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DOD HEALTH CARE ALTERNATIVES FOR MILITARY MEDICARE-ELIGIBLE BENEFICIARIES
House of Representatives,
Committee on National Security,
Military Personnel Subcommittee,
Washington, DC, Thursday, February 27, 1997.
The subcommittee met, pursuant to call, at 1:05 p.m. in room 2212, Rayburn House Office Building, Hon. Steve Buyer (chairman of the subcommittee) presiding.
OPENING STATEMENT OF HON. STEVE BUYER, A REPRESENTATIVE FROM INDIANA, CHAIRMAN, MILITARY PERSONNEL SUBCOMMITTEE
Mr. BUYER. The hearing of the subcommittee will come to order.
We are at this hearing today to share with everyone, yesterday it was announced that there wouldn't be a lot of business today, not substantive votes, we had a general vote, but a lot of Members went on back to their districts. But I am appreciative to the Members who stayed and are here at this hearing. Thank you very much.
Today the subcommittee will hear testimony on various options for providing continued medical conference to the military Medicare-eligible retirees and their families.
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The Department of Defense operates one of the Nation's largest health care systems. Eight and a half million people, including active-duty service members, retirees, and their families are eligible to use military medical facilities. About 1.2 million of these beneficiaries are Medicare eligible, and the Department projects that number to grow to nearly 1.4 million by the year 2001.
The Department of Defense currently estimates that about 25 percent of its Medicare-eligible beneficiaries are reliant on military hospitals for major portions of their health care. Supporting the Medicare-eligible population costs the Department an estimated $1.2 billion annually.
While these Medicare-eligible beneficiaries remain eligible for space-available care in military hospitals, they cannot participate in the Department of Defense Tricare managed-care program. Since Tricare is designed to maximize use of military treatment facilities by Tricare enrollees in order to achieve efficiencies, it will become increasingly difficult for Medicare-eligible beneficiaries to gain access to space-available care in those facilities.
As a result, continuing to meet the medical needs of this growing military population is an extremely difficult challenge, particularly in today's budget constrained environment. The Department of Defense, military associations, and a substantial number of congressional Members believe Medicare reimbursement to the Department for care provided to Medicare-eligible beneficiaries, a concept referred to as Medicare subvention, may be a viable, cost-effective method of providing quality health care to many of these beneficiaries.
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The House National Security Committee has long supported efforts to enact Medicare subvention. The conference report to the National Defense Authorization Act for fiscal year 1996 expressed the sense of Congress that the President's fiscal year 1997 budget should provide for Medicare reimbursement to DOD as a means of ensuring access to medical care for Medicare-eligible beneficiaries. The conference report to the National Defense Authorization Act for fiscal year 1997 included a requirement for the Secretary of Defense and the Secretary of Health and Human Services to jointly provide Congress with a detailed plan for conducting a Medicare subvention demonstration program. Also, in September 1996, the committee reported out legislation that would have authorized a Medicare subvention demonstration program. Unfortunately, despite these efforts, legislation authorizing Medicare subvention or a subvention demonstration program was not enacted in the 104th Congress, largely due to the Congressional Budget Office's unfavorable estimates of the cost of these proposals.
Based on concerns about CBO's unfavorable scoring of Medicare subvention, the National Security Committee had previously directed the Department of Defense and the General Accounting Office to study alternatives for ensuring the continued provision of health care to military retirees.
In light of CBO's unfavorable scoring of even a demonstration program for Medicare subvention, and in response to concerns raised by military associations that subvention only will help a small portion of the Medicare-eligible population, it is evident these and other alternatives need to be fully evaluated. Our military retirees were told that they would be provided with health care for life. We need to do all that we can to ensure that they receive that care.
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The purpose of this hearing today is to explore those alternatives not only from the Government, but that from the retiree community.
I now yield to the ranking member of this committee, Mr. Taylor, for any opening comments or statements that he would like to make.
STATEMENT OF HON. GENE TAYLOR, A REPRESENTATIVE FROM MISSISSIPPI, RANKING MEMBER, MILITARY PERSONNEL SUBCOMMITTEE
Mr. TAYLOR. Thank you, Mr. Chairman, for holding this important hearing on an issue of tremendous concern to our Nation's retirees, those who were promised a lifetime of health care and have found that upon reaching age 65 that health care is being denied. We need to explore all possible solutions for providing that to these retirees.
The current system of administering medical care to military retirees and their families is insufficient. Retirees receive care in military medical facilities on a hit-or-miss basis, and all too often it is a miss. Our retirees deserve better, and, as members of this subcommittee, it is our responsibility to find a way to consistently meet the health care needs of these well-deserving individuals. I support the efforts to enact Medicare subvention.
If you recall, last year, probably one of the biggest disappointments of the 104th Congress was the vote on the floor where 15 Members changed their vote and took what would have been a win for our Nation's retirees and made it into a loss. I hope that we can do better this year.
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I would encourage the people in the audience who are retired military and who are veterans to please bear in mind that this committee is one of several committees that will have to act favorably in order to enact Medicare subvention. In my mind, the biggest hurdle will not be with the Armed Services Committee but rather the Ways and Means Committee. I would urge you to promptly start contacting people on that committee to see that the funds are made available to enact Medicare subvention, because as we saw last year, just passing it through the military committee is not enough, it has to be funded.
But we will do our part, Mr. Chairman. I am glad you made this your highest priority. It is your first hearing this year, and I look forward to making Medicare subvention the law of the land.
Mr. BUYER. Thank you, Mr. Taylor.
I now yield to any other Member who would like to make any opening comments. If not, we will proceed.
I am pleased to welcome our first witness, Mr. Stephen Backhus, director of the Veterans' Affairs and Military Health Care Issues at the General Accounting Office, who will review the various alternatives to providing health care to military Medicare eligibility. Mr. Backhus is accompanied by Mr. Daniel Brier, assistant director, and Ms. Catherine O'Hara, senior evaluator at GAO.
Mr. Backhus, please begin.
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STATEMENT OF STEPHEN P. BACKHUS, DIRECTOR, VETERANS' AFFAIRS AND MILITARY HEALTH CARE ISSUES, U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY DANIEL BRIER, ASSISTANT DIRECTOR; AND CATHERINE O'HARA, SENIOR EVALUATOR
Mr. BACKHUS. Thank you, Mr. Chairman and members of the subcommittee. We appreciate the opportunity to be here today to discuss issues affecting access to health care for older military retirees and their families and the options for addressing those issues.
Today's Department of Defense health care system covers about 8.3 million beneficiaries, of which 1.2 million are age 65 or older. DOD has the statutory authority to provide these retirees health care in its facilities as long as space and resources are available, called space-available care. But the statute does not entitle retirees to care in military hospitals.
As I am sure you are aware, there were major changes in DOD's health care system brought about by downsizing. The introduction of managed care has caused retirees and, in particular, those who are age 65 and older to fear that these changes will eventually end their access to space-available care.
At your request, we are reviewing several alternatives that have been proposed for improving their access to care. We have talked to beneficiaries, associations, people at the headquarters level in DOD, and, more importantly, I think, military medical facility managers and health care providers from across the country to gain a perspective on the effects of the military system changes on retirees.
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Our work is still underway, though, and as this subcommittee and others begin to weigh the costs and other trade-offs associated with how to best help these retirees, we welcome the opportunity to share our preliminary observations on the alternatives and the likely effects on both the beneficiaries and the Government. Around the spring, the end of May, we expect to issue our final report on these issues.
The first topic I would like to address is older retirees' current options for accessing care and the effects of the recent DOD health care system changes on their access. You may know, you may not, but in the early 1950's the military health care system was sized for a large active-duty force. Military retirees and their families made up only 8 percent of the eligible health care population. Consequently, Mr. Chairman, health care in military facilities was almost assured for those people.
Since then, much has change. In the last 10 years, the number of military personnel has declined by 15 percent and one-third of military hospitals have closed, reflecting the one-third reduction in the active-duty forces. Meanwhile, the number of older retirees, 65 and older, has increased by 75 percent and is projected to outnumber active-duty personnel in the future. These changes have significantly reduced the availability of care for older retirees in DOD facilities.
Moreover, recent DOD studies have suggested that the military health care system is larger than is needed to meet the present and future wartime requirements, which, if true, could reduce further medical staffing in facilities, resulting in even less space-available care for these retirees.
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The older retirees' access to health care may also decrease because, under DOD rules, they are ineligible to enroll in Tricare Prime, DOD's health maintenance organization plan, putting them at the bottom of the priority list for care in military hospitals.
According to the medical facility officials we talked to around the country, many retirees are unable now to obtain advanced appointments for routine care or follow-up care or even get urgent care but must persistently call each day hoping for an appointment. As a result, care is episodic and it lacks the regularity and continuity that is important to older retirees who have more frequent and chronic medical problems, of course, than younger ones.
Looking ahead, as Tricare Prime enrollment increases, older retirees' space-available care will further decline in many facilities and will eventually end at others. Retirees will need to depend on more non-DOD sources of health care in the future.
In this regard, Mr. Chairman, older military retirees do have health insurance. Virtually all those age 65 and over receive Medicare part A, which covers their inpatient hospitalization, their skilled nursing facility care, and home health care needs. And by paying an extra monthly premium, they receive Medicare part B coverage for physician and other outpatient services.
A recent DOD beneficiaries survey indicated that 90 percent of older military retirees have part B coverage. Also, these retirees, though not their dependents, are eligible for but not generally guaranteed care through the Department of Veterans Affairs program, but, unlike other Federal retirees, these military retirees are not eligible for the Federal Employees Health Benefits Program.
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Now, despite many having insurance options, older retirees still find that they can experience coverage gaps, high costs; maybe more importantly, they must learn to navigate a patchwork system to receive their care. It does not cover outpatient system drugs; it has no catastrophic limit on patients' out-of-pocket costs.
In addition, because of deductibles and copayments costs, about one-third have MediGap policies from private insurers. These plans' premiums range from about $400 to $2,100 a year, and the coverage under the ten types of MediGap policies vary widely. Only the most expensive plans cover outpatient prescriptions, and none pay for dental or vision care.
At this point, Mr. Chairman, I would like to present our preliminary views on the several proposed alternatives for addressing these concerns. We are looking at five such alternatives. One is Medicare subvention; the other is FEHB; a third would be using the existing CHAMPUS Program as a second payer to wrap around Medicare; a fourth is to examine the cost of a Medicare policy to supplement Medicare; and the fifth is a mail order pharmacy benefit.
Through Medicare subvention, Medicare-eligible retirees could enroll in Tricare Prime. Enrollees would have improved access to care in duty facilities and enjoy the continuity of care many now lack as well as reduce out-of-pocket costs. The Government might also benefit to the extent that DOD care is provided less expensively than care under Medicare.
However, the number of older retirees likely to benefit from subvention appears to us to be proportionately small, because, as I mentioned earlier, available resource capacity in military facilities continues to decline. In fact, DOD estimates that less than one-half of the older retirees now using military medical facilities would be able to enroll in its facilities under Tricare Prime. Subvention would not be available to the many retirees who do not live near a military facility. To expand subvention beyond the limits of DOD's own facilities, it would have to buy care from civilian providers.
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In our view, there is most likely no cost advantage to DOD buying this care rather than what HCFA is doing currently in the Medicare Program, buying care from civilian providers. With FEHB as an alternative, older retirees could choose from a wide array of health insurance programs, including HMO's, and share in the premium costs with the Government.
Offering FEHB would provide military retirees the same coverage provided to other Federal retirees and especially help those affected by facility closures, distance from facilities, those facilities with reduced capacity, and of course those people with limited insurance coverage from other sources.
The proposal's potential cost, however, does appear to be significant. CBO, as you know, and the DOD, in fact, have estimated that annual costs would exceed—the additional annual costs would exceed $1 billion. That is in addition to what the DOD is already spending on these over-65 people of $1.2 billion.
Providing CHAMPUS as a wraparound coverage to retirees when they reach age 65 would also help those with limited access to military facilities and limited insurance coverage. For these retirees, the program is familiar because they have been used to it up to the point of reaching age 65. However, Mr. Chairman, the additional cost of CHAMPUS as a supplementary policy is also significant, and we estimate that, and the DOD estimates that, to be around an additional $2 billion every year.
Finally, Mr. Chairman, many of the benefits older retirees would enjoy under FEHB and CHAMPUS would also be realized if the Department paid the Medicare part B premiums, MediGap premium, or both. Cost implications also are similar, roughly $630 million annually to pay Medicare part B and up to $2 billion to pay to the MediGap plan.
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To us, one alternative that would perhaps fill a significant health care gap for older retirees is an expanded pharmacy benefit. Such a program would reduce retirees' prescription expenses for those with limited or no prescription coverage now and those who live too far from military pharmacies.
The cost of such a program would obviously depend on the amount of cost sharing requirement, whether retirees would continue to use military pharmacies, whether retirees have other coverage, prescription coverage, and of course the prices the Government can obtain from pharmaceutical suppliers.
DOD's preliminary estimates of its traditional annual costs range from $142 million to $360 million. The lower number presumes that only retirees living outside catchment areas would be eligible, and the higher number assumes all retirees would be eligible.
So, in summary, DOD's responsibilities to the growing retiree population, given the availability, cost, and coverage issues, presents the Department with a considerable dilemma. On the one hand, like all responsible employers, DOD seeks to provide the best health care it can for its former employees, particularly during the later years when so many need it most. And DOD has acknowledged an obligation to its retirees who served their country, many in harm's way, during the most productive years.
On the other hand, however, the military's readiness needs determine the size of its health care system. While readiness decisions are now pending, some predict further downsizing, leading to less space-available care at military facilities. Within this context, the Medicare subvention proposal for treating retirees at military facilities appears particularly unlikely to help many of them.
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The FEHB, CHAMPUS, the second payer, and the MediGap proposals have potentially large price tags. While DOD health care restructuring decisions are being made, however, the pharmacy proposal might fill an important gap for retirees.
Mr. Chairman, this concludes my statement. My colleagues and I will be happy to respond to any questions you or the other members of the subcommittee may have.
[The prepared statement of Mr. Backhus can be found in the appendix on page 46.]
Mr. BUYER. You put a lot out there for us to think about.
One thing that is going through my mind is, I remember a hearing that we held; it was maybe a couple of years ago; maybe it was the 103d or 104th, I get confused. In fact, Dr. Joseph was over here testifying, and we looked at the 733 study, and it was putting the brakes on that because of pressures about downsizing the military health delivery systems and at what levels, and many of us were hesitant to do that. And I listened carefully when you made mentioned that medical staff is personally larger than is required.
There are many of us over here that, when we hear that, I don't mind—I don't mind having a bit on the larger side with regard to medical staffs, because what it would take to grow those medical staffs in time of national needs and emergencies, you just can't do that right away. So we recognize that, and so we jealously guard the size of some of those medicals.
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Let me ask you this. If we—I appreciate your testimony. Many of us sometimes get loose with our language with, ''Medicare subvention is the panacea,'' and everything. Actually, you are giving good testimony here, saying, wait a minute, time out; if you do this, you are only serving a smaller size in population.
I would like you to get into the numbers. What are we talking about in size? And if that happens, or we end up doing some kind of wraparound with it, tell me what really increases the capacities in those medical facilities, so when you say yes, they are large, I can say I can fill, I can give them all kinds of things to do. What kind of numbers are you talking about when you say it is small?
Mr. BACKHUS. No one knows precisely how much excess capacity there is now. It is an almost impossible thing to calculate with precision.
Mr. BUYER. Well, it is a dichotomy. Don't testify to me and say that there is—medical staff is presently larger than is required. It makes it sound like they don't have much to do. But you are telling the retirees population that there is not space available because they have too much to do.
Mr. BACKHUS. Well, that statement I made is that there are studies in the Pentagon that suggest that. That wasn't a conclusion that we made, that the military size is larger than needed for war.
What we did was extrapolate, as you know, with the 733 study, that that is, I don't know, the lower limit as to what the requirement is, and our suggestion that if that turns out to be true, if that is what the Department and ultimately the Congress decides the requirement to be, then potentially what happens is, there is another sort of an effort underway to down-size further than what it is today. That is the scenario in which it is possible that there could be less space available than now.
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Now, in terms of the current size and how much excess capacity there is, it varies by hospital. Some hospitals are efficient, they are full or nearly full, upwards of 80 to 90 percent of capacity, when capacity means—there are several things that can happen to hit capacity. There is not just the infrastructure in the square footage, it is also equipment, people, et cetera.
Ultimately, the capacity is limited by the infrastructure, because you can add people, you can add rooms, you can do all those kinds of things. So what we have is a situation where most of the older retirees, over 65, don't live in the areas where the military hospitals are that have a great opportunity to expand. Fourteen percent of Medicare-eligible retirees live near the large medical centers. It is the large medical centers that treat the difficult cases.
Mr. BUYER. Here is where you have got to help me. Subvention appears proportionally small. Quantify it.
Mr. BACKHUS. OK; 25 percent of those, of eligible Medicare retirees.
Mr. BUYER. Quantify that again for me.
Mr. BACKHUS. Those military retirees who are age 65 and over, subvention could probably care for one-fourth of those. There are 1.2 million Medicare-eligible military retirees today and their survivors and dependents. About a fourth of those, I would say, as well as estimates I have seen from within the DOD, potentially can be treated in a managed care environment under subvention.
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Mr. BUYER. All right. I had meant to put myself under the 5-minute rule, and let me yield to my ranking member, Mr. Taylor, for any questions.
Mr. TAYLOR. Thank you, Mr. Chairman.
Mr. Backhus, I am sensing that, on one hand, we were told by the GAO that Medicare subvention is a budget buster because it is too big in dollars, but, on the flip side, you are coming back and saying only one in four military retirees over 65 would use it. They are mutually exclusive.
Mr. BACKHUS. No, we don't have an estimate. The $2 billion figure was for using FEHB or CHAMPUS or a supplemental——
Mr. TAYLOR. OK, what is your cost estimate for implementing Medicare subvention? What would it cost the budget?
Mr. BACKHUS. Given the capacity limitations that we think exist, it is quite possible it is advantageous to the Government and Medicare to do it.
Mr. TAYLOR. Would you put that in writing?
Mr. BACKHUS. Well, I think what we can say, similar to what we say now, to the extent—this is what the demonstration is all about.
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Mr. TAYLOR. Yes, sir.
Mr. BACKHUS. To the extent the DOD can do this care cheaper, then I think that is a win/win situation.
Mr. TAYLOR. Mr. Backhus, I am curious how you came up with the ratio that only one in four retirees live near a base. I think that is inaccurate. I think many of them choose to retire near a base so that they can continue to use the commissaries, continue to use the base exchanges. They have grown accustomed to that life-style, they like to be around military people, and I think your ratios are off.
Mr. BACKHUS. OK, let me give you some details. My comment was, 14 percent live near the big hospitals, the largest and most sophisticated military hospitals. It is 14 percent of those over 65 that live near those facilities. In all, 56 percent of all age 65 and over live in the catchment area of some military hospital. That includes those that are below 50 beds, 10 beds, 12 beds, that kind of thing. So you work it out as to which ones have capacity, which ones don't.
Mr. TAYLOR. OK, if Medicare subvention is enacted into law, you have, in effect, increased the DOD medical budget, have you not, because they would not be compensated for care they are given without compensation now?
Mr. BACKHUS. It depends. If the medical system is able to treat more people than they currently treat, that is when subvention kicks in, when the Medicare reimbursement begins. But it is not until the DOD can reach what they call the current level of effort. But at that point, yes, they would get additional revenue.
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Mr. TAYLOR. OK. If they are treating more people, they are probably going to hire more doctors, more nurses.
Mr. BACKHUS. If they can.
Mr. TAYLOR. Does that not then become something we would like to have in this Nation in the event of general mobilization?
Mr. BACKHUS. That is a darn good question, and I think that is the policy call and relates to the thing we discussed a moment ago, what size should it be. I think the Department of Defense hasn't come to grips with that yet, and I think ultimately that is how we base these decisions.
If we can get back to what is the size of the system and what is needed, what is needed to support the troops, then from that comes some better ways to evaluate and decide how many we can treat.
Mr. TAYLOR. OK. But let's kind of retrace what we have spoken about. You first said you think we could actually save money but enacting——
Mr. BACKHUS. It is a real possibility.
Mr. TAYLOR. No. two, we could increase the number of doctors and nurses in the DOD, which is necessary for general mobilization because we called up a great number of doctors and nurses during Desert Storm, when we had a larger force. Is that not also good? And the third is, OK, we won't solve all problems but couldn't we solve some problems by enacting Medicare subvention?
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Mr. BACKHUS. For those who are able to enroll, absolutely.
Mr. TAYLOR. Thank you, Mr. Chairman.
Mr. BARTLETT. Thank you very much, I have just one simple point to dwell on, and it won't take 5 minutes. To what extent did we tell these young men and, in some cases, women when they entered the military they had health care for life?
Mr. BACKHUS. You are going to hear a lot more about that, I am sure, from the folks behind me, and I have seen those old recruiting brochures that say something to the effect that you have got health care for life. I don't know whether those things have been published since 1991. That is the most current one I have seen. But there is no question that for folks that we are talking about today, especially who are over 65, that that is what they were told and that is what they believed.
Mr. BARTLETT. I think what we are doing is systematic of what is happening all across America. The going gets a little tough in a marriage, and you just forget all those commitments you made, and it is divorce time. We are now in budgetary constraints, and we are forgetting a commitment we made. I have a major concern with this, and that is that it not only is an immoral thing to do, not to keep a contract or relation, but, from a very practical viewpoint, this just has to impact on recruitment.
When our young people see we have not kept our word to previous service personnel, they are going to be less likely rather than more likely to volunteer for the military services. I know that we have budget constraints, but I think that keeping one's word sometimes transcends other issues, and so to whatever extent we can rearrange our priorities so that we are being faithful to the commitment we made to these service personnel, now retired, this is where I am going to come down on this issue.
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I think that all other considerations here pale compared to the one primary thing. We made a commitment; we now are obligated to uphold that commitment.
Thank you very much for your thoughtful testimony.
Mr. BUYER. Thank you.
Mr. Pickett is recognized for 5 minutes.
Mr. PICKETT. Thank you, Mr. Chairman.
In the five alternatives that you have listed here, it is a little bit difficult to quickly try to evaluate them, because each one is considerably different in the coverage that they provide for the retiree. Is there some—could you possibly extend your information here to make all these comparable and then put a price tag on each one so we get some idea of the costs associated with it?
Mr. BACKHUS. I could, in terms of our final report that we are intending to publish in May, I think, yes. That is what we will try to do.
Mr. PICKETT. That will be much more useful than what I see here at the moment. I think all of these alternatives have been mentioned from time to time and they are not unknown to us. What is unknown is the relative values of them and which one meets the commitment that we pretty much agree exists to provide the care to military retirees.
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Mr. BACKHUS. We will give that our best effort.
Mr. PICKETT. And the other matter that I would ask you about is that of Medicare subvention and whether or not you did any cost testing to satisfy yourself whether that program could be implemented by the military and administered in such a way that it would not result in any additional costs to the Medicare health care program.
Mr. BACKHUS. Well, that does hit on a concern we have, sir. I am not sure—in fact, I don't think that the DOD at this point is prepared to try to implement this demonstration program, or a permanent program. I think, you know, they had proposed sometime over this past year to do what they called a simulation, and the purpose of that simulation is to develop the data systems they need to enable them to evaluate and conclude whether it saves money. I don't think that they have the ability to determine that right now. So if we went ahead and did a demonstration, for example, immediately, we would potentially windup at the end of the demonstration not knowing whether this thing has been cost-effective or not.
We are talking about patient level accounting that doesn't exist now presently in the system.
Mr. PICKETT. In which system?
Mr. BACKHUS. The military system, the direct care, military hospitals. And they are just now introducing system-wide the kinds of cost accounting, patient level accounting, we will need in order to know what care is provided to the people and at what cost and how much—and to account for the Medicare reimbursements.
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So I think we do strongly support the notion of moving along with this subvention idea, but in a simulation as opposed to a demonstration, so that at the end we can know and we can conclude definitively whether this is, in fact——
Mr. PICKETT. The military system may not have the DRG classifications in the medical records, but I certainly thought that they had dollar valuations placed in those records, and if they don't—they don't have dollar valuations placed in military records?
Mr. BACKHUS. No, sir.
Mr. PICKETT. You are sure of that?
Mr. BACKHUS. Not to the care. Not attached to the patient care, no. They attempt to calculate, I know, for personnel records, the value of health care in the military. That comes along every year with the statement of earnings and things like that. But that is a simple figure of taking the budget and the number of people that are eligible and making a division, and that is the value of your health care benefit. That is not the cost of.
Mr. PICKETT. I was under the impression that that was—patient level record-keeping that had numbers attached to it were being maintained at the military hospitals.
Mr. BACKHUS. It is now being introduced.
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Mr. PICKETT. Thank you.
Thank you, Mr. Chairman.
Mr. BUYER. Thank you.
Mr. Lewis is recognized for 5 minutes.
Mr. LEWIS. Mr. Backhus, I have Fort Knox in my district, Ireland Hospital, and I was out there the other day, and they have down-sized quite a bit in their medical personnel. And of course they have a tremendous facility there. The hospital is a fairly new building, and I was told that the reason for the downsizing there was because the patient load just wasn't there.
But there is a catchment area there of 50,000 to 80,000 retired personnel and something like 6,000 or 7,000 active military personnel there.
They are doing away with the emergency room services there, which concerns me about, if there would be a catastrophe there at Fort Knox, where would the medical care be there on the Fort? But I think the reason that there isn't the patient load is because there isn't the facility and the personnel to handle the problems. So I think that is probably generally the case across the system.
But they are looking at, you know, Tricare is going to be coming in there. But will Tricare take care of their problem there? Will that still allow for space available in the future for the retirees? And again, I have a concern that if we continue to down-size our medical personnel, as the chairman mentioned, will we have the opportunity to respond to take care of our military in time of war?
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Mr. BACKHUS. Well, that is the crux of the issue. But the extent to which Tricare will provide additional access for retirees, it does vary from facility to facility, depending on lots of things like the size and the number of people staffed now.
I could, if you would like, look into the particular hospital in your district. I don't have the details on it now. I am unable to say for that particular location what——
Mr. LEWIS. The hospital is a tremendous hospital—size, space. You were talking about the facilities, and I think it isn't a lack for space and a very good hospital. But I would appreciate that.
Mr. BACKHUS. OK, I will.
[The information referred to can be found in the appendix beginning on page 141.]
Mr. BUYER. Thank you, Mr. Lewis.
You touched on Tricare. I am eager to jump on that issue, but I will hesitate.
Mr. Thornberry, you are recognized for 5 minutes.
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Mr. THORNBERRY. Thank you.
Based on your testimony, Mr. Backhus, I take it that your opinion is and your findings are that we have a problem now with getting retirees the access that we think they need to have. There is an access problem, and that is basically undisputed in most places.
Mr. BACKHUS. Yes, sir, that is what I believe.
Mr. THORNBERRY. OK. And second, that this is going to get worse because there is a good chance that our facilities and personnel may shrink a little bit, and certainly if you look at the numbers of retirees, as they get older, that will continue to increase for several years.
Mr. BACKHUS. Yes, sir.
Mr. THORNBERRY. Mr. Chairman, when we had a hearing on this subject back in September, I asked for specific numbers—and I would like that to be made a part of the record—to show year by year how things get worse. And one of the things I want to talk to Dr. Joseph about extends even beyond that, beyond the year that I have.
My impression is that the basic problem in access is not so much hospital beds or physical facilities as it is personnel. As health care has changed around the country, we have lots of hospital beds that are going unused everywhere. So, is my impression correct that the crux of the problem is really the people to treat the retirees rather than the hospital beds because fewer and fewer people are in the hospital these days?
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Mr. BACKHUS. But there are even limitations to capacities to providing outpatient care.
Mr. THORNBERRY. OK, outpatient, but as far as hospital beds, which is the most expensive form of care, physically, that is not the problem.
Mr. BACKHUS. I think that is the case.
Mr. THORNBERRY. OK. Let me ask you this then. After dealing with this problem for the past couple of years, I have come to believe that certainly a multilayered approach is going to be essential, and you talked about that some.
What would be—setting cost, which is a big deal, setting that aside for a second, and looking at whether this would be effective in meeting the goal of providing health care for military retirees over the age of 65, if we allowed them to sign up for Tricare, had Medicare subvention and also the Federal employee plan for those who don't live around a military installation, how effective would those three things be in meeting our goal?
Mr. BACKHUS. I think those folks would have all the care they would need. That would solve the access problem.
Mr. THORNBERRY. OK. Let me ask you one other thing. One thing you did not mention is whether or not there are facilities or assets of the VA that could be applied here. Have you looked at it, and have you looked at a possible subvention with them?
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Mr. BACKHUS. I have not looked at subvention yet with them.
Mr. THORNBERRY. And I am talking, of course, particularly about those folks that don't live around a military area where there may be a military hospital but not a veterans' hospital.
Mr. BACKHUS. I think the VA may be the answer here. Just last year they had eligibility reform legislation passed. The VA now has the authority to sell—well, let me start over.
First of all, all military retirees are eligible for care in VA hospitals at a very modest—to the extent that space is available. There is a considerable effort underway in VA to dramatically increase the outpatient care available and to convert inpatient facilities, to the extent they have space, into outpatient facilities.
There is a tremendous amount of inpatient capacity available in the VA hospitals. There is a pharmacy program there that is potentially also available for these retirees to access. There are lots of details that would have to be worked out. I don't want to give the impression that everybody can convert over to VA without any sort of difficulty; that is not the case. But I don't see any impediments either that cannot be overcome in terms of trying to fit them into this health care equation.
Mr. THORNBERRY. Well, is that an option you are going to look at before your final report comes out, and is that one of the things, as Mr. Pickett said, we can evaluate on a basis with costs and everything so we can have the fullest range of openings to try to solve this problem?
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Mr. BACKHUS. I will do that.
Mr. THORNBERRY. Thank you.
Mr. BUYER. Before I yield to Mr. Maloney, when you mention the VA, don't think that the bulk of this Congress is going to accept just lightly this recommendation that came to us on the financing minimums of 30, 20, 10. It scared me to death.
Mr. BACKHUS. I know.
Mr. BUYER. I don't know how you can cut—this is amazing on VA and what he refers to, let's know as we deal with this issue, say let's shift the population over to the VA. What they are proposing is to cut health care expenditures in the VA 30 percent over 5 years, increase the patient load with eligibility reform, increase the patient load by 20 percent, and I will pick up, I will add, 10 percent of new moneys into the system that be nonappropriated funds that come from Medicare reimbursements and from private insurance.
Mr. BACKHUS. Right.
Mr. BUYER. Anybody want to bet that will work? That is scary. That is a scary proposal. So I just want to throw that out there to you that, let's not bet on the gun, because I don't think the Veterans' Affairs Committee is going to accept that. It is very difficult.
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Mr. Maloney is recognized for 5 minutes.
Mr. MALONEY. I yield my time to Mr. Taylor.
Mr. BUYER. No objection.
Mr. TAYLOR. Mr. Backhus, Mr. Pickett, I thought, asked a very pointed question when he asked if you could list each of these programs by what they would cost the Nation.
I think in fairness to our retirees, whom we also include there, what would the cost for each of these programs be to the retirees, OK, as well as, if possible, if you could measure how that would affect availability to the retiree? How would it affect the quality of care to the retiree, and of course his out-of-pocket expenses? because the point that I am hearing is that when you go out on Medicare—and let's face it, people on Medicare, by and large, got it because they are age 65. They may not have served their country. Retirees, on the other hand, have served their country for at least 20 years. And I just find it shameful that people who did not serve our Nation for 1 day are getting the exact same benefits as people who gave 20 years of their life. It is not fair to the retirees; it is just wrong.
And going back to what our friend Roscoe says, we are all about keeping our word. The Nation can't keep its word, and even though it is just the recruiting agents and petty officers who made that promise, they were an agent of this Nation, and they made that promise, and we have to keep it.
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I would yield the remainder of my time to Mr. Pickett.
Mr. PICKETT. I would just go back to the issue of whether or not the medical care components were adequate to meet the requirement of the individual services. Have you examined the THCSRR model of making this determination that the Navy has come up with?
Mr. BACKHUS. We have that analysis underway, we do, and, although I will tell you, we got a little bit diverted from that because of some of the work we began doing related to the Persian Gulf, we are going to get back into this, as I recall, next month, in March, and complete that sometime in summer.
Mr. PICKETT. The other question is, is the report that you are going to prepare going to deal with retirees under age 65 or exclusively over 65?
Mr. BACKHUS. The focus is essentially those over 65. But it is impossible, really, to talk about this in depth without addressing all retirees. So I think I would like to be able to include them both.
Mr. PICKETT. I think that would be very helpful. Thank you.
Thank you, Mr. Chairman.
Mr. BUYER. Mr. Ryun is recognized for 5 minutes.
Mr. RYUN. Mr. Chairman, I have no questions at this time.
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Mr. BUYER. I have some questions, and I want to pick up on Tricare. My colleagues are going to prepare their final report, and if any of you have any questions or directions or guidance to them, please send it. I am sure they would welcome it.
Mr. BACKHUS. Absolutely.
Mr. BUYER. This one gets confusing for me, trying to figure out the patchwork that is out there with regard to health care, and who is eligible for what and when, it is difficult for me to come to grips with. The key for us is, as we analyze this, to make sure there isn't any disenfranchisement that occurs in the system.
When you looked at your five options, I guess under the Medicare subvention, I also think of the issues that deal with Tricare civilian networks. If we have someone who is retired, is 55 years of age, and they are not close in proximity to a health delivery system, military health delivery system, then they are eligible for Tricare or PPO.
Mr. BACKHUS. Yes, sir.
Mr. BUYER. Am I correct so far?
Mr. BACKHUS. Yes, sir.
Mr. BUYER. Now, why wouldn't we consider making 65 years and older eligible just like we do for the 55 years, and, when we do that, we increase the capacities and give sufficient work to the military health delivery systems?
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Mr. BACKHUS. And defining the military health system to include civilian contractors, you could do that, yes, but——
Mr. BUYER [continuing]. Now, at what cost?
Mr. BACKHUS. Correct.
Mr. BUYER. Can you look at that? Are you looking at it?
Mr. BACKHUS. We were kind of——
Mr. BUYER [continuing]. I mean, if we are talking about alternatives and options and trying to figure out where to go, would you please? I am going to ask for you to do that.
Mr. BACKHUS. OK. You may have to wait until longer than the end of May now.
Mr. BUYER. All right. As an addendum, follow-up report—no; would you?
Mr. BACKHUS. Yes, sir.
Mr. BUYER. It would be helpful, because we are trying to struggle with this.
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Mr. BACKHUS. It is a good question.
Mr. BUYER. I saw Dr. Joseph start nodding his head, so I would be anxious to hear what he has to say. So if it takes a required addendum, don't hold up your report, but if you have got some more, we will be more than happy to have that conversation with you.
Mr. BACKHUS. Will do.
Mr. BUYER. I also have a series of questions. If any other members do that they want to send to Mr. Backhus, we will do that.
