New Pay and Benefits
President Bush on Nov. 24 signed into law the National Defense Authorization Act for Fiscal 2004, containing a basketful of increases in military pay and benefits for active duty members, retirees, and reservists.
Active Duty Members
- Basic Pay: An average raise of 4.15 percent on Jan. 1. Individual raises will range from 3.7 percent to 6.25 percent, depending on grade and length of service.
- Housing Allowance: An average 6.5 percent increase in basic allowance for housing will continue a string of BAH raises above average rental costs nationwide. The aim is to end out-of-pocket costs for military renters. The perceived out-of-pocket gap between BAH and local rents will narrow to 3.5 percent in 2004 and be wiped out with the 2005 BAH adjustment.
- Wartime Pays: Recent increases in Imminent Danger Pay and Family Separation Allowance will continue through at least December. Last April, IDP was raised from $150 a month to $225. FSA was increased from $100 to $250. Congress rejected a call by the Bush Administration to roll back these increases and replace with them with an equal increase in hazardous duty pay but only for persons assigned to Iraq and Afghanistan.
- Setting Raises: Annual military pay raises after 2006 will be set to match private sector wage growth as measured by the Bureau of Labor Statistics’ Employment Cost Index (ECI). This modifies a law that, after 2006, would set military pay raises a half percentage below yearly changes in the ECI.
- Moving Damage: The services are to enter contracts with household movers to require reimbursement to military families of full replacement costs of personal property damaged or lost during change-of-station moves. Current mover contracts allow reimbursements at moving industry standards which seldom cover the full value of objects lost.
- Concurrent Receipt: A 10-year phase-in of concurrent receipt of military retired pay and VA disability compensation will begin Jan. 1 for retirees with a disability rated 50 percent or higher. Their full military retired pay gradually will be restored. Retirees rated less than 50 percent disabled will continue to see retired pay reduced, dollar for dollar, by the amount drawn in disability pay.
- Combat-Related Special Compensation: The CRSC benefit will be expanded to cover anyone with 20 or more years of service and combat or combat-training-related disabilities of 10 percent or more. Before Jan. 1, CRSC was offered only to retirees with combat-related disabilities of 60 percent or higher, or any disability tied to wounds for which members received the Purple Heart. Retirees have to apply for CRSC. Payments are immediate, rather than phased, and are tax free. No retiree can receive both CR and CRSC. Finance centers will pay retirees whatever benefit is higher, but retirees, perhaps for tax reasons, will be able to select the alternative.
- Tricare Assistance: Defense officials must develop and implement an outreach program for users of Tricare Standard, the military’s fee-for-service health insurance option. The goal is to assist beneficiaries in finding participating civilian providers.
Guard and Reserve
Tricare Expanded: The triple option of Tricare Prime, Standard, and Extra will be opened to about 170,000 drilling or inactive reservists, those who are unemployed, or have no employer-provided health insurance. To enroll, uninsured reservists will pay an extra premium on top of usual Tricare co-payments and deductibles. Premiums are expected to be about $420 a year for self coverage or $1,440 for self and family. The Bush Administration strongly opposed this change, so the authority is set to expire Dec. 31—perhaps before the program can get started—unless Congress votes to make the program permanent.
Transitional Health Coverage: National Guard personnel and Reservists activated for 30 days or more will have access to transitional military health care for up to 180 days after leaving active duty. The current limit is 60 to 120 days. This program, too, would end Dec. 31, unless made permanent.
Preactivation Health Care: The services are authorized to provide medical and dental care to Guard and Reserve personnel as units are alerted that they will mobilize. No health care had been allowed until units were activated.
Premobilization Tricare: Coverage for reservists and their families could begin up to 90 days before mobilization. Tricare coverage had been available only after personnel were activated. Congress ordered the General Accounting Office to prepare a report on reserve health care needs by May and to judge the effectiveness of these new enhancements.
Commissary Privileges: Drilling Guardsmen and Reservists are allowed unlimited shopping privileges in base grocery stores.
Imminent Danger and Hostile Fire: Mobilized reservists will qualify for Imminent Danger Pay and Hostile Fire Pay under the same conditions set for active duty members.
- National Security Personnel System: New methods of managing defense civilian employees will emphasize flexibility, from recruitment through retirement. The new system will award merit and performance over longevity. Up to 25,500 defense civilians a year will be eligible for voluntary early retirement or separation pay to ease workforce restructuring.
