The long-awaited report of the congressionally mandated Military Compensation and Retirement Modernization Commission arrived yesterday. And the report seems to have been received with a thud by those who will consider its recommendations. According to a report from Politico’s Pro Defense newsletter, House Armed Services Committee Chairman Mac Thornberry, ranking Democrat Adam Smith, outgoing Secretary of Defense, and at least one representative from a military advocacy organization all promised “thorough study” of the recommendations, but offered little else.
Of the commission’s 15 recommendations, the most important deal with reforming the military’s retirement system and its health care benefits. On retirement, it recommends that the Department of Defense offer service members opportunities to save for retirement earlier in their careers by establishing 401(k)-type accounts to which the government would contribute. The program would provide retirement benefits for the overwhelming majority of military personnel who do not reach the twenty years of service required for a pension.
The commission’s recommendation to abolish TRICARE, the military’s health benefits system, is more controversial. Instead, it recommends that service members receive a new Basic Allowance for Health Care (BAHC) that would allow them to purchase health insurance in the commercial market. The report argues that TRICARE’s network of providers is weak, making it particularly difficult for those seeking medical services in remote areas. Savings can be achieved because TRICARE participants pay lower out-of-pocket fees than participants in the private health care market. While the commission wants to maintain the TRICARE-for-Life program that supplements Medicare for military retirees, it argues that the transition to a BAHC for active-duty service members will provide greater choice and flexibility.
The latter recommendation is unlikely to go anywhere. As Austin Wright of Politico Pro reported, Senate Armed Services Committee Chairman John McCain threw cold water on the idea almost immediately after the report’s release: “Abolishing Tricare – those two words, that’s not going to be a starter.” And it’s unclear what chance the commission’s other recommendations have of being adopted. As Jeremy Herb reported yesterday on Politico Pro, many lawmakers do not even agree a problem exists. Herb quotes MacKenzie Eaglen of the American Enterprise Institute who says there is a “zero” percent chance Congress adopts the commission’s recommendations. “For Congress to pass compensation reform,” she says, “the majority of members would have to agree there’s a problem that needs to be fixed.”
But there clearly is a problem with military personnel costs. The Congressional Budget Office reported late last year that Pentagon spending on personnel has increased by 46 percent between 2000 and 2015.
What’s not clear is whether commission’s recommendations—even if they were adopted—are enough to fix the problem. According to the same CBO report, two of the biggest drivers of growth in the personnel account include basic pay (18 percent) and TRICARE-for-Life (16 percent)—both of which the report explicitly recommends against reforming. The proposed reforms to the military health care system would effect the Pentagon’s operations and maintenance account, which grew by 34 percent since 2000. According to CBO, the Defense Health Program contributed to 33 percent of that increase—with the Pentagon’s TRICARE program being the primary reason.
But as Senator McCain has already said, the proposed changes to that program are a non-starter.