Does anyone have any follow-up questions? Mr. Kennedy?
Mr. KENNEDY. No, thank you, Mr. Chairman.
Mr. BUYER. All right. Thank you, Mr. Backhus.
I do have follow-up questions that will get into FEHBP. When you look at what I have just suggested, would you do that cost analysis against FEHBP and other cost analyses for us, and the methodology? And we will have some further questions on the mail order pharmacy and Medicare part B. I appreciate your time, and thanks for being here to testify.
Mr. BACKHUS. You are welcome.
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[The information referred to can be found in the appendix beginning on page 141.]
Mr. BUYER. I would like to introduce our second witness, Dr. Stephen Joseph, the Assistant Secretary of Defense for Health Affairs. Dr. Joseph will provide an overview of the Tricare Program and its impact on providing care to military retirees and will discuss specific alternatives for ensuring continued medical coverage for Medicare-eligible retirees.
Also, Dr. Joseph, we note this is perhaps your last hearing and testimony before the National Security Committee, and we wish you well, we appreciate your service to country, and you may proceed.
STATEMENT OF HON. STEPHEN JOSEPH, M.D., M.P.H., ASSISTANT SECRETARY OF DEFENSE FOR HEALTH AFFAIRS, ACCOMPANIED BY GARY CHRISTOPHER, SENIOR ADVISOR, HEALTH AFFAIRS
Dr. JOSEPH. Thank you, Mr. Chairman, distinguished Members. I appreciate your holding this special hearing on health care for duly eligible beneficiaries and the Medicare subvention issue, and I would be happy to answer, of course, any other related questions that you have.
Let me start by trying to lay out for you something that I think is often overlooked in this equation, and it has to do with our efforts over recent years to be a fiscally sound health care delivery system. I am going to come back to the promise and the obligations, but I want to start by laying that out.
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Reflecting back a few years, you will all recall the tremendous explosion of health care costs across the Nation, 15 percent per year increase. That is what brought health care to the forefront of everyone's concern, and military health care bore a similar cost increase, but in the past years what we have done is put in place initiatives that have stemmed that cost spiral without degrading either access or quality.
Now, the over-65 beneficiaries are a special and different case that have stability. I am going to come back to that. But I would ask you to look—I am not sure you can see it, especially Mr. Kennedy. But if you look at that curve, that is a chart of the percentage of the DOD budget that the health program represents. I don't think there is another health care system in the country that can show you what you have shown there in this time of continued, although temporarily slowed, rising inflation. We have flattened that curve.
And if you will put up the second curve, so this is my businessman's bottom line, I am going to give you the other side of it in a minute. This is looking at the Defense Health Program on a per capita cost rate, because we now budget on a per capita basis, looking at what it was in the original problem and what the requirement is now, and the difference in those lines represents a cost avoidance in the POM years of $20 billion.
Now, think about where the rest of the country and any other system you know is in the health care field, and just keep that in mind. How do we do that without degrading quality and access? And the answer is—excepting the over-65 beneficiaries for the moment, the answer is the implementation of managed care. This is not magic. You do this by making your business run more efficiently without reducing the effectiveness of the product.
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The Congress in 1992 created the Defense Health Program, giving the mandate that the Assistant Secretary of Defense of Health Affairs be the responsible authority within the Department for military medicine.
Centralizing the health care budget afforded us the ability to ensure more uniform policies and practices and allowed, really, for the first time, coordinated and collaborative decision-making among the medical leadership within the Department. The joint sharing as well as the synergy of ideas for improving military medicine has assisted us, has really made us able to become a financially healthy system and to move a Tricare managed care system.
My colleagues, the surgeons general and I, not in a joking way, refer to ourselves as DHP, Inc. That centralized Defense Health Program budget has enabled us to take a corporate cultural view of the MHSS. The direction to centralize the health care budget for the MHSS and other performance improvement efforts within the Department led to a total transformation of the MHSS that brought together the operations of the previously uncoordinated Army, Navy, Air Force, and the CHAMPUS Program. And Tricare is really the result of that program, offering CHAMPUS-eligible beneficiaries three choices: Tricare Prime, which is the HMO organization where most of that gap is accounted for; Tricare Extra, which is a preferred provider, PPO; and Tricare Standard, which is the same as the existing CHAMPUS.
So that is the good news. The other side of the story and the one significant obstacle in the program which we must overcome in order to meet our obligation to provide care for all of our beneficiaries in a fiscally responsible manner is to find the means to care for our dual-eligible Medicare beneficiaries.
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As you have heard and as all of you know, the military health care benefit has been based on availability of services, space-available care for all except active-duty personnel.
Now, until the downsizing efforts began several years ago, services generally were available for those who wanted to receive care in the military medical facilities, sort of the situation that Mr. Lewis was referring to. But as the Armed Forces right-sized with the new national security objectives, many of those support services, including medicine, were also right-sized.
The process of sizing the force continues as technological enhancements offer better performance capability and as the Department considers the prospect of outsourcing—which we have probably done more of in the health program than any other place in the Department—privatization, and military/civilian partnerships.
So under Tricare, space-available care remains an option for all those who are eligible to use military health care, but the reality is that as Tricare matures and as we better manage—as the businessman's side of my job better manages health care services to ensure that all of those enrolled in the option are getting the access they require, there is and will continue to be less space-available care for those who are not or who cannot enroll in that managed care option.
And the beneficiaries and the beneficiary associations understand and have long been concerned about relying on care that is decreasingly available. Under the age of 65 and other than active-duty members, they rely on the CHAMPUS program to assist in the reimbursement of care received in the civilian sector.
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Again, as you know, beneficiaries who reach the age of 65 are, by law, ineligible for CHAMPUS and instead become eligible for Medicare. This breaks the link with the military medical system that those beneficiaries have come to understand and count on after many years of use.
I believe the reality is that most of our dual-eligible beneficiaries strongly prefer to get their care from the military health care services system. One mechanism that we think, the preferred mechanism to achieve that continued relationship, is to reach an agreement currently not permitted under law with the Health Care Financing Administration whereby dual-eligible beneficiaries could have their Medicare entitlement apply to care they received in the military system, just as it might be applied to care they received from Dr. Brown downtown. That is what is known as Medicare subvention.
Our dual-eligible beneficiaries firmly believe that access to health care is a benefit they have earned based on years of service and sacrifice to their country. Many of our dual-eligible beneficiaries were promised free care for life if they spent a career in the military. Let me repeat that. Many of our dual-eligible beneficiaries were promised free care for life if they spent a career in the military.
I believe that they also understand today the reality of fewer hospitals, fewer physicians, and less money. To many of our dual-eligible beneficiaries, Medicare may be a reimbursement program, but it is not military health care, it is not what they are used to, and it is not what they prefer, and, what is more, it does mean more money out of their own pockets.
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During previous hearings before this committee, I have testified that the major problem of Tricare is our inability to take care of those senior beneficiaries who become eligible for Medicare. It has been my goal to solve that, find a way to overcome that problem, and it has been my goal to find the means to provide quality, accessible, cost-effective quality, to care for our senior beneficiaries.
A number of possible alternatives have been studied. You heard about a number of those from Mr. Backhus, including access to FEHBP and Medicare subvention. The FEHBP option would introduce a new health care system to our beneficiaries. It would not include military health care, and initially much higher Federal costs, an essential consideration, make the FEHBP alternative nonviable as a system alternative.
The CBO estimated that an additional cost to the Government of offering FEHBP to our dual-eligible beneficiaries would range from $3.7 to $4.2 billion annually. Those are funds we do not have and which I think it is unlikely the Congress will give us.
Additionally, beneficiaries who elected to enroll in one of the FEHBP plans would incur increased out-of-pocket costs—premiums, deductibles and copays. And I am told, although I don't have this officially, that we are likely to receive significant increases in the costs of the FEHBP program in 1998 and beyond because that program has been running to some significant extent on reserves for a number of years. So there is a bump coming.
Medicare reimbursement, on the other hand, could allow our beneficiaries to remain within the military health care system. Moreover, such an arrangement, Mr. Taylor, would be designed to ensure that total Federal costs are not increased for either DOD or HCFA, and that is the alternative we have been pursuing.
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We began negotiations with HCFA during the summer of 1995 and arrived at an agreement in the fall of 1996 for a 3-year demonstration of this concept. The key to reaching that agreement was our willingness for DOD to maintain its current level of effort and to protect the Medicare trust fund. We can go into the details of the agreement that make that possible if you want, but it holds level of effort, it caps the exposure of Medicare beyond that in the demonstration, and it provides for a reconciliation process at the end of each demonstration year to make sure that those safeguards have been kept.
We require legislation for the implementation of that demonstration, and on February 7 that legislation was resubmitted by the Departments of Health and Human Services and DOD. It is the same legislation that was up here last year.
Enrollment in the Medicare demonstration for our dual-eligible beneficiaries will require that beneficiaries meet such requirements as being covered by Medicare part B, agreeing to receive coverage services only through Tricare, and not being enrolled in another Medicare HMO. There would be no enrollment fee as we are requiring that these beneficiaries be covered by the part B of Medicare.
As we develop the Tricare program, we are exploring a number of potential improvements that will offer our dual-eligible beneficiaries better choices than they have today. As laid out in our Medicare proposal, we want to offer them enrollment in Tricare Prime, which will afford them the opportunity to use the MHSS on the same basis as all retirees. And in the question I want to get into, the issues, I have a different understanding of what we are proposing, both in the demonstration—or at least in full Medicare subvention, from Mr. Backhus' understanding.
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But in addition, we are looking at other possible alternatives. We would like to develop a more comprehensive mail order pharmacy benefit for our dual-eligibles; we would like to improve partnering arrangements with our network providers and other possible interventions.
But let me be clear, as I have said up here every year, that reimbursement from Medicare is critical to our efforts to provide a robust program of care for our dual-eligible beneficiaries. And you have heard me say that I think there may be some merit in a limited FEHBP alternative for a geographically isolated area or those beneficiaries who wish to carry the extra cost. But I don't think that can be done in a fiscally responsible manner unless we get the sound floor of Medicare subvention underneath us.
Those are the goals for being able to provide health care; we believe that Medicare reimbursement makes our goals a workable solution. But prior to an across-the-board authorization for such reimbursement, we have agreed the demonstrations specific location for a 3-year period of time would be the prudent course of action. Both HCFA and us and the country at large could be assured that this is a no-added-cost option. That is what we sought last year, and we are seeking it again.
Our beneficiaries have been very patient with us. I know and you know that they believed there would be a demonstration begun last year or, at most, by January of this year, and we have not met their expectations. But I hope they all know we are working to support passage of that legislation. We are serious about implementing a program that is accessible, high quality, and is cost-effective, and with your help, we will achieve that this year.
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Thank you.
[The prepared statement of Dr. Joseph can be found in the appendix on page 54.]
Mr. BUYER. I want to ask you, Dr. Joseph, and pick up where I left off with Mr. Backhus, about whether or not we could take—often we judge things through our own dimension. I have got Indiana. We had Grissom Air Force Base and Fort Benjamin Harrison. Both were active facilities. Grissom went to reserve facility; no longer has a hospital. There are a lot of retirees in the population. They have to drive all the way to Ohio to get their health care if they want to do it that way. You have got the over-65 that end up in Medicare, and under-65 have the opportunities under the Civilian At Work.
Tell me what your sense is, your feelings are, if we go ahead and, an alternative, permit those who are 65 and older the same access to the Tricare civilian network.
Dr. JOSEPH. Well, what I was jumping up and down about, Mr. Chairman, is, that was my understanding of what we would do. What I understood we would do in a Medicare subvention world, not the demonstration now, is that we would open enrollment in the Tricare process to our Medicare-eligible beneficiaries. We would keep our level of effort, and we would get a capitated—hopefully capitated—reimbursement negotiated from HCFA for those Medicare eligibles who chose to join. Some of them would have their primary providers in the military hospital, and some of them would have their primary providers in the preferred provider network outside the military hospital.
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So I thought you described what I think our subvention proposal is.
Mr. BUYER. Well, then, why would the GAO comment in their testimony—I am just trying to—help me out here. In their testimony, they said Medicare subvention is only going to deal with a very small population. Do they realize that that is what you are also thinking?
Dr. JOSEPH. We have had a very good experience the last few years working with the GAO health people, and I don't want to get us crossways in this. But I think we have a different understanding of what we are talking about with this.
They also said in Mr. Backhus' testimony—and this is worth debating—that they would not see a cost advantage to the government in DOD having a subvention program that was out of MTF as well as in MTF. I think Mr. Backhus' phrase was, it would be just as efficient for HCFA to pay for that directly.
Well, that is not—the whole basis of what Medicare subvention is—and I will be glad to debate this and to grind out the numbers—is that we can do it more efficiently than HCFA. That is why we are offering a negotiated rate for the demonstration that is a good number of percentage points below what Medicare pays their HMO's.
And my assumption is—and I think we can substantiate this, the first substantiations—that we make it work on a demonstration basis, and the second is that we can hold that fiscal advantage through our managed care cost avoidance across the board, not just in the MTF's.
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So I would suggest, if you would bear with me, let us get with our GAO colleagues and come back to you. If we have a real difference of opinion, we will lay that out. If we are looking at apples and oranges, we will try to bring that into focus.
Mr. BUYER. I do feel better with this issue than when I am sitting with the VA and about being cost-effective when you talk about that. So I concur with that comment.
Let me yield to Mr. Taylor now for 5 minutes.
Mr. TAYLOR. Thank you, Mr. Buyer.
Dr. Joseph, I appreciate everything that you said. I particularly appreciate how you point out that Medicare means money out of retirees' pockets. In particular, let's face it, most of these people are at the point of their lives where they are going to face the majority of the medical bills they will have in their lifetime. I have been told that something like 90 percent of the medical costs any of us will incur happen in the last year of our life. So under the present situation, a retiree goes to Oschner Hospital in New Orleans, has over a $100,000 bill for work on his heart; what is his out-of-pocket expense?
Dr. JOSEPH. As a CHAMPUS-eligible retiree?
Mr. TAYLOR. Yes, or Medicare eligible. Someone over 65.
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Dr. JOSEPH. Over 65, so he is not CHAMPUS eligible, purely Medicare eligible. He would have a 20 percent—and that currently does not have a catastrophic cap on that, so that would go all the way up.
Mr. TAYLOR. Twenty percent. So if this guy is a retired E–6, that is all of his money. I am curious why, in your demonstration, you would require these people who were promised free health care to pay for Medicare part B. That is not free.
Dr. JOSEPH. No, it is not free, and what I implied in my testimony—and I will be interested to hear what our friends in the beneficiary community say in the third panel—I do think that we have moved past that. I think that all of us understand that things that were free years ago are no longer free, and if that is an abrogation of a commitment, going back to an earlier comment, we recognize that and move on.
I don't think—and this is what I will be interested to hear when they testify—I don't think that the main issues with the retirees is the fee; I think the main issue with the retirees is the keeping of the commitment of access to care at a reasonable cost.
I am not putting words in their mouth, you should ask them, but that is certainly my sense in working with them and talking with them, that we have put the free behind. And you can tell me that we are wrong for doing that, or I can basically tell you you are wrong for doing that, but that is not the way, not this system—but that is not the way a lot of things work anymore.
So I have chosen to focus not on ways we can access free care; I think that is a nonstarter, Mr. Taylor; what we are aiming at here is what ways can we increase access and meet the obligation for care at a reasonable cost.
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Mr. TAYLOR. You mentioned that it would take about 3 years for this study to take place. Going back to that E–5—retired E–5, E–6—and there are a bunch of them out there, what happens in the 3 years between now and then for those who have heart surgery, for those who have catastrophic illnesses?
Dr. JOSEPH. Well, let's look at the past 3 years. I mean, we wanted the whole apple 3 years ago. We wanted Medicare subvention 3 years ago. We were not able to achieve it, and I think there were some reasonable arguments: It was untested, et cetera, et cetera. So our second fallback position was, let's do a demonstration, and our challenge to HCFA was, let's work out a program together that you can live with, we can live with, that has these safeguards built in, and let us prove we can do it for x cents on the dollar below what you are paying Dr. Brown downtown.
Quite frankly, the subvention demonstration is a fallback position from one which we would prefer. I would much prefer to have full subvention, but, on the other hand, I can recognize the arguments of those who say, prove you can do it, then we can go on. If you offer me the two, there is no question which of the two I would take.
Mr. TAYLOR. If I may, would you state for the record, if you were offered the two, which you would take.
Dr. JOSEPH. Absolutely. Look, this is what we have done. I believe we should run a——
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Mr. TAYLOR. Say it. I need a quote. I am not arguing with you. I need a quote. Which one do you want?
Dr. JOSEPH. I believe that the military health services system could operate a full subvention program for its beneficiaries in a cost-effective way for the Federal Government. I can't prove that because we haven't done it.
Mr. TAYLOR. Is that starting immediately?
Dr. JOSEPH. No. It would take us some time to start up and phase into it.
Mr. TAYLOR. OK. Let me ask you this. If it was the will of Congress this year to pass M edicare subvention, not as a demonstration project but as reality, in your opinion, how long would it take for the DOD and HCFA to implement it?
Dr. JOSEPH. One to 2 years.
Mr. TAYLOR. Before it would kick in.
Dr. JOSEPH. [Nods.]
Mr. TAYLOR. OK. So even if you did a 3-year demonstration program, is that 2 years on top of the demonstration program? Does that put us 5 years away from it?
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Dr. JOSEPH. No, because during the demonstration, one, we will iron out the creases and we will understand a lot better how we are doing this and what the costs and the benefits are.
Also during that period, I think—and Mr. Backhus knows that I am not saying this in a kind of critical way—I think we are further ahead on our data support systems and our ability to track our costs than would appear from his testimony. But we are not all the way there yet.
I mean, one of the reasons argued for the subvention demonstration is that we will start that demonstration in the places where our data systems are most sophisticated. So during the demonstration, we will be moving those systems up so that it wouldn't take the same time to get them available everywhere as it would if we were starting from ground zero now.
Mr. TAYLOR. OK. So for the record, you would prefer to go ahead and ask for Medicare subvention now if we could.
Dr. JOSEPH. If we could, sure.
Mr. TAYLOR. And for the record, of the four or five options Mr. Backhus presented to the committee, you would think that Medicare subvention would do the most good with the funds we have available?
Dr. JOSEPH. Not only that, but I think it is the best deal for the retirees. I know you will hear a difference of opinion about that, and I also believe, as I have always said up here, that there is some value in an FEHBP type of arrangement for some individuals, but not as a replacement for subvention.
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Mr. TAYLOR. Thank you, Mr. Chairman. You have been very generous with the time.
Mr. BUYER. Mr. Thornberry.
Mr. THORNBERRY. Dr. Joseph, if we got full Medicare subvention, is it your opinion that that solves the problem basically, for what percentage of over-65 retirees?
Dr. JOSEPH. I think the percentage is significantly larger than you heard in the previous panel. I hesitate because the real question is, of course, what percentage of all over-65-years retirees would want to come into the subvention, Tricare Prime type of system. But I would assume that if you said that 50 to 60 percent of all would wish to enroll, I would say we would handle that.
Mr. THORNBERRY. Well, do you have the exact numbers? I thought Mr. Backhus said something like 56 percent of retirees live around a military facility. Is that——
Dr. JOSEPH. I can't argue or confirm that. We can get those numbers for you. But I think it obscures a point that goes back to the chairman's comment. My sense of what a subvention program is is not restricted to the MTF's, and increasingly what we are doing in the Tricare program, as it exists, excluding the over-65's, is to move toward providing networks of the contract further and further out into areas away from the MTF's.
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Mr. THORNBERRY. And so——
Dr. JOSEPH. And that trend will continue.
Mr. THORNBERRY. And so your thought would be—for example, Texas is a big State. For someone that, for example, lives in an area where a military base is closing, several hours away from any military facility, they would have to be sure that Tricare Prime has some sort of arrangement with a local hospital, local physicians, and so forth for them to get their health care; if not, it is coming some day. Is that where I understand you are going?
Dr. JOSEPH. Right, and we have our first demonstration of this in Washington and Oregon, where we are offering the equivalent of, or actually, Tricare Prime enrollment in areas remote from military bases. And that has got to be the trend. I mean, the only way we can continue to do this is if we can move managed care further and further out in areas where there are no MTF's.
Mr. THORNBERRY. Is it your goal and intention—by ''your,'' I mean the Department—to have Tricare Prime available everywhere in the country?
Dr. JOSEPH. That would be our ultimate goal.
Mr. THORNBERRY. Do you think you are going to get there?
Dr. JOSEPH. ''Everywhere'' is a big word. I think there will be some places—you know, is there someplace in Goose Egg, WY? Will there be a person who really wants to drive all the way to Casper or Langley? I don't know. But we would expect to have coverage in the vast majority of areas where our beneficiaries live, and they would have an option, living in those areas, to use the enrollment in the HMO program.
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Mr. THORNBERRY. OK, and I guess the other assumption that one would have to make if one believes subvention would solve the problem for everything, is, you get Tricare Prime network available everywhere and that subvention would sufficiently expand the Tricare Prime network where you have enough doctors and nurses to take care of all the retirees. Otherwise, you are back to the space-available problem we have got now, and that is another big assumption that we don't know. Agreed?
Dr. JOSEPH. Well, you know, barring a very significant change in downsizing and change in the national security analysis, et cetera, I believe that if we—I think I said this at the last hearing a couple of weeks ago. I believe that if we maintain parity with the rest of the force in terms of our active-duty care obligations and can get the funds to take care of the additional population that we are talking about, that our access problem, while not solved—I mean, it will also vary place to place—and it came up a bit—the real running sore of that access problem will be taken care of.
Mr. THORNBERRY. One of the things about subvention that I have always been unclear about is where the reimbursement goes. As I understand the idea of—Medicare would pay money basically to your office, to the Department of Defense, and it would be your responsibility then to allocate that money throughout the system so that you are not reimbursed on a—as a Medicare beneficiary, you get so much money for every person you treat in your hospital, but basically the money goes through you and throughout the system. Is that the case, and what effect—you know, how can we then make sure it gets where it needs to go?
Dr. JOSEPH. Well, the way we would see the system working is that Medicare would reimburse DOD, once you iron out all the level of effort and other things, but Medicare would reimburse DOD on a per-capita basis for all those beneficiaries who were enrolled in the Tricare Prime system.
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Now, whether my successor takes that amount of money and spends it all on the under-65's, then he or she is going to be in big trouble. But it would not be a service-by-service, a medical-encounter-by-medical-encounter payment, episodic payment, and it wouldn't be targeted to the care of that individual, it would be an aggregate for those individuals enrolled. And that is the incentive for managed care, because the more we can make our care more efficient without sacrificing quality and access, the more money we have to do better things with it.
Mr. THORNBERRY. Would it at least be on a region-by-region basis? If so many folks sign up in region V, then region V gets an amount of money, so there is a formula it can be distributed by?
Dr. JOSEPH. I don't know the answer to that question. That would be the case under the proposed demonstration, but I don't know; I haven't thought that through. I will get you an answer back on that.
Mr. THORNBERRY. Thank you, Mr. Chairman.
[The information referred to can be found in the appendix beginning on page 141.]
Mr. BUYER. I have a whole bunch of questions. Is that all right? Are you ready? The demonstration project: In your statement, you said that the proposal had been sent on February 7. To whom? I don't have it.
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Dr. JOSEPH. The Speaker, I presume.
Mr. BUYER. OK. I don't have it.
Dr. JOSEPH. I presume from the Speaker it would go to the committee of jurisdiction, and of course one of the issues here has always been, this has essentially rested with——
Mr. BUYER. Ways and Means?
Dr. JOSEPH. Ways and Means and Senate Finance, and that has always been an issue, because those focused on the health care needs are not the ones that have the jurisdiction on this issue, because it is essentially a Medicare issue. I have a copy someone has just handed me. I will be happy to hand it to you. I am sorry that you get it this way.
Mr. BUYER. That is all right. Help me here. What is the rationale or strategy for limiting the demonstration to only a few sites?
Dr. JOSEPH. Well, we chose sites——
Mr. BUYER. It is coming from a little bit of concern, if you have got two sites which already have large—where retirees already have better than average access to the available care, who will the test actually help, and what is it going to demonstrate?
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Dr. JOSEPH. We chose the sites not primarily on that criterion, but we chose sites where we felt our managed care operation was most mature and running well, where our data systems gave us the best chance to capture the kind of information, going back to Mr. Backhus' comments, and then we would also propose a few places that gave us a sense of areas where there was not so much maturity or it wasn't such a sophisticated system in place.
Mr. BUYER. In this legislative proposal, since it was your intention to grow it to include the 65-and-over in the Tricare civilian network, is that in this package?
Dr. JOSEPH. Not in the demonstration proposal.
Mr. BUYER. OK.
Dr. JOSEPH. Remember that——
Mr. BUYER. Should it be?
Dr. JOSEPH. Well, it depends on how you answer Mr. Taylor's question. If you take the conservative approach, which is what we took—and this is a consensus of the administration between HCFA, DOD, and OMB—took the conservative approach of keeping the demonstration to give us the best opportunity to track the costs and the rest, then, you know, you have a different approach than if you were to do it in a less conservative way. And this is a very conservative proposal. We had to build a very conservative proposal to get agreement among the various agencies, and there is nothing wrong with that.
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Mr. BUYER. The Congressional Budget Office, when they scored the concept as proposed by you last year, they stated this: ''DOD and HCFA face different incentives and access to information that will allow DOD to tilt the negotiations in its favor and against budget neutrality.'' What does CBO mean by that comment?
Dr. JOSEPH. Well, I sometimes have difficulty understanding what CBO means by a lot of things, but CBO took the position, if we weren't guilty, they ought to hang us anyway, because we would cheat on the agreement if we could, even though we didn't. And I think some of the scoring last year, what they came up with was based on each worst case assumption.
The last time I am aware that they looked at it, they have now come down to a $25 million costing on it. I guess it is hard for them to come to zero. But I think—at least, I hope—they no longer believe that automatically we are going to do everything we can to cheat on the agreement.
HCFA is not going to let us cheat on the agreement. They have a very strong stake in this, as does the OMB. It is a very tight agreement with those concerns built in, and it now is cost neutral within the Federal Government.
Mr. BUYER. And your decision not to permit a disabled military Medicare-eligible beneficiary from participating in the demonstration is why? Because that person is also eligible because of the disabling condition.
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Dr. JOSEPH. Is still CHAMPUS eligible. If you are a disabled veteran, you don't lose your CHAMPUS; disabled retiree, you don't lose your CHAMPUS eligibility at age 65. So they are—it is the under-65's. It is the under-65 disabled. All right. Let me get my head straight on that and get back to you.
Mr. BUYER. At what percentage did you do your break-off? What percentage of disability?
Dr. JOSEPH. I don't know.
Let me ask Mr. Christopher to answer that.
Mr. BUYER. Sure. Just state your name.
Mr. CHRISTOPHER. Gary Christopher, senior advisor, health affairs.
The way it works out, because the beneficiary under 65 was already covered by Tricare Prime, therefore there wasn't a need to put them in the demo. Anybody over age 65, regardless of status, would be covered by the demo.
Mr. BUYER. So they will be in.
Mr. CHRISTOPHER. Right. It is only under 65 on Medicare because of disability are already covered, so it wasn't necessary to do the demo for them.
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Mr. BUYER. All right. I thought perhaps they were going to be excluded.
Mr. CHRISTOPHER. No.
Mr. BUYER. Thank you.
I understand that the Department spends roughly $1.2 billion on providing care to the 230,000 Medicare-eligible retirees. Some proponents of offering Medicare eligible—some, and we are going to hear this—they proposed the FEHBP argument that money could go a lot farther under that option. In fact, over 70,000 Medicare-eligible retirees could be provided for under the FEHBP. Do you agree with such an assessment?
Dr. JOSEPH. I believe I do not, but I need to see their figures, and perhaps the thing to do is, whatever they present today or other material they have, we would be happy to see it and respond to you on it.
Mr. BUYER. All right.
Dr. JOSEPH. Or work with them on it if we want to work out a single set of numbers.
Mr. BUYER. All right. And based on today's testimony, we will have some follow-up questions for you.
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Thank you.
I also understand that the Department is preparing to begin a Medicare subvention simulation program separate from the subvention demonstration being proposed in your agreement between DOD and HCFA jointly that would test the concept without Medicare actually reimbursing the Department. Can you tell me what you hope to achieve by doing a simulation as opposed to the demonstration? I am confused.
Dr. JOSEPH. Do you want the answer if we get the demonstration, or do you want the answer if we don't get the demonstration?
Mr. BUYER. I don't know.
Dr. JOSEPH. I don't mean to be facetious, but clearly our tack on this is to get every bit of ground we can and move on from there. We tried for full subvention 3 years ago. You know that full subvention was in the President's health care reform plan, and we didn't get that.
So we went to the demonstration concept, back to my interchange with Mr. Taylor, and when we failed to get the demonstration at the end of the last session, we said OK, what do we do now? We don't give up; we will do the demonstration without actual financing change, and that will prove our case, so we will get the demonstration, so we will get the full subvention.
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Mr. BUYER. When are you starting this?
Dr. JOSEPH. Now, it looks that we have a good hope and belief of getting the demonstration. What we have realized is that what we were working on would still be useful as a way to prepare the ground, to plow the ground—again, this goes back to my interchange with you, Mr. Taylor—to plow the ground as the demonstration expands in later years, because we believe it will be successful.
So I think ''simulation'' is probably not the word that we would use to describe it anymore. It is preparation through understanding what the financing is and how you would actually run the system and what it would look like by tracking a real no cash flow situation, so you can move out, as the actual demonstration where cash is exchanged succeeds.
Is that too obscure?
Mr. BUYER. I am just a country boy.
Dr. JOSEPH. All right.
Mr. BUYER. I mean, are you doing spade work in preparation?
Dr. JOSEPH. It is doing spade work in preparation——
Mr. BUYER. Not doing work on the side——
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Dr. JOSEPH. It is spade work in preparation for what we expect will be a successful demonstration. If we don't get the demonstration, doing that spade work will still give us the ability to do some calculations about what would have happened if we had gotten the demonstration. We don't think it is a necessary prerequisite. That is the point to make, it is not a necessary prerequisite, but it is useful preparation for moving on, and should the demonstration thing fail again this year, it will give us a way to go do something other than just mark time.
Mr. BUYER. All right. While I have got you, you know, last year we added the $475 million to the budget on the shortfall, and this year we are getting the hints that there may be a $600 million shortfall, and, you know, I brought that up with Secretary Cohen not only in his testimony but yesterday also in conversation and trying to knock this out with the comptroller, Dr. Hamre.
Do we know what the exact amount of the shortfall is and why this ever came to us again with a shortfall? Could you help us out?
Dr. JOSEPH. Let me begin by reading to you the statement that John Hamre made at the SAC this morning, and I would be happy to answer your follow-up questions. There is an agreed upon shortfall of $275 million in the DHP; this is for 1993. That is constituted by $163 million in what we call a pipeline buy-out from the shift from CHAMPUS to the support contracts. We still have some CHAMPUS obligations. This will be the last year that exists. Seventy-eight million in an adjustment for the grade structure in military medical personnel. That is also a one-time change. And $33 million in the way the existing OMB medical inflation factor was applied to the Defense Health Program. That totaled $275 million.
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And Dr. Hamre finished by saying the Department will submit a budget amendment to fully fund this shortfall.
Mr. BUYER. And then we can debate whether it is in excess of 274 or not.
Thank you for being responsive, and pass that on to Dr. Hamre. I don't know; we would get in and look at that.
Dr. JOSEPH. Let me say just something about that. When this surfaced—and it did surface because of the GAO report, is what kicked it off, and that is where the 609 figure came from—we did what you do in your home budget or what JAM does. We sat down together with the comptroller's office and said, what really is short here? and how can we stretch what we have got to make that short as small as possible, and what is left is what is really short? And we had those discussions with the comptroller and OMB, and this position that the comptroller articulated this morning is our number.
Mr. BUYER. All right. Thank you.
Does anyone else have any other questions of Dr. Joseph?
Mr. Taylor?
Mr. TAYLOR. Dr. Joseph, let me thank you for your years of service to the country. I should have done that sooner. And I regret you are retiring and particularly regret that you are retiring just as this is about to kick in and we are going to have someone new on the watch.
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I do have one question. At the Keesler Medical Center, that is the site of one of the demonstration projects, and off the top of my head I want to say that only one in four of the eligible retirees are in the area, which leads the skeptics to come up with two scenarios. No. 1 is that someone is going to go out and find those retirees who have the fewest medical problems so as to low-ball the actual cost of the program. But the real—I guess the ultimate skeptics are saying no, they are out there getting the least healthy retirees so as to run the perceived costs of the total program up so as to sabotage the whole effort.
What do we say to those people? Because I do get calls along those lines.
Dr. JOSEPH. Let me give you a two-part answer. The first part, directly to your question: It is important because of the different financial interests that—not different financial interests but different interests to protect what HCFA and DOD have, that there be neither low-balling nor high-balling. And that is why built into the agreement for the demonstration is a reconciliation process that ensures that, A, DOD keeps its current level of effort; that, B, HCFA's exposure is capped; that, C, there is an analysis at the end of each demonstration year that shows that there is no adverse risk selection in the specific link to your question. It is important that we do it right, and each side will be watching the other to make sure it is not pushed in the opposite direction.
Mr. TAYLOR. Just for my information, how were the quarter that were allowed to participate—the quarter of the retirees, how were they chosen? At random——
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Dr. JOSEPH. They haven't been chosen yet.
Mr. TAYLOR. OK. How will they?
Dr. JOSEPH. We will do an open enrollment process, and people will come forward and—it sounds pretty crude, but basically get in line. And I want to say something about that. That was the second part of my answer, because I don't want us to be under any misillusions here. In the demonstration process, we will quite likely have more people unhappy with us than happy with us.
Mr. TAYLOR. Why?
Dr. JOSEPH. We are only going to be able to enroll, given the conditions of the demonstration, as you point out, a limited number. Now, maybe people won't want to sign up at any greater rate than that, but I think they will. And not only will people not get to enroll in the demonstration, but the very nature of bringing people in Tricare Prime will make space-available care less available than it is now.
So during the demonstration process, I mean, we have asked the retirees so many times to bear with us and kind of help us out. I think during a demonstration we will be asking them once again to realize that many of the eligibles who wish to enroll during the demonstration process won't be able to enroll during the demonstration and may find it even harder to get space-available care during the demonstration process. They need to understand that straight up.
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Mr. TAYLOR. Thank you, sir.
Mr. BUYER. I have got one more. Looking at what is in front of us, between now and April, as we move into the authorization phase and into the 1998 budget cycle, a lot of alternatives, things we are discussing today, won't be in that pipeline until 1999 or 2000.
You talked about, and GAO also mentioned, the importance of the benefit back on the pharmacy. I am thinking, what are some things we can do at the moment, what are some benefits we can do. Under the Department's proposed mail order pharmacy program, would retirees still be able to fulfill their civilian prescriptions at military pharmacies at no cost?
Dr. JOSEPH. Well, we do not yet have a proposed program. We are working on some ideas. I kind of hinted at that in my testimony.
