[House Report 110-146]
[From the U.S. Government Publishing Office]
110th Congress Rept. 110-146
HOUSE OF REPRESENTATIVES
1st Session Part 2
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NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2008
_______
May 14, 2007.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Skelton, from the Committee on Armed Services, submitted the
following
SUPPLEMENTAL REPORT
[To accompany H.R. 1585]
This supplemental report shows the cost estimate of the
Congressional Budget Office with respect to the bill (H.R.
1585), as reported, which was not included in part 1 of the
report submitted by the Committee on Armed Services on May 11,
2007 (H. Rept. 110-146, pt. 1).
CONGRESSIONAL BUDGET OFFICE ESTIMATE
In compliance with clause 3(c)(3) of rule XIII of the House
of Representatives, the cost estimate prepared by the
Congressional Budget Office and submitted pursuant to section
402 of the Congressional Budget Act of 1974 is as follows:
May 14, 2007.
Hon. Ike Skelton,
Chairman, Committee on Armed Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1585, the National
Defense Authorization Act for Fiscal Year 2008.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kent
Christensen.
Sincerely,
Peter R. Orszag,
Director.
Enclosure.
Congressional Budget Office cost estimate
Summary: H.R. 1585 would authorize appropriations totaling
$640 billion for fiscal year 2008 for the military functions of
the Department of Defense (DoD), for activities of the
Department of Energy (DOE), and for other purposes. That total
includes $141 billion for military operations in Iraq and
Afghanistan. In addition, H.R. 1585 would prescribe personnel
strengths for each active-duty and selected reserve component
of the U.S. armed forces. CBO estimates that appropriation of
the authorized amounts would result in additional outlays of
$631 billion over the 2008-2012 period.
Including outlays from funds previously appropriated,
spending for defense programs authorized by the bill would
total about $568 billion in 2008, CBO estimates. That figure,
however, excludes outlays from the likely enactment of
supplemental appropriations for 2007. When adding the effects
of pending supplemental appropriations for 2007, such spending
in 2008 would exceed $600 billion.
The bill also contains provisions that would both increase
and decrease costs of discretionary defense programs in future
years. Most of those provisions would affect force structure,
compensation, and benefits. In total, such provisions would
raise costs by about $9 billion annually.
The bill contains provisions that would both increase and
decrease direct spending, primarily from changes to survivor
benefits, retirement benefits, and the TRICARE program. We
estimate that those provisions combined would increase direct
spending by $150 million in 2008, but have no net effect on
spending over both the 2008-2012 period and the 2008-2017
period. Those totals include estimated net receipts from asset
sales of $583 million over the 2008-2017 period. (Under current
scorekeeping rules and conventions, asset sale receipts are
recorded as a credit against direct spending as long as such
sales would not result in a net financial cost to the
government--as determined on a present value basis.) In
addition, enacting the bill would have a negligible effect on
federal revenues.
Section 4 of the Unfunded Mandates Reform Act (UMRA)
excludes from the application of that act any legislative
provisions that enforce the constitutional rights of
individuals. CBO has determined that section 1054 would fall
within that exclusion because it would amend the authority of
the President to employ the armed services to protect
individuals' civil rights. Therefore, CBO has not reviewed that
section of the bill for mandates.
Other provisions of H.R. 1585 contain both
intergovernmental and private-sector mandates as defined in
UMRA, but CBO estimates that the annual cost of those mandates
would not exceed the thresholds established in UMRA ($66
million for intergovernmental mandates in 2007 and $131 million
for private-sector mandates in 2007, adjusted annually for
inflation).
The bill also contains several provisions that would
benefit state and local governments. Some of those provisions
would authorize aid for certain local schools with dependents
of defense personnel and convey certain parcels of land to
state and local governments. Any costs to those governments
would be incurred voluntarily as a condition of receiving
federal assistance.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 1585 is summarized in Table 1. Most of
the costs of this legislation fall within budget function 050
(national defense).
Basis of estimate: For this estimate, CBO assumes that H.R.
1585 will be enacted near the start of fiscal year 2008 and
that the authorized amount will be appropriated for that year.
Spending subject to appropriation
The bill would specifically authorize appropriations
totaling $640 billion in 2008 (see Table 2). Almost all of
those authorizations fall within budget function 050 (national
defense). Other funds would be authorized for activities within
other budget functions; they include: $62 million for the Armed
Forces Retirement Home (function 600--income security); $17
million for the Naval Petroleum Reserves (function 270--
energy); and $135 million for the Maritime Administration
(function 400--transportation).
TABLE 1.--BUDGETARY IMPACT OF H.R. 1585, THE NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2008 \1\
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By fiscal year, in millions of dollars--
-----------------------------------------------------------
2007 2008 2009 2010 2011 2012
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SPENDING SUBJECT TO APPROPRIATION
Spending Under Current Law for Programs Authorized
by H.R. 1585:
Budget Authority \2\............................ 517,905 0 0 0 0 0
Estimated Outlays............................... 525,673 178,801 57,946 20,537 8,330 3,503
Proposed Changes:
Authorization of Regular Appropriations for
2008:
Authorization Level......................... 0 499.786 0 0 0 0
Estimated Outlays........................... 0 325,501 112,649 37,062 12,248 5,019
Authorization of Appropriations for 2008 for
Military Operations in Iraq and Afghanistan:
Authorization Level......................... 0 140,639 0 0 0 0
Estimated Outlays........................... 0 63,626 49,455 18,389 5,588 1,930
Spending Under H.R. 1585:
Estimated Authorization Level................... 517,905 640,425 0 0 0 0
Estimated Outlays............................... 525,673 567,928 220,050 75,988 26,166 10,452
CHANGES IN DIRECT SPENDING (INCLUDING ASSET SALES) \3\
Estimated Budget Authority.......................... 0 0 -20 -22 -60 -49
Estimated Outlays................................... 0 150 -20 -22 -60 -49
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\1\ Enactment of H.R. 1585 would have an insignificant effect on federal revenues.
\2\ The 2007 level is the amount appropriated for programs authorized by the bill.
\3\ In addition to the direct spending effects shown here, enacting the bill would have additional effects on
direct spending after 2012 (see Table 4). The estimated net changes in direct spending sum to zero over both
the 2008-2012 period and the 2008-2017 period.
Notes: The Congress is now considering the President's request for $94 billion in supplemental defense
appropriations for 2007, primarily for military operations in Iraq and Afghanistan. CBO estimates outlays from
those appropriations will total roughly $25 billion in 2007, $40 billion in 2008, and smaller amounts in
future years.
For 2008, the authorization levels under ``Proposed Changes'' include amounts specifically authorized by the
bill. The bill also implicitly authorizes some activities in 2009 through 2012; those authorizations are not
included above (but are shown in Table 3) because funding for those activities would be covered by specific
authorizations in future years.
Figures shown here may not add to numbers referenced in the text because of rounding.
