Sen. Levin sides with DOD leaders, offers no cut proposals to super panel

Failure by the supercommittee to find a minimum of $1.2 trillion in federal cuts, as mandated by the August deal to raise the federal debt ceiling, will trigger automatic cuts including $600 billion from national security funding. Lawmakers and Defense Department officials say the Pentagon would take the brunt of that reduction.

In a Friday letter to the congressional panel, Levin aligned himself with Defense Secretary Leon Panetta, who recently called a second round of Pentagon cuts “nuts.”

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“I agree with Secretary Panetta” that the $600 billion cut “would be disastrous,” Levin wrote. “In light of the programmatic challenges DOD faces in achieving this initial $450 billion in savings in the midst of multiple wars, and the detrimental effect additional cuts could have for our national security, I am unable to recommend further discretionary cuts to DOD's budget.”

Pentagon officials argue the $350 billion cuts set in motion by the August debt deal will actually total about $450 billion in real reductions.

Levin also told the special panel that because the Pentagon is still conducting a sweeping strategy review mandated by the Budget Control Act, he lacks sufficient data to propose specific things to cut.

The letter was addressed to Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling (R-Texas), the co-chairmen of the supercommittee.

Levin offered them a few ideas.

First, he urged the panel to support the White House’s proposed commission on military retirement and healthcare reforms — with some changes.

“I suggest that the scope of the commission be expanded to encompass all aspects of military compensation, including the current system of basic pay, allowances (including the housing allowance), special and incentive pays, and healthcare, as well as the tax treatment of the various components of military pay,” Levin wrote.

The Defense Business Board, an influential Pentagon advisory group that reports to the defense secretary, has warned skyrocketing military pay and benefit bills could soon be unaffordable.

Panetta and other DOD leaders say such reforms must be on the table. On Wednesday, the Defense secretary said he would fight to ensure current service members are grandfathered into any new policies.

“There must be sufficient study and discussion of the issues involved to ensure that military retirement and compensation reforms serve to enhance the viability of the All-Volunteer Force in the 21st century,” the Michigan Democrat wrote. “I believe a commission dedicated to a comprehensive study of military compensation, including significant input from the Department of Defense, the military services, and veterans’ organizations can best address the twin goals of strengthening the All-Volunteer Force for a new generation while arresting the substantial growth in personnel costs that has occurred over the past 10 years.”

Levin urged the super panel to support the administration’s plan to create an annual $200 fee for TRICARE for Life (TFL) coverage in 2012 and raise it to $295 in 2013, before raising it each year by the rate of the increase in a beneficiary’s healthcare costs.

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He recommended the panel make “any future increases in the TFL fee be tied to the same benchmark index used to make annual increases in TRICARE Prime enrollment fees.”

The White House also wants to change TRICARE retail pharmacy co-payments to be based on a percentage of the cost of the prescription. It now is a dollar figure.

“I have recently learned from DOD, however, that instituting such a percentage copayment structure at retail pharmacies is not feasible due to the application of Federal Ceiling Price (FCP) cost caps,” Levin told the panel leaders. He is awaiting further data from the Pentagon, and told Murray and Hensarling an additional recommendation will be coming.

Finally, Levin suggests the super panel kill a White House plan to apply “the same co-payment to preferred and non-preferred brand name drugs.”

“The TRICARE pharmacy benefit currently distinguishes between them to give preference to brands that the pharmaceutical manufacturers agree to sell at an additional discount,” he wrote.

That’s because, Levin wrote, the president’s proposal would compromise the Department’s negotiating leverage with pharmaceutical manufacturers' preferred brands.

In his own letter to the supercommittee released Thursday, House Armed Services Committee Chairman Buck McKeon (R-Calif.) urged the special panel to resist, “to the greatest possible extent,” putting forth “multiple simultaneous changes to military retirement and healthcare” that collectively would “impose more sacrifice on the military population than is being asked of any other American.”

McKeon, as well as the ranking member of his panel, Rep. Adam Smith (D-Wash.), also urged the committee to spare the Pentagon a second round of budget reductions because they have concluded it would hinder national security.

Friday was the deadline for committees to deliver recommendations to the Murray-Hensarling panel, which must complete its work by Nov. 23.