicts, sustained the vast majority of
casualties.
We are told now that under these recommendations as many as
75 percent of all servicemembers will leave the Services with
some retirement benefit, even if they do not serve the full 20
years on Active Duty, as most servicemembers do not.
Thank you, Mr. Chairman, and thank you to our panelists for
this important work.
Chairman McCain. Again, I would like to thank all of the
members of the panel, all of whom have other responsibilities
and work that needs to be done, and they took their valuable
time and effort to bring what I think is an excellent,
comprehensive report, which I know will serve as guidance for
us as we move forward with much needed reforms. I thank all of
you again.
Mr. Chairman, we are ready to listen to your statement.
Thank you, again, for your chairmanship.
STATEMENT OF HON. ALPHONSO MALDON, JR., CHAIRMAN, MILITARY
COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION;
ACCOMPANIED BY COMMISSIONERS HON. LARRY L. PRESSLER, HON.
STEPHEN E. BUYER, HON. DOV S. ZAKHEIM, MICHAEL R. HIGGINS, GEN
PETER W. CHIARELLI, USA (RET.), HON. J. ROBERT KERREY, AND HON.
CHRISTOPHER P. CARNEY
Mr. Maldon. Thank you, Mr. Chairman.
Chairman McCain, Ranking Member Reed, distinguished members
of the committee, my fellow commissioners and I are honored to
be here today. We thank you for the opportunity to testify. We
also thank you for your support of the commission during the
last 18 months and for your leadership in protecting our
servicemembers' compensation and benefits.
Mr. Chairman, I would like to request that our final report
be entered into the record.
Chairman McCain. Without objection.
[The Final Report of the Military Compensation and
Retirement Modernization Commission, dated January 29, 2015,
follows:]
See Appendix A at the end of this hearing record.
Mr. Maldon. The All-Volunteer Force is without peer. Their
unwavering commitment to excellence in the service of our
Nation has never been clearer than during the last 13 years of
war.
As commissioners, we recognize our obligation to craft a
valued compensation system that is both relevant to
contemporary servicemembers and able to operate in a modern and
efficient manner. We are unanimous in our belief that the
recommendations we offer in our report strengthen the
foundation of the All-Volunteer Force, ensure our national
security, and truly honor those who served and their families
who support them now and into the future.
Our report is, of course, informed by our own lifelong
experience with military service, public policy, and as public
servants. However, our recommendations are most informed by
insights of servicemembers, veterans, retirees, and families.
The commission and staff visited 55 military installations
worldwide, listened to the views and preferences of hundreds
along the way. More than 150,000 current and retired
servicemembers provided thoughtful responses to the
commission's survey, and we developed working relationships
with more than 30 military and veterans service organizations.
Additionally, the commission received input from more than
20 Federal agencies, several DOD working groups, numerous
research institutions, private firms, and not-for-profit
organizations.
The result of this process that included 18 months of
comprehensive, independent research, review, and analysis, are
15 unanimous recommendations that will improve choice, access,
quality, and value within the compensation system. Our work
represents the most comprehensive review of military
compensation and benefits since the inception of the All-
Volunteer Force.
Consistent with our congressional mandate, we reviewed each
program to determine if and how modernization might ensure the
long-term viability of the All-Volunteer Force, enable the
quality of life for servicemembers and their families, and
achieve a greater fiscal sustainability for compensation and
retirement systems. Our recommendations do this and more,
improving choice, access, quality, and value within the
compensation system.
Our retirement recommendations propose a blended plan that
extends retirement benefits from 17 percent to 75 percent of
the force, as Ranking Member Reed has already stated. It
leverages the retention power of traditional military
retirement to maintain the current force profiles, protects the
asset of servicemembers who retire at 20 years of service, and
reduces annual Federal outlays by $4.7 billion.
Our health benefits recommendations improve access, choice,
and value of health care for Active Duty family members,
Reserve component members, and retirees while reducing outlays
by $3.2 billion.
Our recommendations on commissaries maintain patrons'
grocery discount while also reducing the cost of delivering
that benefit by more than $500 million annually.
While these savings to the taxpayer are significant, the
commission did not engage in a cost-cutting drill. In fact, our
recommendations to improve joint readiness, servicemember
financial literacy, support for exceptional families, and
transition assistance require additional funding to ensure
program efficacy.
In summary, our recommendations represent a holistic
package of reforms that modernize the structure of compensation
programs rather than adjust the level of benefits delivered to
the servicemembers. They sustain the All-Volunteer Force by
maintaining or increasing the overall value of the compensation
and benefits for servicemembers and their families, and they
provide additional options for Service personnel managers to
design and manage a balanced force.
This approach creates an effective and efficient
compensation and benefits system that after full implementation
saves taxpayers more than $12 billion annually, while
sustaining the overall value of compensation and benefits for
those who serve and have served, and the families who support
them.
My fellow commissioners and I thank you again for the
opportunity to testify today, and we are honored to present our
unanimous recommendations. Mr. Chairman, we stand ready to
answer your questions.
[The prepared statement of the Military Compensation and
Retirement Modernization Commission follows:]
Prepared Statement by the Military Compensation and Retirement
Modernization Commission
Chairman McCain, Ranking Member Reed, distinguished members of the
committee: We are honored to be here and thank you for the opportunity
to testify today. We also want to thank you for your support of the
Commission during the last 18 months, and your leadership in protecting
servicemembers' compensation and benefits.
Our All-Volunteer Force is without peer. This fact has been proven
during the last 42 years and decisively reinforced during the last 13
years of war. It is our obligation to ensure the Services have the
proper resources to support our servicemembers. Those resources include
a valued compensation system that is relevant to contemporary
servicemembers and that is operated in a modern and efficient manner.
We are unanimous in our belief that our recommendations strengthen the
foundation of the All-Volunteer Force and ensure our national security,
now and into the future.
Our recommendations sustain the All-Volunteer Force by maintaining
or increasing the overall value of the compensation and benefit system
for servicemembers and their families. They also provide additional
options for Service personnel managers to design and manage a balanced
force. Our recommendations represent a holistic package of reforms that
modernize the structure of compensation programs, rather than adjust
the level of benefits delivered to servicemembers. This approach
creates an effective and efficient compensation and benefit system that
saves the Government, after full implementation, more than $12 billion
annually, while sustaining the overall value of compensation and
benefits of those who serve, those who have served, and the families
that support them.
Our work represents the most holistic and comprehensive review of
military compensation and benefits since the inception of the All-
Volunteer Force. Our Interim Report, published in June 2014, documents
the relevant laws, regulations, and policies; associated appropriated
Federal funding; and historical and contextual backgrounds of more than
350 compensation programs. Consistent with our congressional mandate,
programs were reviewed to determine if modernization would ensure the
long-term viability of the All-Volunteer Force, enable the quality of
life for members of the Armed Forces and the other Uniformed Services,
and achieve fiscal sustainability for compensation and retirement
systems.
Based on the results of this review, our Final Report offers 15
unanimous recommendations that improve choice, access, quality, and
value within the compensation system. Our retirement recommendation
proposes a blended plan that extends retirement benefits from 17
percent to 75 percent of the force, leverages the retention power of
traditional military retirement to maintain the Services' current force
profiles, protects the assets of servicemembers who retire at 20 years
of service, and reduces annual Federal outlays by $4.7 billion. Our
health benefit recommendation improves access, choice, and value of
health care for Active-Duty family members, Reserve component members,
and retirees, while reducing outlays by $3.2 billion. Our
recommendation on commissaries maintains patrons' grocery discounts and
reduces the costs of delivering that benefit by more than $500 million
annually. Yet we did not engage in a cost-cutting drill. Our
recommendations to improve joint readiness, servicemembers' financial
literacy, support for exceptional families, and transition assistance
require additional funding to ensure program efficacy. Our
recommendations also give the Services greater flexibility to recruit
and retain a balanced force.
Our report is informed by our life-long experiences, but more
importantly by the insights of a broad range of servicemembers,
veterans, retirees, and their families. More than 150,000 current and
retired servicemembers responded to the Commission's survey. The
Commission visited 55 military installations, affording us the
opportunity to discuss compensation issues with servicemembers
worldwide. We developed an ongoing working relationship with more than
30 Military and Veteran Service Organizations. We also received input
from more than 20 Federal agencies; several Department of Defense (DOD)
working groups; and numerous research institutions, private firms, and
not-for-profit organizations. Our recommendations align compensation
and benefit programs to the preferences of the modern Force and
societal shifts since the inception of the All-Volunteer Force.
Taken as a whole, our recommendations create a modern and
innovative compensation system that will be relevant to the
contemporary and future workforce. By maintaining or improving
benefits, while concurrently reducing costs, our recommendations
address the ongoing tension between maintaining servicemember benefits
and reducing personnel budgets to meet the demands of the new fiscally
constrained environment. We are confident that our recommendations to
reform the compensation system protect the quality of life for
servicemembers and their families and ensure the fiscal sustainability
of these programs for the future.
We thank you again for the opportunity to testify today and are
honored to present our unanimous recommendations that have one thing in
common: These recommendations were formulated with the benefit to the
servicemembers, and the families who support them, as the top priority.
pay and retirement recommendations
1. Help more servicemembers save for retirement earlier in their
careers, leverage the retention power of traditional Uniformed Services
retirement, and give the Services greater flexibility to retain quality
people in demanding career fields by implementing a modernized
retirement system.
The current military retirement system for the Active component
(AC) is a defined benefit retirement system that vests at 20 years of
service. Annuity payments are generally calculated by multiplying a
member's retired pay base by 2.5 percent for each year of service
completed. Reserve component (RC) servicemembers may request retired
pay after 20 years of ``creditable service'' as defined in law. Under
the current military retirement system, 83 percent of enlisted
personnel and 51 percent of officers receive no retirement savings for
their service.
The Commission's recommended retirement system would maintain
retirement pay for current servicemembers and retirees and set out a
blended retirement plan for servicemembers entering the force. The
blended plan would preserve the 20-year retirement with a reduced
defined benefit multiplier of 2.0, create a defined contribution plan
through a Thrift Savings Plan, and add continuation pay at 12 years of
service to provide mid-career retention incentives. The recommended
plan would provide additional options to servicemembers by authorizing
them to choose full or partial lump-sum payments in lieu of their
working-age defined benefit payments. The proposed plan would allow the
Services to maintain their current force profiles. It would provide
retirement benefits to potentially more than 1 million servicemembers
who, under the current system, would leave Service without any
Government-sponsored retirement savings, yet it would maintain the
value of the retirement system for servicemembers who serve 20 years or
more. A blended retirement system would also provide flexibility to the
Services to obtain the appropriate mix of skill and experience needed
to maintain a balanced force.
2. Provide more options for servicemembers to protect their pay
for their survivors by offering new Survivor Benefit Plan coverage
without Dependency and Indemnity Compensation offset.
The current Survivor Benefit Plan (SBP) gives retiring
servicemembers the option to provide a lifetime monthly annuity to
qualified survivors. Servicemember premiums cover approximately two-
thirds of the full cost of SBP coverage, and DOD subsidizes the
remaining amount. Eighty percent of servicemembers who retired in 2013
enrolled in SBP. Survivors of retirees, entitled to Dependency and
Indemnity Compensation (DIC) payments from the Department of Veterans
Affairs (VA), are restricted by law from receiving the full amounts of
both SBP and DIC benefits (SBP benefits are offset by the amount of DIC
received). The Commission found the DIC offset of SBP very unpopular
with servicemembers.
The Commission recommends maintaining the existing SBP program for
servicemembers who want to select subsidized coverage and remain
subject to the SBP-DIC offset, yet also granting servicemembers the
option of choosing modernized SBP coverage that balances greater
participation cost with no DIC offset. Survivors of servicemembers who
elect the new SBP coverage would derive a greater overall benefit by
receiving full SBP and DIC payments.
3. Promote servicemembers' financial literacy by implementing a
more robust financial and health benefit training program.
The Services currently implement personal financial management
training for their members according to their internal policies.
Nevertheless, military personnel regularly make minimum payments, pay
late fees, or pay over-the-limit charges on credit cards, and commonly
borrow from nonbank financial institutions (e.g., pawn shops).
Servicemembers who get in financial trouble often lose their security
clearance, which is costly to both the individual and the DOD. These
facts demonstrate insufficient knowledge among some servicemembers with
regard to managing their personal finances. The Commission concluded
that existing financial literacy programs do not adequately educate
servicemembers and their families on financial matters.
The Commission's recommendations, particularly with regard to
retirement and health care, would provide increased choice and require
educated financial analysis on the part of servicemembers. The
Commission recommends that DOD increase the frequency and strengthen
the content of its financial literacy training. Servicemembers should
receive financial training throughout their careers, including
mandatory health benefits seminars when they register one or more
dependents, and when they are nearing retirement from the military.
Implementing a comprehensive training program would help educate
servicemembers, provide them with enhanced tools to better protect
their finances, and develop a culture of personal financial
responsibility.
4. Increase efficiency within the Reserve component by
consolidating 30 Reserve component duty statuses into 6 broader
statuses.
Although Active component members have a single duty status--Active
Duty--Reserve component (RC) members serve under a variety of duty
statuses. In the current system, each time the purpose or the source of
appropriation for an RC member's orders changes, existing orders must
be cancelled, and new orders must be issued. The current RC status
system aligns poorly to current training and mission support
requirements, complicates effective budgeting, and causes members to
experience disruptions in pay and benefits as they transition among
different duty statuses.
The Commission recommends replacing the 30 current RC duty statuses
with six broader statuses. Simplifying RC statuses would support both
operational and training missions, better enable the purpose of RC
duties to be tracked to justify budgets requests, and facilitate a
seamless process for RC members.
health benefit recommendations
5. Ensure servicemembers receive the best possible combat casualty
care
The Military Health System (MHS) relies heavily on military
treatment facilities (MTF) as training platforms to maintain the
clinical skills of the military medical force. Military medical
personnel assigned to MTFs deliver health care primarily to active-duty
servicemembers and their families, then, as space is available, to
military retirees and other eligible beneficiaries. Because most MTFs
do not have sufficient case mix and volume to adequately prepare
military medical personnel for deployment into an operational
environment, each Service has created separate trauma training programs
to provide medical personnel additional training prior to deployment.
There is, however, no consistency or standardization in the
organization or requirement for this just-in-time trauma training.
Continuing with this method for training medical personnel does little
to preserve critical skills acquired over the last 13 years of war.
Congress should establish a four-star command to oversee all joint
readiness, especially medical readiness. The proposed central oversight
would ensure a necessary high-level joint focus overall and, more
specifically, enhance the MHS as a training platform for identified
Essential Medical Capabilities required by the medical force in support
of deployed operations. Increased oversight would afford the medical
force greater opportunities for continued training, creating a more
ready force both in peacetime and in preparation for contingency
operations.
6. Increase access, choice, and value of health care for active-
duty family members, Reserve component members, and retirees
The DOD's TRICARE program provides health care benefits for Active
and Reserve component servicemembers, retirees, their dependents,
survivors and some former spouses at MTFs or through a network of
civilian health care providers. The Commission found that TRICARE's
payment schedule limits available doctors. It limits choice to only a
small number of plans with a one-size-fits-all approach to covered
benefits and determinations of medical necessity. The current benefit
lacks flexibility in its program design and contracting process, which
hinders adoption of advances in the health care sector. TRICARE also
restricts access to care with a frustrating appointment and referral
process. Beneficiaries prefer greater choice in their health care
benefit options. Providing a wide range of different health plan
options at different costs incentivizes cost-conscious consumer
decision-making in health care.
The Commission recommends that AC families, RC members, and
retirees would receive a better health care benefit by allowing them to
choose from a selection of commercial insurance plans offered through a
DOD health benefit program administered by the Office of Personnel
Management. This program, which we call ``TRICARE Choice,'' would
increase beneficiaries' choice, enhance their access to care, and
deliver a better value. Under an insurance model, the ease and
timeliness of patients' access to health care would improve because
beneficiaries would not be subject to DOD's lengthy and frustrating
process for making appointments and obtaining referrals. The network of
health care providers would be improved, especially in rural areas and
areas without a substantial military presence. A broader network of
providers would particularly assist RC members and retirees, who often
live away from major active-duty installations. Active-duty
servicemembers, for reasons related to operational readiness, would
continue to receive their health care through their units or the direct
care system MTFs.
7. Improve support for servicemembers' dependents with special
needs by aligning services offered under the Extended Care Health
Option to those of state Medicaid waiver programs
Servicemembers with exceptional family members (EFM) require
specialized supplies and services that are not provided through
TRICARE. State Medicaid waiver programs can satisfy these needs, but
the frequency with which military families are moved between States,
combined with the long waiting lists in most States, result in military
families not having access to this support. The Extended Care Health
Option (ECHO) is a DOD alternative, used when State services are
unavailable. As it is currently implemented, ECHO does not provide
coverage equal to state Medicaid waiver programs. As a result, many
military families with EFMs do not have access to the same level of
support as their civilian counterparts.
Aligning services offered under ECHO with those of state Medicaid
waiver programs would enhance coverage for exceptional family members
to ensure consistency with civilian programs. This change would improve
continuity of support for EFMs as servicemembers and their families are
relocated to support the DOD mission.
8. Improve collaboration between Departments of Defense and
Veterans Affairs
The Joint Executive Committee (JEC) coordinates numerous health
care activities between DOD and VA, including efforts in regards to
electronic health records, drug formularies, resource sharing, and
interagency billing. Yet there remain substantial opportunities for
enterprise-wide collaboration through standardization, elimination of
barriers, and adoption of best practices. The Commission found
numerous, ongoing weaknesses exist in joint collaboration and cost-
effectiveness between the health care services of DOD and VA.
The Commission recommends that the JEC should be granted additional
authorities and responsibilities to standardize and enforce
collaboration between DOD and VA, to include: defining and monitoring
expenditures for common services that are regularly jointly conducted
throughout DOD and VA health-care systems; approving in advance any new
capital assets acquisition, or sustainment, restoration, and
modernization of capital assets, of either DOD or VA medical
components; overseeing electronic health record compliance with the
Office of the National Coordinator for Health Information Technology
standards across both DOD and VA; ensuring that the DOD and VA
establish a health care record within the VA electronic health record
system for all current military servicemembers; creating a uniform
formulary to include all the drugs identified as critical for
transition by the JEC beginning immediately with pain and psychiatric
classes of drugs; and establishing a standard reimbursement methodology
[process] for DOD and VA provision of services to each other. These
actions should substantially ease the transition of servicemembers and
improve collaboration between the Departments.
quality of life recommendations
9. Protect both access to and savings at DOD commissaries and
exchanges by consolidating these activities into a single defense
resale organization.
DOD operates a system of commissaries and three separate systems of
exchanges. These four systems, and their associated organizations,
provide discounted groceries, merchandise, and other services to
servicemembers and their families around the world, in locations
convenient to those living on or near military installations. They also
facilitate or provide services at sea and in theater. In surveys and
testimony, many servicemembers have identified this benefit as relevant
and valuable and some have indicated that the discounts are critical to
their personal financial health. However, financial pressures within
DOD have resulted in proposals to significantly reduce the funding
appropriated to operate these organizations, primarily focused on
commissaries.
Consolidating commissary and exchange activities into a single
Defense Resale Activity would maintain or improve the benefit, while
making changes in structure, law, and policy that would enable more
aggressive reductions in appropriated funding. Despite their
differences, these retail organizations perform similar missions, for
similar patrons, with similar staff, using similar processes. A
consolidated resale organization, with combined resources, increased
operational flexibility, and better alignment of incentives and
policies, would improve the viability and stability of these systems.
Multiple DOD-sponsored studies have identified strategies to improve
cost-efficiency. Organizational boundaries, different cultures and
business strategies, competing incentives, and restrictive policies
have inhibited the aggressive pursuit of many of these strategies.
Creating a consolidated organization would reduce these barriers and
better position commissaries and exchanges to meet the needs of the
Military Services and servicemembers. The proposed plan would also
maintain grocery subsidies at DOD commissaries, while improving the
efficiency of the benefit delivery.
10. Improve access to child care on military installations by
ensuring DOD has the information and budgeting tools to provide child
care within 90 days of need.
Military child care is widely acclaimed for its quality,
affordability, and ability to satisfy the unique needs of military
parents, but is frequently a source of frustration because of its
limited availability. Current models for planning and resourcing full-
time military child care often result in long waiting times,
particularly for children who are 3 years old and younger, the ages for
which care tends to be most expensive and least available from other
sources. Although DOD has established a goal to provide military child
care within 90 days of need, that goal is not yet being met, and in
some cases waiting times are not being reliably measured or reported.
Ensuring DOD has the information and budgeting tools to provide
child care within 90 days of need would both improve DOD's
understanding of the effect of the unmet demand for military child care
and enhance DOD's ability to provide a timely response to that demand.
DOD should standardize reporting and monitoring of child care wait
times across all types of military child care to better understand the
need for services. To quickly respond to the need, the Commissioners
recommend reestablishing the authority to use operating funds for minor
construction projects up to $15 million for expanding or modifying
child development program facilities serving children up to 12 years of
age. Recognizing that staffing, rather than facilities, is often the
limiting factor, DOD should also streamline child care personnel
policies to help ensure proper staffing levels.
11. Safeguard education benefits for servicemembers by reducing
redundancy and ensuring the fiscal sustainability of education
programs.
DOD and the VA provide many programs that deliver educational
benefits to servicemembers and veterans. Current education assistance
programs include the Post-9/11 GI Bill, the Montgomery GI Bill Active
Duty, the Montgomery GI Bill Selected Reserve, the Reserve Education
Assistance Program, and Tuition Assistance. There are duplicative and
inefficient education benefits that should be streamlined to improve
the sustainability of the overall education benefits program.
Montgomery GI Bill Active Duty should be sunset on October 1, 2015.
Reserve Education Assistance Program (REAP) should be sunset,
restricting any further enrollment and allowing those currently
pursuing an education program with REAP to complete their studies.
Already enrolled servicemembers who elect to switch to the Post-9/11 GI
Bill should receive a full or partial refund of the $1,200 that was
paid to buy in to the MGIB-AD. Eligibility requirements for
transferring Post-9/11 GI Bill benefits should be increased to 10 years
of service, plus an additional commitment of 2 years of service. The
housing stipend for dependents should be sunset on July 1, 2017.
Eligibility for unemployment compensation should be eliminated for
anyone receiving housing stipend benefits under the Post-9/11 GI Bill.
When providing feedback in comments to the Commission, Servicemembers
repeatedly emphasized the importance of education benefits as
recruiting and retention tools. Ensuring the robustness of education
programs is one of the best ways to guarantee the future of the All-
Volunteer Force. This recommendation would also support GI Bill
benefits, including transferability, while improving their fiscal
sustainability.
12. Better prepare servicemembers for transition to civilian life
by expanding education and granting states more flexibility to
administer the Jobs for Veterans State Grants Program
DOD, in partnership with the Department of Labor (DOL), the VA, and
the Small Business Administration, maintains the Transition GPS program
to help servicemembers and their families prepare for a successful
transition to civilian life. Transition GPS services are delivered
through a series of workshops administered by each Service. The DOL
administers One-Stop Career Centers which offer employment services for
job seekers across the country, including veterans after they have
transitioned to civilian life. These facilities are part of state
workforce agencies or employment commissions and are partially funded
through a number of grants under DOL's Jobs for Veterans State Grants
program. Despite these services, transitioning from military service to
civilian life is more difficult than it needs to be. DOD should require
mandatory participation in the Transition GPS education track for
servicemembers planning to attend school after separation or those who
have transferred their Post-9/11 GI Bill benefits. The Department of
Labor should permit state departments of labor to work directly with
State VA offices to coordinate administration of the Jobs for Veterans
State Grants program. Furthermore, One-Stop Career Center employees
should attend Transition GPS classes to develop personal connections
with transitioning veterans. A review of the core curriculum for
Transition GPS should be required to reevaluate whether the current
curriculum accurately addresses the needs of transitioning
servicemembers, and DOD, VA, and DOL should be required to produce a
one-time joint report regarding the challenges employers face when
seeking to hire veterans.
13. Ensure servicemembers receive financial assistance to cover
nutritional needs by providing them cost effective supplemental
benefits.
The Department of Agriculture's Supplemental Nutrition Assistance
Program (SNAP), better known as the ``food stamps'' program, and the
Family Subsistence Supplemental Allowance (FSSA), the Military
Services' alternative to SNAP, have the same congressional mandate and
overarching goal of providing nutritional assistance to eligible
beneficiaries. In many circumstances, however, it is easier to qualify
for SNAP than it is to qualify for FSSA. SNAP benefits are typically
more generous, and unlike FSSA, SNAP recipients have no obligation to
inform their chain of command, thus avoiding perceived embarrassment or
stigma. Estimates of servicemembers receiving SNAP vary widely because
States are not required to collect or share data on servicemembers. DOD
needs a better understanding of the number of Service families using
SNAP and the financial situations of those families.
Although FSSA should be retained for servicemembers in overseas
locations where SNAP assistance is unavailable, it should be sunset in
the states and territories that provide SNAP benefits. The SNAP program
should capture and share information on active-duty servicemembers
receiving benefits to better inform military compensation and policy
decisions. Adopting this recommendation would ensure servicemembers
receive optimal supplemental nutritional assistance.
14. Expand Space-Available travel to more dependents of
servicemembers by allowing travel by dependents of servicemembers
deployed for 30 days or more.
The Secretary of Defense is authorized to provide air travel for
servicemembers, certain retirees, and their family members on a space-
available basis. Space-Available travel regulations provide eligible
passengers access to seats on military air transport flights that would
otherwise be empty. Unused seats on DOD-owned or controlled aircraft
are only made available to Space-A travelers once space-required (duty)
passengers and cargo have been accommodated. Current DOD policy permits
unaccompanied dependents to use Space-A travel, but only when their
sponsor is serving a deployment of at least 120 days. In recent years,
frequent deployments have been a reality for many servicemembers and
many were shorter than 120 days, making dependents of these deployed
servicemembers ineligible for Space-A travel.
DOD should allow unaccompanied dependents of servicemembers
deployed for 30 days or more to use Space-A travel. The quality of life
of servicemembers' dependents should be improved by providing this
access to unaccompanied travel on military aircraft.
15. Measure how the challenges of military life affect children's
school work by implementing a national military dependent student
identifier.
Children of active-duty servicemembers are not identified
separately in nationwide reporting of student performance. Most
elementary and secondary school student registration data systems do
not include an indicator of students who have a military affiliation.
These children experience unique stresses associated with parental
deployments and frequent relocations that can adversely affect academic
performance. As a result, national reports on student performance
cannot reliably differentiate military dependent students from all
others.
A military dependent student identifier should be implemented so
that Elementary and Secondary Education Act reporting can identify
students who are children of active-duty servicemembers. This
information would enhance support for military dependent students by
facilitating DOD's ability to monitor academic performance.
Thank you again for the opportunity to testify regarding our
recommendations. We also want to thank all who contributed to our final
report. The Commission is grateful to have been given the opportunity
to make recommendations to strengthen the best All-Volunteer Force in
the world. Ensuring our servicemembers, veterans, retirees, and their
families' get the support they need is a responsibility the Commission
took very seriously. Thank you to all those who serve, those who have
served, and the families that support them.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman McCain. Thank you very much, Mr. Chairman. If it
is okay, I'll just have a couple of brief questions, because I
was briefed by you already. If any of the members of the
committee wish to respond to any questions by me or other
members, just signify and you'll be recognized.
Just two brief questions, Mr. Chairman. How do you know
that your recommendations will provide the same force structure
to the Services, on the issue of the proposed compensation
system? In other words, right now, there is an incentive to
remain for 20 years. In this present plan, there will be
retirement compensation literally throughout. So do we have
incentive for people to remain in for a career or disincentive?
Mr. Maldon. We do, indeed, Mr. Chairman. In our
recommendations, we did a blended plan here. We already have a
defined benefit, and we added a defined contribution to this to
make sure that we can do the retention or provide for the
retention that the Services told us that they wanted us to.
I am going to have Commissioner Higgins talk to the
specifics of that recommendation, Mr. Chairman.
Chairman McCain. Thank you.
Mr. Maldon. Commissioner Higgins?
Mr. Higgins. Thank you very much, Mr. Chairman, and
Chairman McCain.
Sir, the system we have devised includes the incentives,
the flexibility, and the choice that people want in force, so
we feel, at its essence, it's going to be a very powerful
retention tool. When we look forward at how the system will
operate over time, our belief is, and supported by our
analysis, and in this case, it was the RAND Corporation model,
which was the dynamic retention model used, we believe that our
proposal will exactly model the current force profiles. It will
have the tools within it, including continuation pay, Thrift
Savings Plan, which is with matching, which is currently not
offered today. It will include the tools that will draw people
through the 20-year career, much like the defined benefit does
today, and to some large extent, because the defined benefit is
retained under our proposal, about 80 percent of that defined
benefit.
So these new tools to meet the demands of choice
flexibility, along with the defined benefit that is retained,
we believe will operate very effectively. The modeling that we
have done will support that.
Chairman McCain. Thank you. On the issue of health care,
how does this incentivize beneficiaries to seek the most cost-
effective means of getting health care?
Mr. Maldon. Mr. Chairman, thank you for the question. That
was very important to us as we took a look at the programs that
are providing the benefits to our servicemembers.
As we traveled across the country and we talked to
families, servicemembers, Reserve component members, retirees,
after listening very, very carefully to the conversations and
discussions that we had in terms of what people said they
wanted, they preferred as values choice, access, and value of
health care. Those were the themes that just kept coming time
and time again.
I'm going to ask Commissioner Buyer to speak specifically
to that question.
Mr. Buyer. Thank you, Mr. Chairman and members of the
committee. Cost-effective means, I look at it from two ways.
One is to the government. The other is to the families.
When we looked at this, it was at how we can achieve both.
Presently under TRICARE, we don't, because there really aren't
sufficient utilization management tools. It is a very limited
network because of the very low reimbursement rates and how the
TRICARE contractors actually recruit providers into the
networks and pay below Medicare rates.
So with regard to the families, we said, ``can we do
better, not only for the government with regard to the cost but
also with regard to the families and improve the quality of
care, give them the choice that they want and get better
access?'' We found that if we move to a system whereby we have
what we call TRICARE Choice, which is very similar to a Federal
Employee Health Benefit (FEHB) model whereby they select from
available plans in a particular geographic region. It does call
for more empowerment of the individual. We are asking that that
individual is able to select a plan that best fits their
family. When we do that, the plans themselves that are then
managed and administered by the Office of Personnel Management
(OPM), those plans will have effective management unitization
tools, and it becomes more cost-effective not only to the
families but, in particular, to the government, Mr. Chairman.
Chairman McCain. Thank you.
Senator Reed?
Senator Reed. Thank you very much, Mr. Chairman.
Let me direct this question to General Chiarelli, and
anyone else who would like to respond.
Part of your recommendation with respect to health care is
also strengthening the military treatment facilities (MTF), the
traditional facilities that have to be ready to deploy, if we
deploy. Part of it, as I understand the proposal, is that they
would be part of these health care systems.
Can you comment from your perspective as former vice chief
on this whole issue of strengthening the military medical
infrastructure along with giving individuals more choices in
the health care? Or if someone else wants to.
General Chiarelli. No, I'm more than happy to.
Senator Reed. Yes, sir.
General Chiarelli. I think we are in a death spiral right
now in our MTF, from the standpoint of they just don't have the
number of reps that they need to keep their doctors up to
standard. This is a way that we can bring into our MTFs the
kind of cases that contribute to battlefield medicine.
That is what makes this system so different than any other
system. We need well-trained doctors, not only to treat
patients in hospitals, but to be ready to deploy wherever we
send them and provide that same kind of treatment on day one of
the conflict.
This will allow us to attract into our MTFs the kind of
cases that will keep those skills up, and are so absolutely
crucial to our survive-of-wounds rate in the last 14 years of
war.
It will do that on day one of the next conflict. I really
believe that this is something that is going to ensure that we
have that combat medical readiness capability we need moving
into the future. If we don't do it, we are going to have a
very, very difficult time being able to provide that.
Senator Reed. So this is not just about the benefits to the
individual military personnel. This is about the overall
viability of the health care system in the military?
General Chiarelli. Absolutely, and that is one of the
reasons why we looked so strongly at a readiness command,
because we really believe there is going to have to be somebody
who is keeping an eye on this system to ensure that the
Services are doing the kinds of things that are necessary to
keep those MTFs viable training grounds for our physicians.
Senator Reed. Let me direct this to the chairman. You can
decide who is appropriate.
I'm sure I'm not alone, but when we mobilize National
Guardsmen and Guardswomen and reservists, they are the ones who
sometimes have the most difficultly getting into the health
care plan, getting their benefits, making sure that their
family who is not close to a medical facility, who may be far
removed. It seems to me that this approach that you are
suggesting, choosing among a set of private insurance plans,
would be much more easily accessed by Reserve components. Is
that accurate, Mr. Chairman?
Mr. Maldon. That is correct, Senator Reed. One of the
things that happens with our proposal for the Reserve
components is, anytime they are mobilizing or being activated,
the family members normally will go without coverage. There is
a period of time that they just don't have coverage when that
happens. This will solve that problem for them because they
won't have to worry about going long periods of time without
coverage of health care when the Reserve component member
activates and deactivates.
Mr. Buyer. Senator Reed, I mean, that is an excellent
question. That strategic reserve that we built over time really
wasn't prepared operationally. We know that. You funded it. You
did a lot of things to bring it up, round it out, and make the
total force better in the 13 years of war. But with regard to
the undesirable choices that reservists and their families had
to make upon those mobilizations to be part of those
contingency operations, you are absolutely right, Senator.
So when we looked at this and said, with regard to that
total force, even though we really pressured the chiefs, do we
really want an operational reserve versus a strategic reserve?
They really do, but they don't want to call it that because
they don't want to fund it.
But what is realistic is, when we talk about the war after
next or how to fund the war after next, and caring for the
people, when it comes to the health care, that benefit needs to
be for the total force. So for the Reserve components, that
continuity of care that your questioning goes to, it is so
disruptive for the family.
If we say from day one when you join the Reserve component
that health care is part of that benefit, you can select the
type of plan that best fits your family, your premium is 25
percent. We capped it at 25 percent for the premium. Then there
is no disruption in the continuity. They like their local
providers.
Then if they are on for a longer period of time, they've
come, gone on Active Duty, they are part of the contingency
operation, then they go on to the Active Duty plan, they
receive their basic allowance for health care that takes care
of the premium for that of their family.
Senator Reed. Thank you very much, Mr. Chairman.
Mr. Maldon. Senator Reed, if you don't mind, I would like
to have another member of our commission speak to that as a
reservist, please, Commissioner Carney.
Mr. Carney. Thank you, Mr. Chairman.
Mr. Reed, those of us who lived in sort of rural areas and
were on Reserve duty, it wasn't TRICARE exactly. It was more
like ``try to find care.'' This takes care of that.
What we are offering now is a system that provides a
network that is robust enough to care not only for the member
when they are on their civilian side, but also for the families
when the member is deployed. That is exactly what we are trying
to do here and do it in a way that is fiscally sustainable.
Medical readiness as well as dental readiness are critical
aspects of the overall readiness mission. If we can do that
with this kind of system, with a TRICARE Choice system, then I
think this is a good step forward.
Senator Reed. Thank you very much.
Thank you, Mr. Chairman.
Chairman McCain. Senator Inhofe?
Senator Inhofe. Thank you, Mr. Chairman.
I would say to my good friend Steve Buyer, who I used to
sit next to on the House Armed Services Committee, that I agree
with you, except I'm more concerned about today's war than I am
the war after next. Right now is when we are having the
problems that we are having.
We had a hearing last week. We had Schlesinger, George
Schultz, Madeleine Albright. They went back and reminisced
about what our capabilities were at that time, and what is
expected, and even read the charge that President Reagan had
made at one time in determining what a defense budget should
be.
The reason I'm saying this is I look and I agree with
Senator Reed who talked about the inadequacy in meeting the
threats. I agree with Director Clapper when he says, ``Looking
back over my now more than half a century in intelligence, I
have not experienced a time when we have been beset by more
crises and threats around the globe'' than we are right now.
That in light of the fact that we also have the force structure
problems.
I'm very proud of all of our chiefs. General Odierno has
been before us, and all of the rest of them, talking about how
significant this is and it is something that is unprecedented.
The reason I bring this up, we have a quality group here, I
would say, Mr. Chairman. I just think after this is over, you
should reconvene and get into this thing as to the current
threat that is out there and the inadequacy that we are facing.
It is one thing for the chiefs to come forward and talk about
what is going to happen with sequestration. But when you folks
with your backgrounds come forth, to me that gives a different
sense of meaning. I would hope that we might consider that.
I was a product of the draft and look at things a little
bit differently than others. In fact, I was one that was not at
all optimistic that the All-Volunteer Force would be the
quality force that it is. I was wrong, although there were some
advantages to the draft at that time.
I think that when you are examining the charge that were
given to you, and I would ask you the question, what have you
decided motivates the young people to serve in the All-
Volunteer Force? Then, why are so many of them leaving, if you
could zero in on two or three reasons as to why they don't stay
on?
Quite often, we go back and talk about how much cheaper it
is for us to retain than to retrain. The extreme example is to
get a pilot to the point where they can do an F-22 quality and
the reenlistment bonus is $250,000 but the cost to retrain is
$17 million. Now scale that down to whatever forces that we
have here.
What is the major reason that they come in and then they
leave?
Mr. Maldon. Thank you for the question, Senator Inhofe.
We spent a lot of time looking at that, that specific issue
that you address. It is a very important one. As we think about
how to modernize the compensation programs, compensation
programs for tomorrow, we are thinking about exactly what is
required for the military to be able to recruit and retain
people. We have to think about the way the new generation
think, what they value, what they prefer. Those are the kind of
things that we listened to and heard as we talked to people.
As it was already indicated here today, 83 percent of the
enlisted force actually wind up leaving without any kind of
retirement benefits, which is one of the reasons that we made
the recommendation that we did, to be able to extend some of
the retirement benefits for those servicemembers who will serve
and then move on to do other things from 17 percent to 75
percent.
I'd also like to point out that a couple of things that we
were told specifically by the servicemembers is that they are
concerned about the service to their country and the G.I. Bill.
Those were two of the things that were very important to them
in terms of why they would come in, what they were looking for.
Get an education benefit, be able to take advantage of that,
which is a strong recruiting tool, and then move on to
something else.
Senator Inhofe. Very good. Thank you, Mr. Chairman.
Chairman McCain. Senator Manchin?
Senator Manchin. Thank you, Mr. Chairman. Thank you all for
being here.
I guess this would be to anybody who wants to answer the
question. But my thing is, is that it is a very difficult
position you are being put into and we all are, because I don't
think anyone questions the commitment the Service people and
all people in military have to the United States of America.
I know in West Virginia we feel very strongly about that,
people willing to take a bullet. I have always been able to
explain when I was Governor, when they would explain or
complain about whether it be our state police retirement or our
fireman's retirement, they are willing to put their life on the
line every day for you.
So people are willing to pay a higher price for that but
they still want it to be fairly comparable. Do you all look at
that from the standpoint--I can tell you, in most all State
budgets or municipality budgets, the firemen and police
pensions are out of whack, they are under water, and we are
trying to get them back. There is going to have to be some
sacrifices. But to the point, we have to recognize the
sacrifice they are making for us.
How do you balance this out? What would I tell the National
Guardsmen of my State that have been deployed maybe three and
four times, and we are looking at changing some of the
compensation? What type of literacy training are we giving to
help them on their retirement? Why do we have so many that
leave at 10 years of service in the military to go into private
contracting for the extra pay overseas in Afghanistan and Iraq?
What is the magic number of 10 years? I find most of our
soldiers of fortune that leave our military that we spent an
awful lot of time and energy training them, leaving and going
for the higher pay. Can you give me that magic thing at 10
years what they lock in and what gives them that freedom to do
that? Whoever wants to chime in on this.
Mr. Maldon. Yes, Senator. Senator, thank you very much for
that question. We, certainly, have spent a lot of time talking
about that. I am going to ask Commissioner Kerrey, Bob Kerrey,
to share the specifics of that.
Senator Kerrey. Well, first of all, I think you would be
having a difficult time retraining men and women to serve in
the military had this Congress not made all of the changes that
it made since we have been fighting this war for the last 14
years. I mean, if you just look at what you've done with pay
and compensation, it is now better than market. It needs to be.
The changes that have been enacted by Republicans and
Democrats have not been given enough praise, in my view,
because had those changes not been done, given the stress on
families today--I'm a very proud geezer father. I have a 13-
year-old. If we think about having to move our son once every 4
or 5 years, it is a traumatic thing inside of our household.
That is way more stability than anybody in the military gets.
So the stress on the families has increased over the past
14 years. Thanks to congressional action, the pay and benefits
now are quite strong, and they need to be in my opinion.
Otherwise, we are going to have a difficult time retaining men
and women.
The second thing that has happened, and the Senator and
fellow draftee referenced the good old days, the American
people now are quite proud of their military. They are quite
confident that they are getting the kind of support that they
need. But Americans are a lot more patriotic and they care
deeply about the men and women who are serving.
I think that attitude makes a big difference to people's
willingness to serve. I would say the combination of patriotism
and the combination of pay and benefits, those two things
together have made a big difference.
When I looked at the recommendations, Senator, that we are
making, the two big questions that I ask are, are we keeping
faith with the men and women who have served? Those of you who
have understand that what happens is that you give up your
freedom. If you get ordered to do something or go some place,
you do it.
So are we keeping faith with those who have served and are
serving? I answer emphatically yes.
Second, the recommendations that we make, will it enable us
to continue to recruit and retain in the All-Volunteer Force.
Again, I answer emphatically yes.
But it is something that you constantly have to pay
attention to. I think there is a qualitative difference between
the public pensions at the fire and police level. Those firemen
can get a little ornery, and the police can get a little
ornery. They don't have a Commander in Chief that tells them
exactly what to do. I get orders to report to so and so
location, I say yes, sir, and go.
Whereas in negotiation with the fire union and the police
union, you have serious negotiations about where they're going
to go and what they're going to do.
So I think there is a qualitative difference between the
relationship of the American people and the men and women who
have signed up and sworn that oath, given up their freedoms,
and even in training exercises, put their lives and health at
risk.
Senator Manchin. Well, it's not a hard sell. Basically, in
my State and most States around the country are very committed
to our military force, and they want to make sure they are
compensated and taken care of and given the care they need.
They just want to make sure we are doing it in an efficient
manner, and if we are giving them the training and expertise
and literacy training they need to make decisions.
Senator Kerrey. I would say, Senator, I think the moment
that ends, no matter what you pay men and women, they are not
going to sign up. The moment that that attitude changes, as it
was in the 1970s, it is going to be difficult to recruit people
to Service.
Senator Pressler. We have a tradition on our Indian
reservations. A lot of people serve 3 or 4 years and very
rarely go for a career. I always had a difficult time getting
our Native Americans to go to the Military Academies. But it
seems that, aside from whatever we do, there is a tradition in
our country of a lot of people wanting to serve 3 to 5 years.
Of course, we need those people. That is particularly true in
rural areas in States such as mine and with Native Americans.
Senator Manchin. Thank you, Mr. Chairman.
Chairman McCain. Senator Fischer?
Senator Fischer. Thank you, Senator McCain.
Mr. Chairman, you've mentioned flexibility a couple of
times here in your statements. In the report, it says that the
force may benefit from a flexible retirement system that
incentivizes them to remain in Service longer than other
occupational specialties with regard to doctors, cyber-
personnel.
Do you have specific proposals? I would like to dig down a
little bit into this. Do you have any specific proposals that
the commission recommended? Do you see each Service setting a
different requirement there? If so, do you anticipate any
problems? Do you see competition among the Services?
Mr. Maldon. Thank you very much, Senator, for the question.
I am going to ask Commissioner Zakheim to respond to the
specifics of your question first.
Mr. Zakheim. Thank you, Mr. Chairman.
Senator, each of the Services already has different types
of bonuses to keep people on. For instance, nuclear engineers
and specialists get special bonuses from the Navy and so on.
Our proposal does not tell the Services how they should do
it. What we are trying to do here is give them maximum
flexibility, so that if there are, as you pointed out, certain
specialties that, frankly, like doctors, you actually get
better with more time in your practice, then the Services
upfront can decide that they want to recruit an individual and
have that individual stay on longer than the normal term. But
it works both ways, actually. It is not just to keep people
longer. They can sign up some for less.
We wanted to give them maximum flexibility, so at the same
time that we are giving the individual choice, we are giving
the Services flexibility. Again, it goes back to the question
about what kind of a force do you want to shape? The Services
are the ones who know that best, of course.
Senator Fischer. When you looked at the surveys, were there
any issues identified that the commission did not make
recommendations on? I guess I'm thinking specifically of the
housing allowance. That has been a big issue in the past. The
President has made proposals but yet it was not addressed by
the commission. Are there other instances there? Really, why
didn't you address the housing? We hear about that a lot.
Mr. Maldon. Senator, thank you so much for the question.
We, indeed, took a very, very hard look at the Basic Allowance
for Housing (BAH)/Basic Allowance for Substance, and we
actually looked at the pay table. We looked at the structure of
all of those programs.
We clearly asked ourselves three questions. Number one,
were these programs delivering the benefits that they were
intended to? Number two, were the benefits being delivered in
the most cost-effective way possible? Third, could this
commission design a clear path for modernization to those
programs, in terms of improving those programs.
After looking at those, we did not feel that we could
design a clear path to modernization for those programs, and
instead we could provide a much better benefit to the
servicemembers and do it in the most cost-effective way by
making the recommendations that we have made.
Senator Fischer. Would it be fair to say that the
commission supports with what the Congress did then with the
housing allowance? Or do you support the President's proposal?
Mr. Maldon. Senator, again, thank you for the question. I
am going to ask Commissioner Higgins to respond to the
specifics of that question
Senator Fischer. Thank you.
Mr. Higgins. Thank you, Mr. Chairman, Senator.
Clearly, BAH, in our view, is operating effectively to
provide the housing that our servicemembers need. There are a
number of the elements of the compensation system that drew our
attention very dramatically that we did not elect to meddle in,
if you will, because we believe they are operating effectively.
Others would include the pay raise mechanism. The pay table
itself we believe is operating correctly, special pays and
allowances, and BAH, I think along with that.
Now on each, if you believe that you need to save money,
then obviously the Congress could act to reduce programs. That
is your choice. Our objective was modernization, and systemized
modernization where we go into the structure of a program. We
did not believe that the structure of those programs were
deserving of modernization.
If I could go back to your other question as well, Senator,
the Service Chiefs asked for flexibility. One of the primary
complaints about the retirement system as it exists today is
that it is overtly rigid, inflexible. Service Chiefs implored
us to seek opportunities for greater flexibility. We delivered
that section you are referring to.
Are there some potential frictions between the Services?
Would it cause some concern? Do we believe it is going to be
used instantaneously? No. There will be uncertainty, and I
think that will keep that proposal in check, perhaps for years.
But there will come a day when greater flexibility in the
retirement system will be needed. That provision will be there
to deliver that to the managers.
Senator Fischer. It would also allow the Services then to
compete for the men and women that they need to perform in
different areas, correct?
Mr. Higgins. Always a difficult issue, controlling
competition between the Services. The service cultures are,
indeed, incredibly strong. You always want to endeavor to limit
competition and create systems that operate for the best
interest of the total force. But there will be some insecurity,
and I think that will cause this, as enticing as it may be to
some people inside the Pentagon. Whether or not it rises to a
level where it is implemented is a serious question that is
going to take time to resolve.
Senator Fischer. Thank you, sir.
Thank you, Mr. Chairman.
Chairman McCain. Senator Gillibrand?
Senator Gillibrand. Thank you, Mr. Chairman, for this
hearing. Thank you to all of you for your very hard work.
One of the most important considerations for me in terms of
potential changes to benefits and compensation is that the
approach be holistic and that we ensure the lower enlisted
troops and families do not disproportionately feel the impact.
Can you please walk me through why you believe this is holistic
and how it will impact lower enlisted troops and their
families? Anyone can answer.
Mr. Maldon. Thank you, Senator, for your question. I am
going to ask Commissioner Chiarelli if he would please respond
to the question.
General Chiarelli. I think we have done everything we
possibly can to make it holistic and apply to everyone. We have
two charts that go into the retirement. One enlisted E-7 to
show what his retirement is under the current system, and what
it would be under the new system. I think you can see that it
is clear that he or she would do much better under our proposed
system than they would under the current system.
We have one for officers that shows the same thing.
I don't think it's just the retirement system you should
look at. I think you should look at what we are doing with
health care. We are giving them the ability in health care to
go out and immediately go to see a private provider that is in
their insurance network. Or if they would rather choose to go
to the MTF because that is where they feel they can get the
best care, they can go to the MTF.
Today, under most of the TRICARE programs, it takes a
period of time before you can get that TRICARE referral, and it
is up to 30 or 40 days from the time you want to see somebody
until you can get out to see them, if you can find a provider.
This applies not only to officers and warrant officers, but
it applies to our enlisted soldiers. So I think everything in
our recommendations was geared to ensure that whatever we
recommended was holistic and applied to both officer and
noncommissioned officer in the same way.
Senator Pressler. In a holistic sense, we included
exceptional family provisions and childcare issues in our
report, which normally might not be in such a report. But a lot
of the lower ranking servicemembers have a very hard time with
waiting lists on childcare and so forth, so we tried to be
holistic in that sense.
Mr. Buyer. Ma'am, holistic was not only of the moment. We
were very reverent to the past for our military traditions and
heritage.
Senator Gillibrand. Thank you.
Senator Kerrey. If I could?
Senator Gillibrand. Please.
Senator Kerrey. There is one area we have not talked about.
First of all, you completely destroyed me, because I tried to
get the chairman and the rest of the commissioners to stop
using the world ``holistic.''
Senator Gillibrand. Sorry.
Senator Kerrey. Obviously, I failed in that effort.
Among the things you really need to think about is all
these men and women at some point are going to transition back
into the civilian life. The changes we are recommending in the
health care side and the changes we are making on the
retirement side make it much easier to do that, because there
isn't an abrupt differential between what we are recommending
and what the civilian population is doing.
Senator Gillibrand. So to continue along that line, I'd
love to understand better the health care proposal. I
understand that part of the recommendation is to create a basic
allowance for health care based on the average family's out-of-
pocket costs to cover the cost of premiums and the co-pays. So
how do you account for families with extraordinary needs? Will
they pay more? I'm especially concerned about families with the
special needs dependents, children with special needs
specifically.
Mr. Maldon. Senator, thank you for the question. We spent
an inordinate amount of time talking to families across the
country about the challenges they had with exceptional family
members. I'm going to as Commissioner Buyer to speak to that,
the specifics of that question.
Mr. Buyer. There are two parts to the question. I'll do the
health care and then the extraordinary families piece.
To the basic allowance for health care, you are correct. In
order to make that determination, it will be decided by OPM.
OPM will manage the plans and they will take the average of
those premiums of the plans that were selected in the prior
year. They also then will look at that average to come up with
the co-pays and the deductibles.
Senator Gillibrand. Does OPM help families navigate it,
because this is a new system for them.
Mr. Buyer. Part of our recommendations with regard to
literacy training, literacy is not only for financial literacy,
because now, as we move into the Thrift Savings Plan and
government contribution, there is a financial literacy piece.
But there is also a health piece to help people navigate.
This really is calling for more empowerment of the
individual. It goes to that opening question that Mr. Higgins
really posed to all of us on day one, which is that we are very
used to our military being paternalistic. So as we look at what
is happening in society and how dynamic, I want to say the new
generation is, not that they are the selfie generation. They
are the generation who want to have greater controls about
themselves. They watch their peers making contributions into
401(k). ``How about me? I am in the military. I want to
participate, too.'' So we have come up with that blended.
With regard to health care, we are also making that
empowerment of choice in educating them about how important it
is to make the best plan for themselves and their family. When
we give them the financial literacy and the health literacy,
when they leave the Service, it is a better individual and it
is a better family.
Mr. Maldon. Senator, if you don't mind, I'd like to have
Commissioner Higgins follow up on the latter part of the
question. It was two pieces.
Senator Gillibrand. My time has expired. It is up to the
chairman.
Chairman McCain. That is okay. Go ahead, Mr. Higgins.
Mr. Maldon. Thank you, Mr. Chairman.
Mr. Higgins. Thank you, Mr. Chairman, Chairman McCain.
Senator, we had a great deal of concern about exceptional
family members and how we would care for them. We have a
proposal, of course, that would add a new level of benefits for
those families. It was one of those areas where we would
increase costs, so we were not all about cutting. We were about
making life better for servicemembers.
In addition, if you had a catastrophic situation in a
family where you had extreme cost that was related to an
exceptional family member, there is also a fund that we would
propose to ensure that those out-of-pocket costs did not get
excessive. We plan on that for about 5 percent of the people.
So there is help there.
Chairman McCain. Senator Ayotte?
Senator Ayotte. Thank you, Mr. Chairman.
I want to thank all of you for the hard work and
thoughtfulness you put into this commission and for having this
important discussion with us.
I do have to say, today, I'm walking back and forth between
this committee and the Budget Committee. As I look at where we
are, Senator Kerrey, to use the word ``holistic'' in a way that
I think the point needs to be made here, is that if you look at
where we are, for example, the President's budget that was just
submitted, by 2021, our interests costs, what we are paying in
interest, is going to exceed the Defense budget.
As I look at the work that you have done, a bipartisan
commission, and we look at what the biggest drivers in our debt
are overall, looking at the big budget, mandatory spending,
programs that we need to have similar looks at--Medicare,
Social Security, that are very, very important programs to
people.
I appreciate that you have done all this work. I think we
are looking at our military stepping forward first in making
many changes. I think that we need to look across the entire
budget too, because where we are is that we are going in 2016
to defense budget only 3.1 percent of GDP and 14.3 of Federal
spending, which is the bottom of the historic range since 1950.
The reason I want to put that in perspective in the big
picture for everyone, we look at the sacrifices that our men
and women in uniform make--the separations from family,
obviously the sacrifices they make putting their lives on the
line, all of that. I think that the work you have done is
really important, and we look forward to delving into it more
deeply.
But I hope in the bigger Congress, as we scoot between here
and the Budget Committee today, that we look at the big picture
and we won't be sitting in a situation where we are going to
continue to shrink the defense of a Nation because we won't
take on the other hard challenges that need to be taken on for
this Nation.
It would be great to see a group like you look at the
bigger picture as well. I just wanted to say that, and thank
all of you for your work.
In terms of a specific question, I wanted to follow up on
the retention issue, because obviously that is important to all
of us in terms of keeping the very best military in the world
and wanting our best and brightest to join the military.
As we look at your proposals on recruitment and retention,
what assumptions did the commission use regarding economic
conditions in the country and operational tempo (OPTEMPO)? So
meaning, what did you assume would be the rest of the private
economic growth, because that always drives, obviously, what
opportunities our best and brightest have? Also OPTEMPO?
Mr. Maldon. Senator, thank you very much for the question.
We took quite a bit of time actually looking at that and
deliberating over those issues. We actually had experts come in
and talk to us about the millennials and what that means, as
well as what it means with the social environment and those
kind of societal changes that have taken place and how that
would affect retention.
I am going to ask Commissioner Chiarelli to speak to the
specifics of your question.
General Chiarelli. I would totally agree with the chairman,
Senator. We did.
A good example where we provided flexibility is at the 12-
year mark with continuation pay. That is not a fixed amount
someone is going to get. We were going to allow the Services to
set that amount based on the economic conditions that they have
at the particular time to maintain the retention rates, not
only the total retention rate but the retention rates by
specialties that they need to continue past that 12-year mark.
So everything we did was based around an OPTEMPO from
peacetime to the fact that we would have to deploy the entire
force.
If you had told me when I was in the Army Operation Center
on September 11 that we would be able to maintain the All-
Volunteer Force at the OPTEMPO that we did for 13 years, I
would have told you there was no way whatsoever. We did.
I had aviators that literally knew that, on the 365th day
of the year, they were going to be back down range. They would
stay down for a year and come back and get another year at home
before they were going back down range.
Why they did that? A lot of it is pure patriotism, love of
country, and a mission they believed in.
I think it is absolutely critical that in times where we
don't have that OPTEMPO, we give the Services the tools they
need. I think you will find throughout our report we have done
that, everything we can to give them that flexibility to
maintain those retention rates.
I would argue, in the earlier question, as I live around
Fort Lewis, WA, today, the biggest issue for retention today is
uncertainty. They just don't know whether they are going to
have a job tomorrow. There is real concern in the force, as you
wander around that post and see folks, how far the cut is going
to go. Is there a future for me here?
I think our retirement plan speaks to that and puts us in
much better position, should we ever have to cut the force
again to provide people who are leaving something when they
leave.
Senator Ayotte. I want to thank all of you. I have some
additional questions I'll I submit for the record.
I would just say, General, to your point, that goes to the
sequester issue too, in terms of continuing to diminish what we
are going to spend on the overall force and our readiness, and
that is issue we already had hearings on, and we need to do
something about. Thank you.
Mr. Maldon. Senator, thank you. Senator, there was a
modeling component to your question. I would like to take that
for the record and then get back to you, too, because we do
have very specific data and details for that.
Senator Ayotte. Thank you.
Chairman McCain. General Chiarelli, I wish that every
member of the Senate could have heard your last comment,
because we are going to be in a very significant struggle here
in regard to sequestration. You reflect the views that were
expressed to this committee by our four Service Chiefs last
week, and I thank you for that.
Senator Donnelly?
Senator Donnelly. Thank you, Mr. Chairman.
I want to thank all of you for your service to the country.
You have all done so many extraordinary things for us.
My fellow Hoosier, Congressman Buyer, is here. Thank you
for all your work, and to all of you.
I also want to say the importance of the extended care that
you are providing for exceptional family members, what you have
done in that area is really significant, and will change lives
for family after family.
General Chiarelli, I wanted to ask you about the unified
drug formulary between DOD and the Department of Veterans
Affairs (VA). You have done exceptional work in trying to stop
the scourge of suicide. You have worked tirelessly to provide
solutions and answers here.
If you would tell us a little bit the challenge when you
transfer from DOD to VA with the drug formulary and what that
is causing?
General Chiarelli. Thank you for that question, Senator. I
really appreciate that.
When I was vice chief of staff in the Army, I had no idea
there were two different drug formularies between DOD and VA I
really believed every single soldier who used drugs the way
they were supposed, who had posttraumatic stress or traumatic
brain injury and was taking an off-label antidepressant that
was developed 30 to 40 years ago, not for the disease that they
had, that their doctor had to work through a whole bunch of the
different drugs to get them to the right one, that when they
showed up to their VA on day one, they would be able to provide
that prescription to their doctor, and he would automatically
refill it. That is not the case.
We have two different drug formularies. The DOD is very
expansive, just about anything FDA has approved, they can
prescribe them, and they do. When an individual finally gets on
the right drug at the right dosage and goes over to the VA,
many, many times in this particular area, antipsychotics and
antidepressants and antipain medications, they find themselves
in a situation where the doctor looks at them and says I'm
sorry, I cannot refill that prescription.
You are going to hear a lot of different stories from
folks, but I continue to have soldiers come to me, sailors,
airmen, and marines today--just last week, I met with one for
coffee who had the exact same thing happen to him.
If there is anything we can fix to get at this suicide
problem, it would be to make sure that once we get a kid on the
right drug and at the right dosage, wherever he goes in the
system, he is able to get that same drug and not be told, ``I'm
sorry, that's not in our drug formulary.''
Senator Donnelly. Isn't there also a confidence factor for
that person, that they feel comfortable with the drugs they are
receiving, with the treatment they are on, and changing it up
is like a life-changing experience?
General Chiarelli. Most of them don't, Senator. What they
do is they go find a private doc to go ahead and give them the
prescription and they pay for it out-of-pocket.
So here we have told them, ``We are going to take care of
you. We really care for your service. This is your benefit.''
They go over and say, ``I'm sorry, you can't have that drug.''
I'm telling you, no one cares if you get St. Joseph aspirin
in DOD and Bayer aspirin in VA That is not an issue. But on
this drug formulary issue for antidepressants, antipsychotics,
pain medications, these things you have to be weaned off of, we
should not put our service men and women in this situation when
they transfer over to the VA
If it is not on the drug formulary, somebody should hand
them a card and say go to your local pharmacy and get the drug.
Senator Donnelly. As the General and all of you know, we
are losing 22 veterans a day to suicide. In the Active Duty, we
lost 132 young men and women in combat in 2013. We lost 475 to
suicide, almost four times as many. So your efforts on this are
life-changing.
I would like to then follow up with a question. As we
transition from DOD to VA, for a number of our young men and
women, obviously, there are electronic health record
challenges. What do you think is the next largest challenge we
have to tackle and knock out?
Mr. Maldon. Senator Donnelly, thank you very much for the
question. We spent a lot of time talking about the DOD-VA
collaboration and what that really means, what effect it has on
health care for veterans.
I am going to ask Commissioner Buyer to speak to the
specifics of that question first.
Senator Donnelly. Great. Thank you.
Mr. Buyer. When you look at our recommendation eight,
Senator Donnelly, we are asking that the Joint Executive
Committee that has authority, it doesn't have power now. That
is pure heterodox. We are asking that you give it statutory
power to actually implement the recommendations.
When we met with Secretary McDonald, two things we learned.
One is they said they agree with the commission. But could you
also--this wasn't in our recommendation and I throw this to
you, because I anticipate the Secretary of the VA would say I
would like to have parity, so when the Joint Executive
Committee meets, the Deputy of the VA meets with the Under
Secretary for Personnel. It is not the same. If you raise that
so that the Deputy Secretary of the VA and the Deputy Secretary
of the DOD meet at the Joint Executive Committee, and give them
the authority with the power to implement, big difference.
So with regard to the blended recommendations and the exact
antidepressants or antipsychotics General Chiarelli spoke of,
or pain medications, let the experts make that decision with
regard to where in the formulary it should be blended. With
respect to large capital projects, never again should we have
the scenario where we all struggle trying to get the timelines
for the building of an Army hospital and a VA hospital. That
shouldn't ever occur to us again.
With regard to your specific question, ``What do you really
anticipate, Steve, the biggie that is going to happen next?''
It really is this challenge, as the country moves to set these
national standards for the electronic health records. So we
have the scenario whereby you are responsive with regard to the
VA and the scheduling debacle. We said that we will move to
this Choice program, Senator McCain, that you talked about. We
will have this increase of more non-VA care. When you are on
the Committee on Veterans' Affairs in the House, around the
2004, 2005 timeframe, we were spending about $400 million for
non-VA care. Today, $6 billion. It is only going up.
So think of this, DOD has a contract let to create their
own new version of their electronic health record. VA is doing
the evolution of VistA, and they want to make sure, as they
move to their new programs, that they have data standards so
they can be bidirectional.
At the same time, the VA is doing more non-VA-based care in
the private sector. In order for there to be continuity of
care, those private docs have to be able to communicate then
with the VA So we are talking about bidirectional, so they can
communicate. That is a huge challenge.
Now in DOD, as they move to their new electronic health
record, and as we make recommendations to you to move toward
the selection of plans, meaning there is going to be a lot of
care provided in the private sector.
So this setting of national standards on how the country
will communicate is extremely important. That is what I would
see, Senator Donnelly, as the biggie that is about to come. It
is about your leadership on setting those national standards.
Senator Donnelly. Thank you to all of you, and thank you
for your extraordinary service across-the-board.
Thank you, Mr. Chairman.
Chairman McCain. Senator Sullivan?
Senator Sullivan. Thank you, Mr. Chairman.
I wanted to also thank the members of the commission for
the great work that you have been doing for the country, now
and before.