TABLE 2.--SPECIFIED AUTHORIZATIONS IN H.R. 1585
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By fiscal year, in millions of dollars--
Category -------------------------------------------------
2008 2009 2010 2011 2012
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Authorization of Regular Appropriations:
Department of Defense Military Personnel \1\:
Authorization Level................................... 115,440 0 0 0 0
Estimated Outlays..................................... 109,752 5,166 172 25 0
Operation and Maintenance:
Authorization Level................................... 166,141 0 0 0 0
Estimated Outlays..................................... 127,222 30,868 4,775 1,708 719
Procurement:
Authorization Level................................... 104,126 0 0 0 0
Estimated Outlays..................................... 30,982 38,353 20,241 7,108 3,141
Research and Development:
Authorization Level................................... 73,296 0 0 0 0
Estimated Outlays..................................... 40,712 26,405 4,447 1,013 285
Military Construction and Family Housing:
Authorization Level................................... 21,703 0 0 0 0
Estimated Outlays..................................... 3,012 7,269 6,755 2,495 924
Revolving Funds:
Authorization Level................................... 2,887 0 0 0 0
Estimated Outlays..................................... 2,011 623 134 79 40
General Transfer Authority:
Authorization Level................................... 0 0 0 0 0
Estimated Outlays..................................... 900 -180 -360 -180 -90
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Subtotal, Department of Defense:
Authorization Level............................... 483,593 0 0 0 0
Estimated Outlays................................. 314,591 108,504 36,164 12,248 5,019
Atomic Energy Defense Activities \2\:
Authorization Level....................................... 15,979 0 0 0 0
Estimated Outlays......................................... 10,742 4,110 886 0 0
Other Programs \3\:
Authorization Level....................................... 214 0 0 0 0
Estimated Outlays......................................... 168 35 12 0 0
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Subtotal, Authorization of Regular Appropriations:
Authorization Level............................... 499,786 0 0 0 0
Estimated Outlays................................. 325,501 112,649 37,062 12,248 5,019
Authorization of Appropriations for Military Operations in
Iraq and Afghanistan:
Military Personnel:
Authorization Level................................... 17,472 0 0 0 0
Estimated Outlays..................................... 16,045 1,348 39 4 0
Operation and Maintenance:
Authorization Level................................... 78,312 0 0 0 0
Estimated Outlays..................................... 36,509 30,688 7,619 1,954 912
Procurement:
Authorization Level................................... 40,327 0 0 0 0
Estimated Outlays..................................... 8,882 15,791 10,230 3,497 971
Research and Development:
Authorization Level................................... 2,151 0 0 0 0
Estimated Outlays..................................... 1,210 768 126 27 8
Military Construction and Family Housing:
Authorization Level................................... 696 0 0 0 0
Estimated Outlays..................................... 33 291 247 79 29
Revolving Funds:
Authorization Level................................... 1,681 0 0 0 0
Estimated Outlays..................................... 947 569 128 27 10
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Subtotal, Iraq and Afghanistan:
Authorization Level............................... 140,639 0 0 0 0
Estimated Outlays................................. 63,626 49,455 18,389 5,588 1,930
=================================================
Total Specified Authorizations:
Authorization Level............................... 640,425 0 0 0 0
Estimated Outlays................................. 389,127 162,104 55,451 17,836 6,949
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\1\ For purposes of this estimate, CBO assumes that the authorization of appropriations in section 421 for
military personnel includes $10,876 million for accrual payments for the TRICARE For Life program.
\2\ These authorizations are primarily for atomic energy activities within the Department of Energy.
\3\ These authorizations are for the Maritime Administration, the Armed Forces Retirement Home, and the Naval
Petroleum Reserves.
Of the $640 billion in funding for 2008 authorized by the
bill for the costs of defense programs, $141 billion of that
amount would be for DoD costs associated with continuing
operations in Iraq and Afghanistan.
The estimate assumes that the amounts authorized for 2008
will be appropriated near the start of fiscal year 2008. The
estimated outlays from authorizations of regular appropriations
are based on historical spending patterns.
The bill also contains provisions that would both increase
and decrease various costs, mostly for changes in end strength,
military compensation, and health benefits, that would be
covered by the fiscal year 2008 authorization and by
authorizations in future years. Table 3 contains estimates of
those amounts.
Multiyear procurement
Multiyear procurement is a special contracting method
authorized in title 10, United States Code, section 2306b that
permits the government to enter into contracts covering
acquisitions for more than one year but not more than five
years, even though the total funds required for every year are
not appropriated at the time the contracts are awarded. As part
of such a contract, the government commits to purchase all
items specified at the time the contract is signed, including
those to be produced and paid for in subsequent years. Because
multiyear procurement allows a contractor to plan for more
efficient production, such a contract can reduce the cost of an
acquisition compared with the cost of buying the items through
a series of annual procurement contracts.
Such contracts frequently include provisions that require
DoD to pay for unrecovered fixed costs in the event that the
contract is canceled before completion. DoD does not budget
for, obtain, or obligate funds sufficient to pay for those
contractual commitments at the time they are incurred.
Authorizing DoD to initiate a multiyear procurement program
with such unfunded cancellation liabilities provides contract
authority--a form of budget authority--because it allows the
department to incur that liability in advance of
appropriations. CBO believes that the full cost of such
liabilities should be recorded in the budget at the time they
are incurred. The failure to request funding for cancellation
liabilities may distort the resource allocation process by
understating the cost of decisions made for the budget year and
may require future Congresses to find the resources to pay for
decisions made today.
This bill would authorize the Department of Defense to
enter into multiyear procurement contracts for five programs:
improvements to the Abrams tank, the Bradley Fighting Vehicle,
and the CH-47D helicopter, and procurement of new CH-47F
helicopters and Virginia class submarines.
Section 111 would authorize the Army to enter a multiyear
contract for up to five years to acquire a number of
improvements to M1A1 Abrams tanks over a five-year period. If
granted this authority, the Army plans to enter a contract for
the 2008-2012 period to modify 577 tanks at a total cost of
$1,595 million; it has requested $639 million in 2008 to
upgrade 241 tanks. The Army estimates that a multiyear
procurement contract for those tank modifications would cost
$178 million less than a series of annual procurement contracts
for those systems.
TABLE 3.--ESTIMATED AUTHORIZATIONS OF APPROPRIATIONS FOR SELECTED PROVISIONS IN H.R. 1585
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By fiscal year, in millions of dollars
Category --------------------------------------------
2008 2009 2010 2011 2012
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FORCE STRUCTURE
Army and Marine Corps Active-Duty End Strengths.................... 6,683 4,821 4,257 3,292 2,930
Navy and Air Force Active-Duty End Strengths....................... -551 -868 -897 -928 -959
Reserve Component End Strengths.................................... 308 75 55 56 58
Reserve Technicians................................................ -7 -15 -15 -16 -16
Command Grade Officers............................................. 75 77 79 82 84
COMPENSATION AND BENEFITS (DOD)
Pay Raises......................................................... 311 747 1,214 1,712 2,245
Expiring Bonuses and Allowances.................................... 2,127 3,244 3,481 3,300 2,790
Consolidation of Special and Incentive Pay......................... 0 150 300 400 450
Housing Allowance for Reserve Accession Training................... 108 111 115 119 122
National Guard Reintegration....................................... 73 52 32 23 23
Hardship Duty Pay.................................................. 79 56 33 23 23
Transportation of Privately Owned Vehicles......................... 22 36 39 40 41
Accession Bonus for Health Professional Scholarship Program........ 15 15 15 15 15
Special Pays for Medical Officers.................................. 8 9 10 10 10
Dental Officer Special Pay......................................... 8 8 8 8 8
Cold War Medal..................................................... 2 16 7 4 3
Assignment Incentive Pay........................................... 15 0 0 0 0
Loan Repayment for Reserves........................................ 1 2 3 4 5
DEFENSE HEALTH PROGRAM
TRICARE Pharmacy Copayments........................................ 187 0 0 0 0
TRICARE Cost Sharing............................................... 6 3 0 0 0
WOUNDED WARRIOR ASSISTANCE
Case Managers and Advocates........................................ 25 33 23 14 9
Evaluation Board Advocates......................................... 7 14 15 15 16
Medical Support Fund............................................... 50 0 0 0 0
Hotline and Investigation.......................................... 7 7 7 8 8
Liaison Officers................................................... 3 6 6 6 7
Training and Reports............................................... 10 5 4 4 4
Medical Information Systems........................................ 25 0 0 0 0
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Notes.--For every item in this table, the 2008 levels are included in Table 2 as amounts specifically
authorized to be appropriated by the bill. Amounts shown in this table for 2009 through 2012 are not included
in Table 1, because authorizations for those amounts would be covered by specific authorizations in future
years.
In addition to the items shown in this table, there are four additional items discussed in this cost estimate
for which CBO does not have sufficient information at this time to complete a specific estimate of costs or
savings: section 122 (multiyear procurement for Virginia class submarines), section 635 (travel allowance for
inactive-duty training), section 703 (discount drug pricing), and section 1615 (unique military capabilities).
