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Budgetary crisis dims personnel initiative

The fiscal 2012 defense budget taking shape in Congress could have the fewest significant initiatives for military personnel, retirees and their families in a generation.

Blame the ballooning debt crisis, which has left Republicans and Democrats alike looking for ways to curb federal spending, including for defense. And credit a long list of pay and benefits gains over the past decade, which if detailed here could fill up the rest of this column.

This year, however, could mark the clear start of a more austere era for military compensation where personnel advocates worry about preserving what has been won, seeing major new victories as politically unrealistic.

The House armed services subcommittee on military personnel marked up its portion of the defense authorization bill last week. Other than a 1.6 percent pay raise next January so the military keeps pace with wage growth in the private sector, it's a thin menu of no-cost or low-cost proposals.

Indeed the highlight is language to block a small increase in Tricare Prime enrollment fees for working-age retirees, the first since 1995. Defense Secretary Robert Gates says it's needed to begin to control health costs, which have climbed from $19 billion in 2001 to $52 billion in fiscal 2012.

Ironically, the blocking maneuver long promised by U.S. Rep. Joe Wilson, R-S.C., subcommittee chairman, could be reversed next week when the full committee does a final mark up of the entire defense bill. U.S. Rep. Howard McKeon, R-Calif., the committee chairman, believes "now might be the time to allow a modest increase" in Tricare fees for retirees younger than 65, said committee spokesman Josh Holly.

Wilson conceded at mark up that his subcommittee couldn't find funds to avoid some other parts of Gate's health savings package including a bump in co-payments for Tricare prescriptions filled in local retail pharmacies.

The new co-pays are projected to save $2.6 billion through 2016. But U.S. Rep. Dave Loebsack, D-Iowa, criticized this attempt to "incentivize" use of mail order and penalize beneficiaries who "like to talk to their local pharmacist about their prescriptions rather than simply receiving an anonymous package in the mail. "Pharmacists," he said, "play an absolutely critical role in health maintenance."

Loebsack's arguments echoed points made by the National Association of Chain Drug Stores and the National Community Pharmacists Association, which have contributed modestly -- a total of $12,500 -- to his campaigns since 2007, according to the Federal Election Commission.

Rep. Susan Davis, D-Calif., expressed regret that the subcommittee mark found no budget room to make progress on three costly personnel initiatives that have been before Congress for several years.

One is President Barack Obama's call during his first two years in office to allow 107,000 "Chapter 61" retirees -- those forced by disabilities to retire short of 20 years -- to receive some military retirement annuity in addition to disability pay. Davis dubs it Disabled Veterans Tax relief.

A second concern not addressed is the "Widow's Tax" or SBP/DIC offset. Surviving spouses of military members who die on active duty or from service-related conditions can receive tax-free Dependency and Indemnity Compensation from VA. But they also will see a dollar-for-dollar reduction in taxable military Survivor Benefit Plan payments.

A third issue not seen as affordable is a fix to the early reserve retirement provision that lowers age 60 retirement by three months for every 90 consecutive days a reserve component member is deployed after Jan. 28, 2008. Some lawmakers have tried for several years to clarify and expand this benefit to cover Guard and Reserve deployments back through Sept. 11, 2001. But they have been unable to find ways to cut other "mandatory spending" accounts to pay for it, as House budget rules require.

The Senate is to mark up its version of the defense bill next month, but faces the same fiscal constraints as House colleagues. At a hearing of the Senate personnel subcommittee last week, its chairman U.S. Sen. James Webb, D-Va., said he still has "strong reservations" about the proposed enrollment fee increases for younger retirees.

They would pay $60 more a year for family coverage and $30 more for single coverage. Also, these fees would be raised annually based on the percentage rise in health costs as measured by National Health Expenditures, an index produced by the Centers for Medicare and Medicaid Services.

Robert Hale, chief financial officer for the Department of Defense, said if Prime fees had been indexed to inflation since 1995, the current family fee of $460 would be more than $1,000. "Instead," Hale said, "retiree out-of-pocket-cost expenses have fallen from 27 percent of health care costs in 1995 to 11 percent today."

Hale said if planned increases aren't approved, "major holes" will appear in the 2012 budget, forcing cuts in the "support and training we provide to our military."

The panel's ranking Republican, Sen. Lindsey Graham of South Carolina, was more receptive than Webb -- or Wilson -- to fee increases.

"I respect the House, but eventually you're going to have to make some Draconian choices between health care and operational needs," Graham said. "So Secretary Hale, your idea of trying to get a better bang for the buck (and) improving the qualify of care while lowering costs, is absolutely essential."

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