Survivor Benefits  |  Pentagon suggests weakened reforms to Congress.

DoD Offers SBP "Alternatives”

Undeterred by votes in both the House and the Senate to phase out the military “widows tax” that cuts Survivor Benefit Plan (SBP) annuities by one-third for survivors age 62 and older, DoD leaders are persisting in opposing that effort.

Reportedly, a package of Pentagon “appeal documents” sent to the Senate Armed Services Committee July 7 proposed two watered-down alternatives. One merely would delay the annuity reduction until full retirement age—between 65 and 67, depending on the survivor’s year of birth. Alternatively, the letter proposed lowering the SBP premium by an unspecified amount rather than eliminating the annuity reduction altogether.

In MOAA’s view, both proposals ignore the whole purpose of this important legislative effort. Changing the age for the benefit cut would be purely cosmetic, since the vast majority of survivors already are past full retirement age.

Changing the premium helps retirees, not survivors. A prospective change for retirees fails to address the basic problem: The benefit for older widows is disproportionally small for the premiums retirees already have paid. Premiums already were reduced for retirees in 1991. Now, it’s time to help the widows by eliminating the grossly unfair age-62 benefit cut—not just delaying it a few years for a few people.

The government provides every other category of federal survivors 50 percent or 55 percent of retired pay for life, with no reduction at any age. MOAA finds DoD leaders’ continuing efforts to justify imposing this penalty on military widows insensitive, to say the least—particularly as the number of military deaths in Iraq has just passed 900.

We have a strong majority of support in both the House and the Senate to get rid of the widows tax. Defense leaders need to stop fighting this long-overdue effort to protect survivors’ interests.
Your help is needed to press for a real SBP fix. Please sign, stamp, and send the postcards on the cover of this magazine to your legislators in Washington. We need an avalanche of mail to show our elected representatives that the time has come for a real fix, not a watered-down alternative.

Legislation  |  Organizations support SBP, other initiatives.

TMC Sends Input to Capitol Hill

In a July 26 letter sent to the House and Senate armed services committees, The Military Coalition (TMC) weighed in with its viewpoints on personnel and compensation issues in the FY 2005 Defense Authorization Act.

The letter highlights some of the top TMC priorities during conference committee negotiations, including:

• elimination of the Survivor Benefit Plan (SBP) widows tax and an open-season provision that doesn’t pose an excessive deterrent to new enrollees;
• authorization of cost-share access to TRICARE for drilling guardmembers and reservists;
• full immediate concurrent receipt for all retirees with 100 percent VA-rated disabilities;
• significant increases in end-strength for the Army and Marine Corps; and
• permanent id card eligibility for all dependent spouses and survivors age 70 and older.

Accompanying the letter was a matrix detailing dozens of key provisions. The matrix presented applicable House and Senate provisions on every major personnel issue, along with TMC’s position and rationale for the needed changes.

It might be two months or more before we know the results of the conference committee deliberations, as many Capitol Hill sources project the defense bill will not be resolved until after the election. We think, however, congressional leaders will consider the TMC positions in formulating the final bill. The TMC letter and a link to the matrix can be found on MOAA’s Web Base at www.moaa.org/legislative/tmcletter2005.pdf.

Health Care |  New policy limits drug availability in MTFs.

Air Force Limits Prescription List

A July 8 memo from the Air Force surgeon general’s office announced the Air Force’s intent to limit certain medications carried on the shelves of military treatment facility (MTF) pharmacies, effective immediately.

Military health care officials are under a great deal of pressure to stick to their budgets, while pharmacy costs have risen 8 percent for many highly prescribed medications. Leadership has told local commanders there will be no supplemental funding this year to cover budgetary shortfalls, so commanders are looking for ways to make ends meet. One area they can control is medication costs.

Unfortunately, this policy will have the effect of transferring costs to other areas of DoD’s pharmacy program. When the formulary list is curtailed in Air Force facilities, beneficiaries either will have to switch drugs or turn to the more expensive TRICARE Retail and Mail Order programs. Alternatively, in areas with multiple military pharmacies, beneficiaries will utilize other services’ pharmacies. That might look good for the Air Force’s bottom line, but it forces increased pharmacy spending in other areas.

