Hagel is not reneging on military benefits

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Hagel is proposing that working age military retirees pay no more than 14 percent of the costs of their Tricare healthcare plan. When Tricare was instituted in 1996, the executive and legislative branches agreed that the share would be 27 percent. But because of a dereliction of duty on the part of several military leaders for over a decade, the share dropped to less than 11 percent and the costs to the Pentagon and the taxpayers skyrocketed.  Having working age retirees pay only 14 percent is actually reneging on a promise to the American taxpayers, not to military retirees.

The new secretary is also proposing that retirees over 65 who are eligible for Tricare for Life pay a small enrollment fee based on a percentage of their retired pay. Since Tricare for Life did not come into existence until 2001, there is no retiree over 65 who made his or her career decisions based on getting Tricare for Life benefits. Those who assumed Tricare for Life would always be free cannot retire before 2021. Under Hagel’s plan, when they retire, they would pay between $613 and $818 a year depending on their rank.

Finally, like all of his predecessors, Hagel is proposing that raises in military basic pay be indexed to inflation as stipulated by law and policy. Since basic pay is 20 percent above that mark now, it would mean that for the next few years the raises would be slightly less than the rate of inflation. In effect, this would be keeping a promise to the military and the taxpayers, not reneging on any promises.

The MOAA ad also claims that changes are unnecessary, presenting a chart which purports to show that military personnel and health care costs now account for the same percentage of the defense budget as they have since 1980. Even if this were true, it would be irrelevant because these benefits are indexed to specific standards, not a percentage of the budget.  But the chart is not accurate, for two reasons.

First, these costs support a much smaller force than 1980. In that year, there were 2.3 million people on active duty. Today that number is 1.4 million. Moreover, the defense budget in 2010 was twice as large, in real terms, than it was in 1980.

Second, their chart ignores the fact that since 1986 almost $100 billion in personnel costs have been transferred out of the defense budget. In 1980, the DOD budget was charged for the full cost of military retired pay. Today, DOD pays only a small accrual for those on active duty who will probably retire. In 2012, that amounted to about $20 billion. However, military retirees received over $50 billion from the US treasury, which was not charged to the DOD budget.

In addition, the Treasury had to pay the interest on the unfunded liability of the military retired system which is about $1 trillion. This amounted to another $20 billion.

Military men and women should be fairly compensated for their service. And today they are. For example, the regular military compensation (base pay, tax free housing, and food allowances) are $44,000 for an E-4. For an O-3, it is $95,000. Over the past decade, the average cost of pay and benefits per active duty service member increased by more than 50 percent in real terms. In addition, they can receive number of special pays (flight pay, family separation pay, etc.). This is far more than what people comparable education receive in the private sector.

Hagel is not trying to cut their pay or renege on promises. MOAA knows this, but like any other special interest group, it is cooking the books to get a larger share of the pie for its members. But its members and the country deserve better.

Korb, a senior fellow at the Center for American Progress, served as an assistant secretary of defense in the Reagan administration.

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