Revamping the Military Retirement System and Raising Veterans Health Care Fees: Breaking the Faith or Fiscal Imperative?

By Ty Cobb* —

The Obama administration has proposed dramatic fee hikes for all military retirees and is considering a thorough overhaul of the current retirement system. Annual fees for TRICARE participation, the health system now in place for retirees, would go up by a factor of at least three, copays for pharmaceuticals would increase sharply, and retirees would be encouraged to seek alternative providers as proposed in the Patient Protection and Affordable Care Act. Simultaneously the administration has asked Congress to look into replacing the current military retirement system by a “civilianized” 401(K)-like defined contribution system and ending the currently allowed option of retiring after just 20 years service.

The rationale for these proposals is based on emerging fiscal constraints and rapidly growing military health care and retirement costs. The cost of military health care has risen from $17.8 billion in 2000 to $43.5 billion in 2010, a growth rate about twice that of economy-wide medical inflation. As a share of the Defense Department budget, military health care costs went from 4.5 cents of every dollar spent by the Pentagon in 2000 to 6.1 cents in 2010. The TRICARE-eligible beneficiary population has grown 43% in the last decade, due to demographic trends, an expansion of permitted access to the program, and more generous eligibility terms. The TRICARE range of services and benefits has expanded and there has been a marked increase in the proportion of care that fell in the most expensive range.

Likewise, military retirement costs have grown substantially, albeit not as fast as health care allocations. This has generated proposals to revamp the current system by, on the one hand, providing some benefits to those who leave the force before becoming retirement eligible, and on the other, doing away with the current system that permits retiring after 20 years of service at half one’s basic pay.

The proposals have generated outcries on the part of many veterans groups and service associations, such as the MOAA, the VFW, and USAA. They regard these proposals as nothing less than a “breach of faith”, a reneging of promises made over decades to those who “have risked and sacrificed more than their fair share”. Others note, correctly, that the changes will impact efforts to continue to recruit and maintain an all-volunteer force. “Would you stay with an insurance company that raised your premiums by 345% in five years?”, one critic noted. They also charge that similar reductions on the DOD civilian force are not being requested.

Those who believe these proposals represent a breach of promises and will have a negative impact on retention and recruitment are right. Others have correctly pointed out that service in the military is unique and should not and cannot be compared to government service in general. For example, many – like myself – served multiple combat tours, separated from our families for a year at a time, and received no extra benefits. No one in the military has ever received overtime, and none is able to jam overtime, sick leave, and other forms of compensation into a retirement that sometimes exceeds their last year’s salary! The strain that recent events have shown our soldiers to be under – after four, five, or more deployments to the warzone – is unique, while compensation lags far behind their public sector counterparts.

Those who believe, conversely, that current fiscal constraints impose the necessity of reducing military health care costs and revamping the early retirement system are also correct. Unless such reductions are instituted, the Services will be unable to field the forces in numbers required to implement the nation’s strategic imperatives, nor buy the weapons systems necessary to insure our servicemen and women have the best equipment to conduct combat operations.

The administration’s proposals for retirement and health care revision deserve serious consideration. Both systems are growing more expensive and costs will accelerate in the near future. This is especially the case as the costs represented by the wounded, mentally as well as physically, of the current wars begin to impact the defense budget more. And that is an area that cannot — and should not — be compromised in any manner! Yes, cut the health benefits and retirement costs of those of us who are retired, but do not diminish the care and commitment to those wounded in the campaigns in the War on Terror.

However — and this is a big however — none of these revisions and reductions should be implemented unless they are part and parcel of a national commitment to trim back entitlements across the board — Medicare, Medicaid, Social Security, welfare programs, etc. Those who served our country should be full participants in the imperative to reign in the nation’s growing debt and annual deficits. They should not be singled out nor left to bear this burden alone.

The current fiscal crisis mandates a national belt-tightening and sharing of the sacrifices needed to bring fiscal sanity to this country.

Anybody with me?

*Dr. Cobb was a professor at West Point and a Lieutenant Colonel in the Army in the years just prior to the Reagan Administration. He consulted with the National Security Council during the latter half of the Carter administration and the early Reagan administration on international energy issues. At the start of the Reagan administration, Dr. Cobb was on an exchange in the Soviet Union. After the change in National Security Advisor to William Clark and Deputy Robert “Bud” McFarlane, Cobb was asked to submit strategy papers regarding the long-range strategic position of the United States vis-a-vis the Soviet Union. As a result of these papers he was asked to join the NSC staff as a member of the European and Soviet Affairs Directorate to work on European issues and Canada, and to provide some input on long-range strategic Soviet policy. He took Dennis Blair’s slot within this directorate. Cobb worked very closely with Peter Sommer and they divided responsibility for 34 countries among themselves. Cobb was responsible for France, Italy, Canada, the Netherlands, Austria, the Vatican, etc. As part of his Soviet responsibilities, Cobb attended the Geneva and the Reykjavik summits. In 1988, Cobb took Robert Dean’s place as the Special Assistant to the President and Senior Director of the International Programs and Technology Affairs Directorate, with responsibility for science & technology agreements, export policy, United Nations issues, and the environment. He became President and CEO of the Business Executives for National Security (BENS) in 1991, then left to become President/CEO of the Yosemite National Institutes (1995-2002). He returned to his home town of Reno, NV, where he heads up the Northern Nevada Network as well as the National Security Forum. Dr. Cobb received a Ph.D. from Georgetown University, an M.A. from Indiana University, and a B.A. from the University of Nevada. He is married to Suellen Small of Reno, NV. They have three children.

Image courtesy of the U.S. Army.