Mr. BUYER. OK.
Dr. JOSEPH. We are working with some ideas, as I say in my testimony, to get more benefits out to the beneficiaries more widely.
One of the things that I think is a particular issue of concern, especially the retirees', is access to the pharmacy benefit, and one way that we are looking at and trying to figure out how to cost it and how to make it run would be the expansion of a mail order benefit.
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The best way to describe where we are currently is that in exchange for access to the mail order benefit, there would have to be something on the other side, and that might well be the loss of ability to get prescriptions filled cost free in the MTF.
Mr. BUYER. Would you require them to sign up Medicare part B?
Dr. JOSEPH. For the pharmacy benefit?
Mr. BUYER. For the pharmacy benefit.
Dr. JOSEPH. I don't think there is a connection. Maybe I am missing a connection. I don't think so. I don't see that.
Mr. BUYER. OK. Will the mail order pharmacy program provide a uniform full range of medication in its formulary?
In other words, I want to get to the big question. We hear a lot from a lot of our constituents about the drugs for which they receive—drugs if they were on active duty they could receive but, because they are retired, they can't receive. I just want to understand your policies and why.
Dr. JOSEPH. This is not just with respect to any proposed extension of the pharmacy benefit. We are wrestling with two things. One is better service, and the other is better cost containment. We have moved very aggressively toward a standardized formulary. That enables us to run our pharmacy business cheaper. And that is one way of looking at it.
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The other way to look at it is, many of those individual pharmaceutical items are now replaced by a generic prescription, and you will hear, and you will continue to hear, people complain that they can't get brand X because we no longer will give them brand X, we will only give them the generic thing, and we ought to be doing more of that, consistent with not withholding medications that are important for people to have or where there is not a difference in the quality of the medication or whatever.
So I think you are going to hear us come up here increasingly and talk about tighter formularies, and we ought to be doing that.
Mr. BUYER. Do the pharmacies communicate then with the doctors that—will the pharmacies ask the question: Do you mind if you accept the generic as opposed to what is written? Isn't that permissible to do? I don't think that is going to get you into any legal trouble, to do that. If I am there as a beneficiary and the pharmacy is asking me, ''Do you mind having the generic?'' you can do that; right? Otherwise, they say, ''Well, we can provide that to you, but if you want to maintain this one, you can't do it, and you are going to have to pay for it.''
Dr. JOSEPH. That is what we certainly should do, but what we always should do, and do do in many cases, that we will not provide the more expensive alternative, we will——
Mr. BUYER. You will offer the generic.
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Dr. JOSEPH. We will.
Mr. BUYER. And that is being done?
Dr. JOSEPH. [Nods.]
Mr. BUYER. OK. If—no, I won't touch that. I do know that, you know, when you look at the mail order pharmacy and the added stress that this one puts on the health delivery systems, I think you and I would both understand that your largest number of complaints on the risk assessments and quality assurance, on mishaps, are going to come out of pharmacy.
In my 3 years as a legal advisor to a military hospital, I recall the monthly volumes, and actually they did a heck of a job, but the most complaints as opposed to doctor services came from that, and I guess it has prepared the pharmacies for the bow wave if in fact the systems——
Dr. JOSEPH. Yes, but we are not just kind of doing that. We have an institution in San Antonio we call the Pharmacoeconomic Center which is looking, item by item, at everything in the formulary and trying to decide what is the most effective and cost-effective formulary that we can use throughout the system. And I understand, you know, that there will be concerns and a person who may have been on brand A for 20 years, if the Pharmacoeconomic Center can really demonstrate in terms of the quality and the drug that is needed that the generic substitute is need, I really think it is our job to put the generic substitute in the formulary. But there will be complaints about that. I don't think that is the same as a legitimate quality assurance concern.
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Mr. TAYLOR. Sure.
Dr. Joseph, I am told that there was recently an incident at Eglin Air Force Base where a retired NCO—was not the medication that his doctor prescribed, because the medication was restricted for retirees on the grounds that it was too expensive. Is that happening? And how often——
Dr. JOSEPH. That is happening. That is wrong. It shouldn't happen. We are fixing it. There has been either a confusion or an abrogation of policy that is allowed. Different availability of formulations or of medications based on beneficiary class, that is stopping.
Mr. TAYLOR. OK. So your word on the retirees then is that, regardless of what they need, regardless of what the doctor prescribes for them, that need will be fulfilled, even if it isn't on the list of 110 medications.
Dr. JOSEPH. No, no, I am not saying that. What I am saying is no one—there will be no discrimination in what formulation or drug a person gets by beneficiary class. If the generic for drug X is the right drug to use for the active-duty, it is the right drug to use for the retiree, et cetera, et cetera.
Mr. TAYLOR. OK. But I guess that I am asking, you have the standard list of 110 medications. If someone's prescription is other than that 110, will it be made available?
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Dr. JOSEPH. The answer is it depends. If it is a prescription that has a generic equivalent that is on the formulary, then the answer is, no. If there is an appropriate medical reason for that particular formulation being prescribed for that particular patient, then the answer is, yes. That is the case that has got to be made.
Mr. TAYLOR. OK. All right. That is all I wanted to hear.
Mr. BUYER. Here is what I am trying to come to grips with. We are getting complaints from retirees that are saying I was on an active duty and I got this drug. Now I am a retiree and I can't get this drug. I don't know why that is happening. Just so that retirees understand. I don't know what your legal authority is to deny that.
Dr. JOSEPH. There should be no discrimination and there will be no discrimination in the availability of the appropriate medication based on beneficiary class.
Mr. BUYER. Good. Then I will assume that appropriate steps will be taken by you to make sure that that is heard down line so that retirees are served. I would like to work with you between now and the end of March to move towards some type of formulation of a benefit gap here on this mail pharmacy issue. If we can, let's try to work towards it. If not, we will see where it works out. Thank you, Dr. Joseph, for your service to the country and good luck and enjoy your retirement.
Dr. JOSEPH. Thank you very much for both the courtesy and the support of the committee. And also the committee staff.
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Mr. BUYER. Thank you.
Mr. TAYLOR. Thank you, Dr. Joseph.
Mr. BUYER. I would like to introduce the final panel representing the various military associations and organizations. From the Military Coalition I welcome two cochairs of the Health Care Committee. Retired Navy Comdr. Mike Lord of the Commissioned Officers Association of the United States Public Health Service, and Navy Reserve Lt. Comdr. Virginia Torsch from the Retired Officers Association. From the National Military Veterans Alliance I welcome retired Army Col. Charles—Chuck—Partridge from the National Association of Uniformed Services and retired Army Sgt. Maj. Michael Ouellette from the Noncommissioned Officers' Association.
We will go from left to right. Is that all right? Know that old cliche you can only comprehend that which the other side can take? You will be helpful to me. I know you have statements. If you will submit those into the record, each of you have 5 minutes to summarize your testimony to us, and then we can have that at some of the key issues. Is that permissible with you?
STATEMENT OF MICHAEL W. LORD, COMMISSIONED OFFICERS ASSOCIATION OF THE U.S. PUBLIC HEALTH SERVICE, CO-CHAIR OF THE MILITARY COALITION HEALTH CARE COMMITTEE
Mr. LORD. Mr. Chairman, I guess we are going from left to right; it is just our left. It is an honor once again to have the opportunity to address this subcommittee, Mr. Chairman, this time on the very important issue of DOD health care alternatives for military Medicare-eligible beneficiaries.
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As the Executive Director of the Commissioned Officers Association of the U.S. Public Health Service and a military retiree myself, I am also honored to share with Virginia, responsibility for representing the views of the Military Coalition. I will very briefly address the issues specifically of access to care, which is, of course, why we are here. And also the Military Coalition's Health Alternative Reform Task Force also known as CHART. And finally the consideration that DOD is giving to expanding the pharmacy program to include Medicare-eligible retirees.
I don't need to spend a lot of time with this committee on the subject of access, Mr. Chairman. You clearly indicated in your comments your recognition of the problem. You have heard it frequently, and, in fact, I hear it from members of my association and we hear it at the coalition meetings when folks explain and describe situations they have heard within their associations.
The care is great when you can get it. Unfortunately, the question here really is not just access, it is also meaningful tangible access, a benefit that folks can really utilize when, in fact, it is available to them. The sad fact is the care that all of us expected to be there for us following a career of service to our country is frequently not available.
As Mr. Bartlett noted, the issue is also commitment. As the services continue to downsize and bases close, along with them the military treatment facilities which many retirees have come to rely on for their health care, the access continues to decline and it was precisely because of concern over this access issue that the military coalition initiated the CHART study to thoroughly evaluate the alternatives available for providing a meaningful and equitable health care benefit to all uniformed services beneficiaries in light of the realities of military downsizing and base closures.
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After an exhaustive analysis CHART identified three approaches which together would fulfill the lifetime health care commitment to those who served when called upon. These three approaches called for: First, improving Tricare; second, the enactment of Medicare subvention; third, authorizing participation in the Federal Employees Health Benefit Program for those over 65 which we refer to as FEHBP–65. Virginia will briefly summarize the coalition views on these programs in a moment.
Before closing, Mr. Chairman, I would like to mention briefly the Military Coalition's views on what we understand to be DOD's developing plan to expand the Mail Order Pharmacy Program to cover all Medicare-eligible beneficiaries. While we applaud DOD's willingness to address the serious problem of prescription drug coverage, we cannot support the program as we understand it in its current form and we express that in the recent letter to Dr. Joseph. We had three primary concerns. One actually evaporated today during Dr. Joseph's testimony.
First, the plan calls, as we understand it, for DOD's eliminating its current practice of filling civilian prescriptions at a military treatment facility at no cost. Thus, in trying to provide a benefit to those retirees who do not live near an MTF, in keeping the program cost-neutral, DOD would substantially and negatively impact on a number of Medicare-eligible retirees by requiring them to pay monthly premiums and copayments for a benefit they had previously been provided at no charge.
Our second concern, and we are glad it was resolved today, Dr. Joseph indicated that this plan or at least the plan as it is being put together at this point does not envision payment of Medicare part B. Our understanding had been enrollment in part B was also part of the program. And that was a concern because we saw no connection or correlation there.
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Finally, the plan makes no allowances for prescriptions which cannot be accommodated in a practical way through mail order such as antibiotics or chemotherapy drugs. But we are supportive of the concept and would like to work with DOD and this committee to help develop a meaningful benefit.
Thank you, Mr. Chairman for inviting us to participate at this hearing and at this point I would ask Virginia Torsch to take over and address the specifics of the CHART study and the recommendations regarding Medicare subvention and FEHBP–65.
STATEMENT OF VIRGINIA TORSCH, THE RETIRED OFFICERS ASSOCIATION, CO-CHAIR OF THE MILITARY COALITION HEALTH CARE COMMITTEE
Ms. TORSCH. Mr. Chairman, our first approach I am not going to spend a lot of time on, which was Tricare, except to point out that our biggest problem with Tricare is that it does not provide a uniform benefit for all beneficiaries and specifically the Medicare-eligibles cannot enroll. And we are also concerned and it has some bearing on Medicare subvention as well, that all indications are that the Tricare plan will not be implemented all across the country. That does have an impact on the Medicare subvention proposal, which we would like to talk about next.
Our Medicare subvention proposal, which of course authorizes Medicare to reimburse DOD, we came very close to getting that incorporated into the legislation last year. At the last minute we were unable to get it incorporated into the omnibus spending bill. And we understand, of course, that DOD is trying to keep the initiative light by going through with a simulation test. And I do want to express some concerns about the simulation test and one of the reasons why we really feel that we need Medicare subvention legislation.
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One of our biggest concerns about the simulation test is that without Medicare reimbursement, DOD has told us that if someone has to—they will try to treat as many people through the military hospital as possible, but if someone is sent downtown to get care through the Medicare provider, they will incur Medicare copayments, which means then these individuals will not be able to drop the supplemental. That is of grave concern to us that they will not be able to drop the supplemental and many will incur a very high cost.
We are also concerned that you would have decreased access to those individuals, particularly those without part B who are now getting care in the facility. So we would ask that there be some sort of space availability kept aside for these individuals because part B is going to be a criteria for enrollment in Tricare Senior.
And finally, I want to emphasize that Tricare Senior, we view that only as an initial step in the Medicare subvention process and we want to emphasize that we really need the legislation to fully test the concept of Medicare subvention.
One final thought on Medicare subvention. We heard a lot of debate about exactly how many people would this benefit. We have always estimated that it would benefit about 30 to 35 percent of Medicare-eligible uniformed services beneficiaries leaving the other 65 percent without access to a military health care benefit.
And therefore the coalition has pushed the initiative of FEHBP 65, which would allow Medicare-eligibles to enroll in the Federal Employees Health Benefit Plan. Last year, the defense appropriations directed DOD to submit a report to Congress by February 1, 1997. We have yet to see that report and we would ask that you would direct DOD to submit that report as soon as possible. We understand that it is held up in OMB, but we would like to see this report to see what DOD thinks about that option.
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We strongly urge this committee to seriously consider passage of a demonstration program. We believe that a test on FEHBP would provide some concrete information on the number of individuals who would choose this option. We believe that it might be less than the 95 percent that CBO has estimated, which is why they assigned such a high figure to it.
We also believe that you would establish a second risk pool so there is every likelihood that the cost to DOD would be slightly less and the reason being is that most of the uniformed services beneficiaries are covered by Medicare part B, and insurers have said when you combine FEHBP with Medicare, they are only paying 70 cents on the dollar. All Federal civilians are not eligible for Medicare, and when you only cover them with the FEHBP plan the payout is 2.50 for every dollar. So we believe that it would actually be less.
We would prefer to have it enacted nationwide, but we would accept a test just to see what the true costs would be. And that concludes my portion of the testimony.
[The prepared statement of Ms. Torsch can be found in the appendix on page 61.]
STATEMENT OF MICHAEL F. OUELLETTE, DIRECTOR, LEGISLATIVE AFFAIRS, NONCOMMISSIONED OFFICERS' ASSOCIATION
Mr. OUELLETTE. Mr. Chairman, thank you very much. If you don't mind I am going to read just a portion of this and then I just want to talk to you a bit.
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On behalf of the member organizations of the National and Military Veterans Alliance and the Noncommissioned Officers' Association, I want to extend our appreciation to you and the members of the subcommittee for holding this hearing on an important issue of health care alternatives for Medicare-eligible military retirees. Since the military and veterans alliance statement is a matter of record, I felt it would be beneficial to the members of the subcommittee to hear a number of views concerning this current state of military health care from an enlisted standpoint.
Mr. Chairman, it would be safe to say that virtually everyone who is currently serving or has served a career in the military in the Armed Forces believe that as an earned benefit associated with that service they would receive free lifetime medical care for themselves and their eligible family members for the rest of their lives.
Although the diminishment and the elimination of this benefit is of great concern for all eligible beneficiaries, the impact is far greater on the enlisted community simply because of the vast difference in the amounts of retirement pay received. All military people serve with the clear understanding that retired pay differences are based on military grade, and the years served. However, the level of earned benefits, medical care, commissary exchange, remained constant regardless of the grade served. Consequently, the current state of military medical care and associated costs are considered to be broken promises by those who are and have served.
And I would now just branch off in a couple of remarks. I know Dr. Joseph talked about free—maybe the military population has come to the understanding that nothing is free anymore, but I will tell you that there are a lot of enlisted people out there that at least correspond with us and other associations that are holding and continue to hold DOD's feet to the fire on this. But that is the promise made and they are holding to the fact.
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However, as an association we support Medicare subvention. We support FEHPB 65 as an option. Did we like that? Probably not, but we support anything that is going to help any of these people in some fashion. You have got to understand, though, and Mr. Taylor brought it up very good a number of times, that there are economic differences here. In other words, everybody served in the service to qualify for a benefit, and suddenly the quality of that benefit is going to be directly proportionate to the fact of whether you can pay for it or not. Understanding that a retired O–6 is probably in a better condition to pay for an additional health care plan that will improve his health care than a retired E–6 who is basically having a hard time making part B payments right now.
And the other side of this, the other thing is, enlisted people are getting very concerned with the retirement system. The retirement system itself is changing. You retire, you go to retire, first of all, you have got to convert your SGLI to VGLI and pay premiums for that. And then you might want to take the survivor benefit plan and pay premiums for that if you want to protect your surviving spouse.
Now, we are talking enrollment fees, we are talking co-pays, cost-sharing, we are talking deductibles for a health care benefit. We have yet to talk about the retiree dental plan that is going to require another premium. On top of that, you have got State and Federal taxes. By the time we are all finished, you know, enlisted people are very concerned that there is going to be anything left of the retirement benefit.
Mr. Chairman, that concludes my statement. I will be followed by Col. Chuck Partridge.
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STATEMENT OF CHARLES C. PARTRIDGE, LEGISLATIVE COUNSEL, NATIONAL ASSOCIATION FOR UNIFORMED SERVICES
Mr. PARTRIDGE. Thank you, Mr. Chairman, I, too, thank you on behalf of the Association of Uniformed Services and the Military Veterans Alliance to allow us to present our views. And we want to, first off, state that we support a strong military health care system. You have heard talk of downsizing and so forth.
We support the strong systemized right to meet readiness and mobilization requirements and to provide peacetime care. Our major concern is that the Department of Defense does not have a plan today and the testimony here today didn't change our mind on that that will provide a plan that will give access to all eligible beneficiaries. And the certainty system, which reflected savings as shown by those charts, part of those savings are coming out of the pockets of the beneficiaries.
For example, Tricare or its managed care predecessor, have been in California since 1988. That is 9 years. And there are areas there with no networks and no access so that you have military retirees who should have access to Tricare who don't.
Now, of course Medicare-eligible retirees are not allowed in in any case: the 26 States with no major medical treatment facilities; hospitals are being downgraded every day to clinics. When that happens it changes the formulary. You lose the specialist and you lose the drugs that he prescribed. We are hearing from numbers of retirees that they are being turned away from these pharmacies and we heard the same thing that you do that they are discriminating. If you happen to be active duty, they may have a drug, but they are not going to give it to the retiree.
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I was glad to hear Dr. Joseph's remarks on that. And every year the Defense budget comes up with a shortfall year, after year, after year. This is not because health affairs can't estimate their cost. It is because the DOD Controller and OMB use the program for savings figuring you will put it back. So medical funding is always behind and we are always fighting on trying to get up to where we were last year. Dissatisfaction with medical care is great. Two lawsuits are pending and they are not frivolous attempts. They are legitimate strong attempts.
Of course, this lack of funds causes restrictive policies such as rationing drugs and creating bottlenecks to access. One retired NCO described it this way. He says the military health services system is like a sheep pen and we are the sheep. And the DOD reaches in there and they will let some of us get out and come into the gate that go to the MTF's, a few more get into Tricare. Most of us end up either waiting around in the pen or going out through the Medicare gate, which doesn't cost DOD anything. And that is a pretty harsh description of it, I think, but there is a lot of truth in it.
Even when Tricare is fully in place, even when Congress authorizes Medicare reimbursement, if it is authorized, they are still not going to be able to take care for more than about 50 percent or so of the beneficiaries. So what we are saying is we need a plan that will take care of everybody. That at least we are working on something that when we get there, we are there; that we are not just still looking to the future.
Our plan is very simple. Let's make maximum use of the MTF's. Let's do what we can in the Tricare and get those networks established and authorize FEHBP for Medicare-eligibles that will provide them the same benefits that all other Federal employees have. We have to improve the Tricare standard CHAMPUS Program. It was designed to be the equivalent of Blue Cross/Blue Shield high option when it was enacted in 1966.
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Over the years, that program has been decimated so you can't get in a Tricare network if you are under 65, and if you can't get into the Tricare network, many doctors will not take the standard program. That program needs to be brought up to par or let these people have an option of going to FEHPB as well and this should be done now.
Pending legislation calls for years of demonstrations. This is not going to help the 75- to 80-year-old World War II veteran. They want a plan now. Benjamin Franklin said, ''He that lives upon hope alone will die fasting.'' And we need more than hope. We need action. We believe this hearing can be the start of it. Thank you very much.
[The prepared statements of Sergeant Major Ouellette and Colonel Partridge can be found in the appendix on page 87.]
Mr. TAYLOR. Let me begin by thanking all of you for being here. I have two observations. I just finished visiting SOUTHCOM last week. Two observations, one from General Clark. He said one of the things we are trying to teach the Latin Americans is the importance of a good NCO Corps and how important they are to the total force. The second thing was actually a live fire exercise.
Young people, faces painted, hotter than Hades in helmets. And I kind of shooed the officers off and I said tell me what you want to say without the officers here. I said how many of you all want to make a career of this? And they all raised their hand. And what would you say if the officers aren't here and a kid said, ''Will our medical benefits be there when we retire?'' This comes from a 19-year-old.
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If we really put the stock in our NCO's like we say we do, and I think we do, then it absolutely has to be there. And I think you made the correct analogy, it is a lot tougher on the E–6 than the O–6. It is tough on both, but tougher on the E–6. I think we are preaching to the choir here, but I would really encourage all of your organizations to start getting in touch with the members of the Ways and Means Committee.
I do not foresee a problem in the defense authorization bill as far as authorizing subvention. I do see a problem with the Ways and Means Committee. That was the holdup last year. First, the Rules Committee would not allow us to offer it as an amendment and when we tried to go around the Rules Committee, leadership worked the floor and got 15 people to change their votes.
It is an education process that has to go beyond this committee. It is an education process of every single Member of Congress because we have to get 218 votes when it hits the floor. But in particular, since we are talking about funds that would come out of the ways and means health care budget, we have to have their help. Otherwise nothing will happen. Of course, the same thing over on the Senate, but I think you have made your case very eloquently.
Mr. OUELLETTE. Mr. Taylor, when you talked to that one sergeant, he probably, at 19 years old, wasn't probably talking about his retirement health care. He was talking about his active duty.
Mr. TAYLOR. No, I asked that question. He was talking about retirement.
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Mr. OUELLETTE. They talk that, but they are also very concerned about, you know, in Tricare, they understand Tricare, and if they get into the MTF's for treatment, there is no cost and it is virtually like their families are continuing on that. But there is a good chance there are out-of-pocket costs downtown and some even expressed concern about that. A lot of time I don't hear the concerns about retirement too much from the young sergeants.
Mr. TAYLOR. The feeling we are picking up on—my guess is that probably his dad or his uncle is a military retiree and so it is hurting the morale of the active force by not taking care of the veterans the way we should.
Colonel Partridge, I also appreciate you bringing up a point that had not come up before, and that is because Tricare is voluntary in the medical community, you are right, the doctors can choose not to participate and there are a lot of places where they won't, which makes the importance of at least in those places where we have a captive health care system through the DOD that we have to see to it that we take care of our veterans and our retirees there.
Again, I thank all of you for being here. I yield back my time, Mr. Chairman.
Mr. BUYER. Thank you. Mr. Thornberry.
Mr. THORNBERRY. Mr. Partridge, I want to go back to a statement that you made that I think is very important and that is what we need to do is focus our efforts on a plan that will solve the problem so we get there and we are there. I get frustrated when we talk about the difference between a simulation and a demonstration program and we go year after year on that. And I have got to wonder if we accomplish all of that whether we have got anything or not. And what I want to try to get to is figuring out for the best we can what does solve the problem so that we can all focus our efforts on getting to that point.
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Which brings me to the issue that you all heard the difference of opinion on, how many people will subvention actually help. And Ms. Torsch testified 30 to 35 percent is basically the number that you all have worked with. Do any of the rest of you have different opinions on that? Because you heard the testimony, GAO says it is going to help 25 percent, and then Dr. Joseph basically said it is going to help everybody other than a few places in little towns in Texas, I guess.
I think that is an important point. How many is it going to help? If it doesn't help everybody, then we need to look at some of these other things and if some of the rest of you have the basis for other numbers, I would like to know it.
Mr. PARTRIDGE. I would take from this viewpoint. I believe to think that we are going to help everybody in the manner that Dr. Joseph indicated, that might happen by 2050, but that is not going to happen any time soon.
As I indicated, in California, we have been at it 8 years and there are still people who are not in a network. He would limit the subvention reimbursement only to people who enrolled in the network. We believe that they should also let people come in and use it on a space available basis which would save more money, but apparently the Department didn't want that or they can't convince HCFA to accept it. But I would go with Virginia Torsch's numbers that is a little more realistic. I think the proposal you mentioned earlier in the hearing here is what we need to do and you talked about subvention and the FEHBP. That is the plan that will get us there.
Mr. THORNBERRY. Do you all agree that 30, 35 percent is about how many of the retirees that subvention will substantially benefit?
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Mr. LORD. That has been our figure with the coalition.
Ms. TORSCH. And that has been based on what DOD told us before. What Dr. Joseph said today was news to us. But in all of our previous briefings one of our concerns has been that they said they had to restrict it to Tricare Prime areas where there are mainframe PS's. That is what we based that figure on.
I understand now in the expanded Tricare Prime they are not doing that. They are not planning to implement prime in Minneapolis and St. Paul where you have a large number of CHAMPUS-eligible retirees, and I might add probably sufficient providers to establish a Tricare Prime network and we have been asking them why aren't you planning to do that?
Mr. THORNBERRY. I think you are right. The key point he has to prove is that you are going to have Tricare Prime available everywhere for subvention to work everywhere and we are a long way from that it seems.
Colonel Partridge anticipated my next question. I want to ask you what I asked the GAO at the beginning. If we were to have a plan that would allow over 65 to enroll in Tricare Prime, if we had subvention, and if we allowed FEHBP as another option, how effective would that be in meeting a goal of providing access to health care for the over 65 retirees? Mr. Lord.
Mr. LORD. Mr. Thornberry, I think we would be very satisfied with the combination of those programs. Taken collectively, they would take care of pretty much everybody to the maximum extent available. So those three in combination would work very well.
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Ms. TORSCH. Yes, that is what we have established.
Mr. OUELLETTE. Mr. Thornberry, I think that would be a good run at it. The only concern I would have, I would have to see what the numbers are or the costs or how they would bring in the little guys that are out that—you know, I have to be concerned about those things, because those are the people on the low end of the scale.
Mr. THORNBERRY. I think the point you made about that in your testimony is exactly right. I think that is exactly right.
Mr. OUELLETTE. But those three things in tandem would be a significant difference, but there are members out there that would still say, you know, what happened to my free lifetime health care?
Mr. THORNBERRY. I understand, but I think the point you made there is also right, that we are still not necessarily doing what we said we were going to do, but in trying to do as much as we can from where we are, and that may be the best option is what I am looking at.
Let me ask this, I also asked a while ago if what the thinking was, if there are assets in the VA system that could be brought to bear to help expand care where they may not have a major facility right now. Have you all looked at that and do you have opinions about how that might fit in?
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Mr. OUELLETTE. I think there is some activity within DOD and some of the VA facilities and some sharing agreement kind of things. I think that is an idea where you could probably expand a VA facility and bring the VA facility into the Tricare and treat it as a network provider.
The only concern as far as NCOA is concerned is if you bring it in—if you bring in a VA facility as a network provider where you would prefer, there is some talk that you would charge the retirees, the co-pays associated with Tricare, if they used that VA facility. And I think that issue was brought up.
You know, when you have a veteran who has 2 days of service, is indigent and is currently today receiving free lifetime health care in a VA facility and a retiree can't get in the door, there is a problem there. But I think to make it work that if all the VA facilities were brought in as part of Tricare and would operate in that form, you would have a lot you could spread that coverage around much like what they were trying to do under rule health years ago.
Mr. PARTRIDGE. I think FEHBP would take care of that. For a place like in Grand Island, NE, where they have a good VA hospital, probably the best medical capability around. If military retirees had the FEHBP, they would have a third party payment capability to use it, reimburse VA. I would say on that basis we would like to use them. We would not want anything forced or coercive about the use of VA hospitals for military retirees.
Mr. THORNBERRY. The last point I would like to make is also taken off of something that Colonel Partridge said. I do think it makes our job more difficult when the administration, 2 years in a row, has a significant shortfall in their health care budget because basically our job in Congress, Mr. Chairman, is we have got to go find some way working with the administration to make up that shortfall. So we are going out there looking for more money for military health care and then we also want to come back and sell subvention and these other things that we are dealing with.
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And so the impression is that you are always pouring money down this hole. And it is frustrating for me, and I know for you, to deal with that situation now 2 years in a row. Last year, was an enormous amount of money. This year, we don't know exactly how much money we are dealing with. I think it makes our job more difficult to try to get this problem solved and have those constant shortfalls on a political basis.
Mr. PARTRIDGE. Those numbers that you have, $274 million, I would suspect it doesn't include funding for the Uniformed Services University of the Health Sciences, which Congress directed that it be kept open. They were put on the hit list again and I bet that money is still not in the budget.
Mr. BUYER. We will scrub the numbers.
I apologize for not being in the room when you testified. And I have your statements. But I want to be very up front with you. I don't understand why—I almost agree with the sergeant major here. I don't understand why retirees would want to wrap their arms around the FEHBP when you have got a 28-percent premium. Why would you want to do that? I don't think the retirees out there want to pay 28 percent—the current government employee share is 28 percent; is that correct?
Mr. PARTRIDGE. The Government share is 72 percent and the employee share is 28 percent. Right now.
Mr. BUYER. I am not hearing retirees out there saying they want to pay 28 percent.
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Ms. TORSCH. May I address that question?
Mr. BUYER. Sure.
Ms. TORSCH. I think that we look at that as another option for those who cannot access Medicare subvention. And we have had a number of retirees express an interest in that because when you look at the cost of an FEHBP plan, say, Blue Cross/Blue Shield would be about $1,300. When you compare that to what they are paying for, MediGap supplementals, it is less. MediGaps are going up every year and FEHBP does not.
As a wrap around to Medicare, they have waived the copayments and deductibles because as a second payer, it is advantageous for them to do so. Plus they provide a prescription benefit. So that in reality, it is actually a better deal than standard Medicare plus the supplemental because most of the supplementals don't provide prescription coverage.
Mr. BUYER. If I can, not just me, but we on the National Security Committee will work this out not only with you, but also with the Pentagon on a mail order pharmacy initiative. Perhaps, take this existing system of Tricare and take the Tricare civilian network, you have the choices of the PPO, HMO and the fee-for-service and when you have got under the PPO, if we could then pick up the 65 and older in that category, it is 20 percent, not the 28 percent.
I would be saying I want to do the 20 percent versus that. Or if they do the HMO, it depends on the person and how they want to choose, and based on their own financial status, I don't have any answers today. I am struggling with this like you do. But I don't understand why if we are going to move to a system that is going to be—move to greater access under Medicare subvention, why would you want to try to convince us to go with FEHBP and it is the 28 percent? I am missing something here?
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Mr. LORD. Sergeant Major Ouellette makes a good point. We don't want to jettison the retiree who is going to have a hard time making these payments. Our objective, though, is to put something where nothing happens to be right now and so we were trying to reach an accommodation and FEHPB seems to do that and also puts our retirees at least on the same footing as Federal civil servant retirees. And today is the first time we understood that Tricare Prime was going to go nationwide.
Mr. BUYER. I want to do even better if we can. Is that all right?
Mr. LORD. We are happy to do better.
Mr. TAYLOR. I want to go back to the GAO testimony. They talked about the five alternatives. Let's keep in mind, and I hope—I understand the importance of keeping our word, first of all. But I hope you also understand that we have the obligation out of this same budget to defend the Nation. CH-47's, the last one was built in 1972. A6's are ancient. We have a lot of needs out there.
Of the five things that the CBO offered as alternatives, Medicare subvention, FEHBP, CHAMPUS as a second payer, MediGap policies, and mail order pharmacy, if we could fund just two of them—I am going to go down the line—which two would you prefer to see funded. Mr. Lord?
Mr. LORD. I would say subvention and FEHBP, sir.
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Ms. TORSCH. I would say subvention and FEHBP.
Mr. OUELLETTE. I say subvention and CHAMPUS as a second payer, because there are no premiums with CHAMPUS as a second payer.
Mr. PARTRIDGE. I would say Medicare subvention and FEHBP.
Mr. TAYLOR. Do you feel comfortable saying that you are speaking for your organization?
Mr. LORD. I do, sir.
Mr. PARTRIDGE. Yes, sir, we are speaking for our organization.
Mr. OUELLETTE. We support FEHBP, but we would favor—the NCO corps would favor CHAMPUS as a second payer.
Mr. TAYLOR. So the mail order pharmacy benefit really is not that great a benefit in your eyes?
Mr. PARTRIDGE. FEHBP includes it. We would pay about a fourth for the mail order benefit—it costs us about a fourth of what full FEHBP costs. It just doesn't make sense economically to go with that.
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Mr. LORD. But I think we do view it as a good interim step, because FEHBP is not going to get started——
Mr. BUYER. That is what I was going to ask. Do you not want us to do that?
Mr. LORD. We view it as just an interim step, but a good measure.
Mr. PARTRIDGE. It is a good interim step, but whether or not it is a good deal is going to depend totally on the details because the plan that the DOD presented is not.
Mr. TAYLOR. If I may just rehash this, everyone's first choice was Medicare subvention.
Mr. PARTRIDGE. No, sir.
Mr. LORD. We need them in tandem. We need them both. At least that is the coalition's position. You can't take one without the other.
Ms. TORSCH. And it is because we do not see Medicare subvention as benefiting everybody. That is the $64 million question.
Mr. TAYLOR. Let's go down the list again. First choice, second choice of the five alternatives. Unfortunately, that is reality. I have to choose between F–18's and destroyers. I would like to have both, but that is the sort of decisions we make, everybody.
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Mr. LORD. The coalition hasn't described it or discussed it in that way, but from my perspective, given limited choice, I would say that FEHBP would be our first choice because it has broader ramifications, followed by subvention.
Ms. TORSCH. I would like to agree with Mike Lord. If you were to really press us to that point, FEHBP would cover everybody and Medicare subvention would potentially cover only, at most, 50 percent.
Mr. BUYER. What?
Ms. TORSCH. At most 50 percent. And that is Dr. Joseph's figure. Because he has gotten that figure up from 35 to 50 percent, but we still have a delta there.
Mr. OUELLETTE. Speaking for just NCOA, I would favor subvention and CHAMPUS as a second payer. And I say that simply because of who I represent. If I look at CHAMPUS as a second payer, I am not looking at monthly premiums and I am looking at a system that will pay what Medicare part B doesn't pay. And I have also got—I don't have a full prescription drug service, but I have got some help out there and I can offset what I am going to lose on prescription drugs by the fact that I am not paying monthly premiums.
Mr. PARTRIDGE. FEHBP first choice, subvention second choice.
Mr. TAYLOR. I am going to request this in writing from each of your organizations. I would like to have it for my files. OK? I mean, I have got your word, but I would still like to have it. Thank you very much.
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Mr. BUYER. I will accept as part of the record today a testimony—written testimony submitted by Congressman James P. Moran, Eighth District of Virginia. It will be submitted into the record.
I have a letter in support of Medicare subvention from Lt. Gen. Charles Roadman II, U.S. Air Force, the Surgeon General.