I first want to get a sense of kind of the big macro
issues, the competing issues that you have seen, Mr. Chairman,
as part of your mandate. In particular, what I was interested
in, is there a concern about the projected growth of benefits,
of retirement, that ultimately will be or could be taking away
from training and readiness? I think we all want to make sure
we are taking care of our troops. I think, though, sometimes
what gets lost is ultimately the best way to take care of them
is to make sure, if and when they need to go fight, that they
come home alive.
Is that an issue that the commission has had to deal with
on a broad scale? This kind of tension between competing issues
that we are looking at with regard to military expenditures?
Senator Kerrey. Mr. Chairman, can I take that question?
Mr. Maldon. Senator Sullivan, thank you very much for your
question. I knew that Commissioner Kerrey would want to answer
this question, so I'm going to ask him to respond.
Senator Kerrey. Since I'm notoriously holistic in my
thinking about such things.
I argued and I think commissioners were persuaded that for
us to address this problem that you have identified, without
addressing the big one--the big one is Social Security and
Medicare. That is crushing all the appropriation accounts.
It would be unfair to identify military retirement as the
big problem, because it isn't. The big problem is Social
Security and Medicare.
So it seems to me to address military retirement without
going after Social Security and Medicare is basically saying we
are going to balance the budget on the back of our military
retirees, and I think that would be a wrong thing to do and
send a terrible signal.
Mr. Zakheim. Could I jump in here?
Senator Sullivan. Yes, sir.
Mr. Zakheim. Since I had to deal with exactly that question
at DOD when I was comptroller.
First of all, there is a huge misunderstanding as to how
much is being spent on military, as part of the defense budget.
People think it is 50 percent. It is not. It is 29 percent. We
write about that in our report.
If you add the civilians, the defense civilians, that
brings it up to about 40 percent. But that is a whole other
category. That is not something we focused on.
The real issue is, can you modernize what you are offering
to your military at the amount of money that you are spending?
If you can spend a little less and modernize a little more, so
much the better.
That is where we started. We started with modernizing. We
started with choice. We started with what my fellow
commissioner doesn't like, holistic approaches. But that is
where we began.
Then we looked how things fell out. It turned out, it fell
out that you could actually save the government money as well.
You could actually do better by your people and still save the
government money, which tells you how inefficient the current
system is.
The reason it is inefficient is not that it was
deliberately so. When the All-Volunteer Force started, who was
in it? Mostly young men, unmarried. Now look at what we have. A
completely different kind of force.
So we have to be concerned about Extended Care Health
Option (ECHO) programs. We have to be concerned about
childcare. We have to be concerned about a lot of different
things that just weren't paramount in 1975.
That is how we approached it. We did save some money, but
that wasn't the driver, and it shouldn't be.
Mr. Buyer. Senator, I'd be very careful about getting
sucked into this debate of people versus procurement.
Senator Sullivan. I'm not talking about just procurement. I
am talking about hard training for our troops.
Mr. Zakheim. Again, frankly, this is not the issue, because
the amount of spending on personnel has been level.
The real problem, and I think Senator Ayotte pointed it
out, and several others, is there is just not enough money
going to defense, full stop. That is the issue.
Mr. Buyer. When you hear that personnel costs are
unsustainable, the baseline that is used for that is year 2000.
The question you should and is why was the year 2000 chosen as
the baseline to prove that somehow personnel costs were
unsustainable? Congress made a lot of the conscious decisions
to improve the personnel system. We did REDUX reform. We did
the VA formulary reform. We changed the pay tables, and we did
TRICARE for life. Then as you went into war, we did the G.I.
Bill and the pay raises.
So there was a reason, a clever reason, why the year 2000
was chosen.
General Chiarelli. I would only add, and I'm telling on
myself now, my staff used to tell me to come up here 21 times,
and if you go back and look at my testimony, I always quoted
the fully burdened cost of a soldier.
I learned through this commission work that the cost of a
soldier hasn't really gone up. It is what you hang on that
soldier.
Look at an M16 rifle and what it looked like in Vietnam,
and look at that same weapon system today with all the sights
and bells and whistles that we are putting on it. When you look
at the fully burdened cost, you are rolling in the additional
costs of other things and applying that to personnel accounts,
which I was totally wrong in doing that. I apologize.
Mr. Zakheim. One last point, which is really important.
General Chiarelli pointed out that he couldn't imagine, and
neither could I when I came in in 2001, that we would be at war
for 13 years and be able to keep all the people we kept. Well,
if Congress and the executive branch had not done what it had
done, as Congressman Buyer said, in 2000, 2001, 2002, do you
think we would have kept them?
Senator Pressler. Let me add to that, that when this
commission was created legislatively, we were very limited in
the sense we had to assume an All-Volunteer Force and we would
not take anything away from anybody who has it now in certain
areas.
So really a lot of the commissioners might have had great,
grand ideas, but we tried to stay within the confines of our
legislative directives.
Senator Sullivan. Thank you.
Thank you, Mr. Chairman.
Chairman McCain. General Chiarelli, it is very rare we get
an apology from a General before this committee. I hope we will
mark this as a historic moment. I thank you. [Laughter.]
Senator McCaskill. Mr. Chairman, I'm surprised balloons and
confetti didn't drop from the sky. [Laughter.]
Chairman McCain. Senator Heinrich?
Senator Heinrich. Thank you, Mr. Chairman.
I want to thank all of you. Lord knows what a difficult
charge this was. Coming from a State with incredibly high rates
of volunteerism, I want to say how much I appreciate the fact
that you came to these recommendations unanimously. Serving in
this body right now we don't hear that word ``unanimously'' as
often as we would like to.
But I wanted to ask you if you could elaborate a little
more for everyone here and, certainly, for this panel about the
process you used in terms of gathering feedback from our
servicemembers, from their families, at military installations
and at veterans service organizations (VSO)? That was one of
the things I was concerned about in this process, but I was
quite impressed with the level of feedback as you move towards
your recommendations.
Mr. Maldon. Senator Heinrich, thank you so much for the
question. We spent a lot of time traveling across the country
meeting at different military installations. We met with
servicemembers--that is, Active Duty servicemembers, Reserve
component members, as well as retirees.
We held sessions. We held town hall meetings. We held
public hearings as we traveled. We would spend a lot of time
trying to really listen. We listened very carefully to the
comments that the servicemembers and their families shared with
this commission, about things that they really were concerned
about.
They talked about OPTEMPO, the challenges with that. They
talked about the long waiting list of trying to get their child
into a childcare center. They talked about not getting access
to health care and the problems that they had with trying to
get specialty care and waiting to get through the referral
system. All of those kind of things are what we used.
We received tens of thousands of comments that came in to
the office from across the country from servicemembers about
things they were concerned about. Then we also received the
many, many responses from the survey. The survey was a very,
very instrumental part of this process. We sent out surveys to
over 1.3 million retirees. We sent it out to our Active
components and Reserves. We received over 150,000 responses
back that said, ``Here is what it is that is important to us.
Here is what we prefer. Here is what we value.''
They basically stack ordered one benefit over the other, so
we have a pretty good indication of exactly what is important
to them.
Senator Heinrich. I want to thank you for that. I want to
move my next question to Senator Pressler, because I really
appreciated your comments about the culture of service that
exists in our Native American communities. Certainly, that is
one of the reasons why New Mexico has had such an enormous
overall rate of volunteerism, military volunteerism, over the
years.
I was wondering if you had looked at the recommendations in
terms of having the sort of TSP model and a contribution
portion, if you serve as an enlisted person for 4 years, very
much at the beginning of your lifetime career, and you build
that early nest egg through this process, what that looks like
at aged 65-plus, whenever you actually retire? What impact
would that have on tribal communities, as well as on rural
communities, where there are very, very high rates of
volunteerism?
Senator Pressler. We do have a problem, in the sense of the
Native Americans. I just couldn't get mine to go through the
Academies, but they do join the Service for 3 or 4 years. They
have a very high rate of service, and they are very proud of
it. You go on the reservations, and I know your State, they
have American Legion veterans and Vietnam veterans groups and
so forth.
The component that they would take out at least, and most
of them go with no retirement, but they would have at least 1
percent the government would contribute to a TSP. After 2
years--one of my colleagues might correct me--they can
contribute up to 6 percent, through the match.
But when they are elderly, they will have something,
something. It depends how our stock markets work out.
But I think, in our country, we have to the depend on the
citizen soldier. In my view, it isn't just to retain everybody
for 20 years. It is for 3, 5, 6. In my case, I served for 3
years. I got no retirement, but my percentage counted when my
Federal civil service retirement came. So I did get something.
I got 2 percent a year for the time I was in the military.
Most Native Americans don't get to that, and we also have
the compounded thing that most of them do not go back to
careers. They go back to unemployment, and they do have all the
problems that you know about it. But for them to have some
connection to some small retirement benefit at the end I think
would be a very good thing for us to have in our country.
Mr. Maldon. Senator, I'd like Commissioner Higgins also
follow up on that question, if you don't mind, very quickly.
Senator Heinrich. Chairman, I'm out of time. Would you be
willing to indulge?
Chairman McCain. Not a problem.
Senator Heinrich. Thank you.
Mr. Maldon. Thank you, Mr. Chairman.
Senator Heinrich. Commissioner Higgins?
Mr. Higgins. Thank you, Mr. Chairman.
Senator, tapping into the economic power of the United
States through the Thrift Savings Plan is, indeed, a really
powerful financial incentive.
We looked at your point about examining what kind of growth
would be experienced when the individual arrived at retirement
age, say 67. The individual who had done no personal
contributions would still, if they leave at 8 years of service,
would still have $18,000 available to them in the their Thrift
Savings Plan.
But if they contributed and received the full matching of 5
percent of their base pay, they receive at age 67 over $90,000
in benefits that would be available to them. So it is a pretty
powerful mechanism, and I think would serve any community,
including Native American.
Chairman McCain. Senator Rounds?
Senator Rounds. Thank you, Mr. Chairman.
Gentlemen, I most, certainly, echo the message from the
rest of the committee up here when we talk about the work that
you have done. Senator Pressler and I have been on the campaign
trail together for a couple of months in the last year and we
have met with a lot of members of the Native American tribes.
They truly are a warrior society and we respect what they have
provided to our country in terms of service to the Armed
Forces.
My question to you today is that you are trying to put
together a system that while it is similar or at least you want
similarities for services being provided, you are trying to
provide these services and benefits to a whole lot of different
groups. You have the folks that are over the age of 65, those
between 60 and 65, retirees who have left with 20 years of
service but not yet reached retirement age. Then you are also
looking at those individuals who are still there within the
military. Then you are looking at those who are coming into the
military.
How do you transition this from what it is today? I got a
letter from a man who served over in Iraq, and he had 20 years
in, came back. He says, after sequestration, the message he
gets is, my retirement because I've done my 20 years but I'm
not yet 60 is I get my retirement, but instead of having an
inflation factor, I get inflation factor minus 1 percent.
The savings to us was $6 billion, but he says, in the
middle of sequestration, the first thing people do is come back
to the service men and women who have served to be the first to
give back. Why are we the first in line to get cut?
Now today, I think the challenge this commission has and
the challenge that this committee is going to have is to go
back to a lot of those same individuals and say, look, here is
$12 billion that is being reduced, or at least being
reallocated. Are they doing it on our backs? Those of us who
came in and thought we had a deal, knew what we had for
retirement, knew what we had for health care, what is it? How
are we being taken care of? Is there a transition plan that
says we get a chance to choose A or B?
If you could, please, I think the work you are doing here
is important to do, but I think the challenge we are going to
do have is how do you convince these men that are serving or
have served that they have some options available? Is there a
transition plan that you have thought about for those
individuals?
Mr. Maldon. Senator Rounds, thank you very much for the
question. We, indeed, spent quite a bit of time talking about
that very issue that you raised in your question. As we thought
through all the transition assistant kind of challenges that a
servicemember faces when they are transitioning out, we took
all of that into consideration.
I'm going to ask Commissioner Chris Carney to talk to the
specifics of that.
Mr. Carney. Thank you, Mr. Chairman.
Once again, with my colleague right here to my right, the
holistic approach that we took to consider the retirement and
to make sure that we first of all did no harm, was one of the
mandates given us to. Senator Kerrey also mentioned something
very important, and that is that we don't try and balance the
bank on the backs of the military. We tried to not do that.
So in terms of specifics, some of the programs, and we
could talk about this in further committees later on if you
want to, but when we talk about ramp programs, so we don't
transition automatically into something that might cost a
little more to a retiree or a servicemember, that there would
be build-ups over 15 years, for example.
But one of the things that we thought was vitally important
in all the things we recommend is a good sense of financial
literacy. So if our recommendations are adopted, there would be
a very robust financial literacy component for all the troops.
That starts when they are in boot camp or basic training, and
at various points in their career, so they can make good
financial decisions going forward.
What the Federal Government does often impacts them, and
that cannot always be accounted for. Promises have been made,
and sometimes promises have been, I don't want to say broken,
but perhaps bent a little bit.
But when you do the financial planning, when you enable the
servicemember to have the tools at their disposal to make good
financial decisions, the impact of the bending of the promise
by the government may be reduced somewhat.
So I have a son who is a lance corporal in the Marine
Corps. He's making a little money now and came to me on his
last leave and said, ``Dad, what do you know about Ford F-
250s?'' I said, ``I don't know much, but I know you can't
afford one.'' But a lot of kids aren't making those decisions.
They are going ahead and buying that expensive vehicle, so they
don't have the money necessary later on.
We want to have a robust, as I said before, financial
training system so they understand the value of money, they
understand the value of money later in their careers. So when
they hit the 12-year mark and they are making that decision, do
I want to stay in and continue on, or do I want to go out, the
money is there to make a good financial decision for them.
So to try to reduce the impact of maybe a bent promise, we
want to empower the servicemember with the ability to make good
financial decisions to kind of reduce some of that.
General Chiarelli. I would only add also that the specific
thing you said, sir, about somebody who has served 20 and is
retired, is grandfathered in the current system. They will not
be part of this system.
Now, in the area of benefits that may fluctuate and change,
that might affect them. Co-pays, but that is done over a period
of a 15-year ramp, medical co-pays.
But that 20-year person is grandfathered in the current
system, and it would not change.
Senator Rounds. Thank you, Mr. Chairman. I would just say I
hope when we are all done with this, that the thought of
bending the promises is one that we try to get away from.
Mr. Carney. That was, certainly, our intent, Senator. Yes.
Senator Kerrey. I think you should see the recommendations
too, Senator, as a continuation of what Congress has done for
the last 13 years.
Our goal is to improve the quality of paying benefits for
our military. That was the primary objective of the commission.
We have sent a group of holistic recommendations to you that we
do think accomplish that objective.
Mr. Carney. Senator, we really honest to God tried to keep
the faith.
Mr. Maldon. Senator, let me just say that I think, in
summarizing what my colleagues have said here is that,
everything that we did was totally done to protect the
benefits, protect the interests of the servicemembers. I
wouldn't want anyone to get the impression that we are implying
that we were actually cutting benefits of the servicemembers.
It was quite the contrary. Even though we yield savings as a
result of the approach that we took in reforming the structure
of those programs, there was absolutely no interest on our part
to reduce the benefits of the servicemembers, in fact, it was
to support those and improve those benefits. I'd just like to
make that point.
Chairman McCain. Senator Kaine?
Senator Kaine. Thank you, Mr. Chairman.
Thanks to all of you for your service. This is an
incredibly important topic, a very difficult one, and maybe
even a thankless one.
I have had a chance to begin to review the recommendations,
and I see a lot of real positives. I think some of the focus on
matters like financial literacy, the transition from veteran
status to civilian life in terms of employment training and
assistance, these are very far-reaching recommendations. Very
much appreciate your work.
I am going to make an editorial comment that has nothing to
do with any of you. You all were asked to serve on this, and
you said yes, and you've done a good job.
I am not particularly a sensitive person. But when I walk
in and it is a panel, and we are supposed to talk about
military compensation, and there is not one woman sitting here,
it's just like, wow. I mean, really?
One of the first things that happened when I got in the
Senate was the order came down from then-Secretary Panetta to
open up combat billets to women, to work on that.
We have so many women serving in the armed services now,
and on these issues, military compensation, the role of
military families and their thought about these things are
critical.
I have a youngster in the Marine Corps, too. As he's
talking to his guys, they are often talking about what their
own families are saying to them about things commissaries,
exchanges, retirement, health care, salary.
So we send a signal, and you didn't form the committee, in
terms of the membership. It was probably on us or the
executive. But I just have to say that it seems so obvious that
if we are really trying to have a military open to women----
Senator Kerrey. Strike ``probably.'' It was you and the
executive.
Senator Kaine. Okay, yes. So then I'll make it as a point
obviously not critical to any of you who said yes, but it is to
us. I am stunned about it. That is my editorial comment.
Mr. Buyer. Senator?
Senator Kaine. Yes?
Mr. Buyer. I would invite you to actually meet the women
who serve on the staff. They are sharp,, brilliant.
Senator Kaine. I'm 100 percent certain about that, but it
is no substitution for sitting at the--because we always have
panels in this committee that look just like this where the
folks backing up the panel members are the smart, talented,
incredibly competent women. I just want to see some women at
the table. That's my editorial comment.
Senator Kerrey. Raise it in the caucus, Senator.
Senator Kaine. Yes.
Let me ask about collaboration opportunities. I don't think
this was gotten into in significant detail when I was gone, but
what are the collaboration opportunities we can harvest between
the DOD health system and the VA? Looking down the road, there
have to be some economies of scale on the cost side, but there
also have to be improvements in quality of care at both ends of
the spectrum, if we do additional collaboration.
Did you get into that at all, or what thoughts would you
have for us?
Mr. Maldon. Senator Kaine, thank you for the question. We
spent a lot of time talk about the DOD-VA collaboration. It was
mentioned earlier by one of my colleagues as we talked about
the formulary issues, the benefit of having a uniform
formulary. We talked about shared services. We talked about a
need to do better standardization, have standardized policies.
We have actually had conversations with the Secretary of VA
about that and we talked to people at DOD about that.
I am going to ask Commissioner Buyer to talk a little bit
about some of the additional specifics here as to how we
respond to the challenge of that and what we did about it
within our recommendations.
Commissioner Buyer?
Mr. Buyer. Thank you. Senator, earlier we talked about the
real empowerment of the Joint Executive Committee. It really
lies to the heart of ensuring that two departments of
government work together seamlessly. So as that solder, sailor,
airman, Marine transitions from their active status into the
VA, they really shouldn't feel it. As soon as they come over,
they should feel that medical record is there and that the
doctor who has just taken other my care, that there is true
continuity of that care.
That Joint Executive Committee that has authority, it
doesn't have the power to implement. So they can just create a
lot of paper. So we are recommending that you actually give the
Joint Executive Committee, not only do we create parity between
the DOD and VA who lead the committee but also give it the
power to actually implement, and implement what.
So the recommendations on blending the formularies with
regard to the antipsychotics, call it the mental health drugs,
antidepressants, pain medications, let them set classifications
of those drugs and how it should be blended. Extremely
important, and General Chiarelli spoke to that earlier.
The other would be on capital projects, whether it is
building military hospitals or a VA hospital in close
proximity, or outpatient or super-clinics, have some resource
sharing. A lot of sharing initiatives that you find when you go
around, there are a lot of local agreements. It is based on
personality-driven. But there are a lot of things that work and
are effective from those crucibles and that the Joint Executive
Committee can actually then centralize those decisions rather
than that being decentralized.
With regard to the medical information, that is the I.T.
issue. The Joint Executive Committee can really drive how the
electronic health record is developed through its evolutionary
process between the evolution of VistA and this new electronic
health record that is about to come out of DOD, and how we then
communicate with the civilian doctors who are providing the
non-VA-based care to the VA. Then if you adopt what we are
recommending, this choice of civilian plans, you have doctors
out there that are providing that care. That electronic record
needs to ensure that it is interoperable between your doctor
back at home and that doctor from the MTF. But guess what? When
they transition then over into the VA, you want to make sure it
is interoperable, too.
Senator Kaine. That is very helpful. I would say, on the
collaboration side, as I conclude, my sense is, with Secretary
McDonald at the VA, he is a guy who understands collaboration.
So there is a collaboration moment that is coinciding with the
issuance of these recommendations, and we ought do what we can
to take advantages of it.
Mr. Buyer. When we met with the Secretary and the Deputy
Secretary, they had already met with us previously and they
also had initiated a policy paper. I haven't had to chance to
talk to General Chiarelli about it, but they are asking that
doctors, that that they default to the prescription that DOD
doctor had written.
It is kind of nice to put it on paper. I would feel much
more comfortable if it were something that the Joint Executive
Committee looked at and gave it the implementation authority to
ensure that if you had a prescription on Active Duty, a mental
health drug, when you go to DOD, to ensure that you are going
to get that drug is extremely important, because there are a
lot of social ills that occur if he falls backwards.
Senator Kaine. Right. Thank you.
Senator Kerrey. Can I just add something? At the beginning,
Senator Kaine, the chairman invited us to speak our minds,
which was dangerous in my case.
I think this collaboration idea is not going to work. I
don't think you are going to get where you want to go unless
you start considering actually putting these two systems
together. Because of the readiness component, it has to be DOD
who is going to be in charge of it.
I think you have to go further. I would give this committee
both authorizing and appropriating authority so they can't
basically rope-a-dope you. You have to have some pretty
substantial change in order to get what you want.
This is almost the 7-year anniversary of Dana Priest's
story about Walter Reed. I remember Danny Inouye calling me up
because both of us had been transferred out of a military
system into the VA system. What do we need to do?
So I spent a fair amount of time thinking about this. We
have a good recommendation in there, and you are going to
improve collaboration. But unless and until you consider
putting these two systems together and changing Senate rules so
this committee both authorizes and appropriates, it seems to
me, unless you at least consider those two things, it is going
to be very difficult to get the kind of changes that you want.
Chairman McCain. Senator Tillis?
We have always agreed with that, by the way. [Laughter.]
Senator Tillis. I want to go back to a question or follow
up on a question that Senator Manchin asked about the
perception and, Senator Kerrey, I think you responded to it,
the perception that we are losing people because we are not
competitive with the market, say at year 10.
I think you made the comment that we are at or above
market. Did you to say that? Could you expand on that?
Senator Kerrey. Actually, I did say it, and I cannot expand
on it. It came from the analysis we did on the commission, that
we are at or above where we are in the private sector.
It was congressional action that did it. I think we need to
maintain that status.
Senator Tillis. So the perception that people are leaving
at year 10 based on pay or benefits may not be right? There may
be other reasons they are leaving, lifestyle or other, but not
pay and benefits?
Senator Kerrey. I would say that it is likely you can have
individual cases, particularly technical individuals. Earlier
Dov was talking about one of the problems we have is a lot of
these new civilian companies forming up, and they will pay for
a security clearance. They are apt to bid up what the military
is doing.
I think you will find exceptions to it. But I think in the
aggregate, you will see that the military pay is at or exceeds
what is available in the civilian world and the benefit package
as well.
I'm for that. General Chiarelli talked about it earlier. I
came into this commission believing that it is likely we have a
real problem with pay and benefits. I don't believe we do. That
is not the problem.
That problem has a lot more to do with the retirement
issues, and there, as I said earlier, I think it would be
grossly unfair to address military retirement without taking on
the big ones, which are Social Security and Medicare.
Mr. Maldon. Senator Tillis, let me follow up, please, on
that question by having Commissioner Higgins talk, because we
did quite a bit of analysis and review around that. I want him
to talk specifically to what our modeling told us.
Mr. Higgins. Thank you, Mr. Chairman.
Senator, I believe, in a general sense, retention today is
probably as good as the military has ever seen it. Having said
that, there are select skills that have always been
historically very difficult to maintain. Some of the stories
that you hear often are, let's say, nuclear-skilled individuals
in the Navy are always difficult to retain, because once they
acquire those skills, there are very lucrative opportunities on
the outside.
In recent years, during the war years, what emerged was the
10-year departure of special operators. Those people obviously
acquired significant skills during their tenure in the military
that now have very high values placed on them in the private
sector.
The military responded to that with a significant bonus
that I think turned the tide in that community. The Navy has
always struggled with additional bonuses and several of their
high-demand skills. But I think as a general rule, and this may
rely mostly on the economy and the unemployment rate, but as we
have moved through these last few years, retention has been
quite good.
Senator Tillis. One final question for the chairman, or as
directed by the chairman, the recommendations that you put
forth, how have they been embraced by the stakeholder
community? I have heard it said that we are providing for
efficiency and value. It sounds like there winners and not a
lot of losers. Are there areas out there that there are concern
amongst some of the stakeholder groups?
Mr. Maldon. Mr. Chairman, I think at this point the
feedback we have gotten from the VSOs, the stakeholders of that
like, they are very receptive to what we have done at this
point in time. It would be premature to say they are 100
percent on board with this, because they are still looking at
the details of the report and our recommendations themselves,
and they have to do their analysis as well.
I think DOD is doing the same kind of thing, although I
think the general feedback at this point from DOD and members
of the joint staff is that they totally understand the merits
of our report, what we are recommending, how those
recommendations support fiscal sustainability of the
compensation programs, and the fact that we have been able to
achieve efficiencies by reforming the structures of those
programs without taking away any benefits, in fact adding
benefits in most cases for our servicemembers.
Senator Tillis. Thank you, Mr. Chair.
Senator Reed [presiding]. Senator Hirono?
Senator Hirono. Thank you, Mr. Chairman.
I do want to commend Senator Kaine for his observation that
it is always good to have women at the table as well as on the
committee.
I am looking at your retirement plan, and again, I thank
all of you for your service, and I'm looking at the retirement
plan that significantly increases the number of members who
will receive benefits. I think that is very commendable. The
plan does require contributions, basically mandatory 3 percent
deductions from the servicemember's pay as well as depending on
investment return.
Can you share with me what the current servicemembers think
about a basically mandatory 3 percent contribution to TSP, and
what concerns you have about volatility in the market that will
probably arise, and what assumptions did you make regarding
market volatility in coming up with your charts regarding
retirement benefits?
Mr. Maldon. Thank you, Senator, for the question.
Senator, on each of those counts that you just mentioned,
we actually looked at those. The response to the first part of
your question, regarding what servicemembers think, I think we
were informed that servicemembers felt very strongly that this
is an increased benefit. This is kind of what they are wanting.
This is what they are looking for.
I think they told us through the survey responses that they
really want choice. They want the flexibility of being involved
in helping design the kind of compensation package they prefer,
and then how they would receive pay. Those things are very
important to them and they mentioned that to us.
I am going to ask the Commissioner Zakheim to talk
specifically to the other part of that question and those
benefits.
Mr. Zakheim. Thank you, Mr. Chairman.
Senator, first of all, in the United States generally, 97
percent of those who are put automatically into a plan stay in
that plan. That already gives you one indicator.
Another indicator is that right now 40 percent of the
military are voluntarily contributing to TSP. So 4 out of 10
without any kind of automaticity, without any kind of
government matching, or anything like that, are putting their
money into TSP.
So if you take those two figures and put them together, you
are going to get an answer that tells you that they will all
see the benefit of this.
Frankly, you can always opt-out if you want.
Senator Hirono. I understand. That part I think I am
reassured by your responses.
On the market?
Mr. Zakheim. On the market, the volatility, what we assumed
is that the money would be invested in very, very conservative
kinds of funds. Obviously, again, in TSP, you can choose from a
variety of funds. But our assumptions were that there is one
particular fund that would essentially follow people's
lifestyle, so when you are younger, you are probably willing to
take more risk. As you get older, you get more conservative.
Again, I think the record of TSP itself, and the fact that
people, that the civilians stay in, that the military
voluntarily go in, tells you that they trust the fund managers
and, of course, are making their own choices.
So I think we felt very comfortable with the
recommendation, in terms of market volatility.
Senator Hirono. Thank you. That is reassuring.
I am looking at one of your other charts, chart nine, where
pregnancy and childbirth and newborn care are the top two
procedures done in the MTFs. If we move into the private sector
insurance market, what kind of effects do you think will occur
as a result of that, in terms of cost and other impacts? These
are huge numbers for these two procedures.
Mr. Maldon. Senator, thank you for the question.
Commissioner Buyer, would you respond first to the
question?
Mr. Buyer. I am going to do a tag team with General
Chiarelli in my response to this.
I think this chart when you look at it, it is surprising.
It will be surprising to a lot of people when they look at
this. There is an assumption that the medical providers at the
MTF are providing procedures that really hone the skills that
make those doctors and nurses combat-ready. Then when you look
at a chart like this, you say, well, I suppose building the
cohesion of the medical team, that is an added plus. But with
regard to the skill sets that are needed, something is missing
here.
What I am going to do is tag team with General Chiarelli
here because there are two pieces of this. As we move to a
selection of plans, we want the MTF to be part of the network,
because the procedures that the MTF needs are not these
procedures that you see in the chart.
So the creation of the jointness and the essential medical
capabilities, I am going to pass it over to General Chiarelli,
if I could.
General Chiarelli. I think it is absolutely critical that
you understand the concept of essential military capabilities.
That is built into what we are doing here.
Those are those things, simply stated, that transfer to the
battlefield. When you get the surgeons general in here and you
show them this chart, they will argue that, hey, we get a lot
of great training out of taking care of all of those
childbearing issues and childcare issues.
All we are saying is that probably you do, but if we could
rearrange your workload, we would give you more of the kinds of
things that you see in combat.
I think it is absolutely essential, as you talk to the
different interest groups there, as a retired person, I'm
looking at how you are going to provide care for me in my
golden years. If you get stuck on that, you will miss the
essential piece of what we have to do in the medical area, and
that is care for our men and women when they are sent into
harm's way, and ensure that we have people who are trained to
do that based on the kinds of wounds they are going to get.
Senator Hirono. Thank you, Mr. Chair.
Senator Reed. Thank you.
Senator Lee?
Senator Lee. Thank you, Mr. Chairman.
Thanks to all of you who are appearing here today and who
have served on this commission to make recommendations that are
so important.
This is, of course, something that is going to have a
profound impact on the men and women who are currently serving
or have previously served in our military.
I hope that all Americans, particularly those who are
currently serving or are veterans, can take the time to give
these recommendations the thorough consideration they deserve.
They can become part of a debate, a debate that we need to have
to help figure out how we can provide better for the needs of
those who serve us and have served us in the past, and
simultaneously help us to maintain the strength, the viability
of our military.
I will ask this question to anyone who would like to answer
it. Did the commission find the current lack of a retirement
program similar to that recommended by the commission, that the
absence of a plan like that right now is having an impact on
recruiting and retention? In other words, currently, we don't
have a retirement system in place in the military that provides
any benefits for those who serve for less than 20 years. Is
that impacting recruiting?
Mr. Maldon. Senator Lee, thank you for the question.
When we looked, we took a very strategic approach to
designing the right kind of structure for the compensation
programs that are going to really support an All-Volunteer
Force for the future. As we designed the structure for the
program, in terms of how we might make a recommendation to
modernize the current retirement system, we wanted to make sure
we knew exactly what was of interest to the servicemembers that
we would need to recruit and retain.
The recommendations that we provided, we are absolutely
convinced that they are the right set of recommendations here
on having a blended retirement plan, because it does two
things. It actually supports the retention needs by the
Services, and it also supports the recruiting challenges that
the Services would have.
We believe that the recommendations that we made will
absolutely take care of the recruiting and retention needs, and
it is very important that they also support the current force
profiles. The Services were very interested in making sure that
we provided them with the tools so they could make those
adjustments to continue to meet the recruitment and retention
needs for the Services as we move into the future.
Senator Lee. So moving forward, if we were to adopt
something like this, you think it would help recruiting and
retention?
Mr. Maldon. Absolutely.
Senator Lee. Let's talk about the commission's finding. Let
me quote this to make sure I get it right. The commission
found, ``The current compensation system is fundamentally sound
and does not require sweeping overhaul.''
But it also recommends that servicemembers who need
nutritional assistance be transitioned into the Supplemental
Nutrition Assistance Program (SNAP), the program formerly known
as food stamps. So let me just ask the question, if
servicemembers are in need of SNAP benefits, and if the report
is contemplating that some or many of them will need SNAP
benefits, that would, of course, be in addition to their
regular compensation. Does that undermine your conclusion that
their current compensation structure is adequate?
Mr. Maldon. When we talk about the current compensation
structure, we are basically talking about the pay table itself.
We didn't see a need to change the pay table, because the pay
table has supported the All-Volunteer Force for the last 42
years, and specifically during the last 13 years of war.
But we also recognize that because there are constant
changes taking place here, a new generation, and also just the
requirements of the servicemembers themselves, with regard to
the size of families and that kind of thing, so there is an
important purpose that the SNAP program served.
We took a hard look at that, talked through that
extensively. I will ask Commissioner Carney if he would respond
initially. Then very quickly, Senator, I would like to ask
Commissioner Higgins to follow up as well.
Senator Lee. Okay. Mr. Chairman, if I could, I have one
minor follow-up question I want to add to that, if he is going
to answer that as well.
I also am curious to know how many people might be, if you
were to eliminate the Family Subsistence Supplemental Allowance
(FSSA), how many servicemembers might be enrolled in SNAP and
whether we have any kind of estimate as to what the increased
cost would be.
Mr. Carney. Senator, right now, the number of enrollees in
SNAP from the Department of Agriculture is somewhere between
2,000 and 22,000. That is their estimated range. That is the
best information we received.
On FSSA, I think there are 285 people altogether in the
military in FSSA. Now, FSSA is restrictive. It is harder to
get. There is also kind of a stigma attached with it as well.
You have to go through your chain of command to get it, so does
that impact your career somehow? So there are these kinds of
things that make it probably less attractive and probably less
useful, certainly, for the continental United States and the
near territories. Now for overseas, it may still serve some
useful purpose.
But the SNAP program, notwithstanding the fact that it
needs to exist for some of our military, it is something that
is easier to get. It provides better nutritional value for the
families that require it.
So either phasing out or reducing the FSSA program is not a
bad idea because SNAP fills in the gap very nicely.
Senator Lee. Okay.
Thank you, Mr. Chairman.
Senator Reed. Senator McCaskill, please.
Senator McCaskill. First, I want to note that your votes
were unanimous; is that correct?
Mr. Maldon. Yes. That's correct, Senator.
Senator McCaskill. That is quite an extraordinary thing for
all of us who sit on this side of the table. We don't see much
very much that is unanimous, especially with the makeup of this
particular commission. I am familiar and I have worked with
many of you, and I know it is bipartisan, and I know you come
from different perspectives. I know you probably came to the
commission with different viewpoints at the beginning. The fact
that you worked this hard and came up with this proposal
adopted unanimously is something that I hope, before we get off
to the races trying to politicize anything on this side of the
table, that we pause a moment and realize that you might have
gotten this right. This might exactly be what we need to be
doing.
So I want to compliment you in that regard.
First of all, I think our country needs to save more, and
our military always sets the example for our country, in terms
of the values and ethics embraced by our military. So I think
the way this plan embraces saving is terrific.
I think most Americans don't know that if you are in the
military, that your TSP contributions are not matched
currently, unlike all other Federal employees who get a match.
I think that is, obviously, a double standard that is
inappropriate. So the fact that we would move to a match for
members of the military makes a great deal of sense. I think
this part of it is terrific.
Now, here is the tricky part. If we are going to reduce
defined benefits to 40 percent, and someone can retire with 20
at 38, so they are 38 years old, they can't access that TSP
until they are 59\1/2\. Then eventually, not too long after
that, they would be looking at Social Security in addition to
that.
So during that period of time, assuming someone is retiring
at 38 or 39 or 40 from the military with 20, was there any
discussion on the commission about making a special rule or
special circumstances where someone could access TSP before
they were 59\1/2\?
Mr. Maldon. Senator, I'm going to ask Commissioner Zakheim.
These are the kind of questions that these former comptrollers
really love to have.
Senator McCaskill. I have missed him. We had great work,
when I first arrived in the Senate. So I am happy to hear from
you.
Mr. Zakheim. Thank you so much, Mr. Chairman and Senator.
Right now, as you well know, you retire at 20, and then you
start getting a monthly payment. So by definition, the 40
percent you are speaking about, you are going to get.
Now in addition to that, once you retire, you can get a
lump sum payment, if you choose to do so. Or you may say no, I
don't want that, I want it later on.
So you have in fact given the individual much more choice
than he or she has today, because you can choose the lump-sum
payment, and you will get that with a reduced payment until
full Social Security kicks in. Or you can say no, I'm staying
with my 40 percent, my monthly payments. So you basically, now,
are in much more control of your financial situation.
One other point as well, and this was mentioned by my
colleague Commissioner Carney and others. We put a huge premium
on financial education. We actually spoke to some of the
foreign militaries to see how they do it as well.
Right now, you take an 18-year-old or a 19-year-old or 20-
year-old and you fire hose them for a few hours about financial
management, and it is in one ear and out the other. What we are
proposing to do is have regular sessions at key points in their
careers, key promotions, or something happens in your family
life, you get married, you have children, whatever. So they can
learn the nuances of financial management in a way that, when
they hit the 20 or if they leave sooner, they can make an
informed choice about what they want to do with the money they
are entitled to.
So to answer your question, it seems to me, at least, that
you are putting the person in uniform at a far greater
advantage even with the 40 percent versus the 40 percent,
because of the lump sum, because of the financial education,
than they currently have today.
Senator McCaskill. I know my time is almost up, and I thank
you for that.
I will have some questions for the record about whether or
not we should allow them to continue to make contributions
matched to TSP during the pendency of their retirement before
they are eligible to pull out with their payment, whether or
not that costs out in a way that would make sense to the
commission. Some questions about why not just going to FEHBP,
instead of creating another system. What are the advantages
there? Are they substantive in policy or are they political?
Finally, the one that I really would like to hear from you
about, and I want to recognize General Chiarelli for the
trailblazing he worked, especially in the suicide area. I am
very familiar with how hard you worked on that, both while you
were active and after your retirement.
But I'm a little worried about the most expensive
recommendation you made, which is another command, standing up
a three star. We tried to work against quite so many flags. In
fact, Gates, as you all know, did away in 2011 with the joint
forces command, and I am trying to think how this new $300
million a year stand-up adds to the expertise we have now,
because we are still going to have surgeons general in every
branch.
I have to be convinced that we need another group at the
Pentagon. I have a great deal of affection for all of our
generals and what goes with them, but three stars are
expensive, especially everything that goes with them. What are
we really going to gain by adding this new command at the
Pentagon.
I am over my time by 1:48, so I don't know whether the
chairman wants that to be answered now or whether you want to
take it for the record. But that is the only part of this that
I start out a little skeptical about.
Mr. Maldon. Senator McCaskill, thank you very much. Just
very quickly, I know we are out of time here, but I would like
to take the opportunity so that we can respond to that.
Let me just say real quickly, the readiness command that
was recommended, we really deliberated on that. We took a lot
of time and spent it on that. Every recommendation that we made
in this report was made with that in mind, the need for
readiness. There was a readiness implication to every
recommendation that we made.
So when we proposed a readiness command, we did this in a
context of understanding that it is much bigger than a medical
readiness component that it has oversight for. They are much
larger in terms of a number of things that fall underneath
readiness.
The medical readiness piece is only one component of that,
and we were basically wanting to make sure that, if we are
going to ensure success of the medical readiness, we must have
proper oversight. That means having the right kind of people,
the right person in charge with the right kind of ranking to be
able to go to the budget meetings, and to those decisionmaking
venues and hold the presence with the other Service Chiefs, and
to be able to actually have influence with the surgeons general
of the Services.
I will ask Commissioner Chiarelli to speak to that more
specifically, if you will.
General Chiarelli. Senator, I will only tell you that it is
absolutely essential that in this whole process of changing the
way we deliver medical care that we keep our MTFs a viable
training ground for not only the doctors and physicians, but
the entire medical team, to include our corpsmen and our
medics, so that they are trained for the thing that civilian
hospitals don't do and that is go to war.
There will be a tendency as we give the opportunity to get
their health care on the outside, there could be a tendency in
future budget periods to draw down on what is left in that MTF
with our eyes covered not realizing that we may have to deploy
the people in those MTFs far away to support those individuals
who are in combat.
To me, that is an absolute essential piece of this entire
thing, to ensure that we do not allow that to atrophy should we
enter into an extended period of time when those resources do
not have to be deployed.
Every single one of our recommendations, as I went through
them, and I understood where I sat before, without getting into
great detail, I will tell you every single one of our
recommendations impacts readiness in some way. Someone from a
joint readiness standpoint, remember, this is what is critical,
we gain efficiencies in jointness. Somebody from a joint
readiness perspective has to look at the entire readiness
portfolio to include medical and ensure that we maintain that.
I will end by saying I think the $300 million is a very
conservative large number. We believe many of these resources
exist currently. When we took down Joint Forces Command, many
of them were transferred to other locations, many of them in
the Pentagon, and the resource, much of that, and we couldn't
totally put our hands on it, will be pulled out and you will
see a much smaller bill than the $300 million that is cited in
our report.
Senator Reed. Thank you.
Senator Graham, please.
Senator Graham. Thank you, all, for a lot of hard work, and
I think a very good product. To those who want to suggest
alternatives, you are welcome. We will take any new good idea
to make this better. To those who think it is wrong, we will
accept criticism. But we will not accept demagoguery. We are
not going to play that game.
If you have a good idea, bring it. If you think they missed
the mark, we will certainly listen to you. But we are not going
to play the demagoguery game, because change is afoot, and it
is necessary.
Congress required you to do your job. Do you understand
what we were asking you to do? Were we trying to get you to fix
a broken system? There is an old adage, if it's not broken,
don't fix it. Or were we trying to get you to make a system
better? What was your mandate, in your own mind?
Mr. Maldon. Senator Graham, thank you for that question. It
is our understanding that our mandate was to modernize, make
recommendations for modernizing.
Senator Graham. So it wasn't your mandate from Congress to
just go save money?
Mr. Maldon. Absolutely not. That was not our understanding.
Senator Graham. So it was you understanding that Congress
wanted you to look at a 70-year-old system and see if you could
make it better and more efficient, right?
Mr. Maldon. Correct, Senator.
Senator Graham. On the combat medicine point, do you agree
that we have the best combat medicine any time in the history
of the modern military?
General Chiarelli. After 13 years of war, we do. But I
don't believe we had it going into this. I think we got better
and better.
Senator Graham. We have it now?
General Chiarelli. Yes, and we have to maintain it.
Senator Graham. That's right. Don't lose it.
So if the core function of military health care is to make
sure the force is ready to fight, then we have to make sure we
hang on to that. That is what you are telling us, right?
General Chiarelli. Exactly.
Senator Graham. We learned from the Guard and Reserve when
the war first started that a lot of people didn't have dental
coverage and 25 percent of Guard and Reserve were disqualified
for deployment because of dental problems. Is that true?
Mr. Zakheim. That is true.
Senator Graham. Congressman Buyer?
Mr. Buyer. Yes.
Senator Graham. That is true, because your brother is a
dentist. We have overcome that, so we don't want to go back to
that system of having a health care system that doesn't make
you ready to fight, having a health care system that can't keep
you in the fight and save your life if you get injured.
I think Senator Kerrey probably knows more about that than
anybody.
So those are my guideposts. I don't want to lose ground on
the major functions.
As to retirement, no one is suggesting that we are changing
the retirement system to 40 percent versus 50 percent for those
on Active Duty, are you? Everybody is grandfathered?
Mr. Maldon. That is correct, Senator.
Senator Graham. I heard that conversation. If I just walked
into this room not knowing the context, I would think that a 40
percent retirement change had been recommended by the committee
for those on Active Duty. That is not true.
This chart, who did your polling?
Mr. Maldon. That polling was done by True Choice. It has to
do with the survey that we conducted.
Senator Graham. I can't imagine too many things that I do
where 80 percent of the people prefer something new to
something they have. So you feel good about those numbers?
Mr. Maldon. Senator, we feel very good about that,
unanimously.
Senator Graham. Okay. What about the retired community? Do
you have data about how they feel about the proposed changes?
Mr. Maldon. Well, the feedback that we have gotten is
that----
Senator Graham. Can you poll retired military members and
find out?
Mr. Maldon. We polled retired as well as Active Duty and
Reserve components.
Senator Graham. So what were the numbers on the retired
community?
Mr. Maldon. Senator, let me take that question for the
record.
Senator Graham. Fair enough. I want to see both ends of the
spectrum here.
[The information referred to follows:]
First, it is important to note that retirement pay of retired
servicemembers is grandfathered and therefore not affected by the
Commission's recommendations on retirement pay.
In the fall of 2014, the Commission surveyed current and retired
servicemembers about their preferences for changes to military
compensation, including retirement. More than 100,000 retirees
responded to the survey. The results, when weighted to represent the
overall retired population, show that retirees were evenly split
between a preference for a new ``blended'' retirement plan (49 percent)
compared to the plan they have now (49 percent). Although the questions
were developed and asked before the Commission arrived at its
recommendations and therefore did not reflect the Commission's exact
final retirement recommendations, the questions did ask about a blended
retirement plan that included reducing the retirement annuity
multiplier from 2.5 to 2.0 and enhancing the Thrift Savings Plan with
the Department of Defense matching up to 5 percent of servicemember
contributions. These specific changes, along with others, were included
in the Commission's recommendations. It is worth noting that retirees
under the age of 55 (53 percent) and those who retired from the Reserve
component (55 percent) expressed a somewhat greater preference for the
``blended'' retirement option compared to what they have now.
Senator Graham. It seems to me that the jury is in, that
the people on Active Duty like what you are proposing. If they
had an option, they would take the new system.
I think what we need to understand as members of this
committee is where is the retired force. What do they think
about the proposed changes? Because the health care changes are
not grandfathered, is that correct?
Mr. Maldon. That is correct, just retirement.
Senator Graham. All right, so at the end of the day, your
recommendations on health care are driven by the fact that we
think we can provide better choice, more efficient for the
patient, more efficient for DOD, and actually get more choice
and better coverage. Is that correct?
Mr. Maldon. That is correct.
Senator Graham. If we do nothing in terms of health care
costs, it is exploding in terms of DOD's overall budget, and
somebody needs to deal with it. Is that correct?
Mr. Maldon. In terms of fiscal sustainability, that is
correct, Senator.
Senator Graham. Because you have a situation where you have
to deal with retiree health care at the expense of readiness to
fight the war of today and tomorrow, and that is a choice we
don't want to make.
Mr. Maldon. That is correct.
Senator Graham. Thank you all for your hard work.
Mr. Maldon. Thank you.
Senator Reed. Senator Cotton?
Senator Cotton. Thank you all for your service, not just on
this commission, but many of you have served our country in
other ways.
I have questions about some of the retirement proposals,
and then if we have time at the end, about the commissary
proposals.
Could we get chart three up maybe, as a way of providing an
illustrative point of discussions.
Chairman Maldon, I will direct questions to you, if you
want to farm them out that to subject matter experts, that is
fine.
This shows, on the left, the current defined benefit
system. Get 20 and get half-pay. On the right, you show your
blended plan of a defined benefit along with a TSP contribution
and government match, and then the continuation pay at 12
years.
Was there any consideration about trying to move to a pure
defined contribution system?
Mr. Maldon. Senator, we have a defined benefit system now,
and to move to a complete defined contribution system, we
believe would not give us all of the retention benefits of the
traditional military retirement. That is why we wanted to keep
both systems blended, because we can take care of both our
retention needs as well as the recruiting needs.
Senator Cotton. Okay. Does anyone else want to elaborate?
So I understand that trying to keep benefits roughly the
same, or, in this example, better is one goal. Giving services
and personnel flexibility is another goal. Retaining the force
and maintaining the force is one goal. So the assessment of the
commission is the 20-year defined benefit plan is important to
maintain that last goal, retaining personnel for this full 20
years.
Mr. Maldon. Yes, Senator, that is correct.
Senator Cotton. Any consideration of like a stairstep
approach to the continuation pay, rather than saying the one at
12 years, another 4 years extension, maybe having two or even
three periods within a 20-year time horizon where you are
encouraging people to reenlist or officers to remain?
Mr. Maldon. Senator, the current program as it is today,
the compensation system, we have special pay, incentive pay. We
have those bonuses that servicemembers are being paid. So we
have those stepping stones that servicemembers have as a
benefit through those programs already.
This would be that retention piece that would take the
servicemember now to a point of having 12 years plus a 4-year
obligation that would get him to that 16th year, which means
they are close enough to retirement that that is the retention
will keep them there.
Senator Cotton. So the thinking is that not many people
leave after 12, and very, very few leave after 16?
Mr. Maldon. That is correct.
Senator Cotton. Under this proposal, let's say a
hypothetical E-7 who has had 7 or 8 years down range, three or
four deployments. He would be leaving with his contributions to
his defined contribution plans and the government match, is
that right?
Mr. Maldon. If he elected to----
Senator Cotton. If he didn't reenlist at 7 or 8 years.
Mr. Maldon. Yes.
Senator Cotton. There is probably data to illustrate this.
Do we have any problem retaining this kind of midcareer, senior
NCO, company grade officer, field grade officer, in the 6 to 9
year range?
General Chiarelli?
General Chiarelli. It depends on the military occupational
specialty. It is one thing to retain an infantryman who is
willing to hump a 60-pound ruck up the mountains of Afghanistan
and keep him in as a platoon sergeant to 24 as opposed to
someone who is trained with I.T. skills or is an airplane
mechanic and can work in other areas.
That is why it is absolutely essential the continuation pay
be flexible and the Services have the ability, based on the
military occupational specialty, to apply differing amounts
depending on the military occupational specialty.
I will tell you, rather than stair step, I believe that our
RAND modeling showed this was the critical period.
The critical period, my guys used to tell me, is 8 years
and 27 days. The model that was in place before was, if I could
keep someone in under a defined contribution of 50 percent past
that magical mark, I had a better than average opportunity to
maintain them longer.
But our modeling for this particular plan told us that that
the 10- to 12-year mark is absolutely critical.
Senator Cotton. My time is almost expired, so my commissary
question will wait for another day.
Senator Reed. Do you want to ask another question?
Senator Cotton. Sure. I'd be happy to.
So I have been stationed at bases, Fort Campbell stands out
in my mind, that had a nice commissary. But it had an even
better Wal-Mart Supercenter right outside the gates. There are
obviously bases in America, especially bases around the world,
where we need an on-base commissary to provide the choices that
our servicemembers have become accustomed to. Was there any
consideration of assessing local sites around bases and forts,
about whether or not a commissary is needed on that location?
Mr. Maldon. Senator Cotton, we spent quite a bit of time
talking to servicemembers, family members, installation
commanders across the country on that. Polling told us the same
thing. We had people that were in different places on how they
perceived the value of the commissaries.
Overwhelming, though, people believed it was very important
to retention to have the commissaries there. There are people
that would tell us that they have these other shops. We talked
to some of the big shop warehouses, if you will. The stores,
the Wal-Marts, the others, about the benefits they would offer
if they were to offer a benefit.
Quite honestly, at the end of the day, no one was willing
to stand behind their comments that they made or had about
providing savings to the servicemember.
Our intention here was to make sure we could protect the
benefit of the servicemembers, and servicemembers believe that
this is a big savings to them and that they also believe it was
a retention tool.
That is the way we went about moving forward with our
recommendation on the commissaries.
Mr. Zakheim. Could I just add to that, Mr. Chairman,
Senator, several of the big chains talked about issuing a card,
and you probably heard that too, that they will issue some
cards to the military. When we ask their representatives point-
blank, would you do it? Never got a straight answer.
At the same time, we did hear--now, look, there are some
people who will order their food online. We know that. But by
and large, people want that. They want it because it is
convenient, for a start. It is near them. It is military. They
understand it. It is responsive to their needs.
So we looked at that and made our recommendations based on
the feedback. Again, different folks will have different
requirements. But pretty much overwhelmingly, this is not
something they wanted to go away
General Chiarelli. Proclivity to use the commissary is
based on a whole bunch of things, and one of them is the size
of family. We had the FSSA and SNAP issue before. There are
arguments about how much it saves. But if you even cut the high
number, the 31 percent, in half, it is still a great savings to
that E-7 with four kids and a wife who made a decision to stay
home and take care of the kids, and to be an at-home mom. It is
an unbelievable place for them to save the kind of money they
need as part of the benefit we provided them.
Senator Cotton. Thank you all again for your service and
this important report. We look forward to working on it.
Having dealt with junior enlisted men who are new to the
Army, I can say the financial literacy proposals are very
critical as well. Having been a Member of Congress and now a
Senator, I say maybe we should add that to our orientation as
well.
Senator Reed. Thank you very much, Senator.
On behalf of Chairman McCain, I would like to request
unanimous consent to include written comments in the record
from outside groups for up to 30 days after the conclusion of
the hearing. Any objection?
Hearing none, so ordered.
[The information referred to follows:]
See Appendixes D through O at the end of this hearing record.
Senator Reed. Also on behalf of the chairman, I would like
to thank the witnesses for their excellent testimony, for their
extraordinary contribution to this critically important issue.
Thank you all very much.
The hearing is adjourned.
[Whereupon, at 11:56 a.m., the committee adjourned.]
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator John McCain
healthcare
1. Senator McCain. Commissioners, in your discussions with various
constituencies--military and veterans' service organizations,
servicemembers and their families, and retirees and their families--
what were their major concerns about the current military health system
and how do your recommendations address those concerns?
Mr. Maldon. TRICARE beneficiaries expressed three major areas of
concern about the program: access, choice, and value.
Access:
There are limited provider networks in TRICARE. For
example, in Fayetteville, NC, 15 orthopedic doctors are in the
TRICARE network compared to 43-163 orthopedic doctors in other
networks.
Unavailability of appointments with the assigned
primary care manager leads to lack of continuity of care.
Value:
Cumbersome referral and authorization processes lead
to wait times as long as 35 days for specialty care.
Referrals for civilian care, with inadequate
information on which civilian providers actually accept
TRICARE, lead to families giving up on TRICARE and paying out
of pocket to receive needed health care.
The appeals process for medical necessity
determination is frustrating and long.
The one-size-fits-all approach to care does not work.
Beneficiaries are unable to access care that serves
their individual needs.
The commission consistently received the following feedback from
Reserve component (RC) members:
There is a lack of continuity of care transitioning to
and from active duty for the RC.
There is a lack of continuity of care for families
when the servicemember is activated and if the family's
existing health care providers do not accept TRICARE.
RC members must continue to pay the employee's share
of the insurance premium if they choose not to accept TRICARE
coverage. In cases in which employers stop paying the
employer's share of the premium, RC members must fully fund the
existing health insurance.
When RC members are not supporting a contingency
operation during activation, TRICARE coverage ends abruptly
upon demobilization, allowing no time for RC members and
families to find civilian insurance, which in turn leads to a
break in health coverage.
Gaining access to medical care in the civilian sector through
various commercial insurance plans would be a simpler, quicker endeavor
under TRICARE Choice. TRICARE Choice would provide multiple health
insurance options from which beneficiaries would select the plan that
best meets their current needs. This opportunity for choice would
preclude beneficiaries from having to purchase options that are not
necessary for meeting their individual needs, while at the same time
providing them the care that they do need in a timely manner, with the
provider of their choice.
2. Senator McCain. Commissioners, you have recommended that
military retirees' healthcare costs increase over a 15-year period such
that retirees ultimately would pay about 20 percent of the overall
costs of their healthcare. How did you determine that was the right
approach to get retirees to share more of the cost for their
healthcare?
Mr. Maldon. Currently, the retiree premium for TRICARE Prime is
approximately 5 percent of the cost of the program. When TRICARE began
in the early 1990s, the retiree premium for TRICARE Prime was
approximately 27 percent of the cost of the program. The premium was
not indexed for inflation. The commission wanted to increase access to
high valued commercial insurance products, while providing recognition
of service. For this reason, the ramp stopped at 20 percent and did not
continue to 27 percent.
3. Senator McCain. Commissioners, in your view, how much money are
retirees willing to pay for better healthcare for themselves and their
family members?
Mr. Maldon. Importantly, the commission's recommendation was
designed to explore the answers to this question and these are
discussed below, but the most important point to make is that the
commission's recommendation was designed to take into account a wide
range of differences in retiree willingness to pay for better
healthcare. TRICARE Choice would provide a wide range of plans that
vary along many health care attributes (e.g., network size and access).
These plans would have different costs. There would be some lower-cost
plans that offer a similar benefit to TRICARE today (e.g., limited
access and networks like the current TRICARE plan). There would be
other plans with much more expansive covered services, networks, and
access; these plans would cost more. Retirees would be able to choose
among such plans. A retiree with a low willingness to pay for better
health care could choose one of the lower-cost plans that more closely
mirrors TRICARE today, and a retiree with a higher willingness to pay
could choose a much richer plan for a higher cost. TRCIARE Choice would
allow retirees to self-select the plan type they prefer and empower
retiree families to take control of their own health care experience-a
consumer-driven model focused on value and choice.
As part of its analyses, however, the commission did explore this
question in some detail and developed some preliminary answers. There
were three primary methods used by the commission:
Examining academic literature that estimates this
willingness to pay.
Surveying actual retirees to estimate their perceived
value of choice and better healthcare experience.
Simulation modeling of the behavior of Federal
civilians who are similar to military retirees in age, income,
and location.
The academic literature estimates how much workers who are not
provided a choice of plans would be willing to forfeit of their
employer-provided health care subsidies for the freedom to use the
subsides to obtain their choice of plan from a menu of plans.\1\ This
estimate, based on actual data from workers, was that the workers were
willing to forfeit 16 percent of their subsidy. The estimates from the
academic literature were consistent with the commission's survey
results and with the cost share changes for retirees in the
commission's recommendation.
---------------------------------------------------------------------------
\1\ Leemore, Dafny, Kate Ho, and Mauricio Varela, ``Let Them have
Choice: Gains from Shifting Away from Employer-Sponsored Health
Insurance and Toward an Individual Exchange,'' American Economic
Journal: Economic Policy, 5, no. 1, (2013): 33, 56.
---------------------------------------------------------------------------
The commission directly measured the perceived valuation (very
similar to willingness to pay) of health care benefit attributes for
Active Duty family members in its survey. The survey did not directly
measure perceived valuation of those attributes for retirees, but did
measure preference intensity for them. Figure 19 on page 109 of the
commission report provided these perceived valuations for Active Duty
family members. The values are in annual dollar amounts.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
The intensity of preferences for retirees was provided in Figure 14
on page 88.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
As discussed in the report, retirees' perceived value of increasing
choices among health care providers, which was only one of the six
health care attributes presented, was higher than the value of a 35
percent grocery discount at commissaries or a 20 percent one-time cost-
of-living adjustment.
The third method looked at by the commission was the actual
behavior of Federal civilians who were similar to retirees in age,
income, and location. To support its cost analysis of the
recommendation, the commission examined the insurance plan choices of
Federal civilians and contracted with the Institute for Defense
Analyses (IDA) to develop a simulation model of retiree (and Active
Duty family member) health care plan choice. A detailed review of that
model is provided in the IDA report on the commission's website (http:/
/www.mcrmc.gov/public/docs/report/IDA-Paper-P-5213--Final--020215.pdf).
That model predicted that most retirees would take advantage of the
choices provided to them and upgrade to a richer health care plan
rather than the low-cost plans similar to TRICARE today.
4. Senator McCain. Commissioners, what are your estimates of the
annual healthcare costs--premiums, co-pays, deductibles--for retirees
and their families under the proposed TRICARE Choice?
Mr. Maldon. Health care costs for retirees and their families under
TRICARE Choice can be divided into two components. The first component
would be what they pay for coverage similar to what they have today
under the existing TRICARE program. To create a relevant comparison,
cost should be compared for similar coverage. In TRICARE Choice,
retirees would have many options for health care plans and could choose
to purchase enhanced coverage (broader networks, better access, and
more covered services), rather than the existing TRICARE program. The
second component would be any additional cost retirees choose to pay to
purchase coverage that includes these enhancements. If retirees take
advantage of the additional choices made available to them by TRICARE
Choice, it can be argued that they will not experience a price
increase, but rather a compensation increase because the retirees
receive the better coverage at a subsidized rate.
To evaluate these separate components of cost, the commission
considered two plans from the Federal Employees Health Benefit Plan
(FEHBP) as examples of what types of plans might be offered in TRICARE
Choice. The first plan is the Government Employees Health Association
(GEHA). Although not a perfect comparison, this plan is considered most
similar to the existing TRICARE program. GEHA includes larger networks
than the existing TRICARE program in the markets examined by the
commission and more covered services. But it is a lower-cost, PPO-style
plan and is the best comparison the commission could find for the
existing TRICARE program. The second plan is Blue Cross Blue Shield
(BCBS) Standard. This is one of the most robust and highest-cost plans
in FEHBP and is used to illustrate the costs to retirees who exercise
the opportunity to select better coverage made available to them by
TRICARE Choice.
The table below shows the costs to retirees for these options:
existing TRICARE program, TRICARE Choice with a plan similar to GEHA,
and TRICARE Choice with a plan similar to BCBS Standard. The first row
of data illustrates the costs retirees pay now under the existing
TRICARE program. Retirees enrolled in TRICARE prime paid a $548 (in
2014) premium. In addition, about 3 percent of retirees sponsor the
purchase of TRICARE Young Adult (TYA) for about $2,000 and about 65
percent purchase the TRICARE Retiree Dental Program for about $1,500
per year. This means that the average retiree is pays approximately
$1,544 per year in premium costs for TRICARE. Adding in their
copayments and deductible amounts for health care provides an average
annual cost of about $2,030 per retiree household.
These costs would be largely unchanged in the first year of TRICARE
Choice, when the retirees' premium cost share is 5 percent. These costs
would increase, however, by the time TRICARE Choice was fully
implemented with a 20 percent cost share (15 years after program
initiation). In that year (using constant 2014 dollars), the comparable
health care plan (GEHA) would have a premium for retirees of about
$1,769 per year. No retirees would have to buy TYA and some retirees
would rely on the partial dental coverage provided in GEHA instead of
purchasing stand-alone full dental coverage, so the total premium
amounts paid by the retiree in GEHA would be about $2,267 per year.
Adding in copayments and deductibles provides an average annual cost of
about $3,556 per retiree household.
The comparison to GEHA is the best available comparison with the
existing TRICARE program. There would be many retirees, however, who
choose to purchase better coverage that costs more. A retiree who
chooses to purchase better coverage, like BCBS Standard, would pay
about $552 more per year ($3,556 to $4,108) for a plan with a value of
about $2,763 more than GEHA (because the government would pay an 80
percent cost share at the end of the 15-year period, the government
would be paying the remaining $2,211 for the added value of health
benefits. Thus, these retirees are experiencing an increase in their
compensation.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
5. Senator McCain. Commissioners, under your proposed TRICARE
Choice plan, Military Treatment Facilities (MTF) would be network
providers to commercial health plans. MTFs would bill commercial health
plans for materials and services provided, and those health plans would
then reimburse MTFs. Today, MTFs have limited capability to perform
billing and collections functions. What additional infrastructure and
personnel would MTFs need to perform those functions? How much would
that cost the Department of Defense (DOD) and what is the return on
investment?
Mr. Maldon. In the civilian sector, medical providers do not
typically handle medical billing or insurance. These functions are
usually handled by administrative or support services. There are
companies that provide billing services to major health systems in the
United States today. The companies also provide training for coding,
billing procedures, collections, and related processes. The Military
Health System (MHS) could benefit from such a professional service.
Alternatively, MHS could expand its current third-party billing
activities to handle the medical billing. If this latter approach were
taken, MHS would need to ensure that existing administrative personnel
were trained to perform such duties and that efforts currently underway
to modernize MHS information technology (IT) would support this task.
In 2014, DOD awarded a contract to General Dynamics to build the Armed
Forces Billing and Collection Utilization Solution (ABACUS) to generate
medical claims, pharmacy claims, invoices, and governmental billing
forms at 136 military medical treatment facilities globally. ABACUS
will replace legacy IT systems and automate, consolidate, and
centralize the Army, Navy, and Air Force's separate health billing and
collection IT systems. Adequate time would be required to set in place
coding, billing, collections, and related systems, regardless of the
system chosen, which is, in part, why the commission's proposed
legislation includes a 2-year implementation period before
transitioning beneficiaries into the new system.