Medicare Part B Changes
The Medicare Prescription Drug and Modernization Act of 2003 (H.R. 1) includes a long-sought waiver of premium penalties for elderly military retirees using Medicare Part B.
The reform law waives the penalty for military retirees who enrolled in Part B in 2001 or later. The change applies to monthly premiums from January 2004 on. No reimbursements will be provided for penalties paid before then.
On Jan. 1, Part B insurance, which covers physician services and outpatient care, experiences a rise in its standard monthly premium. It goes to $66.60, up 13.5 percent over 2003.
A Medicare user who delays Part B enrollment pays an extra 10 percent per month in premiums for each year in which he delays enrollment beyond age 65. For example, if a retiree waits until 70 to enroll in Part B, his premium will be 50 percent higher, or $99.90 a month in 2004.
Five to 10 percent of elderly military retirees have declined to sign up for Part B coverage at age 65. They believed it was unnecessary because, they reasoned, military health care always would be available.
With the advent of Tricare a decade ago, however, access to care on base began to tighten dramatically. Thousands of service elderly were forced to use Medicare. Congress in 2001 finally came to the rescue with Tricare for Life, a supplement to Medicare.
To use Tricare for Life, however, elderly must be enrolled in Medicare Part B. Many recent enrollees were hit with heavy late penalties.
There will be a special open enrollment for Medicare Part B for military retirees who declined coverage at age 65. Part B coverage will begin in the first month following enrollment.
Elsewhere in the Medicare Bill …
The Medicare reform bill contained at least two other measures of interest to military retirees.
- It stopped a planned 4.5 percent cut in payments to physicians under Medicare and under Tricare and Tricare for Life. Instead, physician reimbursements are set to climb by 1.5 percent.
- The bill lifts a $1,500-per-year coverage cap on physical therapy services, which would have affected many disabled military elderly.
“Keep the Promise” Bill
Two lawmakers from each political party in November introduced a “Keep the Promise” bill (H.R. 3474) that would begin to expand the range of military retiree health care options.
The sponsors are Reps. Chris Van Hollen (D-Md.), Jeff Miller (R-Fla.), Chet Edwards (D-Tex.), and Randy Cunningham (R-Calif.).
Col. George “Bud” Day, USAF (Ret.), and his Class Act Group lobbied for the bill after exhausting judicial remedies to force the government to honor promises of free lifetime health care for military retirees who entered service in 1956 or earlier.
The bill would allow military retirees to participate in the Federal Employees Health Benefits Program, selecting from a menu of health insurance plans available to federal civilian employees.
Proponents say it would give health insurance to military retirees no matter where they live, and out-of-pocket cost would be no more than under Tricare Standard. The government would pick up at least that much of FEHBP costs.
The bill also would:
- Waive Medicare Part B premiums for military retirees who joined the service before Dec. 7, 1956, the effective date of a law that limited retiree health care benefits to “space- available” care.
- Require DOD to establish a system to reimburse pharmacy expenses at Tricare network rates to military retirees who cannot access network pharmacies because they live in a nursing home or have other limiting medical conditions.
- Go beyond this year’s Medicare reform law to provide rebates to eligible military retirees for premium penalties on Part B coverage paid since January 2001.
All the changes would take effect Oct. 1.
Blowback on “Keep the Promise”
A group of retirees that prepared a “White Paper” nearly two years ago on Tricare failings for retirees has criticized the new “Keep the Promise” bill. They questioned the affordability of the Federal Employees Health Benefits Program option, calling it a “generals and admirals” FEHBP.
They note that they would pay the same premiums as federal civilians, a fact that steams them because they had expected the government to pick up more of the tab.
They don’t like establishing a separate “risk pool” of military retirees, which could lead to higher premiums still.
Only one to two percent of retirees, the White Paper Group predicted, “will find it [the FEHBP option] affordable, despite the desirability for all of us of having FEHBP as an option.” H.R. 3474, the group said, “does not keep any promises for under-65 retirees and many others, including active duty families experiencing problems with Tricare.”
Defenders of the bill, however, said no single piece of legislation can correct all of Tricare’s complex problems. In sharp contrast with the critics, the bill’s supporters say that its affordability is one of its strengths.