I have a letter conveying strong support for Medicare reimbursements to the Department of Defense for services we provide to medical beneficiaries from Lt. Gen. Ron R. Blanck, the Surgeon General of the U. S. Army. This will be entered into the record.
I have a letter from Vice Adm. Harold Koenig, Medical Corps, U.S. Navy, the Surgeon General of the Navy, which will also be entered into the record.
[The information referred to can be found in the appendix beginning on page 141.]
Mr. BUYER. And I thank you, very much for your testimony. This hearing is concluded.
[Whereupon, at 3:45 p.m., the subcommittee was adjourned.]
"The Official Committee record contains additional material here."
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QUESTIONS SUBMITTED BY MR. BUYER
Mr. BUYER. In regions where TRICARE has been implemented, are retirees in fact being squeezed from the system?
Dr. JOSEPH. The goal of the TRICARE managed system is to increase overall access to high quality, cost-effective health care for all eligible DoD beneficiaries. Implementation of the TRICARE Prime enrollment system results in a significant increase in the efficient, predictable use of MTF resources, and allows the MTF's to provide a much more comprehensive benefit to their beneficiary populations at a minimal cost to the beneficiaries. The TRICARE enrollment process transforms what was formerly a chaotic competition for all beneficiaries for a finite amount of care in an MTF to an orderly process for ensuring a total range of services for beneficiaries enrolled in the program. Although the level of space-available care in the MTF's may be reduced, a variety of new services to assist non-enrolled beneficiaries gain access to care in the MTF's and the civilian provider networks are now being made available to our Medicare-eligible beneficiaries. The TRICARE Managed Care Support Contracts allow us to enhance access to care all beneficiaries by supplementing the MTF capability with purchased care from a broad network of civilian providers.
All retired beneficiaries and their families are eligible for care in our military treatment facilities (MTF's) on a space available basis. However, priority for access to space available care in the MTF's is based on the person's enrollment status in TRICARE Prime, the military equivalent of a civilian health maintenance organization (HMO). In the MTF's, TRICARE Prime enrollees receive first priority for all available health services. Beneficiaries not eligible to enroll or those who have chosen not to enroll in Prime still remain eligible for space available care the same as they were before TRICARE was implemented. Beneficiaries who reach age 65 lose their statutory right to CHAMPUS benefits and become eligible for care under the Medicare system. Since they are no longer eligible for CHAMPUS, they are not eligible to participate in TRICARE Prime. Because of continuing diminishing military health care resources, these beneficiaries may find space available MTF care, especially primary care, becoming increasingly scarce in the future.
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As long as space is available in our MTF's, our beneficiaries are encouraged to obtain their health care there because we believe it is less costly to the Government. When care is not available in the MTF's, our retired beneficiaries are legally entitled to receive care in the civilian health care system under CHAMPUS or Medicare, depending upon the age of the beneficiary. Before implementation of TRICARE, we were limited in our ability to assist this category of beneficiaries to obtain the health services we couldn't provide. The TRICARE, system allows us to continue serving them beyond the walls of the MTF. We are able to help them access care in our extensive networks of civilian health care providers established through the TRICARE Managed Care Support contracts. Under these contracts, quality professionals actually facilitate the acquisition of care not available in our MTF's from the civilian marketplace. In sum, instead of ''squeezing out'' our retirees from the military health care system, TRICARE actually expands the boundaries within which we can help them gain access to the primary care specialty services they need, either in military or civilian facilities.
Even with the increased efficiencies effected by implementation of TRICARE, it becomes more and more of a challenge to provide care to all our beneficiaries as the number of retired beneficiaries continues to grow and the demand of downsizing increase. It is clear that since the finite amount of space for care in the MTF's has been continually subjected to resource constraints beyond our control, even without the implementation of TRICARE, many of our beneficiaries would have had to obtain care outside the MTF's. We believe that the added services available under the TRICARE system provide these beneficiaries greater access to care at lower cost shares than they would have had before TRICARE.
Mr. BUYER. How does the Department plan to continue to provide for this deserving group of beneficiaries?
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Dr. JOSEPH. The TRICARE system has several unique features especially designed to help our beneficiaries manage their own health care and gain quick and easy access to the system at their appropriate level of need. For our retired beneficiaries who previously bore the burden of acquiring health services not available in the MTF's, many services in our TRICARE Service Centers are now available to help them find the care they need. Qualified health professionals answer questions and assist them with claims paperwork, and in most regions, a Nurse Advisor is accessible by telephone to provide health care advice and assistance 24 hours a day, 7 days a week. Health Care Finders can make referral appointments to physicians and specialists participating in the TRICARE network. For both CHAMPUS and Medicare-eligible retirees, they are very helpful in locating network physicians who will accept CHAMPUS or Medicare payments for treatment.
Medicare reimbursement to DoD is the real key to alleviating the access to care problem for our Medicare-eligible population. To address this important issue, the Department of Health and Human Services (DHHS), the Health Care Financing Administration (HCFA), the Department of Defense (DoD), and the Office of the Assistant Secretary of Defense (Health Affairs) have agreed to conduct a demonstration where the Medicare program will treat the Military Health Services System similarly to a risk-type HMO for dual-eligible Medicare/DoD beneficiaries. The President has expressed his strong support for the Medicare demonstration project, in recognition of the need to honor the commitments made to those who made a career of military service. Full implementation of the demonstration is contingent upon enactment of authorizing legislation.
Once the demonstration project is authorized by Congress, DoD will be able to assume full financial responsibility for the health care of the program's enrollees. They will be able to take advantage of a benefit and cost share structure similar to TRICARE Prime and featuring all the required Medicare-covered services. DoD cannot offer these benefits unless HCFA is authorized to reimburse DoD for care provided to dual-eligibles beyond DoD's current level of effort, making passage of the authorizing legislation essential to the success of this demonstration.
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Mr. BUYER. To whom did DoD and HCFA submit the February 7th legislative proposal? OMB? Congress?
Dr. JOSEPH. The legislative proposal was submitted on behalf of the Administration to the Senate (Vice-President) and the House (Speaker) on February 7 by Donna Shalala, Secretary of the Department of Health and Human Services.
Mr. BUYER. What is the status of this effort, and what do you hope to accomplish by conducting such a demonstration? Has CBO scored the legislation that was submitted on February 7th?
Dr. JOSEPH. The Department of Defense is pursuing, along with the Department of Health and Human Services, Congressional approval of legislation to authorize a Military/Medicare managed care demonstration project, including an authorization for HCFA reimbursement to DoD for care provided to Medicare-eligible military retirees. In conducting the demonstration, DoD intends to honor the commitments it has made with respect to health care to those who made a career of military service. As reduced DoD Budgets have required the closing of many MTF's and required DoD to be more efficient with the health care resources it still has available, many military retirees are finding their access to the space-available care on which they depend limited. A Military/Medicare managed care project would allow DoD to demonstrate its ability to offer Medicare-eligibles the opportunity to stay within the Military Health Services System, something our beneficiaries prefer and have earned after their years of service to and sacrifice for their country. The demonstration is designed to allow DoD to operate a cost-effective managed care program offering dual-eligible beneficiaries access to quality affordable health care.
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CBO has not yet scored the legislative proposal submitted on February 7th. CBO did analyze a similar bill introduced during the 104th Congress and scored it at $25 million per year. Scoring of the current legislative proposal will continue this year.
Mr. BUYER. Depending on the results of the demonstration program, do you hope to expand the program to do more than just a few test sites?
Dr. JOSEPH. The Department anticipates that a successful demonstration project conducted at selected test sites will provide sufficient information to justify the authorization of a nationwide Medicare program in which all dual-eligible beneficiaries would be eligible to enroll in a managed care program wherever TRICARE Prime is offered. The sites included in the demonstration have been selected because the Department believes they would provide the most representative sample and provide the most reliable information upon which DoD, HHS, and Congress could make a decision to implement a nationwide Medicare subvention program.
Mr. BUYER. Does the plan that was submitted on February 7th also significantly limit the number of test sites? How many sites are proposed?
Dr. JOSEPH. As in the previous legislation, the number of sites would be five, of which three (San Antonio (TX), Madigan (WA), and Fort Sill (OK)) have been tentatively designated.
Mr. BUYER. What is the rationale or strategy for limiting the demonstration to only a few sites?
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Dr. JOSEPH. As is the case in most demonstrations, the number of sites is limited to allow the agencies to focus on them. In addition, a limited number of sites and a cap on reimbursements limits the risk to the Medicare program. The Department has selected these sites because each is a major medical facility within its TRICARE Region, and the lessons learned from the project at these sites can be readily applied to those MTF's which may operate Medicare managed care programs in the future. The DoD/HHS agreement requires that the demonstration project be cost neutral for both DoD and HCFA. Moreover, to ensure that the project does not place an undue burden on the Medicare Trust Fund, the agreement limits annual HCFA payments to DoD to $65 million annually. Thus, the project is limited by the amount of DoDs level of effort with respect to dual-eligible beneficiaries and the annual limit on HCFA reimbursement to DoD. Given those constraints, DoD chose those facilities which would serve the most dual-eligible beneficiaries and yield the most reliable information about the performance of a military managed care program within the budget constraints outlined in the DoD/HHS agreement.
Mr. BUYER. Two of the sites previously identified—San Antonio and Bremerton/Madigan, Washington—both have large military medical facilities where retirees already have better than average to space available care. Who will this test actually help, and what will it demonstrate?
Dr. JOSEPH. A successful demonstration project would ultimately benefit all dual-eligible beneficiaries since such a project could be used as the basis for a full-scale, nationwide Medicare subvention program, in which dual-eligibles could enroll in a TRICARE Prime-like benefit program. The project also would provide DoD the opportunity to show that it can operate a managed care program for Medicare-eligible beneficiaries at a cost to HCFA lower than that which it currently pays to commercial Medicare-risk HMOs. To continue providing only space-available care to dual-eligibles at facilities like those in San Antonio and Seattle/Tacoma would do nothing to bring those beneficiaries any closer to improved access to military health care.
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Mr. BUYER. How will such a limited test centered around large military medical facilities demonstrate the feasibility of implementing subvention nationwide, at smaller sites and in non-catchment areas?
Dr. JOSEPH. The demonstration will provide the Department with a vehicle to exhibit the ability of the MTF's to function as Medicare risk-HMOs, meeting applicable Medicare regulations and fully managing the care of enrollees. Major medical centers were selected to participate for several reasons. First, they are also the Lead Agents for the Regions, thoroughly familiar with the TRICARE HMO option and managed care. Second, the larger facilities are less likely to be disrupted by testing a new program; and, third, there are large numbers of Medicare-eligibles in their catchment areas. The expertise developed in administering a Medicare-risk HMO benefit at these larger sites can then be applied to smaller facilities at little risk to their operating budgets when full subvention is authorized for all MTF's. During the demonstration, DoD will also be examining ways to use the overall TRICARE program to reach beneficiaries not living in the immediate area of large military facilities.
Mr. BUYER. Within those few test sites, do you plan to limit the number of Medicare-eligibles allowed to enroll in the demonstration?
Dr. JOSEPH. The number of enrollees will be limited to the MTF's primary care managers' capacity. As noted above, the size of the program according to the DoD/HHS agreement, will be limited by the resources represented by DoD's level of effort and the annual $65 million cap on HCFA reimbursement to DoD. These limitations will be reflected in the fixed number of enrollment slots of each participating MTF will be able to offer the dual-eligible applicants in its catchment area.
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Mr. BUYER. Wouldn't limiting the number of enrollments at a demonstration site actually serve to ''lock out'' other Medicare-eligible beneficiaries? What mechanisms are included in the plan to prevent such unintended ''lock out?''
Dr. JOSEPH. Enrolling dual-eligibles in a managed care program at selected MTF's may result in a reduced level of space-available care. However, as with the implementation of TRICARE, the demonstration program will result in the more efficient, predictable use of the MTF resources, allowing those facilities to provide a more comprehensive benefit to their beneficiary population. Medicare reimbursement to DoD is the key to alleviating the access to care problem. Ultimately, a successful demonstration can provide the basis for a nationwide program in which many more dual-eligible beneficiaries may use their Medicare benefit, for which they paid throughout their working years, at the MTF. Through the use of Medicare reimbursement, DoD can expand its capacity and serve more beneficiaries than with current resources.
Mr. BUYER. Would subvention allow Medicare-eligible retirees to enroll in TRICARE Prime and receive their care wherever they live, through the TRICARE civilian newtorks if necessary? Or would it truly only help those already near military facilities by guaranteeing their access to care?
Dr. JOSEPH. The Department hopes that full Medicare subvention would allow Medicare-eligibles to enroll in all areas that offered the TRICARE Prime option. This would include offering dual-eligible beneficiaries the opportunity to enroll with network primary care managers as those currently eligible for TRICARE Prime may choose network PCMs.
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Mr. BUYER. Depending on the results of the demonstration program, are there any plans to add additional test sites?
Dr. JOSEPH. The Department anticipates that the successful demonstration will lead to full Medicare subvention, not an expansion of the demonstration.
Mr. BUYER. Are there any plans to increase the number of enrollees at the selected sites, if the plan comes under budget?
Dr. JOSEPH. Yes.
Mr. BUYER. In the Congressional Budget Office's scoring of the subvention demonstration concept proposed late last year, it states that DoD and HCFA face different incentives and access to information that will allow DoD to tilt the negotiations in its favor and against budget neutrality. Based on the DoD/HCFA agreement you have presented at this hearing, it sounds like HCFA has been more successful in tilting the negotiations in its favor by severeley limited (sic) the size of the demonstration program.
What does CBO mean by that comment? What incentives does HCFA have for allowing DoD to tilt the negotiations in its favor?
Dr. JOSEPH. The Department has always viewed a Medicare subvention demonstration project as a partnership between DoD and HCFA. Both agencies have a vested interest in seeing that the demonstration is conducted based on shared, accurate information and is independently evaluated. Also, both Departments are committed to the principle that the demonstration should not pose a threat of any kind to the Medicare Trust Fund. As a result, DoD and HCFA are in ongoing discussions concerning the proper procedures for the exchange of data between the two agencies, with the understanding that accurate information is critical to the calculation and tracking of DoD's level of effort with respect to dual-eligible beneficiaries. The provision of the DoD/HHS agreement setting a limit on annual HCFA reimbursement to DoD is the strongest indicator of both agencies' understanding of the need to prevent the project from becoming a drain on the Medicare Trust Fund. The data exchange efforts and the reimbursements limitations will serve as safeguards against one agency unfairly profiting from the project and should provide sufficient assurances to those evaluating the feasibility of the demonstration of the commitment to fairness exhibited by both DoD and HCFA.
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Mr. BUYER. Furthermore, CBO implies that DoD would enroll a disproportionate share of healthy Medicare-eligible beneficiaries and/or current MTF-reliant Medicare eligible individuals. Both of these groups currently cost the Medicare program very little. If DoD enrolls these individuals and exceeds its current level-of-effort, the Medicare program would be obligated to pay DoD the adjusted capitation rate which is much higher than current Medicare costs for these individuals.
How will DoD select enrollees for the demonstration program? Will it simply be accomplished on a first-come, first-served basis? Or if there is an overwhelming response, will you hold some sort of random ''lottery'' to select participants?
Dr. JOSEPH. Enrollees would be selected on a first-come, first-served basis as required under Medicare HMO regulations. If there should be a larger response than the available capacity, a random selection process would be used to ensure equity.
Mr. BUYER. Will Medicare-eligible beneficiaries be required to complete the TRICARE health assessment form? If so, could these forms be used to ''cherry pick'' healthy enrollees to remain within budget constraints?
Dr. JOSEPH. Beneficiaries would be required to complete the TRICARE Health Evaluation and Assessment Review (HEAR) form only after they are enrolled. Therefore, there would be no opportunity under the demonstration for DoD to select enrollees based on health status.
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Mr. BUYER. Why are disabled military Medicare-eligible beneficiaries being excluded from this demonstration?
Dr. JOSEPH. Beneficiaries who are under 65 and eligible for Medicare by reason of a disability are eligible for the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) and, therefore, are already eligible to enroll in TRICARE Prime.
Mr. BUYER. Since enrollment in Part B is not a requirement for receiving space-available care and many military retirees have chosen not to enroll in Part B as a result, is there any provision in the DoD/HCFA demonstration program to waive the Part B late enrollment penalty for Medicare-eligible beneficiaries who may not have previously enrolled in Part B?
Dr. JOSEPH. DoD does not have the authority to waive the penalty for late enrollment in Medicare Part B. There is not a provision in the demonstration program to waive the Part B as that would increase Medicare's costs. The Department has long advocated a change in the Federal statute which would waive the late enrollment penalty for Medicare-eligible military retirees whose access to military health care has been adversely affected by military rightsizing. We would hope that this issue will be addressed favorably by the 105th Congress.
Mr. BUYER. Why is enrollment in Part B required? Is it required of other federal employees in the FEHBP?
Dr. JOSEPH. HCFA regulations require enrollees in Medicare-risk HMOs to be enrolled in Medicare Part B. One of the primary goals of the demonstration is for DoD to demonstrate that it can operate a managed care program in a manner as close as possible to that required of all other Medicare-risk HMOs. Therefore, the Medicare demonstration project must adhere to HCFA's Part B enrollment requirement.
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For Medicare-eligible FEHBP participants, the FEHBP plan they choose becomes the second payer after Medicare. FEHBP participants are not required to enroll in Part B, but failure to enroll in Part B will result in the participants being financially responsible for all their costs for medical professional services.
Mr. BUYER. Dr. Joseph, in your testimony you make clear that the Department of Defense believes that Medicare subvention is the best, and only, feasible solution for meeting the health care needs of Medicare-eligible retirees. Does that mean the Department is not willing to consider any other options?
Dr. JOSEPH. The Department is currently considering several options for addressing the health care needs of Medicare-eligible retirees, including a mail-order pharmacy program and partnering with commercial HMOs. However, our examination of these alternatives has led us to the conclusion that Medicare subvention is the best alternative for improving access by dual-eligible beneficiaries to military health care.
Mr. BUYER. How extensively has the Department begun to study alternative methods for meeting the medical needs of this population should Medicare subvention not be enacted?
Dr. JOSEPH. The Department has studied several alternatives for addressing the issue of Medicare-eligible beneficiaries' access to military health care in the event that Medicare subvention is not authorized. As noted above, DoD is analyzing a proposed mail-order pharmacy benefit for dual-eligible beneficiaries. The Department has also examined the cost and feasibility of providing dual-eligible beneficiaries access to the FEHBP program. However, DoD analysis of each of these options shows that, while each would offer some improvement in benefits for the dual-eligible population, only Medicare subvention would allow DoD to offer a cost-effective benefit which accommodates the desire of military retirees to get their care from the military health care system.
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Mr. BUYER. How will subvention meet the needs of those retirees who do not reside near military medical facilities? How many Medicare-eligibles live near military treatment facilities?
Dr. JOSEPH. Under the Medicare/Military managed care demonstration project, DoD would offer enrollment only to those who resided in the catchment area of the participating MTF's. Those residing outside catchment area would not benefit from the demonstration.
The Department anticipates that a successful demonstration project will lead to the authorization of a nationwide Medicare subvention program, in which HCFA would reimburse DoD for all care to Medicare-eligible beneficiaries beyond DoD's level of effort. Such reimbursement may provide DoD with the resources necessary to allow the Department to offer dual-eligible beneficiaries the opportunity to enroll with civilian network primary care managers, an option currently available to those already eligible to enroll in TRICARE Prime.
Mr. BUYER. How will subvention work if facilities continue to be downsized and closed?
Dr. JOSEPH. Under full Medicare subvention, DoD would be responsible for all the health care services needed by those dual-eligible beneficiaries enrolled in its Medicare managed care program. HCFA would reimburse DoD for such care on a capitated basis, in the same manner that it currently makes payments to Medicare-risk HMOs. The use of the resources at military treatment facillites will make a significant contribution to DoD's ability to provide quality care at a reimbursement rate lower than that which HCFA pays to commercial HMOs. Should the capacity at military medical facilities continue to be reduced, DoD will have to continue to work to make more efficient uses of the remaining MTF resources and become even more resourceful in purchasing quality health care from the private sector, an area in which the Department has already made significant progress during the development of networks of civilian providers under TRICARE. By continuing to become more sophisticated purchasers of care, DoD will continue to be abled to provide first-rate health care to those dual-eligibles who enroll in the Department's Medicare managed care program.
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Mr. BUYER. Dr. Joseph, the 1996 Defense Authorization Act directed the Secretary of Defense to report to Congress on the feasibility of alternatives for improving access to health care for Medicare-eligible retirees, including the options of using CHAMPUS as a second payer to Medicare and offering these retirees enrollment in the Federal Employees Health Benefits program.
Has the Department evaluated any option for caring for this beneficiary group other than seeking Medicare subvention.
Dr. JOSEPH. The Department has studied several alternatives for addressing the issue of Medicare-eligible beneficiaries' access to military health care in the event that Medicare subvention is not authorized. As noted above, DoD is analyzing a proposed mail-order pharmacy benefit for dual-eligible beneficiaries and the possibility of DoD facilities becoming network providers for commercial Medicare-risk HMOs. The Department has also examined the cost and feasibility of providing dual-eligible beneficiaries access to the FEHBP program. However, DoD analysis of each of these options shows that, while each would offer some improvement in benefits for the dual-eligible population, only Medicare subvention would allow DoD to offer a cost-effective benefit which meets military retirees' to get their care from the military health care system.
Mr. BUYER. Has there been any discussion of possibly developing a test program for using CHAMPUS as a second payer to Medicare or allowing Medicare eligibles to enroll in FEHBP? What is your professional opinion on the usefulness of testing such concepts?
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Dr. JOSEPH. The Department has examined both of those options and has determined that they are neither cost-effective nor do they meet the needs of our Medicare-eligible beneficiary population. Both of these options would take dual-eligible beneficiaries out of the Military Health Services System (MHSS), breaking the link these beneficiaries have had with military medicine and they have come to understand after many years of use. Our experience is that dual-eligible beneficiaries have a strong preference for remaining with the MHSS. Therefore, the Department favors testing medicare subvention, a program which we believe would offer dual-eligible beneficiaries access to military health care in a cost-effective manner.
Mr. BUYER. Do you have any estimates of how much these options would cost?
Dr. JOSEPH. The National Defense Authorization Act for Fiscal Year 1996 required the Department to provide the Congress with recommendations about the feasibility of a CHAMPUS as second payer and an FEHBP program for dual-eligible beneficiaries. In the report, DoD indicated that having CHAMPUS serve as a second payer to Medicare could increase the Department's costs by as much as $1.41 billion and the Government's total cost by up to $1.98 billion. If Medicare beneficiaries were offered enrollment in the FEHBP, it is estimated that the Department costs could increase by as much as $1.5 billion. Each option would increase total Government spending above the amounts currently spent by the Defense Health Program. With the proportion of MHSS Medicare-eligible beneficiaries growing steadily each year, from 1.080 million in Fiscal Year 1994 to 1.398 million in Fiscal Year 2001, an increase of over 29 percent, the expected costs of these two options will only continue to increase.
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Mr. BUYER. I understand that the Department spends roughly $1.2 billion on providing care to about 230,000 Medicare-eligible retirees. Some proponents of offering Medicare eligibles FEHBP argue that that money would go a lot farther under the FEHBP option. In fact, they claim that at the current annual subsidy rate, over 780,000 Medicare-eligible retirees could be provided for with FEHBP.
Do you agree with that assessment?
Dr. JOSEPH. In FY 1996, the Department estimates we spent roughly $1.2 billion providing care to approximately 325,000 Medicare-eligible beneficiaries who actually use the Military Health Services System.
The $1.2 billion represents the level of effort for DoD care of beneficiaries aged 65 and older, and is the total cost, fully burdened, of providing health services and pharmacy. For example, the total costs of $1.2 billion includes the cost of military personnel (the cost of our military doctors, nurses and enlisted health care specialists), infrastructure costs (such as the cost of heating, lighting, and maintaining our facilities) and other costs that cannot easily be recovered. Thus, it would be virtually impossible to recover the $1.2 billion to finance FEHBP premiums without reducing military personnel and losing more of our facilities. As you know, our military personnel and facility sizing is based on our wartime medical requirements and any reduction will translate directly to loss of medical readiness.
The Department believes that there are other, more cost effective alternatives than using our present level of effort for DoD beneficiaries aged 65 and older to pay the government's share of FEHBP premiums. Principally, the Department believes that passage of Medicare subvention legislation would expand the health care options for these beneficiaries by enabling DoD to enroll them in TRICARE.
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Mr. BUYER. Does the care DoD provides to Medicare eligibles actually cost the Department $1.2 billion a year, or are there hidden costs associated with the care such as graduate medical education costs?
Dr. JOSEPH. The current estimate for care provided to Medicare eligibles includes supplies, materials, equipment and a portion of resident salaries used in the course of treating Medicare eligibles.
Mr. BUYER. Dr. Joseph, the 1997 Defense Appropriations bill required the Department to submit a report to the committees of jurisdiction by February 1, 1997 on the feasibility of conducting an FEHBP–65 demonstration program.
What is the status of that report? When can we expect to see it? What is the reason for the delay?
Dr. JOSEPH. The report is presently in coordination with the Office of Personnel Management and the Department of Health and Human Services. We expect to have coordination completed and available at the end of March.
Mr. BUYER. In your statement, you only discuss the issue of providing FEHBP to all beneficiaries. However, the subject of this hearing, as well as the recent legislative proposals addressing the concept, relate to Medicare-Eligible beneficiaries.
Have you evaluated this proposal as it relates to Medicare-eligible beneficiaries only?
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Dr. JOSEPH. There are a number of approaches to resolving acess to care for those beneficiaries eligible for Medicare. Among these are the FEHBP and reimbursement from Medicare, or Medicare Subvention. For the FEHBP approach, we have evaluated proposals related to Medicare-eligible beneficiaries. There are about 1.2 million Medicare-eligible beneficiaries who are also eligible in the Military Health Services System (MHSS). Of that number, only about 325,000 are full-time equivalent users of MHSS. Usage can range from inpatient care on the most intensive end of the spectrum to occasional pharmacy use on the low end of the spectrum. That leaves approximately 900,000 who do not use the MHSS and who may elect to enroll.
Mr. BUYER. Do you have any information on the number of retirees who would choose this option?
Dr. JOSEPH. The Congressional Budget Office in a July 1995 report, ''Restructuring Military Medical Care,'' estimated that as many as 95 percent of Medicare-eligible beneficiaries would elect to enroll, compared to roughly 27 percent of eligibles who use the MHSS today. If that estimate is accurate, we would expect enrollment to reach 1.1 million beneficiaries. The Department has no separate independent estimate.
Mr. BUYER. What is the Department's estimate of the costs to offer this benefit to Medicare-eligible beneficiaries only?
Dr. JOSEPH. In its 1995 report the Congressional Budget Office (CBO) evaluated alternatives to the current operation of the Military Health Services System focusing primrily on a proposal to enroll military beneficiaries in the FEHBP. The report found total government costs for FEHBP enrollment limited to military retirees, dependents, and survivors aged 65 and over was between $3.7 billion and $4.2 billion. The component of Medicare cost increase was estimated at $1.4 billion. Increased Medicare costs would be experienced because it was assumed that a significantly greater number of beneficiaries who are 65 years of age and eligible for Medicare would enroll in a plan offered under the FEHBP, vice continue to receive services in our MTF's where there are presently no Medicare expenditures. As I noted before, CBO estimates that 65 and older enrollment could reach 95% of eligibles.
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FEHBP would drive up the cost for the retiree (through payment of the individuals share of the FEHBP premium), the cost to DoD (through payment of the government share of the FEHBP premium), and the cost to Medicare (because present MHSS users would opt-out for FEHBP). As I pointed out in my statement, my opinion is that the FEHBP option would introduce a new health care delivery system to our beneficiaries; it would not include military health care, which would have both cost and readiness implications.
Mr. BUYER. Under the Department's proposed mail-order pharmacy program, would retirees still be permitted to fill their civilian prescriptions at military pharmacies at no cost?
Dr. JOSEPH. This proposal is still in the exploratory stages and no decision has been made.
Mr. BUYER. Will a mail-order pharmacy program provide a uniform, full-range of medications in its formulary? Or will certain ''more expensive'' drugs be unavailable even by mail order leaving beneficiaries to pay very high out-of-pocket costs for needed medications for forcing them to take prescriptions that may be the ''best fit'' for their ailments?
Dr. JOSEPH. Again this proposal is in only the exploratory stage, and we would want to make sure that medically necessary pharmaceuticals were available.
Mr. BUYER. Will retirees be required to purchase Medicare Part B in order to participate in such a program? If so, what is the justification for that requirement when pharmacy benefits are not even a Medicare benefit?
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Dr. JOSEPH. Retirees would to the extent that this is part of the Medicare subvention program. The Medicare subvention program would be what would necessitate Part B. If there were no connection Medicare Part B coverage would not be a necessary condition for pharmacy participation. However, it is DoD's view that all Medicare eligible should have Part B for their own benefit.
Mr. BUYER. What is the Department's policy on restricting drugs to retirees?
Dr. JOSEPH. The Department's policy on this issue has not changed. All retirees are authorized to receive medications at Military Treatment Facilities (MTFs) on a space available basis. This means that MTF pharmacies will fill all prescriptions for medications included on the local MTF drug list (formulary), independent of beneficiary category.
Mr. BUYER. Is there any legal authority for military facilities to deny retirees their needed medications?
Dr. JOSEPH. There are valid clinical reasons that not all medications are available at all MTF's. The inability to get medication in these cases is because the medication is not routinely stocked at that facility. However, all DoD beneficiaries are legally entitled to space available medications (those included on the local MTF formal drug lists).
Mr. BUYER. Is there a uniform formulary for all military pharmacies?
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Dr. JOSEPH. The Department's Tri-Service Formulary (TSF) is a baseline of drugs that all MTF pharmacies must have available. It is routinely updated to reflect the most current, cost-effective medications, and each facility supplements the TSF as indicated by local requirements. Beyond the TSF, the types of medications differ due to the availability of space, resources, facilities and the capabilities of the assigned professional staffs of each medical care facility.
Mr. BUYER. What steps are being taken by the Department to alleviate this problem?
Dr. JOSEPH. The inability of retirees to obtain prescribed medications in some cases has been attributed to a misunderstanding of Departmental policy at the medical facility level. We are in the process of issuing policy to clarify any misunderstanding. The Military Services are being reminded that their MTF pharmacies will fill all prescriptions for medications included on the MTF drug lists, without regard to beneficiary category.
Mr. BUYER. Dr. Joseph, I understand the Department is preparing to begin a Medicare subvention ''simulation'' program, separate from the subvention demonstration being proposed by DoD and HCFA jointly, that would test the concept without Medicare actually reimbursing the Department. Your statement does not address this program. Could you briefly outline this concept for us? How will the Department determine who gets to enroll in this simulation? What does the Department hope to achieve by ''simulating'' subvention? Do you fear that some members of Congress may see this as a justification for not enacting subvention legislation until the Department completes this three-year ''simulation?'' How many retirees will be eligible to participate in this ''simulation?'' How many will actually be able to enroll in the program? Could this simulation actually serve to lock some retirees who are now receiving some of their military facilities out of the facility completely? How will the Department provide for Medicare services that are not available in a military facility?
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Dr. JOSEPH. DoD is considering various approaches to preparing for the subvention demonstration. Those approaches are still under discussion within the Administration. Any preparatory steps prior to the demonstration could not take the place of the Medicare demonstration since Medicare reimbursement would not be authorized.
Mr. BUYER. Do you know the exact amount of the shortfall?
Dr. JOSEPH. A budget amendment will be submitted by the Department that will resolve the $274 million shortfall. If that is accepted there will be no shortfall.
Mr. BUYER. Can you explain what caused the shortfall and why the comptroller was not aware of it?
Dr. JOSEPH. It was caused by resource deficiencies in the following functional area:
We appear to have experienced a communication problem regarding the DHP shortfall. My staff and I believed that the appropriate individuals in the resource management community were aware of our problem. However, it now appears they were not. While this breakdown was regrettable, it generated two important results. First the lines of communication between Health Affairs and the DoD Comptroller have been strengthened. Secondly, the shortfall and associated functional impact are now clearly understood by all necessary elements of DoD. This clear understanding will serve as an excellent base for correcting the problem in the upcoming summer program cycle.
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Mr. BUYER. Did you or your staff ever express concern over the DHP budget to the Pentagon budget authority?
Dr. JOSEPH. We appear to have experienced a communication problem regarding the DHP shortfall. My staff and I believed that the appropriate individuals in the resource management community were aware of our problem. However, it now appears they were not. While this breakdown was regrettable, it generated two important results. First the lines of communication between Health Affairs and the DoD Comptroller have been strengthened. Secondly, the shortfall and associated functional impact are now clearly understood by all necessary elements of DoD. This clear understanding will serve as an excellent base for correcting the problem in the upcoming summer program cycle.
Mr. BUYER. How does the Department intend to remedy this shortfall?
Dr. JOSEPH. The shortfall will be corrected by submitting an amendment to the FY 1998 budget.
Mr. BUYER. If the shortfall is not resolved, what are the implications for DoD health care beneficiaries, particularly, Medicare-eligible retirees?
Dr. JOSEPH. Currently, the DHP does not have a shortfall. As a result, identifying specific impacts is very difficult. However, with a shortfall of the magnitude originally projected, a reduction in the availability of care would have surely resulted.
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Mr. BUYER. As TRICARE is implemented in each region, has TRICARE taken into consideration the higher concentration of retirees that may be in one area as opposed to other TRICARE regions? If so, what changes are made to guarantee these populations are served?
Dr. JOSEPH. Given the absence of Medicare subvention authority, TRICARE implementation today focuses on active duty families and CHAMPUS-eligible retirees and family members. We do not make specific provisions for the care of retirees as distinguished from other beneficiaries. Instead, we provide population data and information on past health care utilization to bidders on our TRICARE Managed Care Support Contracts; the bidders are required to describe, and we evaluate, how they propose to meet the health care needs of beneficiaries within specified access and timeliness standards. The contract awardee then has to fulfill these requirements. We avoid specifying some precise amount of care or number of providers to be included, relying instead on enforcement of the requirement to meet the needs of beneficiaries.
Under current authorities, Medicare-eligible beneficiaries are entitled to space-available care in military facilities. With subvention, we would offer them enrollment in TRICARE Prime, which would guarantee them access. Without subvention, we expect that space-available care will diminish as more space in military facilities is taken by enrollees in TRICARE Prime, the HMO-type element of TRICARE. We do require our TRICARE network providers to be Medicare participation providers, and we offer assistance to Medicare beneficiaries in locating a Medicare participating provider.
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Mr. BUYER. Has DoD studied the varying types of care that areas with high concentrations of retirees may need? Why or why not?
Dr. JOSEPH. We have not studied this issue in any comprehensive way, because our facilities are sized and staffed principally in relation to medical readiness. In preparing for the Medicare Demonstration of Military Managed Care proposed in the last Congress, we have assessed the extent of health care services for Medicare beneficiaries available in selected military facilities where the demonstration might be undertaken, in order to determine how much we would need to rely on civilian health care services in the demonstration.