6. Senator McCain. Commissioners, how do your recommendations
improve beneficiaries' access to care, quality of care, and the
experience of care?
Mr. Maldon. Currently, TRICARE Prime is the only option available
at no or limited out-of-pocket cost; however, under TRICARE Choice and
including the Basic Allowance for Health Care (BAHC), most Active
component families could choose from numerous plans with no or limited
out-of-pocket costs. Under an insurance model, such as TRICARE Choice,
the ease and timeliness of patients' access to health care would
improve because beneficiaries would not be subject to DOD's lengthy and
frustrating process for making appointments and obtaining referrals. By
allowing beneficiaries the opportunity to select from an array of
health plans, they could choose coverage that best fits their
individual needs. Providing TRICARE Choice and access to commercial
insurance plans would give beneficiaries access to the medical
industry's most recent innovations and procedures, and eliminate the
lengthy DOD contracting and appeals processes. RC members who are
called to active duty would receive BAHC, which would create options
for helping address concerns about cost and continuity of care that
pertain to them and their families. One option would be to use BAHC to
purchase a plan with a provider network that includes numerous
providers, including the family members' current provider. Another
option would be to use BAHC to pay for a member's current civilian
plan. With commercial health insurance, beneficiaries who live away
from major troop concentrations would have more extensive provider
networks in civilian health plans.
7. Senator McCain. Commissioners, how do your recommendations
incentivize beneficiaries to seek the most cost-effective means of
getting healthcare?
Mr. Maldon. TRICARE Choice would provide multiple health insurance
plans from which beneficiaries could select the plan that best meets
their current needs. This opportunity for choice would preclude
beneficiaries from having to purchase options that are not necessary
for meeting their individual needs. The recommendation also provides
BAHC to be paid to servicemembers with dependents. The allowance
creates a situation in which families spend their own money (subsidized
by BAHC to be cost neutral) on health care, which provides a mechanism
for more cost-effective decisionmaking. For example, a family is less
likely to seek care in an emergency room for a minor injury or illness
knowing the expense would be greater than that associated with care
provided by a primary care or urgent care provider.
The TRICARE system today is unable to effectively manage the rate
at which users consume health care because it has limited use of
monetary and nonmonetary incentives to influence beneficiaries'
behavior and promote better health outcomes. One reason utilization is
substantially greater in TRICARE than in the civilian sector is the
relatively low out-of-pocket (OOP) expenses-copayments, deductibles,
and coinsurance-experienced by TRICARE beneficiaries compared to their
civilian counterparts. Although OOP costs are an important tool the
health care sector uses to manage consumption of services, they usually
are used in conjunction with nonmonetary tools to achieve greater
results. Nonprice methods lower utilization by, among other things,
reducing avoidable emergency room and urgent care visits, addressing
health care needs before a hospital admission becomes necessary,
shortening inpatient stays, and avoiding readmission. Nonprice
techniques also can lead to better health care outcomes through disease
management, wellness, and better coordination of care. These
nonmonetary tools include strategies such as identifying high-risk
patients, managing complex cases, keeping chronic diseases under
control, and promoting wellness and preventative services. Under the
proposed TRICARE-Choice model, health care plans would use a range of
both price and nonprice techniques to affect beneficiary behavior and
improve health care outcomes.
8. Senator McCain. Commissioners, what safeguards have you included
in your recommendations to protect active-duty family members from
experiencing higher than usual out-of-pocket costs for healthcare?
Mr. Maldon. The commission modeled the actual amount of out-of-
pocket health care costs expended for current Active component (AC)
family members. BAHC would cover all health care expenses for the vast
majority of AC families. Based on the commission's cost estimates, 85
percent of AC family members would have 100 percent of costs covered;
10 percent would have marginal cost increases; and 5 percent would be
eligible for additional assistance via the proposed catastrophic and
chronic health care program. For this program, the commission
recommended setting aside $50 million annually in a special fund to
assist families with catastrophic or chronic health care needs. Because
of BAHC and the catastrophic and chronic assistance program, the
commission expects net health care costs should be less under TRICARE
Choice than under the current TRICARE program for most beneficiaries.
commissaries
9. Senator McCain. Commissioners, you recommend consolidating the
Defense Commissary Agency and the three exchange systems into a single
Defense Resale Activity (DeRA), and you recommend retaining the current
branding of the three exchange systems with their separate directors.
It appears DOD could save more money through additional efficiencies
with a single exchange system. Why do you recommend retention of
separate exchange systems? How much additional money could be saved
with a single exchange system under a DeRA?
Mr. Maldon. The commission's proposal for implementing a
consolidated resale organization includes a recommendation to initially
retain the current branding and a director for each of the currently
branded exchange systems. This recommendation is meant to ease the
transition and should not be interpreted as the recommended end state.
The intent is to eventually transition to a single organization with a
single leadership team, a single headquarters, a single information
technology infrastructure, a single human resources system, a single
logistics network, a single support staff, and so forth. Many of the
savings estimated in the commission's final report are based on these
consolidation efforts.
Although a Defense Resale Activity liaison position is recommended
for each of the Services, those positions do not have to be directors.
A consolidation of branding may eventually be pursued, but given that
this is not expected to be a significant driver of savings it was not
identified as a key component of implementation. The commission
suggested that branding and organizational structure can be modified
over time by the Board of Directors (BOD).
10. Senator McCain. Commissioners, how would your recommendation
impact the total amount of funds that the exchange system annually
provides for the Services' Morale, Welfare, and Recreation programs?
Mr. Maldon. The commission's proposal to consolidate commissaries
and exchanges is expected to have no impact on the contributions to
Morale, Welfare, and Recreation (MWR) programs. The commission's Final
Report offers multiple ways that the consolidated organization would
increase profits through reduced operating costs and increased sales.
The Board of Directors (BOD) would determine and direct the best use of
those profits, making tradeoffs among the needs of the MWR programs,
the benefits of reinvesting in the resale system, and the goal of
slowly reducing the burden on taxpayers. It is expected that the BOD
would ensure that the MWR programs receive the same priority and
resources that they do today.
11. Senator McCain. Commissioners, how would your recommendation
affect the current savings percentages that patrons receive when
shopping in defense commissaries?
Mr. Maldon. The commission's recommendation is focused on
preserving and improving the benefits delivered to servicemembers and
their families through commissaries and exchanges. At the core of this
recommendation is a statutory guarantee that food would continue to be
sold at cost (plus a 5 percent surcharge) in commissaries. The
commission strongly recommended that personal health items continue to
be sold at cost and be protected through policy. DOD would have the
authority to protect other categories of items through policy as well.
The consolidated organization would have the option of raising prices
on other nonfood items but would have to find a balance between
generating profits and maintaining customer loyalty and satisfaction.
The prices for these other nonfood items would likely be similar to the
discounted, but slightly higher prices found in the exchanges.
12. Senator McCain. Commissioners, in your deliberations, did you
consider commercialization of the commissary and exchange systems? In
your view, how much money could be saved by out-sourcing the commissary
and exchange systems to the private sector?
Mr. Maldon. The commission considered commercialization of the
commissaries and met with multiple groups investigating this
alternative but did not find this approach to be a promising way of
saving money. Initial analysis indicates that commercial grocers cannot
afford to sell such a wide selection of groceries at prices similar to
those currently offered in commissaries. The commission did not
investigate the option of commercializing commissaries and raising
prices because doing so would reduce the benefit to servicemembers. The
option of subsidizing commercial grocers was rejected for multiple
reasons. Advocates of commercialization also expressed concern over the
many restrictions currently placed on commissaries to minimize
competition with the exchanges.
The commission considered but did not investigate commercialization
of exchanges. Initial analysis indicated that the opportunity for
savings is greater through the consolidation of commissaries and
exchanges.
child care
13. Senator McCain. What are the average wait-list times for child
care on military bases?
Mr. Maldon. Currently, wait times for military child care programs
are not tracked in a reliable way and are not routinely reported. This
is why the commission recommended establishing mandatory, standardized
monitoring and reporting of child care wait times. In response to a
commission data request, the Army indicated that it is experiencing 6
to 9 month wait times for infants and 3- to 5-month wait times for
toddlers. The Navy estimated a 3- to 5-month average wait for infants,
but cautioned that the methods used to calculate and report this data
were inconsistent and may affect its accuracy. The Air Force does not
consistently calculate or track wait times across its child care
programs, but was able to provide information for one of its largest
overseas bases, indicating wait times up to 7 months for infants. Wait
times were not received from the Marine Corps.
14. Senator McCain. What causes the child care shortage on military
bases? Is it due to a lack of skilled personnel available to work in
child development centers or a lack of physical space available in
those centers? Are there any other limiting factors that we should
consider?
Mr. Maldon. The root causes of military child care shortages can
vary significantly from one location to another. Although Child
Development Center (CDC) staffing shortages was the most frequently
cited cause, some locations are more substantially affected by
shortages in available and properly configured facilities, shortages in
available and qualified community-based and home-based providers, or
shortages in funding to pay community- and home-based providers.
Based on the limited data available, shortages are consistently
more acute for infant and toddler care. As documented in the
commission's Final Report, this particular cause for shortage can be
the result of financial considerations. The cost of providing services
for these younger children is higher and the fees collected from these
typically younger parents tend to be lower based on their lower
household income. Because military child care fees do not vary with the
age of the child as they typically do in private sector child care, the
fees paid for older children often subsidize the care for younger
children. As a result, the mix of ages that are provided care in
military programs may be intentionally favorable for older children,
even when the demand is highest for infant and toddler care.
Even though DOD salaries for child care staff are generally
competitive, in some areas, finding interested and qualified candidates
can still be difficult. In recent years, staffing shortages have often
been related to the lengthy process associated with conducting
background investigations and making hiring decisions based on the
results of those investigations. Forthcoming updates to the policy on
background checks for individuals in DOD child care services programs
should shorten this process.
In areas where facilities are needed, military construction
(MILCON) funding may be required to build new facilities, expand
existing facilities, or reconfigure leased facilities. These funds are
limited and require a lengthy approval process. The commission's
recommendation to reestablish the authority to use operating funds for
minor construction projects at child development facilities should
improve responsiveness when facilities are needed.
______
Questions Submitted by Senator Kelly Ayotte
compensation and retirement
15. Senator Ayotte. Commissioners, consistent with section 674 of
the National Defense Authorization Act for Fiscal Year 2013, Congress
clearly established principles that should govern the commission's
recommendations. One of those principles that Congress explicitly
identified was the idea of grandfathering those currently serving or
already retired. Do the commission's recommendations with respect to
retirement pay completely comply with this governing principle set
forth by Congress that for those currently serving or retired the
``retired pay may not be less than they would have received under the
current military compensation and retirement system?''
Mr. Maldon. Yes, retired pay would be completely grandfathered for
servicemembers currently serving or retired. Also, consistent with the
congressional principles set forth in the National Defense
Authorization Act for Fiscal Year 2013, servicemembers and retirees
would have the choice to opt in to the recommended blended retirement
system. For those who choose not to opt in, their retired pay remains
unchanged, and therefore would not be less than they would have
received under the current compensation and retirement system.
16. Senator Ayotte. Commissioners, is it correct that the
commission proposes increasing the cost share for medical costs 1
percent each year for 15 years so that the cost share grows from 5
percent to 20 percent?
Mr. Maldon. Yes, the commission did propose a gradual increase in
cost shares for retirees not yet eligible for Medicare. Currently, the
premium for TRICARE Prime for non-Medicare-eligible retirees is
approximately 5 percent of the cost of the program. When the TRICARE
program went into effect in 1996, the cost share for retirees younger
than 65 was 27 percent of total health care costs. The premium was not
indexed for inflation. The commission wanted to increase access to
high-valued commercial insurance products, while providing recognition
of service. For this reason, the ramp stopped at 20 percent and did not
continue to 27 percent.
17. Senator Ayotte. Commissioners, under the commission's proposal,
would that significant cost share growth impact those currently
retired, as well as those currently serving when they retire?
Mr. Maldon. The change in cost-share percentage would take place in
successive years after the recommendation is implemented. Anyone who
was retired at that time or who retired before the 20 percent threshold
is reached would experience a 1 percent increase in cost share per
year. Even at the end of the designated 15-year implementation period,
the cost share would be a smaller percentage than the 27 percent cost
share that retirees paid when TRICARE was first created and
substantially less than retired government civilians pay.
recruitment and retention
18. Senator Ayotte. Commissioners, did your model consider the
impact retirement and health care proposals in an individual or in an
aggregate manner--in terms of their impact on recruitment and
retention?
Mr. Maldon. Recruitment and retention were considered both
individually and in aggregate. For example, the retention modeling
conducted by RAND showed the recommended blended retirement system
would maintain the Services' current force profiles. The commission's
survey showed that servicemembers strongly prefer better choice and
access in health care plans. The recommended TRICARE Choice health care
plan would therefore be expected to improve recruitment and retention.
These individual effects were then aggregated to ensure the
holistic package of reforms would maintain recruiting, retention, and
the All-Volunteer Force. For example, the Post-9/11 GI Bill and
retirement recommendations work collectively to provide midcareer
retention incentives that would help meet retention goals as follows:
Providing Post-9/11 GI Bill transferability at 10
years of service (YOS), with 2 additional YOS, would enable the
Services to increase retention to the critical 12-year point in
a military career.
Awarding continuation pay at 12 YOS, with an
additional commitment of 4 YOS, would bring servicemembers to
the 16-year point, at which the draw of the defined benefit
(DB) encourages retention.
Maintaining the majority of the DB retirement plan,
would encourage servicemembers to stay 20 years or more.
Maintaining flexibility in special and incentive pays,
including continuation pay, would provide additional
opportunities for retention incentives in cases where those
listed above are not sufficient to retain key personnel.
service beyond 20 years
19. Senator Ayotte. Commissioners, under your proposal, does the
Thrift Savings Plan (TSP) government match end at 20 YOS?
Mr. Maldon. The commission recommended matching contributions end
at 20 YOS because retention modeling shows the Services' current force
profiles would be sustained after 20 YOS without TSP matching. The
commission testified to Congress, however, that matching after 20 YOS
is an issue Congress should explore to ensure the recommended
retirement plan maintains lifetime earnings of servicemembers.
20. Senator Ayotte. Commissioners, under the commission's proposal,
is it correct to say that the defined benefit for retirement at 20
years would decline from 50 percent of base pay to 40 percent of base
pay?
Mr. Maldon. Although the recommended blended retirement system
would maintain the majority of the current defined benefit, retired pay
would decline from 50 percent to 40 percent of basic pay for
servicemembers who retire with 20 YOS. These servicemembers would also
have government-sponsored TSP assets and would receive a new
continuation pay at 12 YOS. Using conservative estimates, this
combination of blended retirement system benefits is projected to
generate greater lifetime earnings for servicemembers who retire with
20 YOS.
21. Senator Ayotte. Commissioners, if a servicemember served for 30
years, would the reduction of the defined benefit decline from 75
percent to 60 percent?
Mr. Maldon. Although the defined benefit for a servicemember who
retires with 30 YOS would decline from 75 percent to 60 percent of
basic pay, servicemembers would also receive government-sponsored TSP
assets and a new continuation pay at 12 YOS.
22. Senator Ayotte. Commissioners, when we look at these two
proposals together--ending the TSP match at 20 years and reducing the
defined benefit so significantly for those who serve 30 years--wouldn't
that create a reinforcing disincentive discouraging service beyond 20
years?
Mr. Maldon. Retention modeling shows that the Services' current
force profiles would be maintained after 20 YOS without TSP matching
after 20 YOS. It is for this reason the commission did not recommend
matching after 20 YOS.
Matching after 20 YOS would increase retention after 20 YOS, but
would also approximately maintain lifetime earnings for servicemembers
who retire with 30 YOS relative to their lifetime earnings under the
current retirement system. For this reason, the commission testified to
Congress that matching after 20 YOS is an issue Congress should explore
to ensure the recommended retirement plan maintains lifetime earnings
of servicemembers.
______
Questions Submitted by Senator Dan Sullivan
general
23. Senator Sullivan. Commissioners, there is a quantitative
difference between the service of our military members and other
Federal employees; benefits and healthcare should reflect this
disparity. Assuming Congress implements new changes like the
recommendations the commission is suggesting, does the issue of
grandfathering play a role?
Mr. Maldon. Under the commission's recommendation, retired pay is
grandfathered for currently serving servicemembers and retirees.
Benefits from the Montgomery GI Bill and REAP are also grandfathered.
Several of the commission's recommendations improve or maintain current
benefits (e.g., Commissary savings, financial literacy training, and
child care availability) or provide new options without changes to the
current benefit (e.g., Survivor Benefit Plan). For these
recommendations, grandfathering would not be necessary. Although it is
not feasible to grandfather the current TRICARE program under the
commission's recommendation, TRICARE Choice is designed to be separate
from the Federal Employee Health Benefit Plan precisely because of the
qualitative differences between servicemembers and other Federal
employees.
24. Senator Sullivan. Commissioners, if so, how do you plan to
implement these changes to programs and services currently and
previously used by servicemembers while applying new standards?
Mr. Maldon. Retired pay is grandfathered for currently serving and
retired servicemembers by the commission's recommendation. For
grandfathered servicemembers, their retied pay would continue to be
calculated by the Defense Finance and Accounting Service (DFAS)
consistent with the current retirement system. For servicemembers who
are under the proposed retirement system, DFAS would simply calculate
retired pay using a different retired pay multiplier. In both cases,
DFAS would use existing processes to disburse retired pay to
servicemembers.
The commission's recommendations also grandfather benefits under
the Montgomery GI Bill and the Reserve Education Assistance Program
(REAP) for servicemembers currently enrolled in those programs. The
commission's recommendations stop new enrollments in those programs in
favor of the Post-9/11 GI Bill.
education
25. Senator Sullivan. Commissioners, one of the best things the
military does for its servicemembers and veterans is provide
educational assistance and training in the form of the G.I. Bill. I
have seen firsthand how the benefits of this program have changed the
lives of the marines in my command, as well as their dependents. What
impacts--if any--would alterations to the existing program have on
those that are currently benefiting as well as those troops that hope
to utilize it in the future?
Mr. Maldon. The commission shares the belief that education
benefits are very valuable to our servicemembers, with the potential to
substantially change their lives. Based on this appreciation for the
value of the education benefits, multiple recommendations were made.
Sunsetting the Montgomery GI Bill (MGIB) and the REAP shifts
servicemembers to the Post-9/11 GI Bill, which is generally more
generous and supportive of their academic goals. Those currently using
MGIB and REAP benefits would be grandfathered and the rules concerning
reimbursement of MGIB fees would not change.
For the Post-9/11 GI Bill, the recommendations to require 10 YOS
before being eligible for transfer and the recommendation to sunset the
living stipend for dependents using transferred benefits are both
intended to increase the use of the Post-9/11 GI Bill for the education
of servicemembers, which was the original and primary intent of this
benefit. A secondary effect of these changes is that they slow the
rapidly growing cost of transferred benefits, which threatens the
fiscal sustainability of the benefit for all.
The recommendations related to data collection and reporting are
all designed to inform those who set education policy, manage these
programs, and evaluate their effectiveness. The expected effect for
servicemembers and their families is a gradual improvement of these
benefits.
______
Questions Submitted by Senator Mike Lee
implementation costs
26. Senator Lee. Commissioners, the commission report states that
the recommendations, if implemented, would reduce Federal outlays by
$11 billion over the next 5 fiscal years and by $12.6 billion annually
by fiscal year 2053. Can you talk about the assumptions that were made
in developing these estimates, and what factors, such as increased life
expectancy, higher than assumed costs of healthcare, or smaller than
assumed economic growth could impact those savings estimates?
Mr. Maldon. The commission estimates its modernization
recommendations, if enacted, would substantially reduce DOD budgetary
costs and Federal spending over time. All Commission estimates of
savings and cost-avoidance are expressed in fiscal year 2016 constant
dollars, and therefore account for expected inflation. These estimates
have been calculated using an appropriate set of assumptions, specific
to each recommendation. For a complete list of assumption related to
each individual recommendation, please refer to Appendix D, ``Cost
Data,'' (p. 255) of the commission's Final Report.
All budget estimates, including those made by the commission, can
be affected by changes in economic conditions. Many factors, including
shifts in economic performance and political decisions may affect the
realization of earlier estimates. The commission's approach to
developing estimates, however, has been fact based, rooted in commonly
accepted financial theory and modeling, and informed by relevant
historical data and trends. This approach serves to maximize the
utility of commission estimates as a key element in the careful
consideration of the commission's recommendations.
27. Senator Lee. Commissioners, is it the commission's assessment
that all of these recommendations could be implemented immediately with
minimal negative impact on the Armed Forces, or do you believe some of
the reforms could be either phased in or introduced through pilot
programs in order to assess impact and utility for servicemembers?
Mr. Maldon. The commission's recommendations include multiyear
implementation timelines to ensure the necessary preparations are
completed before implementation of the new programs. Importantly, these
implementation steps include financial literacy training for
servicemembers prior to implementation.
28. Senator Lee. Commissioners, in your cost analysis, does the
commission take into consideration the overhead costs of implementing
these recommendations, such as the cost of introducing and managing
Thrift Savings Plans across the force or creating and managing new a
healthcare insurance system for all military families and retirees? How
much time would it take to implement such recommendations?
Mr. Maldon. The commission's cost estimates include estimates of
implementation costs for each of the recommendations. Cost estimates
also include administrative costs such as managing the new health
insurance system, which would actually be a savings relative to the
cost of administering the current TRICARE program.
The commission's recommendations include multiyear implementation
timelines to ensure the necessary preparations are completed before
implementation of the new programs. It is important to note, these
implementation steps include financial literacy training for
servicemembers prior to implementation.
29. Senator Lee. Commissioners, in Recommendation 6, the commission
recommends that non-Medicare eligible retirees have access to the same
military health benefit program as military families at a cost that
gradually increase over time. If this recommendation were enacted,
would these retirees be paying more for health benefits than they are
under the current system?
Mr. Maldon. In the first year of TRICARE Choice implementation,
when the premium cost share is set at 5 percent, the range of premiums
available to working age retirees would be similar to the cost of
TRICARE Prime today and total costs of health care to retirees would be
similar to what they are today. Fifteen years after implementation,
when the premium cost share for working age retirees grows to 20
percent after a 1 percent per year increase, the premiums would be
higher than TRICARE Prime is today and the total costs of health care
to retirees would be higher. The commission's best estimate of the
average cost to a retiree user of TRICARE today is about $2,000. This
includes the premium for TRICARE Prime, the average costs of extra
programs like TRICARE Young Adult and TRICARE Retiree Dental Program,
and their out-of-pocket costs for co-pays and deductibles. Under
TRICARE Choice when the premium cost share has risen to 20 percent, the
total average cost is estimated at $3,600.
30. Senator Lee. Commissioners, the modeling used in Recommendation
1 indicated that the new retirement system proposed would maintain the
Services' current force profiles. Can you explain in more depth how the
modeling for this particular recommendation worked, and if ``current
force profiles'' refers to both a quantitative and qualitative
assessment of the current force?
Mr. Maldon. RAND's Dynamic Retention Model (DRM) can analyze
structural changes in military compensation. In the commission's case
the DRM was used to analyze proposed changes to the retirement system.
Recent applications of the DRM include analyses for the 9th, 10th, and
11th Quadrennial Reviews of Military Compensation (QRMCs), as well as
analysis in support of the recent DOD review of military compensation
reform. The model's capability has steadily increased. For example,
new, faster estimation and simulation programs have been written;
costing has been refined; and the model can now show retention and cost
effects in both the steady state and the year-by-year transition to the
steady state.
The model is based on a mathematical model of individual decision-
making over the life cycle in a world with uncertainty and in which
servicemembers have heterogeneous preferences (tastes) for active and
for Reserve service. The parameters of this model are empirically
estimated with data on military careers drawn from administrative data
files. The model begins with service in the active Component (AC), and
individuals make a stay/leave decision in each year. Those who leave
the AC take a civilian job and, at the same time, choose whether to
participate in the Reserve component (RC). The decision of whether to
participate in the RC is made in each year, and the individual can move
in to or out of the RC from year to year. More specifically, a
reservist can choose to remain in the RC or to leave it to be a
civilian, and a civilian can choose to enter the RC or remain a
civilian.
The quantitative and qualitative effects of a reform are both
important. The commission focused on the quantitative aspects of
maintaining the baseline force profile, judged in terms of the overall
force strength and experience mix (the number of personnel by year of
service). In the course of analyses, the model confirmed the retirement
recommendation can maintain the baseline force profile.
With respect to maintaining the quality of the force, the
commission thought about the accession of personnel who are judged to
be high quality based on information available at the time of
accession, and the retention of personnel who are revealed to be high
quality through their performance in the military. Under the retirement
recommendation there would be little if any change in accession
requirements for enlisted and officers. Further, an important aspect of
a compensation system is the incentives it provides for individuals to
exert effort and to reveal their ability, and for harder working, more
able individuals to remain in the force. The retirement recommendation,
along with the continuation of the current promotion system (including
criteria for promotion as well as time-in-grade constraints), maintains
these incentives. Because both the accession requirements and the
incentives for effort and ability are essentially the same under the
recommendation as at baseline, the commission foresees a continuation
of the baseline recruiting and resourcing policy, which is adaptive to
the economic environment and the personnel needs of DOD, to be
sufficient to sustain the quality of personnel entering the military,
and the quality of the retained force to be sustained.
31. Senator Lee. Commissioners, Recommendation 13 advocates for
eliminating the Family Subsistence Supplemental Allowance (FSSA)
domestically and replacing that assistance with the Department of
Agriculture's Supplemental Nutrition Assistant Program (SNAP). The
report states that only 285 servicemembers in fiscal year 2013 used
FSSA assistance, in large part because SNAP creates fewer social
stigmas for recipient families. Did the commission estimate how many
servicemembers, in addition to those already on FSSA, would start using
SNAP if FSSA was eliminated domestically? What cost increase would be
incurred by the Department of Agriculture?
Mr. Maldon. The commission found no reason to predict that the
number of servicemembers who would start using SNAP if FSSA were
eliminated domestically would be substantially larger than those who
are already receiving FSSA benefits. No evidence was found to suggest
that other servicemembers, who are not currently receiving FSSA
benefits, would apply for SNAP as a result of this change. Note that
only 75 percent of the 285 servicemembers receiving FSSA benefits in
2013 were stationed in the United States. Based on this percentage, we
project Department of Agriculture would incur a cost increase of
approximately $1 million as a result of this recommendation.
______
Questions Submitted by Senator Jeanne Shaheen
preparation of the recommendations
32. Senator Shaheen. Commissioners, how confident is the commission
that a majority of our men and women who are serving and have served
support the commission's recommended reforms?
Mr. Maldon. The commission recommendations were very much informed
by discussions with many servicemembers, family members, and retirees.
The commission and staff visited 55 military installations, conducted 8
public hearings, 8 town hall meetings, and many sensing sessions.
Through these discussions, the commission heard from the Force very
clear preferences for additional choice, access, and flexibility in
compensation programs.
These preferences were reinforced by the commission's survey, in
which more than 150,000 servicemembers and retirees indicated their
preferences for various features and levels of compensation programs.
The sources showed that servicemembers, particularly those lower in
rank, prefer TSP matching and autoenrollment, as well as greater access
and choice in health benefit. Servicemembers also expressed preference
for a wider network of civilian health care providers, coupled with
maintaining access to health care in MTFs.
The commission's recommendations deliver additional choice, access,
and value to servicemembers. The retirement recommendation extends
benefits from 17 percent to 75 percent of the force, while protecting
lifetime earnings of servicemembers who retire with 20 YOS. The health
benefit recommendation, TRICARE Choice, provides much more choice of,
and access to, health care at lower costs to the majority of Active
Duty servicemembers' families. TRICARE Choice also would provide a
substantially better health benefit to Reserve component members, which
would, in turn, improve medical readiness. Several of the other
recommendations improve or sustain benefits for servicemembers, such as
enhanced financial literacy training, greater support for exceptional
family members, and maintained grocery discounts at DOD commissaries.
cost savings
33. Senator Shaheen. Commissioners, the commission's report details
substantial anticipated cost savings after full implementation. How
long does the commission assess it would take to realize full savings
for the more significant recommendations and how substantial does the
commission expect the upfront transition costs to be?
Mr. Maldon. Savings estimates for the more significant
recommendations are provided below. Upfront transition costs are
included in each table as ``implementation costs.''
Retirement:
The commission estimates that its retirement recommendation would
reduce DOD budgetary costs by $6.1 billion during fiscal year 2016-
fiscal year 2020 and result in annual steady-state savings of $1.9
billion by fiscal year 2046. Federal outlays would increase by $7.2
billion during fiscal year 2016-fiscal year 2020, but decrease by $4.7
billion annually starting in fiscal year 2053. In this estimate, DOD
budgetary reductions are the net result of decreases in DOD's normal
cost payments (NCPs) into the Military Retirement Fund (MRF), increases
in automatic and matching contributions for the servicemembers' Thrift
Savings Plan (TSP) accounts, increases in Continuation Pay (CP) for
midcareer retention bonuses, and minor funding effects from associated
changes in the disability retirement system. Reductions in Government
outlays are the net result of changes in payments from the MRF to
retired servicemembers for defined benefit (DB) annuities and increases
in TSP contributions and CP. Outlays are higher in the near years
because Government contributions to servicemembers' TSP accounts begin
immediately upon implementation of the blended retirement system, yet
reductions in DB payments are realized over time as servicemembers
retire under the blended retirement system.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Health Benefit:
The commission estimates that its health benefit recommendation
would reduce DOD budgetary costs by $26.5 billion during fiscal year
2016-fiscal year 2020 and result in annual steady-state savings of $6.7
billion by fiscal year 2033. Federal outlays would decrease by $3.9
billion during fiscal year 2016-fiscal year 2020 and $3.2 billion
annually starting in fiscal year 2033. In this estimate, these
reductions are the net result of decreases in costs for providing the
health care benefits, decreased cost shares for some beneficiaries, and
increased cost shares for other beneficiaries. The decline in DOD
budgetary costs also results from accrual funding non-Medicare-eligible
retiree health benefit costs. In developing this estimate, the
commission worked closely with the Office of Personnel Management
(OPM); procured the services of the IDA to conduct health benefit
pricing analyses; and relied upon data from OPM related to beneficiary
demographics, choices, and health care plans in the FEHBP.\2\
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\2\ The Office of Personnel Management provided support for the
commission's analysis; however, such support does not represent an
endorsement of, or suggest any opinion on, the report, study, or
recommendations.
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Commissaries and Exchanges:
The commission estimates that its recommendation related to DOD
commissaries and exchanges would decrease DOD budgetary costs and
Federal outlays by $1.0 billion during fiscal year 2016-fiscal year
2020 and result in annual steady-state savings of $515 million by
fiscal year 2021. In this estimate, these reductions result from a
series of efficiencies, primarily in consolidating back office
functions, logistics systems, and staffing. Numerous studies have
projected that both financial savings and nonfinancial benefits can be
achieved through a consolidation of the three exchanges.\3\ Including
the commissaries in such a consolidation increases potential
efficiencies. The recommendation proposes a new defense resale
executive team that would be responsible for evaluating, selecting, and
implementing these potential efficiencies. Realized costs and savings
therefore depend upon the set of efficiencies selected for
implementation.
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\3\ Office of the Assistant Secretary of Defense (Force Management
and Personnel), DOD Study of the Military Exchange System, September 7,
1990. See also Logistics Management Institute, Report PL110R1, Toward a
More Efficient Military Exchange System, July 1991. See also Systems
Research and Applications (SRA) International, Integrated Exchange
System Task Force Analysis, 1996. See also PricewaterhouseCoopers,
Joint Exchange Due Diligence, 1999, See also Unified Exchange Task
Force, Modified Business Case Analysis for Military Exchange Shared
Services, August 26, 2005.
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Education Benefits:
The commission estimates that its recommendation related to
servicemember education would reduce DOD budgetary costs by $87 million
during fiscal year 2016-fiscal year 2020 and result in annual steady-
state savings of $17 million upon implementation. Federal outlays would
decrease by $15.6 billion during fiscal year 2016-fiscal year 2020 and
$4.8 billion annually starting in fiscal year 2025. In this estimate,
changes in DOD budgetary costs result from elimination of unemployment
benefits for veterans who are using Post-9/11 GI Bill benefits.
Reductions in Government outlays primarily accrue to VA, which funds
the Montgomery GI Bill-Active Duty, REAP, and the Post-9/11 GI Bill.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
34. Senator Shaheen. Commissioners, in the case of the proposed
reform to servicemember education benefits, how much of the savings
come from the phase-out of the housing stipend for dependents and how
much come from raising the service requirement to 10 years?
Mr. Maldon. Changing the eligibility requirement for transferring
Post-9/11 GI Bill benefits from 6 YOS, with a 4-year additional
commitment, to 10 YOS, with a 2-year additional commitment, results in
a steady state savings of $1.6 billion annually. Phase out of the
housing stipend for dependents accounts for $3.2 billion of the
savings.
healthcare recommendations
35. Senator Shaheen. Commissioners, does the commission anticipate
any additional burden for servicemembers obtaining healthcare through
the existing system but having their dependents rely on a distinct
system?
Mr. Maldon. The commission does not anticipate any additional
burden in obtaining healthcare under the recommended plan. Currently,
servicemembers receive care through their units or MTFs, and their
families receive care through the MTF or the network of civilian
providers in their TRICARE region. Under the commission's plan, there
would be no change in how servicemembers receive their care, and their
families would still receive care either at the MTF or through civilian
providers within their selected health plan's network. The major
difference would be in how the health care benefit is provided.
36. Senator Shaheen. Commissioners, I understand active-duty
families could continue to access MTFs as a venue of care. How would
this work?
Mr. Maldon. Under the commission's recommendation, insurance plans
operating within the geographic area around an MTF would include the
MTF in their provider networks. Beneficiaries could choose to receive
care at the MTF in the same way they might choose to receive care from
other providers. To provide beneficiaries incentive to seek care at
MTFs, copayments at MTFs would be lower than those for civilian
providers.
37. Senator Shaheen. Commissioners, the commission recommends the
DOD implement a robust medication therapy management (MTM) program.
Pharmacist-provided MTM has been shown to improve patient health while
at the same time reducing costs, so increasing access to these services
makes sense. How should DOD implement a robust MTM program, and what
role will retail community pharmacies play?
Mr. Maldon. The commission recommended DOD's TRICARE pharmacy
benefit should remain in place but proposed some important adjustments.
DOD would manage the pharmacy program and continue to use the DOD
formulary and Federal Supply Schedule pricing. In keeping with the
commission's objectives to increase choice, access, and flexibility in
health care, beneficiaries using TRICARE Choice, as well as Medicare-
eligible retirees using TRICARE for Life, would obtain medications from
retail, mail-order, and MTF settings. DOD would retain the authority to
contract with a third-party administrator to perform functions such as
managing the retail pharmacy network, distributing mail-order
medications, and processing claims. The commission recommended such
contracts require a pharmacy benefits manager to integrate
pharmaceutical treatment with health care and to implement robust MTM,
including the integration of MTM activities at retail pharmacies.
______
Questions Submitted by Senator Mazie K. Hirono
choice of healthcare plans
38. Senator Hirono. Commissioners, when considering a transition to
a new choice of commercial health plans, did the commission take into
account the complexity and potential disruption dependents may face
each time a Permeant Change of Station (PCS) occurs?
Mr. Maldon. The commission did consider these concerns. With any
permanent change of station move, military families face changes, and
health care is no exception. When they move, families need to select
new health care providers whether they receive care through the current
TRICARE plan or through TRICARE Choice. In terms of their health
insurance, families would have the option to select national, rather
than regional, insurance plans, which would preclude the need to change
insurance companies in a new locality. That said, because health care
pricing is regional in nature, families might find that going with a
less expensive regional plan better suites their needs. The
commission's financial literacy recommendation would provide families
support for understanding how to choose a plan that best suits their
needs.
39. Senator Hirono. Commissioners, what plan will be in place to
ensure that individuals who can ill afford a disruption in care will
not be materially harmed by having to wait to enroll in a new health
plan until after they PCS?
Mr. Maldon. Coverage would be seamless from location to location.
Beneficiaries would not be removed from their old policy before they
were added to their new one. If they needed care before they arrived at
their new duty station and their new policy took effect, they could use
out-of-network benefits on their old policy if needed. Beneficiaries on
national plans would not have to change plans unless they wanted to do
so, and would be able to use physicians from their plan's national
network.
cost of private medical care for pregnancy, childbirth, and infant care
40. Senator Hirono. Commissioners, I appreciate your response to my
question regarding moving the most common procedures performed at MTFs,
childbirth and newborn care, to the private sector. What I am still
concerned by is: what financial cost can be anticipated for both the
dependent and the military when these services are moved to commercial
health plans for treatment outside of MTFs?
Mr. Maldon. Costs for maternity and childbirth care would depend on
the insurance plan beneficiaries choose. As a point of comparison, the
2015 Government Employee Health Association plan (both the High and
Standard options) covers maternity and delivery costs at 100 percent
with no deductible when care is provided in network. For the 2015
Federal Blue Cross/Blue Shield (BC/BS) policies, maternity and delivery
costs are also covered at 100 percent when care is by preferred
providers. There is no deductible for the BC/BS Standard plan; however,
on the BC/BS Basic plan beneficiaries are responsible for $175 of
inpatient services per admission. Because the commercial insurance
carriers would assume risk associated with maternity costs, there would
be no associated costs for the military.
financial literacy
41. Senator Hirono. Commissioners, did the commission evaluate the
feasibility for implementing the robust frequency of financial literacy
training you've recommended within the current training schedule of
military units?
Mr. Maldon. The commission's recommendation to increase the
frequency and strengthen the content of financial literacy training was
made after a thorough review of financial training policies, schedules,
and content for Active and Reserve component members of all Services.
Servicemembers and their families, as well as organizations devoted to
increasing financial literacy, such as the Consumer Financial
Protection Bureau, also provided input to the commission. Training,
provided at more appropriate career and life milestones, would be
beneficial to servicemembers, their families, and the Services.
Military leaders have expressed concern regarding the amount of stress
experienced by servicemembers in financial difficulty and the amount of
time spent counseling those experiencing difficulties. Increased
financial literacy training would provide proactive, vice reactive,
effort and contribute to improved readiness.
42. Senator Hirono. Commissioners, for many military families
financial decisions are often made by members and their partners and,
in some instances, solely by the partner if the member is deployed. Did
the commission consider financial literacy programs for military
families as a whole or only individual servicemember training?
Mr. Maldon. The commission believes encouraging financial literacy
within the military family unit best supports financial readiness for
the Uniformed Services. According to the Blue Star Families' 2013
Military Family Lifestyle Survey, 82 percent of servicemembers
indicated their spouse should be included in financial readiness
courses. The commission believes in the importance of financial
literacy training for military families, and servicemembers would like
to have their spouses included in financial training; however, it is
difficult for the Services to mandate training for family members As
such, the commission believes that financial literacy should be open to
family members, but participation should not be mandatory.
______
[Appendixes A through O follow:]
APPENDIX A--FINAL REPORT OF THE MILITARY COMPENSATION AND RETIREMENT
MODERNIZATION COMMISSION
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APPENDIX B--LEGISLATIVE PROPOSALS OF THE MILITARY COMPENSATION AND
RETIREMENT MODERNIZATION COMMISSION
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
APPENDIX C--ADDENDUM TO THE REPORT OF THE MILITARY COMPENSATION AND
RETIREMENT MODERNIZATION COMMISSION
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
APPENDIX D--STATEMENT OF THE FLEET RESERVE ASSOCIATION
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
APPENDIX E--STATEMENT OF THE AIR FORCE ASSOCIATION
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
APPENDIX F--STATEMENT OF THE COMMISSIONED OFFICERS ASSOCIATION
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APPENDIX G--STATEMENT OF THE CONCERNED VETERANS FOR AMERICA
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
APPENDIX H--STATEMENT OF THE ENLISTED ASSOCIATION OF THE NATIONAL GUARD
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
APPENDIX I--STATEMENT OF THE NATIONAL ASSOCIATION FOR UNIFORMED
SERVICES
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APPENDIX J--STATEMENT OF THE NATIONAL DEFENSE INDUSTRIAL ASSOCIATION
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
APPENDIX K--STATEMENT BY THE RESERVE OFFICERS ASSOCIATION
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APPENDIX L--JOINT LETTER
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APPENDIX M--STATEMENT OF THE VETERANS OF FOREIGN WARS OF THE UNITED
STATES
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APPENDIX N--STATEMENT OF THE WARRANT OFFICERS ASSOCIATION
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APPENDIX O--LETTER FROM THE CONJOINED MILITARY/VETERANS SERVICE
ORGANIZATION
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THE RETIREMENT AND COMPENSATION PROPOSALS OF THE MILITARY COMPENSATION
AND RETIREMENT MODERNIZATION COMMISSION
----------
WEDNESDAY, FEBRUARY 11, 2015
U.S. Senate,
Subcommittee on Personnel,
Committee on Armed Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 3:03 p.m. in
room SD-G50, Dirksen Senate Office Building, Senator Lindsey
Graham (chairman of the subcommittee) presiding.
Committee members present: Senators Graham, Tillis,
Gillibrand, and King.
OPENING STATEMENT OF SENATOR LINDSEY GRAHAM, CHAIRMAN
Senator Graham. Thank you, all. The subcommittee will come
to order.
We have our ranking member, and what I thought I would do
is just basically let you introduce yourselves, so I don't
destroy your names, starting with the chairman.
Mr. Maldon. Alphonso Maldon, chairman.
Mr. Higgins. Sir, Mike Higgins.
General Chiarelli. Pete Chiarelli.
Admiral Giambastiani. Ed Giambastiani.
Mr. Zakheim. Dov Zakheim.
Senator Pressler. Larry Pressler.
Mr. Buyer. Steve Buyer.
Senator Graham. Where is he? There you are. He is a House
Member, and he's sitting in the audience. [Laughter.]
So the testimony you gave before the full committee was
compelling. I think you have been to the House. Is that
correct?
Mr. Maldon. That is correct, Mr. Chairman.
Senator Graham. Did you all survive?
Mr. Maldon. We are intact.
Senator Graham. I heard it went well.
Mr. Maldon. Thank you.
Senator Graham. So, rather than doing an opening statement,
I will turn it over now to our ranking member. I would like to
ask some questions, and I appreciate your work product. It is
an extraordinary amount of time, talented people coming up with
I think pretty innovative solutions that could probably always
be made better.
So without further ado, our ranking member, Senator
Gillibrand.
STATEMENT OF SENATOR KIRSTEN E. GILLIBRAND
Senator Gillibrand. Thank you, Senator Graham. I really
appreciate this committee and your chairmanship.
I want to note that this committee works very well
together, in the past we have, and I know we will continue to
work well together in a bipartisan fashion.
I want to thank all the witnesses for your hard work. I
appreciate the testimony you gave to the full committee.
Many members of the subcommittee have expressed
reservations about the Department of Defense's (DOD) proposals
to control the growth of personnel costs, which we received
while waiting for the findings of this commission and which
were requested by the administration again this year. We have
been concerned that the efforts were piecemeal rather than
holistic, and that their short-term and long-term effects on
servicemembers and their families were unclear. We were most
concerned about the consequences of those recommendations on
what we consider the most vulnerable military population, our
most junior servicemembers.
I am very grateful that you have looked at these issues in
a holistic manner and really look to have some long-term
changes that can make a difference. I am very grateful for the
new ideas that have been put forward, and I am very eager to
talk further about the assumptions that underpin your
recommendations.
Thank you, Senator Graham, for hosting the hearing.
Senator Graham. That was excellent.
Mr. Chairman, why don't you lead us off?
STATEMENT OF HON. DOV S. ZAKHEIM, COMMISSIONER, MILITARY
COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION;
ACCOMPANIED BY COMMISSIONERS HON. LARRY L. PRESSLER, HON. DOV
S. ZAKHEIM, MICHAEL R. HIGGINS, GEN PETER W. CHIARELLI, USA
(RET.), AND ADM EDMUND P. GIAMBASTIANI, JR., USN (RET.)
Mr. Maldon. Mr. Chairman, thank you very much, and Ranking
Member Gillibrand, distinguished members of the subcommittee.
My fellow commissioners and I are honored to be back here
in front of you today. As a commission, we stand unanimous in
our beliefs that our recommendations strengthen the foundation
of the All-Volunteer Force. It ensures our national security
and honors those who serve and the families who support them,
not only today but into the future.
Our recommendations maintain or increase the overall value
of compensation and benefits for servicemembers and their
families, and provide needed flexibility for service personnel
managers to design and manage a balanced force.
Our blended retirement plan expands benefits from 17
percent to 75 percent of servicemembers while maintaining the
Services' current profile. It provides flexibility for
servicemembers and the Services while protecting or improving
the assets of servicemembers who retire at 20 years of service.
These findings are based on reasonable and conservative
estimates, including Thrift Savings Plan (TSP) investment
returns of 7.3 percent and retired pay cost-of-living
adjustments of 2.3 percent. To maintain current force profiles,
TSP contributions were not recommended beyond 20 years of
service by this commission. However, the consideration of
matching contributions that continues beyond the 20 years of
service may be an interest that the committee wishes to
explore.
Our recommendations promote essential high-level focus on
readiness through a new joint readiness command that can serve
as a strong advocate for readiness funding and skilled
maintenance standards. They expand choice, access, quality, and
value of health care by offering family members, Reserve
component members, and retirees a broad choice of insurance
plans that are more flexible and efficient than the current
TRICARE system.
They maintain savings on groceries and other essential
goods, while providing the cost-effectiveness of DOD
commissaries and exchanges. Our recommendations also save more
than $12 billion annually after full implementation without
cutting overall servicemember benefits.
Our recommendations align compensations and the preferences
of servicemembers, which were partially measured through the
more than 155,000 survey responses we received. Our survey
methodology, which was new to the military community, captured
preferences for alternative benefit levels. Its analytical
tools then enabled for the first time direct comparison between
the values that servicemembers place on varying compensation
and benefits packages.
The survey validates the many comments we received from
servicemembers and their families at the 55 installations that
we visited.
Our recommendation, Mr. Chairman, incorporates a
substantial consideration of potential second- and third-order
effects, which are reflected in our implementation timelines.
Advancing these implementation timelines due to budget
constraints may lead to unanticipated cost implementation
challenges, or even failed modernization efforts. An example
may be accelerating the multi-year back-end operational
efficiencies of our commissaries and exchange recommendations.
In closing, my fellow commissioners and I again thank you
for the opportunity to testify before you today, and we are
pleased to respond to your questions. Thank you.
[The prepared joint statement of Mr. Maldon, Senator
Pressler, Mr. Buyer, Mr. Zakheim, Mr. Higgins, General
Chiarelli, Admiral Giambastiani, Mr. Kerrey, and Mr. Carney
follows:]
Prepared Statement by the Military Compensation and Retirement
Modernization Commission
Statement of: Hon Alphonso Maldon, Jr., Chairman; Hon. Larry L.
Pressler; Hon Stephen E. Buyer; Hon. Dov S. Zakheim; Mr. Michael R.
Higgins; GEN Peter W. Chiarelli, USA (Ret.); ADM Edmund P.
Giambastiani, Jr., USN (Ret.); Hon. J. Robert Kerrey; and Hon.
Christopher P. Carney
Chairman Graham, Ranking Member Gillibrand, distinguished members
of the subcommittee: My fellow commissioners and I are honored to be
here, and we thank you for the opportunity to testify today. We also
wish to thank you for your support of the Commission throughout the
last 18 months and for your unwavering commitment to and leadership in
the protection of servicemembers' compensation and benefits.
As a Commission, we stand unanimous in our belief that the
recommendations offered in this report strengthen the foundation of the
All-Volunteer Force, ensure our national security, and truly honor
those who serve--and the families who support them--now and in the
future. Our recommendations represent a holistic package of reforms
that do not simply adjust levels of benefits, but modernize the
structure of compensation programs for servicemembers. These
recommendations sustain the All-Volunteer Force by maintaining or
increasing the overall value of compensation and benefits for
servicemembers and their families, and they provide needed options for
Service personnel managers to design and manage a balanced force.
We would first like to address the concern that an all-male
Commission does not have sufficient diversity to make recommendations
on military compensation. As stated previously, the members of the
Commission were appointed and had no input on the composition of the
Commission. Nonetheless, the Commissioners immediately recognized the
need to supplement our experience through selection of our senior
staff. Our General Counsel and two of our three portfolio leads are
women. One is a retired two-star admiral, one is a retired Lieutenant
Colonel, and another is the spouse of a retired Army E-8, with
exceptional family members. Beyond our senior staff, many of our
diverse Commission staff members are current or former representatives
of most key military and family demographics and are current or former
beneficiaries of many of the very programs we explored. This internal
diversity of insight and personal experience was deeply appreciated
and, indeed, essential to our consideration of all relevant issues.
retirement
The Commissioners recognize that an appropriate and truly
beneficial retirement system is fundamental to keeping faith with our
Nation's heroes. Currently, only 17 percent of enlisted members and 49
percent of officers earn a military retirement. The Commission's
blended retirement plan recommendation expands benefits to 75 percent
of servicemembers, and protects recruiting and retention to maintain
the Services' current force profiles. It also provides more flexibility
for servicemembers, as well as for the Services that must field a
balanced force. The Commission's recommendation also protects, and even
improves, the assets of servicemembers who retire at 20 years of
service (YOS), based on reasonable and conservative estimates.
For example, the Commission's model assumes that servicemembers
contribute only 3 percent of their basic pay to Thrift Savings Plan
(TSP), even though 75 percent of participants in the Federal Employees
Retirement System contribute 5 percent or more of their pay to maximize
government matching contributions. It assumes investment returns of 7.3
percent, consistent with TSP returns since 1989 and lower than the
average rate of return estimated by State pension funds. It assumes 2.3
percent annual retired pay cost-of-living adjustments, consistent with
Department of Defense (DOD) actuarial assumptions. It further relies on
discount rate assumptions calculated by our contractor support based on
servicemember behaviors. To maintain current force profiles, TSP
contributions were not recommended beyond 20 YOS; however, the
consideration of matching contributions that continue beyond 20 YOS may
be an area the committee wishes to explore.
Key features of the blended retirement plan include the following:
Grandfather retired pay for current servicemembers and
retirees, while allowing servicemembers to opt in to the new
blended retirement plan.
Maintain the majority of the current defined benefit.
Vesting at 20 YOS for standard retirement.
Defined benefit multiplier of 2.0 (vs. the
current 2.5 percent) to maintain 80 percent of the
current defined benefit.
Institute a defined contribution plan for all
servicemembers through the Thrift Savings Plan.
Automatic enrollment of servicemembers to
contribute 3 percent of basic pay.
Automatic Government contributions of 1
percent of servicemembers' basic pay.
Government matching of servicemember
contributions of up to 5 percent of basic pay from
beginning of 3 YOS to 20 YOS.
Vesting at beginning of 3 YOS (2 years and 1
day).
Continuation pay at 12 YOS to provide mid-
career retention incentives.
``Basic continuation pay'' of 2.5
times monthly basic pay for active-duty
servicemembers (0.5 of active-duty pay for
Reserve component (RC) members).
Additional continuation pay from
Services as needed to maintain desired force
profiles.
Provide servicemembers more choice in how to structure
defined benefit payments.
Choice to receive all or part of pre-Social
Security age defined benefit annuities as lump-sum
payments.
Full annuities resume at full Social Security
receipt age to ensure steady income later in life.
Provide Services additional career field flexibility.
Authority to propose adjustments to YOS to
vest for defined benefit annuity for individual career
fields.
One-year waiting period after YOS adjustment
is proposed to Congress.
Enables differing force profiles to resolve
long-term manpower challenges.
joint readiness
The primary goal of the Commission's recommendations is to maintain
the All-Volunteer Force. A critical element of this goal is a focus on
sustaining or improving joint readiness. There are challenges to
maintaining joint readiness capabilities during peacetime. For example,
currently high levels of medical readiness could be enhanced if
Military Treatment Facilities (MTFs) had access to a different mix of
cases, yet DOD has limited means to affect MTF workload or access to
trauma-care cases. The recommended Joint Readiness Command would
provide essential high-level focus on readiness for the next conflict
and provide a strong advocate to ensure appropriate readiness funding.
Key elements of the Commission's recommendation include the following:
Establish a Joint Readiness Command (JRC).
Functional unified command led by a four-star
General/Flag Officer.
Includes a subordinate joint medical function.
Required structure and personnel may be
realigned from current Joint Staff functions.
Participates in annual planning, programming,
budgeting, and execution process.
Establish a Joint Staff Medical Readiness Directorate.
Led by a three-star military medical officer.
Current Joint Force Surgeon billet transitions
to assume the increased authorities.
Establish statutory requirement for DOD to maintain
Essential Medical Capabilities (EMCs).
Limited number of critical medical
capabilities that must be retained within the military.
Secretary of Defense approves, establishes
policies related to, and reports to Congress annually
on EMCs.
JRC identifies EMCs; establishes joint
readiness requirements consistent with EMCs; monitors
and reports on Services' adherence to EMC policies and
standards; and monitors allocation of medical personnel
to ensure maintenance of EMCs.
Protect and improve transparency of medical programs
funding.
Active component (AC) family, retiree, and RC
health care should be funded from the Services'
Military Personnel accounts.
Medicare-Eligible Retiree Health Care Fund
should be expanded to cover health-care and pharmacy
for non-Medicare-eligible retirees.
New trust fund for health care expenditures
appropriated in the current year.
MTFs funded through a revolving fund using
reimbursements for care delivered.
MTF operations that exceed reimbursement for
care delivered to be funded from Services' operations
and maintenance accounts as cost of readiness.
health benefits
The health benefit is essential for nearly all military
constituencies. The current TRICARE program is beset by several
structural problems that hinder its ability to provide the best health
benefit to AC families, RC members, or retirees. It has weak health
care networks because it reimburses providers at Medicare rates or
lower. It limits access to care with a frustrating referral process. It
has challenges adopting medical advancements or modern health care
management practices in a timely manner. The Commission's
recommendations expand choice, access, quality, and value of the health
care benefit. Key features include the following:
Continue to provide active-duty servicemember health
care through their units or MTFs to ensure Services can
maintain control of medical readiness of the Force.
Retain current eligibility for care at MTFs, pharmacy
benefit, dental benefit, and TRICARE For Life for all
beneficiaries.
Establish a new DOD health program to offer a
selection of commercial insurance plans.
Beneficiaries include active-duty families, RC
members and families, non-Medicare-eligible retirees
and families, survivors and certain former spouses.
AC families receive a new Basic Allowance for
Health Care (BAHC) to fund insurance premiums and
expected out-of-pocket costs.
BAHC based on the costs of median
plans available in the family's location, plus
average out-of-pocket costs.
Part of BAHC used to directly transfer
the premium for the plan the family has
selected to the respective insurance carrier.
Remainder of BAHC available to AC
families to pay for copayments, deductibles,
and coinsurance.
Establish a program to assist AC
families that struggle with high-cost chronic
condition(s) until they reach catastrophic cap
of their selected insurance plan.
RC members can purchase a plan from the DOD
program, at varying cost shares.
Reduce cost share for Selected
Reserves to 25 percent to encourage RC health
and dental readiness and streamline
mobilization of RC personnel.
When mobilized, RC members receive
BAHC for dependents; select a DOD plan or apply
BAHC to current (civilian) plan.
Non-Medicare-eligible retirees' cost
contributions remain lower than the average Federal
civilian employee cost shares, but increase 1 percent
annually over 15 years.
Leveraging its experience, Office of Personnel
Management administers the program with DOD input and
funding.
Institute a program of financial education and health
benefits counseling.
survey
In an effort to gather input from key stakeholder groups, the
Commission surveyed current and former servicemembers' preferences for
possible changes to military compensation. This survey was designed to
be statistically representative of key Active, Reserve, and retired
subgroups. Some important aspects of this survey include the following:
More than 155,000 current and former servicemembers
completed the survey.
Results are statistically representative the overall
populations and key substrata (95 percent confidence interval).
Unlike other military surveys that measure
satisfaction with current benefits and other aspects of
service, the Commission's survey explored servicemember
preferences for alternatives to their compensation.
Survey participants manipulated sliders (scaled 0 to
100) on a set of web-enabled interactive screens to express
their preferences for alternative levels of a benefit's feature
(e.g., preferences for alternative TSP contributions matched by
DOD).
Preference scores were standardized into measures of
relative importance across all benefit features (24 items in
the Active Force survey) to enable comparisons and rank
ordering of benefit features.
The system's analytical tools also calculated a
measure of perceived value which identified how much of a basic
pay raise would be required to match the perceived worth
servicemembers assigned to alterative levels of a benefit
feature (such as alternative TSP percent's matched by DOD).
The survey analysis tools also calculated aggregate
preference measures for alternative configurations of
compensation (including retirement, health care, and quality of
life benefit changes), providing insight into how compensation
changes could alter servicemember preferences for an overall
pay and benefits package.
Analysis of the survey results revealed considerable
support across key servicemember groups for the Commission's
modernization recommendations.
The survey results underscore the Commission's
position that efforts to modernize military compensation must
be undertaken in an integrated, holistic manner.
The Commission considered the insights gained from
this survey valuable, yet it was just one of several sources of
data and analysis available to support its deliberations.
In addition to the material on the survey included in
the Commission's Final Report, a separate report on the survey,
along with extensive data files on the results, are available
on the Commission's web site (MCRMC.gov).
We offer one additional note as you review and contemplate these
and the full complement of our recommendations. Our recommendations
look beyond the immediate and incorporate a substantial consideration
of potential second- and third-order effects. The implementation
timelines in our report are a direct result of these considerations. We
ask, therefore, that the members of the Subcommittee work to ensure the
most effective possible implementation of any enacted recommendations.
For example, our recommendation related to DOD commissaries and
exchanges has a multiyear implementation timeline. The Commissioners
are concerned that DOD budget constraints may create pressure to
accelerate the backend operational efficiencies recommended in our
report. An inappropriate acceleration, however, may lead to
unanticipated costs, implementation challenges, or even failed
consolidation of the military resale system. We ask that you give such
concerns your full consideration as you move forward in your review and
implementation of any recommendations.
In closing, my fellow Commissioners and I again thank you for the
opportunity to testify here today. It has been our honor and privilege
to serve American servicemembers and their families as we have assessed
the current compensation and retirement programs, deliberated the best
paths to modernization, and offered our recommendations. We are
confident that our recommendations will indeed serve our servicemembers
in a positive, profound, and lasting way. We are pleased to answer any
questions you have.
Senator Graham. Thank you all very much. I will start off
and try to be very brief.
When it comes to retirement reforms, is it fair to say that
if you are in the Service today and anywhere in the near
future, you are going to be grandfathered? If you like the
system you have today, you can keep it?
Mr. Maldon. That is correct, Mr. Chairman.
Senator Graham. So no one is being required to give up the
current system?
Mr. Maldon. They are not required to give up the current
system. They can in fact opt into the new system, if in fact
those recommendations are adopted, Mr. Chairman.
Senator Graham. They have to opt in. If they do nothing,
they stay in the current system. Is that correct?
Mr. Maldon. That is correct.
Senator Graham. When it comes to percent of Active Duty
servicemembers who prefer the current or proposed compensation
system, if that chart is remotely right, 80 percent prefer the
new proposed system when they are told how to compare the two?
Mr. Maldon. That is correct, Mr. Chairman.
Senator Graham. How sure of that result are you?
Mr. Maldon. Mr. Chairman, we are about as sure as we can
be, based on the data, just looking at the data, analyzing the
data.
We actually used the survey results to validate the
comments that we heard from our hearings that we had, town hall
meetings, those sensing sessions. All of those conversations
and discussions that we had with the servicemembers and their
families and the Reserve component members and retirees, they
were validated by the survey results.
Senator Graham. Every retiree, they are going to keep what
they have, right?
Mr. Maldon. Let me make sure I understand your question
again, Mr. Chairman?
Senator Graham. People who are currently retired, who have
already done their time, they are not affected by this?
Mr. Maldon. They are not affected by this.
Senator Graham. So if anybody calls you up on the phone and
says you need to get in this fight because they are going to
take your retirement away from you or change it, that is not
accurate?
Mr. Maldon. The only thing that is going to change is the
health care piece of it.
Senator Graham. That is why I am talking about retirement.
Mr. Maldon. Yes.
Senator Graham. We will get to that later.
Mr. Maldon. Okay.
Senator Graham. Talking about retirement, I want to make
sure that everybody understands what we are doing.
Mr. Maldon. That is correct.
Senator Graham. If you have earned your retirement, if you
have your retirement, you can keep your retirement.
Mr. Maldon. That is correct, Mr. Chairman. It is
grandfathered.
Senator Graham. If you are on Active Duty today, nobody is
making you change. But if you want to change, you can.
Mr. Maldon. That is correct.
Senator Graham. Now, if those numbers hold, I will have to
ask myself why would I stop a choice that 80 percent seem to
want? If those numbers hold, I will have a conversation with
myself, and I think I know how that will end.
That is an incredible work product, to have 80 percent
willing to accept the new idea. That is just fantastic, if
those numbers are accurate.
Health care, the current health care system, TRICARE, do
you agree that it is sort of, in terms of choice and provider
participation, dying on the vine?
Mr. Maldon. Mr. Chairman, I would say that the current
system, the current TRICARE system, in my opinion, has
certainly lost its usefulness. It is not as effective as it was
at the time that it was established and served a purpose, in
fact, in some good ways for a number of years. But the time has
come that I believe it has, certainly, outlived its usefulness.
Senator Graham. Well, do you agree with me that the reason
there are fewer providers in the TRICARE network is that we are
paying below Medicare reimbursement rates?
Mr. Maldon. I absolutely believe that, Mr. Chairman.
Senator Graham. I have never run a hospital, and I am not a
doctor. But I would be reluctant to take on a patient
population that is paying less than Medicare. So if that is
true--is that true? TRICARE actually pays less than Medicare to
the provider?
Mr. Maldon. TRICARE pays at the reimbursement rate or less
than that rate.
Senator Graham. Okay, the best is Medicare and, many times,
it's less.
Mr. Maldon. That is correct.
Senator Graham. Well, if that is true, then our military
members and their families and our retirees are going to have
less choice because that is an unsustainable system. Your goal
was to replace that system with something that would give you
more choices in health care. Is that correct?
Mr. Maldon. Yes, Mr. Chairman. It was to get more choices.
It was to expand the network. Tt was to actually give better
access to health care.
Senator Graham. Let's keep it really simple, too. Under the
new plan, doctors and hospitals will get paid more. They will
have a higher reimbursement rate, potentially.
Mr. Maldon. I believe that is correct. That was the
intention, yes.
Senator Graham. Okay. The rate of reimbursement for the
Federal employee health care system, is that generally higher
than TRICARE for the providers?
Mr. Maldon. That is correct, Mr. Chairman.
Senator Graham. So I can see why more doctors and hospitals
would want to participate in TRICARE Choice, because they have
a chance of getting higher reimbursement. Under TRICARE Choice,
the member and their families will have more choices than they
do today under TRICARE. Is that correct?
Mr. Maldon. That is correct, Mr. Chairman.
Senator Graham. The belief is that they will have more
options and higher quality. Is that correct?
Mr. Maldon. That is correct.
Senator Graham. That eventually the 5 percent cost share
that is currently being appropriated or taken from the
population is insufficient to maintain the system over time.
Five percent of the money to pay for TRICARE comes from the
patient population. Is that correct?
Mr. Maldon. Yes, Mr. Chairman.
Senator Graham. I don't know of any system in the world
that 5 percent is the number, so we are going to have to adjust
that number.
The goal for me is, if we are going to adjust that number,
that you get more for your money, that if we are going to ask
you to pay more, you get more. I am not going to ask you to pay
more and get less. Is that the general idea of health care?