Figures shown here may not add to numbers in the text because of rounding.
Section 112 would authorize the Army to enter a multiyear
contract for up to four years to acquire a number of
improvements to the Bradley Fighting Vehicle. According to
budget documents provided by the Army, the service would use
this authority to enter a contract for the 2008-2011 period to
modify 965 vehicles at a total cost of $2,310 million; it has
requested $1,151 million in 2008 to upgrade 525 vehicles. The
Army estimates that a multiyear procurement contract for those
modifications would cost $131 million less than a series of
annual procurement contracts for those systems.
Section 113 would authorize the Army to enter a multiyear
contract for up to five years to convert CH-47D helicopters to
the more capable CH-47F configuration. Under this authority,
the Army would enter a contract over the 2008-2012 period to
convert 152 helicopters at a total cost of $3,029 million; it
has requested $511 million in 2008 to convert 23 aircraft. The
Army estimates that a multiyear procurement contract for those
modifications would cost $134 million less than a series of
annual procurement contracts for those systems.
Section 114 would authorize the Army to enter a multiyear
contract for up to five years to procure new CH-47F
helicopters. The Army wishes to use this authority to enter a
contract for the 2008-2012 period to purchase 41 aircraft at a
total cost of $1,209 million; it has requested $191 million in
2008 to pay for 6 helicopters. The Army estimates that a
multiyear procurement contract would cost $40 million less than
a series of annual procurement contracts for those systems.
Section 122 would authorize the Navy to enter a multiyear
contract for Virginia-class submarines beginning in fiscal year
2008. The Navy did not provide details on its plan for that
contract as part of its budget submission. However, we expect
the Navy to enter a multiyear contract extending through 2013.
Because current law limits such contracts to five years, the
authority granted by this section would expire in 2012 and the
Navy would not be able to complete the last program year of
such a contract under its current plan. CBO cannot estimate the
costs or savings that would result from a multiyear contract
for those submarines because it is not clear how the Navy would
modify its plans to comport with the authority provided in this
section.
Force structure
The bill would affect force structure by setting end-
strength levels for the various military services.
Military end strength.
Title IV would authorize active and reserve end-strength
levels for 2008 and would set the minimum end-strength
authorization in permanent law.
The bill would specifically authorize regular
appropriations of $115.4 billion and additional appropriations
for operations in Iraq and Afghanistan of $17.5 billion for
costs of military pay and allowances in 2008.
Under title IV, the authorized end strengths in 2008 for
active-duty personnel and personnel in the selected reserves
would total about 1,370,000 and 850,000, respectively. Of those
selected reservists, about 76,000 would serve on active duty in
support of the reserves. In total, active-duty end strength
would increase by about 6,000 and selected-reserve end strength
would decrease by about 5,000 when compared to levels
authorized in 2007.
Section 401 would authorize increases to the active-duty
end strengths of the Army and Marine Corps. The increases are
part of a recently announced plan by the Administration to
increase the size of the Army to 547,400 personnel and the
Marine Corps to 202,000 by the end of 2012. Relative to
personnel levels authorized by the John Warner National Defense
Authorization Act for Fiscal Year 2007 (Public Law 109-364),
the proposed increases represent an additional 35,000 personnel
for the Army and 22,000 for the Marine Corps. This section
would authorize only the first full increment of the proposed
increase--13,000 additional personnel for the Army and 9,000
for the Marine Corps--which CBO estimates would increase costs
to DoD by about $7 billion in 2008 and about $22 billion over
the 2008-2012 period.\1\ Those costs include the pay and
benefits of the additional personnel, as well as costs for
operation and maintenance, procurement, and construction. If
the Congress eventually authorizes the balance of the personnel
increases proposed by the Administration, CBO estimates the
incremental cost would total about $65 billion through 2013.\2\
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\1\ Section 403 of this bill would authorize the Army and Marine
Corps to increase their strength levels to 547,400 and 202,000,
respectively, but only for fiscal years 2009 and 2010. If the Secretary
of Defense chose to exercise this authority, CBO estimates it could
cost an additional $8 billion over the 2009-2011 period.
\2\ In addition to the cost of additional Army and Marine Corps
personnel, CBO's estimate of $65 billion through 2013 includes the cost
of proposed personnel increases to the Army Reserve and National Guard.
The estimate represents the incremental cost of personnel levels above
those authorized by the John Warner National Defense Authorization Act
for Fiscal Year 2007. For additional details see Congressional Budget
Office, Estimated Cost of the Administration's Proposal to Increase the
Army's and the Marine Corps's Personnel Levels (Letter to the Honorable
Carl Levin, April 16, 2007).
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Section 401 also would decrease the Navy's active-duty end
strength by 11,600 and decrease the Air Force's active-duty end
strength by 4,500. CBO estimates that the decrease in end
strength for the Navy and the Air Force combined would cut
costs for salaries and other expenses by about $550 million in
the first year and about $900 million annually in subsequent
years.
Sections 411 and 412 would authorize the end strengths for
the reserve components, including those who serve on active
duty in support of the reserves. Under this bill, the selected
reserve would experience a net decrease in end strength of
4,900, with the Navy Reserve and Air Force Reserve losing
personnel while the Army Reserve and National Guard would see
an increase. However, the cost savings from that net decrease
would be more than offset by an increase in the end strength
for reservists who serve on active duty in support of the
reserves. Those full-time reservists would increase by about
1,900. CBO estimates that the net result of implementing those
provisions would be an increase in costs for salaries and other
expenses for selected reservists of $308 million in 2008 and
about $55 million a year thereafter as compared to the
authorized end-strength levels for 2007. Costs would be higher
in 2008 and 2009 than in later years as a result of the need to
procure new equipment for the additional Army National Guard
personnel.
In addition, sections 413 and 414 would authorize the
minimum end-strength level for military technicians, who are
federal civilian personnel required to maintain membership in a
selected reserve component as a condition of their employment.
Under this bill, the required number of technicians would
decrease by 128 relative to the levels currently authorized.
CBO estimates the savings in civilian salaries and expenses
that would result from fewer military technicians would be
about $7 million in 2008 and about $15 million annually
thereafter, as compared to the minimum end-strength levels for
technicians in 2007.
The bill also would authorize an end strength of 10,000
servicemembers in 2008 for the Coast Guard Reserve. Because
this authorization is the same as that under current law, CBO
does not estimate any additional costs for this provision.
Command grade officers
Sections 404 and 405 would increase the number of officers
authorized to serve as majors in the Army and as lieutenant
commanders, commanders, and captains in the Navy. The number of
officers allowed to serve in those grades are currently limited
by the strength restrictions specified by the Defense Officer
Personnel Management Act (10 U.S.C. 523). CBO estimates that
adjusting the current restrictions in the manner specified by
sections 404 and 405, would increase the number of Army and
Navy personnel serving in those grades by about 3,300. Based on
information from DoD, CBO expects that the proposed increase in
the number of personnel serving in higher grades would most
likely be accomplished by promoting officers from lower grades.
CBO estimates that the additional pay and benefits associated
with promoting 3,300 personnel to those higher grades would be
about $80 million per year and $396 million over the 2008-2012
period.
Compensation and benefits
H.R. 1585 contains several provisions that would affect
military compensation and benefits for uniformed personnel.
Pay raises
Section 601 would raise basic pay for all individuals in
the uniformed services by 3.5 percent, effective January 1,
2008. In addition, section 606 would guarantee pay raises that
are one-half of one percentage point higher than amounts
required by current law for fiscal years 2009 through 2012. CBO
estimates the total cost of a 3.5 percent raise in 2008 would
be about $2.2 billion. Under current law, CBO estimates the
across-the-board increases that would go into effect on January
1 of each year would be 3.0 percent in 2008, 3.4 percent in
2009, and 3.3 percent each year thereafter. CBO estimates that
the incremental cost associated with the larger pay raises
would be $311 million in 2008 and total about $6.2 billion over
the 2008-2012 period.
