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New budget: Pay raise, health costs, Concurrent Receipt

By Tom Philpott

The Obama administration proposes to spend three percent more next year on support programs for war-strained military families. But officials are urging Congress to stop adding extra dollars to the military pay raise every January and find a way to raise TRICARE fees for the first time in 15 years.

In its fiscal 2011 budget request, the White House also is repeating its call that Congress phase in "concurrent receipt" –the payment of military retired pay in addition to disability compensation –for 103,000 veterans who were forced by medical conditions to retire short of 20 years’service.

Just like last year, however, the administration hasn’t identified "offsets"to other entitlements to be able to pay for expansion of concurrent receipt. This has left Rep. Ike Skelton, chairman of the House Armed Services Committee, "greatly disappointed."Without help from the White House to find funding, Skelton said, the White House proposal will again violate "pay-as-you-go"budget rules and won’t be able to be enacted.

Here are highlights from the budget’s release and follow-on hearings:

PAY RAISE –The administration requests a 1.4 percent military basic pay raise for next January to match average wage growth in the private sector as measured by the government’s Employment Cost Index (ECI).

By law, military raises are to match year-to-year change in the ECI. However, for the last 12 years Congress has suspended the formula, setting military pay increases at least half percentage point above ECI. This was to close a pay gap with civilians that, in the late 1990s, stood at 13.5 percent.

Defense officials argue the "pay gap"is gone if one counts hefty increases in basic allowance for housing (BAH) over the past decade. When total compensation is compared, say pay officials, most military members earn more than civilian peers of similar age and education level.

But Rep. Susan Davis (D-Calif.) still pressed to close the pay gap at an armed services committee hearing Wednesday, asking Defense Secretary Robert Gates why the requested raise for 2011 doesn’t continue the pattern of ECI-plus-a-half percent to keep closing the remaining 2.4 percent gap.

"Nobody cares more about our troops than we do,"Gates said, sitting beside Adm. Mike Mullen, chairman of the Joint Chiefs. Gates said there was a "lot of money"in the budget to improve childcare and housing and to begin to overhaul Department of Defense schools.

"But the [extra] pay increases, along with health care [costs] are beginning to eat us alive. And…we have to be realistic about this. If you look at the economy today, and the unemployment rate, the pay for our troops, at all levels, is very competitive,"Gates said.

Each half percentage point tacked on to military pay adds about $500 million to personnel costs. The cumulative effect, Gates said, is large and squeezing other budget priorities.

TRICARE FEES –Mullen echoed Gate’s concern but focused on rising health costs, growing from $19 billion in 2001 to $50.7 billion next year, tied to new benefits, a frozen beneficiary fee formula and a steady migration of working-age retirees from employer insurance into TRICARE.

Under Obama, DoD no longer builds a large hole into its health budget and then asks Congress to fill it by raising TRICARE fees.

"We fully funded health care this time,"explained Mullen. "But health care premiums haven’t gone up since 1995. We cannot do this."

"I ask anybody to point me to a health insurance program that has not had a premium increase in 15 years,"Gates complained to reporters. A family of three under TRICARE pays an average of $1200 a year out of pocket versus $3300 under federal civilian employee plans, Gates added.

Mullen suggested that rising health costs are making it more difficult to buy weapons or stay ready. "That’s how I pay for my ops, the same pot of money,"he said.

"We absolutely want to take care of our men and women in uniform and our retirees,"Gate said. "But at some point, there has to be some reasonable tradeoff between reasonable cost increases or premium increases or co-pays, and the cost of the program." 

CONCURRENT RECEIPT –Obama promised on the campaign trail to end the ban on concurrent receipt for all military retirees. The largest group still hit by the ban is retirees who served full careers and later got disability ratings of 40 percent or less from the Department of Veterans Affairs. Their retired pay is cut by the amount they draw in VA disability compensation.

Last year, in a first step to end the ban, the White House made a surprise decision. It proposed allowing concurrent receipt in phases for 103,000 "Chapter 61"retirees forced by disability to leave short of 20 years. The president wants them to be able to draw Concurrent Retirement and Disability Pay (CRDP) based on years served, in addition to their disability compensation. The first year cost would be $241 million to benefit Chapter 61 retirees with ratings of 100 or 90 percent. Those with 80 or 70 percent rating would eligible next for CRDP and so on until all Chapter 61 were getting both disability compensation and, in effect, some retired pay.

The cost over 10 years would be $5.4 billion versus $45 billion to lift the ban for all career retirees with ratings of 40 percent or less.

Skelton and staff worked for weeks last year to find offsets to pay for Obama’s proposal. In the end, they only found enough to lift the ban on all 100- and 90-percent Chapter 61 retirees for a single year. Without long-term funding identified, the Senate refused to accept the plan.

Skelton signaled Wednesday that he won’t jump through those hoops again unless the White House is there to help find the money.

"This committee has a deep commitment to this issue and our veterans,"Skelton said. "But we simply cannot enact it unless the administration identifies and advocates for specific offsets."

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