Mr. Maldon. That is absolutely the general idea.
Mr. Chairman, let me add that as we had conversations with
the military service organizations and the veterans service
organizations, certainly from the military service
organizations, that was one of their main concerns, that if
they had to pay more, that they would be able to get more in
return. I believe we have done that.
Senator Graham. I promise them that you are not going to
pay more and get less, and to the Guard and Reserve. You are
going to get a better deal.
Senator Gillibrand?
Senator Gillibrand. Thank you, Mr. Chairman, for those
great questions.
So to focus again on retirement, I just wanted to get some
detail for Guard and Reserve. Guard and Reserve are crucial
tools for retention for troops, especially as we drawdown. But
your recommendations about government contributions to TSP and
bonuses favor the Active component. Did you assess the role of
the Reserve component in retention when looking at these
recommendations?
Mr. Maldon. We did, indeed, assess that, Ranking Member
Gillibrand.
I would like to have Commissioner Higgins respond to that
first, please.
Mr. Higgins. Thank you, Mr. Chairman, Senator.
Yes, ma'am. Without a doubt, our analysis included the
impacts and implications for the Guard and Reserve of the
retirement system that we proposed. We believe it will operate
very similarly there as it does in the Active Force.
Senator Gillibrand. So this chart here, does that show
that, according to your study, the demographic prefers the
hybrid retirement system that you have recommended? Is that
what your chart shows?
Mr. Higgins. The survey questions we asked were highly
influenced by some of our early thinking about what reforms may
be possible. The answer is yes, a lot of what was in the survey
is what you see today as our final proposal.
Senator Gillibrand. When you did survey the servicemembers,
what were the things that they said they valued in a retirement
plan?
Mr. Higgins. Choice, flexibility, and we believe that we
have delivered on that with a plan that is multifaceted and
delivers the force profile, which is what the Joint Chiefs
demanded.
Senator Gillibrand. Your recommendation is that retirees
leaving after 20 years of service have the option to choose a
lump sum in place of all pension payments up through age 67, or
to split the difference by getting half the benefit upfront and
the other half spread out in monthly checks. All the options
you recommend would resume monthly payments to retirees at age
67. How do you recommend that the DOD calculate the lump sum?
Mr. Higgins. We would suggest that they should consider an
actuarial type of assessment and consider the interests of
people, what would draw them to this benefit.
Senator Gillibrand. Okay. A different topic, I am
particularly concerned about the well-being of families, so one
of the questions that I wanted to ask was about those military
families who are food insecure, who don't have enough food. I
have been concerned by the small amount of servicemembers that
use the Family Subsistence Supplemental Allowance (FSSA). You
have recommended eliminating it in favor of the Supplemental
Nutrition Assistance Program (SNAP). What factors informed your
recommendation to do away with the FSSA rather than reform it?
Do you think the SNAP can adequately meet the needs of the
servicemembers who live with chronic food insecurity?
Mr. Maldon. Senator, we gave a lot of consideration to
that. We obviously want to make sure that we don't have anyone
who is with the need and that need is not being met, especially
with regard to nutrition or any other kind of support that the
military should be providing for the servicemembers.
I am going to ask Commissioner Dov Zakheim to respond to
the question.
Mr. Zakheim. Thank you, Mr. Chairman.
One of the things is that SNAP tends to be more anonymous
for people, so that you don't have to go through the chain of
command and let the whole world that you have a problem.
Senator Gillibrand. Right.
Mr. Zakheim. That is one of the bigger issues. There are
not all that many people on the FSSA program.
Senator Gillibrand. Right.
Mr. Zakheim. The benefits are actually a bit better.
Senator Gillibrand. That was the purpose of it, to give
more support.
Mr. Zakheim. Exactly.
Senator Gillibrand. But it doesn't really work.
Mr. Zakheim. So you are doing a bit better. You are keeping
your pride and dignity. It seems, to us, that it is kind of a
no-brainer on this one.
Senator Gillibrand. Does the Basic Housing Allowance or
other military benefits prevent servicemembers from qualifying
for SNAP or will they still qualify? Did you do any analysis of
who would qualify?
Mr. Maldon. Thank you for that question, Senator.
Commissioner Higgins?
Mr. Higgins. Senator, clearly, the Basic Allowance for
Housing would have an impact on SNAP eligibility in some
States. But I think the States have very different formulas,
which was one of the complications that we encountered.
The major concern that we had was nobody really knows how
many people actually participate in SNAP and receive the
benefit. In addition, it appears that for most people, SNAP is
actually a better benefit. So our original concern was to
deliver to the families that have need the best benefit
available. FSSA was not providing that. SNAP does.
But following right behind that is the awareness that we
need to understand exactly which servicemembers are on SNAP.
This is where we come in with our reporting requirements, to
fully get that information.
Senator Gillibrand. To identify which ones are actually
food insecure.
How would this affect families serving overseas, because
they are not eligible for SNAP.
Mr. Higgins. We would retain the FSSA overseas, because
there is a valid, urgent need there for the program.
Mr. Zakheim. There is no alternative.
Mr. Higgins. Correct.
Senator Gillibrand. Right.
Mr. Higgins. SNAP doesn't reach overseas.
Senator Gillibrand. Do you plan on any particular outreach
to try to assess which families are food insecure, so that you
can be more supportive?
Mr. Higgins. I think one of our recommendations is to
ensure that the States are properly accounting for
servicemembers and their families as they approve people for
SNAP. The commission obviously may not be the ones making these
decisions, but once DOD has the information, then you can
reassess what changes to the pay system may be required, once
you fully understand who is in need.
Senator Gillibrand. I have a lot of other questions that I
can submit for the record. But specifically, I want to talk a
little bit about commissaries and exchanges, as well as child
care on military installations and education benefits. So I
will submit those for a written response.
Thank you, Mr. Chairman.
Senator Graham. Thank you. Very good questions.
Senator Tillis?
Senator Tillis. Thank you, Mr. Chairman.
Gentlemen, thank you for your work. I want to go back and
maybe cover some of the points that Chairman Graham made.
First, I am assuming that the anticipated adoption rate of
the new plan has a lot to do with, well, let's say somebody
like the chairman, who is a little bit more advanced in his
pension accruement, so he may end up deciding to stay on the
plan, when he asks that question of himself.
But with the pyramid being among some of the younger, less
tenured people, it looks like it is more or less following the
same trends that you have seen with these type of pension
transitions in the private sector. Is that right? Does it fit
pretty much with that adoption rate?
Mr. Maldon. I think that is fair, yes.
Senator Tillis. The question that I have in that is, I know
there are some people who may have some concerns with tying
some of the retirement to stock, but it is also using
contemporary models another 401(k) programs to optimize the
return. Is that correct?
Mr. Maldon. That is correct.
Senator Tillis. Then, in the process of doing this, one
question I have is with respect to the adoption rate. Over what
period of time do you think you would see the mix where the
proposed plan, people would opt in? I am assuming there is an
opt-in when they come into the Service, there is some period of
time, but the ones already here can make that decision. Over
what period of time do you see the plan being implemented?
Mr. Maldon. Commissioner Higgins?
Mr. Higgins. Thank you, Mr. Chairman, Senator.
Sir, we have to be clear about the two groups of people we
are talking about here. One is all the new accessions. They
will be in our proposal, if our language is adopted.
Senator Tillis. From that point forward.
Mr. Higgins. As we recommend. As soon as they enter Active
Duty, new accessions.
Those who are currently serving will have the ability to
opt in. We feel the strength and power of our proposal would
draw many of the currently serving people in, up to a certain
point, up to, say, 10, 12 years of service, where their
investment in the current system is perhaps more remote in
their perspective than what we are offering. I think you will
see very high rates, indeed.
Mr. Maldon. Senator, we do have a data point. We know that
40 percent of folks in the military now are investing in TSP
with no government match.
Senator Tillis. So they are already in, fundamentally, the
same sort of plan without any leverage.
Mr. Maldon. Without any leverage. So that is a pretty good
indication of what my colleagues just said.
Mr. Higgins. If I could, sorry, the opting in is limited.
There is a window.
Senator Tillis. What is that window?
Mr. Higgins. I believe it is 6 months, if memory serves.
Senator Tillis. One of the questions I have, because I
think it is a good idea to add the additional cost for
financial literacy, and there may very well be that some may
not opt in, not because it is not a good idea but because they
don't understand that it is a good idea. So that is why I was
asking about of the enrollment window.
To what extent are we really presenting to those who have
the choice, and are probably within a window where it will most
likely make sense for them to go this route, that they have the
right education and materials to make that decision?
Mr. Maldon. Step one is a briefing for every servicemember
concerning our recommendations, assuming they would be adopted,
throughout the force, to ensure that the force knows what is
available to them.
Mr. Zakheim. It is going to be continuing. That is another
point that is very, very important. I mean, it is not fire-
hosing a 19-year-old for 6 hours or something, and then he or
she has no idea after the 6 hours are over.
We studied this in great depth. We even talked to other
militaries about it.
Clearly, if you have a regularized approach, people go
through different stages in their lives. They get married. They
have children. They get promotions. At each major stage, the
idea is that you come back and say, well, now you are at this
stage, here are some of the concerns you ought to bear in mind,
here is how you might want to look at the benefits available to
you.
So it is a completely different approach to financial
literacy than the military has today.
Senator Tillis. A different line of questioning, but how
does this work out for the government in terms of saving us
money or managing our long-term obligations?
Mr. Maldon. Thank you, Senator, for the question.
There is savings, but not savings. By that, I mean there is
a $75 million cost per year to actually support or sustain this
kind of training that we are recommending, because we are
talking about a very robust kind of training.
Senator Tillis. Oh, I am sorry. I completely agree with the
value of the financial literacy. I am back to the program as a
whole. How do the economics of this look versus the current
state?
Mr. Maldon. I'm sorry, Senator. I thought you were still on
the other question. I apologize for that.
Commissioner Zakheim?
Mr. Zakheim. Sure. You are going to have, initially, some
outlays, because you have to get the TSP program going. But our
numbers show that in budget terms, budget authority terms, you
are already saving up to $1 billion in 2016, if you went
immediately.
Senator Tillis. So that is after you fund the transition
bubble?
Mr. Zakheim. The transition bubble is an outlay number.
This is a net budget authority number. By the time you get out
to where this really kicks in, so this is quite a few years
down the pike, say 2053, you are talking about savings and
outlays of nearly $15 billion a year.
Senator Tillis. Great. I had another question. It is on a
different topic, and it is with the unemployment. I read a
little bit on it, but I would like to get your take
recommending eliminating unemployment compensation for those on
the post-9/11 G.I. Bill. What was the thought process behind
that?
Mr. Maldon. Senator, we wanted to make sure that when we
looked at each one of these programs, we wanted to take a very
hard look at what the intent of those benefits were and to make
sure that they were being delivered in a cost-effective way. As
we did that, in talking to people across the country that we
talked to, we would find out that there were servicemembers who
were getting unemployment benefits. They were using tuition
assistance benefits. They used the the 9/11 Montgomery G.I.
Bill. There were a number of duplicative benefits that
servicemembers were receiving.
We did not think that we could not just look at that and
look past it, because it was just not an efficient way to do
that. We wanted to make sure that we could sustain the
educational benefits for a very long time. The way to do that
was really to look at those things that we could do away with.
The unemployment piece of that, which is something where if a
servicemember was receiving tuition assistance and using that
tuition assistance to go to school, there was no reason to
actually be getting unemployment and having the BAH paid for as
well.
Senator Tillis. Thank you all for the work. As speaker in
North Carolina, we were trying to get this done for our State
employees, and I think we will ultimately do it there. This is
great work, and I look forward to hearing more about it. Thank
you.
Thank you, Mr. Chair.
Senator Graham. Senator King?
Senator King. Thank you, Mr. Chair.
The premise, as I understand it, was that this was not a
budget-cutting exercise. It was a realignment of compensation
exercise and the sort of underlying assumption was that people
aren't going to be hurt by this. However, I note that there is
a budgetary impact of something like $4.8 billion in year one
and $30 billion over 10 years.
That money isn't coming out of the air. Isn't that coming
from military personnel in one way, shape, or form?
Mr. Maldon. Thank you, Senator, for the questions.
Those are savings, but those are savings that we arrived at
by achieving efficiency in some the various programs that were
decades-old and just weren't serving a purpose. The funding for
those programs were there. The benefits to servicemembers, from
what the servicemembers have told us, is that they just were
not meeting their requirements.
I am going to ask Commissioner Higgins to speak
specifically to the cost savings there.
Mr. Higgins. Sir, with regard to retirement, where there
were significant savings, as you suggest, we believe, and our
analysis would confirm, that servicemembers who stayed in 20
years, over the course of their lifetime, their assets will be
as good or better under our proposal.
That could vary based on the assumptions that you apply to
that formula, but what I would like to maybe clarify for you,
where I think you are going, is do we save this money on the
backs of servicemembers who are loyal, faithful, and serve
through their 20 years?
Senator King. Well, you are showing $30 billion in savings.
Like I said, it is not coming out of the air. It is coming from
somewhere.
Mr. Higgins. With regard to retirement, it is a more
effective use of dollars. We are moving dollars from future
benefits to current dollars. Those dollars are far more
effective in producing retention than dollars that are paid
later in a differed plan. We are delivering a Thrift Savings
Plan, the continuation pay, new choices, new flexibility, a
lump sum, for example, on retirement.
Those are all things that people want that we delivered
under a modernization, not a cost-cutting objective, but a
modernization objective. We deliver on those, and those are
highly effective in producing retention. That is what our
analysis that we believe in suggests is true.
Senator King. Well, you mentioned retention, and it seems
to me that is what this is all about. A fundamental difference
in the military system than in the private sector is that in
the military system, you have to grow your talent. You don't
hire middle managers in midcareer. So retention is the whole
deal.
I am concerned, for example, how the new system would
affect somebody who has done their 20 years, because you get
some of the most important service between 20 and 28 or 30
years. My understanding is that the incentive to stay those
additional years really diminishes under the plan that you are
proposing. Can you react to that thought?
Admiral Giambastiani. Senator, if I could, I think, first
of all, it is important for you to know that of the nine
commissioners who have unanimously put this report together
that I am guessing we have 130, 140 years of military service
amongst all nine of us. I don't know the exact number, but it
is pretty close.
So we looked at this, how we sustain the All-Volunteer
Force. Having, for example, speaking for myself, I came in
during Vietnam, during the draft era. I had a lot of fine
people serving with me. But the midgrade chief petty officers,
sergeant majors, all of those senior enlisted frankly didn't
exist in big numbers and didn't stick around very long. So that
is part of the retention profile that we looked at, in addition
to officers.
Senator King. They got nothing.
Admiral Giambastiani. Correct.
Senator King. The current system is it is 20 years or
nothing. Isn't that correct?
Admiral Giambastiani. Well, no. It is for 20 years for
retirement pay. They get the G.I. Bill. There are other V.A.
benefits. But the retirement plan.
So we looked at this, and as you can see from our surveys,
we went out and talked with folks. We wanted to make sure that
we maintained the best profile.
The chairman in his opening statement said that the Joint
Chiefs asked us to look very carefully at the profiles that the
Services needed over a career path. So we tried to put together
a whole series of packages.
We looked at 350 programs, frankly, and we came up with
only 15 recommendations. The reason is that those are the most
important to provide the value, the benefits, the access,
choice, retention, all the rest of it. We think we have put a
pretty complete package together.
I would say one thing. Will some of the retirees pay more?
The answer is yes. We have a program in health care where the
non-Medicare, Social Security-eligible retirees will pay 1
percent more per year, if you will, from the 5 percent they are
currently paying over a 15 year period, up to a total of 20
percent.
So, yes. There are a couple of these were somebody's going
to pay a little more like that. But the vast majority of these
are, for example, because we reduced the TRICARE staff
significantly, we have reduced the Defense Health Agency staff
in the Pentagon by transferring many of these to this Federal-
type health program, if you will, including the Military
Treatment facilities.
That is where we come up with a lot of these, if you will,
efficiencies and savings, so that we can finance these better
programs.
Mr. Zakheim. Senator, as you probably know, I used to be
Comptroller of the Pentagon, so I worried a lot about budgets.
There are really two ways to approach what you are raising. One
is to say that I have to find some money. How do I do it? So I
will slice off here, I will slice off there.
The other is to get entirely off the cost curve. That is
what we have done. It is not just retirement that saves you
money. As Admiral Giambastiani just said, the health care
approach that we are taking saves you money. Yet, it benefits
the consumer.
When you think about it, in the private sector, that
happens all the time. Computers get cheaper. They get better at
the same time they get cheaper.
What we are essentially doing is getting off the classic
cost curve, a cost curve that, by the way, has been around in
some cases for 70 years, give or take, and saying, if you have
an entirely new approach, you not only save some money, which
was not, as the chairman said, our priority, but you are really
bringing your military into 21st century choice.
It is a very different military from when I came into this
business in the mid-1970s, when most of the military people
were young, single, no families. A lot of these issues never
arose. It is different, and, essentially, this is a 21st
century program.
Senator King. Well, I am not taking a position on your
proposal yet. I just want to underline that this retention
issue, it seems to me, is really crucial. We cannot make a
mistake because it may be 10 years before it manifests itself.
That is why I think we really to be careful with fully modeling
it, thinking about it, having a representative group that fully
understands the survey and what the options are.
So I just throw that out, Mr. Chairman.
Mr. Zakheim. Senator, you are absolutely right. One of the
things, if you look at, and this actually points to the
comprehensiveness of what we are doing, why it all hangs
together. So you have, for instance, under our approach, the
G.I. Bill, 10 years you vest. You commit to 2. That brings you
to 12. At 12 years, you get continuation pay. You commit to 4
more. It brings you to 16. At that point, you are in for 20.
So if you look at the package, it is actually a phenomenal
retention tool, and that is what the analysis that we had
showed, to a great degree.
Mr. Maldon. Senator King, let me also add, please, that DOD
sent a white paper to the commission last March. They concluded
that a blended retirement plan like the one we have proposed
would sustain the recruiting and retention, just to kind of
make that point here, that that was their conclusion with their
white paper, which we took into consideration as we moved
forward with our deliberation.
Admiral Giambastiani. I think it is important to understand
that you are creating a problem today as you ask individuals to
leave the Service who have gone on two, three, four deployments
and they leave with absolutely nothing.
My biggest concern is that they are going to talk to other
people about how they answered their country's call, were
planning to stay in for 20, and then asked to leave. I think
our recommendation would go a long way in correcting what I
believe is wrong there.
Senator Pressler. Senator King, your very original
question, I just want to add one footnote, where does this
money come from? In part, there is a reduction from 2.5 percent
a year that one gets in their retirement formula. Our plan
would reduce that to 2 percent. That is probably where some
heavy lifting is going to come. Probably that will be objected
to, to some extent.
But your very original question was where does the money
come from. Some of it comes from that in the retirees' formula,
the formula will reduce. Now it is 2.5 percent a year. It will
be reduced to 2 percent a year, I believe. Correct me if I am
wrong.
Senator Graham. Thank you. Very good question, but as I
understand the blended plan, you get a 40 percent guarantee
defined benefit, but you get a matching Thrift Savings Plan for
your entire 20 years. I think you are going to get more money
at the end of the day.
Mr. Zakheim. Senator, we have a chart I think that we could
put up for you.
Senator Graham. Well, the chart I am looking at is 80
percent of the people want to transfer into the other system. I
think I know why.
But we are going to vote in about 5 minutes, and I will
just start it off.
I think he asked a really good question about retention.
The G.I. benefit, the Webb bill, for lack of a better word.
Senator Webb did a great job. Senator McCain and I had a real
concern.
I want to be generous after 4 years, but I want to keep
people around. So one thing we did that I think was really
smart, is if you stay in 12 years, after 12 years, you can
actually transfer your G.I. benefits to your kids. I'm working
on grandkids.
So think about this. If you retire, now the G.I. benefit
that you didn't use in the military, basically pay for your
education, there will be a pretty healthy benefit left, if you
manage your career right. You can actually pay for your kids'
college. I thought that was a real incentive to stay past 12
years, that if you make it to 20, you can take the G.I. benefit
and actually use it for the benefit of your children.
But the goal is to be generous, sustainable, and keep
people around who we want to keep around. I hate the fact that
after 12 years of fighting in Iraq and Afghanistan, you get a
pink slip and you get zero. Under sequestration, that is going
to be more likely than not.
Remember what we are doing to the force here. We are going
to reduce personnel down to the lowest level since 1940 in the
Army. That means a lot of people are going to be asked to leave
before they get to 20, and get nothing for it. That is why we
have to be smart about sequestration and about what you are
trying to do.
So any second rounds?
Senator Tillis. I look forward to actually meeting with
some of your representatives to talk more about the plan
design. I think Senator King makes a great point. If there are
documented savings and there are things we can realize, versus
on paper savings, then there is something to be said for
turning those savings back into even more benefits for the
veterans, really use those for strategic investments that
address retention, those sorts of things.
A question I had is since this has come out, I see what the
graphic says here in terms of the adoption rates, but what are
you hearing from people? When I have gone through these types
of conversions before, everybody hates it until you go through
the financial literacy and really show what it means to the
large number of people who will probably opt into it. Are you
getting resistance now? Is it generally positive? Where are you
in terms of the stakeholder community and feedback?
Mr. Maldon. Senator Tillis, I think at this point in time I
do still believe that it is kind of early in the process to
really give a definitive answer to that question. But I think
for the most part, the support the recommendations, the report,
is getting, it seems people are rather supportive of it.
I think it is fair to say that a lot of the key
stakeholders who would be impacted in some way by this or
associated in some way with the decisions are thinking that
they still need to know more about the details. So we are in
the process of going through that. So I am sure we don't have
the final decisions from them in terms of where they might be
at this point in time. Most are supportive at this time.
Admiral Giambastiani. If I could add, Senator, in talking
with members of the Joint Chiefs, these are the Service Chiefs,
they would tell you that at the beginning of this process when
this commission stood up, there was a tremendous amount of
doubt with the Active-Duty Force out there that you were
messing with my retirement system. Senator Graham made that
point many times at the beginning here.
Once the message has gotten out by the senior officers and
senior enlisted across the force, the heat level went down
dramatically. So that is very important for those stakeholders.
Mr. Zakheim. I would just add, Senator, and this is purely
anecdotal, I am getting a lot of emails from people, some whom
I know and some whom I don't. I mean, it is literally running
99-1 in favor.
Senator Tillis. Well, I would think that you benefit from
this working relatively well in a lot of large, complex
organizations out there. I do think, though, that what Senator
Graham opened up his comments with is very important. If you
like your current plan you will have the option to keep it, and
we mean it this time. So I think that that is critically
important.
When you wind into that the financial literacy, this is
something that is critically important, something I have seen
benefit from policy down in North Carolina, then you are going
to help these folks make some very positive decisions. I think
they will become positive supporters of this plan.
So thank you for your work. I look forward to learning more
about it.
Senator Graham. Thank you, all. Anything else? I think they
have just called the vote. Does anybody have any more
questions?
If not, we will let you go. Well done.
One final thought, if you are 18 years in, I am probably
sticking with what I got. But if I am just getting started, I
like the blended plan.
We have to fix sequestration, because Senator King has
raised a great point. How do you retain people? Well, under
sequestration, you can't. You are going to have to let a lot of
people go. We need some kind of system to at least be fair to
these people. If you are going to let them go, you ought to pay
them for their honorable service rather than just say thank
you.
So I appreciate the hard work.
Mr. Maldon. Thank you, Mr. Chairman.
Senator Graham. Why don't we go vote? We will stand in
adjournment, go vote, and come back to the second panel. How
does that sound?
Senator Gillibrand. That is perfect.
Senator Graham. Okay.
[Recess.]
Senator Graham. Thank you all.
Can we get the second panel upfront and ready to go?
I apologize. We had to go vote.
So panel two, could you introduce yourself, starting with
the Air Force Sergeants Association.
Mr. Frank. I am Rob Frank, retired Chief Master Sergeant of
the U.S. Air Force, and I am the CEO for the Air Force
Sergeants Association.
Ms. Parke Holleman. Good afternoon. I am Deidre Parke
Holleman. I am the head of the Washington office of The Retired
Enlisted Association.
Mr. Jones. My name is Rick Jones. I am the legislative
director for the National Association for Uniformed Services.
Mr. Nicholson. I am Alexander Nicholson, legislative
director for Iraq and Afghanistan Veterans of America.
Senator Graham. Thank you all for coming. I don't have an
opening statement. Would you all like to go with ladies first?
How would you like to do this? Do you want to give a quick
opening statement, or do you just want to take questions?
Ms. Parke Holleman. Well, I wrote it. I will give it a
shot.
Senator Graham. Well, you wrote it, and I will listen to
you, if you read it.
STATEMENT OF DEIRDRE PARKE HOLLEMAN, EXECUTIVE DIRECTOR, THE
RETIRED ENLISTED ASSOCIATION
Ms. Parke Holleman. Thank you kindly. Chairman Graham and
members of the subcommittee, thank you for the opportunity to
testify on behalf of the men and women of The Retired Enlisted
Association concerning the retirement recommendations made by
the Military Compensation and Retirement Modernization
Commission.
May I ask that our full written statement be made part of
the record?
Senator Graham. Yes, ma'am. Your entire written statement,
including the first panel, will be made part of the record.
Thank you.
Ms. Parke Holleman. Thank you.
The Retired Enlisted Association is the largest veterans
organization in the Nation that was created specifically for
enlisted personnel from all the branches of the armed services.
We were founded in 1963 and congressionally chartered in 1992.
The commission has outlined a series of recommendations
that would result in the blended retirement system that
contains elements of a defined contribution retirement plan
while retaining a good bit of the military's current 20-year,
cliff-vesting defined benefit plan.
We are very grateful that you wish to hear our views,
though a bit breathless as well. We are told the Pentagon, with
all their resources, is working like mad to develop response to
present to the President in 60 days. We have only had 13 days
to prepare comments to present to you.
Because of that timetable, we must say that even with the
fine cooperation of the commission's members and staff, we are
far from having the numbers, details, and analysis that are
needed to accurately and thoroughly assess the recommendations.
With that large caveat, we acknowledge that the report of
the commission is a serious analysis that contains interesting
proposals. It is clear that they made an honest attempt to
change and, in their view, improve the system as it is now.
But first, we should note that the present cliff 20-year
retirement system has worked very well for over 40 years for
our all-volunteer military. It has worked during good and bad
economic times, and amazingly well during the last 13 years of
war. Therefore, we believe that Congress should adopt the
medical model of first do no harm when considering overhauling
the present system.
On the other hand, we agree improvement should be made
whenever possible to a system designed not only to attract
personnel to our Armed Forces who will defend our Nation but
also to care for him who shall have borne the battle and for
his widow and his orphan, as President Lincoln said. We
recognize, of course, that this is now the motto of the
Department of Veterans Affairs, but it is equally true when it
comes to those currently serving, not just for those who have
left the Services.
It is a splendid idea to provide a portable retirement
investment account for those who serve in our uniformed
services but leave, for whatever reason, before serving 20
years. It is also a first-rate idea to provide effective
financial education to all those who serve. But neither benefit
should be paid for by reducing the retirement of those who
served 20 years or more.
Does this proposal do that? We are worried that it may. We
have many concerns.
First, clearly, there is a 20 percent cut in the defined
benefit plan value from 50 percent to 40 percent. How is that
made up? There is the Thrift Savings Plan where, except for an
initial 1 percent, retirees must contribute their own money to
receive any of the government's matching contributions.
It should be noted, as was noted earlier, that currently 40
percent of the presently serving force is contributing to
nonmatching TSP to augment their present defined plan. Thus,
this advantage to future members would be lost.
Another issue of concern is that the 12-year bonus payment,
which is listed as part of the retirement calculation but
certainly looks like present taxable income and not tax-
deferred income, it seems to us that in order for that to be
part of the retirement calculation, a change in the law would
have to be made.
In addition, the commission says that they are leaving the
method of calculating the lump sum payment proposal to the
Secretary of Defense, as was discussed a bit in the first
panel. We question whether that is appropriate since a new
Secretary could change the method with the stroke of a pen.
Further, is the discount rate used in calculating present
value of future money correct? According to the senior pension
fellow of the American Academy of Actuaries, who is quoted the
Military Times regarding the commission's use of a 12.7 percent
discount rate, it is not. I quote, ``Twelve percent, my gosh.
That is an outrageous rate to use for something like that.''
The article went on to say private sector companies would
normally use 4 percent to 5 percent, but he said that he would
use an even lower rate, perhaps 2 percent to 3 percent, because
the U.S. Government is considered the safest lender in the
world.
We believe that the reason for this dramatic disparity is
because the commission is not using actual value of an E-7's
present retirement, which DOD pegged at $1.1 million last year,
but rather the servicemember's perceived value of the benefit.
It appears to us the thought behind this is that if the
servicemember's perception is favorable, even if it is
incorrect, retention will not be harmed.
That assumption may be correct, but is it appropriate? The
value of a retirement plan should first be analyzed
objectively, not subjectively. Doesn't Congress have a duty to
protect the objective interests of the men and women who in the
future will continue to serve the Nation in danger,
inconvenience, and loneliness for 20 or more years?
The commission has proposed that servicemembers be given
effective financial education, and we agree. Shouldn't this
sophisticated financial analysis be used when considering the
creation of a new retirement system. We believe that it should
even when changes are being considered in part for the
admirable goal of improving the situation of those who have
served 3, 5, or more years in our same uniformed services.
These are just a few of the worries and questions that we
have concerning the commission's retirement proposals. I will,
of course, try my best to answer any questions you may have for
me.
Again, thank you for the opportunity to speak before you
and thank you for all that you do for our servicemembers.
[The prepared statement of Ms. Parke Holleman follows:]
Prepared Statement by The Retired Enlisted Association
Chairman Graham, Ranking Member Gillibrand, and members of the
subcommittee, thank you for this opportunity to submit testimony on
behalf of the men and women of The Retired Enlisted Association
concerning the retirement recommendations made by the Military
Compensation and Retirement Modernization Commission (MCRMC). The
Retired Enlisted Association is the largest veterans organization in
the Nation that was created specifically for enlisted personnel from
all branches of the armed services. We were founded in 1963 and
congressionally chartered in 1992.
The MCRMC has outlined a series of recommendations that would
result in a blended retirement system that contains elements of defined
contribution retirement plan while retaining a good bit of the
military's current 20-year, cliff-vesting defined benefit retirement
plan.
We are very grateful that you wish to hear our views though a bit
breathless as well. We are told that the Pentagon, with all of the
resources at its command, is working feverishly to develop a response
to present to the President in 60 days. We have only had 13 days to to
prepare comments to present to you.
Because of that timetable we must say that even with the fine
cooperation of the Commission's members and staff we are far from
having the numbers, details, and analysis that are needed to accurately
and thoroughly be able to assess the recommendations. With that large
caveat we acknowledge that the report of the MCRMC is a serious
analysis that contains interesting proposals. It is clear that the
Commission made an honest attempt to change and, in their view, improve
the system as it is now.
But first we should note that the present cliff 20 year retirement
system has worked very well for over 40 years in our All-Volunteer
military. It has worked during good and bad economic times, and
amazingly well during the last 13 years of war which, after all, is
what it its purpose is. Therefore, we believe Congress should adopt the
medical motto of ``first do no harm'' when considering overhauling the
present system.
On the other hand we agree improvements should be made whenever
possible to the system that is designed not only to attract the
personnel in our Armed Forces who are required to defend our Nation,
but also ``To care for him who shall have borne the battle and for his
widow, and his orphan,'' as President Lincoln said. We recognize, of
course, that this is the motto of the Department of Veterans Affairs.
But it is equally true when it comes to those currently serving, not
just for those who have left the Services.
It would be a splendid idea to provide a portable retirement
investment account for those who serve in our uniformed services but
leave (for whatever reason) before serving 20 years. It is also a first
rate idea to provide effective financial education to all those who
serve. But neither benefit should be paid for by reducing the
retirement of those who serve 20 years or more in the Services.
Does this proposal do that? We are worried that it may. Clearly
there is a 20 percent cut in the Defined Benefit Plan value from 50
percent to 40 percent. How is that made up? There is the Thrift Savings
Plan (TSP) where the retirees must contribute their own money to
receive any of the government's matching contributions. (It should be
noted that currently 40 percent of the presently serving force is
contributing to non matching TSPs to augment their present defined
plan. Thus this advantage would be lost.)
Another issue of concern is the 12 year bonus payment, which is
listed as part of the retirement calculation but certainly looks like
it is present taxable income and not tax deferred. It seems to us that
in order for that to be part of the retirement calculation a change in
the law would have to go through the Ways and Means Committee. In
addition, the Commission says they are leaving the method of
calculating the lump sum payment proposal to the Secretary of Defense.
We question whether that is appropriate since a new secretary could
change the method with a stroke of the pen.
Further, is the discount rate used in calculating present value of
future money correct? According to the senior pension fellow for the
American Academy of Actuaries, Mr. Donald Fuerst, who is quoted in the
Military Times, regarding the Commission's use of a 12.7 discount rate
and I quote: ``Twelve percent! My gosh, that is an outrageous rate to
use for something like that.'' The article went on to say private
sector companies would normally use a 4 percent or 5 percent but Mr.
Fuerst said that he would use an even lower rate (perhaps 2 percent or
3 percent) because the U.S. Government is considered the safest lender
in the world.
We have heard that the reason for this dramatic disparity is
because the Commission is not using actual value of an E-7's retirement
(which the Department of Defense (DOD) pegged as $1.1 million last
year) but rather the servicemember's ``perceived value'' of the
benefit. It appears to us the thought behind this is that if the
servicemembers' perception is favorable, even if it is incorrect,
retention will not be harmed. That assumption may be correct--but is it
appropriate? Doesn't Congress have a moral duty not to mislead men and
women who have served this Nation in danger, inconvenience and
loneliness for 20 or more years? The Commission has proposed that
servicemembers be given effective financial education, and we agree.
Shouldn't this education occur before they are asked to make these
crucial and complicated decisions? We believe that honor requires
members understand what these changes would mean to them even when
these changes are being proposed, in part, to protect the interests of
others who have served 6 or 8 or 10 years in the same uniformed
services.
We recognize there is real concern about the lack of fairness in
the current retirement system when it comes to military members who
leave after 10, 12, or other multiple years of service but have no
savings or investments to show for that service. This seems especially
unfair to those who may have served multiple combat tours in Iraq and/
or Afghanistan.
We agree that the current retirement system needs to be changed in
order to give servicemembers an investment portfolio they can take with
them when they leave the Service, even if they do not stay for a 20
year career. However, we strongly oppose any reduction in the
retirement benefits career military personnel currently receive as a
way a paying for a new benefit for those who leave prior to 20 years.
The retirement recommendation of the MCRMC gives us concern because
it appears to provide a greater incentive to leave at critical
retention points, especially during periods of great stress for
personnel such as they have experienced since 2003. It also appears to
give less incentive to those who stay for a 20 year career to remain in
the Service after the 20 year point. That's because the government
contribution to the TSP ends at 20 years, which means the only addition
to the TSP that would occur after 20 years would be contributed by the
servicemember. It seems to us that any senior noncommissioned officer
or any officer who is an O-5 or O-6 would be smart to leave at that
point. If that happens, the Services would lose the cadre that are
their very backbone and the resulting loss of expertise and leadership
would severely harm them.
We also question the wisdom of putting additional financial
pressures and worries on senior personnel deployed to a combat zone
should the market drop, as happened in 2008. The stress of serving and
providing leadership in a combat zone, as well as keeping in touch with
family members and dealing with family issues should not be increased
by adding on additional pressures regarding retirement financial
matters.
The Commission's recommendations for changes in the Guard-Reserve
pay and retirement generally follow those recommended for active duty
personnel. However, there are some exceptions and we believe, as has
happened so often in the past, Guard-Reserve members could end up that
is not equal, in terms of treatment, to the active duty in spite of
their exemplary performance during the past 12 years of war.
Specifically, the recommendation for continuation pay at the 12th
year of service is for an amount that is equal to 0.5 times the serve
member's monthly basic pay, as if the member were on active duty.
However, the active duty continuation pay is recommended to be 2.5
times monthly basic pay. We believe this is unfair and discriminatory
and the Guard-Reserve amount should be 2.5 times monthly basic pay, the
same as the active duty.
In addition, the commission's recommendation calls for the Guard-
Reserve member to earn basic pay in a ``given period'' to make TSP
contributions and to receive government contributions into their TSP
accounts. This ``given period'' needs to be clearly defined and needs
to take into account varying drill periods among Reserve component
members, depending on their type of drill status.
There also needs to be clarification regarding whether Reserve
component members would get the lump sum payment when they enter the
Retired Reserve, just as active duty members would.
As we have stated before, many aspects of the Commission's proposal
deserve much more study before it would be appropriate to come to any
sort of definite conclusion as to its merit. But it is readily apparent
to TREA that the Commission's proposals seek an equivalency between
military occupations and those in the private sector. On this we simply
do not think that the proposals hit their mark.
It is laudable that the Commission has made such a serious attempt
at making sure every servicemember leaves with ``something'' at the end
of their time in service. But this proposal will simply not accomplish
the mission of creating a smooth transition between the military and
civilian sectors. We agree that a system like this will make the
transition into the private sector easier for those who fail to
complete 20 years of service, but it will not erase the vast gulf that
already exists between the military and the private sector.
When a servicemember with a Military Occupational Specialty (MOS)
of 19-K, which is an M1A1D/A2 tank crew member, transitions out of the
Service they are told that ``there is no civilian equivalent'' in the
private sector. The mission of DOD is ostensibly to provide for the
national defense. But many servicemembers are trained in warfighting
skills and it is not surprising that for those individuals the private
sector has difficulty in translating military skills and placing value
on military experience.
The Commission's proposals are a welcome attempt to rectify this
inequity. The fact is, however, that this incongruity between military
service and the private sector will never be erased. Servicemembers who
get out after one or two enlistments, usually at the 4 to 8 year point
of time in Service, will still be junior to their age cohort when they
eventually take private sector jobs. This ``seniority delta'' will
remain for their entire career, as will reduced salaries and wages when
compared to their age cohort. As all human beings are limited to a
finite number of working years, there is simply no way to overcome this
fact of military service.
Another inconvenient fact about military service is that the longer
one serves in the military, the greater the impairment their career
suffers when they inevitably transition out. The vast majority of
military retirees are not four star admirals or generals with $500,000
defense contractor consulting jobs lined up; they are E-7s with many
fewer options. They are unable to build up equity in a home because
they are moving every 2 to 3 years, and their educational
accomplishments are often lacking as well.
Frankly, this proposal disincentivizes these individuals from
serving any longer than exactly 20 years in the military. Every month
longer that they serve is another month that they are missing out on an
employer match to their TSP, or to a 401(k). As rational actors (as the
vast majority of individuals who serve 20 years in the U.S. military
are) most people are going to move to a situation that is the greatest
benefit to them. For servicemembers to serve any longer than 20 years
sizeable bonuses or other inducements are going to be needed to get
them to stay in the military when they realize they may be missing out
on a matching employer contribution to their TSP or 401(k).
If a servicemember decides to stay in the military for more than 20
years, they are taking on an even greater risk that the TSP portion of
their retirement may not be there when they retire. One need not go
back to 1929, only to 2008 for an example of what can happen. It has
taken nearly 5 years for the average 401(k) to return to the level that
it was at in 2008--not to mention all of the growth potential that has
been lost. It seems unfair to ask servicemembers, even after they pass
the 20 year point, to bear the risk of their TSPs declining in value
even as they volunteer to die in defense of this great country.
In the final analysis, this proposal from the Commission attempts
to bridge the gap between military and civilian employment, but does
not accomplish what it sets out to do. Wage and salary gaps that result
in lessened career earnings will still persist. Further, in attempting
to save money by ending the DOD's matching contribution to the TSP at
20 years it actually disincentivizes the vast majority of
servicemembers from spending any more than 20 years and 1 day serving
their country. As DOD knows, many of these servicemembers have skills
and knowledge that the military cannot afford to lose, en masse, at
exactly 20 years.
One aspect of the Commission's proposal that we think Congress
should strongly consider supporting is the one that makes ability to
transfer the Post-9/11 GI Bill to dependent family members vest once
the servicemember reaches 10 years in Service.
The Post-9/11 GI Bill is one of the great legislative
accomplishments of the 21st century because it shows how America honors
those who have committed to defend her. By covering the full cost of
in-State public school tuition to attend any accredited school in the
country as well as providing money for books, housing, and a monthly
stipend returning servicemembers are permitted to concentrate their
full attention on their studies while they successfully reintegrate
back into American Society.
Recognizing the vast value that the Post-9/11 GI Bill has to
servicemembers in this way will strengthen the morale of America's
fighting force far into the future. That being said, we have grave
concerns about the part of the proposal that would take away the
housing stipend from dependents that have had the benefit transferred
to them. Making college less affordable, even if it only refers to
housing costs, for the dependents of servicemembers who have served our
country honorably for over 10 years seems an odd way to honor their
sacrifice.
We look forward to participating in more debate about how to
strengthen the current system to overcome these obvious hurdles and we
are happy to answer any questions on these issues.
Senator Gillibrand [presiding]. Mr. Frank?
STATEMENT OF ROBERT L. FRANK, CHIEF EXECUTIVE OFFICER, AIR
FORCE SERGEANTS ASSOCIATION
Mr. Frank. Ranking Member Gillibrand, members of the
subcommittee, it sure is an honor to be here to speak on this
particular commission's report. We have some early analysis, of
course, with similar concerns that she has outlined, but I am
going to get right to the point. Why is it that we are talking
about reforming the system? To be frank, and the elephant in
the room, is this about saving money? Is it about the bottom
line? $12 billion is nothing to sneeze at when it comes to
savings of our government taxpayer dollars.
But the commission has reported to us that no, that wasn't
the objective of this. Is this change for the sake of change?
We have a perceived antiquated system. It is decades old and
people say it should be modernized to match the private sector.
I will point to the fact that other than when our retirement
system has been tinkered with, and Congress, certainly, has
done a good job of fixing that in the past, that this is
ushered in the All-Volunteer Force. It has got us through good
economic times and bad. It certainly has put us through 20
years of high operations tempo and war.
But when we talked to the commission, they said our
objective was to create a better system. So the real question
is, how is this a better system for the Services? Does it
combat a perceived recruiting and retention issue? I am ready
to tell you that is a phantom menace. We haven't missed
recruiting goals in years. As a matter fact, over the last
couple of years, we have had to tell people that they need to
leave. Notably so, we do give them severance pay and other
things as they leave the service. But again, our recruiting and
retention issues are not a problem in today's military.
We are led to believe that 83 percent get out with nothing.
That is nothing except for that $80,000 education, significant
home loan guarantees, hundreds of thousands of dollars in
training and experience they will take to get a great job,
numerous veteran benefits, a 401(k) style system that they can
invest in today for their future retirement, and, of course,
the title of veteran. In recent times, less than 1 percent
carry that title.
Retention is the biggest concern I think that we have. We
can look at the past, and back in 1986, of course, we changed
the retirement system. Ten years later, Congress had us take
some time to fix that system. What is it going to look like 10
years from now if this is enacted?
The cumulative effects of everything else that is on the
table, not to consider necessarily what is in this report but
everything else, and then we create a system where it is easy
to off-ramp at early points in their career, could have
significant impact on retention, especially when the economy
rebounds.
This system has been compared to the private sector, and
let me be very clear about this. This way of life has no
comparison. To add to that, in the private sector, if you are
running a company, you have someone with 10 years' experience
who gets out, what do you do? You go hire somebody with
equivalent experience to take their place, and you move on with
the mission of your company.
We cannot do that in the U.S. military. We must grow our
experience. It is different, and we have to take that into
consideration.
Senators, we need people to go 20-plus years. In the Air
Force, most significantly, our enlisted corps, we have a higher
rate of folks who go to 20-plus years for a reason. We need
them to do that.
We as an association urge the committee to proceed with
caution. Education about this new system has to be upfront.
Financial education in my background, I can tell you, it is not
enough for what they need, especially when they have to start
making decisions about their own retirement.
The chart said 80 percent were in favor of this. I know the
charts are gone now, but it said 80 percent were in favor of
this. Now that everything is in context, and we have run our
surveys, I can tell you that there is a stark difference in
what people currently serving in uniform today say about the
choice between this system, what they have today, and what the
future proposal is.
We, certainly, don't want the budget to be balanced on the
backs of our servicemembers. We welcome change. Change is good,
but change for the better.
To take away from those who have gone the long term, the
ones we need to go long term, to take away from that to give to
those who are one and done will have a significant effect on
the All-Volunteer Force. Thank you.
[The prepared statement of Mr. Frank follows:]
Prepared Statement by CMSGT Robert L. Frank, (Ret.)
Chairman Graham, Ranking Member Gillibrand, and members of this
committee, thank you for this opportunity to present the views of the
Air Force Sergeants Association (AFSA) on the military retirement
recommendations of the Military Compensation and Retirement
Modernization Commission.
AFSA is a 110,000 member strong, federally chartered, worldwide
veterans and military service association representing the quality-of-
life interests of current and past enlisted airmen as well as their
families. We are in a unique position to have a good understanding of
the views of enlisted servicemembers as half of our membership is
currently serving in uniform and half are retirees or veterans. We have
chapters at every Air Force base around the world, as well as a variety
of retiree chapters. As such, we have the pulse of our members and
regularly receive feedback on a variety of important issues.
We want to thank the committee for its historic, nonpartisan focus
on protecting this Nation and those extraordinary military citizens who
subject themselves to unlimited liability to make freedom possible. We
know your work here today is not an academic exercise. The
recommendations of the commission and how this Congress acts on them
will have a great impact on the morale of those serving, their
decisions whether or not to pursue the military as a career, and the
attitudes and well-being of those who love and support them. More
importantly, these recommendations will have a significant impact on
those who have not yet decided to serve, as well as the effect on
retention well into the future.
Today, I want to briefly comment on the commission recommendations
relative to changing the structure of the military retirement program
itself. The tasking to the commissioners was extraordinary, and we
certainly applaud their dedicated efforts. Their challenges were
unique, and they delivered several recommendations for you to consider
as this nation's military moves forward. We understand budget
protection and reduction was not the stated motivation of the
commission; rather, it was primarily the long-term efficacy of the All-
Volunteer Force and the quality of the lives of those who serve.
Some say the current pay, benefits, and retirement systems are too
generous. We would ask, ``What is the basis for comparison to make that
statement?'' We would assert that you cannot fairly compare the lives
of military members with those of other citizens, and there is no
``job'' like this for a true comparison. Military members face unique
day-to-day risks, demands, and challenges, and a condition of their
employment is a pledge to give up their very lives if ordered to do so.
As such, it would seem to us that the measurement of success of the
current compensation, benefits, and retirement systems has to be based
on the success of recruiting and retention.
Compensation in this report has been compared to private sector
programs, yet unlike the private sector, the military services cannot
hire experience into most of their positions, and must rely on
``growing'' experience. Because we must retain servicemembers at
various degrees to keep experience levels right, a retirement and
compensation system has to entice a significant portion of
servicemembers to make the military a full career to 20 years and
beyond. We urge the committee to proceed with caution, find the
unanswered questions, and note the challenges we have seen already in
the All-Volunteer Force. Errors with adjustment to the retirement
system has occurred in the past and it has required Congress to take
corrective action.
The current retirement system has also been characterized as an
``old system'' which hasn't been drastically altered in nearly 70
years. Yet it is a system that ushered us into an All-Volunteer Force,
served us in good and bad economic times, through significant personnel
downsizing over the past few decades, and certainly has maintained a
ready force through 13 years of war with more than 20 years of heavy
deployment cycles. We believe there are times that call for bold
decisions; but we also believe a primary motivator should be to not
harm a system that seems to be working.
Specifically, my comments today will center on Recommendation #1 to
``help more servicemembers save for retirement earlier in their
careers, leverage the retention power of traditional uniformed services
retirement, and give the Services greater flexibility to retain quality
people in demanding career fields by implementing a modernized
retirement system.'' I will also include Recommendation #3, to
``promote the financial literacy of servicemembers by implementing a
more robust financial and health benefit training program,'' in my
comments as a related measure.
While we are intrigued with the intent of these recommendations, we
have serious concerns about some details of the proposals. Our members
have told us the current retirement system has served us well since the
initiation of the All-Volunteer Force in 1973. Our nation does not
currently have an overall military recruiting and retention problem. In
fact, such problems have usually not cropped up unless there is
tinkering with their pay and benefit programs. Therefore, we will be
interested in further examining the justification to change an untested
system that may or may not have the same consistently positive results.
The commission cited many private sector programs in comparison, but as
previously stated, there are stark differences between the private
sector and military service. Changes made today could take 10 or more
years to reveal their success or failure. There is no better example of
this than the passage The Military Reform Act of 1986 (better known as
``Redux'') which triggered severe retention issues in the mid to late
1990s requiring congressional intervention to stop them in 1999.
First, we will be interested in viewing the details of the specific
surveys that resulted in these recommendations. As you know, enlisted
servicemembers represent about 83 percent of the overall force. As
such, decisions made in regard to the military retirement program will
primarily impact enlisted members and their families. Based on the
views of our members, our understanding has been that the vast majority
of them are content with the current system that provides them with a
solid retirement benefit based on the extraordinary career they serve
over the long term--without their need to constantly monitor and
participate in the details of the growth and development of the
retirement benefits they will eventually receive. So our first major
interest would be to examine the specific survey results received from
the large majority of servicemembers who are current and past
noncommissioned members.
A second concern that we believe is an important one is that the
recommendations may well encourage early departure from the military--
rather than promoting a full, 20-year service career. We believe most
involved in these recommendations recognize the need for a strong
career force to ensure continuity, training, mentorship, and
leadership. As you know, our military members have certainly been
stressed during the past decade--with repeated deployments, persistent
separations from families, increased group and individual taskings due
to cuts in our military forces, and the unique challenges of their
military operations and tactics of the particular enemies they are
facing. It would seem the recommended changes provide servicemembers
with greater incentives to leave at critical career points. We would
ask this committee to take a close look at the choices offered in
relation to the stresses on military members and their families, and if
the changes might set in motion future retention problems.
Next, in looking at the numbers, it is apparent those who would
choose to serve beyond 20 years under the recommended system would
derive less of a financial benefit than they do under the current
system. We believe it is important to always keep in mind the
possibility that the decisions this committee makes in regard to
military retirement changes could backfire. The recommended changes
could entice members who currently would choose to serve full careers
to instead opt to leave military service in order to start different
career paths in civilian industry that do not have the career stresses
and unique challenges of military life. Again, we would be moving to an
untested system to replace one that is already working, potentially
leaving a hollow force without critical experience and leadership at
certain levels. Accordingly, we challenge this committee to make its
decisions to call for change--only if you are very confident that no
unnecessary risks to the maintenance of the All-Volunteer Force will be
set in motion.
Additionally, the recommended system would only provide government
matching of the thrift saving aspect of the blended program up to the
20-year point. It would seem to us that this, in itself, would
encourage those members who reach 20 years of service to find another
career outside of military service to continue to gain matched
contributions and make the most of a defined compensation system.
Again, we would suggest that this aspect of the recommended program--of
encouraging departure at critical career points--should be closely
scrutinized.
Concerning the thrift savings portion of the blended retirement
system, we would make a few observations.
First, a greater management burden and risk would be shifted from
the employer (the Department of Defense) to the employees
(servicemembers)--who are already very occupied in carrying out their
military duties, often overseas, in spartan conditions, and at great
risk. Furthermore, many of our servicemembers lack the knowledge to
fully understand how to manage the investment funds they will be
expected to use under this proposal.
Second, the recommended blended retirement system should first
include a program to promote and provide for financial literacy
training, such as has been recommend in this report. Having worked
during my active duty years as an Air Force First Sergeant and in later
years with the Office of Servicemember Affairs of the Consumer
Financial Protection Bureau, I can personally attest to the specific
financial capabilities and challenges of servicemembers--and several of
the ``traps'' they can fall into. While any such training would be
commendable, one would have to take a close look at the logistics,
funding, and practical applications of this training. Some very
important questions would include these:
Would the financial education training program be
enthusiastically funded by DOD, or would it be a prime, first-
in-line target for future spending cuts--as are some other
military personnel programs?
Would it be carried out as a part-time, additional
duty (as many programs in the military tend to be), or would it
be taught by a dedicated team of professional financial
counselors?
Will financial counseling be provided early on, before
Basic Military Training to ensure these servicemembers fully
understand the system they are about to enter?
How large would this financial training force be?
Would it be adequate to provide counseling when needed at all
military locations?
Would this program include family financial training/
planning as well--considering that participation of a spouse is
important when making career decisions?
Who will review the curriculum of such training
outside of those facing budgetary pressures?
Will the recommended, blended system be placing those
who are simply financially illiterate and/or unlikely to grasp
the full breadth of the training at a career disadvantage?
Remember we are dealing with military members of various
capabilities, aptitudes, and educational backgrounds.
Would such a training effort leverage already-
existing, very successful agencies and programs such as those
provided by the Consumer Financial Protection Bureau?
Mr. Chairman, AFSA has worked for many years with members of the
overall Armed Services Committees and its subcommittees--this
subcommittee in particular, since we primarily focus on quality-of-life
programs. Together, we have worked on and achieved many things that
have greatly benefited the force and which have made the All-Volunteer
Force effort successful.
We have watched you adjust military pay in the past, gauged the
results, and made further adjustments when warranted to get it ``just
right.'' Similarly, during the past 40 years of the All-Volunteer
Force, we have seen a few minor adjustments to the military retirement
system.
However, in the coming months this committee will exercise its
collective wisdom to decide if a major departure from the currently
working system is justified and appropriate. We do not envy you in that
regard, and we fully recognize the burden of leadership you have chosen
to carry out on behalf of this Nation.
As this committee moves forward in looking at the range of
recommendations made by the Commission, on behalf of this association
and the 110,000 enlisted members we represent, we pledge our
cooperation, participation, and support of your effort to make the
right decisions for the great men and women who serve to protect and
defend the interests of the American people.
Senator Gillibrand. Mr. Jones?
STATEMENT OF RICHARD A. JONES, LEGISLATIVE DIRECTOR, NATIONAL
ASSOCIATION FOR UNIFORMED SERVICES
Mr. Jones. Mr. Chairman, Madam Ranking Member, Senator
King, the National Association for Uniformed Services
appreciates the opportunity to testify and appreciates the
Military Compensation and Retirement Modernization Commission
(MCRMC) commissioners' decision to hold harmless the current
retirement system for those currently retired and for those
currently serving. We also applaud MCRMC's recommendation for
no change in TRICARE for Life.
The MCRMC report, however, has some questions in it. What
we question is the pay-for of the TSP innovation. The MCRMC
report makes a simple but questionable change in the retirement
system. It takes the current system as it stands with 20-year
program and voluntary TSP and adds government participation
with a 1 percent automatic TSP contribution and matching
contributions up to 5 percent.
There is one more aspect. It drops the retirement
multiplier 20 percent, cutting it two times for the years of
service from 2.5. The result, the retirement check would be 20
percent less under the proposed plan, 20 percent less.
Of course, one of the key questions about the commission's
report is why is it necessary to shave the 20-year program in
order to enhance the system for those who leave early?
In recent past testimony, we have heard principal Defense
Department officials tell us the current military retirement
system is neither unaffordable nor spiraling out of control,
remaining a relatively constant percentage of pay over time.
Since issuance of the report a little less than 2 weeks
ago, the National Association for Uniformed Services has
already heard a barrage of critical comments. One said, ``I
depended on that retirement check when I transitioned to
civilian life.'' Another member said, ``You are better off
being a policeman, a fireman.'' And, ``The blended plan
requires servicemembers to actually pay into the account.
Basically, that's a pay cut of 3 percent.''
Another questionable element of the package recommends
stopping the government's automatic and matching TSP
contributions at the 20-year mark. The retirement package is a
critical incentive to stay in service beyond 20 years.
There are many valid reasons. It generally takes 15 to 20
years to train and prepare the next generation of infantry
battalion commanders, of submarine captains. We need to create
these experienced leaders.
The National Association for Uniformed Services agrees that
young men and women who serve three, four, or five deployments
would be better off if offered something after honorable
service other than a pink slip and the door. We also see,
however, that the current 20-year cliff retirement program has
proven its mettle.
It works, through nearly 70 years. It is not spiraling out
of control. It remains a powerful pull for career service and
keeping experience at hand.
It may be prudent to upgrade the TSP account. However, it
should not come as a result of cutbacks in the military career
incentive package.
Thank you for the opportunity to testify. I appreciate it.
[The prepared statement of Mr. Jones follows:]
Prepared Statement by The National Association for Uniformed Services
Chairman Graham, Ranking Member Gillibrand, and members of the
subcommittee:
The National Association for Uniformed Services (NAUS) honors and
applauds the Military Compensation and Retirement Modernization
Commission (MCRMC) Commissioner's decision to hold fast the moral
contract for those who have retired and for those currently serving on
a career path. The retirement system is not disturbed for those
currently retired or those currently serving. Also we applaud MCRMC
recommendation for no change in TRICARE for Life. It, too, is held in
honor.
Of course, the NAUS welcomes improvement. We ask, however, that any
proposed change to the present retirement system do no harm. The fact
that our All-Volunteer Force (AVF) is without peer, the best in the
world, has been proven over the past more than 40 years and clearly
demonstrated at most other times. The current retirement system has
helped sustain the AVF, and we should be guarded not to jeopardize this
achievement.
The NAUS sees nothing wrong with servicemembers being provided a
government match to their Thrift Savings Plan (TSP) choice. It might be
a good idea to provide a matching TSP to strengthen the compensation
system for those servicemembers who leave the force prior to a full
career.
At present, more than 40 percent of the Force already participates
in the TSP program without government participation. Adding a
government contribution could make it more attractive. However, we
question the ``pay for'' of this innovation.
The MCRMC report makes a simple but questionable change in the
retirement program. In essence, it takes the current system as it
stands--a 20-year program with an available TSP--and adds government
participation. The government would make a 1 percent automatic TSP
contribution and match contributions up to 5 percent. There one more
aspect, the report calls for a 20 percent reduction in the retirement
multiplier--dropping it to 2.0 from 2.5.
The result is that a servicemember with a 20-year career would
receive a retirement check amounting to 40 percent of his final basic
pay, 20 percent less than under the current plan.
Of course, one of the key questions about the Commission's report
is why reduce the 20-year calculation. Is it necessary to shave the 20-
year program in order to enhance the system for those who leave early?
In recent past testimony, Dr. Jo Ann Rooney, principal deputy
under-secretary of Defense for Personnel and Readiness, said the
current military retirement system is ``neither unaffordable, nor
spiraling out of control, as some would contend'' noting that
retirement costs as a percentage of pay are projected to be relatively
constant over time.
There are many valid reasons to keep the current retirement system.
It generally takes 15 to 20 years to generate the next generation of
infantry battalion commanders and submarine captains. As a result, the
department must ensure that the military retirement policy promotes
greater retention and longer careers necessary to create these
experienced leaders. A civilianized system with the introduction of
investment risk many not be the right approach for the military.
Since issuance of the report less than 2 weeks, the NAUS has
already heard from a number of members and supporters about this
proposal.
Let me run down a few of their comments:
- The difference is this . . . with the 20-year deal, you knew
what to expect. Very black and white. With this ``new deal,''
there are many ``what ifs'' that can change depending who is
running the country . . . people like stability on issues like
this.'
- I don't know what I would have done during my transition to
civilian life without my immediate retirement pay after 20
years.
- They're basing that 401(k) off past performance. What
happens if you retire on a down market, or if the market goes
total bust?
- Under the new proposed retirement you're better off being a
policeman or firefighter.
- That chart of theirs presumes that the E-7 under the current
system is not saving or investing or deferring anything . . .
total hogwash.
- Nothing is stopping the servicemember from contributing to
the TSP right now . . . other than the fact that it would make
the difference in the charts not as great.
- Let's not forget another assumption . . . that the future
holds no more economic crashes to wipe out the 401 accounts
again.
- The blended plan requires servicemembers to actually pay
into the account. Basically this cuts pay by 3 percent.
Another questionable element of the package recommends stopping the
government's automatic and matching TSP contributions at the 20 year
mark. MCRMC officials call this a force shaping item while
simultaneously recognizing the heightened costs of sustaining the
contribution beyond 20 years.
In 2006-2007, Congress recognized the importance of retirement
benefit as an incentive to stay in service. It thoughtfully changed
retirement rules to allow the multiplier to run beyond 30 years for
senior enlisted and senior officers. The change was an incentive to
encourage these senior people to stick around.
In that period, 4,000 people with greater than 30 years of service
stayed--3,000 were senior enlisted and 1,000 were senior officers. As
retired Navy Admiral and Commissioner Edmund Giambastiani said,
``Having a Command Sergeant Major who's been in for 36 years who will
stay for another four really makes a huge difference--tremendous amount
of experience.''
The congressional decision to retain experience during wartime made
a difference. Congress rightly concluded retention was more affordable,
in lives and money, than retraining.
There remain many questions and considerations--the analysis of
this report has only just begun. The NAUS agrees, however, that we
would be better off if the young men and women who served three, four
and five deployments were offered something after honorable service
other than a pink-slip and the door.
Government participation in the currently available TSP account
could be helpful in advancing the present 40 percent servicemember
participation rate. These servicemembers voluntarily contribute without
any kind of automatic government contribution.
The NAUS recognizes, however, that all investing for retirement is
subject to risk, including the possible loss of the money you invest.
To ensure an adequate retirement, conservative financial advisors
believe savings rates need to be between 12 percent and 15 percent of
income (including an employer match). That would require a set aside of
upwards of 7 percent of present disposable pay.
Investment is often times compared to a yo-yo. The market goes up
and down. Historically, however, the market has acted more like a man
walking up hill with a yo-yo. It still goes up and down but over time
it runs generally uphill, and may it always be so. But the future is
uncertain and one must remember that past performance is no guarantee
of future results.
We still remember the severity of 2008 and the years it took to
regain the loss after the crisis of that period. We are concerned that
altering the certainty of a regular retirement check at 50 percent of
base pay may be a disincentive for mid-level officers and top enlisted
to continue their careers.
The NAUS applauds Congress for taking action over the 13 years of
war to maintain the powerful pull of the 20-year retirement system, to
raise pay, enhance health benefits and enact the Post-9/11 GI Bill. If
you had not taken these actions, it is questionable as to whether we
would have the military strength we have today.
In recent testimony before Congress, Commissioner and former
Senator Bob Kerry said, ``I came into this commission believing that
it's likely we have a real problem with pay and benefits.''
But, Commissioner Kerry concluded, ``It would be unfair to identify
military retirement as the big problem because it isn't. The big
problem is Social Security and Medicare, so it seems to me, to address
military retirement without going after Social Security and Medicare is
basically saying we're going to balance the budget on the backs of our
military retirees. I think that it would be a wrong thing to do and
send a terrible signal.''
Many pundits and other so-called experts around the beltway
continually write critically about military pay and benefits. As John
Finkel writes in The Good Soldier, if some of these folks could get out
from behind their desks ``into the lead Humvee and go out on Route
Predator or Berm Road, they could experience, as our troops do, the
full `pucker' factor. They could experience it the next day, too, and
the day after that and then maybe, they could go back on the job and
tell the reality of service--at least we'd hear the truth.''
Defending our national security is a tough job. It is arduous
service and demands enormous sacrifice that many Americans are
unwilling to commit. Clearly, we need to assure quality recruitment and
retention, and we need to retain experienced career personnel. NAUS has
concerns that this proposal, which mirrors private sector models,
carries the incentives to assure an appropriate retention outcome.
Over the years the current 20-year cliff retirement program has
proven its mettle. It works. Though the military retirement system is
nearly 70 years old, it is not spiraling out of control. While it may
be prudent to upgrade the TSP account, it must not come as a result of
cutbacks in the military career incentive package. The strength of our
national security depends mainly on three pillars; a vibrant economy, a
strong defense and a faith in the Nation and support for those who
serve.