Bonuses and allowances
Sections 611 through 614 would extend DoD's authority to
pay certain bonuses and allowances to military personnel for
another two years. Under current law, most of those authorities
are scheduled to expire in December 2007. However, a different
part of the bill--section 661--would consolidate all bonuses
and allowances, both those with and without sunset dates, under
eight new sections in Title 37 of the U.S. Code. Section 661
would eliminate all sunset dates, including those set in
sections 611 through 614, thus providing an indefinite
extension of the expiring provisions, and would effectively
increase the maximum dollar amounts that can be offered through
each of the bonuses and allowances.
Combined, those provisions would increase spending on
bonuses and allowances in two ways. First, based on DoD budget
material, CBO estimates that extending authority for the
expiring bonuses and allowances indefinitely would cost $2.1
billion in 2008 and about $14.9 billion over five years. CBO
estimates that the cost of those bonuses and allowances would
eventually decrease in later years as the pace of current
overseas military operations diminishes.
Second, because the maximum dollar amounts under the new
authorities would generally be greater than maximum amounts
allowed under existing law, CBO expects it would lead to an
increase in the overall cost of such pay, beginning in 2009.
(Section 662 of this bill would prohibit DoD from obligating
funds under the new authorities for 2008 in excess of what they
would have otherwise obligated for those special and incentive
payments under current law and under the provisions of sections
611 through 614.) Under current law, the annual amount spent on
the special and incentive pay affected by this section is about
$5.5 billion. To estimate the effect the higher payment caps
would have on the overall budget for targeted compensation, CBO
assumed the annual cost would begin to increase in 2009 at the
same rate as the employment cost index for wages and salaries.
Under such a scenario, the total incremental cost of increasing
the pay caps would be about $1.3 billion over the 2009-2012
period.
Taken together, extending the expiring bonuses indefinitely
and increasing the pay caps for all bonuses and allowances
would increase costs for those programs by about $2.1 billion
in 2008 and about $16.2 billion over the 2008-2012 period.
Housing allowance for reserve accession training
Section 602 would allow reserve component members without
dependents to receive a basic allowance for housing (BAH)
during initial military training (also known as accession
training) if they are making a rental or mortgage payment on a
primary residence. Under current law, BAH is only permitted for
reserve members during accession training if they have
dependents. Based on information from DoD, CBO estimates that
this section would allow an additional 30,000 reservists to
receive BAH for about four and a half months each year. The
average BAH rate would be about $820 per person per month,
which is the rate for an E-1 without dependents. The total cost
of this section would be $108 million in 2008 and $575 million
over the 2008-2012 period, CBO estimates.
National guard reintegration
Section 516 would establish the Yellow Ribbon Reintegration
Program, which would provide information and services to help
National Guard members readjust to civilian life after lengthy
deployments. The bill's authorization total includes $73
million in 2008 to carry out this program. The cost would be
lower in subsequent years as the number of National Guard
deployments would presumably begin to decrease; as a result,
CBO estimates a cost of $204 million over the 2008-2012 period.
Hardship duty pay
Section 624 would increase the maximum allowable amount of
hardship duty pay from $750 per month to $1,500 per month. The
Army reports that it would use this additional authority as
part of its ``Warrior Pay'' program, which would provide extra
incentives to military personnel who make frequent deployments
to combat zones. Based on information from the Army, CBO
estimates the total cost of implementing this section would be
$79 million in 2008 and $214 million over the 2008-2012 period.
Costs would be lower in later years because CBO expects
overseas deployments will decrease.
Transportation of vehicles
Section 634 would allow military servicemembers accompanied
by dependents of driving age to ship an additional privately-
owned vehicle at government expense to certain duty stations
outside the continental United States as part of a permanent
change of station move. Duty stations in Guam, Alaska, and
Hawaii would be the primary destinations affected by the
provision. Based on information from DoD, CBO estimates that
approximately 25,000 vehicles are transported back and forth
between those locations and the continental United States
annually, at an average cost per shipment of about $3,400 per
vehicle. Based on the percentage of military personnel with
dependents, CBO estimates that enacting this section would
result in an additional 10,000 vehicle shipments per year.
Thus, this section would increase costs to DoD by about $40
million annually and $180 million over the 2008-2012 period,
CBO estimates. Costs would be lower in 2008--$22 million--
because this new authority would apply only to orders for
change of station moves issued after the enactment of this
section. Such orders usually precede the actual move by several
months.
Accession bonus for health profession scholarship program
Section 622 would allow DoD to award accession bonuses of
up to $20,000 to students who enroll in the Health Professions
Scholarship and Financial Assistance Programs. Those programs
pay for the tuition and stipends of medical students who agree
to serve in the armed forces upon completion of their studies.
Because the armed forces are having difficulty recruiting
medical professionals, CBO believes DoD would use the maximum
amount of this authority if funding were made available. Based
on data from DoD, CBO estimates about 750 personnel would
enroll in the program and receive this bonus each year, and
that the total cost of implementing section 622 would be $15
million in 2008 and $74 million over the 2008-2012 period.
Special pay for medical officers
Section 615 would increase the maximum allowable amounts
for both incentive special pay and the multiyear retention
bonus for medical officers from $50,000 to $75,000 for each
year the officer agrees to remain in the armed forces. There
are currently only three medical specialties that are paid at,
or near, the current maximum amounts: neurologists,
radiologists, and anesthesiologists. The total number of
personnel in those specialties is currently about 630, although
to qualify for incentive special pay medical officers must
first complete their initial service agreements with DoD, and
to qualify for the retention bonus an officer must have at
least eight years of service. Based on DoD data, CBO estimates
about 50 percent of those 630 people would be eligible for the
increased incentive special pay and about 15 percent would
receive the higher retention bonus. CBO estimates the total
cost of implementing this section would be $8 million in 2008
and $48 million over the 2008-2012 period.
Dental officer special pay
Section 616 would increase additional special pay for
dental officers with less than 10 years of service by $6,000
per year. Currently, those personnel receive either $4,000 or
$6,000 per year depending on their seniority. This section
would increase those amounts to $10,000 and $12,000. Based on
data from DoD, CBO estimates about 1,350 dentists would receive
the increase in additional special pay if this section were
enacted, for a cost of $8 million in 2008 and $41 million over
the 2008-2012 period.
Cold war medal
Section 556 would require the Secretary of Defense to issue
a Cold War Victory Medal to former military members who served
between 1945 and 1991. The medal would be issued upon
application by former members or their surviving relatives.
Based on data from DoD, CBO estimates that between 20 million
and 30 million people would be eligible for this medal. This
same population is currently eligible to apply for a Cold War
Recognition Certificate, which was first issued by DoD in 1998.
To date, 1.1 million people have applied for and received this
certificate.
Because many veterans might prefer a medal over a
certificate, CBO estimates that more of them would apply for
the new award--about 3 million in total. Based on information
from DoD, CBO estimates that the costs for minting the medals
and administering the program would average about $10 per
medal, which translates into a total cost of $32 million over
the 2008-2012 period. CBO estimates costs would be relatively
low in the first year--$2 million--because of the time needed
to design the medal and to set up application and
administrative procedures. However, CBO expects costs would
increase to $16 million in 2009 because many of the people that
applied for the Cold War Recognition Certificate would
immediately apply for the new medal.
Assignment incentive pay
Section 623 would allow the Secretary of Defense to give
assignment incentive pay to certain reservists who served in a
combat zone between January 2005 and January 2007. The amount
of the payment would be $1,000 for each month the reservist
served in a combat zone in excess of 22 months of total
mobilized service since January 2003. Based on data from DoD,
CBO estimates that DoD would pay about 3,700 reservists using
this authority. Based on the criteria specified in section 623,
CBO estimates that, on average, those personnel would be
eligible for four months of assignment incentive pay, so that
the total cost of implementing this section would total about
$15 million in 2008.
