Lawmakers Get Lost in the Math of Reforming Military Benefits
The business of reforming the military's compensation system got very confused very quickly during a Wednesday House Armed Services subcommittee hearing.
There’s general agreement in Washington that reforming the military’s compensation system will be difficult, even now that a new independent panel has released several proposals, for the most part well-received on Capitol Hill. Explaining the nuances of the actual recommendations clearly and concisely however, is also proving challenging.
During a Wednesday House Armed Services subcommittee hearing, lawmakers questioned members of the commission mostly about proposed changes to service members’ retirement benefits and health care coverage -- the most politically fraught and technically complicated of the panel’s 15 recommendations. It got very confusing, very quickly.
One early exchange between Rep. Tom MacArthur, R-N.J., and commission Chairman Alphonso Maldon was particularly incomprehensible. MacArthur asked if it was correct that the savings from the panel’s proposed TRICARE reforms totaled $6 billion, and if so, how those savings broke down in terms of structural changes to the system versus increased contributions from beneficiaries.
Maldon: Yes, Congressman. For improved utilization and program management, just in that area alone, there is $5.2 billion. There’s an increase to the cost of beneficiaries, there’s an increase there of $2.0 billion dollars. There’s a movement as we shift to accrual funding -- that’s a $4 billion dollar savings. Now, that gave us a total, of course, of about $11.2 billion dollars, but what we’ve proposed is to turn around and invest in benefits to improve the quality of the program, which will be TRICARE Choice, and also to make sure that there’s some other insurance reforms that would take place. So, we’ve allowed for that. So there’s about four…there’s roughly $2.7 billion dollars that is spent for the insurance reform. There’s another $4 billion dollars that we are spending for making sure that we can put money back into the system to make it better with regard to choice, access, and improve the overall value of the program by expanding the network. So, totally, yes, we are talking about somewhere between six and $6.7 billion dollars.”
MacArthur: You lost me a little bit, I’m afraid.
You’re not the only one who’s lost, congressman.
“Twenty, 30 years ago I think I used to understand this, and now I feel like I’m in the middle of a calculus problem,” said Rep. Paul Cook, R-Calif., who is a retired Marine Corps general, later during the hearing. Cook then explained that he was not very good at calculus. “Can’t we make it any simpler?” he asked, of compensation reform. “It seems that we’ve thrown out the KISS [‘keep it simple, stupid’] principle. I appreciate that you are trying to do something. But we’ve got to have a standardized message and make it as simple as possible.”
To be fair, the panel’s proposals are complex because the military health care and retirement systems are that way. And changing them is a big deal. But selling Congress on military compensation reform depends on making sure everyone understands some basics first. There was confusion among Republicans and Democrats regarding the panel’s recommendations on the Thrift Savings Plan, whether the commissioners were advocating for eliminating the defined retirement benefit altogether (they are not), changes to active-duty members’ health care coverage and the fate of TRICARE for Life beneficiaries, among other things.
It’s not just lawmakers, either. The panel held a press conference in late January on its recommendations, and reporters repeatedly asked for clarification on the specifics of the panel’s proposals – detailed in a 280-page, text-heavy report. Many of those reporters have a working knowledge of the military’s health care system as well as the Thrift Savings Plan, and still had a hard time sussing out some of the proposals.
Commissioner Michael Higgins, a former longtime staffer of the House Armed Services Committee, fielded many of the lawmakers’ questions on Wednesday, helping to clear up some misunderstanding and to explain the mechanics of various programs.
Here are some important things to remember when thinking about the Military Compensation and Retirement Modernization Commission’s proposed changes to health care and retirement:
- The panel supports moving from the current retirement system – which rewards those with 20 years of service with a pension that is 50 percent of their base pay – to a more flexible, blended system that incorporates defined benefits, contributions and continuation pay as a “midcareer incentive.” These changes would only affect NEW service members who joined the military after the law was changed (though current members could opt in at any time). Pensions for those with 20 years or more would be smaller than they are now for those new service members, and they’d be auto-enrolled in the TSP at 3 percent of their pay and an automatic 1 percent government contribution when they joined the military. After two years of service, a government match would kick in.
- Military members currently can contribute to the TSP, but are not enrolled automatically and do not receive a matching contribution from the government. The panel’s proposal would essentially reinforce the defined contribution part of retirement for new service members through auto-enrollment.
- Now, personnel who serve less than 20 years—about 83 percent—do not receive a defined benefit, which some believe is unfair given their multiple deployments during the wars in Iraq and Afghanistan. Those who do spend a career in the military can hit the 20-year mark relatively early, retire from service in their 40s or 50s, draw a pension and work elsewhere for a while. About 17 percent serve 20 years or more in the military.
- The panel proposes giving the Defense secretary the authority to change the service years required for retirement, in either direction.
- Dependents, reserves and working-age retirees would be moved from TRICARE into a different system -- TRICARE Choice -- that would include commercial insurance plans. It would be similar in concept to the Federal Employees Health Benefits Program. Family members would still have access to care in military treatment facilities, but the idea is to shift a large chunk of beneficiaries from TRICARE to the private health insurance market to save the Defense Department money but also increase access to more providers and improve the quality of health care.
- Active-duty members would remain in the current health care system. Service members would receive a basic health care allowance in their paychecks to help pay for their dependents’ health insurance coverage.
- Health care coverage for retirees aged 65 and older who are enrolled in TRICARE for Life would remain the same.
Confusion over retirement benefits and health care notwithstanding, the subcommittee’s lawmakers praised the panel for wading through complex issues and making thoughtful recommendations. “We have spent a lot of time making sure we are taking care of the troops because of the pain that we’ve gone through and seeing how these systems either work, don’t work or continually get degraded, which is why we came to where we are,” said Commissioner Edmund Giambastiani Jr., a retired Navy admiral.
Clarification: Service members who retire after 20 years or more in the military receive a pension that is calculated on their base pay.