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Facing budget woes, could Armed Forces Retirement Home be run like a military base?

April 5, 2017 (Photo Credit: Armed Forces Retirement Home)
Most service members' connection to the finances of the Armed Forces Retirement Home begins and ends with a 50-cent-a-month deduction from their paycheck. But that revenue stream, and other funding sources, are running short, and defense officials are considering drastic changes to the management of the home, which cares for about 1,000 former enlisted members in two locations.

Among the suggestions: Convert the home's leadership into a "military garrison model" with a senior officer at the helm, or privatize it completely.

Deputy Defense Secretary Robert Work ordered defense officials to evaluate those and other options and propose a new management structure in a Feb. 14 memorandum. Work also directed officials to take actions to save money in a variety of areas at AFRH, such as reducing spending on veterans' activities, revising the fee structure and eliminating a golf-course subsidy. 


The home has campuses in Washington, D.C., and Gulfport, Mississippi. It's open to former enlisted members and warrant officers, with certain exceptions and eligibility requirements.

Some residents are retirees. Others are eligible because service-connected disabilities make them unable to earn a living or, if they served in a war theater, because they suffered from qualifying injuries, diseases or disabilities.

Enlisted members and warrant officers contributed $6.8 million to the AFRH in 2015 through paycheck deductions. A move to increase that amount to $1 several years ago was blocked by the services.  

Funding to pay for other operations costs come from the residents themselves and from fines and forfeitures paid by active-duty service members as punishment for misconduct during military service. That revenue has dropped by more than 40 percent since 2009.


The retirement home’s trust fund balance has declined from $186 million in 2010 to $46 million in 2015, according to AFRH budget justification documents for fiscal year 2017. In fiscal 2015, the AFRH had $63 million in expenses against $48 million in revenue. DoD has estimated it will need an infusion of $22 million a year to bail out the home. 

Todd Weiler, who served as the assistant deputy secretary of manpower and reserve affairs in the last year of the Obama administration, ordered a complete review of AFRH operations in 2016, he told Military Times, when he realized the home wasn't getting the managerial oversight it needed and was in dire financial straits.

“It should never have gotten into this situation,” Weiler said. “There was a series of not-smart business decisions being made, so consequently the trust fund was depleted.”


Weiler said he asked the services' senior enlisted advisers about raising the mandatory deductions from enlisted members' paychecks from 50 cents a month to $1, and "they all pushed back," he said. The population of the facilities is small, he noted, and a small percentage of enlisted members will ever live there.

"We're asking the most junior service members to pay up. Until we make sure we have our house in order and have found ways to do business better, we shouldn't be asking more of them."

He proposed putting an active-duty officer at the O-6 level with experience in installation management in charge of the home. 

“That colonel is not going to sit there and let that stuff happen like it’s happening now,” he said. “And the residents will respect the military leadership.” 

Such a senior leader would be in charge under the “military garrison model” outlined in Work's memo. As chief operating officer, he'd be supported by experts in the management of retirement homes and in providing long-term medical care for older people. Such a move would require legislation, according to the memo.


Rules now in place allow an active-duty member below general or flag officer rank to administer each AFRH facility, but while some administrators have been retired members, it’s been a number of decades since an active-duty member served at the helm.

ADMISSIONS AND CUTBACKS

The eligibility system also has been subject to suggested reforms. Weiler said he was also concerned about some admission requirements that apparently exclude veterans if they have issues like post-traumatic stress disorder and traumatic brain injury, and was in the process of addressing that when he left in January.

Work’s memo calls for an evaluation of admissions requirements that are excessively restrictive and that “may preclude serving veterans with post-traumatic stress disorder, traumatic brain injury, addictions and other psychological conditions.”

It also pushes for the home to increase occupancy rates (it's about 84 percent of capacity) and to revise the fee structure, which is based on a percentage of resident income and type of care received. After a 2016 increase, the basic independent living fees are 40 percent of total current income, up to a maximum of $1,429 a month; and the long-term care fees are 80 percent of total current income, not to exceed $4,664 a month. Those fees include many expenses, such as meals. 

Officials should evaluate the fee structure “to balance the appropriate level of service, resident cost-sharing, need-based aid, and demand for space across campuses," the memo states.


Other actions Work has approved to address the financial problems include:

  • Stop using trust funds to pay for operating the golf course at the Washington site. The nine-hole course would be allowed to continue to operate if the costs to operate it are recovered by golfers or other sources of revenue.
  • Reduce spending on resident activities by at least 20 percent in the first year and by half over the next four years. “AFRH spending in this area far exceeds the industry average,” Work’s memo states.  
  • Establish nurse-to-resident staffing targets for each level of care provided at the homes. The ratio of staff to residents is higher than industry averages as staffing is based on full occupancy, despite the 84 percent occupancy level. 
  • Explore receiving Veterans Affairs Department payments, such as per diem payments for qualified residents. The law allows VA to provide per diem payments to state veterans' homes for certain kinds of care of veterans.
  • Explore agreements with DoD and VA for reimbursement for medical care to veterans normally provided for veterans by those departments.
  • Improve contract management and surveillance, to ensure AFRH is getting full value for its money. One example: Weiler said he was concerned when he discovered that AFRH has a contract to raise the flag in the morning at the golf course.
  • Sell excess property and lease non-excess property, which could include the golf course if it doesn't prove self-sufficient. 
  • Explore options for charitable funding.
Karen Jowers covers military families, quality of life and consumer issues for Military Times. She can be reached at kjowers@militarytimes.com.
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