Mr. BUYER. If yes, is that information taken into consideration when decisions are made to reduce inpatient access to army facilities, as part of TRICARE implementation?
Dr. JOSEPH. The goal of the TRICARE managed care system is to increase overall access to high quality, cost-effective health care for all eligible DoD beneficiaries. The TRICARE Managed Care Support Contracts, partnerships between the Department of Defense and private health care delivery organizations, significantly enhance our ability to offer a full range of health care services to our beneficiaries. The contractors establish networks of civilian providers to specifically augment our military physician and facilities networks. Essentially, they allow us to enhance access to care for all beneficiaries by supplementing the MTF capability with purchased care from a broad network of civilian providers, based on the needs of the beneficiary populations.
Mr. BUYER. Medicare subvention may not help every eligible veteran in a 40-mile catchment area, but it will certainly benefit areas with high concentrations of retirees near a military facility. Clearly, over the past few years, Congress has shown its support for Medicare subvention implementation. Therefore, is the possibility of new healthcare services for retirees being considered and planned for when decisions are made to close military medical facilities? Is there coordination between these two efforts?
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Dr. JOSEPH. Closure of military bases and their military treatment facilities (MTF's) required the Department of Defense (DoD) to initiate an intensive business process reengineering effort to design new ways to provide military health benefits for our beneficiaries residing near those facilities. Formerly, when an MTF closed, beneficiaries had to rely solely on either the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) or Medicare programs for their health care needs. That is no longer the case. With strong congressional support to do more for our beneficiary populations affected by base closures, we have enhanced our planning and programs to specifically address their needs. The Military Services are charged to develop transition health care plans for their MTF's scheduled for closure. These plans are coordinated at the DoD level to ensure a consistent and integrated approach to the identification of resource requirements and access to care at closure sites.
We have taken specific actions to ensure that eligible DoD beneficiaries remaining in areas affected by base closures, both past and future, are being provided with alternative health care delivery options following the closing of the local MTF. For instance, one of the greatest needs of this population is for prescription drugs. In response to this need, we have included retail and mail order pharmacy benefits in each location where a provider network is developed. This program is available to Medicare-eligible beneficiaries residing within former Base Realignment and Closure (BRAC) catchment areas and for those outside the catchment areas who had used a closed facility for pharmacy services within twelve months before its closure. Medicare-eligible beneficiaries may continue to obtain pharmacy services at no cost to them from remaining MTF's. Many of these beneficiaries also have the option of enrolling for health care coverage in nearby Medicare HMOs (health maintenance organizations).
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The Department believes that Medicare reimbursement to DoD is the key to alleviating the access to care problem for these and all our Medicare-eligible population. At the moment, we are awaiting legislation that would authorize us to implement an agreement between the Department of Health and Human Services, the Health Care Financing Administration, and the Department of Defense (DoD) allowing us to set up a Medicare demonstration in which DoD would operate a military managed care plan resembling a Medicare-risk HMO. Full implementation of the demonstration is contingent upon enactment of the authorizing legislation. Once Medicare reimbursement to DoD is authorized by the Congress, the Department could assume full responsibility for the health care needs of beneficiaries enrolled in the demonstration. Initially, enrolled Medicare-eligible beneficiaries. would receive care principally through the MTF's, but as the program matures, we would like to be able to make available to them the extended resources of our civilian network of providers. Ultimately, a successful demonstration can provide the basis for a nationwide program in which all dual-eligible beneficiaries may use their Medicare benefit, for which they paid throughout their working years.
Mr. BUYER. Retirees only have ''space available access'' to Army facilities under TRICARE. Does the program include any basic requirements for retired personnel or offer any guarantees of treatment or access to treatment in military facilities for retirees?
Dr. JOSEPH. The Military Health Services System provides health care to our retired beneficiaries, their families and survivors until they reach age 65. At that point, they are still eligible to use the services of military treatment facilities (MTF's), on a space available basis, but they become eligible for Medicare and, by law, lose their eligibility for care under CHAMPUS.
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The Department has a moral obligation to provide health care for its retirees. We will continue to provide health care services in military treatment facilities, on a space available basis, to Medicare-eligible retirees. With the continuing reductions in medical infrastructure, however, we believe space available will continue to shrink and these individuals will be forced to rely on fee-for-service providers in the civilian economy.
The most equitable way to resolve this problem would be to enroll over-65 retirees in the TRICARE HMO program and to seek reimbursement from HCFA for their care. This would ensure continuity of care and access to services for those retirees who want to remain part of the military community.
Retirees are eligible to receive health care benefits under the Medicare system when they become 65 years of age. They continue to be eligible for care in the MHSS on a space-available basis, but, by law, they are no longer eligible for care under CHAMPUS and therefore are not eligible to participate in the TRICARE program.
Since the private sector has achieved significant health care cost savings using managed care programs, DoD has dedicated a significant portion of its health care resources to developing a managed care program, TRICARE Prime, which will achieve the same results for the Federal Government. The Department is eager to apply the same managed care principles to the provision of care to its dual-eligible beneficiaries.
Mr. BUYER. Does TRICARE include any protections, minimum care, requirements, such as access or reasonable travel requirements, that must be met by private care providers when retirees are referred to them?
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Dr. JOSEPH. Yes. Under normal circumstances, enrollee travel time may not exceed 30 minutes from home to primary care delivery site, and travel time for specialty care may not exceed one hour under normal circumstances, unless a longer time is necessary because of the absence of providers (including providers not part of the network) in the area. The wait time for an appointment for a well-patient visit or a specialty care referral may not exceed four weeks; for a routine visit, the wait time for an appointment may not exceed one week; and for an urgent care visit the wait time for an appointment may generally not exceed 24 hours. Emergency services must be available and accessible to handle emergencies, within the service area 24 hours a day, seven days a week. The network must include a sufficient number and mix of board certified specialists to meet reasonably the anticipated needs of enrollees. Office waiting times in nonemergency circumstances shall not exceed 30 minutes, except when emergency care is being provided to patients, and the normal schedule is disrupted.
Mr. BUYER. Mr. Backhus, in your testimony you claim that the number of retirees likely to benefit from Medicare subvention appears small because available capacity in military facilities continues to decline. You also state that subvention would not be available to retirees who do not live near military facilities. If DOD received reimbursement from Medicare for care provided to Medicare-eligible retirees, could the Department increase capacity in military facilities to accommodate larger numbers of retirees?
Mr. BACKHUS. We do not believe capacity could be expanded a great deal. The ability to expand depends both on physical infrastructure and staffing. DOD officials told us that some larger facilities, such as medical centers, could expand to fill their existing infrastructure by adding staff. However, only about 15% of Medicare eligible beneficiaries live within 40 miles of a medical canter, DOD's definition of a catchment area. DOD officials also said that many smaller facilities offer little of the specialty care needed by many retirees and reportedly are already operating at or near their capacity. Thus, even with additional funds, these facilities are unlikely sources of added care for retirees.
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Mr. BUYER. How would base closures or downsizing of medical facilities affect subvention?
Mr. BACKHUS. More closures or downsizing would mean that fewer Medicare eligible retirees could be accommodated by subvention in military facilities. DOD officials in Health Affairs and those who have conducted studies on the appropriate size of the military medical system have suggested that further downsizing should occur. In fact, DOD currently has plans to reduce 17 hospitals to clinics which will eliminate most inpatient care provided by those facilities. In short, additional base closures or downsizing of medical facilities means less space available care and less capacity for enrolling beneficiaries in TRICARE Prime. Because active duty members and their families and retirees under age 65 receive first priority for enrollment, and thus care, in military medical facilities, Medicare eligible retirees under subvention would have less opportunity to enroll if facilities were downsized.
Mr. BUYER. To help retirees who do not live near military facilities, could the Department allow these retirees to use the TRICARE civilian network?
Mr. BACKHUS. With legislative authority, DOD could use its TRICARE civilian network to provide care under subvention. However, the TRICARE network is not available nationwide, and as we have testified, the cost advantage to the government of DOD doing this as opposed to the Health Care Financing Administration (HCFA) is questionable. Furthermore, HCFA already offers many retirees a Health Maintenance Organization (HMO) option through its risk contracts with private providers—including some companies who now have managed care support contracts with DOD. Over 240 of these plans exist nationwide and many provide benefits equal to or better than TRICARE. DOD has reported that many of its Medicare eligible retirees are already using these plans.
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Mr. BUYER. Would using the TRICARE civilian network be more cost-effective than contracting for care from other civilian providers and would using the TRICARE civilian network be less costly than offering these retirees FEHBP?
Mr. BACKHUS. As requested by the Chairman during the hearing, to the extent possible we will consider the potential effects of using the TRICARE civilian network in our comparison of alternatives for our final report. But, because the TRICARE civilian network does not now provide care for Medicare eligible beneficiaries, the cost data needed for an adequate response to these questions may not be readily available. To the extent that we cannot sufficiently address these questions in our final report, we will be happy to discuss followup work on this issue.
Mr. BUYER. Mr. Backhus, you said that DOD estimates that less than half of the older retirees currently using the military medical facilities in areas where subvention will be tested would be able to enroll in TRICARE Prime. Is this under the actual Medicare subvention demonstration being proposed by the Administration, or is it under the Department's Medicare subvention ''simulation'' plan?
Mr. BACKHUS. The estimate was development by DOD for its subvention simulation, however a senior DOD official told us that the expected enrollment capacity of the demonstration would be similar to that planned for the simulation.
Mr. BUYER. Does this mean that the remaining retirees will be completely disenfranchised from the system?
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Mr. BACKHUS. DOD's estimates assume that some space-available care will remain, but it will be less than exists now. To the extent that retirees cannot enroll in TRICARE Prime through subvention, or cannot access the remaining space-available care, they will not be able to access any source of DOD-sponsored health care. Furthermore, as we have testified, even those still able to access space available care will find that it is episodic and less than fully reliable.
Mr. BUYER. Mr. Backhus, in your testimony you said that allowing retirees to join the Federal Employees Health Benefits Program (FEHBP) would provide them with more dependable, consistent access to care. Is FEHBP readily available in all parts of the country.
Mr. BACKHUS. Yes, the FEHBP is available nationwide through fee-for-service plans such as Blue Cross/Blue Shield and the Government Employees Hospital Association (GEHA), and through regional Health Maintenance Organizations and Point of Service plans. The Washington Consumers' Checkbook Guide to Health Insurance Plans for Federal Employees estimates that every Federal employee can choose from at least a dozen plan options and many can choose from two dozen or more. There are over 400 health plans in the FEHBP.
Mr. BUYER. How do the TRICARE enrollment fees compare to the FEHBP premiums these retirees would have to pay if they were authorized use of these programs?
Mr. BACKHUS. Premiums under the FEHBP vary depending on the plan chosen. Assuming that military retirees would face the same premium sharing arrangement as other Federal employees, enrolling in TRICARE Prime could be less expensive than FEHBP for many retirees. This is because the Department intends to waive TRICARE enrollment fees for Medicare eligible retirees. These beneficiaries, therefore, would only be responsible for their Medicare Part B premium, approximately $526 per year for each person over age 65. The costs of some illustrative FEHBP plans are cited in the table below. It is important to note that FEHBP enrollees are not required to join Medicare Part B, but most do.
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Mr. BUYER. What would be the total cost to the federal government of allowing these retirees to enroll in FEHBP?
Mr. BACKHUS. The Congressional Budget Office (CBO) in its July 1995 report, ''Restructuring Military Medical Care,'' estimated that the fiscal year 1996 cost to the government of allowing all Medicare eligible DOD beneficiaries to enroll in the FEHBP would be $3.7 billion. This estimate assumed that these beneficiaries would pay the same share of FEHBP premiums as other federal employees and that DOD would pay for the Medicare Part B premium for the enrollees. We plan to review this estimate and others in more detail and, as appropriate, use them in a comparison of the alternatives to be included in our final report.
Mr. BUYER. Since the Department spends about $1.2 billion on care for Medicare-eligible retirees, could the Department pay for an FEHBP option by cutting Medicare-eligible beneficiaries out of the military health system, completely and using those savings to pay for this options? What impact would such a move have on military medical readiness?
Mr. BACKHUS. If the $1.2 billion that DOD estimates it now spends on treating Medicare eligible beneficiaries in its medical facilities were taken out of the Defense Health Program budget and Medicare eligible retirees were subsequently ''locked out'' of military facilities, that amount would pay for about one-third of the cost—as estimated by CBO—of covering all Medicare eligibles under the FEHBP. However, doing so may raise other issues for DOD, such as whether care for other beneficiaries may be affected and whether it may have to consider downsizing some facilities given that such funds are part of its total health care system operating funds. A lockout may also impact DOD's ability to maintain its Graduate Medical Education program, should it be unable to treat a sufficiently diverse mix of medical cases. On the other hand, appropriate training and education opportunities may exist in the private sector, such as in civilian medical facilities.
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Mr. BUYER. Has there been any discussion of possibly developing a test program for allowing Medicare eligibles to enroll in FEHBP? What about for using CHAMPUS as a second payer to Medicare? What is your professional opinion on the usefulness of testing such concepts?
Mr. BACKHUS. In its report on the Fiscal Year 1997 Defense Authorization Act, the Senate Armed Services Committee directed DOD to submit a report to Congress by March 1, 1997 evaluating the feasibility of an FEHBP alternative. This report has not yet been issued. While we believe there is value in testing these and other concepts, such tests have proven difficult to design so that their results are measurable and can be applied nationwide. Data sources in DOD that are sufficient to measure the effects of such tests are still in their early implementation and the variability of DOD facilities makes comparisons between test and control sites problematic. In addition, such tests can prove disruptive to beneficiaries who drop other insurance coverage to participate in a test program which ends without becoming a permanent program. In California and Hawaii, for example, the test of the CHAMPUS Reform Initiative ended when TRICARE was implemented. TRICARE incorporated higher beneficiary costs such as the enrollment fee, and also required a more restrictive management under primary care providers.
Mr. BUYER. In your statement, Mr. Backhus, you state that one alternative that would fill a significant gap for many older retirees is an expanded mail order pharmacy program. How should that program be structured to best meet the needs of these retirees with the least impact on the DOD health budget? and Would DOD need to prohibit these retirees from filling their prescriptions in military facilities in order to hold down the cost of this program?
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Mr. BACKHUS. There are a wide variety of design elements to be considered in developing a pharmacy benefit for Medicare eligible retirees. Moreover, DOD has not yet developed a specific proposal for a retiree pharmacy benefit that we can analyze. We plan to look at the entire area of pharmacy benefits in DOD in greater detail in a separate study and, to the extent that DOD has finalized its proposal, we will evaluate that proposal and others for our final report on military retiree health care.
Mr. BUYER. Would a mail-order pharmacy program provide a uniform, full-range of medications in its formulary? Or, in order to be cost-effective, would more expensive medications need to be excluded from the program? and How would excluding more expensive medications affect these retirees? Would it require them to pay high out-of-pocket costs for certain needed medications, or force them to take prescriptions that may not be the ''best fit'' for their ailments?
Mr. BACKHUS. According to a 1996 industry study, approximately 81% of HMOs and 41% of Preferred Provider Organizations (PPOs) use drug formularies.(see footnote 1) A formulary is a list of prescription drugs, grouped by therapeutic class, that are preferred by a health plan sponsor. Drugs are included on a formulary not only for reasons of medical value, but also on the basis of price. In developing formularies, companies rely on pharmacy and therapeutic committees, consisting of pharmacists and physicians, to analyze the safety, efficacy, and substitutability of prescription drugs. Formularies can be open, incentive-based, or closed. Open formularies do not penalize enrollees if their physicians prescribe nonformulary drugs. More restrictive formularies may provide benefits to enrollees if their physicians prescribe drugs on the formulary list or may penalize enrollees, charging them more if they are prescribed a drug that is not on the formulary. However, the health plans cover nonformulary products when physicians determine that they are medically necessary for their patients.(see footnote 2)
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Moreover, the use of a formulary to contain costs does not by definition exclude ''more expensive medications'' or require beneficiaries to accept medications inappropriate for their medical condition. How a formulary might affect DOD beneficiaries would depend on the extent to which DOD chose to be more or less restrictive. As noted above, pharmacist and physician committees, such as DOD's Pharmaco-Economic Center in San Antonio, Texas, develop formularies based on both medical efficacy and price considerations.
Mr. BUYER. Mr. Backhus, in your statement, you said that a recent survey found that 84 percent of military Medicare-eligible retirees have Medicare Part B, as compared to about 95 percent of the general population. Do you have any indication of where the majority of retirees without Medicare Part B live? Are they generally near military facilities, and do they receive most of their health care at those facilities?
Mr. BACKHUS. The most recent data from DOD's Survey of Beneficiaries indicates that 90 percent of military Medicare-eligible retirees have Medicare Part B, up from the results of the earlier survey. According to DOD officials, those without Medicare Part B are more likely to be found living in the vicinity of DOD facilities and probably rely on DOD for their care. An accurate count of Medicare eligible retirees with Medicare Part B is not available in DOD records and must be obtained through a matching of DOD to HCFA records. DOD has done such a match with HCFA data for a recently submitted report to Congress on the extent to which Medicare eligibles living in base closure areas have not enrolled in Medicare Part B. For the beneficiaries studied, this match found that those without Medicare Part B are more likely to live within the 40 mile ''catchment area'' of a military facility. DOD is also beginning to do this type of match to develop data for its proposed Medicare subvention demonstration, and has completed work on matches in the San Antonio, TX and Seattle, WA areas.
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Mr. BUYER. Since the Administration's subvention proposal would require these beneficiaries to be enrolled in Medicare Part B, do you believe Medicare subvention could actually be more harmful to these beneficiaries than the current ''patchwork'' system of care?
Mr. BACKHUS. For those without Medicare Part B, participating in subvention could cost them more, because they would have to pay the penalty for late enrollment. However, their DOD-sponsored care would then be guaranteed. Those who choose not to participate in subvention and do not enroll in Part B, but instead continue to rely on space available care, could find military facility care unavailable in the future.
Mr. BUYER. How substantial would late-enrollment penalties be?
Mr. BACKHUS. If a Medicare-eligible person does not sign up for Medicare Part B during their Initial Enrollment Period (a seven month period surrounding their 65th birthday), a surcharge is applied to their premium. Each year after the 65th birthday that they do not sign up for Medicare Part B, the surcharge increases by 10% of the current premium. The maximum penalty is 280% of the current premium, which would apply to a person enrolling for the first time at age 93. For example a 70 year old beneficiary who has not enrolled in Medicare Part B would pay a premium equal to 150% (10% for each year past age 65) of the current premium, or $65.70 monthly instead of $43.80. This penalty would be applied against the standard premium for each subsequent year he/she is enrolled in Part B.
Mr. BUYER. Mr. Backhus, you stated that as of January 1997, most facilities where TRICARE is in place reported having space available for older retirees, but that older retirees could not be assured of obtaining care whenever they sought it. Looking ahead, you said you think this situation will only get worse. Do you have an estimate of how long after TRICARE has been implemented that military treatment facilities will reach capacity with TRICARE Prime enrollees, cutting out space-available care for retirees?
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Mr. BACKHUS. Because of the wide variation in size, staffing, population mix, and demand for care at each facility, it is not possible to reliably predict when the direct care system will reach capacity and space available care will end. DOD officials told us that in larger facilities, such as medical centers, space available care for some specialties could remain for quite some time. Improved management of primary care and referrals to specialists have even increased space available specialty care in some large facilities. Even in these facilities, however, space available care remains episodic and relatively unreliable. DOD officials also said that many smaller facilities already have little care to provide to Medicare eligibles or any other beneficiaries who are not enrolled in TRICARE Prime. These facilities appear close to their capacity limits with their current enrollees.
Mr. BUYER. How does DOD plan to provide care to these retirees at that point?
Mr. BACKHUS. Once a facility reaches its enrollment capacity for TRICARE, space available care may be rare or non-existent for most non-enrollees, including Medicare eligibles. DOD is counting on subvention to enable it to enroll Medicare eligibles and use TRICARE's civilian networks to add capacity. However, as we have stated, we have concerns about the potential coverage and, for non-DOD facility care, the cost-effectiveness of Medicare subvention. But without subvention or some other alternative, many Medicare eligibles who currently rely on space available care will be without a source of DOD-sponsored care.
Mr. BUYER. Are your members willing to pay these premiums?
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Ms. TORSCH. Yes. Based on a survey conducted by the Coalition, we know that a significant number of our members can receive better coverage at less cost than the alternatives now available to them.
In 1995, the Military Coalition formed the Coalition's Health Alternatives Reform Task Force (CHART) to conduct a thorough evaluation of possible ways to restore equity to the current health care benefit provided to all uniformed services beneficiaries. After an extensive examination of the various alternatives, the Military Coalition endorsed the CHART study, which proposed a three-pronged approach: 1) Improve Tricare, 2) implement Medicare subvention, and 3) implement FEHBP–65. The Coalition associations unanimously agreed, however, that FEHBP–65 must be a voluntary program, so that none of their members would be forced to pay premiums, and that FEHBP–65 must be offered in tandem with Medicare subvention so that their members would have the opportunity to enroll in Tricare Prime if they lived near a military facility.
One of the reasons why the associations in the Coalition agreed to FEHBP–65 was that they realized that many of its members were already paying considerable costs for health care in the form of premiums for supplemental insurance, deductibles and co-payments. In fact, when the Coalition conducted a written survey of its members in early 1996, it was determined that, based on what members currently pay for health care, 33% of enlisted personnel and 40% of officers would benefit by enrolling in FEHBP since they would receive better care at less cost. If prescription drug expenses are factored in, even more might benefit because Rx coverage is included in all FEHBP options.
Mr. BUYER. Does this reflect a shift in general thinking of your members? Are military beneficiaries more concerned with making sure they have access to medical care than about paying for it?
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Ms. TORSCH. With the advent of Tricare, concurrent with the closure of 58 military treatment facilities (MTF's), we have noticed increased concern about access to the military health care system, especially among Medicare-eligible uniformed service beneficiaries. Many beneficiaries have already been locked out of MTF's while others are becoming aware of the stark reality that Medicare subvention will only benefit them if they live near a military hospital. These events are generating increased demands for FEHBP–65.
Mr. BUYER. If a fee-for-service option were included in subvention, would that help reach a much larger number of Medicare-eligible beneficiaries?
Ms. TORSCH. Possibly, except that a fee-for-service option is dependent on DoD making space available for care on an ad hoc basis for Medicare-eligible uniformed service beneficiaries in military hospitals and clinics. Currently, DoD is providing funding and resources to its hospitals based primarily on the number of individuals enrolled in Tricare Prime, which is one of the reasons space-available care for those not enrolled in Tricare Prime has rapidly diminished. DoD would have to be motivated to set aside a certain number of appointment slots in its clinics to treat Medicare-eligibles on a fee-for-service basis. But, so far DoD has not been receptive to the fee-for-service option. The Military Coalition has always been in favor of a fee-for-service component of Medicare subvention, and would certainly support this option in Medicare subvention legislation. If enacted, its success would ultimately promote the fee-for-service option, or only pay it lip service.
Mr. BUYER. How would a subvention plan that incorporates the Tricare fee-for-service option be less adequate than the Federal Employees Health Benefits Program (FEHBP)? Would it not provide access to care with at least two choices—Medicare or Tricare?
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Ms. TORSCH. In the first place, because it would depend on available space it would be a hit or miss proposition. Even under the best of circumstances, it would not provide one of the most important elements of good health care—continuity of care. Other factors would also limit its utility. For example, DoD has always told the Coalition that the only way a fee-for-service option under Medicare subvention would be cost-effective is if care were provided at a military treatment facility (MTF). This is problematic, because DoD has already closed 58 MTF's and is planning to downsize 17 more hospitals to outpatient clinics. This leaves a large portion of the continental U.S. without access to a MTF. DoD has also repeatedly told the Coalition that it can only offer Medicare subvention in locations where Tricare prime is centered around an MTF and cannot provide it throughout the entire nation. Therefore, the Coalition estimates that more than 50% of the Medicare-eligible uniformed services beneficiaries would not benefit from either enrolling in Tricare Prime or accessing an MTF on a fee-for-service basis. To fill that void, the Coalition considers its imperative that the uniformed services ''cast offs'' be given the opportunity to enroll in FEHBP–65—the same option that is offered to retired Members of Congress and virtually every other Federal civilian retiree.
Mr. BUYER. Would Medicare subvention be more effective in providing care to all military Medicare-eligible retirees if under subvention these retirees were allowed to enroll in Tricare Prime and receive their care wherever they live, through the Tricare civilian networks if necessary?
Ms. TORSCH. The Military Coalition agrees that a larger percentage of Medicare-eligible uniformed service beneficiaries would benefit from Medicare subvention IF they are allowed to use the Tricare Prime civilian network and IF Tricare Prime is implemented throughout the country. However, as we indicated in our previous answer, DoD has repeatedly told the Coalition that it will only enroll Medicare-eligible beneficiaries in areas where Tricare Prime is centered around a military medical facility. Further, DoD has not implemented Tricare Prime throughout the country. For example, in Region 7, DoD is not planning on implementing Tricare Prime in the St. Paul/Minneapolis area even though there are large numbers of retirees in that area and even though there are certainly enough civilian health providers available to support a Tricare network. Several factors militate against the viability of this option, including Tricare's unattractive, bare bones reimbursement rates, poor claims processing and the reality that the pool of available beneficiaries is insufficient to compete with those offered by providers under the FEHBP or in Medicare networks. Our concern, therefore, is that if Tricare were expanded with a view toward accommodating the vast majority of uniformed services beneficiaries under a civilian network, the resultant benefit would be inferior to offerings under the FEHBP and would do little to calm the feeling of being treated like second class citizens compared to the Federal citizen retired population. A fair question would be, Why build a military unique ''Volkswagen'' when a smooth-running Cadillac already exists, ready and rarin' to go?
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Mr. BUYER. Do you have any estimates of how much subvention could save Medicare or the federal government?
Ms. TORSCH. DoD would enroll Medicare-eligible uniformed service beneficiaries in Tricare Prime at 93% of the Medicare capitation rate. Therefore, DoD would be saving the Medicare program 7% for every Medicare-eligible beneficiary enrolled above the current ''level of effort.'' Under the terms of its agreement with the Health Care Financing Administration, DoD would continue its currently spending on Medicare-eligible uniformed service beneficiaries in the military health care system (about $1.4 billion per year for approximately 324,000 full-time users), before accepting reimbursement from Medicare for new enrollees. The total amount of savings to the government will depend on how many new Medicare-eligible beneficiaries (beyond the current 324,000 full-time users) DoD enrolls in Tricare Prime. In the Coalition's Health Alternatives Reform Task Force study, we estimated DoD could enroll an additional 100,000 Medicare-eligible uniformed service beneficiaries in Tricare Prime under Medicare subvention. Medicare would reimburse DoD $450 million for these individuals vice $480 million if these individuals enrolled in private sector Medicare HMOs or stayed with standard Medicare, thus saving the government $30 million per year.
Mr. BUYER. Is subvention the most cost-effective method of meeting the medical needs of this beneficiary group?
Ms. TORSCH. Subvention is the most cost-effective method for meeting the needs of the 35% or so of Medicare-eligible uniformed service beneficiaries DoD will be able to enroll in Tricare Prime. However, a second option is needed to restore health care equity to the 50% or more Medicare-eligible military retirees who will not be able to enroll in Tricare Prime. The Coalition believes that FEHBP–65 is a superior alternative for that purpose since it provides better and more comprehensive coverage than worldwide prescription drugs or CHAMPUS as a second payer. It is also less costly to the government than CHAMPUS as a second-payer, and less costly to beneficiaries than most Medicare supplementals.
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Mr. BUYER. Based on your understanding of this proposal, what do you think the impact will be on Medicare-eligible retirees in the simulation demonstration sites? Will it increase their access to care?
Ms. TORSCH. Do you know how many retirees will be eligible to participate in this ''simulation''? How many will actually be able to enroll in the program?
Mr. BUYER. Do you worry that this simulation could actually ''lock out'' some retirees who are now receiving some of their care in military facilities?
Ms. TORSCH. (This answer addresses the three interrelated questions.) Since DoD will not be receiving any reimbursement from Medicare for the simulation test (known as Tricare Senior), the percentage of Medicare-eligible uniformed service beneficiaries DoD will be able to enroll in Tricare Senior will not be as high as under a full Medicare subvention test (with reimbursement from Medicare). We have enrollment figures for only the site at Keesler AFB where the hospital commander has said he can only enroll 2,200 Medicare-eligible beneficiaries out of a total population of 6,000. Another test site—Eisenhower Army Medical Center—has a Medicare-eligible population of 6,500; the hospital commander says he will try to enroll 4,800, but the Coalition believes that figure may be high. We anticipate the percentage will be lower at other test sites where the eligible population is much higher.
Tricare Senior will increase access to care for those lucky enough to be enrolled. However, it is almost certain that space available care in the MTF will almost completely disappear for those Medicare-eligible uniformed service beneficiaries who are unable to enroll in Tricare Senior. That is why the Coalition strongly believes that legislation needs to be passed for a full Medicare subvention test so that DoD can use the reimbursements from Medicare to expand its Tricare Prime network to enroll more beneficiaries.
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Mr. BUYER. Do you fear some members of Congress may see this as justification for not enacting subvention legislation until the Department completes this three-year simulation?
Ms. TORSCH. Yes, the Military Coalition is very concerned that some members of Congress could misconstrue DoD's simulation test as obviating the need for legislation for a full Medicare subvention test. It would be a travesty if we lost the momentum for subvention we generated in the last two years. We strongly recommend this Subcommittee continue its leadership role by ensuring that Medicare subvention demonstration authority is enacted this year.
Mr. BUYER. The General Accounting Office earlier said that a mail-order pharmacy benefit might fill an important benefit gap for retirees with limited or no pharmacy coverage. Mr. Lord, in your statement, you say that a world-wide pharmacy benefit would be a step toward restoring the lifetime commitment to health care, but that the Military Coalition has concerns with the current structure of DoD's proposal to establish this benefit. Has the Coalition discussed these concerns with DoD?
Mr. LORD. The Military Coalition was first briefed on DoD's proposal on January 21, 1997 by the Assistant Secretary of Defense for Health Affairs. The program was presented as one of three inter-related proposals designed to enhance the military health care benefit for Medicare-eligible uniformed services beneficiaries. As we said in The Military Coalition's written statement, we applaud DoD's efforts to create a more comprehensive prescription benefit. The proposal as presented to us, however, raises a number of concerns, which we explained in detail in our written statement and which I discussed further in my oral testimony before the Committee. We conveyed these same concerns in a letter to Dr. Joseph which was sent on February 6, 1997.
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Mr. BUYER. Has the Department been receptive to addressing these concerns?
Mr. LORD. Mr. Chairman, to date The Military Coalition has not received a response from the Department to the concerns which we raised in our February 6 letter. As we indicated in our written statement, The Military Coalition is very interested in continuing to work with DoD and the Committee to create a meaningful prescription benefit without penalizing current users. Dr. Joseph indicated during his testimony that the Department is merely working with some ideas regarding a mail-order pharmacy benefit, which is different than our previous understanding of the status of development of the program. We certainly hope that DoD will consider our concerns as the program is structured. During his testimony we were heartened to hear that he does not expect to require beneficiaries to enroll in Medicare Part B as a condition of participation in the DoD pharmacy program, which does address one of our major concerns.
Mr. BUYER. Mr. Lord, the General Accounting Office has said that expanding the current BRAC mail-order pharmacy benefit to retirees living in non-catchment areas (areas with no military facility within 40 miles) and continuing to allow all other retirees to continue to use military pharmacies might be the least costly way to structure a mail order pharmacy benefit? Would the Military Coalition support a pharmacy benefit structured this way?
Mr. LORD. Mr. Chairman, The Military Coalition views an expanded pharmacy benefit as an important step toward fulfilling the commitment of lifetime health-care promised to those who served their country and endured extraordinary sacrifices when called upon. We would support a pharmacy benefit structured as described above provided it does not penalize current users of the military pharmacies, which is what we understand that the current concept being developed by DoD would do. I must emphasize the fact that The Military Coalition views an expanded pharmacy benefit as an important step, and not a solution, to the health care problem for Medicare-eligible beneficiaries. As we have indicated, we view the combination of Medicare subvention and FEHBP–65 as the only meaningful way to resolve the health care problem for our Medicare-eligible retirees.
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Mr. BUYER. Will such a benefit be effective in meeting the prescription drug needs of all military retirees as you understand those needs?
Mr. LORD. The expanded pharmacy benefit as described above would meet the prescription drug needs of military retirees, with the exception of those retirees who do not live in a catchment area and require prescriptions which cannot be accommodated in a practical way by mail-order, such as antibiotics or chemotherapy drugs.
Mr. BUYER. Mr. Partridge, offering enrollment in FEHBP would require beneficiaries to pay a percentage of the premium. The current government employee's share in 28 percent. The majority of Medicare-eligible retirees we hear from here in Congress say that they were promised ''free health care for life.'' FEHBP would not be free. Do you know how much the individual's share of the premium would be?
Mr. PARTRIDGE. In a typical plan for the Washington, DC area, the individuals' share of the FEHBP premium would be $44.94 per month ($539.28 per year) for a Blue Cross/Blue Shield Standard plan which includes both fee for service and Preferred Provider Options and prescription drug coverage.
Mr. BUYER. What is the difference in total cost to a retiree between enrolling in TRICARE-Prime and an FEHBP plan with the same medical benefit?
Mr. PARTRIDGE. There is little difference in total cost to non-Medicare eligible retirees enrolling in TRICARE-Prime compared with an FEHBP plan with the same medical benefit. The premium for a Washington, DC, HMO, Kaiser, is $566.00 per year. The premium for TRICARE-Prime is currently $230.00 per year; however, TRICARE-Prime is not yet available in the Washington, DC area. Fees for prescription drugs, office visits, lab work, x-rays, etc. are generally lower in the Kaiser HMO than TRICARE-Prime, thus offsetting the higher premiums. Civilian HMO's often offer eye, dental and other benefits, which TRICARE-Prime as yet has not fully matched.
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Mr. BUYER. Are the members your organization represents willing to pay these premiums?
Mr. PARTRIDGE. Most of our members would like the option of continuing in the current DoD sponsored MHSS or choosing a plan offered under FEHBP. They pay premiums now—TRICARE enrollment premiums, Medicare or CHAMPUS Supplemental premiums and for those over 65, Medicare Part B. Many will choose fee for service/PPO plans rather than HMOs or TRICARE-Prime. Most of those willing to enroll in an HMO would probably enroll in TRICARE-Prime if given the choice. Unfortunately, TRICARE-Prime is not widely available. Currently, many Medicare-eligible retirees participate in many HMOs because they have been unable to access MTF's. They pay no premiums or co-pays and low fees for office visits.
Mr. BUYER. Does this reflect a shift in the general thinking of your members? Are military beneficiaries more concerned with making sure they have access to medical care than they are about paying for it?