Loan repayment for reserves
Section 671 would expand DoD's education loan repayment
program to include officers in the selected reserve. Enlisted
reservists are currently eligible to receive benefits under
this program. Assuming that officer enrollment in this program
would be proportionate to that of enlisted members with college
degrees, CBO estimates that DoD would initiate loan repayment
for about 620 reserve officers each year if this authority were
enacted. CBO estimates the average amount of the loan
repayments would total about $7,000 per person and would be
paid over six years in annual increments of about $1,200, so
that the total cost of this section would be $1 million in 2008
and $14 million over the 2008-2012 period.
Travel allowance for inactive duty training
Section 635 would allow the Secretary of Defense to
reimburse members of the selected reserve up to $300 for travel
expenses each time they are required to perform inactive duty
training outside the commuting limits of their duty station. At
this time, CBO does not have enough information to estimate the
costs ofthis section. However, based on the number of reserve
personnel that perform special training assignments each year,
CBO estimates the cost of implementing this provision could be
in the tens of millions of dollars each year. The Secretary
could begin using this authority in fiscal year 2009.
Defense health program
Title VII contains several provisions that would affect DoD
health care benefits. The three principal provisions are
described below.
TRICARE pharmacy copayments
Section 702 would prohibit DoD from increasing the cost-
sharing amounts that beneficiaries will pay for pharmaceutical
drugs until 2009. Under current DoD plans, for medications
obtained at retail pharmacies, beneficiaries will be charged
copayments of $5 for a one-month supply of generic drugs and
$15 for the same amount of brand-name drugs. Section 702 would
keep those copayments at the current amounts of $3 and $9,
respectively. Those copayment amounts apply to active-duty
dependents and all retirees and their dependents. Health care
costs for active-duty dependents and retirees under age 65 and
their dependents are discretionary costs and are covered in
this part of the estimate. Retirees and their dependents age 65
and older are covered under TRlCARE For Life, which is
classified in the budget as a mandatory (i.e., direct spending)
program. CBO's evaluation of the pharmacy costs for that group
of retirees is discussed later in the ``Direct Spending''
section.
Based on data provided by DoD, CBO estimates that in 2008
over 23 million prescriptions for a one-month supply of a drug
will be filled at retail pharmacies for active-duty dependents
and retirees and their dependents under age 65. CBO estimates
that prohibiting the planned increased in copayments would
reduce DoD collections by about $100 million.
In addition to reduced collections, CBO estimates that DoD
would also face higher spending for prescription drugs under
this provision for two reasons. DoD's current plan to raise
copayment amounts is expected to lead beneficiaries to purchase
fewer prescription drugs and to shift some of those
prescriptions to military hospitals and the TRlCARE mail-order
program, both of which are less expensive for DoD as well as
for the beneficiaries. Banning the planned copayment increases
would therefore prevent DoD from reaping expected savings that
CBO estimates, based on information from DoD, will be $87
million in 2008.
In total, CBO estimates that implementing section 702 would
increase DoD's discretionary costs by about $187 million in
2008.
Prohibition on TRICARE premiums and other cost increases
Section 701 would prohibit increases of certain premiums
and other costs paid by TRlCARE beneficiaries through December
31, 2008. CBO estimates that implementing this section would
increase costs by $6 million in 2008 and $9 million over the
2008-2012 period.
Under current law, TRlCARE Reserve Select (TRS) premiums
are adjusted on January 1 of each year to maintain a fixed
ratio between the premium amount and the actuarial cost of
providing health care. Section 701 would prohibit an increase
for calendar year 2008. Based on data provided by DoD, CBO
estimates that, under current law, almost 30,000 singles and
families will purchase coverage under TRS in 2008. For 2007,
premiums are $972 per year for single coverage and $3,036 per
year for family plans. Based on historical trends in this and
similar programs, CBO estimates that premiums will grow about 7
percent next year, and thus, that this prohibition would reduce
TRS premium payments by $4 million in 2008 and $3 million in
2009.
Section 701 also would prohibit an increase in the TRlCARE
cost-sharing payment for hospital stays. Under current law,
retirees and their dependents under age 65 must pay for 25
percent of the charges for inpatient care. For 2007, the
average payment by beneficiaries is $535 per day. Assuming that
charges for inpatient care increase by the rate of medical
inflation, about 4 percent, and based on information from DoD,
that this amount would apply to about 76,000 days of inpatient
care, CBO estimates that DoD would lose $2 million in 2008 as
the result of this prohibition.
In addition, section 701 would prohibit DoD from increasing
fees or deductibles for TRlCARE Standard, a fee-for-service
plan, and TRlCARE Prime, an HMO option. DoD does not currently
have the authority to raise cost-sharing amounts for TRICARE
Standard. While it does have the authority to increase cost-
sharing amounts for TRICARE Prime, there is no indication that
it is willing to do so without the ability to increase cost-
sharing amounts for TRICARE Standard at the same time.
Therefore, CBO expects that this prohibition would have no
budgetary impact.
Discount drug pricing
Under current law, DoD is one of several federal agencies
that receives from pharmaceutical makers a significantly
reduced price for drugs on the Federal Supply Schedule (FSS).
Through this program, DoD is able to procure at a discount the
drugs that it provides to beneficiaries through its hospital
pharmacies and mail-order program. However, under DoD's TRICARE
programs, beneficiaries can also fill prescriptions at retail
pharmacies. Many drug manufacturers have refused to provide
discounted prices to DoD for medications provided to
beneficiaries in that manner.
Section 703 would give DoD the authority to exclude from
its pharmacy benefits program any drug that is not provided by
the manufacturer at a discounted price. DoD has estimated that
receiving FSS rates could provide annual savings of $300
million or more for prescriptions filled at retail pharmacies
by active-duty dependents and retirees and their dependents
under age 65.
However, the authority provided in this section would not
directly give DoD access to FSS prices on purchases covered by
TRICARE at retail pharmacies. Furthermore, TRICARE has
consistently maintained a relatively open formulary, providing
beneficiaries and their doctors a choice of competing drugs. As
a result, it is unclear whether or to what extent DoD would use
the authority provided in section 703 to obtain savings. CBO
expects that any savings under this provision would be
significantly less than the projected savings based on FSS
rates. (See the section under ``Direct spending'' for CBO's
evaluation of this provision on the mandatory TRICARE For Life
program.)
Wounded warrior assistance
Title XIV would impose a number of new requirements on the
Department of Defense intended to improve the medical care and
other services received by servicemembers who are sick or
wounded. Implementing those sections would require the
establishment of a joint DoD Department of Veterans Affairs
(VA) medical information system, the hiring of additional
civilian personnel, the development of a formal transition plan
for members leaving the service, the creation of a wounded
warrior battalion, and the preparation of several reports and
studies. CBO estimates that implementing those sections would
cost about $130 million in 2008 and about $340 million over the
2008-2012 period.
Case managers and servicemember advocates
Servicemembers who are outpatients at military treatment
facilities receive the assistance of both medical care case
managers and servicemember advocates. The former are generally
social workers who help coordinate care for servicemembers. The
latter are military personnel who assist the patients with
administrative matters. Section 1411 would clarify the roles of
each and establish the maximum workload that could be carried.
Based on information from DoD, CBO estimates that about 330
case managers would have to be hired initially to meet those
requirements. Fewer new case managers would be needed in the
future as fewer troops are expected to be in a combat
situation. With an average salary and benefits package of
$100,000 per person, the estimated cost of this provision is
$104 million over the 2008-2012 period.
While a number of additional servicemember advocates would
be required under this proposal, personnel for those positions
would come from within authorized personnel levels. Thus, CBO
expects that implementing this provision would not increase
overall personnel costs, relative to those authorized levels.