The question regarding the Military Compensation and Retirement
Compensation report is whether faith has been broken. Once the
servicemember's appreciation of the compensation or care they are given
is broken, no matter what ``bells and whistles,'' it's going to be
difficult to recruit people to serve or to retain their skills.
on the other hand, sequestration is a problem
Sequestration, however, is a problem. We were told sequestration
would never happen. But here we are in year three facing the blunt and
irresponsible approach to taming our annual deficits and reining in the
enormous debt we and future generations face.
Under sequestration, defense, which accounts for less than 15
percent of the budget, is forced to take 50 percent of sequester cuts.
It is disproportional by any measure of understanding and incredibly
detrimental to our national security.
The results of these cuts have already been devastating to our
national security. The Air Force is approaching the smallest it has
been since 1946; the Navy is approaching a historic low level of ships;
the Army is on its way to the lowest troop level since before World War
II; and the Marine Corps will be down two divisions.
Sequestration is a blunt instrument. It was wrong when the
President proposed it; it was wrong when Congress accepted it; it was
wrong when enacted, wrong when signed; and wrong when implemented.
The NAUS implores you to end defense sequestration.
Senator Gillibrand. Thank you, Mr. Jones.
Mr. Nicholson?
STATEMENT OF ALEXANDER NICHOLSON, LEGISLATIVE DIRECTOR, IRAQ
AND AFGHANISTAN VETERANS OF AMERICA
Mr. Nicholson. Thank you, Ranking Member Gillibrand. Even
though he stepped out, I have to say, as a native South
Carolinian and representing an organization headquartered in
New York, it is a particular honor to testify for this
particular combination of chairman and ranking member.
On behalf of Iraq and Afghanistan Veterans of America
(IAVA) and our nearly 300,000 members and supporters, we
appreciate the opportunity to share with you our views on the
final report of the Military Compensation and Retirement
Modernization Commission.
To give you the bottom line upfront on the commission's
recommendations from our perspective, we see them as somewhat
of a mixed bag. Some of the recommendations align well with the
recommendations that we and other military and veterans
organizations have been advocating for years while others
appear to be bold new steps in a positive direction that merits
serious consideration. However, a few of the other
recommendations raise questions and concerns for IAVA and our
members.
But first, let me talk about some of our areas of
agreement. We are in strong alignment with the commission on
the need for increased DOD-VA cooperation up to and including
sharing systems and information. The process of transitioning
from Active Duty to veteran status is still disjointed.
Operation Iraqi Freedom/Operation Enduring Freedom veterans
often report gaps in care and assistance when leaving DOD and
entering the VA system.
Another area in which we strongly agree with the commission
is on the urgent need for increased financial literacy and
benefits stewardship education for servicemembers and military
families, especially if you are going to change the dynamic and
require troops to take more personal responsibility for their
part of their own benefits package outcomes. We see the need
for this not only in countless examples of predatory lending
targeting servicemembers but also predatory for-profit
educational institutions going after servicemembers' and
veterans' valuable post-9/11 G.I. Bill benefits.
Second, IAVA is interested in taking a deeper dive into the
commission's recommendations regarding alternate retirement
plan packages. In our 2014 annual survey of our members, 36
percent of respondents felt that 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, 33 percent favored increasing the
overall value of the current retirement benefits, and 59
percent favored a partial early retirement benefit for 10 or 15
years of service.
To many of IAVA members, who are by definition combat
veterans, it seems fundamentally unfair that one can serve for
10 or 12 years with three, four, or five more deployments and
leave with absolutely no retirement benefit at all, yet a
careerist who never deployed could be entitled to a full
retirement package. Therefore, IAVA is open to reforms that
would amend the current system to allow noncareer troops the
opportunity to receive some retirement benefits.
Lastly, IAVA has some serious concerns and questions with
some of the commission's recommendations regarding reductions
in post-9/11 G.I. Bill benefits. We will continue to analyze
these numerous comprehensive recommendations the commission has
articulated before developing final views. However, fundamental
reductions in post-9/11 G.I. Bill benefits, even for
dependents, raise red flags for IAVA and our members.
We appreciate the opportunity to offer our views on the
commission's recommendations and look forward to working with
each of you and your staff and the committee to improve the
lives of servicemembers, veterans, and their families. Thank
you.
Senator Gillibrand. Thank you.
I will reserve my questions for the end. We will go to
Senator King.
Senator King. Thank you all for your testimony. It is very
helpful, and also for your service.
Ms. Holleman, I had to smile when one of the first things
you said was the proposals are interesting. In Maine, when
somebody says something is ``interesting,'' that means forget
it. I sort of get the drift. ``Oh, that is interesting.''
As you can tell from my prior line of questioning, I am
very concerned about the issue of retention and particularly
retention beyond 20 years, or retention of those people who
have solid service credentials between, say, 12 and 20 years.
Talk to me about the cliff vesting of the current system and
how you think this would either improve retention or diminish
it.
Mr. Frank?
Mr. Frank. Senator, I came in in 1987. I came in under the
REDUX retirement plan. Ten years later, I am working a flight
line. I am having a hard time finding a specialist to help me
fix my airplane so we can get it in the air, and it is because
we had a system in place that people said, you know what, I am
not making this a career. We don't have the experience that we
need at these particular levels.
So, of course, it was changed. We had the option to go back
to the High-3 system as we moved forward. TRICARE, of course,
was coming online at that time, again, health care changes.
Fast forward to where we are at now. As the economy gets
better and there are less perceived value of a retirement
system based on this new system, especially if they are not
educated on how to properly invest or the way to go about doing
this, you are going to have people--this is almost like REDUX
on steroids. It is an easier off-ramp.
You know what? I have some money now that I have socked
away. It is even easier for me to depart the Air Force or the
services and go out and work for this company that has offered
me a great job. We would salute them smartly and say thanks for
your service. But we could very well put ourselves in a
position to have problems with those key components.
They talk about, hey, if you go to 12 years, it will get
you to 16, and 16 will get you to 20. But under this new
system, I don't know.
Senator King. But all of you said in one way, shape, or
form the current system is working, why change it? My
understanding is it is working great for people to stay for 20
years, and it is not working at all for people who stay 12 or
13 or 8. They could have three or four deployments and end up
with zip in terms of retirement benefits.
How is that fair or appropriate? Don't we have to do
something about that? Isn't this proposal one of the only real
options for dealing with that problem?
You talked about this, from the point of view of your
groups.
Mr. Nicholson. Sure, I think that we would absolutely agree
that something has to be done to give some sort of benefit to
those who are noncareerists. I think, however, we would agree
with our VSO and MSO colleagues that we don't want to also do
that at the expense of those who are careerists.
It is not necessarily a zero-sum game, or we don't have to
look at it that way. We don't want to necessarily support
reducing their benefits.
Senator King. But I think this is important. The way I read
the math, you are not reducing their benefits. They are getting
40 percent instead of 50 percent, but the other 10 percent, if
there is any kind of decent compounding with the contribution
and the match.
By the way, somebody characterized it as a 3 percent pay
cut. Well, you can look at it that way, but it is voluntary,
and then government is going to match it on the other side.
That is 3 percent. I mean, it works out both ways.
But you are going to end up with the same or more money,
aren't you? I mean, it is not accurate to say that you're
cutting people's retirement benefits. If you stay 20 years and
get the 40 percent and the 401(k), what it looks like, don't
you end up in the same place or better?
Mr. Jones. At what age does one retire? Is it 40, 42? At
what age does one receive the TSP? So for that period of time,
between your age of retirement and the acceptance of the TSP
401(k) program, you have benefits that are reduced 20 percent
through that period. That is practically where a lot of the
money comes from that it is being saved in this program. Do you
follow?
I retire at age 42, and I get 40 percent instead of 50
percent under the current program in my retirement check. I
wait until I am 65 or 60 to receive TSP. That is where you
begin to make an equivalence.
Senator King. So that is the difference that you see as the
disadvantage of this program to somebody who stays longer than
20 years.
Mr. Jones. Well, the other thing that you mentioned
earlier, that a lot of the senior officials who are in the
military stay beyond 20, 20 to 28. Between 20 and 28, there is
no TSP match. There is no contribution of 1 percent for those
folks.
So when you speak about retention, Congress decided in 2007
that they needed that experience. So what they did was to allow
retirement benefits to continue beyond 30 years. I think two
members of the panel stayed with the military for that period
of time beyond 30 years.
That experience counted. It saved not only money that might
have been required for training, but it saved lives through
that experience. So that was a very important thing that
Congress did in 2007.
Senator King. What is your reaction to the problem of the
12-year veteran who has served three or four deployments and
ends up with no retirement benefits whatsoever?
Mr. Jones. Well, I thought I made it clear in my statement
and I will do it again, the deal is that we like that part. We
think there should be some TSP agreement, if they can make a
contribution. Forty percent of folks voluntarily get into that
program.
Evidently, there are 17 percent of people who go on for
retirement. If every retired person, 17 percent of the force,
was part of that voluntary 40 percent, that still would leave
23 percent of the folks in service who are not making a career
in TSP.
So that is an acceptable program. If you can enhance it, it
will be like magic. People would love to come in.
Senator King. So you would do the TSP but not the cut from
50 to 40.
Mr. Jones. Absolutely. I am not at a negotiation table
here, but there could be some program like that, and it would
enhance that benefit for particularly those in this drawdown. I
mean, we are pulling people out of the combat zones and giving
them the pink slips.
Senator King. That is going to be a real problem in the
next several years.
I hope you all can help us get rid of the sequester,
please. Can we all agree that that is something we need to work
on together?
Mr. Jones. The final page of testimony is that that is the
real problem, the sequester. That is what we would love to see,
the end of that sequester for defense.
As was mentioned earlier by the chairman, there is a
substantial reduction in Navy ships, in the force for the Air
Force, right down the line. This is a very dangerous time, and
there are problems all around the world, hotspots from Iraq to
the Japanese sea.
Senator King. Well, I hope, as part of your communications
mission, you will not only be reacting to this issue, but also
communicate to your Representatives and your Members the
importance of dealing with sequester, because that is a huge
problem. It is going to cost American lives.
Thank you.
Ms. Parke Holleman. May I say, quickly, we are. We are all
talking about sequester. But when you are analyzing the
proposed package, I would ask that you analyze it at 1 percent,
just the 1 percent, all the way up to the 5 percent matching. I
would ask that you do both, because, as Senator Gillibrand
said, there are many, particularly enlisted young ranks, who
cannot afford or at least, certainly, don't feel they can
afford a 3 percent cut in their pay. There are people with real
financial problems in our young enlisted ranks. The 3 percent
or the 5 percent matching could be could really feel like a
bridge too far for them.
So when you are looking at that, I would be grateful if you
looked at various, not just the 5 plus 1, but the 3 and the 1
by itself.
Senator King. Thank you.
Ms. Parke Holleman. Thank you.
Senator King. Mr. Chairman?
Senator Graham [presiding]. Senator Tillis?
Senator Tillis. Thank you all for being here. I thank you
for your service and your continued service.
A couple questions. I mean, first, would you all agree that
giving more servicemembers more retirement benefits is a good
thing?
Mr. Jones. It is good thing.
Senator Tillis. That we do have a problem with those men
and women who are serving who are not going the full 20 years,
that we owe it to them to provide them with something more than
they are getting today?
Mr. Jones. We could improve that.
Senator Tillis. The next question I had, is this report is
fairly fresh. And I see Mr. Frank, I know you have a copy of
the report before you, I believe. It looks like it is tabbed in
the first 15 or 20 pages. My guess is, like us, you haven't
been able to thoroughly exhaust going through it, modeling it,
and reviewing all the recommendations.
Mr. Frank. That is correct.
Senator Tillis. So you have to spend some time doing that,
coming up with use cases and really understanding how this
affects your members and the stakeholders who are referred to.
I am going through that same process.
Ms. Holleman, you made a comment that reminded me of a
discussion I literally just had yesterday with one of my
legislative staff who was talking about the TSP and the
matching. This person, college educated, I think he actually
even did some finance studies in school, was questioning the
wisdom of taking advantage of the math. I had to sit down with
him like I did with my daughter and my son, when they first had
to do that.
I would say that it may look to a younger person that that
is insurmountable. But I think if we really educate them
through financial literacy, they will realize it will be a
great long-term benefit to them.
That is one of the reasons I am excited one of the
recommendations is increased investment in financial literacy,
so that they can make informed decisions. And in some cases
perhaps the 1 percent or 3 percent or 3 percent or 5 percent
isn't achievable. But I hope for many it will be, because it
benefits them long term.
I guess my question goes back to the feedback that you are
getting. Is the feedback that you are getting from your members
now more based on a fear of the unknown or documented examples
of where this would be less preferable than the status quo?
Mr. Frank. I would tell you, Senator, from our association
that the feedback that we have is significantly different than
what they put on a chart. So 80 percent of anybody in favor of
anything is suspect sometimes. So I don't know that I ever
found that in the Air Force, that anybody was ever in favor 80
percent.
So again, this is early returns, but it is statistically
significant that now that they see the whole picture, and I
know how the question kind of led out with the survey was.
Would you like this, would you like this, and then they put it
together with people who are good with those kind of things.
But the reality is, now that people see it in context, it is,
``Oh, wait a minute, I am not sure.''
I think, to Chairman Graham's point earlier, they have been
in the Service a while. ``I am not sure that this necessarily
what I like to do.''
But they are also looking at other suggestions in there, in
the particular report. But to that one, at least this is a
known safe factor for me.
Senator Tillis. Mr. Frank, I think you touched on an
important point. And as I said earlier about Chairman Graham,
he is in a much more advanced state, shall we say, in terms of
his career progression, so it probably isn't going to make
sense for him, which has proven to be the case in a number of
other cases. We are talking about people being an opt-in into
the other plan. Silence is consent with the current plan.
So just understanding we have that has a level set. This is
not changing the deal for those who came in with this option.
We need to go through a process here of education. But I
would really encourage you, as you are going through and
forming an opinion about this, this is reminiscent of a few of
the cycles that I have done before I entered public service and
private sector work.
I agree with your opening comment. There is no job like the
job of serving in the U.S. Armed Forces. But I do believe that
this program is something that could potentially provide some
balance. But what we need to do is provide the resources so
that the people who ultimately give you feedback, they cannot
possibly know the use cases that apply to that, in the same way
that they may not completely understand the compounding
opportunity that they could have if they hopped into the plan.
So I think that we have to do a lot of work so that we can
get feedback and identify any outliers where maybe there are
some things that would have. to be changed, if we were to move
forward with this plan.
So I hope we can get your commitment and make sure that we
provide assistance. I know that my staff will be pouring
through this plan, and that we'll give you the information so
you can model it, because I do believe the adoption rate is
probably not too far off from what was ultimately seen in large
programs done in, say, a 300,000-person organization that I
have had some exposure with.
So just keep your mind open. I think you should always be
vigilant and do exactly what you are doing here and advocate,
but keep your mind open and figure out what we can do to
provide you with information to do that modeling.
I do have some things that are probably--you made positive
comments on I think the recommendation on financial literacy.
You would generally agree that is a good thing, not only in
terms of making a decision about this retirement plan but for
long-term financial planning.
Ms. Parke Holleman. Absolutely.
Mr. Frank. Senator, and to add to that, I think you have to
get to them early, before basic training.
Senator Tillis. Absolutely. In fact, we are doing that in
high school down in North Carolina now as a part of financial
literacy curriculum requirements. I agree with you.
Do you all agree that on other areas, outside of the
retirement plan, that SNAP provides more robust benefits than
FSSA?
Ms. Parke Holleman. I do, yes, Your Honor. [Laughter.]
Senator Tillis. You can call me Thom.
Ms. Parke Holleman. Thank you kindly.
Mr. Frank. Senator, in my experience as a first sergeant,
the FSSA was actually to get away from the stigma of food
stamps. It just was a pain in the rump, I will say, to work
through that. So SNAP probably would be a better option.
Ms. Parke Holleman. There are only a few hundred people in
that program, because of the problems. Since the commission
recommended that it continue overseas, then we are very much
for that recommendation.
Senator Tillis. Thank you. Any other comments?
Mr. Jones. It is a rational proposal.
Senator Tillis. Okay.
Do you all also believe that the G.I. Bill is a good
incentive for retention?
Mr. Frank. Certainly.
Mr. Jones. It is for recruitment, the G.I. Bill is a
tremendous recruitment incentive. Retention was modified and
well done by the current chairman and also the current chairman
of the full committee. We supported that when it was presented.
Mr. Frank. Its transferability is a retention tool. I am
concerned about the proposed change a little bit, but
definitely a tool.
Senator Tillis. And, Senator Graham, did I hear you were
working on grandchildren?
Senator Graham. Not mine, but others'.
If I did the Strom thing, it's possible, but I better get
started.
[Laughter.]
Senator Tillis. If I could just ask a couple more
questions, I know my time has expired. These are things that I
didn't get to the other panel, and that was if you had all dug
in long enough to form any opinions about the recommendations
on the national student identifier, benefits or concerns?
Mr. Nicholson. That has been on the lower end of our
priority list.
Senator Tillis. How about space available travel?
Mr. Nicholson. That seems like a good one.
Mr. Jones. Excellent idea.
Senator Tillis. And do you think it is going to have any
effect on availability for retirees? I didn't get a chance to
ask that of the panel members.
Mr. Frank. Well, Senator, as a matter of fact, I had a
conversation with a couple folks the other day on this very
topic, and that is exactly what they brought up, for retirees,
it may take some space there. I think we have to look at this a
lot further. Off-the-cuff, it looks like a great thing. If
space is available, allow them to do that. But it might have an
impact.
Senator Tillis. I was going to submit that as a follow-up
question to the first panel. But I want to let you all know
that this is something that is very important to me. I come
from North Carolina. We have a couple people in uniform down
there, and this is a very, very important matter to me. I
welcome you to come to my office and discuss your concerns with
my staff and with me. Thank you.
Mr. Nicholson. Senator Tillis, could add one more thing to
your earlier question? On the issue of member feedback, the
numbers I cited earlier, the 36 percent of respondents who were
in favor of reforming the retirement system, we do one of the
largest annual service surveys of Iraq and Afghanistan veterans
in the country. At the time we did our 2014 survey, we of
course didn't know what the proposals were going to be. We
tried to formulate questions to get at this issue in advance,
having, of course, talked to the commissioners about where they
were going with this.
We intend to survey more specifically in our 2015 survey,
which we will deploy in a couple weeks, on the specific
recommendations.
But I would just think that one of the biggest things we
have been seeing, because in addition to our quantitative
surveys, I mean, a lot of our feedback is qualitative. It is
through social media. The biggest thing I have been seeing is
what you mentioned earlier, the fear of the unknown. A lot of
people are under the mistaken impression, still, no matter how
many times we say, you all say, and the commissioners say that
this not going to be impact those who are currently in or
currently retired, the biggest fear that we see seems to be
that it is. They don't believe it or they're not hearing that,
for some reason.
So if the methodology of the commission in arriving at
their 80 percent figure is to have explained what the system
would be and then gauge a reaction, I don't find it beyond the
scope the reality that the 80 percent number could be accurate.
But the biggest issue I think not only in gathering accurate
data, but in terms of P.R. for the commission itself moving
forward, and any changes that might be pursued and proposed, is
clarifying and amplifying that data point that this isn't going
to impact those who are currently in the system.
Senator Tillis. Mr. Nicholson, that is a great point. And
just to reinforce it, when I say, if you like your plan, you
can keep it, when I hear the commission say, at repeated
requests from me and Senator Graham that that is the case, that
will be an area that we'll be working on to confirm, because I
think it is critically important. You don't break a promise
that you made to the people who entered with that expectation.
I think that is critically important.
The other thing that I will send as a follow-up to the
commission is so that you can provide the kind of tools--I
don't know what the implementation strategy would be here, and
the stakeholder engagement strategy would be. But it almost,
certainly, needs to use the kind of tools that are used in the
private sector to say, if you are a soldier at this point in
time and you model out the financial choices that will be a
part of financial literacy, I would presume to give them that
informed decision about what this exactly means to them, that
this decision makes, so that we can really begin to identify
the people to become a part of that potentially 80 percent or
60 percent, whatever that number is, and the ones who may have
legitimate concern in the plan design that we need to address.
We will be pursuing that as a part of our due diligence.
Thank you, all.
Mr. Jones. Senator, one thing on the plan, that you can
keep it. There is a provision in the recommendations that
allows the Secretary to change the 20-year period for career
either to more years or to fewer years. So if you can keep your
plan, the Secretary may change it.
Senator Graham. Thank you. Well, we will fix that, if that
is true.
So the bottom line is you have to look at it this way. The
chairman of this committee is a military retiree. I am not
going to go to John McCain and say we are going to take your
retirement away. I'll let someone else do that. We're not. That
wouldn't be fair. So just chill out. Nobody's going to mess
with something you've already earned.
If I don't get court-martialed, I'm retiring in August
after 33 years. I'm not going to screw with my own retirement.
If nothing else, you can believe that.
I'm not going to put people in the position who have
served, ready to retire, that they are going to lose anything.
It is not fair. If you are on Active Duty today and this is
your first day of Active Duty, you can keep the current system
until we pass a bill, if we ever do, because to do otherwise is
not fair.
It is not fair to kick somebody out at 12 at no fault of
their own, because we are reducing the force and Congress is
stupid to do sequestration. That is your guys, the Iraq and
Afghan vets. We want to do right by them, and that means a new
benefit that doesn't exist today. We want a sustainable,
generous benefit.
Here is my belief, that if you are going to enlist in the
military the day after we reform the system, you are going to
know on day one that the defined benefit plan is 40 percent. If
that is not a good deal for you, don't join. Go somewhere else.
If you are halfway decent at managing your money, you'll make
up the 10 percent.
But, Ms. Holleman, we are going to make sure that the 1
percent is modeled out because a lot of people live paycheck to
paycheck. So I want to take the most conservative estimate of 1
percent and see how much of the 10 percent that makes up.
From 20 to 30, I am not worried about that group because at
20, you are basically working for half pay anyway. You just
obviously like your job, because you could quit and get half
your salary and go do something else. So the reason people stay
past 20 is they just like what they do, and they want to get
promoted and maybe increase their retirement. So I am not
really worried about that so much, Mr. Jones.
But what I am worried about is, does the math add up? It
sounds like a good deal, but let's test it. And if you need
more time to run the numbers, you are going to get it, because
this is a transformational change. And we want to do it
thoughtfully.
If I were a young person coming into the military, let's
say I had been in 4 years, I would take the blended plan in a
heartbeat. You are just going to have more. But if I am 16, 17
years in, I'm sticking with what I have. It makes no sense.
So I bet you that 19 percent reflects people who are close
to 20, and that 80 percent, whether it is accurate or not,
probably reflects people under 10.
When you look at the G.I. Bill, it rewards people to stay
past 12 by transferring their benefits to their kids. That is a
big deal. That is one less expense in retirement, paying for
your kids' college. Under the current plan that they are
proposing, you get a bonus to stay in, an incentive to stay in,
so that helps retention. I think those two things make sense.
The idea that you are paying for this on the back of the
people past 20, I don't really buy that. But I want to know
more about it, because you can't create a new benefit helping
the 12-year guy, the 8-year guy, without something giving. And
I don't want to punish somebody because you are helping
somebody else.
But I think this modernization effort of a blended plan
will serve the country well. A 40 percent defined-benefit is a
pretty good deal. There are not many deals like that in society
today.
But what we are asking people to do is an incredible thing,
and that is to get shot or get killed. So I am going to make
sure that you get a good deal. If it is below 20 percent cost
share, it will be because I think you have earned a discount
when it comes to health care.
So please be mindful that this committee wants to embrace
modernization, but it won't be punitive. But if it does save
money to make the system more sustainable, that is a good
thing, because we are $17 trillion, $18 trillion in debt and we
ought to be looking for savings where we can.
So I will shut up now and take any final comments.
Mr. Frank. Chairman Graham, it was a great opportunity to
come talk, and we do appreciate the opportunity the extended
time to look at this.
To your point, there are only a few marks in here. It is a
little beat up, but it is going to get worse. And we would love
to spend some time, obviously, discussing it with all of you in
the future and help find the way forward.
Senator Graham. We will try to be reasonable and make sure
you have a reasonable amount of time. I will be very sensitive
to that.
Mr. Frank. Thank you.
Senator Graham. Thank you all so much for participating and
representing your interests very well. Thank you.
The hearing is adjourned.
[Whereupon, at 4:53 p.m., the subcommittee adjourned.]
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Kirsten E. Gillibrand
retirement
1. Senator Gillibrand. Commissioners, the Department of Defense's
(DOD) own studies, and those of outside think tanks, seem clear that
your average 17-21 year old does not spend a lot of time thinking about
the retirement system or what kind of healthcare the military will give
them when they retire 40 years in the future. This seems reasonable
since most servicemembers--above 70 percent--only serve one enlistment.
Instead, it seems more likely that young recruits care about cash
compensation, housing, and education benefits. The commission undertook
an extensive study of these values and preferences. According to the
commission's study, does this demographic prefer the hybrid retirement
system you recommend here?
Mr. Maldon. Yes, the Commission's survey showed that lower pay
grade groups, both enlisted and officer (E1-E4 and O1-O3) generally
preferred the blended retirement model. For example, E1-E4 active-duty
servicemembers prefer the blended plan by a margin of 60:40.
2. Senator Gillibrand. Commissioners, the commission's
recommendation is that retirees leaving after 20 years of service have
the option to choose a lump-sum in place of all pension payments up
through age 67, or to split the difference by getting half of the
benefit upfront and the other half spread out in monthly checks. All
the options the commission recommends would resume monthly payments to
retirees at age 67. How does the commission recommend that DOD
calculate that lump sum?
Mr. Maldon. The Commission does not recommend a specific
methodology for calculating the lump sum. In general, it is expected
that the lump sum would be calculated as the present value of all or a
portion of retired pay between retirement and age 67. The present value
would be calculated with a selected discount rate, and assuming a level
of expected retired pay cost-of-living adjustments (COLAs). However,
the Commission recommends that the Secretary of Defense establish
policy to calculate lump sums, including discount rates and COLA
assumptions.
financial literacy programs
3. Senator Gillibrand. Commissioners, currently every branch has
different policies on how they provide financial literacy. Would the
new proposed program be standardized across the branches or left up to
each branch to set their own policies?
Mr. Maldon. The recommendation establishes minimum training
timelines that would be standardized across the Services. This minimum
standard would ensure a level of commonality for financial literacy
training that servicemembers receive. The Services would retain the
flexibility to offer additional training to their respective
servicemembers.
Minimum training events would be provided during initial training
or upon arrival at the first duty station; during leadership and pre-
and post-deployment training; at transition points (e.g., Active
component to Reserve component, separation, and retirement); at major
life events (e.g., marriage, divorce, birth of first child, disabling
sickness or condition); and upon request of the individual.
4. Senator Gillibrand. Commissioners, the commission report
recommends DOD hire outside firms to provide financial literacy
training. Currently every branch has a different set of policies on how
they provide financial literacy. Does the commission agree that all the
branches should have the same financial training provided for their
military member?
Mr. Maldon. The recommendation establishes minimum training
timelines that would be standardized across the Services. This minimum
standard would ensure a level of commonality for financial literacy
training that servicemembers receive. The Services would retain the
flexibility to offer additional training to their respective
servicemembers.
Minimum training events would be provided during initial training
or upon arrival at the first duty station; during leadership and pre-
and post-deployment training; at transition points (e.g., Active
component to Reserve component, separation, and retirement); at major
life events (e.g., marriage, divorce, birth of first child, disabling
sickness or condition); and upon request of the individual.
5. Senator Gillibrand. Commissioners, how are the commission's
recommendations different from current financial literacy training in
the military?
Mr. Maldon. The Commission's recommendation substantially increases
the frequency and content of financial literacy training for
servicemembers, as well as provides common minimum training standards
for all Services. Based on the 2013 Blue Star Families Annual Lifestyle
Survey, only 12 percent of servicemember respondents indicated they
were receiving financial education from servicemember training. The
Commission's recommended changes to financial literacy training would
ensure servicemembers universally received financial literacy training
at certain key times over the course of their military career. Another
change would be hiring professional trainers to provide financial
literacy training, ensuring that servicemembers are receiving training
from certified financial advisors.
department of defense commissaries and exchanges
6. Senator Gillibrand. Commissioners, in fiscal year 2013, the
Defense Commissary Agency reported the average discount for commissary
patrons to be 30.5 percent and the exchanges reported savings between
20 and 24 percent. Respondents to the commission's survey indicated
that a commissary discount of 10 percent or less offers little to no
value. What impact will the commissions' recommendation have on the
level of discounts at commissaries and exchanges?
Mr. Maldon. The Commission's recommendation is focused on
preserving and improving the benefits delivered to servicemembers and
their families through commissaries and exchanges. At the core of this
recommendation is a statutory guarantee that food would continue to be
sold at cost (plus a 5 percent surcharge) in commissaries. Although
just as it is now, no restrictions would be placed on exchange pricing,
to remain competitive in the face of increased private-sector
competition, the exchanges would need to continue to offer substantial
discounts. The nine strategies suggested in the Commission's final
report offer the consolidated resale system additional opportunities to
reduce costs and increase revenue. These strategies include the
following: consolidate and optimize logistics networks, consolidate
staffing creating shared services business units, convert some or all
of the commissary workforce from APF to NAF employees, expand
commissary sales through the introduction of convenience items with
variable pricing, aggregate procurement of supplies and services,
reduce second destination transportation costs, aggregate and align
capital expenditures, expand the Military STAR card to commissaries,
and consolidate retail space. Pursuing some or all of these
opportunities can increase profits. The additional profits can be used
to increase the discount on nonfood items, improve the commissary and
exchange facilities, increase Morale, Welfare, and Recreation (MWR)
dividends, or reduce the appropriated fund burden. To satisfy the Board
of Directors, the Executive Director of the consolidated resale system
would need to find the right balance among these competing demands,
satisfying the needs of the Military Services and the needs of
shoppers. Shoppers would not be satisfied unless they were provided the
right goods and services, in a safe and pleasant environment, at an
acceptable discount.
7. Senator Gillibrand. Commissioners, how does the commission
envision maintaining the profits that go to Morale, Welfare and
Recreation activities in this new system?
Mr. Maldon. The Commission's recommendation preserves the partial
dependency of MWR programs on resale profits. The Commission's Final
Report offers multiple ways that the consolidated organization can
increase profits through reduced operating costs or increased sales.
Through the Board of Directors, the Military Services would determine
and direct the best use of those profits, making tradeoffs among the
needs of the MWR programs, the benefits of reinvesting in the resale
system, and the goal of slowly reducing the burden on taxpayers.
8. Senator Gillibrand. Commissioners, has the commission considered
allowing veterans, regardless of retirement or duty status to use the
Exchanges online? How would this affect the profitability of the
Exchanges?
Mr. Maldon. The Commission considered multiple options for
expanding the list of authorized patrons, both in exchange facilities
and online. The decision to increase the patron base must consider
multiple factors, such as estimated profits, concerns over fairness,
the likely response from private-sector retailers and their
representatives, and the control and management of access. Although it
is reasonable to expect some increase in profits, the Commission did
not find defensible analysis to quantitatively estimate that increase.
Accordingly, no effort was made to assess the objections that may be
raised by States, commercial retailers, and other groups regarding
substantial expansion in the eligible population of tax-free shoppers.
improve access to childcare on military installations
9. Senator Gillibrand. Commissioners, did the commission look at
how the proposed reduction in the force structure would impact the
current childcare wait times?
Mr. Maldon. Child care services, demand for those services, and
associated wait times can vary substantially from location to location.
The data needed to establish a baseline and perform a credible analysis
of the effect of force structure reductions at each location was not
available.
To address changes in force structure and other variables affecting
demand, the Commission instead focused its child care recommendations
on standardizing the tools needed to measure demand and minimize the
obstacles to satisfying that demand. Upon implementation of these
recommendations, the Military Services would be better able to
understand and respond to changes in demand, including effects
associated with local force reductions.
10. Senator Gillibrand. Commissioners, bases have 24 hour
operations; why did the commission not make recommendations on how to
help military families with childcare during nights and weekends?
Mr. Maldon. The Commission received only a few inputs citing
concerns with the availability of military child care outside of normal
business hours. Many parents cited the extended hours offered in Child
Development Centers (CDCs) as one of the advantages over private-sector
alternatives, noting the CDC's willingness to open early to support
activities like physical training or stay open late to support extended
working schedules.
safeguard education benefits for servicemembers
11. Senator Gillibrand. Commissioners, many current servicemembers
have made decisions about whether to extend their service based on the
current G.I. Bill benefits and what they could do for themselves and
their families. I am concerned that making changes without a
grandfathering process would pull the rug out from under these
servicemembers plans. Did the commission look at how many
servicemembers would be impacted by the 2017 sunset in your
recommendations?
Mr. Maldon. Yes, this is why the Commission recommended sunsetting
the living stipend for dependents on July 1, 2017. Doing so would allow
time for families to identify alternative methods of paying for room
and board if needed.
Using available historical data, the Commission estimated that
approximately 400,000 dependents would need to identify alternative
methods of paying for room and board. It is important to note that more
than 33 percent of children to whom Post-9/11 GI Bill benefits have
been transferred are younger than 10 years old, and thousands of these
children are infants.
12. Senator Gillibrand. Commissioners, did the commission consider
alternatives that would allow for greater grandfathering of the current
benefits?
Mr. Maldon. Under the Commission's recommendation, retired pay is
grandfathered for currently serving servicemembers and retirees.
Benefits from the Montgomery GI Bill and REAP are also grandfathered.
Several of the Commission's recommendations improve or maintain current
benefits (e.g., Commissary savings, financial literacy training, and
child care availability) or provide new options without changes to the
current benefit (e.g., Survivor Benefit Plan). For these
recommendations, grandfathering would not be necessary. It is not
feasible to grandfather the current TRICARE program under the
Commission's health care recommendation.
transition to civilian life
13. Senator Gillibrand. Commissioners, one of the commission's
recommendations is focused on strengthening the new Transition GPS
program that requires several reports to Congress. What is the
commissions' assessment of the current effectiveness of the current
Transition GPS program?
Mr. Maldon. Although overall veterans' unemployment has remained
lower than that over nonveterans during the last 2 decades, since 2005,
veterans age 18 to 24 have consistently had a higher unemployment rate
compared to nonveterans. One large company told the Commission that
veterans, even those who complete the Transition GPS program, do not
necessarily have the networking skills they need to get jobs. Despite
the fact that a recent survey showed 44 percent of veterans attend
school part- or full-time, the education track of Transition GPS is
optional. Assessing the outcomes of the program is difficult because
the matrixes needed to do so are incomplete. Veterans may also benefit
from more face-to-face interactions with employees at One-Stop Career
Centers. Currently, these employees are not required to attend
Transition GPS workshops and their participation in veteran-focused job
fairs is not monitored or reported.
military dependents education
14. Senator Gillibrand. Commissioners, the commission has
recommended adding military dependent student identifiers to the
Elementary and Secondary Education Act (ESEA). What benefit does the
commission see from tracking military dependents?
Mr. Maldon. Currently, there is no systematic way to identify
issues military students might experience because of the military
lifestyle. Tracking information reported about these students through
the ESEA data submitted by schools would provide DOD with the means to
compare military children against their peers and to identify areas
where additional support might be needed to better serve military
children in their schooling.
15. Senator Gillibrand. Commissioners, does the commission think
that more resources will be required to help teachers and
administrators be better prepared to meet the needs of military
children?
Mr. Maldon. Currently, military children are not identified as such
in public school data reported to the Federal Government. Large-scale
data specifically pertaining to military children's achievement in
school does not exist; therefore, the Commission did not consider if
more resources are required to help teachers and administrators be
better prepared to meet the needs of military children. The first step
is to identify any concerns about military children's schooling by
tracking their achievement, and the Commission's recommendation
regarding the military student identifier creates a tool for generating
data needed to do so.
THE HEALTHCARE RECOMMENDATIONS OF THE MILITARY COMPENSATION AND
RETIREMENT MODERNIZATION COMMISSION
----------
WEDNESDAY, FEBRUARY 25, 2015
U.S. Senate,
Subcommittee on Personnel,
Committee on Armed Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:36 p.m. in
room SH-216, Hart Senate Office Building, Senator Lindsey
Graham (chairman) presiding.
Committee members present: Senators Graham, McCain, Cotton,
Tillis, and Gillibrand.
OPENING STATEMENT OF SENATOR LINDSEY GRAHAM, CHAIRMAN
Senator Graham. Hearing come to order. I apologize for
being late.
We have a vote at 2:45 p.m., so let's just get started, see
how far we can go, and just keep the trains running, here, so
we get the testimony we need from this distinguished group.
The Military Compensation and Retirement Modernization
Commission (MCRMC) has been introduced to the committee about
four times. Are y'all still the same people you were before?
Mr. Maldon. We are, Mr. Chairman.
Senator Graham. Okay. If you could just start with the
Admiral, here, for the record, announce who you are, then we'll
get started. I'll defer any opening statements to the Senator
from New York.
STATEMENT OF SENATOR KIRSTEN E. GILLIBRAND
Senator Gillibrand. Mine's really short, but I am just
going to say thank you to Senator Graham for his leadership on
this committee. I want to join him in welcoming all of you to
be our witnesses.
We've already held a full committee hearing and a Personnel
Subcommittee hearing on the MCRMC's findings and
recommendations. Obviously your work is incredibly important to
this committee. Today's hearing will address the MCRMC's
recommendations to improve health benefits for our
servicemembers and families. I'm especially interested in
hearing from our witnesses about how these recommendations
address the issues of healthcare access, healthcare choice, and
healthcare quality for the junior enlisted families and for
military families with special needs dependents.
Recent reports indicate that many Military Service
organizations have reservations about these specific
recommendations. We will hear from some of these Service
organizations today during the second panel. I take their
concerns seriously and will ensure that their concerns are
addressed before we consider any major overhaul of the military
healthcare system.
Again, thank you for your excellent effort in this regard.
We're very grateful for your hard work.
Senator Graham. That was well done, and quick.
Senator Gillibrand. Short and sweet.
Senator Graham. Admiral.
Admiral Giambastiani. Good morning, sir. Ed Giambastiani,
retired Navy.
Mr. Buyer. Congressman Steve Buyer, class of 1980.
Senator Graham. Go Dogs.
Mr. Maldon. Al Maldon, chairman.
Mr. Higgins. I'm Mike Higgins.
General Chiarelli. Pete Chiarelli.
Senator Graham. Thank you all for your great service. We'll
receive your testimony.
STATEMENT OF HON. ALPHONSO MALDON, JR., CHAIRMAN, MILITARY
COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION;
ACCOMPANIED BY COMMISSIONERS HON. STEPHEN E. BUYER, MICHAEL R.
HIGGINS, GEN PETER W. CHIARELLI, USA (RET.), AND ADM EDMUND P.
GIAMBASTIANI, JR., USN (RET.)
Mr. Maldon. Thank you, Mr. Chairman, Ranking Member
Gillibrand, distinguished members of the subcommittee. My
fellow commissioners and I are honored to be here with you. We
thank you for the opportunity to testify before you again
today.
As a Commission, we stand unanimous in our belief that the
recommendations offered in our report strengthens the
foundation of the All-Volunteer Force, it ensures our national
security, and it truly honored those who serve and the families
who support them. Our recommendations sustain the All-Volunteer
Force by maintaining or increasing the overall value of the
compensation of benefits for servicemembers and their families,
and provide needed options for service personnel managers to
design and manage a balanced force. Our recommendations,
further, save the government more than $12 billion annually
after full implementation.
Today, we specifically address our recommendations to
improve the military health benefit. Modernization of the
health benefit was one of the most sacred trusts given to this
Commission. There is no benefit more fundamental, nor one more
personal, than that which maintains the very health and well-
being of our Nation's heroes and their families.
As commissioners, we share the unequivocal belief that a
high-quality health benefit is essential for all military
constituencies, and we find that the current TRICARE program
falls short of this aspiration. TRICARE, as it exists today, is
beset by several structural problems that deny our Active Duty
families, Reserve-component members, and retirees the high-
quality health benefit they deserve.
Low reimbursement rates result in weak healthcare networks,
a frustrating referral process that limits access to care
unnecessarily. A key medical advancement and modern healthcare
management practices are often slow to be adopted. The current
TRICARE program limits choice, access, and quality. Conversely,
our recommended--our recommendation on TRICARE Choice program
expand all three while increasing the overall value of the
health benefit to the servicemember.
Choice and access are important components of a high-
quality health benefit, and we believe they can be delivered
without undermining the existing Military Treatment Facility
(MTF) structure and the training platform it provides. Current
TRICARE beneficiaries already elect MTF-based care through
TRICARE Prime, even when other options are available to them.
The Commission's survey showed that servicemembers strongly
prefer a health benefit that both increases choice of civilian
providers and ensure continued access to MTF care.
Moreover, our proposed TRICARE Choice offer the same
incentives to choose MTF care as DOD's less robust TRICARE
reform proposal, and would be expected to result in the same
retention of workload at the MTFs. Our recommendations further
offer tools to improve medical readiness by attracting new
cases into the MTFs, especially those related to combat
casualty care.
Currently, there are serious challenges to maintaining
joint combat medical capabilities with the typical mix of cases
during peacetime. As a result, military medical personnel often
rely on just-in-time proficiency training at civilian
hospitals, and the Services substitute wartime medical
personnel requirements with nonoperational family and retiree
care specialists during peacetime. Our healthcare
recommendations improve the viability of MTFs as a readiness
training platform by providing our families and retirees with
greater access, choice, and value to their healthcare
experience.
Finally, Mr. Chairman, our recommendation on DOD/Department
of Veterans Affairs (VA) collaboration improves the healthcare
experience for transitioning servicemembers. Just one example
of insufficient collaboration, drug formularies continue to
differ between DOD and VA, to the detriment of our
transitioning servicemembers. Differing formularies often
results in uncertainty, tension, and a lack of continuity of
care for wounded warriors that should not exist, especially for
those managing pain and mental health concerns. Our
recommendations ensure proper continuity of care, regardless of
the organizational considerations.
In closing, my fellow commissioners and I again thank you
for the opportunity to testify here today. It has been our
honor and privilege to serve our servicemembers and their
families in our role as commissioners, and a particular honor
to seek ways to improve and modernize the health benefit. We
are confident that our recommendations will serve our
servicemembers in a positive, profound, and lasting way.
We are pleased to answer your question at this time.
Thank you.
[The prepared statement of Mr. Maldon follows:]
Prepared Statement by the Military Compensation and Retirement
Modernization Commission
Chairman Graham, Ranking Member Gillibrand, distinguished members
of the subcommittee: My fellow commissioners and I are honored to be
here, and we thank you for the opportunity to testify today.
As a Commission, we stand unanimous in our belief that the
recommendations offered in our report strengthen the foundation of the
All-Volunteer Force, ensure our national security, and truly honor
those who serve--and the families who support them--now and into the
future. Our recommendations represent a holistic package of reforms
that do not simply adjust levels of benefits, but modernize the
structure of compensation programs for servicemembers. These
recommendations sustain the All-Volunteer Force by maintaining or
increasing the overall value of compensation and benefits for
servicemembers and their families, and they provide needed options for
Service personnel managers to design and manage a balanced force. Our
recommendations also create an effective and efficient compensation and
benefit system that saves the Government, after full implementation,
more than $12 billion annually, while sustaining the overall value of
compensation and benefits of those who serve, those who have served,
and the families that support them.
joint readiness
Some have suggested that increasing access to and choice among
health care providers would impair readiness by limiting training
opportunities in Military Treatment Facilities (MTF). Yet beneficiaries
currently have complete freedom to use TRICARE Standard or Extra to
seek care outside of MTFs, but they often choose TRICARE Prime and
receive MTF care. The Commission's survey also showed that
servicemembers strongly prefer a health benefit that, while increasing
choice of civilian providers, allows continued access to MTF care. The
Department of Defense's (DOD) TRICARE reform proposal recommends
elimination of TRICARE Prime with lower MTF co-payments to incentivize
continued MTF usage. TRICARE Choice proposes the same incentives and
should therefore result in the same retention of readiness workload at
MTFs.
Furthermore, our recommendations contain additional tools that
enable DOD to improve medical readiness by attracting new cases into
MTFs, especially those related to combat casualty care. There are
serious challenges to maintaining joint combat medical capabilities
with the typical mix of cases seen in the military health care system
during peacetime. As a result, military medical personnel have had to
rely on just-in-time proficiency training at civilian hospitals. The
Services also regularly substitute wartime medical personnel
requirements with medical specialties that provide non-operational
family and retiree care during peacetime. DOD has recommended closing
or repurposing many MTFs that do not have sufficient workload to
adequately support readiness training. Conversely, our health care
recommendations improve the viability of MTFs as readiness training
platforms, while providing our families and retirees greater access,
choice, and value to their health care experience. Key elements of the
Commission's recommendation include the following:
Establish a Joint Readiness Command (JRC).
Functional unified command led by a four-star
general/flag officer.
Includes a subordinate joint medical function.
Required structure and personnel may be
realigned from current Joint Staff functions.
Participates in annual planning, programming,
budgeting, and execution process.
Establish a Joint Staff Medical Readiness Directorate.
Led by a three-star military medical officer.
Current Joint Force Surgeon billet transitions
to assume the increased authorities.
Establish statutory requirement for DOD to maintain
Essential Medical Capabilities (EMC).
Limited number of critical medical
capabilities that must be retained within the military.
Secretary of Defense approves, establishes
policies related to, and reports to Congress annually
on EMCs.
JRC identifies EMCs; establishes joint
readiness requirements consistent with EMCs; monitors
and reports on Services' adherence to EMC policies and
standards; and monitors allocation of medical personnel
to ensure maintenance of EMCs.
Protect and improve transparency of medical programs
funding.
Active component (AC) family, retiree, and RC
health care should be funded from the Services'
Military Personnel accounts.
Medicare-Eligible Retiree Health Care Fund
(MERHCF) should be expanded to cover health care and
pharmacy for non-Medicare-eligible retirees.
New trust fund for health care expenditures
appropriated in the current year.
MTFs funded through a revolving fund using
reimbursements for care delivered.
MTF operations that exceed reimbursement for
care delivered to be funded from Services' operations
and maintenance accounts as cost of readiness.
health benefits
A high-quality health benefit is essential for all military
constituencies. Yet, the current TRICARE program is beset by several
structural problems that hinder its ability to provide the best health
benefit to active duty families, Reserve component members, or
retirees. It has weak health care networks because it reimburses
providers at Medicare rates or lower. It limits access to care with a
frustrating referral process. It has challenges adopting medical
advancements or modern health care management practices in a timely
manner. The Commission's recommended TRICARE Choice program expands
choice, access, quality, and value of the health benefit. Key elements
of the Commission's recommendation include the following:
Continue to provide active-duty servicemember health
care through their units or MTFs to ensure Services can
maintain control of medical readiness of the Force.
Retain current eligibility for care at MTFs, pharmacy
benefit, dental benefit, and TRICARE For Life for all
beneficiaries.
Establish a new DOD health program to offer a
selection of commercial insurance plans.
Beneficiaries include active-duty families, RC
members and families, non-Medicare-eligible retirees
and families, survivors, and certain former spouses.
AC families receive a new Basic Allowance for
Health Care (BAHC) to fund insurance premiums and
expected out-of-pocket costs.
BAHC based on the costs of median
plans available in the family's location, plus
average out-of-pocket costs.
Part of BAHC used to directly transfer
the premium for the plan the family has
selected to the respective insurance carrier.
Remainder of BAHC available to AC
families to pay for copayments, deductibles,
and coinsurance.
Establish a program to assist AC
families that struggle with high-cost chronic
condition(s) until they reach catastrophic cap
of their selected insurance plan.
RC members can purchase a plan from the DOD
program, at varying cost shares.
Reduce cost share for Selected
Reserves to 25 percent to encourage RC health
and dental readiness and streamline
mobilization of RC personnel.
When mobilized, RC members receive
BAHC for dependents; select a DOD plan or apply
BAHC to current (civilian) plan.
Non-Medicare-eligible retirees' cost
contributions remain lower than the average Federal
civilian employee cost shares, but increase 1 percent
annually over 15 years.
Leveraging its experience, Office of Personnel
Management administers the program with DOD input and
funding.
Institute a program of financial education and health
benefits counseling.
dod-va collaboration
Our recommendation on DOD-VA collaboration improve the health care
experience for transitioning servicemembers. For example, drug
formularies continue to differ between DOD and VA to the detriment of
transitioning servicemembers. Differing formularies create tension
maintaining servicemembers on medications with which they are familiar
and transitioning servicemembers to new medication on new formularies.
This tension should not exist, especially for pain medication and anti-
psychotics. We believe creating a single formulary for these
medications is the best and only means of ensuring continuity of care
regardless of organizational considerations. Key elements of the
Commission's DOD-VA collaboration recommendation include:
Grant additional authorities and responsibilities to
the Joint Executive Committee to standardize and enforce
collaboration between the DOD and VA to:
Establish within 6 months a strategic uniform
formulary to include all drugs identified as critical
for transition from DOD to VA status.
Oversee electronic health record compliance
with national health information technology standards
ensuring health care data can be quickly and easily
shared between the departments.
Approve or disapprove in advance any new DOD
or VA medical capital asset acquisition or
modernization of capital assets, of either DOD or VA
medical components.
Define common services and planned
expenditures for them, and certify consistent with
strategic plan.
Establish a standard reimbursement methodology
for DOD and VA provision of services to each other.
In closing, my fellow Commissioners and I again thank you for the
opportunity to testify here today. It has been our honor and privilege
to serve servicemembers and their families as we have assessed the
current compensation and retirement programs, deliberated the best
paths to modernization, and offered our recommendations. We are
confident that our recommendations will indeed serve our servicemembers
in a positive, profound, and lasting way. We are pleased to answer any
questions you have.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Graham. Well, thank you all very much for your hard
work. We'll just get right at it.
One of the recommendations is that the amount of money to
pay TRICARE bills, past increase on the patient side, is 5
percent. Is that correct?
Mr. Maldon. It's--that's 5 percent--there--it is at 5
percent.
Senator Graham. Okay. So, the bottom line is, of all the--
of the dollar we'll pay for TRICARE, 5 percent comes from those
utilizing the service. Is that correct?
Mr. Maldon. That is correct, Mr. Chairman.
Senator Graham. The norms in the private sector, somewhere
in the 20s--28? Is that right?
Mr. Maldon. About 28 percent.
Senator Graham. TRICARE originally was at 28 percent----
Mr. Maldon. 27, I believe.
Senator Graham. 27 percent.
Mr. Maldon. Yes, Mr. Chairman.
Senator Graham. Your recommendation is to get it to 20
percent over 15 years.
Mr. Maldon. That is correct, Mr. Chairman.
Senator Graham. You believe we have to do that to make
TRICARE sustainable, no matter what we do.
Mr. Maldon. It is our belief that that is absolutely
correct.
Senator Gillibrand. Congressman Buyer, do you see a way to
maintain the 5 percent and keep the program viable?
Mr. Buyer. No.
Senator Graham. Okay.
All right. Now, you have retirees under 65 who are TRICARE
recipients. Will they get a--an allowance in this new system?
How much will their premiums go up beyond the 5 percent? Will
their copayments go up? Will their deductibles go up?
Mr. Maldon. Mr. Chairman, they do not. Retirees--non-
Medicare-eligible retirees do not get a basic allowance for
healthcare as the active Duty----
Senator Graham. How much----
Mr. Maldon.--family would do.
Senator Graham.--more can the retired force expect to pay
if we go to this new system, per person?
Mr. Maldon. Today, Mr. Chairman, they're paying about--
roughly $500. Under the new system, the worst-case scenario
would be up to about $1,760--$1,760--$69.
Senator Graham. So----
Senator Gillibrand. That's per year? Is that per year?
Senator Graham. Per year?
Mr. Maldon. Per year.
Senator Graham. Wow. 17- what?
Mr. Maldon. That's $1,769. That's the worst-case scenario.
Senator Graham. Gotcha.
Mr. Maldon. That's out to the----
Senator Graham. I gotcha.
Mr. Maldon.--the 15 years.
Senator Graham. I gotcha. Oh, so that's after the premium--
--
Mr. Maldon. That's after the--that's premium that will take
you out to that----
Senator Graham. No, I got you. So, aside from premiums,
will their copayments or deductibles go up? Do we know?
Mr. Maldon. There would be some other costs in there.
There's copay costs and deductibles, and some of those costs
may be there.
Senator Graham. I'll tell you what I want you to do. I want
you to give me kind of a summary of what the median would look
like. I want the retired force to know, ``Here's what it would
cost you to make this change.''
[The information referred to follows:]
Health care costs for retirees and their families under TRICARE
Choice can be divided into two components. The first component would
what they pay for coverage similar to what they have today under the
existing TRICARE program. To create an apples-to-apples comparison,
cost should be compared for similar coverage. In TRICARE Choice,
retirees would have many options for health care plans and could choose
to purchase enhanced coverage (broader networks, better access, and
more covered services), rather than the existing TRICARE program. The
second component would be any additional cost retirees choose to pay to
purchase coverage that includes these enhancements. Should retirees
take advantage of the additional choices made available to them by
TRICARE Choice and is not a cost increase to the retiree. Instead, it
is, in fact, a compensation increase because the retirees receive the
better coverage at a subsidized rate.
To evaluate these separate components of cost, the Commission
considered two plans from the Federal Employees Health Benefit Plan
(FEHBP) as examples of what types of plans might be offered in TRICARE
Choice. The first plan is the Government Employees Health Association
(GEHA). This plan is considered the most similar to the existing
TRICARE program, although is not a perfect comparison. GEHA includes
larger networks than the existing TRICARE program in the markets
examined by the Commission and more covered services. But it is a
lower-cost, PPO-style plan and is the best comparison the Commission
could find for the existing TRICARE program. The second plan is Blue
Cross Blue Shield (BCBS) Standard. This is one of the most robust and
highest-cost plans in FEHBP and is used to illustrate the costs to
retirees who exercise the opportunity to select better coverage made
available to them by TRICARE Choice.
The table below shows the costs to retirees for these options:
existing TRICARE program, TRICARE Choice with a plan similar to GEHA,
and TRICARE Choice with a plan similar to BCBS Standard. The first row
of data illustrates the costs retirees pay now under the existing
TRICARE program. Retirees enrolled in TRICARE prime paid a $548 (in
2014) premium. In addition, about 3 percent of retirees purchase
TRICARE Young Adult (TYA) for about $2,000 and about 65 percent
purchase the TRICARE Retiree Dental Program for about $1,500 per year.
This means that the average retiree is paying about $1,544 per year in
premium costs for TRICARE. Adding in their copayments and deductible
amounts for health care provides an average annual cost of about $2,030
per retiree household.
These costs would be largely unchanged in the first year of TRICARE
Choice, when the retirees' premium cost share is 5 percent. These costs
would increase, however, by the time TRICARE Choice was fully
implemented with a 20 percent cost share (15 years after program
initiation). In that year (using constant 2014 dollars), the comparable
health care plan (GEHA) would have a premium for retirees of about
$1,769 per year. No retirees would have to buy TYA and some retirees
would rely on the partial dental coverage provided in GEHA instead of
purchasing stand-alone full dental coverage, so the total premium
amounts paid by the retiree in GEHA would be about $2,267 per year.
Adding in copayments and deductibles provides an average annual cost of
about $3,556 per retiree household.
The comparison to GEHA is the best available comparison with the
existing TRICARE program. There would be many retirees, however, who
choose to purchase better coverage that costs more. A retiree who
chooses to purchase better coverage, like BCBS Standard, would pay
about $552 more per year ($3,556 to $4,108) for a plan with a value of
about $2,763 more than GEHA (because the government would pay an 80
percent cost share at the end of the 15-year period, the government
would be paying the remaining $2,211 for the added value of health
benefits. Thus, these retirees are experiencing an increase in their
compensation.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Graham. Now, the hope is that, if you make this
change, the benefits go up and make it worth the additional
investment. That's the goal of this, right, is to give you more
choices, better healthcare?
Mr. Maldon. Yes.
Senator Graham. Okay.
Mr. Maldon. Yes, Mr. Chairman.
Senator Graham. All right. Now, Active Duty family members,
they'll get a basic allowance, so they'll have no out-of-pocket
cost. Is that correct?
Mr. Maldon. That is correct.
Senator Graham. For the median program.
Mr. Maldon. That is correct, Mr. Chairman.
Senator Graham. For the median cost.
Mr. Maldon. Yes.
Senator Graham. Will their deductibles or copayments
appreciably go up under TRICARE Choice?
Mr. Maldon. Let me ask----
Senator Graham. Do they have any copayments or deductibles?
Mr. Maldon. Let me ask Commissioner Higgins if he would
respond to that question, please.
Mr. Higgins. Senator, today there are copayments that----
Senator Graham. Right.
Mr. Higgins.--Active Duty people pay. If they remain inside
the MTF, obviously those are minimal. But, the key here is that
there are two pieces to the basic allowance for healthcare. One
is the premium. They----
Senator Graham. Right.
Mr. Higgins.--pay the 28 percent.
Senator Graham. Right.
Mr. Higgins. The other piece is the copayments that they
are expected, in that median plan, to pay. So, we would project
that 85 percent of people would not see a copayment or out-of-
pocket expense beyond what they're doing today.
Senator Graham. Okay, that's my question. I want you to
validate that. Eighty-five percent of the people in the current
TRICARE system would not expect to see an increase in
copayments.
Mr. Higgins. That's correct. They would be fully----
Senator Graham. Everybody's going to expect to see an
increase in premiums if we adjust from the 5 percent.
Mr. Higgins. That's, of course, the 5 percent only applies
to the----
Senator Graham. Retirees.
Mr. Higgins.--working-age retiree----
Senator Graham. Yes.
Mr. Higgins.--not the Active Duty----
Senator Graham. That's--not Active Duty family members.
Mr. Higgins. Right.
Senator Graham. Okay. So, 85 percent of the people seem to
be immune from any copayment increase if they----
Mr. Higgins. That----
Senator Graham.--go to TRICARE Choice.
Mr. Higgins. That would be our analysis----
Senator Graham. Active Duty----
Mr. Higgins.--yes, sir.
Senator Graham. Okay. Guard and Reserve, is that still the
same?
Mr. Higgins. The Guard and Reserve package is a little bit
different. The TRICARE Reserve Select would have a cost share
of 25 percent, and that would be, as it is today, fully
burdened to the individual.
Senator Graham. How much more would they have to pay, in
terms of dollars?
Mr. Higgins. It would be my view, I believe, that there
wouldn't be much of an increased cost. We're going to take that
percentage----
Senator Graham. Right.
Mr. Higgins.--and make it a lower percentage burden to the
individual, from 28 down to 25.
Senator Graham. Okay. I guess what I'm saying is, just give
me some estimate of out-of-pocket cost, here. You've given me a
good estimate from 500 to 1,769 over the next 15 years.
Mr. Higgins. Sir, if----
Senator Graham.--in terms of premiums, in the worst-case
scenario. On the copayment side, I'd like some kind of
analysis, too.
[The information referred to follows:]
Health care costs for retirees and their families under TRICARE
Choice can be divided into two components. The first component would
what they pay for coverage similar to what they have today under the
existing TRICARE program. To create an apples-to-apples comparison,
cost should be compared for similar coverage. In TRICARE Choice,
retirees would have many options for health care plans and could choose
to purchase enhanced coverage (broader networks, better access, and
more covered services), rather than the existing TRICARE program. The
second component would be any additional cost retirees choose to pay to
purchase coverage that includes these enhancements. Should retirees
take advantage of the additional choices made available to them by
TRICARE Choice and is not a cost increase to the retiree. Instead, it
is, in fact, a compensation increase because the retirees receive the
better coverage at a subsidized rate.
To evaluate these separate components of cost, the Commission
considered two plans from the Federal Employees Health Benefit Plan
(FEHBP) as examples of what types of plans might be offered in TRICARE
Choice. The first plan is the Government Employees Health Association
(GEHA). This plan is considered the most similar to the existing
TRICARE program, although is not a perfect comparison. GEHA includes
larger networks than the existing TRICARE program in the markets
examined by the Commission and more covered services. But it is a
lower-cost, PPO-style plan and is the best comparison the Commission
could find for the existing TRICARE program. The second plan is Blue
Cross Blue Shield (BCBS) Standard. This is one of the most robust and
highest-cost plans in FEHBP and is used to illustrate the costs to
retirees who exercise the opportunity to select better coverage made
available to them by TRICARE Choice.
The table below shows the costs to retirees for these options:
existing TRICARE program, TRICARE Choice with a plan similar to GEHA,
and TRICARE Choice with a plan similar to BCBS Standard. The first row
of data illustrates the costs retirees pay now under the existing
TRICARE program. Retirees enrolled in TRICARE prime paid a $548 (in
2014) premium. In addition, about 3 percent of retirees purchase
TRICARE Young Adult (TYA) for about $2,000 and about 65 percent
purchase the TRICARE Retiree Dental Program for about $1,500 per year.
This means that the average retiree is paying about $1,544 per year in
premium costs for TRICARE. Adding in their copayments and deductible
amounts for health care provides an average annual cost of about $2,030
per retiree household.
These costs would be largely unchanged in the first year of TRICARE
Choice, when the retirees' premium cost share is 5 percent. These costs
would increase, however, by the time TRICARE Choice was fully
implemented with a 20 percent cost share (15 years after program
initiation). In that year (using constant 2014 dollars), the comparable
health care plan (GEHA) would have a premium for retirees of about
$1,769 per year. No retirees would have to buy TYA and some retirees
would rely on the partial dental coverage provided in GEHA instead of
purchasing stand-alone full dental coverage, so the total premium
amounts paid by the retiree in GEHA would be about $2,267 per year.
Adding in copayments and deductibles provides an average annual cost of
about $3,556 per retiree household.
The comparison to GEHA is the best available comparison with the
existing TRICARE program. There would be many retirees, however, who
choose to purchase better coverage that costs more. A retiree who
chooses to purchase better coverage, like BCBS Standard, would pay
about $552 more per year ($3,556 to $4,108) for a plan with a value of
about $2,763 more than GEHA (because the government would pay an 80
percent cost share at the end of the 15-year period, the government
would be paying the remaining $2,211 for the added value of health
benefits. Thus, these retirees are experiencing an increase in their
compensation.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Higgins. The----
Senator Graham. That's all I'm asking.
Mr. Higgins. If I could, Mr. Chairman, when we look at
retirees today, the working-age retiree, we have determined
that their out-of-pocket costs are approximately--a little over
$2,000, on average.
Senator Graham. Okay.
Mr. Higgins. Many pay much less if they stay within the
MTF. But, many are paying dental premiums, many are paying for
adult-child coverage that is quite expensive. So, on average,
the retiree--working-age retiree--is about $2,000, and final
end state, 15 years from now, we would project that that
retiree, who's going to get the adult child in their healthcare
plan under TRICARE Choice, is going to be out-of-pocket
somewhere around $3,500. So, we're looking at a increase of
less than two times.
Senator Graham. Okay, thank you.
Senator Gillibrand.
Senator Gillibrand. Thank you.
One of my concerns is the needs of families with special
needs. Your report says that there should be a DOD program
available to assist families with a high-cost chronic condition
or a catastrophic event or illness with medical expenses until
they reach their health plans' catastrophic caps or are no
longer required to pay out-of-pocket costs. Active Duty
families should apply for the--to this program for additional
funding to cover copayments that substantially exceed their
basic allowance for healthcare. How do you envision this
operating?
Mr. Maldon. Thank you, Senator, for the question. I'm going
to ask Commissioner Buyer to respond to that question, please.