Mr. PARTRIDGE. Over the years as military beneficiaries have seen hospitals close, pharmacies cut back, and clinics close they have become increasingly concerned that they will lose all access to DoD sponsored care. While disappointed and angry with the failure of the government to keep the promise of free lifetime medical care, they have become more concerned with lack of access to medical care. There are a small number of retirees and widows who do not have a CHAMPUS or Medicare supplement and some are not enrolled in Medicare Part B. They are gambling that they will not get sick or if they do, that they can get in a military hospital. For these retirees, any premium or fee will be out of reach financially. However, the vast majority of retirees of all grades would rather pay than lose all access to medical care. At the same time they want the government to honor its commitment to provide lifetime care. However, they do not believe DoD has a plan that will do so at any time in the near future.
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Mr. BUYER. Mr. Ouellette, would the National Military/Veterans Alliance support a pharmacy benefit structure this way? Will such a benefit be effective in meeting the prescription drug needs of all military retirees as you understand those needs?
Mr. OUELLETTE. We would not support a pharmacy benefit structure that restricts retirees access to military pharmacies based on where they live. The catchment area was originally designed as a benefit to military beneficiaries, i.e. if they lived 40 miles from an MTF they would not need to obtain a non-availability statement. We oppose any effort to use the catchment area as a means of funding, restricting or denying care to military beneficiaries.
A mail service pharmacy benefit has been a long time objective of the National Military/Veterans Alliance. We believe a mail service pharmacy can be developed as an option for retirees while preserving the current system for those who prefer to continue using it. We would like to work with this committee and DoD in developing such a benefit. The BRAC benefit offered to all, funded and structured with a sufficiently large formulary, with appropriate access to branded drugs could be a welcome step in moving toward DoD sponsored health care for Medicare-eligibles. However, the plans we have seen to date do not meet the criteria of a supportable proposal.
Mr. BUYER. Mr. Partridge, in your written statement you state that if subvention is enacted Medicare eligible beneficiaries enrolled in TRICARE should be given the same priority for care as other enrollees. Does the DoD subvention proposal not provide a priority for care for Medicare-eligible retirees enrolled under subvention?
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Mr. PARTRIDGE. While all TRICARE enrollees have priority of care compared to those not enrolled (except active duty who always take priority), we are concerned about priority of care among the enrolled beneficiaries. We would like assurance that Medicare participants in TRICARE-Prime have equal priority for treatment and will not be turned away from or be subjected to extra fees at MTF's/networks based on their status.
Mr. BUYER. Do you think these retirees should be given the same priority as active-duty family members or as other non-Medicare-eligible retirees?
Mr. PARTRIDGE. We believe that all enrollees should have equal priority of care. Once enrolled, there should be no distinction among enrolled beneficiaries.
Mr. BUYER. Mr. Ouellette, we've been told by the Department of Defense that about 25 percent of the 1.2 million Medicare-eligible retirees are reliant on the military health services system for the majority of their health care. Do you believe that estimate is accurate? If so, where do the other 75 percent get their care?
Mr. OUELLETTE. We have been unable to confirm the DoD figure of 25 percent. However, we believe that most Medicare-eligible military retirees obtain their care other than in the MHSS. Many live in the sunbelt where Medicare HMOs abound and are enrolled in those. Others depend on plans they kept from post retirement careers. In many cases their spouses worked for Federal, state or other employers and they have care through their spouses. Finally, many have enrolled in Medicare Part B, have Medicare supplements and depend on this coverage.
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Mr. BUYER. Do you think the relatively low number is due to a lack of space-available care at many military facilities?
Mr. OUELLETTE. There is no doubt that the low number is due to lack of space-available care. Retirees are regularly turned away as hospitals are closed or downsized, as clinics close or personnel and funding cuts limit the care available at those hospitals remaining open.
Mr. BUYER. If subvention is enacted, what percent do you estimate would receive their care through the military health system? Would it increase at all?
Mr. OUELLETTE. Current subvention legislative proposals severely limit DoD's capability to expand care to Medicare eligible military retirees. Under these proposals little increase in patients seen would occur. The 25 percent figure DoD uses is full time equivalent (FTE) patients, not a true figure showing all medical needs met for individuals. Current proposals would limit care and limit savings. DoD would provide more care to fewer individuals. Additional beneficiaries would be added only if DoD could enroll them and provide all of their care. In most cases this would require contract support from local providers. If a fee for service option as we recommend were included in subvention legislation, DoD could provide care based on available resources and Medicare would be the recipient of savings of 25% to 44% over fee for service care provided in the private sector. It would require no contracts and would make maximum use of all available MTF resources if properly managed.
Mr. BUYER. Mr. Partridge, in your statement you mentioned that the Defense Health Program (DHP) is underfunded again this year. On this committee, we have been unsuccessful in determining just how short the DHP is this year. Do you know the level of this shortfall? You also state that there are insufficient funds for fiscal year 1999 and beyond. Do you have any estimate of the level of underfunding in those years?
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Mr. PARTRIDGE. The numbers we have been using are $609,000,000 of which we understand OMB has admitted to $247,000,000. However, our concern goes beyond these numbers. We understand the Uniformed Services University of the Health Sciences was not fully funded because the Administration is continuing efforts to close it despite the clear intention of Congress to keep this cost effective, outstanding institution open. Our concern for fiscal 1999 and beyond is based on GAO/NSIAD–97–83BR, Defense Health Program which showed that from 1998–2003, the budget shortfall could be $8.4 billion. This is conservative since it does not take into account the disastrous condition of TRICARE Standard/CHAMPUS which needs significant improvement in reimbursement rates.
QUESTIONS SUBMITTED BY MR. LEWIS
Mr. LEWIS. But they are looking at, you know, TRICARE is going to be coming in there (Ireland Army Community Hospital at Ft. Knox). But will TRICARE take care of their problem there? Will that still allow for space available in the future for the retirees? And again, I have a concern that if we continue to down-size our medical personnel, as the chairman mentioned, will we have the opportunity to respond to take care of our military in time of war?
Mr. BACKHUS. We have provided Mr. Lewis' office with information on this issue obtained from the Office of the Army Surgeon General and identified a contact point in the Surgeon General's office in the event that Mr. Lewis has further questions.
QUESTIONS SUBMITTED BY MR. THORNBERRY
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Mr. THORNBERRY. Dr. Joseph, if we got full Medicare subvention, is it your opinion that that solves the problem basically, for what percentage of over-65 retirees?
Dr. JOSEPH. According to data collected during the fourth quarter of Fiscal Year 1996, a total of 632,575 dual-eligible beneficiaries reside within the catchment area of a military treatment facility.
Mr. THORNBERRY. Would it at least be on a region-by-region basis? If so many folks sign up in Region V, then Region V gets an amount of money, so there is a formula it can be distributed by?
Dr. JOSEPH. Military treatment facilities (MTF's) will receive all funds required to provide health care to Medicare demonstration enrollees. The funds are allocated by the Defense Health Program (DHP) capitation model and includes the MTF's level of effort for all Medicare-eligible beneficiaries.
MILITARY COMPENSATION REFORM AND RECRUITING/RETENTION ISSUES
House of Representatives,
Committee on National Security,
Military Personnel Subcommittee,
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Washington, DC, Thursday, March 13, 1997.
The subcommittee met, pursuant to notice, at 10:05 a.m., room 2216, Rayburn House Office Building, Hon. Steve Buyer (chairman of the subcommittee) presiding.
OPENING STATEMENT OF HON. STEVE BUYER, A REPRESENTATIVE FROM INDIANA, CHAIRMAN, MILITARY PERSONNEL SUBCOMMITTEE
Mr. BUYER. The hearing will come to order.
Mr. Taylor is presently detained, and he is on his way. He does not like to give statements, so why don't I just go ahead and read my statement? Then when he arrives, we will turn the mike over to him.
Today the Subcommittee on Military Personnel will turn its attention to the predominant quality-of-life program in the military, which I believe is the military compensation, and two programs that contribute directly to future combat readiness, recruiting and retention. During this past fall, the House National Security Committee staff conducted an extensive series of focus groups with officers, enlisted personnel, and their families at military installations across the Nation and in the overseas theaters. The results were troubling, not just because they demonstrated a remarkable consistency that military quality of life has eroded over a wide range of programs, but also because they confirmed the damage that many of the members of this committee had feared would ultimately occur as the defense budget has been reduced, notwithstanding the reassuring testimony of Department of Defense officials throughout the drawdown.
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The focus groups have shown that not only are military people under immense stress resulting from a pervasive ''do more with less'' attitude and record operational tempo levels, but they are also struggling to make financial ends meet in their homes. The message of these groups was very clear: people are wearing out, and absent any changes to the financial and operational tempo conditions, it was only a matter of time before retention and recruiting would begin to suffer.
The enduring message of financial need emerging from the focus groups was emphatically reinforced on March 4 during the joint hearing with the Readiness Subcommittee. Testimony that day from senior enlisted witnesses and spouses of military members was compelling and unequivocal. A pay increase was the highest priority need for all members, but particularly the enlisted force.
The issue of the military pay raise is an interesting one. For example, the President's budget request makes a point of clarifying that the 2.8-percent increase is the largest allowed by law, even though it is a half percent below the pay raise dictated by the Employment Cost Index, the ECI. As a result, this pay raise will follow suit with the pay raise in fiscal year 1994, 1995, and 1996 and will contribute to the growth in the gap between military and civilian pay raise rates. The only pay raise that did not increase the gap was the fiscal year 1997 pay raise, which was about 3 percent, two-tenths of a percent higher than the ECI level.
Although I understand that experts disagree on the pay comparability issue and the significance of the gap, I do not believe that it is healthy to allow the gap to be systematically increased year after year. If the budgets continue as currently projected, the gap will increase to 13.5 percent in fiscal year 1998 and ultimately over 15 percent by the year 2001. I think we need to cooperate to find a way to prevent that from happening.
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My interest in correcting the situation is made even more compelling when you consider the half percent of a point decrement in question results from a legislative nexus with the law that dictates Federal civilian pay raises and has no connection to the management of military personnel.
In addition to the pay raise, this legislative year promises to be the busiest in nearly 20 years. Congress has been anxious to reform both the basic allowance of subsistence, the BAS, and the basic allowance for quarter, BAQ. The President's budget includes a proposal to reform BAS. It is not without controversy, so we look forward to learning more about that from the witnesses here today.
On the issues of recruiting, when I think the important missions performed by the peacetime military, I tend to think about the actions we take today to protect combat capability in the future. When you do that, the obvious conclusion is that the quality of people are absolutely essential to any future military force. That means recruiting has to be one of the most important missions, if not the most important mission, of bringing in these people but also retaining them.
My concern about recruiting has recently been heightened by a series of management decisions taken by the Army as it confronted increased difficulty achieving its recruit quality goals. In January 1997, the Army was facing a potential shortfall of 14,000 from its fiscal year 1997 accession mission, and a drop in recruit quality to 88 percent high school diploma graduates. That is 7 percent below the Army's objective.
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Given the austere budget environment, the Army's response was extraordinary. The Army stopped the departure of recruiters as they reached the end of their tours, thereby immediately adding 350 field recruiters to the force. The Army incrementally added $68 million to enlistment bonuses, education incentives, and advertising. The Army doubled the recruiting objective for prior service personnel, an easier population to recruit, from 4 percent to 8 percent. The Army announced on March 4 that their goal for the recruits with high school diplomas would be reduced from 95 percent to now 90 percent.
This is a very troubling event because no one really knows how deep this problem is or how much we will be able to invest to assure the recruiting successes.
We are embarking on a slippery slope of recruit quality erosion and increased resource investment. For example, if the increases the Army has applied during fiscal year 1997 are extended to the year 1998, the cost jumps to an additional $122 million, an amount that will be very difficult to find in the very tight budget. What is even more worrisome is the almost inevitable threat that the problems being experienced by the Army will be extended to other services. Historically, the Army is always the first to experience some of the negative recruiting trends. Certainly, other services are not immune to the conditions that created the challenging recruiting environment. The high accession requirements that come with the end of the drawdown, an economy that is producing jobs, the reduced number of enlistment-age youth, the decline in youth propensity to join the military, and the stagnation of recruiting funding within the tight budgets are real problems for all of the services.
Overlaying the recruiting problem is a growing problem with the first-term attrition that I fear may result from a growing disconnect between the moral and ethical standards within society and the standards espoused within the military. Our discussions with recruiting managers has yielded very few optimistic voices. Caught in the tangle of uncertainty are the recruiters themselves. I believe we must find ways to motivate them to succeed while enhancing their quality of life. We have increased their pay. We did that last year, and we look forward to gaining a better understanding of that scope of the problem that I just discussed.
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On the issues of retention, finally we will examine the retention issues in the services. Having heeded the warning of men and women we spoke with last fall and we continue to speak with and that the staff had met with, I am very interested in understanding the services' strategy for improving attitudes about retention. We have always feared that the drawdown has masked a fundamental shift in attitudes within the force about military careers from predisposition to needing justification to get out, to needing justification to stay in.
While first-term reenlistment rates always bear watching as a historical indicator of the retention climate, I have observed a more disturbing trend for second-term reenlistment rates as they go down. This would appear to reflect the very quality-of-life concerns we have heard about in focus groups, and I hope that the services are tracking these trends very closely as we in theory emerge from this drawdown. I say theory because we all know what the Air Force and the Navy has done with the personnel numbers and breaking through the floors which this committee had set.
The specter of this continuing drawdown has a very coercive effect on the morale and retention, and I hope the services have approached these cuts very cautiously. I am also increasingly concerned about the retention of some of the high-value people such as the pilots and the nuclear-qualified officers and whether or not it begins to impact for the technicians. It seems that every day there are articles about new trends in airline hiring and their preferences for military-trained pilots and technicians when they can get them.
We have already seen a decreased willingness within the pilot and nuclear officer communities to accept retention bonuses. We need to understand what it has done to turn the trend around and retain these valuable resources, and, Admiral Oliver, when I was on the aircraft carrier John F. Kennedy this past weekend, I asked some of the pilots the question—and these are brand-new pilots—How many of you are receiving contact from companies and corporations? And they all started laughing and shaking their heads. They all are being pulled away. And so they have just arrived on the carrier, and they are trying to be pulled away. So the pressures are very real out there.
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Let me now yield to Mr. Taylor for any comments or opening remarks he would like to make.
STATEMENT OF HON. GENE TAYLOR, A REPRESENTATIVE FROM MISSISSIPPI, RANKING MEMBER, MILITARY PERSONNEL SUBCOMMITTEE
Mr. TAYLOR. Thank you, Mr. Chairman. Like you, I am properly concerned about the welfare of the men and women serving our Nation in the military and their families. The sanctioning of a systematic annual increase in the gap between military pay and private sector pay raises how the Department of Defense is wrong. Mr. Chairman, I agree that something needs to be done to correct the situation.
I am particularly sensitive to the needs of our most junior military members, especially those with families. Many of these families are having to make very troubling compromises to make ends meet, compromises that most of us, fortunately, are able to avoid. For many of these young families, the need for adequate safe housing is secondary to just putting food on the table. With 12,000 service members, even putting food on the table requires the use of food stamps. That is totally unacceptable.
While I am aware that the Department of Defense has an explanation for the less than 1 percent of the force who receive food stamps, it remains an issue that troubles me deeply. In an effort to address my concern about the junior members of the force, I am considering the pros and cons of a flat amount pay raise.
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For example, funding set aside for the pay raise would be divided equally among all of the members of the active-duty, thus yielding a single pay raise amount for all personnel. I have used this approach when giving pay raises in my office, and I believe it to be a fair and effective method of allocating pay raises that protects the interests of those receiving the least. It has the effect of directing and lifting the lower end of the pay scale, thereby assisting the very people that we need to help.
I do not need to remind Lieutenant General Mutter that over half of all the people in the U.S. Marine Corps are lance corporals or below.
Most importantly, two-thirds of all the uniformed personnel would receive a larger pay raise under this plan. I happen to have been an E–2 the last time this was done. It was done in 1971, in November. Since then, every single pay raise has been done on a percentage basis, and the gap between those at the lower end and the higher end continues to increase. It simply is not fair. It is not right, and it needs to be addressed.
Mr. Chairman, it is important to note that a flat pay raise would be an advantage to our recruiters. This would seem to be particularly important as we enter an era where recruiting will apparently be more difficult and costly. I share the priority that you place on recruiting and agree that successful recruiting is essential to future combat readiness.
I am also very concerned about the welfare of our recruiters, as there are few people in the military who carry so much of the responsibility of representing the American Armed Forces to the American public on a day-to-day basis. I would hope that we could take some action to improve recruiter quality of life and provide incentives for the best people to become recruiters.
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Mr. Chairman, I am very supportive of our National Guard Youth Challenge Program. We are very proud of the excellent program in Mississippi. We are particularly proud that half the cost of that program is provided by the taxpayers of the State of Mississippi.
I have been disappointed to learn that these young men and women who graduate from this program with GED's are not universally acceptable for entry into the Armed Forces. Lieutenant General McGinty, the Air Force is the one branch that will not recognize a GED from a youth challenge program. I would hope we can address that this year.
I would hope that the services could make an exception to their accession policies to allow the entry of these highly motivated young people who have already proven that they can survive and thrive in a tough military-type environment. I am confident that the services will not be disappointed by having these young people in uniform.
Thank you, Mr. Chairman.
Mr. BUYER. I would like to welcome our panel today. There are obviously some familiar faces, the most familiar being that of the Honorable Frederick Pang—we welcome you here this morning—the Assistant Secretary of Defense for Force Management Policy and a respected authority on military personnel matters.
I would also like to welcome back Lt. Gen. Michael McGinty, the Deputy Chief of Staff, Personnel, U.S. Air Force. And the other three appearing for the first time before this Personnel Subcommittee—there is a good relationship, I believe, between this committee and the personnel chiefs, so that you are new not because they did a bad job, you know. But we welcome Lt. Gen. Frederick E. Vollrath, Deputy Chief of Staff for Personnel, the U.S. Army. We welcome also Vice Adm. Daniel T. Oliver, the Chief of Naval Personnel, the U.S. Navy. We welcome Lt. Gen. Carol A. Mutter, the Deputy Chief of Staff for Manpower and Reserve Affairs, the U.S. Marine Corps.
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I would like to share with the committee that the prior chief of the U.S. Marine Corps was quite a warrior, and I asked the Commandant that whomever the replacement would be, would be a warrior, and he assured me, in fact, that it would be a warrior. When I met with Lieutenant General Mutter, who came to the office, I asked her: The Commandant assured me that the personnel chief would be a warrior. Are you a warrior? To which her response was very articulate, and she said: I may not be a warrior, but I always think of the military—I always think of those in the field.
I will not put words in your mouth, but it was very close to that, and you were very articulate, and your sincerity was very real.
Now, Secretary Pang, you may begin, and then we will follow your statement with statements from the Army, Navy, Air Force, and the Marine Corps, in that order. Secretary Pang.
STATEMENT OF FREDERICK PANG, ASSISTANT SECRETARY OF DEFENSE FOR FORCE MANAGEMENT POLICY
Mr. PANG. Mr. Chairman and members of the subcommittee, I appreciate the opportunity to appear here this morning, along with my colleagues, to report on recruiting and retention in our military and our plans for compensation reform.
I have submitted a written statement for the record, and with your permission, I would like to briefly summarize it.
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Mr. Chairman, before I get into the specifics, I want to set the context for our recruiting mission. Military service is often referred to as a calling. As you know from your service in uniform yourself, Mr. Chairman, it is a way of life that demands young people surrender many of the personal freedoms they take for granted in the civilian world. They must adapt to a regimented life-style. They must meet strict standards of discipline, performance, and honor. And once they are trained, we frequently ask them to do difficult and dangerous jobs.
There is nothing in civilian life that can prepare them for what they will find in the military. So the first challenge for us, given what we demand, is to convince enough young people that the rewards of service are worth the sacrifices we will call upon them to make.
Mr. Chairman, I am pleased to report that we have been very successful at meeting this challenge in recent years. In each of the last 3 years, all of the military services have achieved their recruiting goals, and this has been accomplished despite a declining propensity among young people to join the military. We succeeded to a great extent because of the extraordinary support we have received from the Congress, and particularly this committee.
When we reported trouble in meeting our goals in fiscal year 1995, you acted swiftly to give us additional funding for recruit advertising. And as a direct result, the services reported one of their best recruiting years in the history of the all-volunteer force. When we told you that we needed more recruiters, you lifted the recruiter caps, and, again, your action was a crucial factor in our recent success.
The first 4 months of this fiscal year remind us that recruiting remains a tough job, but one at which I believe we can succeed. The good news is that the recent slide in the propensity of young people to enlist seems to have abated. The challenging news is that the recruiting objectives of the services have increased substantially now that the drawdown is essentially complete. In fact, our fiscal year 1997 recruiting objective is more than 20-percent higher in the aggregate than in 1995, making a tough job even tougher. But all services have met their recruiting objectives thus far in fiscal year 1997.
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Mr. Chairman, as you noted in your opening statement, the Army will have the most challenging task because its recruiting objective is fully 44-percent higher than it was just 2 years ago in 1995. We are working very closely with the Army to ensure that it will have the necessary tools to meet its objective for this fiscal year.
Our second challenge, once we have recruited young people into our forces, is to mold them into soldiers, sailors, airmen, and marines. We want as many of these recruits as possible to make it through their initial term of service, but it is also important that only those who can adapt to our standards remain in our force.
Frankly, a certain degree of first-term attrition is a healthy and necessary part of the system. Of course, when attrition is too high, it becomes costly and disruptive. Attrition in the first term has been increasing somewhat, and while the increase is not alarming at this time, we are concerned about it. We are working on several strategies, including the adoption of most of the recommendations from a report by the General Accounting Office to lower attrition responsibly.
But let me emphasize that we will not lower our standards in order to meet an arbitrary target. We will instead do everything we can to help young people adapt to military life.
Once we have recruited these young people and brought them through their first term of service, our task is to retain the best of them to build our career force. In a competitive employment market, that means providing adequate compensation, decent housing, rewarding career opportunities, and a robust program of community and family support.
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The most important element of quality of life for service members is an adequate level of compensation, as you noted. The military compensation package is composed of pay, non-pay, and retirement benefits, each of which is crucial to the way we provide for our service members. We have allocated funds to support the full pay raise authorized by law for service members through the end of the decade. This commitment reflects our recognition that the adequacy of military pay is essential to attract and retain high-quality people.
In an effort to further improve compensation for service members, we are recommending two major initiatives this year. These changes in the housing and subsistence allowances will result in a fairer and more logical system for providing these allowances. Our proposal for housing allowance reform, detailed in my written statement, is the first step in reducing the percentage of housing costs borne by individual service members. It will eliminate the complicated variable housing allowance and basic allowance for quarters formulas in housing surveys and replace them with a single allowance based on a commercially provided housing cost index. We have designed our proposal to make it cost-neutral.
We are also proposing a major reform of the basic allowance for subsistence, which would entitle all members to the allowance, tie future increases in the allowance to a credible food index, and eliminate certain inequities among the services on how the allowance is paid during operational deployments. We are confident that these changes will benefit service members and lead to a more efficient compensation system.
Mr. Chairman, we have a high-quality, ready force because we have respected the arduous nature of military service by investing in a decent quality of life for our people. The evidence is in the return on this investment by the splendid performance of our troops every day around the world and in performance in complex, dangerous missions such as in Bosnia and in Haiti.
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Mr. Chairman, I know that you and the other members of this committee share that view, and I look forward to working with you to support those who defend our Nation.
Mr. Chairman, that concludes my oral statement. I will be happy to answer your questions at the appropriate time.
[The prepared statement of Frederick Pang can be found in the appendix on page 206.]
Mr. BUYER. Thank you, Mr. Pang.
Lieutenant General Vollrath.
STATEMENT OF LT. GEN. FREDERICK E. VOLLRATH, DEPUTY CHIEF OF STAFF FOR PERSONNEL, U.S. ARMY
General VOLLRATH. Mr. Chairman, members of the committee, thank you very much for the opportunity to testify before you on very necessary matters concerning recruiting, retention, and that which supports both, compensation and quality of life.
Mr. Chairman, as you very correctly and aptly stated in your opening statement, the Army does face some recruiting challenges in the future. To date, we have been successful in meeting our recruiting mission. The rise in the requirement this year to about 90,000 new soldiers was not unforeseen. We had used reduced recruiting as one of the drawdown mechanisms. We knew that upon termination of the drawdown we would again have to begin replacing one-for-one all of our losses. That is the primary driver for the increase in the recruiting mission this year, and the increase this year that we see of about 90,000 will continue then throughout the remainder years to the POM if we sustain a 495,000-active-component Army.
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Also in your statement you correctly point out that the Army has taken quite a few actions in order to ensure success as we look to the future: increased bonus money, increased advertising, increase in recruiters, and also a change in our objectives in that we have now established an objective of recruiting 100-percent high school graduates, but have increased the percentage of nontraditional high school certificate holders, normally referred to as GED, from about 5 percent of the mission to 10 percent of the mission. But having increased that by that 5 percent, we have at the same time stipulated that all in that category must score in the upper 50th percentile of our test score categories I to IIIA.
We believe with the changes that we have put in place, we will be successful in the near future. However, one area that bears looking at as we look to the next several years is the ceiling placed on the money available for college. We know by experience that money for college is a very large market expander for us. Presently, the ceiling is set at $40,000. When we take a look at the inflation rate of tuition over the last 5 years, it has clearly outstripped the overall inflation rate of the economy. Therefore, the buying power of the money that we now offer for college has diminished. It may be time to look at increasing that ceiling appropriately.
Next, soldier attrition and retention are also related to the success in the recruiting mission and overall readiness. As Secretary Pang indicated, attrition in the force has gone up, and that is true for the Army also. Our first-term attrition rate has risen over the last 5 years from about 31 percent of a first-term cohort to 37 percent. This, of course, affects how we recruit and the resources that we must devote. Therefore, we have embarked upon several actions to reduce attrition by 10 percent a year for the next 2 years, without lowering standards.
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In the area of retention, the total Army continues to meet its objectives and anticipates being successful in 1997. However, we are concerned about the future because of the perception of eroding benefits and the increased levels in personnel tempo.
The most fundamental requirement today is stability in compensation and quality of life. America's Army has undergone a drawdown over the last 5 years and is now more involved around the world than ever. Our soldiers and their families need to be assured in these turbulent times that they can count on stable, dependable support. And when questions arise about reduced pay raises, changes in retirement systems, and medical care, our soldiers become concerned about commitment, both institutional and, equally important, their own personal commitment.
While some improvements in compensation and quality of life are needed, the key to success, as far as I am concerned, is overall stability in these vital areas. The requested pay raise of 2.8 percent, that which is permitted by law, will help maintain the current quality of life of our soldiers, and we certainly recommend your continued support.
We also support legislation to reform the basic allowance for subsistence and link it to a credible food allowance index. We also believe that it should be expanded to cover all active-duty enlisted members.
The most recent changes in permanent change-of-station allowances have gone a long way to reduce our soldiers' out-of-pocket expenses. The increase in dislocation allowance, the reimbursement now permitted for delivery and return from POV, delivery to ports, as well as POV storage, certainly help. But we would also recommend stable funding in the PCS account because that is also key to quality of life and readiness.
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We should not forget retirees also. Retirees have served long and faithfully and selflessly for our country. Today they consistently express concern about the perception that the benefits that they were promised on active duty are possibly going to erode.
There are three top areas of concerns: the availability of health care, the changes in the cost-of-living adjustments, and possible reductions in the commissary and the PX system. Any further reductions in these systems could have a severe impact on future recruiting and retention. Therefore, we recommend stability as something that is critical to the total Army, active included.
The Army also remains committed to ensuring that soldiers and families have ready access to the programs and services that will enrich their lives. Our focus will be to provide that environment as efficiently as possible in concert with our sister services and the civilian community. And an adequate quality of life is critical to readiness.
Housing initiatives for families and single soldiers are underway to ensure adequate quarters. Child development and youth programs provide support to soldiers' families. Both are critical now as more soldiers are married and spouses are working. Army families are a key component of readiness as the Army continues to support robust family programs. These programs focus on family readiness throughout the deployment cycle: pre-deployment, deployment, and post-deployment.
For example, to support deployments to Bosnia, United States Army-Europe conducted family assistance center exercises within the local communities. These exercises better prepare the stay-behind force so as to assure the soldiers that were deployed that their families would be well taken care of. And your continued support of quality-of-life programs for families will make this possible in the future.
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We believe that America's Army today is one of the best and, with your continued support and our vigilance, will remain so.
Mr. Chairman, I thank you very much, and I await your questions.
[The prepared statement of General Vollrath can be found in the appendix on page 225.]
Mr. BUYER. Admiral.
STATEMENT OF VICE ADM. D.T. OLIVER, DEPUTY CHIEF OF NAVAL OPERATIONS, MANPOWER, AND PERSONNEL, U.S. NAVY
Admiral OLIVER. Mr. Chairman, distinguished members of the subcommittee, I welcome this opportunity to discuss Navy's perspective on compensation reform and Navy's efforts in recruiting and retention. With your permission, I will submit a separate formal statement and summarize it here in a couple of minutes.
Notwithstanding challenging operational schedules, your sailors, like all of our country's servicemembers, are team players who take great pride in getting the job done, often under difficult or even dangerous circumstances. They have a right to expect our absolute commitment to the very best resources available. Despite diminishing budgets, this commitment must include providing Navy members with the latest technology as well as fair compensation, benefits, and quality of life throughout active service and retirement.
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Mr. BUYER. Admiral, could you pull that mike a little closer to you? Thanks.
Admiral OLIVER. With regard to compensation, Navy's fiscal 1998 legislative agenda is modest compared with our 1996–97 compensation-related legislative initiatives. However, this year's proposals are important in maintaining competitiveness of our total military compensation package.
In concert with the other services, we strongly support reforming basic allowance for subsistence and the single housing allowance based on external price-based data. Fixing these most basic human need allowances, balanced with a fiscal year 1998 annual pay raise, will build upon past quality-of-life compensations promises kept and strengthen the commitment of our all-volunteer force to stay with us. It is our total military compensation package—pays, allowances, special pays, and bonuses—that will ensure combat readiness of our ships at sea and result in adequate recruiting, retention, and morale.
With regard to recruiting, fiscal year 1996 proved to be a challenging but successful year for Navy recruiting, achieving nearly 100 percent of accession goal while improving quality. At the same time, significant progress was made in recruitment of minorities and women. Now and in the future, it will not be enough to simply recruit numbers of sailors. For example, Navy requirements dictate that over two-thirds of our new enlisted recruits must attend school for specialized skill training. This year, our priorities focus on maintaining or improving the moral and technical quality of sailors entering the fleet, finding and channeling qualified people into specific programs, and continuing to expand the ethnic and cultural diversity of our service.
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To meet program goals, particularly our high-technology and medical career fields, both officer and enlisted, and at the same time reduce attrition, Navy has increased accession standards for the first time since fiscal year 1991. We greatly appreciate the strong congressional support for our recruiting programs. For the long term, we must maintain this commitment to a healthy and adequately resourced force.
With regard to retention, during 1996 Navy launched a war on attrition at every level of a sailor's career. Specific emphasis was placed on creating meaningful life goals for new recruits, starting in the delayed entry program. One measure of success was a drop in RTC attrition, which resulted in 900 additional sailors coming into the fleet.
As the post-cold-war drawdown continues and while overall Navy retention will also for the time being continue below our long-term requirements until we reach our steady state, we must even now retain our more technically trained enlisted personnel and a higher percentage of our expensively trained officer corps. Many of these sailors represent a substantial investment in skills training highly desirable in the civilian sector, and they are recruiting's toughest challenge to replace.
Our incentive bonus programs remain our most effective tools to retain these highly trained and very capable personnel. Superb people are the Navy's greatest assets. Recruiting quality sailors and taking very good care of them and their families are my highest priorities, as they are the ones who will ensure successful accomplishment of the Navy's mission.
Your help will mean that we can meet our people needs and the needs of our people so that our Navy will always be ready to meet its challenges.
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Mr. Chairman, thank you. I look forward to your comments and questions.
[The prepared statement of Admiral Oliver can be found in the appendix on page 240.]
Mr. BUYER. Thank you.
General McGinty.
STATEMENT OF LT. GEN. MICHAEL D. MCGINTY, DEPUTY CHIEF OF STAFF, PERSONNEL, U.S. AIR FORCE
General MCGINTY. Mr. Chairman and members of the committee, I am pleased to have this opportunity to report to you for a second time on the status of our recruiting, retention, and quality-of-life efforts in the Air Force. And with your approval, I will submit a full report for the record and provide a brief opening statement.
We had a very successful recruiting year last year. We achieved our enlisted goals while maintaining our high-quality standards. Ninety-nine percent of our new recruits were high school graduates; 83 percent scored in the top half of the Armed Forces Qualification Test, and we made our officer recruiting numbers.
For 1997, we will make our recruiting goals again, but we have a caution light on this year concerning some of the quality indicators. For example, so far this year we have seen a 4-percent drop, from 83 to 79 percent, in our enlisted recruits that are scoring in the top half of the Armed Forces Qualification Test.
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Our retention situation is very similar. The numbers look OK for now, but we are concerned with some downward trends. Our first-term, second-term, and career enlisted retention rates were all above our goals for 1996, but due to a slight dip last year, we are watching this very closely.
Our non-rated, non-flying officer retention has rebounded from its low during the height of the drawdown of 1992 and 1993, and is leveling off at our required sustainment level of 50 to 55 percent. However, our pilot and navigator story is not as good.
We are very concerned at the number of losses we are experiencing. We had a 9-percent drop in pilot retention and an 11-percent drop in navigator retention. Even more alarming are our leading indicators. The aviation continuation pay or pilot bonus take rate is down 18 percent for 1996, with another 16-percent drop expected this year. We are also seeing an increase in the number of approved pilot separation requests, 51 percent higher this year at this time than it was at the same time last year. These items, together with a 40-percent increase in airline hiring, have our caution lights flashing.
Since the value of the flight pay and pilot bonus programs, our proven retention tools, has fallen 35 percent since 1990, we need to increase the amount of these incentives to help keep our high-quality experienced pilots with us. Strong quality-of-life programs are vital to recruit and retain the quality people that we need in today's fast-paced, high-tech environment. Secretary Cohen has stated, and I quote, ''A key element of readiness is the quality of our people and, therefore, the quality of life we provide them and their families.''
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Because readiness remains our ultimate goal, we continue to pursue quality-of-life programs which positively influence our ability to create a force of the highest quality people. Taking care of our people and their families not only improves mission accomplishment, but we believe it is the right thing to do. We focused our quality-of-life efforts by identifying seven priorities which are listed in my formal statement. These are not just Pentagon priorities; they come from surveys of our people in the field. And from their responses, we have developed a balanced quality-of-life agenda for our folks. Our progress in each area is in my prepared remarks, but we certainly owe the Members of Congress a sincere thank-you for our many accomplishments over the past few years. The 3-percent pay raise last year, the 4.6-percent increase in quarters allowance, the many housing and dormitory projects that were authorized, and the permanent change-of-station reimbursements all have really helped to improve our quality of life.
The Air Force is confident that putting people first ensures that we can provide a strong, capable, and ready-to-win air and space force.
