Military Advantage

Avoiding the 'Fiscal Cliff' May be as Painful as Going Over It

This week Tom Philpott reported that the Congressional Budget Office has put a red "laser dot" on future pay raises, TRICARE, and future retirement benefits.

In their report, the CBO says annual military pay raises have exceeded civilian wage growth over the last 10 years. In fact the CBO estimates that military pay increased by 52 percent from 2002 to 2010 while civilian wages rose only 24 percent.

Read the Costs of Military Pay and Benefits in the Defense Budget online.

The CBO says that any impact reducing pay increases might have on recruiting and retention can be mitigated by offering larger enlistment and reenlistment bonuses.   The CBO pay cap option would mean military pay would lose nine percent to private sector wage growth over the five-year period.

The CBO also suggests an option to raise TRICARE enrollment fees, deductibles or copayments, actions also proposed by the administration last April.  For working-age retirees, those under 65, fee hikes should be phased over five years and use a "tiered approach" so that senior-grade retirees would pay higher fees than lower-ranking retirees.

Philpott reports that the CBO says higher enrollment fees not only would raise collections but also discourage retirees and families from relying on military health care versus civilian employer health insurance.  Higher deductibles and co-pays would restrain use of medical services too and also lower TRICARE costs.

The report estimates that out-of-pocket costs to military beneficiaries today are just one-fifth of what civilian workers pay for healthcare.  Unless fees are raised, CBO projects that military health care costs will jump from $51 billion in 2013 to $77 billion (in 2013 dollars) by 2017.

The plan to discourage retirees and families from relying on TRICARE has some support in the Senate.

CBO says restricting Prime access to retirees under 65 and their family members would save as much as $10 billion a year.

The servicemembers and retirees should be aware that the deal to avoid the “fiscal cliff” is likely to impact their families as much as the sequestration itself.

Let your elected officials know how you feel about this subject.

Read Tom Philpott’s “Military Update” for complete summary of the CBO report.

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