Mr. Buyer. In our report, I'll refer you to pages 265
through 267. What we seek to do is to mitigate the financial
risks of the chronic and catastrophic illnesses to the Active-
Duty family households. So, when you take about the average
median plan, and you're about--around the $995s, say just under
$1,000. We--back--when we did--prior to Medicare Part D, we
used to talk about the ``donut hole,'' with drug costs. There's
kind of a hole here, also, meaning you're covered to $1,000,
but, when you get to $2,000, that's the cap, and then you're
triggered into a fund. We've come up with a calculation that we
believe that funding the program with about $50 million
annually will allow for the complete coverage of expenses for
that family in excess of $2,000.
Senator Gillibrand. Okay. Who will be in charge of deciding
who receives the additional funding and how to define
``chronic'' and ``catastrophic'' conditions?
Mr. Buyer. You have the plans. So, the--each of the plans--
when you have a family member that--with a particular condition
for which they're being treated, if, in fact, it's chronic, and
you have catastrophic coverage. I mean, my gosh, it could--it
could be--catastrophic could be any form of--type of an illness
or an accident. When those costs exceed $2,000, it triggers
into the fund.
Senator Gillibrand. Okay.
Admiral Giambastiani. If I could, the Secretary of Defense
or Department of Defense (DOD) would determine that.
Senator Gillibrand. Okay.
How--would families with special-needs dependents be
automatically enrolled, or do they need to figure this out?
Mr. Maldon. Yes. Commissioner Higgins, I'm going to ask you
to respond to that question.
Mr. Higgins. We don't envision an enrollment, per se,
although I think a family with a special-needs individual in
the family would be well-recognized in the system, and there
would be an acknowledgment that, after the first year or 2,
that there would be--it would be consistent to consider them a
special category, and there wouldn't be an--a very arduous kind
of administrative process.
Senator Gillibrand. Okay. How did you assess the $50
million fund? How did you assess that that would be the right
amount of money?
Mr. Higgins. We calculated what the out-of-pocket costs
would be today, where that--the basic allowance for healthcare
would take--the allowance for out-of-pocket costs would take
them. Where that line crossed, we considered what the costs
would be for all the population beyond the crossing lines. That
was calculated to be $50 million. You could add money to that,
obviously, and push that line back. That would be perhaps a
decision Congress might want to consider. But, we believe that
we have the right analysis, on $50 million after the crossing
lines, where you have out-of-pocket costs match each other.
Mr. Maldon. Senator, that's based on 5 percent, too, I
thought, just to be sure. It was 5 percent of the people we
thought that would fall within that category.
Senator Gillibrand. Now, it's not clear, would this program
also apply to family of military retirees, or is this just for
Active Duty?
Mr. Maldon. It's Active Duty, Senator.
Senator Gillibrand. Okay. So, did you assess possible costs
for medically retired wounded warriors having access to these
kinds of funds to pay for medical expenses for any special-
needs dependents they have?
Mr. Maldon. No, we did not. I mean, no, it will not.
Senator Gillibrand. Okay.
So, what would they--so, someone who is a veteran, who is--
wounded warrior who has a child with autism, what do they do?
They just don't get coverage through this system, or there's no
extra money if they do have catastrophic-care requirements?
Mr. Maldon. Commissioner Higgins, would you respond to the
question?
Mr. Higgins. Senator, I'm assuming you're talking about
somebody that qualified for a disability retirement.
Senator Gillibrand. Yeah.
Mr. Higgins. They would be covered in the same way as a
working-age retiree would be covered.
Senator Gillibrand. But, you said retirees aren't covered--
their families aren't covered.
Mr. Higgins. I'm sorry. The----
Senator Gillibrand. So, I'm asking about dependents of
retirees or medically wounded--wounded warriors. So, let's say
you're Active Duty, you have an autistic child, you're trying
to get the medical necessities for your child----
Mr. Higgins. I see.
Senator Gillibrand.--to develop. You get wounded in
Afghanistan. You are--must retire, for--due to that injury.
What does that dependent do? Are--is there any coverage for
them? Have you assessed cost? What happens?
Mr. Higgins. I believe I would like to correct that, then.
They would not be covered, because this would be an Active Duty
benefit. I--if I do understand you correctly now. So, a
wounded----
Mr. Maldon. Yes, let us take that, Senator Gillibrand----
Senator Gillibrand. Just----
Mr. Maldon.--for the record.
Senator Gillibrand. Just analyze that fact pattern for me.
Mr. Maldon. Okay.
Senator Gillibrand. Because it's real. It's the kind of
thing that happens.
Mr. Buyer. But, I think it's also--it's also worthy--you've
brought up a scenario that we didn't think about.
Senator Gillibrand. Yeah.
Mr. Buyer. I want to thank you for that. But, it's also
worthy for you to improve our work product. So, if you have the
consideration that, ``You know what? I think this fund, for
these special needs''--because this is really narrow population
that you've defined, here----
Senator Gillibrand. Yes.
Mr. Buyer.--because the VA's not going to cover that
dependent, and whether they access into this fund is probably a
worthwhile recommendation, and it's right in your jurisdiction
to do.
Senator Gillibrand. Okay.
Admiral Giambastiani. When I was on Active Duty, I thought
the Exceptional Family Member Program was working and that we
were sending people where they could get the medical care they
needed. When we went around to posts, camps, and stations and
talked to servicemen all across the country, we found out it is
not working, according to spouses, that many of them are sent
to places where they cannot get critical care.
Senator Gillibrand. Right.
Admiral Giambastiani. I honestly believe that this program
would increase the access to that care for the Active
component----
Senator Gillibrand. Now, are you----
Admiral Giambastiani.--soldier.
Senator Gillibrand. Did you do any analysis about whether a
stigma would be created for people who access this fund? Or was
that not an issue raised? Meaning, you may not want your
commander to know that your wife has a chronic condition that--
whatever. It may be personal. It may be something that--so, is
it known--is it known by your commander unit that you're
accessing this fund, or does it stay----
Admiral Giambastiani. Well----
Senator Gillibrand.--confidential under healthcare?
Admiral Giambastiani. I remember the day I could no longer
go and pick up my wife's medical records at the MTF, when HIPAA
went into play--in play. So, I believe that that would----
Senator Gillibrand. It would stay confidential.
Admiral Giambastiani.--that would be confidential under
HIPAA, which the military follows very, very strictly.
Senator Gillibrand. Okay. Because we--I worked a lot on
special----
I'm over time.
Senator Graham. No, take your time.
Senator Gillibrand. I worked a lot on getting funding for
special-needs treatment specifically under TRICARE. So, that
work gets vitiated to a significant degree if other options are
now available. I just don't want to lose the access that we
were trying to develop for special-needs kids if a
servicemember gets injured, which happens all the time. So, we
just want to make sure this population has services.
Admiral Giambastiani. I--if I could just add, we--as
General Chiarelli said, we spent a lot of time looking at
exceptional family members on the Active Duty side. We did not
spend as much time on the----
Senator Gillibrand. On retirees.
Admiral Giambastiani.--veteran side.
Senator Gillibrand. Okay.
Mr. Buyer. But, the medically retired, I think it's
awesome. I mean, you went right to something very narrow and
specific. If you try to define that population----
Senator Gillibrand. It's going to be----
Mr. Buyer.--it might be 12.
Senator Gillibrand. Yeah, it's going to be----
Mr. Buyer. I mean, it's going to be----
Senator Gillibrand.--specific.
Mr. Buyer.--really small.
Senator Gillibrand. Yeah.
Mr. Buyer. So, adding that to access this fund, I think, is
probably--is well worthy of your consideration.
Senator Gillibrand. Thank you.
Senator Graham. With that, we're going to just recess.
We're going to go vote. We have back-to-back votes, and so,
we'll stand in recess. When Senator Tillis gets back, tell him,
please, to just go ahead and chair the hearing, and we'll be
right back.
Thank you.
Senator Gillibrand. Thank you.
[Recess.]
Senator Tillis [presiding]. Thank you all. If we can come
back to order.
I think the chairman and the ranking member will be back
momentarily, but, since I'm probably the only other one that
was going to ask questions of this panel, we'll go ahead and
proceed.
I'd like to start with kind of normalizing the first
numbers, Chairman Maldon, that you and Senator Graham
discussed, and that was the $500 to $1,700 number. I'm just
trying to normalize that, because I think we need to make sure
it's communicated properly, because--are you saying that the
$500, in today's dollars with the new program design at year
15, is at $1,700?
Mr. Maldon. Yes, Senator Tillis, it's at the--today it's
$500--roughly $500. What we are saying is that, 15 years from
today, that cost would have--would be $1,769----
Senator Tillis. Could you go----
Mr. Maldon.--approximately.
Senator Tillis. Could you go on to discuss if--let's just
say we keep current state, and the number under the current
state is $500--what the projection would be 15 years from now
if you did nothing. Has there been math on that?
Mr. Maldon. We did some math on it. I honestly don't
remember exactly what those numbers might be at this point in
time. I'll ask my colleagues, here, if anybody might remember.
If not, I'll----
Senator Tillis. Okay. If it's----
Mr. Maldon.--take it for the----
Senator Tillis.--not readily available, if we could ask you
to----
Mr. Maldon. I'll take it for the record. Let me take it for
the record.
Senator Tillis. Because I think that that's--it's very
important for people to understand that this is not added
purely because of the change in program design, that some of
these are rising costs of insurance, healthcare, and a number
of other factors over a 15-year period.
Mr. Maldon. Yeah. We will do that. It is constant dollars
that we're talking about. But----
Senator Tillis. All right.
Mr. Maldon.--we'll definitely take that for the record, and
I can get back to you on this.
[The information referred to follows:]
The estimates on the change in retiree health care costs that have
been provided by the Commission have been in constant or real dollars,
i.e., they are in a base year so that simple comparisons of the costs
at different points in time can be made on a comparable basis. In
constant dollars, the TRICARE Prime premium for retirees declined from
the program's inception in 1995 until 2012. In fiscal year 2013, the
TRICARE Prime premium became indexed to retirement pay increases and
thus is now fixed in constant dollar terms.
The 2016 President's budget request eliminates the TRICARE Prime
program for non-Medicare-eligible retirees and introduces a new premium
at the Prime level for the remaining (modified) version of TRICARE
Standard/Extra that was previously provided for free.
Senator Tillis. Okay.
Mr. Maldon. Okay?
Senator Tillis. Something else that was in the--I think,
the opening paragraph of your opening statement, was the $12
billion that would, I think, be saved. The--typically, the leap
one would make, who may be a stakeholder in this, is that $12
billion comes at the expense of something less than they're
going to receive. I'm assuming, similar to the pension
strategy, it may come from efficiencies and other things. Can
you talk about the key sources of the--the sources of that $12
billion in savings?
Mr. Maldon. Yes, Mr. Chairman. I'm going to ask
Commissioner Higgins to start off talking about it, and then
we'll have others talk about it, as well.
Mr. Higgins. Senator, the $12 billion that you refer to has
three parts. One would be the savings from just moving to an
accrual system for the working-age retiree. That has budgetary
savings of $4 billion. So, just looking at the healthcare
components of all this, of what we propose, we would suggest
that the cost shares are going to produce roughly $2 billion in
savings. Better utilization, better management of the program
is going to develop about $5.2 billion of savings there. So, we
are increasing cost shares for the working-age retiree. As a
result, they are part of the savings, obviously.
Senator Tillis. So, some of that is as a result of the cost
share, but not all of it. You're saying somewhere on the order
of $5 billion of the $12 billion?
Mr. Higgins. Is the purely utilization management that the
private sector is going to bring to the program. For example,
we're going to put $4.5 billion of those total savings back
into the system, in terms of your choice, in terms of the
improved network, in terms of that healthcare management, that
quality management that's going to produce quality healthcare
for people. We believe that we're pushing back into that system
about $4.5 billion. So, the net savings, just looking at the
healthcare aspect alone, is about $2.7 billion.
Senator Tillis. Do you have any sense where some of the
increased cost comes with a benefit of increased value? Where--
to the extent there's going to be more--or is there something,
as you're talking to the stakeholders--I know that the choice
becomes a factor which seems to rate pretty highly among many
that would be a part of the plan. But, can you give me some
sense of how much of that--the additional costs or the cost
share is somehow compensated for by much higher value for the
money?
Mr. Higgins. Mr. Chairman, you want to----
Mr. Maldon. Yes. One of the things that takes place, Mr.
Chairman, is that there's an expense in----
Senator Tillis. He's back. It was a fleeting moment.
[Laughter.]
Mr. Maldon. Okay, I apologize. Okay.
Senator, is the--there's an expansion of the network that
takes place there. Then, in terms of just the program
management, in itself, just bringing about efficiencies and
streamlining the processes of the way the work is done, of some
of that. Also, just in increasing the value of the services
that they were to get with regard to the doctors, themselves--I
mean, the medical professionals, and--because now you're
talking about the people that would not be reimbursed at the
reimbursement rate or lower rate, so you have increased quality
that would hopefully come with that, as well.
General Chiarelli. I would argue that--also, that I don't
think that there's a single one of the groups that'll follow us
that would argue they don't want to see the best possible
medical care for servicemembers when deployed into harm's way.
Central to our recommendations is that, ensuring that our
doctors are trained in a way that, as I've said before, on the
first day of battle, they can provide the same kind of care
they have after 13 years of battle. That's a critical piece. As
these--as the Services get smaller, the number of dependents
gets smaller, we need to find ways that attract additional
people into the MTFs, but also the right kind of caseload into
the MTFs, so that we have that critical, critical combat
medical readiness.
Senator Tillis. Then, the last thing--sorry, Mr. Chairman,
if I may--just, again, going back to initial reactions by
stakeholder groups, either those who would be in the plan or
the providers. What sense do you have of their reaction? We're
going to hear, I think, shortly, but what sense do you have, in
terms of the challenge that we would have to convince those who
are--would be beneficiaries of other changes, that it's the
appropriate path?
Mr. Maldon. I'm going to ask Commissioner Buyer to respond
to your question.
Mr. Buyer. So, if I may, Mr. Chairman, right now in
TRICARE, we have very limited networks. Okay? The networks are
limited because of the reimbursement rates. So, in order for
me--you're a doctor, I'm one of the TRICARE contractors. I want
you in my network, but I want to make money, too. So, I get you
in my network, but I'm going to pay you below--below Medicare
rates.
Now, you look at your practice, and you say, ``Okay, of my
practice, I can only take so much Medicare, so much Medicaid,''
right? You make these decisions. You say, also, ``I may be a
veteran. I'm going to do this because of the flag, my
patriotism,'' but you can only do that for so long, right?
So, here's what I'd like you to see. You say, ``Well, how
does the family really feel about this?'' Well, access is
pretty important, right, to a health network. In TRICARE, our
networks are very limited. So, take for example--we'll go to
Fayetteville, Fort Bragg. So, for orthopaedic surgery--you blew
out your knee, right, or your son or daughter has, in an
athletic event, and you need to see an orthopaedic surgeon. In
the TRICARE network around Fort Bragg, you get access to only
15 orthopaedic surgeons. If you are in the BlueCross/BlueShield
plan, under TRICARE Choice--you chose the BlueCross/
BlueShield--you get access to 163 orthopaedic surgeons. How
come only 15 out of the 136 are in the network? Because of the
low reimbursement rates, right? So, those rates are going to
begin to limit the choice.
So, when you say, ``How does it impact the family?'' You
want the access to the very best of healthcare, and, in order
for someone to qualify as a provider under a BlueCross/
BlueShield plan, they don't select just anybody, they have to
meet their own qualifications to be a provider within their
plan. They want the best. They don't--and what does TRICARE do?
Does TRICARE have any specialty requirements in order to be in
their plan? No. It's just you'll accept below-Medicare rates.
This is incredibly important when you begin to see the
differences from family practice, OB-GYN--you can go down a lot
of different specialties and you'll be able to see how these
limited networks limit the access and choice and access to good
quality healthcare.
Senator Tillis. Thank you. That chart reminds me that I
need to enroll in vision care, now that I'm here in the Senate.
[Laughter.]
But, thank you, Mr. Chairman.
Mr. Buyer. The reason I have the GEHA plan, there, the
Government Employees Health Plan, is--that's about the median.
Senator Graham [presiding]. Right.
Mr. Buyer. We couldn't find an actual plan in the
marketplace to say what would be the median. So, Mr. Chairman,
you talked about the median----
Senator Graham. Right.
Mr. Buyer.--early on. That's about it.
Senator Graham. That's 87? What number is that?
Mr. Buyer. Yes, that would be 87 or in the GEHA plan, which
is about the median.
Senator Graham. Okay.
Mr. Buyer. But, if you wanted the BlueCross, oh, my gosh,
the numbers--oh, I'm sorry, it's 43 for orthopaedic surgeons.
Senator Graham. Gotcha.
Mr. Buyer. So, TRICARE would be 15----
Senator Gillibrand. Reimbursement rates or that's----
Mr. Buyer.--GEHA median plan is 43; with BlueCross/
BlueShield, 163.
Senator Graham. Gotcha.
Mr. Buyer. So, look at the avenue of choice and access and
quality of healthcare. Pretty extraordinary.
Senator Graham. Your----
General Chiarelli. I would also point out, besides being
it--the cost, and paying below Medicare rates, there's another
bureaucratic requirement, and that's to get certified by
TRICARE to be in the network. Many people--many doctors back
away from joining the network when they realize that there's
the additional bureaucratic requirement to get certified and
made part of the network, even though they're certified in
their State to provide that care.
Admiral Giambastiani. Finally, if I could say, when you
look at this chart, this is just a static chart that exists
today. As we go on in the history of TRICARE, these numbers
keep getting wider and wider and wider, which is why we think
TRICARE, long term, is in a death spiral.
Senator Graham. Well, that was very impressive for a House
member. So----[Laughter.]
Senator Cotton.
Mr. Buyer. You have a feigned memory, Mr. Chairman.
[Laughter.]
Senator Graham. Senator Cotton. Nope, you're next.
Senator Cotton. So, your comment about vision makes me
think of a--an element of the essay ``What Does ISIS Really
Want from the Atlantic,'' last week, where the reporter had
gotten--had talked about the roots of ISIS, and he went to
interview a jihadi in London, said that no one really
understood how great Sharia was, because all they saw was the
beheadings and the cutting off of hands. They didn't understand
all the social-justice elements of it: free public education,
free housing, free healthcare. The reporter asked the jihadi,
``But, doesn't Great Britain already have free healthcare?''
The jihadi said, ``No, a lot of stuff like vision isn't
covered.'' [Laughter.]
So, maybe that's the legitimate grievances that they have.
Mr. Chairman, I'll start with you. So, I mean, as I've gone
through some of the recommendations--and I've heard, last week,
from a lot of folks at home--one point that you commonly hear
is, ``Well, we're going to have to pay for more.'' I mean, it
is a--is it a fair characterization to say maybe you're paying
a little bit more, but you're also getting a lot more?
Furthermore, you would be getting less for what you're already
paying for if we proceed with the current sequestration
policies?
Mr. Maldon. I think that is absolutely correct, Senator
Cotton.
Senator Cotton. Okay. I mean, other--feedback from other
folks on the panel?
But, how--when you--we were talking to the beneficiaries
here, and they, in the end, just see that they have a higher
bottom line. Like, what are the key benefits that you think we
can tell them, like, ``No, this is what you're getting if you
pay a little bit more on a periodic basis''?
General Chiarelli. Well, I would argue the mere fact that
you take it out of the government contracting business and--DOD
contracting--and you don't wait 5--you have a 5-year contract
that's very, very difficult when a new medical procedure comes
out, of some kind, to go ahead and modify that contract. That
5-year contract turns into an 8-year contract after the protest
takes place. So, in the eighth year, all those things that were
brought to medicine in that 7-year period aren't available to
the TRICARE recipient. That's why we've literally got people
that we're putting together treatment plans for traumatic brain
injury and post-traumatic stress at the NICO at Walter Reed.
They go under the TRICARE system, and TRICARE, their insurance,
refuses to pay for 50 percent of the things that are on the
plan that we said that this particular servicemember needed, to
get better. That, to me, validates Admiral Giambastiani's
statement that this system is broken.
Senator Cotton. Other feedback?
Admiral?
Admiral Giambastiani. I would just tell you that you just
look at the way the numbers keep going. Unfortunately, what's
happened over the years is, because we haven't changed the
copays, because we haven't changed any of the fees, because
they've remained virtually static, you have to get money out of
it somewhere out of the system. So, we keep changing the size
of the sectors or the areas of responsibility. We try to
collapse contracts that--the DOD is working as hard as they can
to make it as efficient, but, ultimately, what happens to this
is, you reduce the amount of available care to beneficiaries,
you reduce the quality, because the groups that are available
to do this have shrunk considerably. So, therefore, the system
keeps eating itself from within, is what I would tell you.
That's why I think it's in a death spiral.
Mr. Buyer. I would just like to add this. In the 1990s,
after the first Base Realignment and Closure (BRAC), and it was
exposed that the military retiree really wasn't enjoying the
freedom and liberties that they had fought for, because they
felt that they had to live in close proximity to a military
base to access healthcare. Then the BRAC exposed them, that,
wait a minute, that the government was about to throw them onto
Medicare. Congress responded with TRICARE for Life. When we did
that, we essentially said to the military retiree, ``You're
free. You can live anywhere you want in the country that you
fought to defend.'' It really changed the interdynamic of the
military retiree, because now they can go live with their
children and know their grandchildren. Better yet, when they go
do that--and I'm a military retiree of which I'm a military
retiree--I look at this and say, ``I can actually access better
choice, a greater number of highly qualified doctors.'' There
is--it's not written about in the press.
This debacle that occurred in the VA, on waiting times--the
reason America got so upset about it was because of the
integrity question. It really was. We still--we--if you go in
and you look at the inside of the MTFs today, talk to those
soldiers and the families, talk to the wives. The waiting times
for primary care and specialty care--shameless.
So, accessing this under TRICARE Choice, not only for the
families, but also for the military retirees, that gray-area
retiree, we get them better access to care, increase their
choice, and increase their quality.
So, that's what they get for a little more money.
Senator Cotton. I mean--go ahead, Mr. Chairman.
Mr. Maldon. Senator, I'd just also add to this--and, I
think, in terms of just summarizing it, here, into three
different areas. For the Active Duty family members, they get
those--for their money, there's no additional costs, here, but
they get a lot more, in terms of choice, access, and so forth,
as my colleagues have already said. Then, for the Reserve
components, they get a lot more, because, one, the cost has
been reduced from 28 percent of their premium to 25 percent, so
they--that's a--there's a cost savings there to them. It's a
lower cost there. In addition to that, there are--there's no
break in coverage when the Reserve component member is
mobilizing, deploying, and back and forth, and so forth. They
don't have that break in coverage that they would have under
the current system. They're going to have consistent coverage
during that period of time, which would be a much better value
under the new--under our proposed----
Mr. Buyer. Could I----
Mr. Maldon.--recommendations.
Mr. Buyer. Could I add one more? The big winners, that
isn't really talked about in this, are those that live in the
rural areas. They're the ones who are the really big winners
under this type of a health system. Because when--if you're
subject to the TRICARE today, and you're in a limited network,
it's so limited, whereby sometimes you go against your
migratory pattern. We don't talk about that very often. But,
someone from a small town thinks that they need to go to a
bigger town for better healthcare. Of if I'm in a bigger town,
I need to go to the bigger city for better healthcare.
In the TRICARE network, sometimes when they sign up a
particular doctor, they may say, someone in a town of 10,000,
you have to go over to the town of 3,000 people to go get your
healthcare. It just drives them crazy. It really does.
This type of plan, we can access a greater--I'm sorry, I
didn't mean to point in front of your face--but you great--you
access a greater number of healthcare providers in rural areas,
Senator Cotton, and that is a huge benefit in this plan.
Senator Cotton. I'll yield back.
Senator Graham. Excellent question.
Anything else, Senator Gillibrand?
Senator Gillibrand. No.
Senator Graham. Thank you all. We will----
Absolutely.
Senator Cotton. Since there's no more questions----
Is it your best estimate that beneficiaries in the system,
even if they pay--in certain cases, pay a little bit more than
they do now--still, on average, will be paying less than
similarly situated beneficiaries who did not serve in our
military?
Mr. Maldon. Yes. In fact, they'd be paying less than what
someone that was a part of a healthcare plan similar to FEHBP.
They'd be paying less than those civilian employees that would
be enrolled in that plan.
Senator Cotton. That's at--everyone's in agreement on that
point? So----
Admiral Giambastiani. Yes.
Senator Cotton. Admiral? Yes.
So, one might say that to--in response to the point that we
promised our veterans that they would receive a certain level
of healthcare, and that would be a better or lower priced care
than civilians who didn't serve receive, yes, this proposal is
going to keep that promise.
Mr. Buyer. Absolutely.
Senator Cotton. Yes.
Mr. Buyer. Because today someone who worked at a depot as a
Federal civilian employee is getting access to better
healthcare than the servicemember in uniform or his--in
particular--not necessarily him, it's his family, in the
TRICARE network. Because the TRICARE network is so limited so
that Federal civilian employee is getting access to better
healthcare for his children than the servicemember for theirs.
That's not right.
Senator Cotton. When you take into account the entire
package of healthcare benefit, price, access, quality, so
forth.
Mr. Buyer. Yes.
Senator Cotton. That the promise we made to our
servicemembers is that they would receive that package,
relative to civilians, not necessarily that that package would
never change in any way for the rest of time.
Mr. Buyer. For the rest of time? Well, I don't----
Senator Cotton. For the----
Mr. Buyer.--I don't know what that means. But, for--for the
rest of time.
Senator Cotton. For----
Mr. Buyer. I do know, for the military retiree, for
example, they're very artful, okay, in their words that they
will select, because they're, ``Oh, I've been promised
healthcare for life.'' I mean, you----
Senator Cotton. That's because soldiers are very artful----
Mr. Buyer. Well, you'll----
Senator Cotton.--and always have been.
Mr. Buyer.--you'll hear artful things. But, they have----
Mr. Maldon. No, but----
Mr. Buyer.--they have had a tremendous benefit. They really
have.
General Chiarelli. But----
Mr. Buyer. But it's----
General Chiarelli. But, it----
Mr. Buyer. Go ahead.
General Chiarelli. No, I'm just saying, if you look at the
details of our legislation, one of the things we did was, we
saw that TRICARE used to be good, not so good today, because of
actions taken by DOD. Okay? Because they need to save money. We
turned to Commissioner Zakheim and said, ``Bulletproof this.
Set this legislation in a way that, if we can get this through
and get this benefit in the hands of these folks, that nobody
will be able to do that.'' He did. I won't give you the
specifics of that, but he did in our legislation.
Mr. Buyer. So, my conclusion is, for that military retiree,
when they've been at 5 percent--they were at 27 percent, right,
and they're at 5 percent today, and we walk them up to 20 over
15 years. They are getting so much more value in a health--in a
quality health system that their complaint does--is not
legitimate.
Senator Cotton. Yeah, I mean, I think it's important that
we all be prepared--Republican, Democrat alike, and the
commissioners--to answer these questions, because we will get
those questions, and I think we're all in agreement that we all
want the same thing for the retirees. We just have to be able
to explain to them exactly how the new system will work and how
much better the package could be for them, despite the discrete
changes they see in their lives.
Mr. Maldon. Senator, I think that it is fair to say,
though, that the retirees--in all of the travel that we did
across the country in townhall meetings, into sessions, and
public hearings, and so forth--retirees basically--they told us
that they didn't mind seeing an increase, frankly, in that cost
sharing, as long as they got value for it. They wanted to make
sure there was improved value for it. I think that's what we
have provided in those recommendations that we've----
Senator Cotton. Yes.
Mr. Maldon.--made.
Senator Cotton. Thank you.
Senator Graham. Thank you all very much.
So, let's hear some--from retirees. Y'all are next.
Thank you very much.
Next panel, please. [Pause.]
Thank you all very much. Could you introduce yourselves,
starting from the--my left to the right?
Ms. Raezer. Hi, Mr. Chairman. I'm Joyce Raezer, with the
National Military Family Association.
Admiral Ryan. Norbert Ryan, with the Military Officers
Association of America.
Mr. Snee. Retired Master Chief Tom Snee, Fleet Reserve
Association, sir.
General Hargett. Gus Hargett, National Guard Association
(NGAUS).
Senator Graham. Thank you all.
I will defer my opening statement and allow Senator
Gillibrand to say anything she would like.
Senator Gillibrand. Thank you for your service. Thank you
for being here. We look forward to your testimony.
Senator Graham. Speaking of military retirees--Senator
McCain, would you like to say anything?
Chairman McCain. I'm retired. [Laughter.]
Senator Graham. Okay. With that insight, we'll let the
panel move forward.
So, just----
STATEMENT OF JOYCE W. RAEZER, EXECUTIVE DIRECTOR, NATIONAL
MILITARY FAMILY ASSOCIATION
Ms. Raezer. Okay, thank you very much, Mr. Chairman and
Ranking Member Gillibrand, Senator McCain. We appreciate the
opportunity to speak on behalf of National Military Family
Association and the families we serve about the healthcare
proposals of the Military Compensation and Retirement
Modernization Commission.
We thank the commissioners for their thoughtful approach,
outreach, and dedication to obtaining input from troops and
their families.
Military families deserve nothing less than the best
possible health coverage and care. They also expect the
readiness of their servicemember to perform the mission as well
as the readiness of their medical providers to meet the
challenges of the battlefield in its aftermath to be a
priority.
We agree with--our association agrees with the
commissioners who have testified that the current TRICARE
benefit and system to deliver that benefit is unsustainable.
Budget pressures continue to diminish the benefit, delay
access, and threaten military medical readiness in what has
been DOD's most frequently proposed reform: raise the fees
charged to beneficiaries. When we asked for their input last
year for the Defense Department's military health system
review, families cited bureaucratic hassles to obtain
referrals, lack of continuity of care, inability to obtain
timely care, and a lack of coverage for certain services.
We do know that many families remain satisfied with
TRICARE, the care they receive and the low cost of that care.
But, what could happen to that care when financial pressures
take a greater toll on the military hospitals or the TRICARE
benefit over time? Our association is open to other healthcare
options for military families because DOD has been well aware
of many TRICARE problems--in some cases, for years--but has
failed to take corrective action. We support, in principle, the
concept of moving military families to high quality commercial
health plans as a way to improve access to providers and offer
more coverage options that match families' needs, but we need
more information.
Military families are concerned, as you are, Mr. Chairman,
about what would happen to out-of-pocket costs. Even when
assured that the proposed basic allowance for healthcare would
be set to ensure most Active Duty families have no additional
cost, families are unconvinced. They cite recent changes to the
basic allowance of health--housing formula as evidence the
healthcare allowance could become a target for cost-cutting.
They worry how a formula based on averages will support larger-
than-average families or those with a family member with a
chronic or a catastrophic health condition, as you mentioned,
Senator Gillibrand. They also--the families of the wounded also
cited the same kind of questions that you are asking, so
appreciate you asking those. Many families tell us the cost
proposed for retirees and their families are too high, despite
the gradual ramp-up.
In our written statement, which we've submitted for the
record, we've outlined many logistical challenges involved in
implementing TRICARE Choice and the need for families to have
the tools they need to make informed decisions. We do believe
the Commission's proposal does contain important protections
for families, protections they don't have now, but which must
be in--written into any statute implementing the changes.
Implementation plan must also address unique circumstances
of military life. For example, FEHBP plans only cover Applied
Behavioral Analysis (ABA) therapy for autistic children if a
State requires that coverage. A unique circumstance of military
families would be, we would need to see that coverage in any
plan offered to military families. Change also demands an
analysis of the potential impact on military hospitals to avoid
unintended consequences for beneficiaries and military medical
readiness.
I would like to touch briefly on one additional
recommendation from the Commission, because of its relation to
healthcare, which is recommendation 7, to align the services
offered under the Extended Care Health Option, ECHO, to those
of State Medicaid waiver programs. The ECHO benefit is
currently underutilized because of bureaucratic requirements
involved in obtaining some services, such as respite care, and
a mismatch between the benefit and what families experience
that they need. This match--mismatch forces families to apply
for State Medicaid waiver programs and get stuck on waiting
lists whenever they move to a new State. Adopting the
Commission's recommendation would provide for better continuity
and coverage of services.
In an era of budget constraints, when military families see
any proposed change in their benefits as just another attempt
to cut costs, it's important to rebuild their trust and show
them their service is valued. We hope the Commission's
proposals prompt a thorough discussion of how to deliver the
best health benefit possible for military families.
Questions you ask about--and others ask about the
Commission's proposals should also be asked about the current
system. How does the structure promote medical readiness? How
does it ensure timely access and quality care at the best
possible price for both beneficiaries and the government? Now
is the time to have that conversation. So, thank you for
beginning it.
[The prepared statement of Ms. Raezer follows:]
Prepared Statement by the National Military Family Association
executive summary
The National Military Family Association (NMFA) appreciates the
creation by Congress of the Military Compensation and Retirement
Modernization Commission (MCRMC or the Commission) and we thank the
commissioners and their staff for their work over the past 18 months.
Recommendation 5: Ensure servicemembers receive the best possible
combat casualty care by creating a joint readiness command, new
standards for essential medical capabilities, and innovative tools to
attract readiness-related medical cases to military hospitals.
Recommendation 6: Increase access, choice and value of health care
for active duty family members, Reserve component members, and
retirees.
readiness first
The MCRMC recognizes the Military Health System's (MHS) dual
mission by making two separate recommendations aimed at modernizing the
MHS. The proposed Joint Readiness Command (JRC) is charged with
ensuring servicemembers receive the best possible combat casualty care
while the TRICARE Choice concept proposes a new way to deliver the
health benefit. We agree with the MCRMC assessment that the two
proposals are interdependent. While the JRC and TRICARE Choice
recommendations must be in sync, the MHS must start with maintaining
and improving readiness as the primary objective of any modernization
proposal. Military families expect the readiness of their
servicemembers to perform the mission, as well as the readiness of
their medical providers to meet the medical challenges of the
battlefield and its aftermath, to be a priority.
national military family association position on tricare choice
The Commission's health care proposal merits further study and
serious consideration. Offering military families a selection of high
quality commercial health plans could provide them with better access
to high quality care, a more comprehensive set of benefits, and the
ability to tailor coverage options based on individual family needs.
Our Association believes military families could benefit from increased
choice in health care options.
While our Association supports, in principle, the concept of moving
military families to high quality commercial health plans, more
information and analysis are needed before we can fully endorse the
Commission's health care proposal. The MCRMC report raises several
questions and areas of concern. Some segments of the military family
community will incur significantly higher out-of-pocket costs versus
the current system. Implementation details are sparse for important
aspects of the plan. Most importantly, we believe a change of this
magnitude demands a more thorough analysis of the potential impact on
MTFs to avoid unintended consequences for beneficiaries and military
medical readiness.
We agree with Commissioners who have testified before Congress that
TRICARE--both the benefit and the system to deliver the benefit--is
unsustainable as currently structured. Specifically, TRICARE's
beneficiary satisfaction and fiscal sustainability have both declined.
Given fiscal constraints, future improvements to address beneficiary
dissatisfaction are unlikely. In fact, further dilution of the TRICARE
benefit seems inevitable. Therefore, we are receptive to alternative
ways of delivering the military health care benefit to families.
Our Association believes growing TRICARE beneficiary
dissatisfaction and increased cost pressures warrant a reexamination of
how DOD delivers the health benefit to military families.
mcrmc recommendations we support
Recommendation 7: Improve Support for Servicemembers
Dependents with Special Needs
Recommendation 10: Improve Access to Child Care on
Military Installations
Recommendation 13: Ensure Servicemembers Receive
Financial Assistance to Cover Nutritional Needs by Providing
Them Cost-Effective Supplemental Benefits
Recommendation 14: Expand Space-Available travel to
more families of Servicemembers
Recommendation 15: Measure how the Challenges of
Military Life Affect Children's School Work by Implementing a
National Military Dependent Student Identifier
We support the proposal to improve support for dependents with
special needs, reducing their reliance on State programs that very few
are able to access. We thank the Commission for recognizing the
importance of child care for the readiness of servicemembers and their
families. Making access to Federal nutrition programs easier will help
servicemembers and their families meet their nutritional needs. We have
supported the need for a Military Student Identifier for several years
as a means of tracking graduation rates and other milestones for
military children as they move from one school district to another.
recommendations we cannot support
Recommendation 2: Provide more options for
servicemembers to protect their pay for survivors
Recommendation 11: Safeguard education benefits for
servicemembers by reducing redundancy and ensuring the fiscal
sustainability of education programs.
We cannot support the Commission's recommendation on the Survivor
Benefit Plan (SBP), as it does nothing to eliminate the SBP-DIC offset
for today's survivors and imposes additional costs on some of the most
vulnerable military families. We believe Congress should preserve the
full Post 9-11 GI Bill for military families whose servicemembers have
already transferred the benefit.
recommendations requiring further study
Recommendation 1: Help more servicemembers save for
retirement earlier in their careers, leverage the retention
power of traditional Uniformed Service retirement, and give the
Services greater flexibility to retain quality people in
demanding career fields.
Recommendation 3: Promote servicemembers' financial
literacy by implementing a more robust financial and health
benefit training program.
Recommendation 9: Protect both access to and savings
at Department of Defense commissaries and exchanges by
consolidating these activities into a single defense resale
organization.
The proposals for the new retirement system and the health care
proposal call for servicemembers and their families to make responsible
choices that will require a robust financial training program. We
wonder how DOD and the Services will accomplish this financial training
for both the servicemember and his/her spouse. We also have concerns
about the proposal to merge commissary and exchange operations and
worry about the effect this change would have on the military resale
system. We will seek more information on how these proposals could be
implemented and encourage Congress to do the same.
Chairman Graham, Ranking Member Gillibrand, and distinguished
members of the subcommittee, the National Military Family Association
(NMFA) thanks you for the opportunity to present testimony concerning
recommendations of the Military Compensation and Retirement
Modernization Commission's (MCRMC or the Commission) report. Our
primary consideration as we read the report was the impact on the
quality of life of military families--the Nation's families. We are
concerned about the long-term viability and availability of the
benefits, programs, and resources that help servicemembers and their
families maintain readiness. We appreciate the Personnel Subcommittee's
recognition of the service and sacrifice of these families. Your
response through legislation to the ever-changing need for support has
resulted in programs and policies that have helped sustain our families
through more than a decade of war.
Our Association appreciates the creation of the Commission by
Congress and we thank the commissioners and their staff for their work
over the past 18 months. Their task, to conduct a holistic evaluation
of the entirety of the military compensation system, has been a
daunting one. Indeed, in our statement before the Personnel
Subcommittee of the Senate Armed Services Committee last year, we
requested that Congress delay making any substantial legislative
changes to personnel policies until the Commission had finished their
study. Now it is our turn to comment on the recommendations the
Commission has made in their report.
We thank the Commissioners and their staff for seeking insights
from our Association and others during all stages of the Commission's
process. We surveyed military families for their input and concerns. We
prepared a statement and were invited to testify as part of a panel
before the Commission in November 2013 to share what we had heard from
military families. We encouraged military families to attend the town
hall sessions with the commissioners in their localities. We met with
commission staff members on numerous occasions to answer questions and
to share information. Since the release of the Commission report, we
continued to elicit the thoughts of military families on the
recommendations.
The main focus of our statement today will be on the Commission's
health care recommendations. Additionally, we appreciate the
opportunity to share our thoughts on other pertinent recommendations
that we feel impact military families. We hope our analysis will be
useful to you as you weigh the merits of the recommendations and think
about implementation.
mcrmc health care recommendations
Recommendation 5: Ensure servicemembers receive the best possible
combat casualty care by creating a joint readiness command, new
standards for essential medical capabilities, and innovative tools to
attract readiness-related medical cases to military hospitals.
Recommendation 6: Increase access, choice and value of health care
for active duty family members, Reserve Component members, and
retirees.
background: the dual missions of the military health system
The Military Health System (MHS) is unique in that it has dual
readiness and benefit provision missions. The MHS readiness mission
must achieve both a medically ready fighting force that is healthy and
capable of deploying as needed and a ready medical provider force
capable of delivering health and combat-casualty care for
servicemembers in operational environments. The MHS benefit provision
mission is responsible for providing the earned health care benefit to
family members, retirees, and survivors. The two missions intersect
when military medical personnel provide care to family members and
retirees in the Military Treatment Facilities (MTFs) honing their
medical skills in the process.
The MCRMC recognizes the MHS dual mission by making two separate
recommendations aimed at modernizing the MHS. The proposed Joint
Readiness Command (JRC) is charged with ensuring servicemembers receive
the best possible combat casualty care while the TRICARE Choice concept
proposes a new way to deliver the health benefit. In both
recommendations, the MCRMC acknowledges that the two proposals are
interdependent, but cites few--if any--concerns on how one might
negatively impact the other.
With our Association's mission and expertise in advocating for
military families, we have clear perspectives on how the MCRMC's
proposals might impact beneficiaries. However, we also have concerns
about how these recommendations could affect the MTFs' future viability
and the ability of the MHS to achieve its military medical readiness
goals. We realize that while the JRC and TRICARE Choice recommendations
must be in sync, the MHS must start with improving readiness as the
primary objective of any modernization proposal.
national military family association position on tricare choice
The Commission's health care benefit proposal merits further study
and serious consideration. Our Association believes military families
could benefit from increased choice in health care options. Offering
military families a selection of high quality commercial health plans
could provide them with better access to high quality care, a more
comprehensive set of benefits, and the ability to tailor coverage
options based on individual family needs.
While our Association supports, in principle, the concept of moving
military families to high quality commercial health plans, more
information and analysis are needed before we can fully endorse the
Commission's health care proposal. The MCRMC report raises several
questions and areas of concern. Some segments of the military family
community will incur significantly higher out-of-pocket costs versus
the current system. Implementation details are sparse for important
aspects of the plan. Most importantly, we believe a change of this
magnitude demands a more thorough analysis of the potential impact on
MTFs to avoid unintended consequences for beneficiaries and military
medical readiness.
why is our association open to changing or dismantling tricare?
We agree with Commissioners who have testified before Congress that
the TRICARE status quo is unsustainable. TRICARE--both the benefit and
the system in place to deliver that benefit--faces pressure on multiple
fronts and beneficiaries will continue to feel that pressure as they
access care and in the cost of that care. Specifically, TRICARE's
beneficiary satisfaction and fiscal sustainability have both declined.
Congress has directed DOD to find efficiencies in the MHS. While it has
adopted some better business practices, DOD's most-frequently-proposed
``efficiency'' seems to be raising beneficiary cost shares. Given
fiscal constraints, future improvements to address beneficiary
dissatisfaction are unlikely. In fact, further dilution of the current
TRICARE benefit seems inevitable. Therefore, we are receptive to
alternate ways of delivering the military health care benefit to
families.
beneficiary dissatisfaction
The Commission's findings regarding TRICARE beneficiary
dissatisfaction are on point. Many military families encounter
difficulties in using the TRICARE benefit. Among the most common
complaints are:
Access Challenges:
- TRICARE's cumbersome referral and authorization
process is not only a hassle, but often leads to
treatment delays. These are particularly problematic
for a highly mobile population that must endure the
referral and authorization process after each PCS
simply to continue already established specialty care.
Military family members with chronic conditions cite
examples that the cumulative effect of repeated
treatment interruptions has had a negative impact on
their long-term health outcomes.
- Limited provider networks pose challenges to families
seeking care. Network provider shortages are more
pronounced in certain areas of the country and with
certain specialties, particularly behavioral health
care.
- Inadequate access standards and insufficient measures
within many MTFs mask beneficiaries' (including active
duty servicemembers') reported difficulties in
obtaining appointments. This disconnect was highlighted
in the Military Health System Review ordered by
Secretary of Defense Chuck Hagel in 2014.
Coverage Issues:
- TRICARE is slow to cover emerging technologies and
treatment protocols. Families frequently complain that
TRICARE does not cover services commonly reimbursed by
commercial plans such as molecular diagnostic tests and
intensive outpatient programs for mental health issues.
- TRICARE's pediatric coverage is also problematic.
TRICARE is authorized to approve purchased care only
when it is ``medically or psychologically necessary and
appropriate care based on reliable evidence.'' The
Defense Health Agency's (DHA) hierarchy of reliable
evidence includes only ``published research based on
well-controlled clinical studies, formal technology
assessments, and/or published national medical
organization policies/positions/reports.'' There is no
doubt that evidence of effectiveness is a cornerstone
of medical necessity, yet such tightly prescribed data
for children is not always readily available. Pediatric
providers are adamant advocates of robust research for
children's health needs, but the reality is strict
adherence to this adult-based standard of reliable
evidence results in military children being denied care
and treatment that is widely accepted and practiced
elsewhere in the health care system.
Lack of Choice:
- TRICARE's uniform benefit means that military
families cannot choose from various coverage options to
best meet their needs. This is frustrating for families
who could benefit from nontraditional care such as
chiropractic.
- Current Reserve component options pose problems for
families during mobilization/demobilization. Switching
to TRICARE when the servicemember is activated can
result in disruptions in care, while maintaining the
servicemember's employer-sponsored health insurance can
lead to significant out-of-pocket costs. We have long
advocated giving National Guard and Reserve members
more flexibility to maintain their employer-sponsored
coverage for their families during activation.
Customer Service:
- TRICARE is slow to adopt customer service innovations
from the private sector such as the Nurse Advice Line.
We advocated for a nurse advice line for several years
and many commercial health plans offered nurse advice
lines long before DHA rolled out their version in 2014.
- TRICARE's contracting process leads to customer
service problems during transitions between regional
contractors. In April 2013, military families
experienced issues with referral authorization and
customer service during the West Region transition to a
new managed care support contractor. These issues were
compounded by what the Government Accountability Office
determined was a lack of oversight by DOD.\1\ It took
months before beneficiary support was running smoothly
under the new contractor.
---------------------------------------------------------------------------
\1\ More-Specific Guidance Needed for TRICARE's Managed Care
Support Contractor Transitions GAO-14-505: Published: Jun 18, 2014.
Publicly Released: June 18, 2014.
---------------------------------------------------------------------------
- TRICARE beneficiary communications are inadequate
particularly when dealing with coverage changes. There
are numerous instances of TRICARE implementing coverage
changes without notifying beneficiaries and/or
providers, resulting in beneficiary confusion and, in
some instances, significant out-of-pocket expenses. For
instance in January 2013, TRICARE ceased reimbursement
for lab-developed tests including prenatal and
preconception cystic fibrosis screenings. They failed
to notify beneficiaries and providers that they were no
longer covering this prenatal screening test that has
been the standard of care for over 10 years. As a
result, these tests were not reimbursed and some
beneficiaries faced $800 in out-of-pocket charges.
One main reason we support the MCRMC's concept of shifting military
families to commercial health plans is that DOD has been well aware of
these TRICARE problems, in some instances for years, but has failed to
take corrective action.
TRICARE's pediatric coverage is a prime example of DOD's failure to
address known issues. Based on urging from pediatric health care
stakeholders, the National Defense Authorization Act (NDAA) for Fiscal
Year 2013 mandated a DOD review of military kids' health care and
related support. That report, Study on Health Care and Related Support
for Children of Members of the Armed Forces, identified significant
gaps and areas for clarification related to TRICARE's pediatric
reimbursement policies. The TRICARE for Kids Stakeholder Coalition, a
group of pediatric provider organizations, military and veterans'
service organizations (including our Association), disability groups,
and military families, has urged DOD to share their plans for
implementing solutions and help us identify areas where legislative
fixes are necessary. Since the study's release in July 2014, we have
met with DHA once to share our reactions to the report, but have not
heard any details on next steps. DHA's seeming inability to move
forward in a timely manner and engage in transparent communication
lowers stakeholder and beneficiary confidence that improvements are
possible.
Any discussion of beneficiary dissatisfaction must differentiate
between TRICARE as a whole and the direct care system. While we believe
most MCRMC findings on TRICARE beneficiary satisfaction are accurate,
the report contains some examples (e.g., never seeing the same primary
care provider or the inability to choose your providers) that military
families tell us are issues most often in the direct care system, not
necessarily TRICARE as a whole. It is important to note that the
MCRMC's TRICARE Choice proposal does not address beneficiary complaints
regarding the direct care system other than by allowing dissatisfied
beneficiaries to seek care somewhere else in the hope competition will
incentivize the MTFs to improve.
Additionally, it is important to acknowledge there is a segment of
the beneficiary population that is satisfied with the current TRICARE
system. Some have been fortunate enough never to experience the
problems outlined above. Others accept these issues as part and parcel
of getting ``free'' health care. As advocates for military families we
focus on solving beneficiary problems and improving the Military Health
System but, in the course of our work, we also hear from families who
are content with the status quo and won't relate to the dissatisfaction
areas outlined in the MCRMC's report. Our concern for these families
centers on what could happen to their care if financial pressures take
a greater toll on the MTFs or the TRICARE benefit over time. If the
status quo is unsustainable, what will happen to their satisfaction
with the system and the quality of their care?
fiscal sustainability
Year after year, DOD contends that the TRICARE program is fiscally
unsustainable as currently structured. Officials highlight the limits
Congress has placed on beneficiary cost shares while expanding benefits
(e.g., TRICARE for Life). They cite statistics showing the health care
budget is growing as a percentage of overall DOD spending. They contend
that growing health care costs will limit DOD's ability to fund
readiness and modernization. DOD's statistics can be debated, but there
is no doubt about the relentless pressure to erode the TRICARE benefit
by increasing fees and reducing available resources to the system.
The Defense Health Agency (DHA) points to purchased care as the
largest driver of military health care spending. As currently
configured, TRICARE has limited options for reducing purchased care
spending in ways that won't negatively impact beneficiaries. TRICARE
contracts are configured such that providers and beneficiaries have
minimal incentives to manage utilization. In fact, certain TRICARE and
MTF policies drive beneficiaries to more expensive venues for care. For
instance, when acute care appointments are unavailable at the MTF
(either because the MTF is closed or completely booked), TRICARE
requires a referral and authorization to seek Urgent Care from a
network provider. Some MTFs go a step further and simply refuse to give
any referrals to network Urgent Care. Beneficiaries who find themselves
in this situation often have no choice but to seek more expensive care
at the Emergency Room.
Despite DOD initiatives to become more efficient, cost cutting
pressures will continue. Our Association fears attempts to reduce
purchased care spending will result in erosion of network provider
access and questionable coverage policies. Provider reimbursement rates
will continue to decline, resulting in fewer providers participating in
the TRICARE network. Alternatively, providers might further limit the
number of TRICARE patients they will see due to low reimbursement
rates. The result will be diminished access to care for military
families. While maintaining the current TRICARE program gives the
appearance of delivering a promised benefit, we fear that ongoing cost
cutting measures will reduce TRICARE's value in ways that might not be
readily apparent to beneficiaries until it's too late and they have no
other options.
Our Association believes that growing TRICARE beneficiary
dissatisfaction and increased cost cutting pressures warrant a
reexamination of how DOD delivers the health benefit to military
families.
evaluating tricare choice: advantages for military families
Our Association believes the Commission's health care proposal has
the potential to provide military families with a more robust and
valuable health care benefit than they have today. Offering families a
selection of high quality commercial health plans could provide them
with better access to high quality care, a more comprehensive set of
benefits, and the ability to tailor coverage options based on
individual family needs. We also appreciate the Commission's efforts to
maintain minimal out-of-pocket costs for active duty families. We also
thank the Commission for its recommendation to keep the TRICARE for
Life benefit for our Medicare-eligible beneficiaries as it is today.
TRICARE for Life is working the way Congress intended.
Our Association supports the concept of transitioning active duty
military families, as well as working-age retirees and their families
and survivors, to a high quality DOD health benefit program since it
would offer the following advantages:
Enhanced Access to Care:
- TRICARE Choice promises to offer beneficiaries more
robust provider networks with greater access to primary
care and specialists. Since commercial health plans
reimburse providers at market rates versus the
discounted Medicare rates TRICARE offers, they are able
to attract more providers to their networks.
- TRICARE Choice should streamline access to specialty
care. Many commercial plans allow beneficiaries to
direct their own health care. Even families who elect
an HMO type plan should find less cumbersome referral
and authorization processes than they currently face
with TRICARE.
- A selection of national commercial health plans
should streamline the transition of care during most
PCS moves. Under TRICARE Choice, families will not have
to modify their enrollment when moving from one area of
the United States to another, assuming they have
selected a TRICARE Choice plan with national coverage.
- Barriers to Urgent Care will be eliminated with
TRICARE Choice. Families will be able to elect plans
that do not require a referral and authorization for
Urgent Care.
- Beneficiaries retain access to MTFs for medical care
with TRICARE Choice. Many military families are
familiar and comfortable with MTFs. Others value MTF
providers' cultural competency and sensitivity to
military family challenges. It is important that
TRICARE Choice offers beneficiaries continued access to
MTF care.
Better Coverage Policies: Commercial health plans
should reduce problems with TRICARE coverage, such as
questionable pediatric reimbursement policies and lack of
coverage for emerging technologies and treatment protocols.
Coverage decisions would no longer be subject to rigid TRICARE
regulations regarding medical necessity, the hierarchy of
reliable evidence, and, in some cases, the additional step of
requiring Congressional approval for a new benefit. While
beneficiaries certainly want safe and effective treatment,
commercial plans would offer more comprehensive coverage for
services and procedures widely accepted by the medical
community that don't meet TRICARE's rigid standards. Whether or
not a procedure is medically necessary would no longer be a DOD
decision.
Greater Choice:
- TRICARE Choice would allow military families to
tailor coverage to best meet their needs versus the
current TRICARE benefit that provides uniform coverage
and meets some families' needs better than others.
- TRICARE Choice plans would offer coverage options
that are currently unavailable such as vision,
chiropractic, and acupuncture.
- More robust provider networks should give
beneficiaries greater choice in selecting their
providers.
- We appreciate that the MCRMC recognized the patient
care management tools used by U.S. Family Health Plan
(USFHP). USFHP knows our community and has high
satisfaction among beneficiaries. We agree with the
MCRMC suggestion that some USFHP plans could continue
as TRICARE Choice options for military families since
we believe most USFHP families would like to retain
their coverage.
- National Guard and Reserve members will have more
attractive options under TRICARE Choice.
We have long advocated for more
flexibility in allowing Guard and Reserve
members to retain their employer sponsored
health plan for their families while activated.
The Basic Allowance for Health Care (BAHC)
gives them the option of applying BAHC to their
employer plan premiums. This will enable
Reserve component families to maintain
continuity of medical care during servicemember
activation.
For families that prefer using TRICARE
during activation, a menu of commercial plans
will better serve Guard and Reserve members in
areas not near a military installation where
current TRICARE networks may be particularly
weak.
Minimal Active Duty family out-of-pocket costs (in
principle). Although we are not convinced the current MCRMC
proposal completely insulates active duty families from
excessive medical expenses, we appreciate that the Commission
acknowledges the principle of minimal out-of-pocket costs for
active duty families and proposes the creation of the Basic
Allowance for Health Care to give families a way to cover their
health care costs.
Underpinning our assessment of TRICARE Choice advantages is the
assumption that the menu of commercial plans would be comparable to or
better than those offered via the Federal Employee Health Benefit
Program (FEHBP.) We believe this is a valid assumption since the MCRMC
uses FEHBP as a point of reference in their report and suggests that
the Office of Personnel Management (OPM) manage the DOD program due to
their proven track record with FEHBP.
Our Association believes the Commission's TRICARE Choice health
care proposal has the potential to provide military families with a
more robust and valuable health care benefit than they have today.
However, while we are open to the idea of transitioning military
families to commercial health plans, the MCRMC report raises questions
and concerns that must be addressed before we can fully support the
Commission's health care proposal.
evaluating tricare choice: areas of concern and clarification
First, we believe a change of this magnitude demands a more
thorough analysis of the potential impact on MTF caseload to avoid
unintended consequences for beneficiaries and military medical
readiness. Second, some segments of the military family community will
incur significantly higher out-of-pocket costs versus the current
system. Third, implementation details are sparse for important aspects
of the plan.
1. TRICARE Choice's Impact on MTFs/Military Medical Readiness is
Unclear
Even though the MTFs will remain an integral component of military
family health care delivery under the MCRMC's proposal, the report
contains very few details on the potential impact TRICARE Choice might
have on the direct care system. We have the following concerns:
The MCRMC report contains no analysis of TRICARE
Choice's impact on MTF caseload. TRICARE Choice makes two
radical changes to beneficiary health care. It introduces a co-
pay for MTF treatment and it provides unfettered access to
civilian providers. Yet, there is no analysis of the potential
impact these changes might have on MTF beneficiary caseload.
- From a beneficiary standpoint, will DOD still insist
on the option of employing ``sticks'' to drive
beneficiaries back into the MTFs if the lower co-pay
``carrot'' is insufficient motivation? DOD has
frequently employed the ``stick'' approach to pull the
patients it needs into the direct care system, most
recently in the ``MTF recapture'' efforts that limited
TRICARE Prime beneficiaries' ability to enroll with a
civilian network Primary Care Manager even if they had
already established a relationship with that doctor.
It's been our experience that many military medical
providers believe they must maintain the ability to
force military families into the MTFs in order to
maintain needed skills and patient loads.
- From a readiness standpoint, what happens if a
significant percent of family members and retirees
elect to leave the MTF and receive care in the civilian
market and the MTFs no longer have means to force them
in when they need the bodies for training and
maintaining provider proficiencies? Will the MTFs
remain viable? The MCRMC recommendation seems to assume
MTFs will respond to patients' new opportunities for
choice by improving quality and other enhancements to
draw beneficiaries in. What happens if their efforts
aren't enough?
The Joint Readiness Command (JRC) is charged with
attracting a different mix of medical cases into MTFs to better
support combat-care training and medical readiness. We are
pleased the Commission emphasized that care for active duty
servicemembers is a key part of readiness and so proposed no
changes in how they would get their care. We hope the readiness
focus they propose will improve the care and readiness of
servicemembers for their missions. We understand and appreciate
the goal of bringing new Essential Medical Capability (EMC)
cases into the MTFs as part of that readiness focus. However,
we are skeptical the tools the MCRMC suggests for the JRC will
be sufficient in attracting the necessary caseload,
particularly if currently enrolled beneficiaries leave the MTFs
in great numbers.
- The ability to adjust MTF reimbursement rates is
cited as one tool to attract EMC cases, but decisions
on where to seek medical care, particularly in trauma
and complex cases, typically do not involve price.
Since price shopping isn't currently a significant
factor in consumer behavior for medical care decisions,
we question how much impact alternative prices would
have in attracting EMC cases to MTFs.
- Another tool the MCRMC outlines for the JRC is
establishing commercial reimbursement rates and
associated billing systems, improving authorities, and
allowing greater access to veterans and civilians with
relevant complex cases and trauma. However, the MTFs
would be competing for these cases with established
medical systems that employ marketing departments and
campaigns as well as established relationships in the
local community. Simply opening the MTFs to the broader
community may not be enough to attract the desired EMC
cases.
- The MCRMC report states that financial incentives,
specifically lower co-pays at MTFs versus those for
civilian providers, would encourage beneficiaries to
seek care at the MTFs. However, beneficiaries currently
pay nothing out-of-pocket for MTF care and it is
unclear what impact a co-pay will have on beneficiary
decisions regarding where to seek care.
From a JRC implementation standpoint, it is unclear
who would be responsible for working out the details at the
individual MTF level. Who sets the standards for what services
and medical specialties will be available at the MTF? Is that
an MTF commander decision? A Service decision? A Joint Medical
Command might have had more authority over MTF implementation.
It seems there is high potential for inconsistencies and lack
of coordination on readiness needs.
The MCRMC report is unclear on the magnitude of the
desired shift from beneficiary care to EMC cases. If the goal
is a major shift away from beneficiary care (such as labor/
delivery/newborn care), is there sufficient civilian medical
capacity to absorb increased demand for care from military
families, particularly in remote locations with significant
troop concentrations, such as Twentynine Palms, CA; Fort Polk,
LA; and Fort Riley, KS?
TRICARE Choice does nothing to address access and
quality issues within the MTFs. Although the MCRMC report
highlights areas where beneficiaries are unsatisfied with the
direct care system, their proposal does nothing to address
those complaints other than to say beneficiaries can now vote
with their feet and go elsewhere for care. In fact, the renewed
emphasis on combat casualty care skill building, while
critically important for military medical readiness, might
actually exacerbate problems with care for family members and
other beneficiaries. What will the process be for determining
the level at which MTFs will participate as network providers
in the TRICARE Choice civilian plans and for managing that
participation as MTF staffing and focus on the EMCs evolves?
TRICARE Choice introduces radical changes to the beneficiary health
benefit with no estimate of the impact on MTF caseload. While the Joint
Readiness Command proposal calls for a strategic shift to EMC cases in
the MTFs, details on this transition are sparse. We believe a change of
this magnitude demands a thorough analysis, including a forecast of
beneficiary demand for MTF services under TRICARE Choice and an
estimate of the likely increase in EMC cases within the direct care
system.
2. Potential for Significant Out-of-pocket Costs
Active Duty Families
The MCRMC report acknowledges that TRICARE Choice will result in
increased out-of-pocket costs and these higher costs would effectively
reduce overall active duty compensation if they were not offset with
the creation of the Basic Allowance for Health Care (BAHC). Although we
appreciate the MCRMC's attempt to address this issue, we are not
convinced the current proposal sufficiently insulates active duty
families from excessive out-of-pocket health care expenses for the
following reasons:
TRICARE Choice's Catastrophic Cap is Unspecified: A
key advantage of the current TRICARE plan is a low catastrophic
cap. By limiting annual out-of-pocket expenses to $1,000 per
family, the current TRICARE benefit limits the financial risk
currently serving families face from health care costs. The
catastrophic cap amount for TRICARE Choice plans is not
specified, so we have no way of assessing the financial risk
families would face under the MCRMC's proposal. We must have
details on this element of TRICARE Choice to complete our
evaluation.
Details are Sparse on the Chronic/Catastrophic
Program: The MCRMC proposes that active duty families facing
chronic or catastrophic conditions and resulting copayments
that substantially exceed their BAHC could receive assistance
from a new catastrophic fund. But, the report provides very few
details on this program. How would eligibility be determined?
What process would families follow to apply for the fund? Would
there be an appeals process? What portion of costs exceeding
BAHC would be reimbursed? There is no mention of adjusting the
program based on lessons learned. Implementation must include a
mechanism for adjusting policies and processes to ensure the
program achieves the desired outcomes. We fear that applying
for this fund would become another hurdle for families facing
already challenging circumstances. More importantly, given one
of the main benefits of TRICARE Choice is removing DOD from the
coverage determination process, we are opposed to giving DOD
authority over coverage decisions for families with chronic or
catastrophic conditions.
The BAHC Formula Raises Concerns:
- BAHC is calculated to cover the premium cost share of
the health plan selected in the prior year by the
median active duty family. This methodology introduces
risk that the BAHC will be eroded over time if families
scrimp on their choice of plans. We contend there
should be a high standard for the type of plan that is
appropriate for military families given the impact of
family member health on servicemember readiness. The
quality of health plans for military families should
also be commensurate with the extraordinary sacrifices
made by servicemembers and their families. The level of
the BAHC should be set based on the costs of plans
available for their location in the current year and
not on what families chose in the prior year.
- Under the TRICARE Choice plan, large families become
vulnerable to higher out-of-pocket expenses. The
portion of BAHC intended to cover out-of-pocket costs
is calculated as the average copayment amount by all
active duty family member beneficiaries in the prior
year. Although details are limited, the MCRMC has
confirmed to us BAHC would not vary based on family
size. While there would be no difference in family
premiums based on family size, a large family will
almost certainly incur higher copayment expenses than
the ``average'' family and those additional expenses
will not be covered by BAHC. The current TRICARE
benefit provides a zero out-of-pocket cost option for
health coverage for all active duty families regardless
of family size. TRICARE Choice should be modified to
minimize out-of-pocket costs for larger than average
families.