Evaluation Board Advocates
Section 1415 would require that servicemembers being
considered by medical evaluation boards (MEBs) have access to
an independent health care professional to act as an advocate
on their behalf. Based on information from the military
services, CBO estimates that MEBs consider about 25,000 cases
each year. Due to this large case load, CBO believes it would
be difficult for DoD to meet this requirement without hiring
additional personnel or using private contractors. For this
estimate, CBO assumes the military services would enter into
contracts with private-sector nurses to perform this service.
Based on information from several firms that specialize in
workers' compensation and veterans disability cases, CBO
estimates the cost to hire a registered nurse as an advocate
for military personnel would be about $500 per case. This would
result in a cost to DoD of $7 million in 2008 and $67 million
over the 2008-2012 period. Costs would be lower in 2008 than in
later years because of the time needed to establish procedures
and program resources to meet this new requirement, CBO
estimates.
Medical support fund
Section 1422 would establish a DoD Medical Support Fund to
be used for programs and activities related to medical care for
wounded servicemembers and support for their families. The bill
would authorize the appropriation of $50 million to remain
available through fiscal year 2008. That money could be
transferred from the new fund to several appropriations
accounts, including construction, research, and military
personnel. Based on information from DoD, CBO estimates that
this provision would increase medical costs by $50 million in
2008.
Hotline
Section 1413 would require DoD to establish a toll-free
hotline to collect information about the condition of medical
facilities. Any deficiencies would have to be investigated
within 96 hours. If the problems violate health or safety
standards then occupants of the building would have to be
relocated until the corrections are made. Based on information
from DoD, CBO estimates that implementing this section would
cost $7 million in 2008 and $37 million over the 2008-2012
period. This includes a cost of about $2 million per year for
operating the hotline and for relocating patients and about $5
million per year for investigation of the complaints.
Liaison officers
Section 1416 would mandate that physical evaluation board
liaison officers (PEBLOs) be assigned to no more than 20 cases
at anyone time. Based on information from the military
services, there are currently about 260 personnel that perform
the role of PEBLOs throughout the DoD medical system. Of those,
CBO estimates about 15 percent, or 40 liaison officers,
currently have caseloads of less than 20. Of the remaining 220
personnel, CBO estimates the average caseload is about 28 per
PEBLO. Therefore, decreasing the average caseload to 20 would
require the hiring of an additional 90 PEBLOs. The current
population of PEBLOs is comprised of both military and civilian
personnel. For this estimate, CBO assumes the new PEBLOs would
all be civilians and each would cost about $60,000 per year,
which is the approximate cost of pay and benefits for a GS-8 on
the General Schedule. Therefore, CBO estimates that
implementing this section would average $6 million per year and
$28 million over the 2008-2012 period. The cost would only be
$3 million in 2008 because of the time needed to hire and train
the new personnel.
Training and reports
Various sections of title 14 would require DoD to establish
training programs and to prepare several reports and conduct
surveys. CBO estimates that the total cost for those purposes
would be $10 million in 2008 and $27 million over the 2008-2012
period.
Medical information systems
Section 1421 would require the Secretary of Defense and the
Secretary of Veterans Affairs to jointly establish and
implement, within eight months of the date of enactment of the
bill, a process to ensure an interoperable, bidirectional,
real-time exchange of medical information. The requirements of
the proposal would most likely be met by expanding access to an
existing application, the Bidirectional Health Information
Exchange (BHIE), and continuing development of its
capabilities.
The BHIE is currently being used to transmit electronic
medical information between VA and DoD, though it is not yet
operational in all DoD facilities nor is it capable of
transmitting all the information required by this provision.
Planned and ongoing expansions of BHIE would likely meet most
requirements of the legislation within the time frame
specified. However, systemwide transmission of radiographic
images is not a part of the current plan and will likely take
18 to 24 months to add to the system. Based on information
provided by DoD, CBO estimates that the cost of implementing
this section would be about $25 million.
Unique military capabilities
Section 1615 would require the Secretary of Defense to
determine the unique capabilities that the Department of
Defense should provide to support civil authorities during
incidents of national significance or catastrophic events, and
develop a funding plan to acquire and maintain such
capabilities. Since the ultimate effect of this provision would
depend on the types of capabilities the Secretary of Defense
determines are appropriate for DoD to provide in such
circumstances and how those capabilities would be developed
within DoD's overall budget, CBO cannot estimate the potential
effect of this provision at this time. In addition, it is not
clear what the total universe of such incidents would include.
However, if such a plan led to more frequent deployment of DoD
personnel or assets, or required a substantial investment in
equipment, the costs of implementing section 1615 could be
substantial.
Direct spending
The bill contains provisions that would increase and
decrease direct spending, primarily by providing a new annuity
for survivors of military members, expanding a compensation
program for certain retirees, increasing the death gratuity for
certain federal employees, and through changes to the TRICARE
program. H.R. 1585 would also increase receipts from asset
sales, as discussed in the following section. We estimate that
those provisions combined would increase direct spending by
$150 million in 2008, but would have no net effect over the
2008-2012 period and the 2008-2017 period (see Table 4).
TABLE 4.--ESTIMATED IMPACT OF H.R. 1585 ON DIRECT SPENDING
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
---------------------------------------------------------------------------------------------------------------
Total Total
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008-2012 2008-2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING (EXCLUDING ASSET SALES)
Special Survivor Indemnity Allowance:
Estimated Budget Authority.......... 0 33 34 34 34 35 35 35 15 0 135 255
Estimated Outlays................... 0 33 34 34 34 35 35 35 15 0 135 255
Combat-Related Special Compensation:
Estimated Budget Authority.......... 0 17 24 16 17 17 18 18 0 0 74 128
Estimated Outlays................... 0 17 24 16 17 17 18 18 0 0 74 128
TRICARE Pharmacy Copayments:
Estimated Budget Authority.......... 198 0 0 0 0 0 0 0 0 0 198 198
Estimated Outlays................... 198 0 0 0 0 0 0 0 0 0 198 198
Transfer from National Defense Stockpile
Fund:
Estimated Budget Authority.......... -150 0 0 0 0 0 0 0 0 0 -150 -150
Estimated Outlays................... 0 0 0 0 0 0 0 0 0 0 0 0
Death Gratuity for Federal Civilians:
Estimated Budget Authority.......... 2 0 0 0 0 0 0 0 0 0 2 2
Estimated Outlays................... 2 0 0 0 0 0 0 0 0 0 2 2
---------------------------------------------------------------------------------------------------------------
Subtotal:
Estimated Budget Authority...... 50 50 58 50 51 52 53 54 15 0 260 433
Estimated Outlays............... 200 50 58 50 51 52 53 54 15 0 410 583
ASSET SALES
National Defense Stockpile:
Estimated Budget Authority.......... -50 -70 -80 -110 -100 -70 -60 -43 0 0 -410 -583
Estimated Outlays................... -50 -70 -80 -110 -100 -70 -60 -43 0 0 -410 -583
TOTAL CHANGES IN DIRECT SPENDING
Total--Changes in Direct Spending:
Estimated Budget Authority...... 0 -20 -22 -60 -49 -18 -7 11 15 0 -150 -150
Estimated Outlays............... 150 -20 -22 -60 -49 -18 -7 11 15 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes.--Section 703 could lead to some direct spending savings by allowing DoD to lower costs under its pharmacy benefits program. CBO cannot estimate
savings that might be realized by enactment of that section.
Numbers may not add up to totals because of rounding.
Special survivor indemnity allowance
Currently, servicemembers' survivors who are entitled to
both Survivor Benefit Plan (SBP) benefits and Dependency and
Indemnity Compensation (DIC) see their SBP benefit reduced
dollar-for-dollar by the amount of the DIC payment they
receive. Section 644 would provide a monthly allowance of $40
(or the amount offset from their SBP, whichever is less) to
about 60,000 survivors. Because this provision would not take
effect until fiscal year 2009 (and would terminate five months
into fiscal year 2016), CBO estimates that enacting this
provision would not affect direct spending in 2008, but would
increase direct spending by $135 million over the 2009-2012
period and by $255 million over the 2009-2016 period.
