Authorization Bill Highlights
House and Senate actions on the 2007 defense authorization bill appear to have locked in some pay and benefit gains, but by early June, much was still in doubt.
The House, in passing its bill (HR 5122), endorsed a military pay raise for next January of 2.7 percent, half a percentage point higher than requested by the Bush Administration. It would be an eighth straight annual increase set a half percentage point above wage growth in the private sector and would narrow a perceived pay gap of 4.5 percent down to four percent.
The Senate Armed Services Committee voted for a 2.2 percent raise, the figure sought by the Administration to keep pace with private sector wages. (See “Action in Congress: Pay Raise Pace Slows,” April, p. 24.) With floor amendments still to come, the full Senate was not expected to finalize its own authorization bill (S 2766) until mid-June, at the earliest.
Each chamber approved a number of initiatives that the other did not, with the differences to be reconciled in conference. Below are highlights of personnel initiatives that are found in both the House and Senate bills and therefore are likely to be enacted.
Pay and Manpower Changes
Manpower Levels—Both bills would lower active duty Air Force strength by 23,200, to 334,200, and active duty Navy strength by 12,000, to 340,700. Army active duty end strength would be set at 512,400, which is 30,000 above what the Administration sought. Marine Corps active strength would rise by 5,000, to reach 180,000 next year.
Special Raise—an unusual pay raise will be coming next April—only for warrant officers and longer-serving enlisted members in grades E-5 through E-7. Proposed by the Administration, the special raise would come atop whatever January pay hike is approved. The raise, with details still to be finalized, would range from a low of 1.1 percent for E-5s up to 8.3 percent for warrants (W-1) with 20 years of service or more.
Flag Officer Pay—Current ceilings on basic pay for flag officers would be raised by $13,200 a year by applying a new maximum equal to Level II ($165,200 a year) rather than Level III ($152,000) of Senior Executive Service pay.
Bonus Ceilings—Various bonuses for medical skills and other high-demand job specialties in short supply would be raised, but compromises on amounts are still necessary.
Tricare Fees—Blocked for at least one year are Administration plans to raise Tricare enrollment fees, deductibles, and co-payments for under-65 retirees. Pentagon leaders had argued for increases that would double or triple out-of-pocket costs for many within two years. They argued that the fees needed a “re-norming” of beneficiary costs that had been frozen since 1995. (See “Action in Congress: Keeping Pace With Costs,” April, p. 25.) Lawmakers balked and are directing Congressional auditors instead to study the accuracy of the projected cost savings.
Retail Drug Fees—Co-payments for users of the Tricare retail pharmacy network will increase, and the House bill also would add a dollar to drug fee hikes sought by the Administration. The current $9 co-pay for brand-name drugs on the military formulary would increase to $16. The $3 co-pay for generic drugs would double. (The Administration sought fee increases to $15 on brand drugs and $5 for generics, which the Senate matched.)
Mail-Order Drug Fees—These fees would end for drugs on the military formulary. The House bill would eliminate the $9 charge for a three-month supply of brand-name drugs and the $3 charge for generics. The Senate committee voted to end the fees if a physician confirms medical necessity.
Federal Drug Pricing—Federal pricing rebates would be mandated for medicines bought to stock the Tricare retail network. The change, strongly opposed by the pharmaceutical industry, would save DOD $256 million in 2007 alone.
Employer Tricare Incentives—Employers of Tricare beneficiaries would be banned, by January 2008, from offering financial incentives to entice employees to use Tricare instead of employer-provided health insurance.
White House Dislikes
The White House’s Office of Management and Budget weighed in with a statement of Administration policy to explain what it liked—and more specifically disliked—about the authorization bill.
OMB leveled its strongest criticism at the House rejection of higher Tricare fees and at plans to expand Tricare eligibility to all drilling Reserve and National Guard members.
The expansion of reserve health benefits, said OMB, “dramatically worsens” defense health program costs by adding $1.2 billion to annual costs by Fiscal 2011.
“It is critical for Congress to eliminate these unfunded expansions and work with the Administration to place the system on a sound fiscal foundation,” said the OMB letter to House leaders.
OMB also is disappointed that the House ignored a proposal to amend the Uniformed Services Former Spouses’ Protection Act (USFSPA) to prohibit divorce court judges from ordering service members to share a portion of their retired pay before they actually retire.
“Courts requiring such payments fail to recognize that retirement-eligible service members do not necessarily control their date of retirement,” OMB noted. “Further, some of our most experienced leaders are being forced to leave active duty in order to meet their court-ordered financial obligation.” (See “Action in Congress: New Scrutiny of Ex-Spouse Law?”, September 2005, p. 34.)
Though both the House and Senate failed to act on the retired pay issue, the Senate bill has taken its first steps in 14 years to amend the USFSPA with three changes aimed at improving how the controversial law is administered. These changes were among those endorsed by a comprehensive DOD review of the ex-spouse law in 2001. The more sweeping changes found in the report have been ignored, as lawmakers remain wary of taking any steps that might be perceived as favoring either ex-spouses or divorced retirees.
Tricare Fee Regrets
William Winkenwerder Jr., assistant secretary of defense for health affairs, said in an interview that DOD erred by not making a stronger argument to Congress and beneficiaries that the planned Tricare fee increases truly are reasonable for retirees under age 65.
The proposed increases often were described in news reports as a doubling or tripling of current Tricare enrollment costs. But Winkenwerder and his staff have prepared new charts for lawmakers that compare the higher Tricare costs to increases in monthly retired pay resulting from annual cost of living adjustments or COLAs.
“We want beneficiaries to understand that even though their health care contribution might go up, it would only be a fraction of the amount by which retiree pay is going up,” said Winkenwerder.
The monthly increase in Tricare enrollment fees would be $6 for lower grade enlisted retirees in 2007, he said, versus a $38 a month increase in their annuities next year, assuming a three percent COLA.
“So the increase in retirees’ pay would cover by a factor of six the increase in health care fees,” said Winkenwerder.
For senior enlisted members, the Tricare fee increase would be $13 a month, but retired pay would go up $46 a month.
“And for officers, the pay increase would go up $95 a month while their fee for Tricare would only go up $24 a month,” said Winkenwerder.
Unified Medical Command?
There is growing support among lawmakers and Pentagon leaders for reorganizing military health care around a new unified medical command.
The House Armed Services Committee backs the concept in its report on the 2007 defense authorization bill. The HASC clearly favors a single command, backed by the Army and Navy surgeons general, versus the alternate idea of two separate unified commands.
The command would be led by a four-star medical officer given unprecedented authority to oversee what now are service-unique responsibilities for medical staffing, training, purchasing, operations, and medical readiness.
The Army and Navy surgeons general favor a major combatant command, similar to US Special Operations Command, that would report directly to the Defense Secretary. Medical personnel still would be trained for service-unique missions and in the culture of their parent service. But overall medical training, assignments, procurement, and operational support would be centrally controlled.
Lt. Gen. George Taylor Jr., the Air Force surgeon general, told a Senate subcommittee in May of the Air Force’s great success story in airlifting wounded from Iraq and Afghanistan. He expressed the desire to avoid a change in command structure that might diminish such service-unique capabilities.
Senior defense officials oppose the inclusion of the Tricare Management Activity under the new command, including $11 billion a year in regional support contracts. The contracts run vast networks of civilian health care providers and represent 70 percent of funds spent for care to the military’s nine million beneficiaries.
If two separate unified medical commands were established, one could oversee private sector military health care with the second, military-led command overseeing operational medicine.