Commissary, TRICARE adjustments needed to retain readiness, senators told

Monday, May 12, 2014 - 8:44pm

Slowing the growth of military pay and housing allowances, reducing commissary subsidies and adjusting TRICARE costs will save $31 billion over the next five years and enable readiness to be maintained, senior leaders told lawmakers.

"First, we are not advocating direct cuts to troops' pay," said Army Chief of Staff Gen. Ray Odierno, Tuesday, at a Senate Armed Services Committee hearing on military compensation.

The general testified along with his counterparts from the Joint Chiefs of Staff and the Chairman of the Joint Chiefs of Staff Gen. Martin E. Dempsey.

Under the proposed fiscal year 2015 budget, military pay would increase only one percent for Soldiers next year, and compensation would be frozen for general officers.

"Taking care of Soldiers is not just about providing them competitive pay and compensation benefits," Odierno said at the hearing, "it's also about having the right capacity in order to sustain reasonable personnel tempo, invest in the most modern equipment and maintain the highest levels of readiness."

The compensation proposal would restructure TRICARE into a single plan. TRICARE Prime, Extra, and Standard would be consolidated. Seniors over 65 enrolling in TRICARE for Life would be required to pay modest annual enrollment fees.

The proposal would also adjust pharmacy co-payments for retirees and active-duty families, phased in over the next 10 years. Changes would provide incentives for beneficiaries to use mail-order and generic drugs, according to the Joint Chiefs' written statement to the committee.

Enrollment fees for TRICARE for Life would only apply to those who turn 65 after the Defense Authorization Act becomes law, according to the Joint Chiefs.

The costs for military health care have risen from $19 billion in 2001, to $48 billion in 2013. Fundamental structure of the TRICARE health insurance program has not been revised since its inception in the mid-1990s, according to the Joint Chiefs of Staff statement, which went on to say the program needs simplifying and modernizing.

"We have not requested changes to military retirement benefits," the Joint Chiefs said in their submitted testimony. "We are awaiting the results of the Military Compensation and Retirement Modernization Commission before considering reforms in that area. But, we want to reiterate our ardent support of the principle of grandfathering for any future changes to military retirement plans."

The fiscal year 2015 budget proposal would reduce subsidies to commissaries over the next three years, but it would not specifically direct the closing of any commissaries.

The Department of Defense operates 245 commissaries worldwide, and spends about $1.4 billion per year to pay for employee and overhead costs. The budget proposal would cut $200 million of that subsidy from next year's budget, and by 2017, phase out $1 billion in commissary subsidies. That would leave about $400 million a year to pay the overhead costs of 67 overseas commissaries, and 25 in remote U.S. locations.

If the plan is fully implemented, commissary shoppers will still receive an average 10 percent discount compared to most private-sector grocery stores, according to the Joint Chiefs of Staff statement. It added that the level of savings may increase further through efficiencies implemented by the commissaries.

The fiscal year 2015 proposal would also gradually slow the growth rate of tax-free basic allowance for housing, until BAH ultimately covers about 95 percent of the average service member's housing expenses. The cost of renter's insurance would also be eliminated from BAH.

"The proposal will result in an average six percent increase in out-of-pocket cost from today," the submitted testimony stated, "but far less than the 18 percent out-of-pocket cost in the 1990s."

The changes would be phased in over several years.

"Failure to approve this compensation package will require us to take $31 billion in savings over the Future Years Defense Program out of readiness, modernization, and force structure," the Joint Chiefs said in their submitted statement. It pointed out that just for next year, not adopting the recommendations would require DOD to cut $2.1 billion somewhere else in the budget.

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