Combat-related special compensation (CRSC)
Currently, disabled servicemembers who are allowed to
retire with less than 20 years of service see their retirement
annuity offset or reduced by any amount of disability
compensation that they receive from VA. Retirees who have
served 20 or more years in the service and whose VA-rated
disability is related to combat, hazardous duty, or military
training, are eligible to receive CRSC. This compensation
replaces part or all of the portion of their retirement annuity
that is offset by VA disability compensation. Section 645 would
allow disability retirees with less than 20 (but more than 15)
years of service to receive CRSC, as long as their VA
disability rating is 60 percent or greater. Based on
information from DoD, and because this provision would not take
effect until 2009 (and would be terminated at the end of 2015),
CBO estimates that enacting this provision would not affect
direct spending in 2008, but would increase it by about $74
million over the 2009-2012 period and by about $128 million
over the 2009-2016 period.
TRICARE pharmacy copayments
Section 702 would prohibit DoD from increasing the cost-
sharing amounts that beneficiaries will pay for pharmaceutical
drugs until 2009. Under current DoD plans, for medications
obtained at retail pharmacies, beneficiaries will be charged
copayments of $5 for a one-month supply of generic drugs and
$15 for the same amount of brand-name drugs. Section 702 would
keep those copayments at the current amounts of $3 and $9,
respectively. Those copayment amounts apply to active-duty
dependents and all retirees and their dependents. Retirees and
their dependents age 65 and older are covered under TRICARE For
Life, which is classified in the budget as a mandatory (i.e.,
direct spending) program, and is covered under this part of the
estimate. Health care costs for active-duty dependents and
retirees under age 65 and their dependents are discretionary
costs. CBO's evaluation of the pharmacy costs for that group of
beneficiaries is discussed in the ``Spending Subject to
Appropriation'' section of the estimate.
Based on data provided by DoD, CBO estimates that in 2008
over 24 million prescriptions for a one-month supply of a drug
will be filled at retail pharmacies for retirees and their
dependents age 65 and older. CBO estimates that prohibiting the
planned increases in copayments would reduce DoD collections by
$102 million.
In addition to reduced collections, CBO estimates that DoD
would also face higher spending for prescription drugs under
this provision for two reasons. DoD's current plan to raise
copayment amounts is expected to lead beneficiaries to purchase
fewer prescription drugs and to shift some of those
prescriptions to military hospitals and the TRICARE mail-order
program, both of which are less expensive for DoD as well as
for the beneficiaries. Banning the planned copayment increases
would therefore prevent DoD from reaping expected savings that
CBO estimates, based on information from DoD, will be $96
million in 2008.
In total, CBO estimates that implementing section 702 would
increase mandatory spending by $198 million in 2008.
Discount drug pricing
Under current law, DoD is one of several federal agencies
that receives from pharmaceutical makers a significantly
reduced price for drugs on the Federal Supply Schedule (FSS).
Through this program, DoD is able to procure at a discount the
drugs that it provides to beneficiaries through its hospital
pharmacies and mail-order program. However, under DoD's TRICARE
programs, beneficiaries can also fill prescriptions at retail
pharmacies. Many drug manufacturers have refused to provide
discounted prices to DoD for medications provided to
beneficiaries in that manner.
Section 703 would give DoD the authority to exclude from
its pharmacy benefits program any drug that is not provided by
the manufacturer at a discounted price. DoD has estimated that
receiving FSS rates could provide annual savings of $365
million for prescriptions filled at retail pharmacies by
beneficiaries in the TRICARE For Life program (generally, those
people age 65 and over).
However, the authority provided in this section would not
directly give DoD access to FSS prices on purchases covered by
TRICARE at retail pharmacies. Furthermore, TRICARE has
consistently maintained a relatively open formulary, providing
beneficiaries and their doctors a choice of competing drugs. As
a result, it is unclear whether or to what extent DoD would use
the authority provided in section 703 to obtain savings. CBO
expects that any savings under this provision would be
significantly less than the projected savings based on FSS
rates. (See the section under ``Spending Subject to
Appropriation'' for CBO's evaluation of this provision on the
discretionary TRICARE program.)
Transfer from the national defense stockpile fund
Section 423 would require the Secretary of Defense to
transfer $150 million from the unobligated balances of the
National Defense Stockpile Transaction Fund to the
Miscellaneous Receipts Fund of the U.S. Treasury. The transfer
would not affect federal spending because CBO estimates that
those balances will not be spent over the 2008-2017 period
under current law.
Death gratuity for Federal civilians
Section 1105 would authorize payments of $100,000 to the
families of federal civilian workers who were killed either
while serving with the armed forces or in terrorist acts. The
benefit would apply to deaths that occurred on or after October
7, 2001. Because the benefit would be retroactive, CBO
considers those payments to be direct spending, since the
relatives of those victims would be entitled to claim the
gratuity upon enactment of the bill. Based on information from
the Departments of Defense and State, CBO estimates that the
families of about 20 federal employees would qualify for this
benefit by the time this bill is enacted, at a cost of $2
million in 2008. In addition, there would be costs related to
deaths that occur after the enactment of this bill, but CBO
considers those costs to be discretionary because they would be
paid from future appropriations.
Transfer of MGIB-SR from DoD to VA
Section 525 would transfer the Montgomery GI Bill-Selected
Reserve (MGIBSR) program from DoD to VA. Because the transfer
would change neither the existing benefits nor the incentives
to use the program, CBO estimates that there would be no change
in direct spending as a result of this provision.
Other provisions
The following provisions would have an insignificant
budgetary impact on direct spending:
(1) Section 232 would authorize DoD to allow private
companies to use the facilities and equipment at defense
laboratories and research centers to promote accelerated
development of critical technologies. The bill would allow DoD
to charge fees for the use of those facilities and equipment,
and to spend any amounts it collected.
(2) Section 342 would extend the period of eligibility for
servicemembers who deployed to combat operations to seek the
reimbursement for the purchase of helmet pads. To date, the
Army and the Marine Corps have received a small number of
claims for reimbursement of such items.
(3) Section 511 would set to 38 the maximum number of years
of service for reserve officers in the grade of lieutenant
general or vice admiral, aligning such limit with that for the
active-duty force.
(4) Section 514 would allow the Secretary of the Air Force
to defer retirements of some reserve technicians until the age
of 60.
(5) Section 522 would increase from 416 to 424 the annual
limit on certain Reserve Officer Training Corps (ROTC)
scholarships for the Army Reserve and Army National Guard,
thereby increasing usage of the MGIB-SR.
(6) Sections 551 through 555 would award medals of honor to
several servicemembers who performed acts of bravery in prior
conflicts. Those members that are still living would be
eligible to receive a pension of $1,000 per month.
(7) Section 571 would extend for three years the authority
of the Secretaries of the Army, the Navy, and the Air Force to
accept gifts on behalf of members of the armed forces and
civilian employees of DoD who are injured in the line of duty.
(8) Section 576 would establish a program to commemorate
the 50th Anniversary of the Vietnam War. This provision would
authorize the establishment of a fund and allow the Secretary
of Defense to accept and spend donations from private parties.
(9) Section 641 would require pre-trial periods of
confinement to be counted towards retirement when determining
eligibility for retired pay that would be paid to dependents.
(10) Section 643 would require that any amounts paid under
the Survivor Benefit Plan that were not appropriately offset
against Dependency and Indemnity Compensation to be recouped
from survivors only to the extent that they exceed any SBP
premiums to be refunded to those same survivors.
(11) Sections 672 and 673 would change the treatment of
overseas residence relating to certain immigration benefits for
military spouses and children.
(12) Section 843 would require DoD to license military
designations and likenesses of weapons systems to toy and hobby
manufacturers, and would allow DoD to charge fees to offset the
administrative costs of providing such licenses and to spend
such fees.