MOAA is concerned that this unilateral decision is motivated by cost alone. The Air Force has bypassed the new, congressionally mandated Uniform Formulary (UF) process. The UF uses clinical experts to determine which medications are safest and most cost-effective for the entire TRICARE program. More important, this decision bypasses input from the (also congressionally mandated) Beneficiary Advisory Panel—where beneficiary representatives can make public comments about pharmacy decisions.

Limiting the Air Force pharmacy formulary so soon before the UF is announced only will increase hassles for beneficiaries. Also, we are concerned that if drugs the Air Force picked don’t match the preferred drugs soon to be identified by the DoD UF process, beneficiaries and providers will have to go through all the hassles of changing prescriptions again.

In late July, MOAA and The Military Coalition sent the Air Force surgeon general a letter expressing concern about this unilateral decision. The coalition urged Pentagon leaders to seek supplemental funding from Congress to address immediate shortfalls in ways that don’t have such negative effects on beneficiaries.

Disabled Retirees |  Qualifying retirees receive additional compensation.

CRSC Begins Unemployability Pay

Barring any unforeseen problems, retirees receiving Combat-Related Special Compensation (CRSC) who are eligible for Individual Unemployability (IU) payments should have started receiving prospective IU payments in their Aug. 2 paychecks. Retroactive payment of IU for months of previous eligibility (back to June 1, 2003) were to take a few weeks longer, but at press time defense officials planned to deliver these lump-sum retroactive payments before the end of August.

Eligibility criteria dictate that a retiree must have a CRSC disability rating of 60 percent or greater to have IU included in his or her CRSC compensation.

DoD hopes to begin payments to CRSC-eligibles for applicable dependent allowances in August. Special Monthly Compensation payments for special disability circumstances pose a greater challenge, but the Finance Center hopes to be able to make those payments by the end of September.
We’ll continue to monitor the implementation of this provision and report any further developments in a future issue of Military Officer.

Health Care |  Older retirees living overseas get a new option.

Part B Open Enrollment Coming

One of MOAA’s significant legislative victories this past year was a provision in the Medicare Modernization Act of 2003 that will relieve many TRICARE For Life (TFL) beneficiaries from onerous Part B late enrollment penalties. The statute waives late enrollment penalties (as of January 2004) for all TRICARE beneficiaries who enrolled in Medicare between Jan. 1, 2001, and Dec. 31, 2004. Importantly, the statute also provides a special enrollment period in 2004 for TFL-eligibles who have been holding off enrolling in Part B.

Because that special enrollment period ends Dec. 31, 2004, it is critical to publicize this opportunity as broadly as possible—especially overseas. Many potential beneficiaries of the legislation (including 12,000 who reside overseas) will be hard to find and inform of this one-time opportunity.

TRICARE officials are working in collaboration with Medicare and Social Security representatives to develop a communication plan for military beneficiaries who could benefit from this new law. They have developed a number of outreach strategies, including direct mail and advertising campaigns.

Medicare plans to send each eligible beneficiary a letter in early fall explaining what this new law does for them. The letter will state that the beneficiary automatically will be enrolled in Part B and become eligible for TFL. New enrollees will begin paying the normal $66.60 monthly premium. The letter will explain that beneficiaries can opt out of Part B if they do not want Part B coverage or do not want to pay the monthly premiums. But doing so also will mean opting out of TFL.

We’re particularly concerned that beneficiaries residing outside the United States, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa will not be well educated about the value of enrollment in Part B. Up to now, overseas retirees saw no advantage to enrolling in Part B, particularly if they faced increased premiums for late enrollment. They knew Medicare doesn’t pay for health care outside the United States, so their Part B premiums would have been wasted in the past. That changed with the enactment of TFL, which made Part B enrollment a requirement for TFL eligibility. Since Medicare still doesn’t pay for care received overseas, TRICARE becomes the first payer for overseas Part B enrollees.

In this circumstance, TRICARE will pay 75 percent of the allowed cost (after a $150 single/$300 family deductible), and the beneficiary is responsible for the remaining 25 percent, plus any amount for unauthorized or non-covered services. This is the same cost-share applicable to retired beneficiaries under age 65. In many cases, this might be less than overseas retirees currently pay for health care. Retired beneficiaries residing outside the United States for whom TRICARE is first payer also can purchase a TRICARE supplement policy to help cover the cost-shares for TRICARE-approved services.