I appreciate this opportunity to share these comments with you today and stand ready to answer your questions. Thank you.
[The prepared statement of General McGinty can be found in the appendix on page 259.]
Mr. BUYER. Thank you.
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General Mutter.
STATEMENT OF LT. GEN. CAROL A. MUTTER, DEPUTY CHIEF OF STAFF FOR MANPOWER AND RESERVE AFFAIRS, U.S. MARINE CORPS
General MUTTER. Mr. Chairman and members of the committee, I am very pleased to appear before you today for the first time and to discuss compensation and recruiting on behalf of our marines. With your approval, I will submit a full statement for the record and provide a summary.
Both of these issues are instrumental in shaping the quality of our corps. If we expect to attract and retain the caliber of individuals who will lead us to success on future battlefields, we must be willing to invest the time, effort, and resources necessary to craft the best possible compensation and recruiting policies. We appreciate very much your past support.
Compensation is an issue that is near and dear to the hearts of all marines. While no one joins the corps to get rich, all marines expect a level of pay and allowances that enables them to focus on the mission at hand rather than worry about financial hardship and consequences. We have said that bringing our marines home alive is our highest quality-of-life priority. Certainly very close behind that is providing an adequate level of compensation. We do support the current initiatives aimed at establishing more logical, efficient allowances for housing and subsistence, as well as the proposed increase to basic pay.
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As a retention tool, a little extra compensation goes a long way. This is evident in our selective re-enlistment bonus which allows us to retain the highly skilled marines needed to operate in today's technological environment. We intend to expand our use of the bonus program this year and next and are confident that this action will enhance our ability to meet our enlisted force management objectives.
I do have an area of concern, though, to piggyback on what Lieutenant General McGinty has said. The Marine Corps has recently suffered an unprecedented departure of pilots. While many factors contribute to the decision to resign their commissions, compensation is clearly an important item. With lucrative opportunities pulling our pilots to the civilian sector, I believe the tide can be sufficiently stemmed if we apply the necessary resources to our aviation continuation pay program and the bonus. Simply hiring new Marine pilots to replace the old is not an option, as the training pipelines are long and the level of expertise cannot be readily replaced.
No discussion of military compensation is complete without addressing the retirement issue. When marines hear talk of yet further modifications to the military retirement system, they perceive a breach of faith by the Government. To echo what Lieutenant General Vollrath has said, what is really needed is stability of the current system. We have not yet fully determined the impacts of the changes made in 1980 and 1986. However, we can safely assume that further erosion of retirement benefits will have an adverse effect on recruiting, morale, and retention.
Our recruiting effort plays a crucial role in determining the quality of our corps. While fiscal year 1996 was a banner year for Marine Corps recruiting—we met all quantity and quality goals—we are facing significant increases to our mission both this year and next. Combined with the keen competition we face from the other services, as well as from America's colleges and universities, recruiting will remain difficult for the foreseeable future. Since so many of today's high school seniors have plans for college, it seems prudent to do whatever we can to link military service with college. The Marine Corps college fund is an excellent tool for attracting otherwise college-bound men and women. However, we are able to average only one college fund contract for every two recruiters in a given year.
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The correlation between quality of recruits and first-term attrition is evident. We are tackling the attrition problem by maintaining our high physical, mental, and ethical standards of all potential marines. With this in mind, we would benefit from better access to pre-accession offender records, which are sometimes difficult to obtain. We will also reduce our attrition with our transformation process. This process begins in the delayed entry pool and continues at the recruit depots with the addition of the crucible event, as well as more intensive emphasis throughout on our core values of honor, courage, and commitment. Very simply put, we intend to reduce our first-term attrition by raising our standards.
I am confident that by combining the dedication and professionalism of our recruiters with the right approach to compensation, the Marine Corps will continue to attract and retain the people needed for the Marine Corps to be and to do what you and the Nation expect.
Mr. Chairman and committee members, I look forward to answering your questions.
[The prepared statement of General Mutter can be found in the appendix on page 286.]
Mr. BUYER. The question I am trying to ask here is—I want you to help me here, General Vollrath. I am being left with this great sense that the Marine Corps is going to reduce its attrition by raising its standards, yet the Army is meeting goals by reducing their standards.
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Explain this to me. Clear my mind.
General VOLLRATH. First of all, Mr. Chairman, I am not sure we are referring to the same standards. Standards during the training event might be one thing. Standards for qualification for a recruit to enlist is another.
From the Army's perspective, when we took a look at the goal that we had set for the high school diploma graduate mark at 95 percent, we had to ask ourselves several questions. The first question was: Changing it, is this a prudent thing to do? And would it, in fact, expand the market?
Clearly, it would expand the market, and that is the reason we took a look at it. That market expansion is about 600,000 other young men and women that we could draw from.
Is it prudent? When we took a look at that goal and we took a look at the Department of Defense standards, in that area the Department of Defense standard is 90 percent. The high school diploma graduate standard and goal makes a statement about attrition. By experience over many years, a high school diploma graduate attrits at a lower rate than a non-high school diploma graduate.
Given that we have had an increase in attrition, which I mentioned in my opening oral statement, we also considered the fact that we, concurrently with that increase in attrition rate, had increased our goal from 90 percent, which is what it was set at in 1990, to 95 percent during the course of the drawdown. So as we increased our goal for high school diploma graduates, our attrition went up.
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As we look at that today, the first thing we believe is that there now is a change in the correlation between the two. We can no longer draw that parallel that says the more high school diploma graduates you take, the lower your attrition, because that is not happening and has not happened for the last 5 years after we raised the goal.
Second, we asked ourselves what are we, in fact, doing to quality. When we took a look at the high school diploma goal out there, we concluded that was a statement of attrition. It was not a statement about quality. The quality measurement is how one scores on the AFQT and whether or not you score in test score categories I to IIIA, or IIIB, or category IV, of which we take 2 percent or less from category IV.
So we concluded that if we wanted to maintain quality but expand the market, we could reduce slightly the high school diploma goal, but when doing that, ensure that all that we enlisted in that expansion were in the upper 50 percent category, I to IIIA, because that is the definition of quality as opposed to attrition. So we believe that we will still bring in the quality young men and women that we need for a more high-tech Army of the 21st century, while still meeting our recruiting objectives and our end-strength.
Mr. BUYER. And, Lieutenant General Mutter, you do not have to do that. Is that what you are telling us? You do not have those types of concerns or problems?
General MUTTER. Mr. Chairman, there is no doubt that the recruiting environment and climate out there is extraordinarily challenging, but we have for the last year and a half, at least, put the type of priority on recruiting that you mentioned in your opening statement, sir. And because of the high-quality recruiters we have out there and the extraordinary amount of work and labor that they are putting into their job, we have been, continue to be, successful in this very difficult environment. And we are putting more emphasis on the values piece, as you also mentioned in your opening statement. A lot of the attrition is due to people who are coming from a society that produces people who are broken, young men and women who do not necessarily have the right values and the right stick-to-it-iveness, sense of responsibility, all the things that we need. And so we are putting our emphasis there in our reduction of attrition.
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Mr. BUYER. Thank you. I have one other question. Secretary Pang, in the opening statement that I gave, I talked about the current 12.9-percent gap between the military pay and the private sector. It will continue to grow under the present budget proposal that was sent over here, up to 15 percent by 2001. I do not believe that is acceptable.
How can the pay raise proposed in the budget be sufficient to preserve morale and readiness when it systematically allows the individual buying power to erode over time? I do not know how—I mean, you are hearing your personnel chiefs talk about recruiting and how difficult that is and the challenges, and if we are going to permit that erosion to occur, where does it break?
Mr. PANG. Mr. Chairman, let me say first off that, you know, the formula that is provided for in law will cause a growing gap, and this is something we really need to look at very carefully. I know of your interest in this area, and what we have done is gone back to check to see how this thing grew to where it did. The last time that we were at parity was back in fiscal year 1982. That is when there was no gap between the military pay raise and the ECI, if you use the ECI as the measure, the Employment Cost Index. So the gap in 10 years, from 1982 to 1992, in 1992 it was at 11.5 percent. So, quite frankly, when this administration took office, the gap was already at 11.5. This is a growth over a 10-year period, and it is for various reasons, funding, et cetera.
But between then and where we are now, where we have a 13.5-percent gap, is a 2-percentage-point growth, and it would have been larger. I will be frank with you. The record states that, you know—and I will lay this out. The first 2 years of this administration we offered pay raises less than was authorized, but this was not new. Previous administrations——
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Mr. BUYER. Well, the first budgets that came over did not have anything in them at all.
Mr. PANG. Well, there was zero. You are right.
Mr. BUYER. And so had it not been for Mr. Skelton, when he was chairing this Personnel Subcommittee——
Mr. PANG. Absolutely.
Mr. BUYER [continuing]. The military would not have had one, Mr. Pang.
Mr. PANG. That is correct. In 1994, the proposal was a zero-percent pay raise, and we got a 2.2-percent pay raise. The Congress put that in. No question about that. In 1995, we asked for a 1.6-percent pay raise, and the Congress provided a 0.6-percent pay raise.
I guess, you know, you learn a lesson after that because in the next 3 years, the proposed raises matched what was authorized by law. And, in fact, in one year, last year, it was higher than what would have been provided for in law.
I think the point I just wanted to make was, you know, this gap did not happen overnight. It took 10 years to get to—in 1992——
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Mr. BUYER. Mr. Pang, that is given.
Mr. PANG. Yes, sir.
Mr. BUYER. I will agree with you. That is given. Our responsibility now is how do we reduce the gap. The budget proposal that has been faced to us increases the gap. And you will agree with us that we want to reduce the gap. How is it you can send us a budget that increases the gap? That is my question to you.
Mr. PANG. Yes, sir. And then I think the answer is simply, you know, funding and the current formula that is provided for in law.
Mr. BUYER. Funding. When you sat at the table with the comptroller in making those budget decisions, all of a sudden I have noticed modernization is overtaking a lot of priorities. Readiness and modernization. Are they sacrificing personnel and people in that process as we are increasing operational tempo? Are we killing the people in the process?
You sat at the table. I do not know.
Mr. PANG. Right. You know, we—yes, Mr. Chairman, I mean, you know, quite frankly, the decision was made in preparing the 1998 budget that paying the—advocating a pay raise equal to that provided for in law was sufficient at this time.
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Having said that, let me just point out that if we wanted to close the gap today, it would cost about $7, $8 billion to close the gap, and that is the tough part about all this. A one-percentage-point pay raise is about $600 million. So it is a conundrum because, you know, we want to close the pay gap, but in order to do it, it would require more money—if we just wanted to do it 1 year, more money than we allocate for the pay and allowances——
Mr. BUYER. More money than what the administration was willing to give the Department of Defense to close the pay gap? See, that is what I view this as. A lot of decisions were made by the administration, and there have been over the years, and either we have a commitment for parity or we do not.
Let me throw this question out. Think out of the box. Let's try to think out of the box. Everything is saying, well, there is always this linkage. How about we delink military pay raises and civilian pay raises in the future? How about we delink them? If I do legislation to delink the two, would you support that?
Mr. PANG. We would not object to that, Mr. Chairman, but there is a danger, I think, in doing that in this sense: The linkage was put in, as I recall, many, many years ago when what happened was civilian pay raises were going up at a rate faster than military pay raises. So the linkage was really put in to protect military personnel so that they would at least get the same rate of pay increase as civilians. You know, that is the reason for the linkage.
But it is fair to say that the Congress and the administration had requested pay raises that broke the linkage, I mean, you know, in the past. So, the linkage has really not been an impediment, but you can argue that in some cases it is an excuse for both sides. I mean, to say, well, I mean, that is what is provided for in law, that is a fair statement.
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Mr. BUYER. If we do not delink and the commitments do not add up, we continue to fester a problem.
Mr. PANG. Yes, sir.
Mr. BUYER. It is worthy of discussion that I want to have further with you.
Mr. PANG. Mr. Chairman, could I make just one point? Because I am a little bit troubled by the perception that there has been an erosion of benefits. You know, I hear that, and whenever I hear that, my question is: If there has been an erosion of benefits, name me the benefits that have been eroded.
The Congress and the administration, working together, have done a lot, you know, to provide for the quality of life for our men and women in uniform just over the last couple of years. I had my people do a report on quality-of-life accomplishments over the last couple of years, and I have it here. With your permission, I would like to include that in the record because there have been, you know, not in pay but in many areas, improvements. They were not only done by the administration. The Congress ought to be proud about what it did to plus-up the BAQ last year. They provided improved quarters allowance for our people, and they provided for better care in our child care, you know, tuition assistance, model communities programs, new parent support programs, which the Congress put in—not at our request—improved morale welfare and recreation programs. We put telephones and computer access into the barracks.
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You know, we have done a lot, sir, in the last couple of years to try to take care of our people, and I think that that really ought to be a part of the record.
Mr. BUYER. Can you send that up?
Mr. PANG. Yes, sir.
Mr. BUYER. We will do that.
[The information referred to can be found in the appendix on page 304.]
Mr. BUYER. General Vollrath in his statement referred to this; he talked about the perception in the force about the erosion of PX and commissary privileges. I do not know where that is coming from. My sense is that through the BRAC processes they have seen in Indiana and Michigan and a lot of places, when they close the bases and forts around the country, those of whom had access to the PX and commissary and medical, to include the Guard and Reserve and retirees, it is no longer there. That begins to have a domino effect throughout the whole military community and about those decisions, well, should I stay in the military, and if I stay in, will those benefits really be there upon my retirement. I think that helps add, it adds to a lot of that perception, Mr. Pang.
Let me now recognize Mr. Taylor for any questions he may have.
Mr. TAYLOR. Thank you, Mr. Chairman. My colleague, Mr. Skelton, has to get to another important meeting, so in the interest of time, I will yield my time.
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Mr. SKELTON. Well, I appreciate it, Mr. Taylor, very much. I will be brief.
The three elements that go into keeping good people in the military are pay and allowances, the operational tempo, how often you are gone from your family, and the third is that of stability. I am convinced that stability is the most important of the three.
Yet I find the Air Force and the Navy coming in and saying this year, and I think the Air Force again next year, we want to get rid of 11,000 folks. This does not lead to stability even though we put a legal floor on the numbers in each of the services last year.
Now the Marines will fight to the last Marine any cuts, the Army will fight to the last soldier any cuts. Am I correct?
General VOLLRATH. Yes.
General MUTTER. Yes.
Mr. SKELTON. This does concern me with the Air Force and the Navy. I assume by what you are doing you will end up and you knowingly will end up with a more senior Navy and Air Force, both in officers and in non-commissioned officer ranks. But I am also convinced there is an element that no one has mentioned today insofar as retention is concerned, and that is this thing called leadership and this thing called appreciation.
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I know of instances and I do visit, as Secretary Pang will tell you, many posts and bases, both here in the country and overseas, and visit with many, many young men and women in uniform. And in talking with some of them, it is leadership, or lack thereof, or appreciation, or a lack thereof, that causes them to light the fuse to cause them to want to get out, which is exacerbated by instability, op tempo, and pay.
There are captains and lieutenant colonels and colonels and majors sitting behind you, and people like them all across our services, that are really the key to retention. Nice job, sergeant. Good job, petty officer, I am proud of you. Those are the ingredients that go into keeping people in the military.
We can give you all the pay increases in the world. We can up those family allowances. We can help create stability, which we have done, and yet the Air Force and the Navy want to cut them. And I hope, Admiral Oliver, this is the last year for the Navy. Maybe I am wrong, but I know it is not for the Air Force.
So I do not know what you can do about it other than—I know the Army has a very intense leadership development program. But it does not take a rocket scientist or a brain surgeon to know that in order to keep people, you have to give them good, sound leadership and appreciation.
I have no questions other than the lecture that I just delivered. But having a rather sad experience with a very, very able young Army lieutenant that interned for me and worked for me—he had ''colonel'' written all over him. I saw him the other day back home in Missouri, and he said he got out because he did not like the way the soldiers were being treated. It bothered me immensely, and I hope you take what I say because I mean it very, very seriously.
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I speak not just of the Army. I can give you Marine examples and others as well.
Thank you.
Mr. BUYER. Mr. Watts?
Mr. WATTS. Mr. Chairman, I have one question, and it is rather lengthy so bear with me as I articulate what I am about to ask.
TRICARE is the new system on the block developed by the military health service system to provide medical care by the Department of Defense. Unfortunately, I am receiving indications that multiple problems exist with this new program, problems such as access to care and degradation of military health care on several fronts.
Military health care is in disarray, and according to a recent GAO report, the President's budget has underfunded this vital program. Given the fact that the community most affected by the problems that we see in military health care and by the aforementioned situation is over 65, your retiree population, given that fact, what steps will the Department of Defense take to resolve this issue so that the active-duty population that will eventually evolve in this system, to give them some comfort level that this population will know that the promises the DOD makes will be fulfilled in the future, you know, what steps are we taking to give them some comfort level that these promises will be fulfilled? Because if you do not ensure that these promises are kept, then I believe recruitment and retention will be negatively impacted.
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So, Mr. Pang, or anyone else, for that matter, who would like to take a stab at that, I would appreciate your comments on it.
Mr. PANG. Congressman Watts, I will take a stab at answering that. The health care program falls really under the purview of the Assistant Secretary of Defense for Health Care, Dr. Steve Joseph. But this is a problem that, you know, affects the quality of life of our people, so we watch it ourselves, all of us at this table, very closely.
I think, you know, first of all, let me just say that the health care cost to the Defense Department to provide health care for active-duty people, family members of active-duty members, reservists who are eligible for health care, and for retirees is about a $9 billion budget. So it is quite a large budget, and I think it is fair to say that medical or health care costs, the increases are at a steeper rate than inflation in general. So we have rising health care costs. We have demand for good health care, and what TRICARE is aimed at doing is trying to provide this health care in the most effective and efficient manner that we can. It is a very, very large program, not fully implemented yet. I believe there are, as I recall, 12 TRICARE regions and I think about 7 or 9 of them are already up and running.
So it is in the process of becoming full-blown, and why is that? Well, for efficiency's sake, and I think the other reason is so that when people move from one place to another, the kind of care that they are going to receive is the same, regardless of where they go. And that was not the way it was before TRICARE.
I think it is fair to say that there are growing pains with regard to TRICARE. I know in a lot of the visits that I have gone on in visiting with people, people, especially retirees, are not happy with the way that the health care is being delivered under TRICARE.
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Dr. Joseph has a working group evaluating all of the concerns that have been raised to see what we really need to do with regard to making systemic changes, if any, to the TRICARE system.
You mentioned that there is a shortfall in funding for health care. We have examined that, and quite frankly, there is a shortfall in our health care funding. Dr. Joseph is working with our comptroller, Dr. Hamre, to sort that out and find a way to make up that shortfall.
With regard to retirees, I think the most severely impacted group are those who are over age 65. Under current law—and I am a military retiree myself, so it shows up on your retiree ID card. When you hit age 65, it clearly states you are no longer eligible for military health care, meaning CHAMPUS, or now TRICARE. Therefore, any kind of care you get in a military treatment facility will be on a space-available basis. It means that you have to, at age 65, depend on Medicare and that upset our people. They pointed out to us that a lot of them when they came in were promised health care, you know, from cradle to grave. So we are looking at that.
One of the initiatives we are pursuing is to seek what we call Medicare subvention. In other words, if a person who is over age 65, retired, gets treated in a military treatment facility, then Medicare ought to pay that cost to the military treatment facility so it can provide that kind of service.
So that is where we are. We do not have a perfect fix for the system yet. There are some troubles with it. We know it and we are working hard on it.
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Mr. WATTS. Let me say, Mr. Pang, we have had an opportunity to have Secretary Joseph before our full committee testifying, and that question came up. And I know that the wheels of government, you know, spin a little slower than we would like for them to from time to time, especially those out there who are depending on the Government service that is provided, that is, TRICARE, for that 65-year-old or older population. And I would just encourage the military folks that work with my office and other offices trying to find solutions and trying to make it work a little better and a little more efficiently and effectively. I hope that you all will continue your commitment to try and target the problems or identify the problems and try and work them out. My office will stand and I know other offices will stand ready, willing, and able to do whatever we need to do to try to get those problems corrected. Thank you very much.
Thank you, Mr. Chairman.
Mr. BUYER. I appreciate Mr. Watts bringing up that issue of the Medicare subvention. That alone really only applies to about a third of those military retirees, and you would also have to take TRICARE and extend out TRICARE.
I was at a meeting yesterday, and we had some high-level discussions between the Congress, the House and the Senate, on this whole issue. And there were some at the table that were very disturbed about—their view is that DOD had been providing a lot of these services over the years, and now are saying no to them, dumping, yet they are not given any money back. Right? And where is the money? If they have been providing these services for a great many people and now they are stopping providing some of those services, I do not see them asking—they are still asking for more money.
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I just wanted to share that with you. Sometimes those discussions are interesting.
Let me yield to Mr. Taylor, and then I have got a whole bunch of questions.
Mr. TAYLOR. Thank you, Mr. Chairman.
Mr. Pang, I want to talk to you about a couple things. No. 1 is Medicare subvention. We know we have a problem. You experienced it with the change in your ID card, and yet the best I hear coming from the administration—and I will also be quick to point out that the administration makes suggestions; Congress makes laws. So I realize that we cannot walk away from this responsibility. What I am asking for is a little bit more help as far as from the administration saying, yes, let's do this and let's do it right now.
I am troubled by the proposal for a pilot program. I am particularly troubled that only one in four of the military retirees nationwide who live within a reasonable amount of distance from a military hospital and who would like to use Medicare subvention will be allowed to do so. Who is going to make the decision as to the haves and the have-nots?
I am already getting retirees calling my office saying, ''Do I have to be a friend of yours to be included?'' You know, who is actually making this decision? And, believe me, the last thing I want is to be in the position where I have to decide the haves and the have-nots, and I just do not think that there is a fair way of doing it, which leads me to saying, why are we going to have a test program at all? Why don't we just enact it? Because for the time it takes to do the test program, all we are going to do is create more bad feelings by the three-quarters who are left out.
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If the GAO said to us, as they did last week, that Medicare subvention will not cost us any money to the national treasury, let's just do it. Why doesn't the administration just recommend that we start doing it now?
I realize Congressman Buyer comes from a little bit different circumstance, but I happen to have a district where people chose to retire there, and one of the reasons they chose to retire there is the proximity to a military hospital and the ability to use it. And retirees are a little bit more mobile than the average citizen in determining where they want to live and if they want to live near a military hospital, if they happen to be over 65, then let's let them use Medicare subvention now, all of them, not just one-fourth of them.
What would be your reaction to that? I realize you have given us a budget. But, again, last week was the first time I ever heard the CBO say it would not cost the Treasury money to enact Medicare subvention. Just last year they were saying it would cost us about $2 billion annually, so they have had a big about-face on that.
Mr. PANG. Congressman, I believe that on the basis of this—and, you know, this is something that we can revisit and do it in a very short order. Having said that, this really does not fall under my purview. It falls under Dr. Joseph. But I will carry the message back.
With regard to where the demonstration projects or the pilot programs are going to be, again, it falls under his purview. I am not trying to dodge this, but, you know, I will get back to you swiftly.
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Mr. TAYLOR. Mr. Pang, again, I realize that Congress makes the laws. All you can do is make recommendations. But it is a heck of a lot easier for us to get our colleagues to agree with us, first in committee and then on the House floor, and also in the Ways and Means Committee, if we are all singing with one voice.
Mr. PANG. Congressman, I agree with you completely. If this is a cost-neutral proposal, I find it myself kind of difficult to understand why we would object to it. So let me go back and raise this with my colleague, Dr. Joseph, and urge him to move swiftly.
Mr. TAYLOR. We have, what, about 6 weeks until the markup? I would think we could do a great service to our military retirees and in turn help recruiting in the future by solving this problem this year.
Mr. BUYER. Would the gentleman yield on that? I would move to another question. The issue is revenue-neutral. The reason this is a discussion right now and you say, we are personnel chiefs, what are we talking about this one for, well, it has a lot to do with your retention issues. And my sense of caution is that last year we had some testimony about a program that was not going to cost the Government any money, that reserve insurance program, and now it has ended up costing us $72 million at the moment. It is going to grow even more, with more deployments that are coming.
So I am going to support a pilot program, and we are going to put one together. We are working toward that end to get a pilot program done. It is not going to be what the administration has recommended exactly, but we are working toward that end to have a pilot program that is revenue-neutral. I want to make sure it is revenue-neutral.
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I can understand Mr. Taylor's concerns. I have a district whereby we have Grissom Air Force Base, an active-duty base, with a lot of retirees that live there. Under the first BRAC, it was hit; it went to a reserve base. So, Mr. Taylor, I hear about this one a lot from the retirees.
I just wanted to share that with you, that we are committed to moving forward on some type of program. We will negotiate that out.
Let me now yield back to Mr. Taylor.
Mr. TAYLOR. Thank you.
Mr. Pang, the other thing I wanted to mention to you is—and I regret that I did not bring your letter to me, but in it we had a previous conversation on trying to go to a flat rate increase this year. I keep hearing from the naysayers this term pay compression. Now, I used to be an outside machinist. I have taken engines apart. So compression is when the top of the cylinder moves toward the cylinder head. Things get smaller.
When everyone's pay increases by the same amount, there is no compression. Everyone is being increased by the same amount, including, I hope, the Joint Chiefs of Staff. I would like to see them get a little pay raise this year. And so, you know, I really think that is a false argument.
What we are seeing, every year that there has been a COLA increase—and that is like almost every year since the 1980's, the early 1980's—is a difference, a growing difference in the pay between the O–6 and the E–6, the E–1 and the O–1. The difference keeps growing.
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I do not know of any officers who are on food stamps. I do know of enlisted people, particularly in the lower grades, who are on food stamps. That is wrong, and it has got to be changed. And leadership is about taking care of your people.
So I am going to, again, realizing that we make the last, ask the administration to show some leadership on this and try to take care of those people on the lower ranks. We have gone 20-something years giving people raises based on percentages. We have helped the guys at the top a great deal. Again, I happen to have been an E–2 the last time there was a drastic increase in the pay for the people in the lower ranks. That was a quarter of a century ago. I think they have been more than patient. I think this ought to be their year, and I hope the administration will help us with that.
Thank you, Mr. Chairman.
Mr. BUYER. Well, I want to hear a response. I am just curious.
Mr. PANG. From me, sir?
Mr. BUYER. Yes; I hear about it from him all the time. I am curious about what you have to say.
Mr. PANG. With regard to the pay raise, you know, here is what I did after we had our discussion, Congressman Taylor. I got our senior enlisted advisers together. I meet with them about—well, I meet with them once a month, at least. I asked them about whether or not we ought to go to a flat rate pay increase system or would they prefer the way we do it now, which is to apply an equal percentage raise to each of the pay grades. And their preference back to me was they like it the way we do it now.
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Mr. TAYLOR. Who are you asking, Mr. Pang?
Mr. PANG. Our senior enlisted advisers who have——
Mr. TAYLOR. They are at the very, very top. They are the E–9's. The bottom line is, as a Congressman, compared to my receptionist, OK, she starts off in the low twenties. I make $130,000. If we both get a 3-percent raise, guess what? I get about a $3,000 raise, and she gets a little bitty minuscule raise.
So if you ask the guys at the top what is the better deal, including Congressmen, they are going to say percentagewise. I used to be one of those E–2's, and I would sure as heck hate to have to do it again because I think they are actually worse off paywise than they were when I enlisted in 1971.
Now, I think it is time we look after the little guys for a change. Just 1 year out of 25 I do not think is asking a whole lot.
Thank you, Mr. Chairman.
Mr. BUYER. That is all right. His lip got real tight. I just wanted to hear why his lip got tight.
Mr. PANG. Quite frankly, you know, we have examined this time and time again to see whether or not we ought to give just dollar raises to people or a percentage raise. I think it is fair to say that when you provide a percentage raise by pay grade, you maintain the differential between grades.
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Mr. BUYER. Was that the advice of the senior enlisted advisers?
Mr. PANG. They prefer it.
Mr. BUYER. They want to maintain——
Mr. PANG. They prefer the structure. I mean, we have a hierarchical system in the military. Let me just give you an example.
An E–1 person just coming in the service who, let's say, has dependents and, therefore, lives off base, the cash pay for that person—and this is not a single person, and I will give you the single rate, too. The cash pay is $17,668. That is the salary. And an individual stays in that E–1 grade for about 6 months, then becomes an E–2, and the annual cash pay for that individual is $19,775. And, you know, by the time that individual is in the service for about 1 year to 18 months, they get promoted to E–3, and that is $21,000 a year salary. This is their cash pay. And it keeps growing, all the way up to an E–9, whose cash pay is $50,702.
So, you know, I would just like to provide the RMC and cash pay comparison for the record, because I think it is important to understand what we are talking about here when we look at the pays that we are paying people.
We have advocated a pay raise, and the pay raise is a percentage increase applied across all grades. At this point in time, we do not have a proposal to do otherwise. We are considering other options. One option would be to make the increase at promotion greater than it is now. We have a pay table, and, you know, we were examining that. We might come forth with legislation to ask that that—you know, for something like that.
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If we wanted to change the way we pay people now, we would have to come forth with a legislative proposal and make changes to the pay table.
Mr. BUYER. I think an ongoing dialog would be healthy on that.
Lieutenant General Mutter, we had some testimony from a marine, a marine sergeant major of a regiment, a 30-year marine who recommended that marines in the first enlistment should not be married. What do you think about his proposal?
General MUTTER. Mr. Chairman, I think you are probably aware that we had some initiatives along those lines a few years ago and that we felt, and still feel pretty strongly, that it is a terribly demanding environment out there for our very young marines, our first-termers. They do deploy a lot. They are very young. Their pay is not as large as other people, and it is very difficult for them to make it in that stressful deploying type of environment.
To add the additional stresses of family is not necessarily what we would like to see. But we also, I think, have found out that it is hard to legislate that and that there might be some unintended consequences that could be even more troublesome than some of the leadership challenges that we face today because many of our young folks are married.
Mr. BUYER. Why do you say it would be hard to legislate it? We are not going to do it. You can do a lot of things, you know, and the Supreme Court permits you to do a lot of things differently than society.
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General MUTTER. Right.
Mr. BUYER. You know, we are also concerned about the high divorce rate, I am sure as you are.
General MUTTER. Yes, sir.
Mr. BUYER. I mean, we cannot say, well, we are going to be family friendly and we are going to still drive them hard and let the divorce rates go. I do not know what—I am just saying from his testimony. I know when General Mundy brought this up, he was immediately trounced on by the White House, and he immediately said—what was his quote? ''I punted the football out of the stadium.''
General MUTTER. ''Into the stands,'' I think, yes, sir.
Mr. BUYER. And into the stands, was that it?
General MUTTER. Right.
Mr. BUYER. Although now that that idea is—this sergeant major claimed that the commandant took that from him, that idea, but it was interesting because he has had to work 30 years dealing with that issue.
General MUTTER. Yes, sir.
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Mr. BUYER. Either we recognize that the force has grown, what, 65 percent? Is that about right? The married force that you are dealing with?
General VOLLRATH. For the Army it is 65 percent.
Admiral OLIVER. Sixty-two.
Mr. BUYER. What do you have?
General MCGINTY. Near 70.
Mr. BUYER. I mean, either we begin to talk about these family-type benefit packages, or we leave everything the way it is and we drive right into the heart a wedge between husband and wife.
General MUTTER. Yes, sir; I apologize for the use of the term legislate. I did not mean it in the sense that you legislate. I mean even policywise, if we tried to make a policy that said they could not be married, I think we would drive them to—they would be living together, not married. She would not rate a dependent ID card. She could not shop at the commissary. She would not have the benefits that we can offer and all of those family services that we have focused on so much in the last few years to ensure that the quality of life for our families is there and that there is a support mechanism for those families in that difficult environment.
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I am afraid that if we tried to force a position where they could not be married, we could create some unintended negative consequences that could create additional problems that would be even worse.
Mr. BUYER. If you joined the Marine Corps as single, not saying that, well, in your first enlistment you cannot marry, if you only—if you are recruiting only single, what does that do to your pool and your impact? Is this proposal realistic or not?
General MUTTER. That is something that would make that very challenging job out there today even more challenging. We do not recruit as many married folks, I think, as some of the other services do because I think naturally they do not necessarily come to the Marine Corps in many cases. It is not that we have a weeding out process.
Mr. BUYER. Do you know how many are married?
General MUTTER. It is about 6 percent, sir.
Mr. BUYER. It is 6 percent.
General MUTTER. Of our recruits, yes, sir.
Mr. BUYER. All right. Thank you.
To move over to basic allowance for quarters, BAQ reform, the variable housing allowance floor authorized by Congress for fiscal year 1997 was the first step in the process of consolidating the two housing allowances, basic allowance for quarters and the variable housing allowance, into one cost-based system. The plan under consideration, as I understand it, would correct two longstanding problems without additional cost over a 5- to 6-year phase-in period.
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First, we will ensure that the housing allowance remains relevant by basing increases on actual base housing index and not the military pay rate. Second, it will restore equity in housing allowance paid in high- and low-cost areas by establishing a uniform amount of out-of-pocket expenses.
The question is to Secretary Pang and to each of you. Secretary Pang, will any personnel suffer a loss of income under this? And why is it better to transition to a system that measures the cost of housing to the general public as opposed to what military families spend on housing? And to the personnel chiefs, are all the services supportive of this initiative to include the Army and Air Force who will see some funding shift to the Navy and Marine Corps because of their higher cost locations?
Mr. PANG. Mr. Chairman, I think this is a very good proposal. I think it is—we want to go to a price-based system where we use commercial rates rather than rely on surveys, because when we rely on surveys, I think our experience in the past has been people who live—who pay more out-of-pocket than the system was designed for will then live in substandard housing and reflect that in their surveys. So for those people, you are caught up in sort of what I would call a death spiral where you are reporting, you know, what you are paying for housing, but you are paying for substandard housing, and there is no way to reflect that in the survey. So I think it is more appropriate to take a location and look at, you know, what people are paying in this particular location and base the rate of housing allowance on the prevailing rates that are being paid in that particular locality.
Mr. BUYER. Are the services supportive? We will go right down the line. General Vollrath?
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General VOLLRATH. Mr. Chairman, I would say that the Army is in general agreement with the concept, primarily because it will over time eliminate what Secretary Pang refers to as the death spiral, particularly for our more junior enlisted soldiers. There is no doubt, however, in the course of its implementation, as presently envisioned, that some of the more senior members of the Army would get less money, but not necessarily less where they are presently at. As presently proposed, you would not lose your current BAQ and VHA in combination. But once you move to a new location, you would get whatever that prevailing rate would be in that area, which would be approximately 15 percent of what you should pay. That is the intent and always has been the intent of both programs.
In the near term, our problem is that this has got to be implemented in terms of being cost-neutral. That is the dilemma. How do we get there from here? So our position is in the long run this makes sense because it will better take care of, in particular, the more junior soldiers who continue to lose and lose. Right now, however, the dilemma is how do we, in fact, afford going to it within the next couple of years. It may be that we have got to trade off in order to have balance to get to where we want. So we are supportive of it. Our problem is how do we get there from here. And we do not have the answer right now.