To move beyond the principle of minimal out-of-pocket costs and
gain more visibility on the financial impact of TRICARE Choice on
actual military families, we would like to see more data on out-of-
pocket expenses for a variety of family circumstances (family size plus
high/med/low health care utilization) crossed against a variety of plan
types to get a better understanding on potential out-of-pocket
expenses.
Although the MCRMC states its goal is to minimize out-of-pocket
expenses for active duty families to avoid a reduction in overall
active duty compensation, several elements of the TRICARE Choice
proposal could lead to significant out-of-pocket costs for some
families. The BAHC calculation must ensure a baseline of excellent
medical coverage with minimal out-of-pocket expenses for all active
duty families. The MCRMC must also be more transparent about the risk
of out-of-pocket costs by providing specifics on TRICARE Choice plans'
catastrophic cap(s) and the chronic/catastrophic program.
Non-Medicare Eligible Retirees
The MCRMC report acknowledges that beneficiaries will incur higher
out-of-pocket expenses with TRICARE Choice versus the current benefit.
For active duty families, as outlined above, the MCRMC seeks to
mitigate these higher costs with BAHC so as to avoid reducing overall
active duty compensation. Retirees would not receive BAHC and would
thus be fully responsible for premiums and cost shares. The
Commission's proposal focuses on the advantages of choice and states
that military retirees should pay a lower premium than civilian
employees as a recognition of their service. However, it does not
address the perceived reduced value of the military retirement package
resulting from TRICARE Choice. While our Association has not opposed
moderate TRICARE fee hikes in the past, we believe out-of-pocket
expenses for retirees under TRICARE Choice could become too high and
diminish the value of the earned retirement benefit unless safeguards
are written into law.
Premiums and Out-of-pocket Expenses Will Be
Significantly Higher than TRICARE as it stands today: Although
the MCRMC report does not provide specifics on premium costs,
an ultimate 20 percent premium cost share (after a 15-year
ramp-up), higher out-of-pocket expenses, and copays associated
with the civilian could be as much as thousands of dollars more
per year than retirees currently pay for TRICARE Prime. We
agree with the Commission, however, that the availability of
additional benefits and automatic coverage of adult children up
to age 26 at no additional premium may partly close the gap
between what retirees currently pay under TRICARE and what they
would pay under TRICARE Choice when fully implemented.
TRICARE Choice's Catastrophic Cap is Unspecified: A
key advantage of the current TRICARE plan for retirees is a low
catastrophic cap. By limiting annual out-of-pocket expenses to
$3,000 per family, the current TRICARE benefit limits the
financial risk military retiree families face from health care
costs. The catastrophic cap amount for TRICARE Choice plans is
not specified, so we have no way of assessing the financial
risk retiree families would face under the MCRMC's proposal. We
must have details on this element of TRICARE Choice to complete
our evaluation, but it's important to acknowledge that DOD has
proposed increases to the retiree catastrophic cap under the
current system.
As we have stated, we believe pressures on the current system will
result in increased beneficiary costs and so understand an accurate
forward-looking ``apples to apples'' comparison between TRICARE as it
might be in 10 years vs. TRICARE Choice does not exist. We do
appreciate the Commission recognized the need for a 15-year transition
to the 20 percent cost share ceiling for working-age retirees and that
they recognized the government's responsibility to absorb a higher
level of the premium costs for military retirees than for civilians in
recognition of their military service. However, current retirees and
currently serving career military members developed an understanding of
the value of their retirement health care benefit based on over 2
decades of TRICARE history. Just as higher out-of-pocket costs
associated with TRICARE Choice would reduce overall active duty
compensation if not offset by BAHC, even higher premium and out-of-
pocket costs for non-Medicare eligible retirees reduces the value of
the earned retirement benefit package. While we accept the
inevitability working age retirees will pay more for their health care
in the future, we believe TRICARE Choice, as proposed by the
Commission, may go too far in undercutting the earned retirement
benefit.
Wounded Warriors/Medically Retired Servicemembers
The MCRMC's TRICARE Choice proposal makes no mention of wounded
warriors or medically retired servicemembers. This omission must be
addressed before we can fully assess TRICARE Choice. We do have two
main concerns regarding TRICARE Choice for wounded warriors as it is
currently presented:
Out-of-pocket Expenses: Currently, non-Medicare
eligible medically retired servicemembers receive the same
TRICARE benefit as all other non-Medicare eligible retirees. We
believe any changes to the TRICARE benefit must maintain
minimal out-of-pocket costs for medically retired
servicemembers. The MCRMC's TRICARE Choice proposal, with its
high out-of-pocket expenses for non-Medicare eligible retirees,
is not an acceptable benefit for wounded warriors and their
families. We also need more information on how TRICARE Choice
plans will work for the families of retired wounded warriors
and other military retirees who may receive some or all of
their care from the VA or be eligible for Medicare Part B
because of their injuries.
Severely Injured Wounded Warriors: We are disappointed
that the MCRMC proposal does not address out-of-pocket expenses
the severely wounded currently face to maintain their medical
coverage. Specifically, if an individual is so severely injured
that he/she qualifies for Social Security Disability Insurance
for 2 years, he automatically qualifies for Medicare Part B.
Qualified individuals MUST take Part B in order to maintain
TRICARE status. If an individual fails to enroll in Part B, he
LOSES both TRICARE and Medicare coverage and must wait an
extensive period of time and pay significant penalties to re-
enroll. For many severely injured individuals, this means they
lose all access to their previous healthcare providers and/or
options for other healthcare needs. The current cost for Part B
coverage is approximately $110/month. This amount increases
regularly.
Our Association requests more information from the Commission on
how TRICARE Choice will be configured for medically retired
servicemembers and their families. We also ask the Commission to
consider the problems the severely wounded face in accessing their
health care benefit as part of their modernization proposal.
The MCRMC must be more transparent and detailed about the potential
out-of-pocket costs faced by all beneficiary categories.
The BAHC calculation must be modified to ensure it
covers out-of-pocket expenses for an excellent baseline plan
for all active duty families regardless of family size.
TRICARE Choice's out-of-pocket expenses for non-
Medicare eligible retirees must not reduce the value of the
earned retirement benefit package.
Finally, consideration must be given to how TRICARE
Choice will work for medically retired servicemembers to ensure
minimal out-of-pocket costs for wounded warriors and their
families.
3. Concerns Regarding TRICARE Choice Implementation Details
Many TRICARE Choice implementation details are lacking in the
Commission's proposal. We have identified several issues, which must be
addressed to ensure successful implementation of a complex program:
Ensuring Coverage Meets Unique Military Family Needs:
We appreciate that the MCRMC proposal says DOD should provide
OPM with recommendations on the unique needs of the eligible
Uniform Services beneficiary population. However, we would like
assurances on some specifics:
- For military families who move frequently, a variety
of high quality national plans is critical. Selecting a
national plan will be the only way for mobile families
to avoid a deductible and catastrophic cap reset with
each move. National plans will also maintain coverage
consistency and lessen disruption and hassle during
geographic moves.
- It is important coverage DOD has already deemed
necessary and appropriate for military beneficiaries,
via inclusion in the current TRICARE benefit, is part
of TRICARE Choice commercial plans. For instance,
TRICARE covers Applied Behavior Analysis (ABA) for
beneficiaries regardless of location, whereas FEHB
plans only cover ABA in States that mandate ABA
coverage. ABA coverage that varies from State to State
is not suitable for a mobile military population.
Similarly, TRICARE offers beneficiaries access to
behavioral health care without referral or prior
authorization. We would expect similar accommodations
for behavioral health care access in TRICARE Choice
Plans.
- It is essential commercial plans and BAHC policies
take into account the unique situations military
families face. Many families geo-bach--that is, the
servicemember lives in a different location from his/
her family members due to the spouse's career, kids'
education or other considerations. Other families
relocate during lengthy servicemember deployments.
Policies must be in place to ensure these unique
situations do not put military families at risk for
higher costs or coverage lapses.
Beneficiary Education and Communication: TRICARE
Choice would require an unprecedented level of beneficiary
communication and education.
- Under TRICARE Choice, servicemembers continue to
receive care through the military, but the spouse and
family members are covered under the new health plans.
Therefore, the servicemember AND spouse must be
educated on how to select the best plan for their
family. This includes the basics of commercial health
insurance (e.g., definitions of premium, deductible,
cost share, co-pay), tools to help select the best plan
for the family, and scenario planning to help families
understand the trade-offs and potential out-of-pocket
expenses associated with various options.
- This education process must be ongoing, as many
families will face new health plan choices every 2-3
years with PCS moves. They will not only need
refreshers on the basics of selecting the right health
plan, but they will need information on how coverage
varies based on location, to include what care will be
available through the MTFs as network providers in the
civilian plans. MTFs must be involved in the education
process.
Financial Planning Guidance: BAHC paid directly to
servicemembers will be difficult to manage for some. It is
critical that financial education prompts servicemembers to
create a plan for BAHC that helps them apply the allowance to
out-of-pocket medical expenses versus other discretionary
spending. The success of the Basic Allowance for Housing has
been cited as evidence servicemembers can successfully direct
an allowance to its intended purpose. However, unlike housing
expenses that are stable and regularly recurring, medical bills
are highly variable in amount and timing, requiring more
sophisticated budgeting skills.
Given the role spouses play in health care decisions and family
finances, it is critical that education and communication programs and
resources are designed to accommodate spouses as well as
servicemembers. Child care and evening/weekend options are critical
factors to achieve spouse participation in any in-person classes. If
the servicemember is responsible for selecting a plan and that
servicemember is deployed, how will the spouse--who in all likelihood
will be the person managing the family's use of the health plan--be
involved in the decision on which plan to choose?
While all Americans face a learning curve when making health
insurance decisions, it is imperative servicemembers and their families
are prepared to successfully navigate TRICARE Choice's commercial
health plan options. Military families lead complicated, stressful
lives. We cannot set them up for additional challenges related to
health care and finances. Additionally, the impact of poor choices,
including limited access to health care or financial problems
associated with unpaid medical bills, has the potential to reverberate
beyond the individual family and negatively impact military readiness.
Providing effective education on health care choices for servicemembers
and their spouses while they on active duty will ultimately benefit
them as they make the transition to civilian life after their service.
concluding thoughts on the mcrmc's tricare choice proposal
Recent media coverage and Congressional hearings, together with the
legislative language included in the report, imply the MCRMC report
should be viewed as a turnkey plan, ready for implementation. Given the
number of unanswered questions regarding the health care proposal, we
view the TRICARE Choice proposal as a first step in a needed process
toward change. While we believe the MCRMC health care concept has merit
and we support the idea of moving military families to high quality
commercial health plans, the MCRMC proposal requires much more analysis
and concept optimization before it could be implemented. The statute
authorizing TRICARE Choice must also set clear baseline standards that
ensure families have access to high quality plans that meet their
unique needs at the best possible cost.
Furthermore, change of this magnitude will take some time to
implement. In the meantime, we encourage Congress and DOD to seek
solutions to the many problems described by the MCRMC report as they
relate to military family health care. These issues deserve to be
addressed without waiting for wholesale change. Ensuring the current
system is still held accountable, while developing ideas for the future
is a very important way Congress and the DOD can build and repair trust
with the families who depend on their military health care benefit.
mcrmc recommendations we support
We appreciate the opportunity to comment on other recommendations
from the Commission report that affect the quality of life of military
families.
Recommendation 7: Improve Support for Servicemembers Dependents
with Special Needs
expand benefits available through echo
The Commission's proposal to improve support for military families
with special needs family members by increasing benefits available
through the Extended Care Health Option (ECHO) program is a critical
step in easing challenges faced by these families. Our Association
supports this proposal without reservation.
Additionally, we ask: (1) Congress consider extending ECHO
eligibility to families for 1 year after retirement or separation to
ensure they have access to much-needed care and services for their
special needs family member, and (2) DOD review procedures for
accessing care through ECHO to remove unnecessary requirements and ease
the process for vulnerable military families.
Caring for children with complex medical needs can be incredibly
expensive. Such children often require nutritional support,
incontinence supplies, and other costly items vital to their care but
non-medical in nature and therefore not covered by some insurance
plans, including TRICARE. Most families in this situation ultimately
turn to State Medicaid programs, which provide this kind of assistance
through waiver programs to individuals whose families do not qualify
based on income. Because the demand for these services far outstrips
the supply, lengthy waiting lists to receive assistance are common in
most States. For that reason, these services are often out of reach for
a military family who must relocate every 2 to 3 years. A military
family who places their special needs child on a Medicaid waiver
waiting list must start again at the bottom of the waiting list
whenever they move to a new State.
The ECHO program was designed in part to address this imbalance, by
allowing military families with a special needs child or spouse to
access non-medical services not covered under TRICARE. According to
TRICARE's website, benefits covered under ECHO include ``training,
rehabilitation, special education, assistive technology devices,
institutional care in private nonprofit, public and State institutions/
facilities and, if appropriate, transportation to and from such
institutions/facilities, home health care and respite care for the
primary caregiver of the ECHO-registered beneficiary.'' However, in
practice military families have found it difficult to obtain services
through the program.
This reality was reflected in TRICARE's May 30, 2013 report, ``The
Department of Defense Report to Congress on Participation in the
Extended Care Health Option (ECHO),'' detailing military families'
usage of the ECHO benefit. In 2012, DOD reported 99 percent of funds
expended through the ECHO program were spent on Applied Behavioral
Analysis (ABA) therapy and ECHO Home Health Care (EHHC). \2\ Although
these services are important and popular with special needs families,
it is impossible to see this statistic and not wonder why families are
not accessing the long list of other services ostensibly available to
them under ECHO.
---------------------------------------------------------------------------
\2\ The Department of Defense Report to Congress on Participation
in the Extended Care Health Option (ECHO), May 30, 2013, available at
http://tricare.mil/tma/congressionalinformation/downloads/
ExpansionEvaluationEffectivenessTRICAREProgramECHO.pdf
---------------------------------------------------------------------------
In our Association's view, there are two reasons why special needs
military families are not utilizing the ECHO program. First, as the
Commission also noted, ECHO simply does not cover many of the products
and services needed by special needs families. For example, many
families need larger than normal diapers for their disabled children.
ECHO deems diapers a convenience item and will not pay for them,
although State Medicaid programs regularly pay for incontinence
supplies. Aligning ECHO benefits more closely with State Medicaid
programs, as the Commission recommends, would provide much needed
support to special needs military families.
ECHO services are also under-utilized due to the procedural hurdles
TRICARE has put in the path of those seeking benefits. An example is
the policy regarding respite care. For families with special needs
children, the time away afforded by respite care is vital. Access to
quality respite care allows families to run errands, spend time with
other children, and simply recharge. Respite care is ostensibly
available through the ECHO program, but TRICARE policies limit its
utility. Specifically, TRICARE requires families use another service
through ECHO in any month that respite care is also provided. We are
grateful the Commission recommended eliminating this requirement, which
creates an artificial barrier preventing families from accessing needed
care.
We have heard reports that special needs families may soon find
their access to respite care limited as the military Services eliminate
or reduce respite care they provide through the Exceptional Family
Member Program (EFMP). Each Service operates its own EFMP program
designed to assist special needs families with assignment coordination,
referral and family support. As part of their family support, the
Services' EFMP programs provide respite care for military families with
eligible special needs family members. We have been told that the Army
intends to eliminate this program and the other Services may soon
follow suit. Given this cutback, it is even more important to ensure
families can access much-needed respite care using their ECHO benefit.
need for transitional care
We also note the ECHO program is only available to currently
serving military families. Families who transition out of the military,
whether through retirement or separation, immediately lose eligibility
for ECHO benefits. This abrupt cutoff places an undue burden on
families who are already coping with the stress of caring for a special
needs family member. While families may eventually be able to access
services through State Medicaid programs, they often face long waiting
lists, which leads either to gaps in treatment or financial hardship
for a family trying to pay for needed care. As more servicemembers and
families transition out of the military, this problem will become more
widespread. To ease the hardship for families in this situation, we
recommend ECHO eligibility be extended for 1 year following separation
or retirement to provide more time for families to obtain services in
their communities or through employer-sponsored insurance.
impediments to accessing echo
Our Association has identified other TRICARE policies that inhibit
families' use of ECHO. TRICARE mandates families first use public
assistance where available before accessing services through ECHO and
requires families to submit a Public Facility Use Certificate
explaining why public assistance is unavailable or insufficient when
requesting ECHO benefits. Families seeking a respite care provider must
find one who meets the strict requirements for such providers set by
ECHO. These conditions can be confusing for families already coping
with the stress of caring for a disabled family member. We suggest
Congress review this and other requirements associated with accessing
benefits through ECHO as you evaluate the MCRMC proposal, with the goal
of streamlining the process for special needs military families.
Recommendation 10: Improve Access to Child Care on Military
Installations
military families need affordable, accessible child care where they
live
We are gratified the Commission recognized the importance of high
quality, affordable child care to military families. Their
recommendation to exempt child care providers from furloughs and hiring
freezes is a common sense solution to an issue that has been a source
of anxiety for families during recent budget crises. We also appreciate
the Commission's concern about the lengthy waiting lists families often
confront when seeking care at installation Child Development Centers
(CDCs) and agree that funds should be available to expand or modify
facilities to increase the number of child care spaces. However, we
also note a large number of military families--more than 70 percent--do
not reside on an installation. For these families, on-base CDCs may not
be the best solution.
According to the 2013 Demographics Profile of the Military
Community, more than 40 percent of servicemembers have children. Of the
nearly two million military-connected children, the largest cohort--
almost 38 percent--is under age five.\3\ Like all working parents,
servicemembers with young children need access to affordable child care
in order to do their jobs. However, the military lifestyle comes with
unique challenges and complications for families. Servicemembers rarely
live near extended family that might be able to assist with child care.
Their jobs frequently demand long hours, including duty overnight. They
are often stationed in communities where child care is expensive or
unavailable.
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\3\ 2013 Demographics Profile of the Military Community. Rep.
Office of the Deputy Assistant Secretary of Defense (Military Community
and Family Policy), http://www.militaryonesource.mil/12038/MOS/Reports/
2013-Demographics-Report.pdf
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For all of these reasons, many military families rely on child care
provided through their installation (either CDCs or in Family Child
Care (FCC) homes). Yet, the demand for child care exceeds the supply.
Statistics cited by the Commission are supported by the experiences
military families share with us: in many locations, the waiting list
for care is so long that the CDC is essentially not an option for many
families. The problem is exacerbated by the frequent moves associated
with military life. Following each Permanent Change of Station (PCS)
move, a military family must restart the process of looking for care in
their new community and frequently find themselves again at the bottom
of the waiting list.
There are three factors contributing to the long waiting lists at
installation CDCs: lack of physical space, staffing shortages, and wait
list management. We support the Commission's recommendation that
Congress reestablish the authority to use operating funds to construct
or renovate CDCs. Streamlining the process to build new facilities and/
or renovate existing ones could provide the physical space to ensure
that more military families can access installation child care.
Although, we wonder where funding to operate these new facilities will
be found.
We also welcome the Commission's simple, common-sense
recommendation to exempt child care providers from hiring freezes and
furloughs. High rates of employee turnover are not uncommon at child
care centers, both at DOD facilities and in the civilian world.
However, high turnover combined with a hiring freeze can make it
impossible for CDC directors to staff their facilities appropriately.
We also heard from many families in 2013 concerned about how they would
find child care if CDC employees were furloughed due to sequestration.
No military family should have to worry about losing needed child care
because of a budget crisis.
We agree with the Commission that CDCs should improve the
procedures they use to manage their waiting lists. Currently lists are
unreliable, making it difficult for families to know whether it is
worth waiting for a space to open at the CDC or if they should seek
care elsewhere. At the same time, if the Services do not have reliable
information about the length of their waiting lists it is impossible to
ascertain if they are meeting their own standards or allocating
resources appropriately.
As stated above, less than 30 percent of military families live on
installations, which can make installation child care an inconvenient
choice. Many families prefer to seek care near their homes or close to
a spouse's job. However, families seeking child care in civilian
communities often find the costs are extremely high, much more so than
on-base care. For those families, the fee assistance program offered by
the Services is invaluable, allowing them to afford quality child care
in their communities. We urge the Services to continue funding this
program and to expand eligibility so families are assured of finding
quality child care regardless of their location.
Recommendation 13: Ensure Servicemembers Receive Financial
Assistance to Cover Nutritional Needs by Providing Them Cost-Effective
Supplemental Benefits
meeting military families' nutritional needs
We are pleased the Commission chose to address the issue of
financial assistance for low-income military families. We have long
recognized that, while the majority of military families are able to
make ends meet, some families struggle financially. This is especially
true of junior enlisted servicemembers with larger families. The Family
Subsistence Supplemental Allowance (FSSA) was designed to assist those
families by increasing their household income until it reaches 130
percent of the Federal poverty level. However, we agree with the
Commission that military families needing nutrition support are better
off seeking this aid through the Department of Agriculture (USDA)
Supplemental Nutrition Assistance Program (SNAP), both because it is
often easier to qualify for SNAP and because that program provides a
higher benefit. For this reason, we agree with the Commission that the
FSSA program should sunset in the United States, although the program
must be maintained overseas. We also agree that more information about
the number of military families relying on SNAP is needed. In addition,
we also ask Congress to evaluate available nutritional support programs
to determine if they are adequately meeting the needs of low-income
military families, whatever their location.
The Commission reports just 285 servicemembers received FSSA
benefits during fiscal year 2013. At the same time, the number of
families receiving benefits through SNAP was much higher, according to
figures cited by the Commission based on estimates by the U.S.
Department of Agriculture. We agree the low number of families seeking
aid through FSSA may be due in part to the application process, which
requires the approval of the servicemember's commanding officer. The
anonymity of applying for food stamps and not having your command know
about your financial straits may appeal more to the servicemember.
While SNAP is indeed a significant help to many military families,
we note the program's inclusion of Basic Allowance for Housing (BAH)
paradoxically means families living in high cost locations do not
qualify for assistance while families of similar size and servicemember
rank do in places with lower housing costs. Because BAH only covers the
cost of rent and utilities, it does not help families with the higher
cost of food, gasoline, and other necessities in areas such as Hawaii,
southern California, and Washington, DC. We ask Congress to evaluate
the SNAP program to see if this disparity can be addressed in a way to
better meet the needs of low-income military families. We agree DOD
needs better visibility over data that can provide information on
families on the financial edge who would benefit from food support
programs. They must analyze the data to determine what other assistance
might be needed to support these families.
Recommendation 14: Expand Space-Available travel to more families
of Servicemembers
supporting military families during deployments
We appreciate that the Commission listened to military families in
the town halls by responding to their requests for greater access to
Space-Available travel during separations. We believe that the ability
to change this policy already exists, but raising the issue in the
Commission report may bring it higher visibility.
Recommendation 15: Measure how the Challenges of Military Life
Affect Children's School Work by Implementing a National Military
Dependent Student Identifier
tracking military children's education progress
For years, our Association has advocated for creating a national
student identifier for military-connected children in public schools.
While we have been pleased to see several States begin tracking
military students in their classrooms, we agree with the Commission
that in order to obtain reliable, consistent data this initiative
should be implemented at the Federal level. A military student
identifier will allow researchers and policy makers to better
understand the impact of military life on academic achievement and
enable them to direct resources more effectively to support military
children.
Our own research has shown that experiencing the repeated,
prolonged deployment of a parent can lead military children to show
symptoms of stress and anxiety at higher rates than their civilian
counterparts.\4\ Military children are also more mobile than other
students, moving an average of six to nine times between kindergarten
and their senior year. There is no data on military students'
attendance, graduation rates, performance on standardized tests or
other commonly measured indicators of academic achievement. Creating a
report-only subgroup of children who have parents or guardians serving
on active duty in the seven Uniformed Services, as the Commission
suggests, would fill this gap and allow policy makers to more
effectively direct programs and services to support military students.
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\4\ Chandra, Anita. Views from the Homefront: The Experience of
Youth and Spouses from Military Families. Rep. RAND Corporation, http:/
/www.rand.org/pubs/technical--reports/TR913.html
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recommendations we cannot support
While we support many of the Commission's recommendations, several
of their proposals concern us. We cannot support the Commission's
recommendation on the Survivor Benefit Plan, as it does nothing to
eliminate the SBP-DIC offset for today's survivors and imposes
additional costs on some of the most vulnerable military families. We
believe Congress should preserve the full Post 9-11 GI Bill for
military families whose servicemembers have already transferred the
benefit.
Recommendation 2: Provide more options for servicemembers to
protect their pay for survivors
we need the dic offset eliminated for today's surviving spouses
We appreciate the Commission listening to the concerns of retirees
and surviving spouses about the inequity of the Department of Veterans
Affairs Dependency and Indemnity Compensation (DIC) offset to the
Survivor Benefit Plan (SBP) annuity. However, we cannot support the
recommendation put forth by the Commission giving retired
servicemembers the option of funding the elimination of the offset by
paying a higher premium.
Our Association has long believed the benefit change that will
provide the most significant long-term advantage to the financial
security of all surviving families would be to end the Dependency and
Indemnity Compensation (DIC) offset to the Survivor Benefit Plan (SBP).
Although we know there is a significant price tag associated with this
change, ending this offset would correct an inequity that has existed
for many years. Each payment serves a different purpose. The DIC is a
special indemnity (compensation or insurance) payment paid by the VA to
the survivor when the servicemember's service causes his or her death.
The SBP annuity, paid by DOD, reflects the longevity of the service of
the military member. It is ordinarily calculated at 55 percent of
retired pay. Military retirees who elect SBP pay a portion of their
retired pay to ensure their family has a guaranteed income should the
retiree die. If that retiree dies due to a service-connected
disability, their survivor becomes eligible for DIC.
We have concerns about the Commission's proposed changes to the SBP
premium structure. It would leave the 60,000 surviving widows/widowers
who currently absorb the offset in the same situation they are now--
continuing to have their SBP annuity offset by their DIC payment. We
need Congress to address the elimination of the offset to those who pay
the premium and don't receive their complete benefit now! Only 8
percent (4,580) of SBP/DIC recipients are active duty death surviving
spouses. Over 57,500 are the surviving spouses of retirees who have
paid SBP premiums subsidized by DOD.\5\
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\5\ Department of Defense Office of the actuary . . . 09-30-14
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As stated, the SBP annuity and the DIC annuity are paid for two
separate purposes. The retiring servicemember chooses to ensure the
financial security of his/her surviving spouse by enrolling in the
Survivor Benefit Plan. There is a chance the retiree may die of a
service-connected disability. We maintain the payment of the DIC is the
responsibility of the VA regardless of what other insurance or annuity
the survivor may be eligible for. No other survivors of Federal
employees (former military members) are subject to the offset when they
receive both a survivor annuity and the DIC. Surviving children
receiving SBP are not subject to the offset. Since the retiree already
pays a premium for SBP, why should he/she also subsidize the payment of
the VA DIC annuity?
The Commission notes in its report the increased election of SBP by
retired servicemembers, comparing an election rate of 52 percent in
1993 to an election rate of 79 percent in 2013. This increase is due in
great part to the elimination of the Social Security offset authorized
by the NDAA for Fiscal Year 2005 (Public Law 108-375) and phased in
over a 3-year period ending in 2008. Increasing the SBP premium to
11.25 percent would discourage retirees from signing up for the higher
coverage unless they were severely disabled and had no other options.
Those with severe disabilities who have been medically retired may be
least financially able to pay higher premiums even though their
survivors would have the greatest stake in having the offset
eliminated.
We are especially concerned the Commission did not address how the
survivors of those who die on active duty would be affected if this
recommendation would be enacted. Would they continue to experience the
DIC offset to SBP? For many of the survivors of junior servicemembers,
the DIC completely offsets the SBP annuity. We have questions where the
funding would come from to fully fund both the DIC and SBP benefits for
these survivors? How would the proposed changes to the retirement
system figure into this?
We are encouraged at the suggestions the Commission has made on
providing an analysis of the costs and benefits of the options to the
retiring servicemember and their spouse. Again, it is important to have
all the information to make an informed decision on retirement and
survivor plans. But, we cannot support asking the retiree to fund both
the unsubsidized portion of the SBP and the VA provided DIC payment on
the chance he/she may die of a service-connected disability.
Recommendation 11: Safeguard education benefits for Servicemembers
by reducing redundancy and ensuring the fiscal sustainability of
education programs.
honor the contract with those who have already transferred the benefit
As anyone who has pursued higher education can attest, tuition is
only a fraction of the cost of attending college. Living expenses,
books and fees add significantly to students' costs. Recognizing this
reality, Congress included a living stipend in the Post 9-11 GI Bill.
This valuable benefit has allowed many servicemembers to complete their
educations and launch careers. Other servicemembers judge the best
choice for them and their families is to transfer the benefit to a
dependent spouse of child. Servicemembers incur an additional service
obligation with the understanding the entire benefit--to include the
living stipend--will transfer to their designated recipient.
In the Commission's view, it is time to evaluate the effectiveness
of transferability of the Post 9-11 GI Bill on retention and better
align the benefit to meet retention goals. However, they fail to
acknowledge many servicemembers have already transferred the benefit--
and met their additional service obligation--but their dependents have
not yet had the opportunity to use their earned GI Bill benefits.
Servicemembers with young children accepted an additional service
obligation with the understanding their families would have full use of
the Post 9-11 GI Bill benefit. They made financial arrangements and
savings plans based on those provisions. They made difficult choices
and possibly passed on other opportunities to ensure their earned
benefit became one their dependents could use. These servicemembers
honored their part of the contract. Now we ask Congress to do the same
and preserve the full Post 9-11 GI Bill for those military families who
have already transferred the benefit.
It is worth noting servicemembers who transfer their Post 9-11 GI
Bill benefits and fail to meet the required service obligation are
required to repay the benefit. The VA recognizes in transferring the
benefit the servicemember has entered into a contract and must meet the
terms of the agreement. Should servicemembers expect any less? We
acknowledge the Post 9-11 GI Bill is an exceptionally valuable benefit.
In a time of fiscal constraint, Congress may have to make difficult
decisions regarding its future viability. However, the contracts of
those who have already earned the benefit must be honored.
recommendations requiring further study
We believe several MCRMC recommendations have promising elements,
but will require more study and further questions in order for the
Commission to answer our concerns. The proposals for the new retirement
system and changes in health care call for servicemembers and their
families to make responsible choices that will require a robust
financial training program. We wonder how DOD and the Services will
accomplish this financial training for both the servicemember and his/
her spouse. We also have concerns about the proposal to merge
commissary and Exchange operations and about the effect this change
would have on the military resale system. We will seek more information
on how these proposals could be implemented and encourage Congress to
do the same.
Recommendation 1: Help more servicemembers save for retirement
earlier in their careers, leverage the retention power of traditional
Uniformed Service retirement, and give the Services greater flexibility
to retain quality people in demanding career fields.
taking responsibility for your own retirement
As advocates for the entire military family community, our
Association is keenly aware of the inequities inherent in the current
retirement system. The majority of the families we serve remain in the
military for fewer than 20 years and thus leave with little or no
retirement savings. Recognizing this disparity, we support the
Commission's recommendation to create an employer match to
servicemember Thrift Savings Plan (TSP) accounts, which would create a
valuable, transportable retirement benefit for servicemembers
regardless of how long they spend in the military. At the same time, we
strongly believe in the value of the defined benefit plan, both as a
retention tool and as a vital element in retirees' financial well-
being. We commend the Commission for creating a hybrid system that
would maintain the majority of the defined benefit plan along with a
defined contribution.
While we would like to support the recommendation fully, we do have
concerns. The proposal shifts both risk and responsibility for
retirement savings from the government to the individual servicemember.
In addition, the recommendation would lead to a significant income
reduction for future working-age retirees compared to the current plan.
We ask Congress to consider the following issues prior to making any
decision about retirement changes.
the ``blended'' retirement system: questions and concerns
Increased responsibility for retirement while
purchasing power is eroded: The value of the TSP is tied
directly to the level of individual contributions. If
servicemembers choose not to participate, or make smaller
contributions, the value of the benefit is diminished.
Currently 40 percent of servicemembers choose to participate in
TSP even though DOD provides no match. While under the proposal
enrollment in the plan would be automatic, servicemembers would
have the choice not to participate. To their credit, the
Commission paired this recommendation with a call for
improvements in servicemember financial literacy programs,
arguing once servicemembers understand the value of saving for
retirement, especially with an employer match, there would be
great incentive to participate. However, the reality is
military families have experienced a series of cuts to their
purchasing power in recent years, with higher out-of-pocket
costs for housing and health care and pay raises that do not
keep pace with inflation. TSP contributions will take another
bite out of their disposable income. How many families will
simply feel they cannot afford to save for retirement?
Higher risk for servicemembers and families: We are
also concerned about the risk associated with a defined
contribution plan, which we feel the Commission did not
adequately address. Like all market-based funds, TSP accounts
carry the risk of investment losses. In addition, a high rate
of inflation would effectively diminish the value of TSP
savings. Under this plan, the TSP would represent a significant
share of retirement savings for a person who spends 20 or more
years in the military, so the proposal imposes greater risk on
those who stay for a full career. If there is a downturn in the
market, retirees face losing a large share of their retirement
savings. While some of that risk could be offset by a robust
financial literacy program, risk is an intrinsic element of any
defined contribution system.
Reduced income for working age retirees: Our most
pressing concern is the financial well-being of future working
age retirees, who would face a significantly reduced income
under this plan relative to the current one. According to the
Commission, future retirees' pensions would be 20 percent less
than provided under the current system. While the loss would be
offset by the increased value of the TSP, servicemembers would
not be able to begin drawing from that until they reached age
59\1/2\. How much of a burden will this reduced income place on
future working-age retirees? We also wonder what will happen to
the Survivor Benefit Plan under this scenario. Will prospective
retirees and their spouses feel they cannot afford to
participate in SBP if their retirement income is reduced? Will
Survivor Benefit Plan premiums and benefits be adjusted given
the smaller retirement amounts and the availability of the
Thrift Savings Plan as an asset for the survivor?
As more servicemembers leave the military due to downsizing, our
Association has increasingly focused on the issues families face as
they transition to civilian life. In 2014, we surveyed military spouses
who recently transitioned or were preparing to do so soon. What we have
heard is that separating or retiring from the military is a difficult
transition for many military families, often accompanied by significant
financial hardship.
``Fortunately, we have been cautious about our
spending and were financially prepared to live on retired pay
if necessary which proved to be true.''
``Save every penny you can. Get out of debt before you
separate. Brace yourself--it is harder than you can imagine. We
are out of debt and have some savings, but my husband has been
job hunting for 7 months.''
``I feel after 15 years in a career, he is starting
from scratch and at the bottom of the barrel in the civilian
workforce. I'm scared we'll be trying to support a family on
minimum wage because nobody knows how to use an 0369 (military
specialty designation) in the real world'' \6\
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\6\ Source: NMFA Transition Survey, May 2014
The prevailing view of the working-age retiree who moves seamlessly
into civilian employment is frequently far from reality. Rather, it is
not uncommon for working-age retirees to face a lengthy period of
unemployment or underemployment, especially if their military skills do
not translate directly into a civilian career. We are concerned that a
reduced retirement annuity will add to the financial stress families
commonly face during this transition.
The Commission's approach to this problem, offering servicemembers
the option of a lump sum payout in exchange for a reduced retirement
annuity, is not an acceptable solution for the long-term well-being of
the family. While the Commission does not detail the amount of the
proposed payout or the how much would be cut from the annuity, similar
proposals in the past have been detrimental to servicemembers,
providing much less total retirement compensation. This is especially
true if the amount of the lump sum offered does not increase with
inflation. Military retirees should not have to face a long-term
financial disadvantage in order to address a short-term financial
shortfall.
A 2014 RAND report, Toward Meaningful Military Compensation Reform,
offered a proposal that would partially offset the reduced benefits for
working-age retirees in the MCRMC plan. In its report, RAND suggests
implementing a transition pay for servicemembers leaving after 20 or
more years of service. Including a transition payment for retiring
servicemembers would address two of our concerns by helping families
through the financial challenges associated with transition and by
offsetting some of the income lost by working-age retirees under a
reduced defined benefit plan. In our view, this proposal merits further
study for all transitioning servicemembers receiving an honorable
discharge.
We also note that the Commission does not address medical retirees
in its proposal on retirement. How would these most vulnerable military
families cope with a reduced annuity?
We recognize the majority of servicemembers currently leave the
service with no employer-provided retirement benefit and we commend the
Commission for attempting to remedy this inequity while preserving most
of the defined benefit plan. While we would prefer the annuity remain
at its current level, we acknowledge that may not be feasible while
also providing an employer match to the TSP. While we support the
proposal in principle, we are concerned about the shift of risk and
responsibility to servicemembers and their families and about the
impact on the financial well-being of working-age and medical retirees.
We believe there are steps Congress and DOD could take to mitigate
these drawbacks--such as including a transition pay for
servicemembers--that would allow us to more wholeheartedly support the
proposal.
Recommendation 3: Promote servicemembers' financial literacy by
implementing a more robust financial and health benefit training
program.
more training is necessary to make good financial choices
We support the proposal to implement a more robust financial and
health benefit training program. However, we question how some of the
recommendations will truly improve financial literacy and must
emphasize the importance of extending these training programs to the
entire military family, particularly the spouse.
The MCRMC concluded that existing financial literacy training
programs do not adequately educate servicemembers. Yet, it maintains
investing money in growing existing programs, with only slight changes,
would better educate servicemembers. We think it is important to note
in many areas, servicemembers are already miles ahead of their civilian
counterparts in financial knowledge and management practices.
According to a survey done by FINRA Investor Education Foundation
in 2012, 80 percent of servicemembers believe they are good at dealing
with day-to-day financial matters.\7\ When compared to their civilian
counterparts in age and demographic, servicemembers were more likely to
have an auto loan, carry a credit card balance, have a student loan,
and a mortgage, but they were also less likely to use non-bank
borrowing and have unpaid medical bills. Servicemembers spent less than
their income and had less difficulty covering their expenses than their
civilian counterparts. They are more likely to save or have a
retirement account. However, they were more likely to be underwater in
their mortgage or have declared bankruptcy. These statistics bear more
reflection and require adaptations in financial literacy programs that
are specific to their military lifestyle challenges, like understanding
the risk of investments in real estate when unable to homestead in one
place.
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\7\ http://www.usfinancialcapability.org/downloads/NFCS--2012--
Report--Military--Findings.pdf, page 28.
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It is absolutely critical changes in financial literacy focus on
educating the entire military family. Spouses are often left in charge
of the big financial decisions as they are more consistently present on
the home front. Financial wellness and health care are often not
executed by the servicemember. Mismanagement can result in far more
devastating repercussions than a loss of security clearance: we have
seen surprising use of food banks by military families; financial
issues are a leading culprit in divorce and military suicide events;
and unsurprisingly, morale is dropping after 14 years of war. The
Commission's proposal must be considered in the light of how it can be
applied to the entire family unit to best serve its purpose.
In considering improvements to financial literacy and health
benefit training programs, opportunities to reach family members must
embrace the lack of mandate the command and service have over family
members. Dependent spouses or family members cannot be forced or tasked
into education. Programs must be interesting, relevant, accessible, and
innovative to reach our youngest families and entice them to
participate. Provisions should be made to ensure attending or accessing
good financial literacy counseling and education resources does not
cost families money and can be performed at times convenient to them.
We think the online budget planner is a good example of the great
potential in this recommendation.
The MCRMC recommends several financial education ideas that are
already in effect. For example, each Service provides financial
management training to the servicemember at various stages in their
career. They also provide financial counseling for servicemembers and
their families through a designated staff member at every installation.
However, in some locations, this person may be shared among various
installations or not be committed to financial literacy as a full-time
responsibility. The MCRMC's proposal for more resources dedicated to
financial education could expand availability of training personnel and
programs.
The MCRMC's proposal recommends:
1. Increasing the frequency of and strengthening financial
literacy content
2. Enhancing financial literacy content
3. Hiring firms to provide financial literacy training
4. Messaging from leadership
5. Mandatory annual Defense Manpower Data Center (DMDC) surveys
6. Strengthening partnerships with Federal and nonprofit
organizations
7. Provide an online budget planner for servicemembers
8. Restructure the LES to reflect compensation changes proposed by
the MCRMC
The Department of Defense (DOD) already provides financial
counseling through Military OneSource confidential counseling number.
Military OneSource counseling is also the most accessible tool
currently available for spouses. DOD engages in a massive campaign
called Military Saves to promote savings in cooperation with the
Consumer Federation of America that includes memorandum and video
messages from the Joint Chiefs and Enlisted Leaders encouraging
servicemembers to pledge to save. The DOD meets quarterly with Federal
and nonprofit organizations at the Defense Financial Readiness
Roundtable to discuss programs and plans for reaching military families
with financial literacy tools provided outside of DOD.
In 2003, DOD formally launched a financial readiness campaign to
deal with financial habits that put members' readiness at risk,
including financial management awareness, savings and protection
against predatory practices. Since then, items 1, 2, 4, and 6 on the
MCRMC list have been implemented. DMDC has surveyed servicemembers
about financial issues as recently as December 2013. With only items 3,
7, and 8 as new recommendations by the Commission, we feel this
proposal leaves too many specifics to chance, especially with so many
other moving parts in the health care and retirement proposals.
We would be remiss if we omitted the other financial challenges
faced by military families. Between 2000 and 2012, Congress approved
pay raises that exceeded the statutory requirement and set the standard
that the Basic Allowance for Housing (BAH) would completely cover
average housing expenses at each rank. For the past 3 years, however,
DOD has proposed pay raises lower than the Employment Cost Index
standard required in statute. DOD has also proposed a reduction in the
BAH. The cumulative effect of these changes will severely impact the
purchasing power of servicemembers and their families. Financial
literacy to promote financial readiness will be more important to help
military families' dollars stretch further.
The MCRMC is proposing a massive overhaul of the health care system
that would give servicemembers the choices they have been craving, but
could also result in out-of-pocket expenses for large families or those
with extensive health care needs. They are also proposing a retirement
system that would ask our younger and least equipped servicemembers to
carry a bigger burden in saving without giving them the extra tools to
do so. According to a 2013 DMDC survey, approximately 10 percent of
responding servicemembers found it difficult or very difficult to cover
expenses and pay all bills.\8\ These 10 percent demonstrate that there
is still a target number of servicemembers who will not just benefit,
but desperately need a different kind of financial management
education.
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\8\ Defense Manpower and Date Center, 2013 QuickCompass of
Financial Issues, Question 73, pg. 138
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We support the MCRMC's recommendation to promote better financial
literacy for servicemembers' through a more robust financial and health
training program and feel that it is absolutely critical for the
success of their other recommendations. We must emphasize that
implementation must include family members. We would also like to see
more information or study on how these proposals benefit the majority
of servicemembers who are already financially savvy, but challenged by
other financial challenges of military service.
Recommendation 9: Protect both access to and savings at Department
of Defense commissaries and Exchanges by consolidating these activities
into a single defense resale organization.
the savings are the reason we shop at the commissary
We thank the Commission for affirming the commissary savings
military families have told us they value must be protected and also
affirming that DOD dollars should help to support the savings level. We
also understand efficiencies can help make more solid a benefit the DOD
continues to find expendable. However, we believe the implementation of
the Commission's recommendation may remove many protections that
sustain the existence of the commissary and exchanges. We don't believe
there is enough data or context on the practical aspects of
consolidation to support this proposal as written and feel it requires
further study.
Currently, commissaries sell items at cost with a 5
percent surcharge that funds infrastructure investments.
Operational costs are paid with appropriations. The exchanges
sell items for profit, cover most of their operational costs
with those profits, and provide the remainder to support
Morale, Welfare, and Recreation (MWR) programs. The MCRMC
proposes a new system that combines the exchange and the
commissary systems into a new Defense Resale Agency (DeRA) and
forces the surcharge and profit margins to fully fund the
operational costs of both systems. The exchanges have already
been yielding smaller and smaller profit margins. How many
efficiencies will be needed in a combined system to cover costs
AND provide the MWR support at desired levels?
The recommendation states ``MWR programs should
continue to be funded from DeRA profits.'' What if there is a
shortfall?
DOD currently operates three exchange systems (NEXCOM,
MCX, AAFES). Previous attempts to consolidate the exchanges
into a single entity have failed due to logistical challenges
and Service objections. How and why will it work this time?
More than 60 percent of the employees working at the
commissary and exchanges are military affiliated. Nearly 30
percent are military spouses. We do not know how these changes
would affect their status. Civilian employees at the commissary
would likely be converted to Non-Appropriated Fund (NAF)
status, possibly reducing their pay and forcing a change in
their benefits as they switch to a new system. What logistical
challenges in merging employees from two distinct pay and
benefit structures must be resolved and at what cost? How will
the financial security of long-time commissary employees be
protected?
Consolidation may also remove the appropriated funds
that cover second destination transportation costs for shipping
commissary goods overseas. The new DeRA would be responsible
for generating revenue to cover operating costs and second
destination transportation at a cost of more than $340 million.
Again, what if they can't? What's the protection for families
who depend on overseas commissaries?
It remains unclear to us what will happen if the new blended system
cannot cover operating costs. What are the second- and third-order
effects on families around the world for providing healthy and familiar
foods and goods? How will potential reductions in MWR revenues affect
the morale of our military families at home or servicemembers away from
home?
As in our health care discussion, we must acknowledge that
commissaries are under tremendous financial pressures and the
appropriation that supports their operations--and by extension the
savings military families need--is a constant target for budget-
cutters. We are open to discussions on how to strengthen the resale
entities in a way that protects customer savings and MWR revenues. We
have concerns that restructuring the commissary and exchanges into a
single entity could diminish each of these benefits. But, we hope this
recommendation and the additional commissary study Congress mandated in
the NDAA for Fiscal Year 2015 will provide a starting point for action
on ways to strengthen the benefits and protect the military families
who depend on them.
the way ahead
The National Military Family Association commends the Commission
for its thoughtful consideration of many issues important to military
family quality of life, as well as its comprehensive approach to
military compensation. We are intrigued by the innovative
recommendations regarding health care and retirement. We hope our
questions will help inform a much-needed discussion, not just about the
proposals, but also about current benefits and ultimately what will be
best for servicemembers and their families and the readiness of the
force. We need more information on the impact of consolidating aspects
of the military resale system on the savings military families
experience at the commissary before embracing this recommendation. We
especially thank the Commission for its recommendations regarding
special needs military families, child care, nutritional support and
military children in public schools. Their recommendations, if enacted,
would address concerns that we often hear from military families and
greatly enhance many families' well-being. While we cannot support the
Commission's recommendations regarding the Survivor Benefit Plan or the
Post 9-11 GI Bill, we do appreciate the efforts to preserve benefits
important to servicemembers and their families.
We ask Members of Congress to consider these recommendations
thoughtfully as they respond to the budgetary challenges our Nation
faces. We encourage Congress and DOD to seek solutions to the many
issues raised by the MCRMC report and would welcome the opportunity to
share additional input from the military families we serve. We must not
delay the conversation on how to provide the best for our
servicemembers and the families who stand behind them! This report
gives us a starting point.
Our Nation will continue to call on servicemembers to address
emerging threats and sustain peace around the world. Any change to the
system of military compensation will have far reaching consequences and
must recognize the unique challenges of military life. The government
should ensure military families have the tools to remain ready and to
support the readiness of their servicemembers. Compensation and
benefits for servicemembers should reflect the singular service of
military members and honor that service with a commensurate system of
financial and medical support into retirement for them, their families
and for their survivors.
STATEMENT OF VADM NORBERT R. RYAN, JR., USN (RET.), PRESIDENT
AND CHIEF EXECUTIVE OFFICER, MILITARY OFFICERS ASSOCIATION OF
AMERICA
Admiral Ryan. Chairman Graham, Senator Gillibrand, Senator
Tillis, and Senator McCain, thank you for this opportunity on
behalf of our 390,000 members.
This afternoon, I'd like to make just five brief points:
First, the Military Officers Association of America (MOAA)
sincerely appreciates the work that the Commission did. These
are very professional, dedicated Americans that have done
quality work. The proposed change to the healthcare system is
welcome. It's a welcome shot across the bow and should serve as
a forcing function, I believe, for Congress to work with DOD
and Secretary Carter to push through with the essential and
much needed reforms necessary to optimize the system. I believe
the one thing we all agree on is that the status quo is not
acceptable.
Second, it's obvious that the Commission, Congress, MOAA,
and my colleagues here at the table all seek the same
objective: a healthcare delivery system that is far more
integrated, efficient, effective, and sustainable than the
current system.
Third, where MOAA respectfully differs with the Commission
is, we believe the problems that TRICARE has can be addressed
in a systematic manner without resorting to its elimination.
MOAA has consistently stated that the largest barrier to a
truly efficient and highly reliable healthcare organization is
the current three-service system. In the 1980s, Congress
demanded, over the strong objection of Pentagon leadership,
that the Services fight wars jointly. It is now time for
Congress to insist that the Services do the same thing
immediately in the medical-care area. Study after study has
concluded that a unified medical command that has a single
budget authority over the three military systems will yield
significant cost savings and efficiencies that will make the
military system one we can be proud of.
Fourth, MOAA's recent electronic survey of 7,500
beneficiaries, 1,500 of which were enlisted, 400 spouses,
indicates that, even with its problems--even with its problems,
8 out of 10 prefer TRICARE to a health plan similar to what
Federal civilians use. If Congress contemplates moving to a
healthcare plan similar to the Commission's recommendation, it
needs to take the time necessary to ensure all stakeholders
understand the second- and third-order effects.
Finally, MOAA believes that, out of the Commission's 15
recommendations, the two that propose dramatic changes to both
military retirement compensation and military care programs
could have a serious impact on career retention required in the
All-Volunteer Force. Both recommendations produce a negative
effect on the pocketbook of patriotic Americans for whom the
government needs to serve for--needs to draw to a 20-year
career.
So, it isn't necessarily as much the money, but I would
like to put up a chart on this, because, Senator Graham, as you
pointed out, people would sign up for this retirement benefit
when they came in because, as Senator McCain has said, it would
be prospective. But, what we're concerned about is the
combination if we implemented a retirement system that was
prospective and we also integrated that with the healthcare
system that the Commission reports, the question is, would
there still be a sufficient draw for those young men and women
who are coming in, in the future, that they would feel it's
worth going from 10 years to 20 years? We think there's
considerable risk with this. All you have to do is multiply
that 20 by 20 and you would see, it's about 128,000 less in
benefit. So, the question is, would that be sufficient to get
people to stay in for a career, let alone more than one tour?
If Congress--and because that's basically a 27-percent cut,
as you see--if Congress and the administration decide to adopt
these two very financially impactful recommendations from the
Commission, MOAA believes the risk to the quality of the All-
Volunteer Force would be significant because of--the incentive
to stay for a career would be in doubt.
Again, thank you for this opportunity, and thank you all
for your continued leadership.
[The prepared statement of Admiral Ryan follows:]
Prepared Statement by The Military Officers Association of America
Chairman Graham and Ranking Member Gillibrand, members of the
committee, on behalf of the 390,000 members of the Military Officers
Association of America (MOAA), we welcome this opportunity to submit
testimony for the record, regarding our views concerning the Military
Compensation and Retirement Modernization Commission's (MCRMC) report
and recommendations regarding military health benefits.
MOAA sincerely appreciates the hard work and detailed analysis that
went into the Military Compensation and Retirement Modernization
Commission's report. The commissioners and professional staff should be
commended for their extensive effort. Their product provides the
country with an instrument that we can use as a catalyst to begin
important thoughtful discussions, analyses, and debates on vital issues
that directly affect our service men and women, retirees, their
families, and their ability to insure our national security. We look
forward to working closely with the Congress and in particular this
committee, your staff, the Pentagon, and the administration on these
critical concerns and recommendations regarding military compensation,
benefits and the retirement system.
The Commission and MOAA both seek the same objective. However, we
urge caution concerning any major changes to the military's health care
system (MHS) that could potentially have a negative impact on the
military medical readiness of our medical personnel, as well as on the
entire All-Volunteer Force and their families. Several of the health
care proposed recommendations represent nothing short of a seismic
change, and have not been modeled and studied within the complex and
dynamic realities of the military health care system.
Some defense leaders and others have stated, and continue to state,
that the military's health care costs absorb a disproportionate 10
percent, non-war share of the Department of Defense (DOD) budget, and
that this spending trajectory must change. These assertions should be
viewed in proper context in that healthcare costs comprise 23 percent
of the Nation's budget; 22 percent of the average State budget; 16
percent of household discretionary spending; and are 16 percent of the
U.S. gross domestic product--so a 10 percent share of DOD's budget is
not too bad a deal. Additionally, not usually highlighted are the
improvements to the benefit and the extended benefit coverages for
Reserve and Guard components which Congress rightfully mandated during
the past decade. The facts also show that DOD healthcare costs have
been relatively flat over the past 3 years because of changes Congress
already has put in place.
The current and future national security situation will require
that we maintain a balance of investment in equipment, training,
operational capabilities, as well as personnel requirements which have
been the cornerstone of the success of our All-Volunteer Force. There
are finite resources for these competing demands and we strongly agree
that the military's health care system needs to evolve beyond what it
is today, into a modern high performing integrated system, delivering
quality, accessible care, safely and effectively to its beneficiaries--
while simultaneously meeting international health crises and national
disasters, while at the same time honing its readiness capabilities. No
other health care entity in the country is charged with these dual, yet
mutually inter-dependent, mandates.
Our Nation's health care industry is undergoing rapid change, and
it is within this context that the military health care system finds
itself at a major inflection point. It must sustain the advances and
skills learned from the past 14 years of combat experience and it
cannot compromise on its readiness platforms. Thus, any reforms must
support the goal of sustaining an operationally ready force with a
ready medical force. How to most effectively accomplish this without
negatively impacting retention and readiness is the crux of the issue.
military health care and the importance of the tricare program
The MCRMC recommends the TRICARE program be eliminated and replaced
with a Federal Employee Health Benefits Program (FEHBP)-like substitute
health plan. It is worthwhile to understand the importance of the
current program that it is purported to replace.
There have been, and continue to be, many studies on the
organization, coordination, and the increasing costs of the military
health system, as well as its effectiveness addressing particular
health challenges. Despite the stress that has been placed on the
military's health system and the TRICARE program, because of war--its
performance has withstood the test of time and in some ways, is
stronger and more resilient now than it has ever been.
The TRICARE program was established in 1995 having evolved from the
Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS). Today, it provides care to over 9 million servicemembers and
families, retirees, and survivors, through a range of benefits from
TRICARE Young Adult to TRICARE for Life.
TRICARE, by its very nature, was designed to support military
medical readiness as well as to ensure the delivery of a defined
benefit. It accomplishes this by sustaining the operational capability
for military treatment facilities through an augmented network of
health care services provided by three managed care support
contractors, who ensure the continuous delivery of the benefit.
The heart of military medical readiness is found in the direct care
system, of which military treatment facilities provide the core
platform for training. The provision of care in these facilities is
vital to the ongoing training of physicians, nurses, corpsmen, medics,
and other ancillary and administrative personnel. Managed care support
contracts allow for nationwide flexibility in support of a ready
deployable force. This model has proven successful but expensive, as
evidenced by large budget increases for civilian purchased care.
Managing and maintaining a health care budget in excess of $50
billion a year is complicated and intricate. It is precisely because of
the challenges presented in managing such a large program that the
system has become somewhat, over time, both self-defeating and sub-
optimal. For instance, reducing the Prime Service Areas (PSA) around
the MTFs saves money in the budget, but reduces the number of
beneficiaries utilizing the MTF which creates even more excess
capacity. The overall result of this sub-optimization of the direct
care system has directly resulted in both the increased use of
purchased care in civilian networks, and a shrinking patient base.
Despite its current challenges and short-comings, MOAA believes
TRICARE is not currently in a ``death spiral'' as some have said, and
it is not broken--but there are areas that definitely need urgent
focused attention and reform. The recent 2014 MHS Review identified key
shortcomings and areas for improvement in the domains of access,
quality, and patient safety--with some steps already underway. This
past summer, MOAA's own survey on MHS access, quality and safety
corroborated much of the same, especially regarding access to care
issues. In short, we will not accept the status quo and we must all
must continue to hold the Department accountable for aggressively
correcting these areas.
TRICARE has come to a unique moment in its history, and is
presented with an opportunity for a thoughtful redesign of the program.
This should be done with the goals of ensuring that the TRICARE benefit
remains robust and medical readiness is strengthened while keeping
beneficiary care and access in the forefront.
the mcrmc proposals
The MCRMC has advanced four over-arching proposals that represent
significant changes to the MHS. We are generally in support of two of
them but have significant concerns regarding the other two.
We applaud the Commission for addressing issues experienced by
military families with special needs. We generally agree with the
recommendations and the intent to improve support for these
beneficiaries by aligning services offered under the Extended Care
Health Option (ECHO program) to those of State Medicare waiver
programs. We believe that Guard and Reserve families are particularly
vulnerable during transitional periods and should have an extension of
support. It is imperative that the benefit must include members of all
seven of the uniformed services.
We also support dramatically improving collaboration between the
DOD and VA and there exist some excellent examples, such as the joint
DOD/VA health care facility in North Chicago. For years MOAA has
advocated for legislative authority to grant the existing Joint
Executive Committee additional authority and responsibility to enforce
collaboration. Many of the issues impeding progress range from a common
electronic medical record to joint facility and acquisition planning
can be accomplished in a transparent manner. Similarly, the issue of a
transitional formulary for servicemembers leaving the DOD and enrolling
into the VA system should be immediately corrected.
We have significant concerns regarding the Commission's proposals
to create a new Joint Readiness Command (J-10), tasked with overseeing
new standards for essential medical capabilities and establishing
military treatment facilities as preferred network providers within
civilian communities. MOAA for years has supported the concept of a
unified medical command that has a single budget authority over the
three military systems. The time is right for this to come to fruition
now, starting with the large multi-service market areas. A single
budget authority to include human resources and infrastructure
oversight and control, will yield huge cost savings and efficiencies
that we can only now dream about. Throughout the years, numerous
studies have recommended the consolidation of medical budget oversight
and execution and this can be done while maintaining the readiness
responsibilities of the Surgeons General under title 10. However, the
MCRMC proposal does not include this MOAA-supported recommendation.
Associated with that recommendation, is the proposal to increase
beneficiary health care choice by dismantling the current TRICARE
three-option program and moving active-duty family members, retirees
under age 65 and Reserve component members into a commercial premium-
based insurance model, similar to the Federal Employee Health Benefit
Program (FEHBP).
proposal to eliminate the tricare program and replace it with a federal
employees health benefits program-like system
Offering military families and retirees under age 65 choices in a
FEHBP--like program is one of the centerpieces of the MCRMC's health
care proposals. It is in response to reported access, referral,
contracting, and bureaucratic problems that beneficiaries experience
under TRICARE Prime. Observations made by the commission regarding many
of these issues are right on the mark.
TRICARE Prime is by design an HMO model of care, costing
beneficiaries less and inherently providing less choice. TRICARE
Standard provides a wider range of choice and is more popular. The
commission's main concerns involve issues with the TRICARE Prime; a
fair question to ask is whether it takes such a radical change to
address those problems.
The new FEHBP-like program, called TRICARE Choice, would offer
beneficiaries an array of plan options to choose from based upon their
location. MTFs would be offered as one of the providers in the plan. It
is envisioned that DOD would have the authority to adjust MTF billing
for civilian reimbursements and co-payments for insurers as needed to
meet the MTF's readiness requirements.
Concerns
This proposal is a dramatic change in the entire philosophy of
delivering military health care coverage and if it is seriously
entertained, should be subject to much more scrutiny to ensure it meets
beneficiary needs without changing the fundamental benefit value or
leading to unintended consequences.
TRICARE is designed to support military readiness--to include
military family readiness. FEHBP serves a very different purpose and
does not factor in readiness. For example, how would DOD's new
investment in an electronic medical record be used in a FEHBP-like
benefit design?
Instead of fixing existing issues and investment in fixing these,
the Commission's answer is to eliminate the entire program and have
beneficiaries, particularly retirees not on Medicare, pay substantially
more under the premise of receiving more ''bang for their buck.''
The unintended consequences to military medical readiness could be
great. Using MTFs as network providers, competing for business in the
civilian market was not thoroughly examined in the Commission's
report--this represents an unacceptable level of risk. Especially since
the MTFs exist for readiness or a unique mission. The use of TRICARE as
a back-up to absorb care during periods of readiness has largely been a
success--for example, during large scale deployments of medical staff
on the hospital ships in both war-time and humanitarian scenarios.
The Commission also presumes the Defense Department, in working
with FEHBP insurers, would be afforded the right to set provider
payments and beneficiary copayments for MTFs versus other providers,
and adjust those as necessary to direct patient flow to MTFs. MOAA
remains dubious that a broad range of insurers would be comfortable
with extending such authority to one provider, however preferred.
Military families would have to receive extensive education when
selecting health plans. Overwhelming choice may be just that -
overwhelming and confusing, especially in the face of the existing
stressors military families face. Educating beneficiaries on their
TRICARE benefits has been a challenge since the program's inception.
Under the MCRMC concept, we are skeptical that DOD could effectively
educate beneficiaries on an even greater array of plans.
Under FEHBP, an open season for plan changes occurs once a year. If
a military family member experienced a new diagnosis or health status
change, he or she may want to change plan coverages. This would be
especially problematic with mental health issues. There are already
shortages of mental health providers in many States with our largest
military bases, regardless of network.
Premiums, copays, unique plan features, and the determination of
medical necessity would vary by location and plan design. This would be
a dramatic and unwelcome departure from what has been a program with a
uniform benefit. Military families today can only plan as far as their
next set of orders. They have come to rely on the uniform nature of the
health benefit administered by TRICARE, no matter where they are
stationed in the world.
For example, Applied Behavior Analysis (ABA) is a therapy
increasingly sought by military families for autistic dependents on the
autism spectrum. Within the FEHBP, the therapy is not a covered benefit
and it is offered by only 20 plans in a handful of States.
Another area not fully addressed by the Commission is pharmacy
coverage. The Commission proposes that the TRICARE pharmacy program
remain unchanged. But virtually all of the FEHBP plans include
different levels of pharmacy coverage, and practical experience is that
the TRICARE pharmacy program is virtually unusable if other coverage
exists. MOAA believes this would entrap military families between
significantly higher costs for civilian coverage or extraordinary
bureaucratic problems if they seek to use TRICARE pharmacy programs.
The needs of a military family today can be dramatically changed by
the demands of service. Unlike the TRICARE managed care support
contractors, it is not clear that commercial plans under an FEHBP-like
scenario would be sensitive to or responsive to a military family's
unique needs. ``Ready to Serve'' the title of MOAA and United
Healthcare Foundation's recent survey on civilian providers, conducted
by RAND and released in December 2014, shows that civilian mental
health providers are not equipped with the necessary knowledge or
cultural sensitivity required in the care of military and veterans
populations.
Putting this major military health benefit under the administration
of the Office of Personnel Management (OPM) appears to be a significant
step toward treating military beneficiaries like Federal civilians for
health care purposes. Military beneficiaries incur unique and
extraordinary sacrifices unlike the service conditions of any civilian,
and their health benefits have been intended to be significantly better
than civilian programs.
MOAA's recent survey of over 7,000 respondents revealed that 4 out
of 5 prefer TRICARE over an FEHBP-like system for retirees and
families, and 9 out of 10 do not feel confident that OPM would be able
to understand and accommodate the unique needs of military families.
The respondents include active duty, active duty family members,
retirees, military spouses, and survivors of all the uniformed
services.
An additional concern of MOAA centers on the potential premium
working-age retirees will pay. It is not clear how the commission
determined premium cost shares for beneficiaries. A 20-percent premium
cost share for retirees is substantially too high, regardless of any
phase-in period. A cost structure this high devalues the in-kind
premiums servicemembers contributed through decades of arduous service
and sacrifice acknowledged in previous cost-share settings.