(13) Section 1045 would authorize the DoD to provide
nonfederal researchers with small amounts of chemical agents to
facilitate research efforts to develop defenses against those
chemical agents.
(14) Section 1049 would prohibit DoD from selling parts for
the F-14 fighter aircraft, except to museums or to other
organizations in the United States that work to preserve F-14
fighter aircraft for historical purposes. (DoD can spend the
proceeds from any such sales without future appropriation
action.)
(15) Section 1107 would allow some retiring civil service
personnel to begin receiving annuities the day after they
retire.
(16) Section 1420 would require that the medical condition
of servicemembers on the Temporary Disabled Retired List (TDRL)
be judged permanent and stable before the members' removal from
the TDRL, in cases where the servicemember has completed fewer
than 20 years of service and has disabilities rated less than
30 percent.
(17) Section 1625 would clarify the mandatory retirement
ages for certain generals and admirals.
Asset sales-National Defense Stockpile
Enacting the bill would lead to increased receipts from the
sale of material in the National Defense Stockpile. Those
additional sales would reduce direct spending by $410 million
over the 2008-2012 period and by $583 million over the 2008-
2015 period.
Section 3302 would increase by $130 million the target
contained in the National Defense Authorization Act for Fiscal
Year 2000 (Public Law 106-65; later revised by Public Laws 108-
136 and 109-163) for continual sales of chromium and beryllium
from the National Defense Stockpile. CBO estimates that the
additional sales would begin in 2010 and that there would be
sufficient quantities of those materials in the stockpile to
complete those additional sales by 2012. Thus, CBO estimates
that this section would increase receipts from stockpile sales
by $130 million over the 2010-2012 period.
Section 3302 also would increase by $453 million the target
contained in the National Defense Authorization Act for Fiscal
Year 1999 (Public Law 105-261; later revised by Public Laws
106-398, 107-107, 108-375, 109-163, and 109-364) for continual
sales of tungsten from the National Defense Stockpile, and it
would extend sales through fiscal year 2015. CBO estimates that
there would be sufficient quantities of tungsten in the
stockpile to achieve additional receipts of $50 million in
2008, $280 million over the 2008-2012 period, and $453 million
over the 2008-2015 period.
Revenues
Sections 571 and 576 would allow DoD to accept and spend
gifts. Such donations are classified as revenues. CBO expects,
however, that enactment of those sections would not have a
significant effect on revenues.
Intergovernmental and Private-Sector Impact: Section 4 of
the Unfunded Mandates Reform Act excludes from the application
of that act any legislative provisions that enforce the
constitutional rights of individuals. CBO has determined that
section 1054 would fall within that exclusion because it would
amend the authority of the President to employ the armed
services to protect individuals' civil rights. Therefore, CBO
has not reviewed that section of the bill for mandates.
Other provisions of H.R. 1585 contain both
intergovernmental and private-sector mandates as defined in
UMRA but CBO estimates that the annual cost of those mandates
would not exceed the thresholds established in UMRA ($66
million for intergovernmental mandates in 2007 and $131 million
for private-sector mandates in 2007, adjusted annually for
inflation).
Increasing the end strength of the armed services
Sections 401 and 412 would increase the costs of complying
with existing intergovernmental and private-sector mandates as
defined in UMRA, by increasing the number of servicemembers and
reservists on active duty. Those additional servicemembers
would be eligible for protection under the Servicemembers Civil
Relief Act (SCRA) including the right to maintain a single
state of residence for purposes of state and local personal
income taxes and the right to request a deferral in the payment
of certain state and local taxes and fees. SCRA also requires
creditors to reduce the interest rate on servicemembers'
obligations to 6 percent when such obligations predate active-
duty service and allows courts to temporarily stay certain
civil proceedings, such as evictions, foreclosures, and
repossessions. Extending these existing protections would
constitute intergovernmental and private-sector mandates and
could result in additional lost revenues to government and
private-sector entities.
The number of active-duty servicemembers covered by SCRA
would increase by less than 1 percent in fiscal year 2008. CBO
expects that relatively few of these servicemembers would take
advantage of the deferrals in certain state and local tax
payments; the lost revenues to those governments would be
insignificant.
CBO does not have sufficient information to estimate
precisely the increase in costs of existing private-sector
mandates. Servicemembers' utilization of the various provisions
of the SCRA depends on a number of uncertain factors, including
how often and how long they are deployed. Nonetheless, because
the increase in the number of active-duty servicemembers
covered by SCRA would be less than 1 percent, CBO expects that
the increased costs to the private sector caused by those new
servicemembers utilizing SCRA would be small and below the
threshold for private-sector mandates ($131 million in 2006,
adjusted annually for inflation).
Prohibiting DoD sale of parts for F-14 fighter aircraft
Section 1049 contains a private-sector mandate as defined
by UMRA, because it would prohibit the sale of any parts of the
F-14 aircraft by the Department of Defense. It also would
prohibit the United States government from issuing an export
license for sale of F-14 aircraft parts. Those prohibitions
would be a mandate upon U.S. persons or entities that purchased
F-14 parts legally from the Department of Defense with
intention to resell the aircraft parts.
The cost of the mandate to the private sector, if any,
would be the amount certain U.S. persons and entities have
already paid to purchase the F-14 parts from the Department of
Defense added to the forgone profit attributable to the
prohibition of resale of the F-14 parts. From April 2006 to
December 2006, F-14 parts were sold for a total of $38,000. As
a result, CBO estimates that the cost, if any, to comply with
that mandate would be minimal.
Providing benefits to state and local governments: This
bill contains several provisions that would benefit state and
local governments. Some of those provisions would authorize aid
for certain local schools with dependents of defense personnel
and convey certain parcels of land to state and local
governments. Any costs to those governments would be incurred
voluntarily as a condition of receiving federal assistance.
Previous CBO estimates: On March 14, 2007, CBO transmitted
a cost estimate for H.R. 1362, the Accountability in
Contracting Act, as ordered reported by the House Committee on
Armed Services on March 13, 2007. On March 12, 2007, CBO
transmitted a cost estimate for H.R. 1362 as ordered reported
by the House Committee on Oversight and Government Reform on
March 8, 2007. The version reported by the House Committee on
Oversight and Government Reform would authorize additional
appropriations for contract management, which CBO estimates
would increase the need for discretionary appropriations by $20
billion over the next four years. The version reported by the
Committee on Armed Services, which is similar to the provisions
in title VIII, subtitle C, of H.R. 1585, would not have a
significant effect on discretionary spending.
On March 23, 2007, CBO transmitted a cost estimate for H.R.
1538, the Wounded Warrior Assistance Act of 2007, as ordered
reported by the House Committee on Armed Services on March 20,
2007. Title 14 of H.R. 1585 is similar to H.R. 1538, and the
estimated costs are the same for both provisions except for the
section on the establishment of an information technology
system to share medical data between DoD and VA. Section 1421
of H.R. 1535 would require a much less comprehensive system
than what would be required under H.R. 1538.
On April 12, 2007, CBO transmitted a cost estimate for H.R.
1441, the Stop Arming Iran Act, as ordered reported by the
House Committee on Foreign Affairs on March 27, 2007. Section
1049 of H.R. 1585 is similar to H.R. 1441 and the estimated
costs are the same for both provisions.
Estimate prepared by: Federal Costs: Defense Outlays: Kent
Christensen. Military Construction and Multiyear Procurement:
David Newman. Military and Civilian Personnel: Matthew Schmit.
Military Retirement and Education: Mike Waters. Operation and
Maintenance: Jason Wheelock. Health Programs: Michelle S.
Patterson. Health Information Technology: Stuart Hagen and
Peter Richmond. Foreign Affairs: Sam Papenfuss. Stockpile
Sales: Raymond J. Hall.
Impact on state, local, and tribal governments: Melissa
Merrell.
Impact on the private sector: Victoria Liu.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.