How to Blast Billions from the DOD Budget
Policy + Politics

How to Blast Billions from the DOD Budget

Reuters/iStockphoto/The Fiscal Times

The 114th Congress is gearing up to boost spending on the Pentagon in the coming year to improve U.S. readiness in the fight against ISIS and other Middle East terrorists.

Senate Armed Services Committee Chair John McCain (R-AZ) and other defense hawks insist lawmakers should breach the statutory spending cap and give Defense $40 billion more in fiscal 2016. That money is part of the new GOP budget that was approved in the House on Wednesday now awaiting approval in the Senate.

Related: Boehner Finally Breaks the Colts to Get the House Budget Passed 

In terms of belt tightening down the road, however, McCain and others have begun eyeing the military’s gold-plated retirement and health care programs. With military health care and retirement costs skyrocketing, McCain says reforming the compensation system is unavoidable – and might actually attract more people into the military. 

The cost of the military’s generous 20-year retirement benefit and the TRICARE health insurance plan for active military members and their families and retirees has put a big squeeze on the Pentagon and its $521 billion annual base budget. 

Last year alone, DOD spent nearly $37 billion on retirees’ pensions and health costs, or roughly seven percent of the total operating budget, according to the Office of Management and Budget. The DOD offers health care to nearly 10 million people including retirees through its TRICARE program, an integrated system of military health care providers and networks of civilian providers. 

If the system is left unchecked, roughly one dollar of every $10 spent by the Pentagon in the coming decade will go for health care and retirement benefits, according to some projections.

Related: House and Senate Duke It Out Over Defense Spending

This helps explain why recommendations of a blue-ribbon commission to overhaul the military retirement system are gaining support – or intense interest – among lawmakers of both parties.

In January the Military Compensation and Retirement Modernization Commission issued a 300-page report proposing significant changes in the military’s 20-year-or nothing retirement system and medical benefits for future members. The commission was headed by Alphonso Maldon, a former DOD assistant secretary on management and policy. 

“We believe we have taken the most comprehensive and holistic view of the pay and compensation programs, and looked at them in a way that has not been done before,” Maldon said at a press conference.

Many lawmakers, veterans lobbies and service members agree reforms are necessary, as Defense One notes in a major new report. Yet there’s a reluctance to rush to change the system in the short run and risk being perceived as cutting benefits for active troops or inadvertently undermining the U.S.’s all-volunteer military. 

Related: DOD’s $1B Redundant Health Program: GAO Says Scrap It

“That was just a first step, so I can’t draw any conclusions,” McCain said early last month after presiding over a hearing to review the panel’s report, as The Washington Times reported. Sen. Lindsey Graham (R-SC), chair of the Armed Services Committee’s personnel subcommittee, has said Congress must reform its pay and compensation system.

Commission members say 15 key proposals could save DOD billions of dollars over the next several decades. Here are some of the most significant as noted by the commission:

Dismantle today’s generous pension system that benefits military retirees with at least 20 years of service. Currently, qualified retirees receive a pension that is 50 percent of their base pay – which is far more than private sector workers receive even under a defined benefit system. In the future, DOD would offer a blended system that would decrease the annuity troops and officers receive after serving 20 years, but set up a 401(k)-like system that service members would pay into and the government would match.

Currently, the large percentage of personnel who serve less than 20 years before retiring do not qualify for a defined benefit, including those who have served multiple deployments. At the same time, many who rack up 20 or more years of service can retire in their 40s or 50s, draw a pension and find work elsewhere.

Related: One Injured Soldier of War Costs the U.S. $2 Million

Grant the Secretary of Defense authority to change the service years required for retirement, either shortening or lengthening the f years required. Commission members believe DOD might be able to attract more talented people to serve if people who retire before hitting the 20-year mark can still qualify for some retirement benefits.

Replace TRICARE with a “selection of commercial insurance plans” for family members, reserves and retirees not enrolled in TRICARE. Active duty service members would remain in the current health system. However, service members would receive a basic health care allowance to help pay for dependents’ health care coverage. While family members would still have access to care in military hospitals and treatment centers, the reform would shift many of them to the private health insurance market.

Require DOD to provide more education and training to service members on better managing personal finances.

Improve collaboration between DOD and Veterans Affairs by enforcing coordination on electronic medical records, transitions for service members and more.

Increase efficiency in the Reserves by consolidating 30 reserve component duty statuses into six broader statuses – and streamline the process of calling up reservists.

Related: 4 Best States for Military Retirees

Sunset duplicative GI bills and programs. Right now many programs overlap. Approved educational programs include graduate and undergraduate degrees, vocational and technical training, on-the-job training, flight training, entrepreneurship training and more. Beneficiaries receive up to 36 months of education benefits, which may be used for up to 15 years after separation from active duty.

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