The fundamental issue is that recognition of decades of service and
sacrifice in uniform should be formally recognized in any cost
determination. A 20 percent cost share is not far off from the 28
percent cost share for Federal civilians using FEHBP. Comparison with
civilian or corporate cash fees is inappropriate. Military retirement
and medical benefits are the primary offset for enduring decades of
arduous service conditions. Career retirees pre-pay huge ``upfront''
health care premiums through 20 to 30 years or more of service and
sacrifice.
proposal to establish a joint readiness command
MOAA has long been on record in support of a joint or unified
medical command to ensure interservice consistency of policy,
consolidated budget authority, appropriate determinations for medical
staffing, training, procurement efficiencies, and more.
Unfortunately, the creation of another layer of bureaucracy does
not address the root of the MHS's problems. The largest barrier to a
truly efficient and highly reliable healthcare organization is the
current three service system organization. This arrangement is directly
responsible for extensive costs through the duplication of technology
services, medical equipment, lack of common procedures and processes,
especially in the much touted multi-service market areas. Literally
millions are wasted each year due to the inefficiencies of this type of
structure.
An example is the military's integrated referral and management
center which serves the multiple clinics and hospitals in the National
Capital Area. It is charged with making specialty referrals and
appointments for the geographical market area. However, they only end
up making approximately 20 percent of the total appointments, due to
the fact that there is no unified policy and process in appointing
beneficiaries into all of the military clinics and hospitals. The
hospitals and clinics still report to three different service commands
under three or more different sets of orders and varying budgets. This
wastes millions in missed referrals going into the private sector.
There have been measures made at integration. The creation of the
Defense Health Agency is a step in the right direction and has proven
it can get things done--but its budgetary successes
have mainly been borne on the backs of the beneficiaries by higher
pharmacy fees, mandatory mail order and rising premiums and co-
payments. The MCRMC health care proposals represent a ``shot across the
bow'' and should serve as a catalyst for the DOD to quickly push
through with these long needed structural reforms under the direction
of Congress.
Concerns
This new command structure does not provide a unified budget
authority, but rather, participation in the budget process with the
service and others. One of the key's to an efficient joint organization
is budget accountability and direct oversight.
The proposed rate setting authority charged to coerce beneficiaries
into using MTFs and to induce private insurers to use the facility is
risky and managerially cumbersome. Even if potential insurers would
allow one provider system to exert such powers. It is unclear if this
could increase the potential to put MTF needs in more direct opposition
to dependent/retiree/survivor beneficiary desires.
Historically, MTFs have wanted older beneficiaries for trauma,
surgical procedures and other needs, but has not had the capacity to
enroll beneficiaries for routine and specialty care.
Placing a new bureaucratic structure over the existing one seems
redundant, especially if it fails to address the principle problems of
diffuse budget and oversight authority for DOD-wide medical programs.
The functions overseeing readiness already exist in the Service
Surgeons General and Joint Staff Surgeon. Service consolidation can and
should take place without introducing another costly layer.
tricare has its faults but can be improved with congressional
leadership
Problems in TRICARE like rising costs, barriers to access, and lack
of customer service in certain areas, can be addressed in a systematic
manner without resorting to its elimination. The elimination of TRICARE
would be akin to ``throwing out the baby with the bath water'' and does
not get to the root of the problems. The recent MHS Review produced a
baseline starting point.
The time is ripe to institute change. The development of a new set
of TRICARE contracts, set to start in 2017, is about to commence
bidding. The Request for Proposal (RFP) seeks industry bidders and
additional input has gone out. Now would be an opportune time to
institute innovative ideas from industry.
The Department of Health and Human Services' Centers for Medicare
and Medicaid (CMS) have instituted reforms calling for more payments to
providers that place the value of health care over volume. There needs
to be more focus on value based reforms which reward innovation
and quality outcomes. DOD and TRICARE should maintain alignment
with Health and Human Services and set goals to institute these same
types of payment reforms into the new contracts. For example, a program
to bench-mark that is already under TRICARE, the U.S. Family Health
Plan, uses capitated financing to effectively manage its defined
beneficiary population.
A great deal of the cost increases have come from the current fee-
for-service payment structure that TRICARE uses to pay its providers as
this facilitates increased use of services. DOD must recognize that it
is simply not possible to maintain a traditional fee-for-service
discount purchasing strategy to keep costs down and improve access for
beneficiaries.
The discounted fee-for-service strategies from the past have also
not been effective in creating provider networks that meet the needs of
TRICARE beneficiaries in an economical and customer satisfying way. The
Commission acknowledged this feedback from beneficiaries in their
report.
A value-based model will require new ways of thinking and risk-
sharing. Under new contracts, managed support contractors and MTFs
should be incentivized to align and integrate, with risk shared by each
for the success of the whole.
These payment innovations can and should be tried in a pilot
program, using one or more of the enhanced multi-service markets as a
testing ground. Experimenting with innovative public/private
partnerships, including the VA, should be done to increase training
case-mix and critical skills maintenance. This can be done now, without
change to the whole system.
One area where the Commission proposal to use an FEHBP-like program
could be productive is for Guard and Reserve members and their
families. We have long sought to bridge the health care continuity gap
between and during periods of activation. As Guard and Reserve family
members are not usually subject to frequent relocations and typically
prefer to keep their employer coverage, the FEHBP-like concept would be
more fitting for this population, including providing these families an
option for an allowance to cover their civilian employer coverage
during periods of deployment.
By effective rationalization of the current military health care
infrastructure, great savings can be gained with resulting better
quality of care for beneficiaries. It simply does not make sense to
keep open facilities with minimal inpatient occupancy.
For the continuous development of the future MHS and TRICARE, DOD
would benefit from frequent dialog with leaders in the health care
industry. A regularly scheduled forum could be modeled after the
existing Defense Health Board (DHB), focused on industry best-practices
from all sectors. A forum like this could also leverage ideas from the
Commission and beneficiary engagement.
Lastly, targeted investment should be made in technologies and
people to support established joint processes and procedures that will
generate real return on investment.
summary
The MCRMC has made 15 recommendations--2 of which propose dramatic
changes to both military retirement and health care programs that
could, in MOAA's opinion, seriously impact on career retention required
in the All-Volunteer Force. Both recommendations produce a negative
effect on the pocket book of those whom the government needs to serve
for a career of 20 years or greater. For example, the combined effects
of the MCRMC's health care and retirement change, if fully implemented
today, on a retired E-7's annual retirement value is over $6,400 or a
loss of 27 percent until they can draw from their Thrift Savings Plan
at age 59\1/2\.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Therefore, a complete overhaul of a health plan and the system
serving 9.6 million military retiree and family beneficiaries deserves
thoughtful and careful consideration, with Congress ensuring that
legislation and implementation reflects intent. Congress should take
all needed time to make deliberate decisions about this proposed
wholesale change, ensuring that both Congress and stakeholders
understand the second- and third-order effects.
Some of the findings in the MCRMC report align with concerns raised
by MOAA, and deserve to be addressed now, pending deeper consideration
of the broader issues. The number one action Congress should take
immediately is to demand that DOD without delay, reform under a truly
unified military health care system--and not just the servicemember's
share of it. Without unified budget and oversight delivery of current
multi-service, multi-contractor programs, TRICARE as we know it will
remain parochially administered and sub-optimized.
Servicemembers, whether in garrison, down range, or anywhere in the
world, should not have to worry if they have selected the appropriate
health care coverage for their families. Radical change of core
retention programs always carries significant risk of unintended
negative retention effects. That risk is exponentially magnified when
the changes include significantly higher costs for already-stressed
beneficiaries.
The key is to ensure that program changes entail real improvements,
both for readiness and the beneficiaries, and avoid the kinds of
changes that merely create a new set of problems for both.
STATEMENT OF THOMAS J. SNEE, NATIONAL EXECUTIVE DIRECTOR, FLEET
RESERVE ASSOCIATION
Mr. Snee. Senator Graham, Ranking Member Gillibrand,
Senator Tillis, Senator McCain--Senator McCain, it's good to
see you. A few years ago, we worked on the reemployment rates
of our veterans a few years ago, and I'm glad that we're still
producing that and keep going. So, again, I thank you--and
other members of the subcommittee, my name is Tom Snee, and I'm
the National Executive Director for the Fleet Reserve
Association (FRA) of 60,000-plus enlisted serving in the U.S.
Navy, Marine Corps, and Coast Guard. I want to thank you today
for the opportunity to express the views of our Association on
the Commission's recommendations related to healthcare, a
valued concern throughout. We also want to thank the Commission
for reaching out to the FRA to seek our input on these complex
and challenging issues during their deliberations.
Before commenting on the Commission's healthcare
recommendations, FRA still notes with concern the impact of
sequestration that is felt outside, not only towards national
security, but to pay and allowances. Please remove DOD from
sequestration.
It should be also noted, on aside, that, in the total force
manning of over 75 percent enlisted mannings, that there were
no representation of enlisted on the Commission staff.
Recommendation number 6 of the Military Compensation and
Retirement Modernization Commission is the most wide-ranging
recommendation that calls on the Congress to replace the
current healthcare arrangement with a new system that provides
beneficiaries with choices offered by commercial insurance
companies. The Commission found that TRICARE is no longer
fiscally sustainable. FRA believes that such vast and dramatic
change to the healthcare benefits should require additional
reviews. It is recognized that the beneficiaries would be
offered a variety of cost choices in their geographic areas of
medical service providers, ranging from the array of copays and
premiums. The critical factor is the making of these choices as
having a well-informed service and family members in the
decisionmaking process of these plans. This is the cause-and-
effect attribute to recommendation number 3, the need for a
well-structured and reenergized financial literacy program
providing an understanding of health insurance and accompanying
care.
Again, recommendation number 6 calls for the realignment of
costs for beneficiaries, which has a major concern with our
members under the age of 65. The Association believes that,
over time, this could devalue the current 20-plus-year career
of military service that retirees can expect as reduction in
healthcare premiums. The question we need to ask is, Are we
advocating a culture of early departure over a viable career
with a potential negative impact on manning requirements either
through recruiting or retention models? FRA advocates that
other options to make TRICARE a more cost-effective measure
would be implemented before raising costs--higher costs to
TRICARE beneficiaries.
It has been noted that higher costs will be ensure a better
access in care response. We ask, Will this be a measured
contractual guarantee of the future? FRA shares the concern
about the timely access and waiting time for care. The Naval
Medical Research Center has reported TRICARE benefit
beneficiaries in some locations are experiencing half of the
referrals for purchased care network that waited longer than
the 28-day standard. Even in locations with the highest access
to care, only 16 percent of referrals maintain the 28-day
standard. FRA recommends a measurable pilot program in specific
geographic locations currently not served by TRICARE Prime that
might be a demonstration if the plan is effective in meeting
the needs of the beneficiaries.
FRA supports the recommendation number 8, and strongly
encourages, again, a quicker collaborative joint action between
DOD and the Department of Veteran Affairs on the joint
electronic health record system to provide a seamless
transition for our members once they leave DOD into the VA
system.
Limited time does not permit me to go into more detail, but
our written testimony does provide further details.
Mr. Chairman and the committee, I thank you very much for
our opportunity to express our views. Thank you.
[The prepared statement of Mr. Snee follows:]
Prepared Statement by The Fleet Reserve Association
the fra
The Fleet Reserve Association (FRA) celebrated 90 years of service
last November 11, and is the oldest and largest enlisted organization
serving Active Duty, Reserves, retired and veterans of the Navy, Marine
Corps, and Coast Guard. FRA is congressionally chartered, recognized by
the Department of Veterans Affairs (VA) as an accrediting Veteran
Service Organization (VSO) for claim representation, and is entrusted
to serve all veterans who seek its help. In 2007, FRA was selected for
full membership on the National Veterans' Day Committee.
FRA was established in 1924 and its name was derived from the
Navy's and Marine Corps program for personnel transferring to the Fleet
Reserve or Fleet Marine Corps Reserve after 20 or more years of active
duty, but less than 30 years for retirement purposes. During the
required period of service in the Fleet Reserve, assigned personnel
earn retainer pay and are subject to recall by the Navy.
FRA's mission is to act as the premier ``watch dog'' group in
maintaining and improving the quality of life for Sea Service personnel
and their families. FRA is a leading advocate on Capitol Hill for
enlisted active duty, Reserve, retired and veterans of the Sea
Services. The Association also sponsors a National Americanism Essay
Program and other recognition and relief programs. In addition, the FRA
Education Foundation oversees the Association's scholarship program
that presents awards totaling nearly $123,000 to deserving students
each year.
The Association is also a founding member of The Military Coalition
(TMC), a 32-member consortium of military and veteran's organizations.
FRA hosts most TMC meetings and members of its staff serve in a number
of TMC leadership roles.
For 9 decades, dedication to its members has resulted in
legislation enhancing quality of life programs for Sea Services
personnel, other members of the uniformed services plus their families
and survivors, while protecting their rights and privileges. CHAMPUS,
(now TRICARE Standard) was an initiative of FRA, as was the Uniformed
Services Survivor Benefit Plan. More recently, FRA led the way in
reforming the REDUX Retirement Plan, obtaining targeted pay increases
for mid-level enlisted personnel, and sea pay for junior enlisted
sailors. FRA also played a leading role in advocating recently enacted
predatory lending protections and absentee voting reform for
servicemembers and their dependents.
FRA's motto is: ``Loyalty, Protection, and Service.''
certification of non-receipt of federal funds
Pursuant to the requirements of House Rule XI, the Fleet Reserve
Association has not received any Federal grant or contract during the
current fiscal year or either of the 2 previous fiscal years.
introduction
Mr. Chairman, FRA salutes you, the ranking member and all members
of the subcommittee, and your staff for the strong and unwavering
support of programs essential to Active Duty, Reserve component, and
retired members of the uniformed services, their families, and
survivors. The subcommittee's work has greatly enhanced support for our
wounded warriors and significantly improved military pay, and other
benefits and enhanced other personnel, retirement and survivor
programs. This support is critical in maintaining readiness and is
invaluable to our uniformed services engaged throughout the world
fighting to stop terrorism generated by Islamic extremism, sustaining
other operational requirements and fulfilling commitments to those who
have served in the past. The Association wants to thank the
Subcommittee for the opportunity to express its views on the
Commission's recommendations related to health care.
background
The National Defense Authorization Act for Fiscal Year 2013 (H.R.
4310-P.L. 112-239) establishes the Military Compensation and Retirement
Modernization Commission (MCRMC), but limits its recommendations from
being a BRAC-like endorsement, as originally proposed, in its review of
the current compensation and military retirement system. FRA believes
it's important that this distinguished Subcommittee and its House
counterpart maintain oversight over commission recommendations. While
FRA supports many of the Commission's recommendations, it was noted
that no enlisted personnel were appointed to serve on the Commission.
More than 75 percent of the current active force is enlisted and
therefore should have representation on this Commission.
The commission was instructed not to alter the current retirement
system for those already serving, retired or in the process of
retiring. Along with a review of military compensation, the president
asked that the commission look at the ``interrelationship of the
military's current promotion system.''
The driving-force for creating the MCRMC has been the myth that
``personnel costs are eating us alive'' and that personnel costs are
``unsustainable.''
Of historical note, in 1986 Congress passed, over the objection of
then Secretary of Defense Casper Wienberger, major retirement changes,
known as ``Redux,'' that significantly reduced retirement compensation
for those joining the military after 1986. FRA led efforts to repeal
the act in 1999 after the military experienced retention and
recruitment problems. The Association continues to monitor the take
rate for personnel choosing to remain on the High-3 program, or the
Redux program at 15 years of service.
The Commission believes that it can make drastic changes to pay,
retirement, and other benefits and assumes it will have no impact on
retention, recruitment, and readiness. Past experiences with
substantial benefit changes indicate otherwise. Rhetoric about
``unsustainable'' personnel costs since 2000 is misleading.
Improvements since 2000 to personnel programs were needed to offset pay
and benefit cutbacks of the late 1980s and the 1990s that undermined
retention and recruitment.
FRA wants to thank the members of the Commission and their staff
for allowing FRA to have input while the report was being written. The
Commission met with 97 other advocacy and visited 55 military
installations, received more than 150,000 survey responses from active
duty and retirees. In addition, the Commission held eight Town Hall
meetings to further understand the complexity of the military
compensation and retirement systems.
defense out of sequestration
Before commenting on MCRMC health care recommendations, FRA wants
to note with growing concern the impact of sequestration. Budget cuts
mandated by the Budget Control Act of 2011 pose a threat to national
security and will substantially impact member pay and benefits. These
automatic cuts, known as Sequestration, require that 50 percent come
from Defense, even though Defense only makes up 17 percent of the
Federal budget. These cuts were intended to be so punitive that
Congress and the administration would be forced to work together to
find reasonable alternatives. Unfortunately, this has not occurred and
Congress along with the White House have been unable to come to a long
term agreement on the budget without sequestration cuts. Unless current
law is changed, the DOD will have to cut an additional $38 billion in
fiscal year 2016 and some $269 billion over the following 5 fiscal
years.
The DOD budget was already scheduled to be cut by $487 billion over
a 10-year period before the enactment of sequestration, which will cut
an additional $500 billion in the defense spending if fully
implemented. The Bipartisan Budget Act of 2013 mitigated the spending
cuts for fiscal year 2014 and 2015. However, the original sequestration
cuts for fiscal year 2016 thru 2021 remain in effect--continuing to
place national security at risk.
Secretary of Defense Chuck Hagel has warned that future
sequestration budget cuts will create a ``hollow force.'' The Services
have already canceled deployment of ships, slashed flying hours,
renegotiated critical procurement contracts, temporarily furloughed
civilian employees, and are in the process of reducing force structure,
giving America the smallest military force since before World War II.
If sequestration is not ended, additional force reductions will likely
go deeper and training and modernization levels will be further
impacted.
mcrmc final report
The report makes 15 major recommendations intended to improve the
cost-effectiveness of quality benefits for those who currently serve,
have served and will serve in the future. Five of the 15
recommendations (#3, 5, 6, 7, and 8) pertain to health care and will be
the main focus of this testimony.
FRA strongly supports recommendation 3 that promotes financial
literacy and believes it should include educational information on
health care in conjunction with recommendation 6, which will provide
beneficiaries with choices offered by commercial insurance companies.
Any enhanced program should also include the spouses.
The Association was in the forefront of supporting the enactment of
the Military Lenders Act (MLA) in 2006 and supported the creation of
the Office of Military Liaison within the Consumer Financial Protection
Bureau (CFPB) when the Bureau's enabling legislation was enacted in
2010. FRA continues its work to ensure Active Duty personnel are
protected from predatory lenders, and urges this subcommittee to ensure
that the MLA is effectively administered. The Association applauds
recent efforts by the Consumer Finance Protection Bureau (CFPB) to
regulate predatory lenders through enforcement of the MLA. FRA supports
a more robust Personal Financial Management (PFM) training that should
include education on health insurance. Furthermore such an invigorated
plan should include training for the spouse.
FRA supports recommendation 5, but is unsure if this can be
effectively implemented. The intent of this recommendation is to ensure
medical combat readiness. FRA supports the establishment of a Joint
Medical Command to reduce duplication of services for each Service
branch and ensure inter-service consistency of policy and budget
oversight.
Recommendation 6 impacts current Active Duty, the Reserve
component, and retirees under age 65, which calls on Congress to
replace the current health care arrangement with a new system that
provides beneficiaries with choices offered by commercial insurance
companies. The Commission found that TRICARE is no longer fiscally
sustainable. At this time FRA does not support or oppose this
recommendation; but believes that such vast and dramatic change to the
health care benefit requires additional review.
Beneficiaries would be switched to a plan similar to the Federal
Employee Health Benefit Program (FEHBP), except that military treatment
facilities would be included in the network. Like the FEHBP
beneficiaries could choose from a selection of commercial insurance
plans. The plan would be administered by the Office of Personnel
Management (OPM) rather than the Department of Defense (DOD).
Beneficiaries would be required to pay 20 percent of all health care
costs. Beneficiary family members would not be covered under the plan
and would be provided a Basic Allowance for Health Care (BAHC) to cover
the cost of premiums and deductibles for an average health care plan.
Reserve component (RC) members who are mobilized would also receive a
BAHC in lieu of TRICARE coverage.
Although there are similarities between the BAHC and the base
allowance for housing, the big difference between the two is that
housing costs are predictable but health care costs are not.
Shifting costs to retirees under age 65 is a serious concern for
FRA. The Association believes that this shift devalues 20 or more years
of arduous military service that earned the retiree an offset in
healthcare premiums during retirement. FRA advocates that other options
to make TRICARE more cost-efficient should be implemented first as
alternatives to shifting costs to TRICARE beneficiaries.
FRA is also concerned about the timely access to care. The MCRMC
report notes that TRICARE Prime beneficiaries in some locations that
half the referrals for purchased care network waited longer than the
28-day standard for purchased care network. Even in locations with the
highest access to care, 16 percent of referrals still do not get
appointments within the 28-day standard. Perhaps a pilot program in a
limited geographic location not currently served by TRICARE Prime could
demonstrate the efficiency of the plan.
The Association supports recommendation 7 that seeks to improve
support for servicemembers with special dependents. These improvements
to the Extended Care Health Option include expanded respite care hours,
and consumer directed care. FRA wants to make sure that U.S. Coast
Guard personnel are also covered by this program. FRA represents the
Sea Services and wants to ensure that the Coast Guard benefits have
parity with DOD benefits.
FRA welcomes recommendation 8 that attempts to improve
collaboration between DOD and the Department of Veterans Affairs (VA).
FRA supports a joint electronic health record that will help ensure a
seamless transition from DOD to VA for wounded warriors, and
establishment and operation of the Wounded Warriors Resource Center as
a single point of contact for servicemembers, their family members, and
primary care givers. The Association is concerned about shifting of
departmental oversight from the Senior Oversight Committee comprised of
the DOD and VA secretaries per provisions of the National Defense
Authorization Act for Fiscal Year 2009, to the more lower echelon Joint
Executive Council. This change is perceived by many as diminishing the
importance of improving significant challenges faced by
servicemembers--particularly wounded warriors and their families--in
transitioning from DOD to the VA. The recommendation to provide
additional authority to the Joint Executive Committee is a step in the
right direction.
Under a broader improved collaboration it should be noted that
Medicare is not authorized to reimburse VA hospitals for care provided
to Medicare eligible veterans. This results in veterans being forced to
decide between receiving medical care through the VA, or using Medicare
at a non-VA facility and foregoing the personalized care of a VA
hospital. The majority of veterans pay into Medicare for most of their
lives, yet the law prohibits them from benefitting from this via care
at VA facilities later in life.
conclusion
FRA is grateful for the opportunity to provide comments on these
recommendations to this distinguished subcommittee.
STATEMENT OF MAJOR GENERAL GUS L. HARGETT, JR., ARNG (RET.),
PRESIDENT, NATIONAL GUARD ASSOCIATION OF THE UNITED STATES
General Hargett. Mr. Chairman, Senator Gillibrand, Senator
Tillis, Senator McCain, thank you for the opportunity to
testify today on the healthcare recommendation made by the
MCRMC in their final report.
National guardsmen nationwide applaud the MCRMC for
providing some innovative ideas and a real starting point to
deliver a reform of the military retirement and healthcare
systems. Maintaining medical readiness, including dental
readiness, allows the National Guard to remain a truly
operational force for the Army and Air Force.
The MCRMC recommends that changes and alternatives to
TRICARE are in order, citing problems with access to care,
number and location of providers, cumbersome referral and
authorization process, limited provider networks, and member
preferences for greater choice. All these problems exist today
in the National Guard, and I can assure you, because I have
been there and done that.
The MCRMC recommends giving servicemembers the option of
selecting from the more than 250 Federal healthcare plans
available under the Federal Employee Health Benefit Program.
This program would be called TRICARE Choice. I believe that
expanded choices for health insurance will be well-received by
all National Guardsmen.
One of our top priorities has always been to see that every
member of the National Guard and their families are able to
afford healthcare. But, NGAUS remains concerned with the actual
cost of these plans. Although the research work of the
Commission is broad and important, that we see the actual
numbers and the cost of each program and it be given to each
servicemember under these 250 plans. NGAUS would recommend the
subcommittee bring in actuaries to do cost-benefit analysis of
each of the programs. These questions need to be answered
before members and retirees of the Guard would feel secure in
supporting the change in TRICARE as it now stands.
Another issue of access to healthcare benefits involves the
men and women of the Guard who are military technicians. Our
technician force is made up of people who run our armories, our
wings, on a daily basis. They do not have the same privileges
under the current law, nor were changes in access and
affordability addressed by the Commission. These men and women
who serve under Title 32 or Title 5 should also be able to take
advantage of a new modernized healthcare program. I ask that
the subcommittee examine the healthcare benefits now available
to our technicians.
One access issue involves the Guard and Reserve retirees
under age 60, gray area of retirees, who would continue to have
access to healthcare benefits, but at full premium. This does
not compare fairly to the Commission's recommendation that
would allow Active Duty retirees to maintain continuity of
coverage at only 20-percent premium cost-share. In all
fairness, providing a premium cost subsidy to gray-area
retirees to assist them in maintaining continuity of health
needs to be included in the report and any legislation passed
to incorporate the Commission's health access recommendation.
Any recommendation of the Commission, although not directly
healthcare related, does not--although not directly healthcare
related, is to the mental health and welfare of the families of
the members of the Guard. This recommendation concerns military
children. The Commission noted that children experience unique
stress associated with parental deployments and that these
stresses can adversely affect academic performance, and
recommends that children of Active Duty servicemembers be
identified in nationwide reporting of student performance.
Although not mentioned, children of the National Guard and
Reserves should be identified, and their issues addressed, and
NGAUS asks the subcommittee to include them.
We support the changes to protect the viability of the
total force. That cannot be done under the current system and
under the constraints of sequester.
Mr. Chairman, as always, we thank you for the opportunity
to testify before the Commission and stand ready to present--to
assist, as required.
[The prepared statement of General Hargett follows:]
Prepared Statement by Major General Gus Hargett, (Ret.)
Senator Graham, Senator Gillibrand and other distinguished members
of the subcommittee: On behalf of the entire membership of the National
Guard Association of the United States, I thank you for the opportunity
to testify today on the health care recommendations made by the
Military Compensation and Retirement Modernization Commission in their
final report.
First, I would like to go on the record and thank the Commission
for its hard work. National Guardsmen nationwide applaud the Commission
for providing some innovative ideas and a starting point to deliberate
reform of the military's retirement and health-care systems. We believe
its final report is a great way to reduce personnel costs while
preserving the viability of the All-Volunteer Force.
Maintaining medical readiness, including dental readiness, allows
the National Guard to be truly an operational reserve of the Army and
Air Force. NGAUS supports any change in health care benefits that allow
the National Guard to be ready to serve this nation at home and abroad.
The Commission recommends that changes and alternatives to TRICARE
are in order citing problems with access to care, number, and location
of providers, cumbersome referral and authorization process, limited
provider networks and members preference for a greater choice. The
Commission found that National Guard members are faced with difficult
choices during mobilization and demobilization and that these
transitions can be costly for Guard families and disruptive to health
care coverage, especially for servicemembers who are mobilized in
support of a mission that is not a contingency operation. All these
problems do exist for the National Guard. Because guardsman are not
living on bases, but in their communities across the country, access to
care on the current TRICARE Reserve Select program, can be extremely
difficult.
Another issue with the current health insurance program looms large
for the Guard. When a member of the Guard is mobilized, his/or her
health insurance changes. When it changes to the limited provider
network of TRICARE, a member and his/her family usually have to change
doctors. Changing back and forth on insurance is very disruptive to
health care coverage, usually during the time most stressful to a
member and their family. Issues of timely enrollment and issues when
returning to civilian health insurance challenge all activated
Guardsmen and women.
As I understand it, the Commission recommends giving servicemembers
the option of selecting from the more than 250 health insurance plans
available under the Federal Employees Health Benefits Program (FEHBP).
This program would be called TRICARE Choice. Of the 250, at least 11
plans cover every area in the country. The Department of Defense would
sponsor and approve the levels of care of these commercial health
insurance plans and servicemembers and their families would not be
subject to the same rates as other Federal employees within FEHPB. The
thought is that more physicians are available in FEHBP networks and
that it is more likely Guard families' civilian job health insurance
physicians are one in the same. I believe that expanded choices for
health insurance will be well-received by the National Guard for these
reasons.
DOD would also fund part of the Guard member's existing health
insurance plan instead of requiring transition to a DOD-sponsored
commercial programs. For example, Guard members who are mobilized would
receive a new Basic Allowance for Health Care to apply toward a DOD
plan or to cover the employees share of their existing health care
plans. I believe many members of the Guard will take advantage of this
option.
These recommendations should increase access and choice for the
entire Reserve component, but NGAUS remains concerned with the actual
costs of these FEHPB plans. Right now, not every member of the Guard
can afford health care, and along with maintaining military readiness,
one of our top priorities is to see every member of the Guard and their
families are able to afford health insurance. Although the research
work of the Commission is broad, it's important we see the actual
monthly costs of the each program to a servicemember for the 250 plans
that would be available under FEHBP. NGAUS would recommend the
subcommittee bring in actuaries to do a cost-benefit analysis of each
of the programs. Choice and the size of the provider networks should
bring costs down, but these questions need to be answered before
members and retirees of the Guard would feel secure in supporting the
elimination of TRICARE as it now stands.
Another issue of access to health care benefits involves the men
and women of the Guard who are military technicians. Our technician
force is made up of the people who run our armories and wings
on a daily basis. They do not have the same privileges under
current law nor were changes to their access and affordability
addressed by the Commission. Although I understand the Commission could
not address every situation, these men and women who serve under Title
32 or Title 5, should also be able to take advantage of a new
modernized health care program and I ask that the subcommittee examine
the lack of health care benefits now available to our technician force,
and work with the other Committee of jurisdiction to address these
vital concerns.
Another recommendation of the Commission, although not directly
health care related, does relate to the mental health and welfare of
the families of members of the Guard. This recommendation concerns
military children. The Commission noted that children experience unique
stresses associated with parental deployments, and that these stresses
can adversely affect academic performance and recommends that children
of Active-Duty servicemembers be identified in nationwide reporting of
student performance. Although not mentioned, children of the National
Guard and Reserve should also be identified and their issues addressed.
Again, I thank the members of this Subcommittee for the opportunity
to provide input into what I hope will be the start of modernization of
our compensation and retirement systems in the military. NGAUS supports
any changes that promote the viability of the force. It's time now for
all of us associated with the military to work with Congress to finish
the job. NGAUS stands ready to provide the subcommittee with any help
it needs.
Senator Graham. Thank you all.
Senator McCain, would you like to go first?
Senator McCain. No, thank you, Mr. Chairman.
Senator Graham. Okay. Let's sort of get right into it,
here.
Do you all agree that the 5-percent number has to change?
Does anybody expect, if you kept the current system and you
didn't change it at all, that we'd have to adjust premiums
upward over time?
Admiral Ryan. Mr. Chairman, we work with you all to
increase the premiums and then have them at a cost-of-living
rate, so they're already planned to continue to go up. What we
don't have a lot of visibility on is, frankly, where the 5
percent came from.
Senator Graham. Okay. Well, the bottom line is, I think we
need to get over that hurdle that something has to give, here,
on that side. The question is--you're going to have to pay more
or the system's going to collapse over time, and I want to make
sure that you're getting more value for your money.
As to the provider network, it seems to me that they're
been hitting--they've been hit hard, in terms of trying to keep
TRICARE afloat. The only explanation I can give for the fact
that there's so many less people participating in TRICARE
versus these other programs is the reimbursement rate. Does
that make sense?
Admiral Ryan. Mr. Chairman, one thing I would say is that
we, at MOAA, certainly agree that we can't continue with the
fee for service. We have to do, I think, what the Department of
Health and Human Services (HHS) is doing. I think we have to do
what the U.S. Family Health Plan is doing, with capitated
financing or paying for the value of healthcare rather than the
number or volume of procedures that you take. That has--this
policy that Admiral Giambastiani talked about, that has us into
this spiral that we're into. I think if DOD would come under a
single unified command and go to what HHS and others are going
to, with a different way of financing healthcare, paying for
the quality, you would get these networks to start opening back
up again.
Senator Graham. Anybody want to take a shot at that?
General Hargett. Mr. Chairman, when I was the adjutant
general of Tennessee and we had the rural communities, as they
were discussed earlier, that were underserved, I actually had
to write letters to healthcare professionals in communities
where we were not served at all, and just ask them to sign up
for TRICARE. What I constantly heard from everyone is that,
``We're--we just can't take the reduced benefit and see the
number of people that are required under the current system.''
Ms. Raezer. Yeah, Mr. Chairman, I would agree. I think
what--one of our concerns about TRICARE is, TRICARE is not fast
enough to look at changes in how healthcare is financed,
incentivized, where some commercial plans have had to do that.
There have been things happening, as----
Senator Graham. That's what General Chiarelli was saying.
Ms. Raezer. Yes, exactly. Some of it comes down to a
choice. Do you want DOD to take this task on, or do you want to
look for solutions among the private sector in--that's----
Senator Graham. Okay. That's the ultimate issue. Let's take
a poll. Starting with you. What do you think is the best thing
for the Congress to do? Try to take the current system and do
what the Admiral is talking about, or look at the private
sector?
Ms. Raezer. I think Congress needs more time to do both.
What we would recommend is maybe put a hold on the next TRICARE
contract procurement until you can ask questions of DOD. How--
what's the best way to address some of these issues?
Senator Graham. Here's my bias. If I were trying to run a
healthcare company, the last people I'd pick would be the----
Ms. Raezer. Well----
Senator Graham.--DOD.
Ms. Raezer.--I----
Senator Graham. They're good at blowing things up.
Ms. Raezer. So I think you need--there have been questions
raised about--that the details in the Commission's report. So,
we need more details as----
Senator Graham. All right. Admiral----
Ms. Raezer. But----
Senator Graham.--what's your bias?
Admiral Ryan. I obviously have biases, but I was surprised
by our polling, that, with the challenges that the plan has
currently, that eight out of ten, across the spectrum, prefer
to TRICARE. So, I would say Plan A ought to be: You ought to do
what you did in the 1980s and tell DOD they don't have a
choice, they have to go to a unified health plan----
Senator Graham. I gotcha.
Admiral Ryan.--with one person. Then you could fall back on
Plan B if it doesn't work. But, I think----
Senator Graham. Yeah.
Admiral Ryan.--you could get the financing the way you want
it, you could make it a uniform benefit, which is what Senator
Gillibrand is concerned about, and we are. Some of the things,
like the applied therapy for autistic children, they're not
covered in FEHBP, and only about 20 of the programs in all the
States----
Senator Graham. Yeah.
Admiral Ryan.--even cover it. So, a uniform plan is a
pretty good benefit.
Senator Graham. Yeah. Okay.
Mr. Snee?
Mr. Snee. Mr. Chairman, the Fleet Reserve, as I mentioned
in my statement, of a pilot program, could probably be of the
best to reevaluate over a period of time. Of course, I wouldn't
come right out and say, but----
Senator Graham. I gotcha.
Mr. Snee.--maybe I'm just saying--but, one of--the other
thing is, maybe combine the medical commands.
Senator Graham. Yeah.
Mr. Snee. Another thing is the--incentivize to encourage
retirees to use the MTF, so there's a little bit more of that
level from the--especially of----
Senator Graham. That's not going to work very good under
sequestration.
Mr. Snee. Well, I understand, sir.
Senator Graham. Yeah.
General?
Mr. Snee. It's just an idea. The----
Senator Graham. Yeah, I know. I know.
Mr. Snee.--other thing is, we can send additional
information in writing, sir.
Senator Graham. I gotcha.
General?
General Hargett. Mr. Chairman, I think if we continue to do
the same thing with the same systems, we will get the same
result. I think we have to look at change. I think it's up to
this subcommittee and the Congress to figure out how to do that
change. We're open to help with the change.
Senator Graham. Senator Gillibrand.
Senator Gillibrand. Thank you, all of you, for the--your
testimony. It's very helpful.
The Commission's report describes significant beneficiary
dissatisfaction with the current TRICARE health benefit. So,
I--it's interesting, Admiral, that you said eight out of ten
preferred TRICARE, which was pretty alarming--shocking to me,
actually.
So, Ms. Raezer, the National Military Family Association is
an important voice for our military families. How would you
describe the military family assessment of TRICARE? Did you
guys do polling similar to what the Admiral did?
Ms. Raezer. We have not surveyed the way MOAA did, but we
did--have gone out to families, did a lot of gathering of input
as we were working through the military health system review
and to provide input to DOD for that. We could get a lot of
feedback from families.
There is a--families are used to TRICARE. They will say,
``I'll accept the hassle of TRICARE because of the cost.''
They're dealing with a lot of things, and accepting of a lot of
things that they shouldn't have to accept.
Senator Gillibrand. So, just to follow up on that, one of
the concerns we were having is that--obviously, military
families move frequently, and they have limited options under
TRICARE. But, at the same time, TRICARE covers a wide range of
medical needs, regardless of where they move. Do you think that
this new model of care will provide the same level or greater
access to quality of care that exists now? Have you assessed
that?
Ms. Raezer. I think there are options, but a lot of how
families will actually access is--is going to be dependent on
what kind of information they get. It's a lot easier to give
information on TRICARE and how it does or doesn't work in
certain places. When you have more choices, families are going
to need more education, ``When do I pick a national plan''----
Senator Gillibrand. Right.
Ms. Raezer.--``versus a local plan?'' for example.
Senator Gillibrand. Are you concerned about how military
families will be able to transfer medical records maintained by
a private provider when the family is required to move to a new
location? Is that something you've assessed?
Ms. Raezer. That's already a problem. If I go to a
civilian--if my TRICARE prime doc at a military hospital sends
me to a civilian specialist, if I don't carry that record back
to that civilian's--to that primary doctor, the--or vice versa,
if I'm going from a military specialist back to a civilian
primary care manager, I'm the one carrying the record. So----
Senator Gillibrand. So, we might have to require portable
records, which is obviously a huge problem from going to----
Ms. Raezer. Yeah.
Senator Gillibrand.--Active Duty to veteran service,
anyway.
Admiral, in your polling, did you poll both Active Duty
military families and retirees?
Admiral Ryan. Yes, Senator, we did.
Senator Gillibrand. Was there a difference in their
assessments?
Admiral Ryan. There was a slight difference. We had--about
10 percent of the folks were Active Duty, because we're--we
have 90,000 Active Duty and we have 300,000 that are in some
stage of second careers or third careers.
It was interesting, of the 400 spouses that responded, they
were at 85 percent, they preferred TRICARE to an FEHB program.
Overall, it was 80 percent. For the Active Duty, there was a
slight split. Below 35, it was about 73 percent. Above 35, it
was about 78 percent that preferred TRICARE to the FEHB. So, it
was fairly consistent----
Senator Gillibrand. Interesting.
Admiral Ryan.--across all.
Senator Gillibrand. Mr. Snee and General Hargett, did you
have any feedback from your members?
General Hargett. Yes, ma'am. The most people that we heard
from--and bear in mind, our people are in rural communities,
they don't have access to the Fort Braggs and the Fort
Campbells--most of them were favorable to change----
Senator Gillibrand. Okay.
General Hargett.--because of the lack of access and----
Senator Gillibrand. Because of the challenge with access,
yeah----
General Hargett. Yes, ma'am.
Senator Gillibrand.--very much so.
General Hargett. Yes, ma'am.
Senator Gillibrand. I see that in New York State all the
time.
General Hargett. Yes, ma'am.
Senator Gillibrand. Mr. Snee?
Mr. Snee. Yes, ma'am. We surveyed 80 percent of ours--
membership, as well. As you said, it is well with--in the
Tennessee area of considering the Active Duty folks is where
they're going to be, especially with our recruiters and our
reservists in this type of thing. But, with--they want to keep
TRICARE.
Senator Gillibrand. One of the things that I hear a lot
from our veterans is that the mental health services that are
needed really aren't there, that, in fact, for a female who is
suffering from post-traumatic stress disorder, she may avoid
the VA, because they don't have specialists who understand her
concerns or what she's going through, or various stigma
associated with going through existing structures. Do--have you
done any assessment if this would perhaps help, the access to
mental health services, being able to go general providers,
where there are specialists and expertise, and have a wider
choice might benefit some of our retirees and veteran
population? But--I don't know, so I'd like to know if you've
had any analysis on that.
Admiral Ryan. Senator Gillibrand, that's a great question.
I was surprised. We chartered a study on mental health--
civilian mental health workers and--were they culturally
sensitive to the military, where they could be effective? RAND
did the study for us, and we can make that available to you,
but we were very surprised that the majority--I want to say
close to 90 percent--did not have the cultural sensitivity to
be effective in their counseling----
Senator Gillibrand. In the military----
Admiral Ryan.--of military families and children, as well
as the veterans. That study, we did in 2014. We briefed up
there on the Hill, but we haven't gotten it out as much as we
want to.
Some States are more effective at helping with that.
Joining forces has helped with doctors. But, overall, the RAND
study was pretty dramatic in the fact that they didn't have the
cultural sensitivity and awareness that they needed to be
effective.
Ms. Raezer. But, Senator, there's also an issue with just
the--the network issue. We hear from too many Active Duty
families who are trying to get behavioral healthcare for a
child, and they've gone through the list in the--that--in the
network, and continue to hear, ``No, we're not taking any new
patients. We're not taking TRICARE patients. No, we're long--no
longer in the network.'' So, there are access issues right now.
We think the sensitivity, there are ways to--that should be
done to make that better for all providers. But, for a lot of
our families, it starts with access. They can't get the care.
Senator Graham. One quick question and I'll turn it over to
Senator Tillis, here.
When people say they prefer TRICARE to a more commercial
system, how do they know, if they've never been in it?
Senator Gillibrand. Yeah, that's the unknown, you're right.
Senator Graham. Yeah.
So, Senator Tillis, go ahead.
Senator Tillis. Actually, just--I was channeling my first
question through the chairman.
But, because the question that I had--and it went back to
maybe some of the surveys or polling, just--I'd be very
interested in taking a look at the methodology and how the
questions were asked, because the--it's one thing to say--first
off, I was astonished by the numbers, in the 70s. I thought,
generally speaking, people don't like their health plan, for
just general reasons. So getting anywhere beyond the 60s would
be surprising to me, in terms of the user experience. But if
you look at--if you couch some of the questions--and I think--
and is it--am I pronouncing it right? Ms. ``Razor''?
Ms. Raezer. Yes.
Senator Tillis. If you couch the question by saying--if I'm
in Fayetteville, and I go from having 15 providers who are
willing to participate in the TRICARE plan, and 138--and I will
guarantee you, knowing North Carolina relatively well, I know
about the quality of the providers at the other end of the
spectrum--would they potentially answer that question
differently?
This is more with an eye towards the value for the money.
You look at behavioral health, the number of people that may
opt out of being in a provider network now simply because the
reimbursement rates do not make it viable in the face of a
number of other people seeking the care that may be able to be
with that insurer that has a higher reimbursement rate.
So, how do we get--I mean, do you all feel like that, in
spite of all that I just said there, that, generally speaking,
your members are satisfied with TRICARE as it exists today?
Ms. Raezer. I know there are military families who are very
satisfied with TRICARE because they're basically healthy and
they're willing, in many cases, to wait for a little bit of
access in a military hospital because they're not paying
anything out of pocket. But, anecdotally--and I think a good
question for DOD is--how many families are switching from Prime
to Standard? Why do you think--because Standard, they pay more,
but they have more choice.
Senator Tillis. Right.
Ms. Raezer. I know a lot of our families who get frustrated
in doing some of the bureaucratic goat ropes will say, ``I'm
going to manage my own care. I'm going to go to Standard.'' I
think there's--families are looking at the cost. They're afraid
of change. There's been so much change. There's a lot of
anxiety, and so, ``Well, we know what to expect with TRICARE
right now, so we're not sure we want to take that leap into
something different.''
Senator Tillis. I always love my insurance when I'm not
using it.
But, what about the rest of the people on the panel, on the
same question, about your members?
Admiral Ryan. It's a great question, and this was more than
just our members. We had over 1,500 noncommissioned officers
answer, 400 spouses. Some of them didn't say whether they were
noncommissioned officer spouses or officer spouses. But, we got
a cross-section. We were really trying to find out just how
people felt. Because the way the Commission asked the question,
I think, was fair, but it's--who was--who doesn't want more
access? Who doesn't want it to be more timely? We know there
are problems with that, as Ms. Raezer has said. So, we were
surprised by the response, that, despite the challenges--and
that's why we're leaning toward Plan A, demand that they go to
a optimized system of one unified person in charge, where you
can hold them accountable for getting a uniform plan, with
better type of financing, where there's risk between the
contractor and the military, and it--whether it's capitation or
value, and go that way, rather than throw the baby out with the
bath water.
Senator Tillis. I was glad to hear your points on
capitation strategies earlier. I agree with it.
Mr. Snee?
Mr. Snee. Yes, sir. From the culture of change, if you
will, from the dependents as to where do we go, we move from
one place to another under permanent change-of-station orders.
What's going to happen where we get to our next duty station?
Is it going to be available? I made mention of recruiters. Of
course, not to take away from my colleague here, the Major
General, and the reservists, as to, okay, so where do we go
from here, and where can we have the change? Are we going to
have something that we know we can use? If you have that
pressure put on the family, especially the spouses, as, ``Okay,
where do we go?'' Nothing the--from North Carolina, even here
in Virginia, but let's go out to Wyoming, let's go out to some
of those other areas. As long as you have that MTF umbrella in
those referral services outside, that's okay. But, once you get
out of that, you're talking about a culture of change of ``What
if?''
Thank you.
Senator Tillis. General Hargett?
General Hargett. Yes, sir, Senator.
I'm probably one of those guys that retired from Active
Duty and I didn't know what I didn't know. I used TRICARE, and
I used the Fort Campbell and Fort Hood and all those places
forever. So, I was actually pretty happy with it. But, once you
go out and retire, you find that it's far different when you
start looking at access.
As a matter of fact, I'll follow onto what she said--when I
retired, and I started figuring out my access, I actually went
to MOAA and bought a supplement, where I could switch over to
Standard and paid, what, I don't know, Norb, $130 every quarter
to be able to have access to a larger network. So I think
sometimes that we kind of get caught into what is it we're used
to, what we're comfortable with. When you asked the question
about change, people fear change.
Senator Tillis. Mr. Chairman, if I may, just one thing.
I would like to underscore what Senator Gillibrand said
about medical information, chart data. We did a lot of work in
North Carolina trying to make sure comprehensive information
follows the patient. That's one of the dangers. If you have an
expanded provider network, and you don't have that
transportability of information, you may have a more qualified
provider, but they're acting on less information. I think
that's a very important part.
The other thing related to support for spouses. I think one
of the panelists mentioned just one of the treatments on
autism. If we're talking about--this is something that we
actually took action on as I was Speaker in North Carolina--
when you're talking about the impact that that has on the
family, particularly of deployed personnel, it's not only
transformational for the child that may be in the program, but
for that parent who's taking care of the family while their
loved one's deployed. I think that's an area that we need to
look at, as well.
Ms. Raezer. I would agree, Senator. I think that's where
the Commission's recommendation to make sure that the plans are
addressing the unique needs of military families, that's so
important, and looking at things that TRICARE has--DOD has
already deemed as essential, with your help, like the ABA
therapy, they need to be included in these plans as
requirements. We need to look at things like mobility and how
to help families as they move. So--but, that, we believe, is
doable, with a conversation. We all have our lists of what
happens. Right now, things are falling through the cracks, in
some cases. So, this is an opportunity to talk about how to
make things better.
Senator Graham. Go ahead, Senator Gillibrand.
Senator Gillibrand. Yeah.
Following along this concern, I think one thing we can work
on, to whatever end we have, a--minimum requirements. I mean,
part of the debate on healthcare reform was the fact that it
would be great if you could go to any State at any time and
have hundreds of plans at your fingertips, that you could buy
whatever you wanted. But, the reason why that was a debatable
issue is because some States had minimum standards. So, New
York State, for example, said, ``You have to cover mammograms.
You cannot not cover mammograms, because we know that if you
don't have any money, you're not going to spend that 20 bucks,
you're saying to say, `I'm going to risk it another year. I can
wait another year. I don't have that 20 bucks right now.' ''
Because that was the copay for a mammogram in that fact
pattern.
So, maybe one thing we should work on is, What are the
minimum standards for the marketplace that we would have?
Because obviously you're going to have a lot of new customers.
If we do something like this, you have an enormous number of
new potential customers, so we say, to be eligible to get these
customers, you have to have minimal standards. Maybe that
creates a marketplace. I don't know. But, to the extent you can
think through that, or if you have thoughts on that, please
advise us. But, I'm going to ask the panel to perhaps brief
that issue--the Commission.
Senator Graham. That's actually a--here's the big dilemma.
One, we have to do something with the current system, because
it's just unsustainable. Admiral Ryan, we've been wrestling
this alligator 4 or 5 years. I just have lost, sort of, faith
that we can take the current construct, the single-payer system
that you're envisioning, and make it as efficient as a
competitive model. But, having said that, the minimum standards
is probably a good idea to look at. You just don't want to have
too much so that it loses the whole advantage of being able to
get more people to participate.
So--and here's the honest answer. It seems to me that the
person who's going to pay the most is the retiree, no matter
what you do. The family members are pretty well held harmless
with the new system, maybe a little more out of pocket. The
National Guard guys may pay some more, but they're definitely
going to get a bigger choice. It's the retiree that we need to
really watch, here, and be fair to.
So, you have reservists who live in rural areas that feel
like they would benefit from choice. You have families that are
accompanying Active Duty members that we want to take care of
for recruitment purposes. So, I think probably the more choice,
the better, for them. Then you have the retiree population, who
has done their service to the country, and you want to be fair
to them. You have a unsustainable system as it exists today.
So, what I want to do is--this pilot project? I don't
really know what the right answer is, other than: Change is
coming. I just really appreciate the input that you've given
us.
Admiral, I promise you, whatever we do, we will listen to
what you have to say. Probably going to come out differently,
at least I will, on the idea of a single-payer system, but I
want to make sure that any cost increased borne by the retiree
community is something I can look them in the eye and say,
``That's justified, and you're getting more for your money.''
If I can't do that, I won't do it. Because I am going to ask
people to pay a little bit more. There's just no way around
that. If I can't say, ``You're getting something better for
your money,'' I'm not going to do it. It's not about just
saving money, it's about improving quality of healthcare.
Thank you all. To be continued.
[Whereupon, at 4:28 p.m., the subcommittee adjourned.]
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Kirsten E. Gillibrand
healthcare
1. Senator Gillibrand. Commissioners, the commission has
recommended the Department of Defense (DOD) implement a system similar
to the healthcare benefits available to civilian employees. Often the
services available in those plans may differ greatly from location to
location. Military families move every 2 to 3 years on average. How
does the commission account for the availability of care in different
locations under the different plans?
Mr. Maldon. For Active component (AC) members, their ability to
obtain care, regardless of duty station, would improve under TRICARE
Choice. First, TRICARE's low reimbursement rates cause less
participation among providers. This situation can be aggravated in
higher-cost markets where TRICARE reimbursement rates are particularly
uncompetitive, deterring provider participation. Health care markets,
including their supply of doctors and the rates for procedures, vary
substantially by geographic location. Commercial health insurance
carriers specialize in organizing networks and delivering health care
suited to local markets. A selection of commercial insurance plans
under TRICARE Choice is more likely than TRICARE to reflect the
conditions of the local health care market, including a network that
best incorporates available doctors. AC family members getting care at
Military Treatment Facilities (MTFs) can experience a loss of
continuity of care mainly because of unavailability of appointments
with the same primary care provider. Under TRICARE Choice, the
insurance plan would be required to build a robust network of civilian
providers allowing the beneficiaries to choose a provider who has
availability and can provide continuous care.
Continuity of care for Reserve component (RC) members would improve
as well under the TRICARE Choice system. RC members and their families
face a lack of continuity of care when RC members transition to and
from active duty and are moved on and off of TRICARE. This situation is
particularly difficult when the servicemember is activated and if the
family's existing health care providers do not accept TRICARE. When the
RC member is not supporting a contingency operation during activation,
TRICARE coverage ends abruptly upon demobilization, resulting in a
break in coverage until coverage can resume under the civilian health
insurance plan. Under TRICARE Choice, when the RC member is mobilized,
the RC families would have the choice to retain their existing
(civilian) health insurance or move to a TRICARE Choice plan. In either
scenario continuity of care is improved. It is more likely the RC
families' current physicians would participate in TRICARE Choice plans
with traditional commercial insurance networks than the current TRICARE
network.
Within TRICARE Choice, national plans would be offered; therefore,
military families that choose national plans would not have to change
plans, which would facilitate having the same level of health care when
moving within the United States. Additionally, the Commission's
proposed legislation would mandate that health benefit plans under
TRICARE Choice include the health care benefits provided under TRICARE
and Federal Employee Health Benefit Program (FEHBP) currently, as well
as the essential health benefits established under the Patient
Protection and Affordable Care Act. The national plans and inclusion of
standard benefits will ensure like coverage in all locations.
2. Senator Gillibrand. Commissioners, do you recommend a required
standard of care that will be available under all plans?
Mr. Maldon. Under the Commission's recommendation, a selection of
plans would be offered that broadly represents what is available in the
commercial market without unnecessary restrictions, meets or exceeds a
baseline of health plan quality, and continuously advances with the
health care industry. Specifically, the Commission's proposed
legislation includes that all health benefits plans under TRICARE
Choice meet a baseline of quality measured in criteria such as an ample
number of health care providers, ease of access to services, and
inclusion of the latest medical treatments and technologies The
Commission's proposed legislation would mandate that health benefit
plans under TRICARE Choice include the health care benefits provided
under TRICARE and FEHBP currently, as well as the essential health
benefits established under the Patient Protection and Affordable Care
Act. The recommendation further states that the Office of Personnel
Management (OPM) would administer the health care program. OPM would be
able to leverage its experience in managing the FEHBP, and other large-
scale health benefits programs, to achieve the best health care
benefits with the greatest amount of flexibility possible. OPM has
established criteria for deeming health plans acceptable for FEHBP, and
would have similar standards for evaluating plans for inclusion in
TRICARE Choice. Additionally, DOD would be required to submit
recommendations and data to OPM to ensure the program meets the unique
needs of the DOD beneficiary population.
3. Senator Gillibrand. Commissioners, will it be more or less
difficult for these family members to receive continuous healthcare as
they move from duty station to duty station with inconsistent civilian
healthcare services available at different locations?
Mr. Maldon. For Active component (AC) members, their ability to
obtain care, regardless of duty station, would improve under TRICARE
Choice. First, TRICARE's low reimbursement rates cause less
participation among providers. This situation can be aggravated in
higher-cost markets where TRICARE reimbursement rates are particularly
uncompetitive, deterring provider participation. Health care markets,
including their supply of doctors and the rates for procedures, vary
substantially by geographic location. Commercial health insurance
carriers specialize in organizing networks and delivering health care
suited to local markets. A selection of commercial insurance plans
under TRICARE Choice is more likely than TRICARE to reflect the
conditions of the local health care market, including a network that
best incorporates available doctors. AC family members getting care at
MTFs can experience a loss of continuity of care mainly because of
unavailability of appointments with the same primary care provider.
Under TRICARE Choice, the insurance plan would be required to build a
robust network of civilian providers allowing the beneficiaries to
choose a provider who has availability and can provide continuous care.
Continuity of care for Reserve component (RC) members would improve
as well under the TRICARE Choice system. RC members and their families
face a lack of continuity of care when RC members transition to and
from active duty and are moved on and off of TRICARE. This situation is
particularly difficult when the servicemember is activated and if the
family's existing health care providers do not accept TRICARE. When the
RC member is not supporting a contingency operation during activation,
TRICARE coverage ends abruptly upon demobilization, resulting in a
break in coverage until coverage can resume under the civilian health
insurance plan. Under TRICARE Choice, when the RC member is mobilized,
the RC families would have the choice to retain their existing
(civilian) health insurance or move to a TRICARE Choice plan. In either
scenario continuity of care is improved. It is more likely the RC
families' current physicians would participate in TRICARE Choice plans
with traditional commercial insurance networks than the current TRICARE
network.
Within TRICARE Choice, national plans would be offered; therefore,
military families that choose national plans would not have to change
plans, which would facilitate having the same level of health care when
moving within the United States. Additionally, the Commission's
proposed legislation would mandate that health benefit plans under
TRICARE Choice include the health care benefits provided under TRICARE
and FEHBP currently, as well as the essential health benefits
established under the Patient Protection and Affordable Care Act. The
national plans and inclusion of standard benefits will ensure like
coverage in all locations.
4. Senator Gillibrand. Commissioners, how can the military provide
continuity of care for military family members who choose to receive
their healthcare using a commercial insurance plan? Will their medical
records now be maintained by their commercial healthcare provider and
not by the military?
Mr. Maldon. Under TRICARE Standard and Extra, military family
members elect to receive all of their health care from civilian health
care providers, and their medical records are maintained by the health
care provider of their choice. Under TRICARE Choice, continuity of care
would come, in part, from providing beneficiaries with the opportunity
to select from among civilian providers who are tied to the communities
they serve, and therefore, are less likely to move and leave the
network. Beneficiaries' medical records would be maintained by the
providers, and because of electronic medical records and electronic
health care records requirements under the Patient Protection and
Affordable Care Act, records could be shared among providers in
different geographic areas (as appropriate, subject to the Health
Insurance Portability and Accountability Act requirements). As it is
today, obtaining documentation from private healthcare providers and
providing documentation for military health records update, if needed,
is ultimately the military family members' responsibility.
5. Senator Gillibrand. Commissioners, if family members elect not
to receive their healthcare in military facilities, and their health
records are maintained by their private healthcare providers, how will
the military conduct medical screenings necessary to ensure that
appropriate medical services are available at new duty stations,
particularly overseas locations, as is currently done pursuant to the
Exceptional Family Member Program?
Mr. Maldon. Under TRICARE Standard and Extra military family
members can elect to receive all of their health care from civilian
health care providers, and their chosen health care provider maintains
their medical records. Obtaining documentation from private healthcare
providers and providing documentation for military health records
updates is ultimately the military family members' responsibility. Any
screening necessary, but not previously conducted, can be accomplished
either at a Military Treatment Facility or by a private health care
provider.
6. Senator Gillibrand. Commissioners, the commission recommends a
Basic Allowance for Health Care (BAHC) to help Active-Duty military
families pay the cost of TRICARE Choice. As we know, medical expenses
are typically not spread out evenly throughout the year, and in many
instances are not predictable. This is particularly significant for
junior enlisted military personnel at the lower end of the pay scale.
How will the BAHC be disbursed to military families to meet unexpected
medical costs?
Mr. Maldon. The portion of the BAHC used to pay the insurance plan
premium for Active component families would appear as an allotment on
the servicemember's Leave and Earnings Statement. This portion of BAHC
would be paid directly into the OPM trust fund for payment to the
insurance plan selected. If the servicemember indicates a non-TRICARE
Choice plan in the Defense Enrollment Eligibility Reporting System, the
Defense Finance and Accounting Services would make payment directly to
that insurance carrier. The portion of the BAHC to be used for active
duty families' out-of-pocket costs (copayments, coinsurance, and
deductibles) would be paid to active-duty servicemembers as a cash
payment in their direct deposit.
To help servicemembers plan for unexpected medical costs, health
care issues would be addressed in financial literacy training sessions
provided for in the Commission's recommendations. In cases when a
family member experiences extraordinary medical expenses due to
catastrophic or chronic health care needs, a fund would be available to
address the gap between BAHC and the catastrophic cap for the
beneficiaries' insurance plan.
military treatment facilities
7. Senator Gillibrand. Commissioners, the commission recommends
further downsizing the capacity of MTF; how do you foresee dealing with
MTFs in more remote areas and would those be at risk under the
commission's proposal?
Mr. Maldon. The Commission supports strengthening MTFs. The
Commission did not recommend downsizing the capacity of or closing
MTFs, rather it recommended reorienting them to focus on training
military medical personnel for the readiness mission. The Commission
has in fact recommended changes that would increase the viability of
MTFs. For example, the Commission proposed eliminating MTF catchment
areas to allow beneficiaries who currently live outside catchment areas
to seek health care at MTFs, incentivizing beneficiaries to use MTFs
through lower copayments than civilian providers, encouraging insurance
carriers to send workload to MTFs by offering lower reimbursement rates
for medical procedures, and providing MTFs the authority to treat
veterans and civilians with cases that are needed for Essential Medical
Capability skill maintenance.
8. Senator Gillibrand. Commissioners, the commission recommends
opening MTFs to people who do not get their care through DOD as needed
to meet trauma, surgical and other professional requirements for the
health providers. What impact do you foresee this recommendation having
on servicemembers and their families as they seek care at the MTFs?
Mr. Maldon. The Commission recommended opening MTFs to veterans and
civilians with the case mix needed to meet Essential Medical
Capabilities (EMC) and not for all care. This change was recommended to
strengthen the MTFs as training platforms, while preserving the access
of beneficiary groups to the MTFs. The Code of Federal Regulations
(CFR) currently specifies the priority level assigned to categories of
DOD beneficiaries with space-available access to MTFs. Veterans and
civilians would be added to the groups within the CFR at a level below
the existing priority groups. Veterans and civilians seeking medical
treatment of the same type as DOD beneficiaries would not displace DOD
beneficiaries in the existing priority groups. In the cases that
involve EMC-related medical procedures, EMCs would be included as a
factor in the prioritization. Servicemembers or their family members
with EMC-related cases would have priority over veterans who will, in
turn, have priority over civilians.
tricare and medicaid and echo
9. Senator Gillibrand. Commissioners, the commission correctly
noted that military families who are eligible for Medicaid services
have to reapply for Medicaid benefits every time they move to a new
State, and many encounter waiting lists that are longer than their
assignments. To address this, the commission recommended that the ECHO
benefit be expanded to provide benefits similar to the Medicaid
benefit. Will the expanded ECHO benefit vary by State so that it
matches the individual State's Medicaid benefit, or would it be a
standard benefit for all military families?
Mr. Maldon. The Commission recommends a consistent set of expanded
Extended Care Health Option (ECHO) services regardless of duty station.
Because Medicaid waiver services are determined at a State level and
can vary from State to State, this means that the services offered
through ECHO will not exactly match the services offered in every
State. The proposed implementation plan includes an analysis of
Medicaid waiver services across all States to identify the common
services to be added to ECHO.
10. Senator Gillibrand. Commissioners, would ECHO continue to
provide this benefit once the military family satisfies the waiting
list requirements? Will the military families be able to choose
Medicaid or ECHO or could they receive benefits from both?
Mr. Maldon. Under the Commission's recommendation for the ECHO
program, military families may continue to receive ECHO benefits even
after they satisfy waiting list requirements for State Medicaid waiver
services, just as they can today. In addition, because the Secretary of
Defense has determined that services through Medicaid are not
considered available and adequate for the purpose of ECHO, military
families may receive benefits from both programs simultaneously.
department of veterans affairs collaboration
11. Senator Gillibrand. Commissioners, if the Reserves are
transitioned to TRICARE Choice, then how will DOD/VA interface with
private providers to make sure military records are up to date and
accurate?
Mr. Maldon. Military records are the servicemembers' and their
Personnel Commands' combined responsibility. Currently, servicemembers
go through their command's personnel office to update their records and
periodically review them for accuracy.
Obtaining documentation from private health care providers and
providing documentation for military health records update, similarly,
is ultimately the servicemembers' responsibility. DOD and VA interface
with civilian providers today for updating medical information in
military health records, and there would be no difference under TRICARE
Choice.
The Commission recommended that the DOD and the VA electronic
health records meet the national standards for electronic health
records. The Commission also recommended that DOD require the private
providers in TRICARE Choice network to adhere to the national
standards. Assuming such compliance, exchanging electronic health
information would be seamless.
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