January 30, 2012

Military.com|by Bryant Jordan

The Pentagon could require future working-age retirees to take employer-provided health care as a way to tackle the Defense Department's cost growth, one top official said Monday.

Undersecretary of Defense for Policy Michele Flournoy said DoD won't try to change the system for current retirees or serving troops, but she said recasting the benefits for future generations of retirees must be on the table if the department is to get control of its spending.

"No one is going to change the contract" of anyone currently serving or who served, Flournoy said, "but we've asked Congress for authority for a commission to look at this holistically to ask the question if we can have a better system."

Flournoy told members of the Reserve Officers Association in Washington that military compensation costs have far outstripped increases in personnel in recent years. DoD figures indicate the costs of military healthcare, which includes retirees, have exploded from about $19 billion in 2001 to more than $50 billion last year.

Many retirees or reservists in the civilian workforce who can get employer health care prefer to stay on TRICARE, said Flournoy. They are entitled to it, she said, "but that means DoD is carrying a lot of the health care cost that would otherwise be borne by private-sector employers."

"In principle you can make an argument for that, but the truth is, in reality what happens is that's money that's not being spent on capabilities, on equipment, on training, on readiness, on those kinds of programs for our personnel," Flournoy said. "So we really have to look at this in a holistic way."

Flournoy also said DoD has to look at the compensation it gives to those service members who do not serve until retirement. "The majority of the military don't stay on for 20 years," she said. "They stay for many, many years and walk away with nothing."

Michael O'Hanlon, a national security and defense policy specialist at the Brookings Institution, also told the ROA audience that the Pentagon has to take a new look at what it promises to its younger troops.

There are ways to save money and also do better by these younger troops, he said, but called for doing it gradually so that it doesn't have a negative impact by cutting across the board or hurting those who have been counting on the benefits they've been working toward.

But O'Hanlon said he wondered about the priorities in Washington when the Pentagon and Congress were talking about scaling back benefits for future servicemembers and not getting control of costs for mandatory social welfare programs.

"Though I'm in favor of rethinking military pension, military health care, TRICARE for Life, et cetera," he said. "I find it a little troubling … that we're getting this whole locomotive [of changing retirement benefits] going full steam while we haven't yet found a way to talk about the broader Social Security reform, Medicare and Medicaid reform for the nation at large."

Everyone needs to sacrifice, he said.

"And it doesn't make sense to focus on those who have served when it's politically untouchable to focus on the other 90 percent who have not served," he said.

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