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Capped pay raise, huge Tricare fee hikes in new budget plan

Apr. 10, 2013 - 01:09PM   |  
President Obama talks about the budget as Office of Management and Budget Acting Director Jeffrey Zients looks on in the Rose Garden of the White House on April 10.
President Obama talks about the budget as Office of Management and Budget Acting Director Jeffrey Zients looks on in the Rose Garden of the White House on April 10. (Mandel Ngan / AFP via Getty Images)
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The White House's defense budget proposal for 2014 that was unveiled Wednesday includes a capped 1 percent pay raise for service members, along with increases of 3.4 percent on the food allowance and 4.2 percent in housing allowances.

While claiming that “people are central” to national security, the $526.6 billion budget request clearly indicates that the squeeze is on programs affecting current troops, retirees and families, with the Pentagon continuing its so-far largely unsuccessful campaign to target military health care benefits as a place to cut.

Defense Secretary Chuck Hagel said the budget “continues to balance the compelling needs of supporting troops at war in Afghanistan, implementing the president's defense strategic guidance, and sustaining the quality of the all-volunteer force — all while ensuring we maximize the use of every taxpayer dollar and address internal imbalances within the DoD budget.”

A key emphasis, Hagel said, is attempting to “maximize our use of resources.” This includes a call for another round of base closings, “restructuring” the civilian workforce in a move that could eliminate some jobs, and overhauling medical care both by turning to the private sector to provide more care at less cost and by adjusting the footprint of military hospitals and clinics to be more efficient.

“These efforts are having some success, with projected health care spending in this budget request declining by some 4 percent compared against our budget two years ago,” Hagel said.

Army Gen. Martin Dempsey, chairman of the Joint Chiefs, said the budget proposal “lowers manpower costs, reduces excess infrastructure, and makes healthcare more sustainable.”

“Most importantly, it protects investment in our most decisive advantage — our people,” he said. “It treats being the best led, trained, and equipped military as a non-negotiable imperative.”

Congressional opposition

Many elements of the plan are non-starters as far as lawmakers on Capitol Hill are concerned. A prime example is base closings.

Seeking to put a positive spin on the proposed one-time round of closings and consolidations of installations and facilities, Hagel said the process “allows communities a role in re-use decisions for the property and provides redevelopment assistance” to those areas. But the House Armed Services Committee already has held a hearing to stoke opposition to the idea.

On troops' pay, the budget documents stress that capping pay raises does not represent a “cut” in pay, but merely a slowdown in pay growth, and seek to portray that proposal as a tradeoff.

“While this adjustment means that the average enlisted member will see a monthly increase in pay of $26 vice $47 beginning in January 2014, it also means that the department will not have to reduce military end strength by thousands of additional troops on top of the drawdown already planned,” the documents stated.

The 1 percent raise, which would take effect on Jan. 1, 2014, is less than the 1.8 percent increase that would be required in order for military pay to keep pace with average private-sector wage growth. If approved by Congress, this would be the first military raise in over a decade that failed to keep pace with the private sector.

The 3.4 percent increase in basic allowance for subsistence and 4.2 percent increase in basic allowance for housing are placeholder figures because the exact percentage increases that would take effect on Jan. 1, 2014, will not be determined until later this year. However, the numbers reflect a willingness by the Pentagon to fully fund these two allowances that are linked to actual increases in food and rental costs.

A Pentagon statement says the intention is “to ensure that U.S. personnel are well-compensated and properly equipped, training and led.”

The budget proposal would reduce funding for bonuses and special pays to $2.3 billion, less than half the peak total of $5 billion in 2008. Still, the budget documents characterize this as “robust” funding aimed at making sure both quality and quantity goals are met.

Spending money on targeted pays rather than bigger across-the-board increases is a strategy long-recommended by budget analysts to concentrate money only where it is needed to attract and retain people with crucial skills and experience.

New Tricare fee hikes

The Pentagon again is seeking increases in Tricare fees with a revamped and more expansive proposal that would touch all beneficiaries but would fall hardest on working-age retirees under 65.

For Medicare-eligible retirees in the Tricare for Life program, the budget proposes an annual enrollment fee based on a percentage of retired pay. For 2014, the fee would be capped at $150 for family coverage for most retirees and $200 for retired flag and general officers.

