January 27, 2012

Serve Longer –Pay More.  On Thursday DoD began to unveil details of their proposed budget cuts.  TRICARE fee increases, force cuts, pay cutbacks, and retirement changes were all included in the initial report.
“Doc Fix” Talks Begin - Slowly.  A Congressional panel tasked with working out a long term deal to avoid a 27% cut in the Medicare/TRICARE physician reimbursement rate met for the first time this week. 
Two Nominees,Two Key DoD Billets.  On Monday, President Obama announced the nominations of Ms. Erin Conanton and MG Jessica L. Wright, ARNG (Ret.) as the undersecretary of defense for personnel and readiness and the assistant secretary of defense for reserve affairs. 

 Serve Longer – Pay More  
On Thursday, Secretary of Defense Leon Panetta confirmed our fears when he released details on just how significant the defense cuts will be regarding the soon to be released FY2013 President’s budget. 

The Pentagon’s FY2013 base budget request of $525 billion is a $6 billion dollar reduction compared to that of the FY2012 base budget, but the impact over the next five years reduces defense spending by $259 billion. 

The impact of the cuts to military members and retirees runs deep.

The Pentagon’s reduction plan includes significant cuts to Army and Marine Corps end strength.  The Army end strength will be cut by 80K from their peak of 570K leaving the Army with 490K.  Marine Corps end strength will be reduced by 20K resulting in a final end strength of 182K. 

Under the plan active duty pay raises will keep pace with private sector pay growth in 2013 and 2014, but starting 2015, military pay raises will be “limited” below that of private sector growth.  Exactly how limited remains to be seen.

Retiree health care benefits takes a significant hit – most affected will be working age retirees under age 65.  DoD’s proposed changes include: 

1. New enrollment fees and additional fee increases for retirees under age 65 enrolled in TRICARE by creating a ‘tiered” approach based on retired rank.  This means-testing will require senior grade retirees to pay more for their health care than junior retirees;
2. An enrollment fee for TRICARE for Life beneficiaries 65 and older; and,
3. Additional increases in pharmacy co-pays with the goal of increasing the use of generics and the mail order pharmacy.

The “tiered” approach to health care fees would make military retirees the only group of government retirees subject to healthcare means-testing.  This is a concept we’ve fought ardently because it flies in the face of logic for a military service incentive – basically, the longer and more successfully you serve, the less benefit you earn.

The proposal doesn’t include any changes to retirement pay, but DoD will ask Congress to establish a BRAC-like commission with authority to conduct a review of the military retirement system.  DoD reiterated that any changes resulting from the study would only affect future recruits.  

Finally, as part of the Pentagon’s plan, the President will request from Congress another round of Base Realignment and Closures in order to reduce excess infrastructure.  More base closures would lead to fewer quality of life programs and services such as exchanges, commissaries, and Military Treatment Facilities and clinics.

The Pentagon’s plan is far from final…it still needs to go through the various committees in both chambers in Congress, but in the current budget environment we definitely have our work cut out for us. 

Now we have to wait for details on exactly how steep the health care fee hikes will be. These should emerge once the President releases his budget on February 13. 

This proposal will set our legislative agenda for the foreseeable future.  Please send your legislators a MOAA-suggested message and ask them to oppose these dramatic cuts.

“Doc Fix” Talks Begin – Slowly 
In December, Congress agreed to a two month patch to avoid a 27% cut to Medicare/TRICARE physician reimbursement rate (doc fix), along with an extension of the payroll tax holiday and certain unemployment benefits through February.

As part of this short term deal, Congress agreed to establish a 20 member conference committee to hash out a long term extension of these three issues when Congress returned to Washington in 2012.

On Tuesday, that panel of legislators met for the first time. 

Aside from appointing Rep. Dave Campo (R-MI) and Sen. Max Baucus (D-MT) as chairman and vice-chairman respectively, the panel didn’t accomplish much in their first meeting.

In the opening dialog both parties appeared to be entrenched along partisan lines much as they were in 2011.  The Democrats continue to insist that increased tax revenues must pay for part of the extension, while Republicans refuse to consider new taxes and want to pay for the extension solely through budget cuts.

One interesting development is that both sides seemed open to using projected war savings as one way of paying for the fix.

Congress has until February 29 to come up withan extension, but it seems negotiations have a long way to go.  Thankfully the panel is supposed to meet again next week to continue the dialog.

If you haven’t already done so, please send your legislators a MOAA-suggested message asking them to pass a long term fix for to Medicare/TRICARE physician reimbursement rate.

Two Nominees, Two Key DoD Billets 
On Monday, President Obama announced the nominations of Ms. Erin Conanton and MG Jessica L. Wright, ARNG (Ret.) as the undersecretary of defense for personnel and readiness and the assistant secretary of defense for reserve affairs respectively.

Ms. Conanton currently serves as undersecretary of the Air Force and previously held an important position as staff director of the House Armed Services Committee.

MG Wright served as Adjutant General of the Pennsylvania National Guard and previously commanded a combat aviation brigade.

If confirmed by the Senate both nominees would step into enormously important positions that can influence key force management, health care, and guard & reserve decisions in the months and years to come.

If and when they’re confirmed MOAA hopes to build a strong working relationship with both Ms. Conanton and MG Wright.