Conferees reject more pruning of military compensation

by Tom Philpott

House armed services committee conferees, in negotiating a final fiscal 2017 defense authorization bill, succeeded in blocking every substantive initiative aimed at slowing military compensation growth as had been backed by the Senate, the Obama administration and the Joint Chiefs of Staff.

As a result, active and reserve component forces will get a 2.1 percent pay raise Jan. 1 rather than 1.6 percent, avoiding a fourth consecutive cap on the annual military pay adjustment, each of which kept troop raises at least a half percentage point behind private sector wage growth.

Negotiators also rejected the Senate’s embrace of higher co-pays for off-base pharmacy benefits to spur greater use of generic and mail order drugs. Co-pays on brand name drugs at retail and mail order won’t climb now from $24 to $46 by 2026, and those on generic drug at retail outlets won’t rise from $10 to $14 by 2025. Brand drugs not on the Tricare formulary will stay available at retail, and co-pays on non-formulary brand drugs provided by mail order won’t jump to $92 by 2026.

Conferees also shelved a Senate plan to replace dual Basic Allowance for Housing payments of service members married to other members with the single monthly allowance payable to the higher ranking member.

Conferees were so careful to avoid bumping out-of-pocket costs for the current force that a larger plan to modernize the Tricare insurance benefit will apply new and higher fees and co-pays only to future retirees – those who first enter service on or after Jan. 1, 2018, and serve at least 20 years. Current members and retirees would be exempt from higher fees. As envisioned by conferees, Tricare in 20 years will be keeping two sets of fees and co-pays for retirees based on the date they entered service.

While rank-and-file military might appreciate such protective actions, Congress can expect to hear fresh complaints from the Joint Chiefs on the need to control personnel costs so that more defense dollars can be applied to training, maintenance and other strained readiness accounts. The bigger pay raise alone will add $330 million to the 2017 budget, dollars the services will be expected to squeeze from other accounts, say congressional sources.

Sen. John McCain (R-Ariz.), chairman of the Senate Armed Services Committee, had backed the smaller pay raise as negotiations began. But in a press release announcing the final bill, McCain praised it for, among other things, providing “our troops with the largest pay raise since 2010.”

There are hundreds more personnel provisions in the National Defense Authorization Act (S. 2943) including dozens to modernize military healthcare and streamline Tricare. The single largest element is a comprehensive overhaul the Uniform Code of Military Justice based on recommendations of a Military Justice Review Group led by Andrew S. Effron, former chief judge of the U.S. Court of Appeals for the Armed Forces.

The UCMJ reforms, to take effect in two years, are the most sweeping since the Code was enacted in 1950. They are to strengthen the structure of the military justice system using best practices of other federal courts; enhance fairness in pretrial and trial procedures; reform sentencing, guilty pleas, and plea agreements, and streamline the post-trial process.

On health care, as Congress did last year in reforming military retirement, it relied on the work of the Military Compensation and Retirement Modernization Commission, but also on best practices from the U.S. health care industry as shared in expert testimony and field trips by McCain’s staff.

“These reforms constitute an important first step in the evolution of the military health system from an underperforming, disjointed health system into a high-performing integrated health system that gives beneficiaries what they need and deserve: the right care at the right time in the right place,” said the Senate committee in summing up the package.

The Tricare triple option insurance plan will be pared to two choices: Tricare Prime remains as the managed care option but Tricare Select, a self-managed, preferred provider option, will replace the fee-for-service Tricare Standard plan and the current PPO option called Tricare Extra.

Many details still need to be settled but only active duty family members and retirees who join service after 2017 would face a new annual enrollment fee and fixed dollar co-pays that will be part of Prime or Select.

House conferees said the bill would permit an enrollment fee for current retirees who choose Tricare Select by 2020, but only if Defense officials can demonstrate and validate improvements to access and care.

One of the most significant reforms will shift responsibility for running military clinics and hospitals from Army, Navy and Air Force to the Defense Health Agency, a consolidation to streamline redundant bureaucracies and standardized best practices and procedures across the health care system.

Conferees also seek to improve access to care by eliminating a requirement that patients be referred for outside urgent care, and by mandating that on-base urgent care be available through 11 p.m. daily.

Other reforms would standardize appointment scheduling across all of military medicine, require greater use of telehealth technology, and encourage public-private partnerships between the military and top-rated private sector care providers to improve patient access to quality care.

Conferees also want medical readiness strengthened by expanding centers of excellence and adjusting the mix of specialists at base hospitals so they are better able to support wartime needs. More family medicine cases would be referred to the private sector when care is readily available.

Here are other personnel highlights from the conference report:

SSIA extended: Conferees voted to extend through May 2018 the Special Survivor Indemnity Allowance of $310 a month payable to 62,000 surviving spouses who see their Survivor Benefit Plan payments reduced dollar for dollar by their VA Dependency and Indemnity Compensation.

SBP study: Conferees will order Defense officials to study whether the insurance industry can offer a less costly government subsidized alternative to the military Survivor Benefit Plan.

Salary system eyed: In shelving the Senate’s call to “reform” Basic Allowance for Housing for dual service couples, conferees ordered Defense officials to produce a report by January 2018 on replacing basic pay and allowances with a military salary system, an idea raised often in past studies.

Ex-spouse law: Conferees agreed to make the first significant change in decades to the 1982 Uniformed Services Former Spouses Protection Act, but it would only apply to future divorce settlements. The change targets an ex-spouse “windfall” long criticized by retirees forced to share retired pay as marital property. The ex-spouse share of retired pay would be calculated based on member’s pay grade and years of service at time of divorce rather than at time of retirement as current law allows.

The Senate voted to use current pay tables at retirement to calculate ex-spouse shares, to reflect basic pay raises since time of divorce. Conferees settled on using retiree cost-of-living adjustments instead, so ex-spouses’ shares keep pace with inflation rather than with basic pay growth.

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