TFL-eligible retirees residing in a foreign country file their TRICARE claims directly with Wisconsin Physician Services (WPS) at the following address:

WPS Foreign Claims
P.O. Box 7985
Madison, WI 53707

(Note: Nothing changes for TFL beneficiaries residing in Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa. Their Medicare claims automatically roll over to TRICARE.)

The bottom line is that retirees residing overseas must understand the value of TFL to weigh the merits of TFL against the options they currently have—be it a private health plan or a national health plan of a foreign country.

A word of caution: If a beneficiary has private health insurance other than TRICARE, federal law requires the other plan pay before TRICARE. Since the implementation of TFL in 2001, most retirees have cancelled their supplemental health insurance to Medicare.

We urge MOAA members and others to assist in getting this important information to retirees residing overseas.

More information is available on the Social Security Administration Web site at www.ssa.gov/legislation/tricare.html. Information has been provided to Social Security field offices and to U.S. embassies and consulates overseas. DoD will disseminate information through the TRICARE Media Center to military installations and retiree activity offices. More details are available at www.tricare.osd.mil.

Legislation |  Senate amendment fails, but need for upgrades remains.

Reserve Retirement Legislation Stalls

For the second year in a row, Congress has declined to act on legislation to improve retirement compensation for members of the National Guard and Reserve who qualify for a “non-regular” retirement at age 60.

In August we reported that reserve retirement champion Sen. Jon Corzine (D-N.J.) attempted without success to push through an amendment to the Senate’s version of the defense authorization bill that would lower the reserve retirement age from 60 to 55. The motion was defeated on a budget point of order, meaning there was no funding set aside for the change.

Interest in reserve retirement upgrades can be traced to the enormous expansion in Guard and Reserve utilization in recent years. Since Sept. 11, 2001, more than 360,000 members of the reserve forces have been mobilized, some on tours as long as two years.

Earlier this year, DoD announced a new policy under which reservists can expect to be routinely called up every five or six years over the course of a normal reserve career. Under this scenario, MOAA thinks it’s difficult to argue that the reserve retirement system still serves its historic purpose as a “supplement” to normal civilian retirement plans. On the contrary, we think reserve retirement needs to be structured to reflect the reality that it should “complement” civilian retirement plans due to the inevitable loss in civilian income from multiple planned activations during a working career. But recognition within the administration of the need for such change has been slow. And, other realities compete with reserve retirement upgrade proposals.

One reality is that deployed reservists have told visiting lawmakers about other concerns besides reserve retirement: problems with their family’s health insurance coverage, pay, reenlistment bonuses, civilian pay differentials, and reemployment concerns.

Another reality is that developing consensus on reserve retirement upgrades won’t be easy. In addition to Corzine’s and Rep. Jim Saxton’s (R-N.J.) age-55 reserve retirement bills (S. 1035 and H.R. 742, respectively), there are a number of other bills that offer alternative methods to improve reserve retirement.

MOAA and its partners in The Military Coalition continue to strongly recommend separate congressional hearings on improving the reserve retirement system. Clearly, guardmembers and reservists no longer are “in reserve,” and their compensation and retirement package should reflect that sea change.

Housing |  $500 million is at risk in construction spending bill.

Budget Cap Hits Military Housing

In an extremely close 212-211 vote in late July, the House of Representatives voted against protecting a $500 million funding increase for military family housing in the FY 2005 Military Construction (MilCon) Appropriations Bill. The increase is needed because construction funding will bump against a funding ceiling later this year. Without the increase, construction will have to cease.

MOAA is disappointed that House budget hawks have chosen this particular target on which to draw the budget line when so many troops are putting their lives on the line overseas. Military housing is in sore need of upgrades, and refusal of this funding means that close to 50,000 military families won’t get the new quarters they need.

Fortunately, there still is some hope for a reversal of this decision before the final MilCon Appropriations Bill is sent to the president later this year. The Pentagon and the White House both have expressed support for the additional funding, as have the armed services and appropriations committees. Just a few days after the vote, House leaders pulled the MilCon funding bill from floor consideration to try to find a solution and avoid another embarrassing vote. Hopefully, they’ll find a way to reverse course and provide the additional funding.

Flag Amendment |  Consideration by full Senate still is uncertain.

