Panels Differ on Pay, Benefits; Retail Drug Hike Near

Active duty service members and reserve forces will get an across-the-board pay raise next January of 2.7 percent – or 2.2 percent. The actual size still needs to be resolved.

The 2007 military pay raise is just one of several key personnel issues that the House and Senate armed services committees handled differently while reshaping the Bush administration’s defense budget request.

The Senate committee supports a 2.2 percent raise, the figure proposed by the administration to match wage growth in the private sector. The House panel wants 2.7 percent. That would be an 8th straight military raise set a half percentage point above national wage growth. This raise would continue to narrow a perceived pay gap with civilian peers.

Senators opted for the smaller increase in part to avoid having to boost federal civilian pay. It is perceived as no longer possible politically to give the military alone a bigger annual increase, said a Senate aide.

"Whatever the military gets across the board, the civilians are going to demand," he said. Indeed, days before the House Armed Services Committee had approved a bump in the military ’07 pay raise, Rep. Steny H. Hoyer (D-Md.) learned of the personnel subcommittee plan and began to urge colleagues to press for "pay parity" next January for government civilians.

"So costs rise exponentially," explained the aide.

The Senate panel also voted to end a dollar-for-dollar "offset" in the military Survivor Benefit Plan (SBP) payments that surviving spouses experience when they also qualify for tax-free Dependency and Indemnity Compensation (DIC) from the Department of Veterans Affairs. And the Senate Bill would accelerate the effective date the so-called SBP paid-up rule to October this year, rather than in 2008. Under the rule, premiums no longer will be collected from retiree participants who have paid for least 30 years and have reached age 70. 

The House bill is silent on the two SBP changes.

Only the House committee bill, however, would allow any drilling reserve component member, starting in 2008, to enroll in TRICARE Reserve Select (TRS), premium-based health coverage. The Senate committee seeks no change to Reserve health benefits, giving the Defense Department more time to implement lesser improvements the Congress passed late last year.

These are just a few of the pay-and-benefit disparities found in separate versions of the defense bill. Some will be ironed out through floor amendments starting in mid-May but most likely reconciled during closed-door negotiations this summer of a House-Senate conference committee.

The separate authorization bills – HR 5122 and S 2507 – do agree already in some critical areas, making their enactment later this year almost certain. Both, for example, endorse the administration’s call for a special pay raise next April for warrant officers and for longer-serving enlisted members in grades E-5 through E-7. The targeted raises would be on top of January hikes of 2.2 or 2.7 percent. April increases will be as small as 1.1 percent for E-5s with at least 8 years of service. The biggest increase would be 8.3 percent for a warrant officer (W-1) with 20 years or more served.

Both committees also endorse stretching the military pay chart to give longevity raises every two years from 28 years through 40, affecting pay for certain higher ranks. Flag officers would see an extra 4 to 7 percent from pay table expansion. Basic pay for a warrant (W-5) with 30 years would climb by 13.8 percent. A W-5 with 38 years would see a combined raised by next April of 25.4 percent.

Health care provisions dominate the personnel section of both bills. Each bill has language to block temporarily the steep increases in TRICARE fees and co-payments planned by the administration for three million under-65 military retirees and dependents. The House bill wants a special task force to study the fees, supported by work from the Government Accountability Office and Congressional Budget Office on the reasonableness of current fees and projected cost savings from raising them. The Senate bill also calls only on GAO to study TRICARE fees, with a deadline of April 2007.

Neither committee wanted to see defense efforts to control health costs left dead in the water this year so beneficiary co-pays are almost certain to rise in the TRICARE retail network and to fall or disappear in the more cost-effective mail order program. This re-balancing of co-pays, combined with new cost-control initiatives in the House and Senate bills, could be touted as a modest start to Defense cost-saving initiatives in fiscal 2007.

The House committee would raise retail co-pays from $9 to $16 on brand-name drugs on the military formulary and from $3 to $6 on generic. Co-pays for non-formulary drugs would stay at $22.

The Senate bill simply does not interfere with DoD plans to raise retail co-pays to $15 for brand name and to $5 for generic drugs. Therefore, higher co-pays in the retail network are almost certain in the new fiscal year.

To encourage use of mail order, the House committee seeks to end co-pays on most mail order drugs. Current co-pays are $9 for a three-month supply of brand-name formulary drugs and $3 for generic.

The Senate bill actually would require that beneficiaries needing refills of maintenance drugs to use the mail order program. To soften that blow, the Senate bill too would end mail order co-pays on generic drugs and on brand name medicines if physician said they were medically necessary.

In a blow to the pharmacy industry, both bills would require federal pricing rebates on medicines dispensed through the TRICARE retail network, a move that could save the government $256 million in 2007 alone. And by January 2008, no employer could offer financial incentives to encourage TRICARE-eligible retirees to use TRICARE instead of employer health insurance.

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