There would be rapid increases over the following years, with annual increases of $150 in maximum fees for most retirees and $200 in the ceiling for flag officers. Retirees who are already 65 at the time of the change would be exempt from any Tricare for Life enrollment fees.

For working-age retirees under 65, the Pentagon wants to increase the current Tricare Prime enrollment fee in phases over four years, based on a percentage of retired pay, again with higher charges for retired flag and general officers.

For those who retired below flag or general officer rank, the minimum annual enrollment for family coverage would be $548 in 2014, rising to $594 in 2018. The maximum for anyone below flag or general officer rank in 2014 would be $750 for family coverage, rising to $1,226 in 2018.

For flag and general officers, annual enrollment for family coverage would be $900 in 2014, rising to $1,840 in 2018.

The budget also proposes to increase Tricare Prime co-pays for retirees and their beneficiaries to $16 per medical visit not related to mental health. That would be a $4 increase.

New annual enrollment fees are proposed for Tricare Standard and Tricare Extra for retirees under the age of 65, phased in over five years. Fees would start in 2014 at $70 for individuals and $140 for families and would rise by 2018 to $125 for individuals and $250 for families.

In 2019 and beyond, enrollment fees would increase each year by the same percentage as the annual cost-of-living adjustment in military retired pay.

In addition to the enrollment fees, the Pentagon proposes what budget documents call a “modest” increase in the annual health care deductibles for working-age retirees, also phased in over five years.

The current deductible is $150 for individuals and $300 for families. In 2014, deductibles would jump to $160 for individuals and $320 for families, then would rise another $40 for individuals and $80 for families in 2015. From 2016 through 2018, the deductible would increase by another $30 a year for individuals and $60 a year for families. Beyond 2018, deductibles would increase each year by the amount of the retiree COLA.

Increases in pharmacy co-pays for all Tricare beneficiaries also are part of the Pentagon proposal, with a plan similar to what was proposed in previous years that modestly increases the charge for generic prescriptions at retail pharmacies while dramatically increasing the cost for brand name drugs through both retail and mail order pharmacies.

One new wrinkle: The Pentagon is proposing to set a co-pay of $9 starting in 2018 to fill a generic drug prescription through the Tricare mail-order program; generics purchasing through the mail-order option is now free.

The White House is seeking to justify squeezing personnel benefits by claiming that total military compensation — including basic pay, housing and food allowances, and tax advantages — provides total earnings above what average private-sector workers receive.

In 2011, according to the budget documents, total average compensation was $52,000 for an enlisted member and $100,000 for an officer, while the national median family income, including dual-income families, was about $50,000.

Those estimates do not take into account combat-related pay or bonuses and special pays that further boost compensation for a generation of troops who served in Iraq and Afghanistan.

The base budget request represents a modest $900 million reduction from the 2013 budget. Adjusted for inflation, the proposal would represent a decline of 1.8 percent from 2013 levels.

This $526.6 billion total is roughly the same amount proposed by the House and Senate in their separate 2014 spending plans; it's also about $50 billion over the cap placed on defense spending by the 2011 Budget Control Act levels and does not reflect the potential impact of sequestration, which continues to overshadow federal budget proceedings.

Whether the new proposed defense budget plan will have to be cut by $50 billion or more will be determined in budget negotiations between the White House and Congress.

Initial reaction from senior Republicans who will have a hand in shaping the budget proposal in Congress was harsh.

Rep. Buck McKeon, R-Calif., the House Armed Services Committee chairman, said the five-year budget plan represents a reduction of $120 billion from last year's plan. McKeon said that reduction was made “with no assessment of strategic impact” at a time when military leaders have warned they cannot take any more cuts, when tensions are rising with North Korea and when the situation in Syria is “more volatile.”

The ranking Republican on the Senate Armed Services Committee, Oklahoma Sen. Jim Inhofe, said the 2014 budget continues the Obama administration's “unfortunate history of saddling the men and women of our military with disproportionate and illogical budget cuts that drastically undermine the readiness and capabilities they need to operate in an increasingly dangerous world.”

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