Senate Panel OKs Flag Amendment

In an 11-7 vote in July, the Senate Judiciary Committee approved a proposed constitutional amendment that would allow Congress to pass legislation prohibiting the physical desecration of the U.S. flag.

Earlier this year, the House passed the flag amendment by a 300-125 margin. The measure requires a two-thirds majority in the Senate in order to proceed. After Senate approval, ratification by three-fourths of the states would be necessary in order to amend the Constitution.

Senate leaders have not stated when they will bring the amendment to the floor, but virtually all observers think the measure will fall short of the 67 votes necessary for passage. MOAA will report any further progress in a future issue of Military Officer.

Legislation |  FY 2005 Appropriations Bill provides Pentagon $418 billion.

DoD Spending Bill Goes to President

On July 22, the Senate voted 96-0 to approve the $418 billion FY 2005 Defense Appropriations Act. The House quickly followed suit, also approving the bill by a wide margin. At press time, the president was expected to sign the bill shortly. Each year, discussion of authorization bills and appropriations bills generates confusion, so it’s worth reviewing the distinction.

The Defense Authorization Bill (which was passed earlier by both the House and Senate and is pending action by its own separate conference committee) authorizes troop levels, pay raises, and benefit changes such as elimination of the age-62 Survivor Benefit Plan (SBP) annuity reduction.
The Defense Appropriations Bill, on the other hand, approves the funding to pay for the programs approved in the Defense Authorization Bill.

As reported previously, Congress appears unlikely to finish work on the authorization bill until October or later. The appropriations bill is important to keep Pentagon programs funded. But on issues such as the Survivor Benefit Plan, concurrent receipt, and reserve health care, it’s the authorization bill that drives the train.

Veterans’ Issues |  House committee approves COLA, reemployment rights.

Veterans’ Benefits Bills Advance

On July 22, the House Veterans Affairs Committee (HVAC) favorably reported a number of veterans’ benefits bills. The committee approved a cola for veterans receiving VA disability compensation, as well as to surviving spouses and dependents of disabled veterans who receive monthly Dependency and Indemnity Compensation. The cola is tied to any adjustment to Social Security benefits and is projected to be in the range of 3.4 percent (see “cola Watch,” page 20). The VA cola will take effect Dec. 1, 2004, and be reflected in checks mailed in early January 2005.

The HVAC also endorsed a bill (strongly supported by MOAA) that would strengthen reemployment rights as well as financial and legal protections for mobilized reservists and guardmembers and their families. The Servicemembers and Veterans Legal Protection Act of 2004 (H.R. 4658) includes provisions to:

• clarify that dependents as well as servicemembers are covered by the Servicemembers Civil Relief Act’s residential and motor vehicle lease termination protections on joint leases;
• prohibit double taxation of servicemembers when the local tax laws do not provide credit against certain taxes the servicemember previously paid in another jurisdiction;
• increase to 24 months (versus 18 months) the maximum period of employer-provided health coverage that an employee covered by the Uniformed Services Employment and Reemployment Rights Act (USERRA) may elect to continue;
• require employers to provide notice to employees of their rights and obligations under USERRA; and
• reinstate a requirement for the Labor Department to report annually to Congress on the disposition of cases filed under USERRA.

MOAA testified before the HVAC on these issues June 23. The testimony is available at www.moaa.org/legislative/testimony/default.asp.

The Senate Veterans Affairs Committee also was busy in July before Congress recessed for the month of August. The committee endorsed an omnibus veterans’ benefits bill (S. 2486) that would enhance education and other benefits for veterans and surviving spouses. S. 2486 includes provisions to:

• permit mobilized reservists who serve an aggregate 24 months active duty within a five-year period (since Sept. 11, 2001) to become eligible for the active duty Montgomery GI Bill (MGIB);
• open MGIB benefits to cover payments for national admission and college credit exams;
• extend the usage period for surviving spouses’ educational assistance benefits if the servicemember died on active duty to 20 years (versus 10 years) after the member’s death (MOAA supports extending or eliminating the usage period for all MGIB programs); and
• raise VA home loan guaranty rates and authorize the use of adjustable rate mortgages for VA home loans.

These proposals and related veterans’ benefits legislation will come before the full House and Senate for consideration when lawmakers return to work after Labor Day. With the nation at war, we expect final action on many of these initiatives before the 108th Congress adjourns.