New budget cut options include military pay, vets

Military members, retirees and veterans have a few more reasons to be wary of politicians who say their top priority is to cut federal spending.

The Congressional Budget Office on Wednesday released a report of more than 100 options for reducing budget deficits. It’s a timely product as House and Senate conferees strive to negotiate by mid-December a new debt-cutting deal to replace automatic budget cuts of sequestration.

More than a few of the CBO options are fresh ideas to roll back compensation for categories of veterans or to raise Tricare fees for military retirees, on suggestions that the government is being too generous.

To be fair, CBO is not singling out veterans here. There are options in the report to make nervous many segments of society dependent on federal payments, from social security recipients to drug manufacturers.

But for select veterans’ programs, CBO makes some hard-edged points that lawmakers bent on cutting spending might find compelling, if not persuasive, to help address the nation’s debt crisis.

Here are some of those ideas:

Cap military pay raises: From 2000 through 2010, Congress approved basic pay raises that averaged a half percentage point above private sector wage growth. The military could save $25 billion from 2015 to 2023 by reversing course, capping raises yearly at .5 percent below civilian wage growth. CBO predicts only a “minor” effect on force retention.

Evidence in favor of this move are data showing cash compensation for enlisted members now exceeds wages of 90 percent of civilian counterparts, well above the Defense Department’s goal of keeping service pay ahead of 70 percent of civilians of similar age and educational background. CBO says officer compensation exceeds 86 percent of private sector peers.

The case against capping raises is that recruiting and retention goals could be compromised, CBO says, and smaller raises also dampen other elements of military compensation including retirement annuities.

Raise Tricare fees: CBO floats two options to have military retirees pay more for health care. One is to have Tricare-for-Life users — retirees, spouses and survivors age 65 and older — pay the first $550 of costs not covered by Medicare and then 50 percent of the next $4950. CBO says this would slow Tricare costs by $31 billion from 2015 to 2023 but also save Medicare dollars as older beneficiaries seek fewer health services.

The drawback is some TLF users might not seek needed preventive care or manage their chronic conditions as closely as they do now.

The second option targets “working age” retirees and families enrolled in Tricare Prime by raising fees, deductibles and co-pays in a complex combination too detailed to describe here. The Prime changes for retirees could save from $2 billion to $11 billion by 2023, depending on final details.

Concurrent receipt: Until 2003, military retirees who drew tax-free compensation from the Department of Veterans Affairs (VA) for service-connected disabilities saw retired pay reduced by an equal amount. Congress phased out this ban on “concurrent receipt” over several years to for retirees with disability ratings of 50 percent or higher. As a result, last year 420,000 retirees received $7 billion in concurrent receipt payments.

Lifting this ban, CBO suggests, encouraged many more retirees to seek a VA disability rating. In 2005, only 33 percent who served 20 or more years received VA disability pay. By 2012, that proportion of longevity retirees drawing disability pay had climbed to 45 percent.

CBO says $108 billion could be saved from 2015 to 2023 if the ban on concurrent receipt were restored for current and future retirees. They “would still receive higher after-tax payments than would retirees who are not disabled,” CBO noted.

The argument against is that retired pay and VA pay compensate for “different characteristics of military service: rewarding longevity in the former case and remunerating for pain and suffering in the latter … Moreover, some retirees would find the loss of income financially difficult.”

That CBO floated such an option could dampen hope among military retirees with disabilities rated 40 percent and less that Congress someday will lift the concurrent receipt ban for them, too.

Narrow eligibility for va compensation: The law requires VA to define “service-connected” ailments broadly so if symptoms occur in service the condition usually is compensable. Last year, CBO says, VA paid 520,000 veterans a total of $2.9 billion “for seven medical conditions that…are generally neither caused nor aggravated by military service.”

VA could save $20 billion, from 2015 to 2023, if it stopped compensating veterans for the following: chronic obstructive pulmonary disease; arteriosclerotic heart disease; hemorrhoids; uterine fibroids; multiple sclerosis; Crohn’s disease and osteoarthritis.

Indeed, if Congress eliminated “compensation for all disabilities unrelated to military duties,” CBO says, the savings would be far greater, though, admittedly, this “would be more difficult to administer.”

The argument in support is that VA disability pay should be more comparable to civilian systems, which “do not typically compensate individuals for all medical problems” that develop during employment.

The opposing argument is that military service “imposes extraordinary risks” and hardships, which justify current pays and benefits including compensation for those who become disabled in any way while in service.

Tighten VA “IU” benefits: VA will supplement regular disability compensation for veterans not rated 100-percent disabled if they are deemed “unable to engage in substantial work,” CBO explains. The “Individual Unemployability” (IU) benefit is paid today to 300,000 veterans, boosting monthly incomes by an average of $1,800 a month.

A third of IU veterans, however, are over 65, the age by which many American workers are retired and drawing full social security benefits. CBO said VA could save $15 billion by 2023 if it stopped IU to older veterans.

These are not recommendations, CBO says, only options intended to inform lawmakers.

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