Mr. BUYER. Admiral Oliver.
Admiral OLIVER. The Navy supports it as formulated. As it is presented in the budget, the Navy is fully supportive of the initiative. We think it is the right thing to do in the long run for all of our people.
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Mr. BUYER. Air Force?
General MCGINTY. The Air Force supports the change. I personally have two concerns that I want to keep my eye on as we phase in to this program. The first one is we have not seen the exact rates that will come. We have seen the test data. And as you correctly pointed out from the test data, which were 41 Air Force bases, at 13 of those 41 sites our enlisted troops are going to lose more than $20 a month. At 21 of those 41 sites, our officers are going to lose more than $100 a month in their housing allowance.
That is a bit of concern to me from this perspective: That is how we——
Mr. BUYER. I am sorry. I have to recess temporarily. We are at the 5-minute mark. Excuse me, please. Hold that thought.
[Recess.]
Mr. BUYER. My interest is not to keep you through lunch. I am going to try to wrap this up by 12:30. I will try to be concise and get to the points if you will also.
I do not know if Mr. Taylor got caught on something. I do not believe he will object if you finish out the question that we had. General McGinty, your thought was—the last word was ''the.'' [Laughter.]
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General MCGINTY. The Air Force does support the change in the quarters allowance business. I do personally have two concerns. One is we have not seen the exact rates that will be used. I have seen the test data. From the 99 bases that were tested, 41 were Air Force bases, and in those bases, we had a fair number of enlisted folks that were going to lose more than $20 a month and a larger proportion of officers that were going to lose over $100 a month.
That then leads to the need to have a good marketing plan as we phase this in, because if we do not, then it is going to be perceived as an erosion of benefits, and that is how it will be reported in the press: There is going to be an erosion of benefits.
So people are going to need to understand why this change has been made, how it works, and what it is all about. I think that will be very important, or you and I will get cards and letters.
The second concern I have is the absorption. Your congressional intent is 15 percent of our housing costs should be absorbed in our pockets. We have made great progress with the BAQ plus-ups over the last couple of years to finally get that below 20, and we are at 19.4. But by keeping this implementation cost neutral, we are driven to let that absorption go back up to 19.9. This is a good program, but we immediately then need to switch in the future years to start working that absorption back down to the congressional intent of 15 percent.
Those are my two concerns, but the Air Force does support the program.
General MUTTER. The Marine Corps fully supports the proposal.
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Mr. BUYER. Well, that is concise. You are supposed to be able to stall here until Mr. Taylor gets back.
I will speak slowly. Let me shift over to basic allowance for subsistence, the BAS reform. Like the reform of basic allowance for quarters, the Congress has had a longstanding interest in reforming the basic allowance for subsistence, or the BAS. Because BAS has been increased at the same rate as increases in basic pay, it has lost any correlation to the cost of goods. As a result, in the Persian Gulf war when troops were provided meals under field conditions and denied their BAS, it was a financial hardship for families back home because the purchasing power of the BAS far exceeds the expenses for feeding the member.
The plan included in the President's budget would transition BAS at no additional cost over 6 or 7 years to a lower amount and would establish an adjusted process based on increases in food costs as determined by the Department of Agriculture. The proposed plan has been criticized by the Military Coalition because the transition process causes current BAS recipients, normally older NCO's with families, to give up income to fund a so-called partial BAS to be paid to those who currently do not receive BAS, which normally are young junior service members living in the barracks. And as I understand it, this partial BAS was the outgrowth of the plan's objective to pay BAS to all personnel and collect back the cost of meals when they are provided.
I have noted that the plan also does not address officers who suffer the opposite problem of the enlisted force in that the BAS is less than the amount needed to feed a single person.
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So to Secretary Pang and the personnel chiefs, isn't it possible to achieve the major objectives of this BAS reform plan, namely, to set BAS at the correct rate and establish an adjustment mechanism based on food costs, without creating a partial BAS in changing to a new policy of collecting less than full BAS when meals are provided? So the question is, do we create a partial BAS—do we need to create the illusion of paying BAS to all personnel?
Mr. PANG. Mr. Chairman, you know, the basic allowance for subsistence is one that has been around for a long time and has really lost any relevancy to food costs. And what we are trying to do with this reform is to bring that thing back to be relevant to food costs.
I think it is fair to say that in the enlisted force, the BAS exceeds the food costs. In the officer part of the BAS, it is under. So what we are trying to do is say we need to bring this back so that the BAS is more relevant to food costs, and we need to phase this in over a period of time, and do it on a cost-neutral basis, and then pay BAS to everyone.
Right now we have people who, for example, live in the barracks who do not draw BAS. What we want to do is have everyone draw BAS, and when they eat in the mess halls, pay the appropriate rate that equals food costs. And that is why we are moving to a partial system where what we would do is bring down the BAS to food costs and use the difference to begin paying people who do not now draw BAS on a partial basis and over a 5-year period we estimate that we will be able to get the BAS in line with food costs. So that is the enlisted side.
On the officer side, you know, the argument would be to increase BAS for officers, and at this point in time, we are not ready to move forward on that. We are doing this on a phased basis.
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Mr. BUYER. If you elected to not establish a partial BAS system, would we not be able to diffuse some of the criticism of the plan by redirecting funding for a partial BAS to the basic pay for enlisted members? In the end it becomes simpler.
Mr. PANG. Yes, sir. Our end state is for all of our people to draw BAS. In order for us to do that immediately, there would be a plus-up that would be required. It would not be cost-neutral. And what was the amount? $314 million. So what we are saying is that rather than come up with the $314 million because of the constrained budget environment that we were working in, what we would do is phase this in over a 5-year period of a cost-neutral basis, and at the end of that 5-year period, we would accomplish in that period of time at the end of the 5 years, what we would have—what we can accomplish in 1 year if we came up with the money.
Mr. BUYER. Would not the enlisted force be more receptive to the plan if you live in the barracks and you get your food for free than no BAS?
Mr. PANG. Mr. Chairman, you know, because of the structure of the BAS now, what you have are people who live off post, if they continue to draw the rates that they draw now—let me do it this way: If the people who live off post now who draw a BAS ate in the mess halls and paid food costs, they would end up with a windfall because the BAS amount is more than food costs. So if you look at it the other way, the people that have to eat in the mess halls are giving up some money, if they could draw BAS and just pay it out of their pocket like the people who live off post.
So what we are trying to do is correct that inequity.
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Mr. BUYER. Services, any comment on this one?
General VOLLRATH. We believe this is a step in the right direction. As it is currently envisioned, we do not believe that anybody, any member presently receiving BAS would be out any money in their pocket. I believe the proposal is to, instead of increasing BAS by, say, 4 percent per year across the force, to increase it only by 1 percent for certain categories of personnel and take that remaining dollar value and use it to build over time BAS for that portion of the force that presently now does not get it.
So the issue, I believe, is whether or not you are going to get less increase than you think you were going to get as opposed to anybody losing money that they presently are drawing. So from that perspective, I do not think we will cause harm to anybody, given that the food costs now—excuse me, the BAS now does, in fact, cover the costs of the food.
Mr. BUYER. Well, now, Secretary Pang, you set the basic allowance for subsistence at $214 a month, approximately halfway between the Department of Agriculture moderate and liberal food plans for a single male between age 20 and 50 years.
I want to know why that particular dollar amount was chosen, and I still have this strong belief that this is going to be perceived by the NCO as a cut.
Mr. PANG. Mr. Chairman, let me answer your last comment first. I met with our senior enlisted advisers and told them what our plans were, and they believe—you know, and every single one said this, that this was worthwhile pursuing and that they would be the ones, they know, that would have to explain this to the troops. So, you know, they are in full support of this reform.
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Mr. BUYER. Well, I do not want to get those cards that the Air Force talked about. That is why I ask the question.
Tell me how you came up with that dollar amount. Why did you choose that?
Mr. PANG. Mr. Chairman, I would like to put the explanation, if you don't mind, in the record. I will just answer generally.
Mr. BUYER. OK.
Mr. PANG. What we did was we did a survey of these USDA food plan guides, and when we surveyed these guides, we found that our people fell within what was called midpoint between the moderate cost and liberal food plans. And these plans are pretty technical in nature.
Mr. BUYER. Why don't you answer that one for the record for us?
Mr. PANG. Yes, sir. Thank you, sir.
[The information referred to can be found in the appendix beginning on page 353.]
Mr. BUYER. Let me move over to special incentive pays. Most of the special incentive pays for hazardous duty have not been increased since 1985, and their value was eroded by inflation. So, Secretary Pang and the personnel chiefs, for example, would you support an increase in pay from the current $110 a month for such duties as parachute duty or carrier flight deck operations, explosive demolition, et cetera? Are there any special incentive pays that can be eliminated? For certain places pay and responsibility may have not increased since 1949 and 1958 respectively. Are these two pays that one can be eliminated? I do not know. And are there any programs that would benefit from the creation of new incentive pay? I have been doing that introspection, but I do not know.
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Mr. PANG. Mr. Chairman, I think it is fair to say that we have a whole host of special incentive pays. I do not know of any one that is indexed. So there are pays that have been authorized many, many years ago, and they have never changed, you know, and therefore, their value has eroded.
There are some special incentive pays that are authorized on the books that we have not used for years, and I think it is fair to say we have not spent much time in reviewing these pays. We are now changing our focus on the basis of the questions that you have raised, and we are going to conduct a full review of all special incentive pays. And we are going to do this on a recurring triennial basis.
Mr. BUYER. I would like to clean it up.
Mr. PANG. Yes, sir.
Mr. BUYER. OK. And let us know if there are some new areas of concern, some new technical hazardous duty that needs to be plussed-up. You know, as the Navy moves to your smarter ships and if we have less people and other things that will take place as some hazardous duties, then let's eliminate some of those.
Mr. PANG. Mr. Chairman, I would like to ask my colleagues to respond to that issue you just raised, because, you know, among special incentive pays are bonuses we pay our aviators. I know that was alluded to earlier in remarks that we have a looming aviator retention problem, and I think General McGinty wanted to make a few remarks.
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Mr. BUYER. Do any of the personnel chiefs want to respond?
General MCGINTY. I would like to talk about our pilot problem, if we have a couple minutes. I alluded to it in my comments. We are coming down from an all-time high in the history of the Air Force pilot retention numbers, which we experienced in 1995, but we are coming down fast. Our retention for pilots dropped 9 percent last year. Our bonus-take rate, people signing up for the aviator bonus, came down 18 percent last year. It is coming down another 16 percent, it looks, this year.
When I look ahead for——
Mr. BUYER. What was the amount of that bonus?
General MCGINTY. The amount of the bonus is $12,000 a year for 5 years, $60,000 total.
When I looked at the pilots that are requesting separation from the service—because that is a leading indicator because they have to give us 6 months' notice—I have 497 pilots in the Air Force that are planning to separate this fiscal year. That is 50 percent higher than the same time last year.
Then when you look at the average cost of a pilot of somewhere around $4.3 million, we are losing a big investment when they separate. And the airlines are hiring—as you said, there are different articles every day, but at least 3,000 or 4,000 pilots this year.
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We survey the pilots that turn down the bonus because that is a good exit survey for us, and the reasons they cite are the personnel tempo that they are enduring, the commitment that is required to serve 5 more years, and the airline hiring is a pull to pull them out of the service.
Perhaps I could compare the bonuses, and that would help put it in perspective.
A young captain in 1990 who would be eligible for the bonus—because the bonus came in in 1989 and has not been adjusted since. Flight pay has not been adjusted since 1990. So that young pilot in 1990 who was offered the bonus, his package for 7 years of flight pay, 7 years of bonus, would be $138,000.
A young pilot today in 1997 who is offered the bonus would get the same 7 years of flight pay, but only 5 years of bonus because we have increased the commitment out of pilot training. So the value of today's contract is $114,000. It is down $24,000.
In addition, 25 percent of my pilots who are eligible for the bonus this year are under the latest retirement system, so they recognize a possible 25-percent loss in life stream earnings from a military retirement program.
These two pays then, I think, need to be immediately raised to today's dollars. That is the quick fix that I think we need to work on, and that is about $66,000 that needs to be added to that $114,000 to bring it up to today's dollars. This can be done by just inflation-adjusting the bonus and the flight pay, or it can be done by doubling the bonus. There are several different proposals. And we are working as services with OSD to come up with a specific proposal and with your staff to try to make that happen.
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Mr. BUYER. All right. None of this came over in the budget proposal. Did you have these conversations as you were putting the budget together and sending it through the works? This did not just happen yesterday.
General MCGINTY. As I said in my opening comments, we were at an all-time high in pilot retention in 1995, fiscal year 1995. We were at 86 percent. We came down 9 percent into 1996. Last year, last summer, when I was building the budget that we are considering now, we were still at pretty good retention. We were at 59 percent, and we have seen it come tumbling down this year. So it is kind of an ongoing rapid hill we are on.
Mr. TAYLOR. General, I am curious. Is this—you are talking about the airlines hiring 3,000 pilots? Is this a cyclical situation? Is this something that—I realize once the airlines hire these pilots, they are going to keep them around for 10, 20, 30 years. So is this something that will happen this year and go away, or is this not directly because of the airlines but more as a reflection of discontentment amongst your pilots, or a combination of the two?
General MCGINTY. Yes, it is a combination of a lot of things. We have been through this before. When I worked on this the first time in 1979, we had awful pilot retention, and by 1982 it had turned around.
If you read the airline hiring projections right now, they have a big hump coming up on age 60, so they are forecasting 3,000 to 4,000 pilots a year for the next 4 or 5 years. They have a tremendous draw if you believe—if they do not change the max age that they can fly in the commercial airlines. And the growth of the airline industry is at a pretty high rate, too, which is pulling pilots out of the service.
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So I think this one may be more than a year, more than the 3 years we had in 1979, but I cannot give you the endpoint of it.
Mr. TAYLOR. One additional question is a disgruntled navigator was telling me about a situation where a large number of navigators were told to leave the force during the drawdown, and then the Air Force recognized a mistake and encouraged many of them to come back or some of them to come back.
Does this uncertainty of being let go one day and brought back the next—that obviously is not helping morale.
General MCGINTY. That is exactly right.
Mr. TAYLOR. Are we having this same situation with pilots, or was that unique to——
General MCGINTY. We have not, throughout the entire drawdown program—with the exception of the very first year, we have not let pilots leave for several years now. We have not let them participate in the drawdown programs. But you are exactly right.
In hindsight, we should not have let those navigators go. We should not have separated the navigators as part of the drawdown. We should have looked for other people to go. And we did invite them back, and some of them did come back, thank goodness. But they came back with a bad taste.
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Mr. TAYLOR. What assurance—I mean, human beings make mistakes. What assurance does this committee have that we can try to prevent this in the future?
General MCGINTY. Well, I think the best assurance you can have is that we hopefully have learned some good lessons as we came through the drawdown, and hopefully we do not have to go through a drawdown of that magnitude again in the near future. We came down 37 percent.
Mr. TAYLOR. If I may, just one last question, Mr. Chairman.
Mr. Pang, you had mentioned that you will be fine-tuning your budget request to us in the next few weeks. I would ask that you try to give us at least a couple of weeks before the markup for your final presentation. No. 1, I am pleased that you are willing to fine-tune it. I think that is the sign of maturity, saying there is something I could have done a little bit better. And so I am pleased that we will be receiving some additional comments from you, and I am looking forward to them. I am encouraging you to take what the generals and admiral have had to say today and make whatever changes are necessary to try to improve the situation.
Mr. PANG. Congressman, we will attempt to work real hard on it and respond promptly.
Mr. TAYLOR. If the chairman will indulge me one last time, I am curious about what is being done on the college fund programs to bring that in line with inflation. I join the club of parents who pay college tuition next year and am very much aware of what that costs. And since Congressman Montgomery, one of my predecessors, was so influential in this, I would sure like to see that program remain strong.
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What is going to be done to keep those costs in line with the true costs of college tuition?
Mr. PANG. Congressman, you know, it is fair to say that the cost of education, the rate of growth, exceeds inflation, and it is fair to say that the Montgomery GI bill today, in terms of reimbursing one for college, is of lower value than it was several years ago.
We do not have a proposal that we are ready to come forward with to increase the value of the GI bill at this time. It is something we are very sensitive to. It came up in the recruiting discussions that we had with the Deputy Secretary of Defense just a couple weeks ago. So this is a matter that we have under consideration internal to the Pentagon at this time. And I do not anticipate that we will be able to come forward with a legislative proposal, you know, for the fiscal year 1998 budget. However, this is something that we are going to look at very carefully to see whether or not we can come forward with anything in fiscal year 1999.
Mr. TAYLOR. Again, I have not had the opportunity to finish everyone's written testimony, but I sense that there is a slightly different incentive service by service. Yes, General?
General VOLLRATH. If I can take that question, as I indicated in my opening oral statement, in order to meet with success this year, we have increased a variety of our incentive packages. One of the packages that we have increased is the Army college fund. That is a combination of the Montgomery GI bill plus other monies that the Army puts against it.
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The Department of Defense had a cap on that of $30,000, and we went to the Department and asked for that to be increased up to the ceiling of $40,000, and we have received that authority. So that has helped us a great deal in meeting with success this year.
However, in my comments, I also mentioned that in the future we may want to take a look at that $40,000 limit because inflation has eaten up the actual value of that money. I do not know what that limit ought to be. I simply put that on the table as something we need to look at.
So I support Secretary Pang in taking a look at this in the long term and coming forth with a proposal as to where the ceiling ought to be set.
Mr. TAYLOR. General, what was the budgetary impact of raising that from $30,000 to $40,000?
General VOLLRATH. Within the Army, the budgetary impact was about $20 to $21 million.
Mr. TAYLOR. And you absorbed that out of your normal operating budget?
General VOLLRATH. Yes, sir. For this year, correct. Next year we will have to adjust, and right now we are taking a look at that. I do not know that that will cause any change that you will see here.
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Mr. TAYLOR. When you take a look at that, I would request that you submit to the committee the average cost of tuition for an in-State student at a State university across the country.
General VOLLRATH. Yes, sir.
Mr. TAYLOR. We certainly want to make sure it is an adequate amount of money so that a young person can go, if not to the school of their choice, at least to a good school near home.
Thank you.
Mr. BUYER. The Air Force provided some testimony on the pilot retention. I notice we have got some Harrier pilots in the Marine Corps and pilots in the Navy. Are you seeing some similar problems?
General MUTTER. Yes, sir, absolutely. Our resignation rate for the past 10 years has averaged about 35 pilots, fixed-wing pilots per year. In 1996, that went up to over 90, and it is 83 already this fiscal year. So we definitely are seeing similar types of problems.
In light of that happening, as of October 1, we raised our aviation continuation pay. We were paying lower than the other services, and we did raise it on October 1 and have looked at what we would hope our take rate be, is in about the 550 mark. We anticipate the actual take rate is probably going to be a little less than 500. We will probably fall 10-percent short of our hope.
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Mr. BUYER. Almost 150 percent.
General MUTTER. Yes, sir.
Admiral OLIVER. Mr. Chairman, our numbers in the Navy are a little more ambiguous. We actually project fewer pilot and NFO resignations this year than we did in 1996. In 1996, we had more technically than we had in 1995, but the data are difficult to discern because in 1995, although we had 413 pilot and NFO resignations, in addition to that we separated 317 with separation incentive bonuses. And so we were forcing pilots out in 1995. So then in 1996, if you add up the numbers that resigned in 1995, plus the ones that we separated in 1996, we actually had a lot fewer resign. We have fewer resigning in 1997.
If you just looked at those data and did not do what you did, get out and talk to pilots, you would say we are doing pretty well here. But I get the same anecdotal information you do, which leads me to some great concern because late-breaking information for us is just in the last couple of months. We have looked at our take-up rate for this year's aviation continuation bonuses, and we find that we are short in four particular communities.
What that portends is down the road in 18 months, 2 to 3 years, we are going to have department head shortages, and there is no way to re-create those losses. So what I believe that we are seeing is we are lagging the Air Force experience, in my judgment, by about 18 months, is what it is looking like just from the numbers that I have here.
I would echo many of the things that General McGinty said here in terms of the ways we need to approach this problem.
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Mr. BUYER. Mr. Taylor.
Mr. TAYLOR. Admiral, I would like to open this up to you and to General McGinty. General, you had mentioned that you called back to duty or gave the opportunity to re-enlist to those navigators who you had let go. Is any effort made—we obviously let a lot of great aviators go because of the drawdown. Is there an opportunity for some of them to re-enter the service? And how is that handled?
General MCGINTY. We have actually a pilot recall program that we have used for, I think, the last 2 years, and to date we have had 57 pilots come back on active duty this year, which helps. It is a small number, but it helps.
We also take pilots that are deferred for promotion and offer them continuation, and we have had 50 pilots accept that.
So we are working the pilot problem from every angle that we can possibly think of.
Mr. TAYLOR. What about a lateral transfer? For example, if the Navy is drawing down, are they given an opportunity to——
General MCGINTY. There are procedures for inter-service transfers, but I have not seen many of those that have taken place. But it is doable. I mean, I transferred a young officer from the Army to the Air Force earlier this year. So there are procedures to do that. But it is not done in wholesale numbers.
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Admiral OLIVER. No. There are lot of considerations for that, but the avenue is open for those who wish to pursue it.
We had a similar experience with bringing some pilots back because things change. For instance, when we were forcing some pilots out earlier, we had planned to decommission the A–6 community, and then circumstances changed and we got—the EA–6 community stood up and migrated to the Navy. And so we then all of a sudden had a requirement for some aviators that we were looking at downsizing, and so we sent out letters to those asking them to reconsider.
Mr. TAYLOR. Thank you, Mr. Chairman.
Mr. BUYER. I wanted to ask about—the Navy identified an advertising shortfall of $6 million for fiscal year 1998. Congress added—in fiscal years 1995 and 1996, our additions apparently halted some of the decline in youth propensity to enlist.
My question to the personnel chiefs is: What is the status of recruiting advertising funding within each of your services? Are you all right? Holding the line? Short? Need more?
General VOLLRATH. From the Army perspective, we need more. But for this year, 1997, and for 1998, it is our intent to make that happen within the budget authority or the budget as it is presented right now. The increase very specifically that we have added is an additional $15 million to advertising this year on top of the $71 million that we had originally committed. And we believe that that increase will have to continue in the next several years because our mission, as I indicated earlier, will stay about where it is today.
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Mr. BUYER. All right. Navy.
Admiral OLIVER. You mentioned $6 million. I think that is about right. We are also looking for trying to figure out how to fund that internally, but the reason—this emerging requirement comes from a couple of things. No. 1 is we started a new campaign last year that we find is particularly effective, and so our enthusiasm for advertising has gone up at the same time advertising inflation is extremely high, almost in the same numbers that medical care seems to inflate. And so any marginal dollar that we can come across to throw at recruiting advertising we think is a dollar well spent.
Mr. BUYER. Let me know over the next couple of weeks if you are going to be able to achieve that internally or not and what your shortfall now is.
Admiral OLIVER. Will do.
Mr. BUYER. Air Force.
General MCGINTY. We cut our recruiting advertising budget too much 3 or 4 years ago. We cut it down to the $7-, $8 million range. We have plussed it back up to $14.7 this year. The 1998 budget is $15.7, and the chief has added another request on his unfunded priority list for $4.5 more.
Mr. BUYER. Thank you. Marine Corps.
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General MUTTER. We, too, have a shortfall which we will be looking to find any way we can to try to fund it because there is absolutely no doubt that that advertising dollar is extraordinarily effective, and we want to keep working with that. I do not have an exact amount off the top of my head, but we will provide you with that.
Mr. BUYER. If you can inform me within the next couple of weeks of the specific dollar amount.
General MUTTER. Yes, sir.
Mr. BUYER. Thank you.
I have a couple questions I would like to ask. For the four personnel chiefs that are sitting here, do all of you support the military academies? Do you all support the academies, yes or no?
General VOLLRATH. Yes.
Admiral OLIVER. Yes.
General MCGINTY. Yes.
General MUTTER. Yes.
Mr. BUYER. OK. Do you think that it is a good idea in the military academies that we maintain active duty at the military academies as professors in military science and their relationship to the corps? Should we maintain that with active duty or should we permit reservists to do that or someone with prior service? Should we maintain active duty, yes or not?
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General VOLLRATH. Yes.
Admiral OLIVER. Yes.
General MCGINTY. I think we need a mixture.
General MUTTER. I would concur on a mixture.
Mr. BUYER. Concur on a mixture, all right. Mixture, mixture, yes, yes.
Should those then professors of military science have direct contact with the corps and be mentors with the corps at the three military academies? Yes or no.
General VOLLRATH. Yes.
Mr. BUYER. Yes from the Army. Navy, yes?
Admiral OLIVER. Yes.
Mr. BUYER. Air Force?
General MCGINTY. If I understand the question, yes.
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Mr. BUYER. OK. Marine Corps?
General MUTTER. Yes, sir.
Mr. BUYER. I am concerned about a trend that I am seeing at the six military colleges. At the military colleges, do you continue to support active duty as professors of military science, yes or no?
General VOLLRATH. Yes.
Mr. BUYER. Yes from the Army. The Navy?
Admiral OLIVER. Yes.
Mr. BUYER. Air Force?
General MCGINTY. What are the six military colleges?
Mr. BUYER. We have Norwich, VMI, the Citadel, Texas A&M, North Georgia——
General MCGINTY. Yes.
Mr. BUYER. Yes from the Air Force. The Marine Corps?
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General MUTTER. Yes, sir.
Mr. BUYER. Yes.
Do you believe then that the active duty professors of military science—since you have agreed that there is a benefit to their direct contact in mentoring with the academies, do you agree that the active duty professors of military science at the six military colleges should have direct contact with the corps as TAC officers for mentoring and recruitment? The Army, yes or no?
General VOLLRATH. No, I do not believe so.
Mr. BUYER. You do not believe that they should have direct contact?
General VOLLRATH. I believe they have direct contact, but not necessarily as TAC officers.
Mr. BUYER. You do not believe that they should serve as TAC officers?
General VOLLRATH. Not necessarily.
Mr. BUYER. The Navy?
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Admiral OLIVER. Not to belabor this, sir, but having been recently briefed on this, I am not sure I know enough about it to give a yes or no answer. I know there is enough of a concern among some of these officers about the things that they are asked to do that I am not prepared at this time to give a yes or no answer in terms of their involvement. But I do believe it is something that we need to look at very seriously.
Mr. BUYER. Air Force?
General MCGINTY. I do not think it is a simple yes or no either. I think that if we are going to have military officers present at these schools teaching in the ROTC programs, which I assume is where they are doing it, that they have to be involved. But if there are concerns with their involvement, then they need to be addressed.
Mr. BUYER. Marine Corps?
General MUTTER. I would echo Admiral Oliver's comments. I do not know that I know enough about it, but it is something that does need to be looked at.
Mr. BUYER. I do not want the four of you to be politicians. OK? I do not want that. There are a lot of steep traditions from the six military colleges and what their product has been, and I know that there are also many pressures from political circles, from many different constituencies for different reasons. And before we begin breaking some of those very strong traditions and some of those contacts from the active duty and their mentoring of the corps, you have got two military colleges out there that are struggling at the moment, VMI and the Citadel, as we move toward gender integration. And the active duty can be helpful in teaching them in those processes. Right now the Department of Justice in their—they have a restraining order that prevents the academies from speaking to VMI and the Citadel in matters of academics and the military. That does not begin to make sense as we try to move them toward the process of progression.
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So if you think this one is going to go away with me, you are wrong. So I would like for you to go back and think about this one and let me know what you are going to do about it, because as I told the service secretaries yesterday, I will give you the opportunity to hear and let me know what your plan is; and if you think you can stonewall it, I will put something in the mark that you may disagree with.
The last comment I would like to make is I share the concerns, not only that you made, but also with Mr. Taylor, with regard to the GI bill and how you have been able to use that as a great recruiting tool. Many of us here in the Congress are struggling with the education issue when you have such a rapid inflationary rate—actually, tuition increased at a rate, in the last 15 years, of about 280 percent. People think that the Pentagon will be the last institution that we would be able to restructure. I disagree. I think the last institutions perhaps in our society that we will ever be able to restructure are colleges and universities.
Purdue—I do not want to pick on Purdue, but it's just down the road from me where I live. They have about 15,000 employees at Purdue University. You know, we keep feeding more money into them, and all they can do is access more Federal funding, more Federal funding, more Federal funding, tax deductions, tax credits, more funding, more State funding as the colleges' budgets and bureaucracies bloat bigger and bigger. If anybody has that idea of how we can restructure the colleges and universities, let me know.
Mr. Taylor.
Mr. TAYLOR. Let me thank all of you for staying around as long as you have. Let me apologize on behalf of the Democratic members who are not in attendance. We have a very serious vote on the floor, a very serious discussion regarding the decertification of Mexico as a result of their efforts or lack thereof in the war on drugs. It is causing many of them not to be here.
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Since that is the subject of the day, I would like to know if you are also in charge of personnel on the civilian side in each of your respective branches.
General VOLLRATH. No, sir, I am not.
General MCGINTY. Yes.
General MUTTER. Yes.
Admiral OLIVER. No, sir.
Mr. TAYLOR. For those of you who are, then, I just finished going down to visit some of your airmen at Latisia, Colombia, where we have a radar installation. We have P–3, E–3's, AWACS, probably people on the ground on a daily basis putting their lives on the line in the war on drugs. And I know that you have drug testing within each of the services and that it is random so that hopefully you can catch those who are abusing drugs.
My question is: Isn't there a huge disconnect with having people put their lives on the line, such as the airmen who were shot out of the C–130 by Peruvians a few years ago, on the one hand, and then on the other not even bothering to demand those civilians who work for the Department of Defense to take a drug test, at least giving the people of this country some sense of certainty that those people who work for them are not on drugs?
I would like you to respond to that. I believe in drug testing. I saw what happened in the 1970's when they instituted drug testing and how drug abuse in the services, throughout all the services, went dramatically down. Why don't we ask the same of those civilians who work for the Department of Defense?
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General MCGINTY. I would defer that perhaps to Mr. Pang because it implies Army, Navy, Air Force, and Marine Corps civilian employees. It applies to all of our civilians in the whole of DOD.
Mr. PANG. Congressman, I believe there is required drug testing for some civilians, but I am not sure for all. What I would like to do is provide a response for the record, because I want to make sure I am accurate on this.
Mr. TAYLOR. Your response, unfortunately, is correct—some people but not all. And, again, if civilian technicians are tuning the engines and that guy is on drugs, you——
Mr. PANG. I take your point.
Mr. TAYLOR [continuing]. Are putting the uniformed personnel lives on the line. It also questions their desire, brings into question their desire to actually make the whole effort on the part of the military with regard to the war on drugs work, because it is not working. I do not think it is for lack of effort. I think it is for lack of a uniform national will across the board to go after the drug user as well as the pusher. And I think it could start with the Department of Defense. I think that is the most logical place to start.
I would hope that you would get back to me, and I hope that would be one of your refinements as far as your recommendations that we will see in the next couple of weeks.
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[The information referred to is found in the appendix on page 353.]
Mr. TAYLOR. Thank you, Mr. Chairman.
Mr. BUYER. Thank you very much for coming over and testifying, and please, if you could, get the answers to us as soon as you can. We will be here next week; then we recess for 2 weeks. But then we go right into our mark. So if you could, let us know the answers to these questions as soon as possible.
I also will have some questions for the record. We will get those to you immediately.
Mr. PANG. Thank you, Mr. Chairman.
Mr. BUYER. Thank you very much, Secretary Pang.
[Whereupon, at 12:43 p.m., the subcommittee was adjourned.]
"The Official Committee record contains additional material here."
QUESTIONS SUBMITTED BY MR. BUYER
Military Compensation and Recruiting/Retention
Mr. BUYER. The Congress has invested considerable funding over the last two years to reduce housing out-of-pocket costs for members and their families, a program that Secretary Perry initiated but later abandoned. Will the proposed housing reform initiative continue to reduce out-of-pocket costs and achieve the 15 percent target set by Congress? If not, what is the effect of the reform initiative on housing out-of-pocket costs? What should be done about level out-of-pocket costs? What should be done about level out-of-pocket housing costs in the future?
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Mr. PANG. The current budget retains our commitment to improving the quality and affordability of housing for our service members. It continues to fund the increases in BAQ from the last two years. We are grateful to the Congress for its support in attempting to achieve the targeted absorption rate of 15 percent. Congress has invested considerable funding in an attempt to reduce absorption; unfortunately, the desired effect has not occurred. The very reasons why this attempt has not produced more pronounced gains is why we want to overhaul the system. First, the system is expenditure-based. This means that when you give members more housing allowance dollars, they spend them. Their increased spending raises member-reported housing costs above housing market inflation, resulting in increased absorption. The other part of the problem was that the BAQ increases, two-thirds of the member's housing allowance, went to some places where there was little or no housing inflation. The housing reform initiative will prevent absorption from rising. Therefore, rather than continuing to invest in a losing effort, we are investing in dormitory and base housing upgrades this year, as we work to reform the housing allowance system.
Our proposal for housing allowance reform is the first step in stabilizing, and then reducing, the percentage of housing costs absorbed by the individual service member. It will eliminate the complicated VHA formulas and cumbersome survey of our service members, and replace them with a single allowance based on a commercially-provided housing cost index for every pay grade and to every location where military members are assigned. This will help ensure that the allowances are credible and sufficient to provide each member with the ability to obtain housing that meets a minimum adequacy standard. Phased in over a multi-year period, implementation would be cost-neutral. The reform would decouple housing allowances from the pay raise and get the right amount of money to the right people, allowing us to truly get absorption under control.
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Mr. BUYER. Some experts have suggested that the ECI is not the best tool for comparing military and private sector pay increases. Is ECI the best standard for measuring military pay comparability with the private sector? Does it need to be modified? Is the gap valid?
Mr. PANG. The ECI is a useful tool, but only one of many that we use to assess pay comparability. The ECI measures the increase in wages and salaries for the average private sector workers. If I were forced to select a single measure among the currently available data series on which to determine an appropriate pay raise for military personnel, I would opt for the ECI. However, comparability is a complex issue and one that does not readily lend itself to a single comparison. Similarly, measuring a ''pay gap'' by comparing the annual increase in basic pay with the annual increase in the ECI does not tell the entire story. There is a difference in the growth of the ECI compared with the growth in basic pay, but I would not say that this is an absolute measure of pay comparability.
Mr. BUYER. Following the Persian Gulf War, the Department has experimented with a strategy to deploy personnel in a temporary duty status in an effort to overcome the BAS problem and provide fair compensation when deployed. The temporary duty strategy has been criticized for inconsistent application and excessive monetary windfall to some members. Currently the system is rife with inconsistencies between Services and between deployment locations. I understand that deployment compensation is very complex, but I believe it might make sense to establish one consistent DoD policy regarding BAS when deployed. Once the correct level of BAS is established, wouldn't it be fairer and more cost effective to terminate the deployment of personnel in temporary duty status and, when appropriate, return to the traditional policy of denying BAS when meals are provided?
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Mr. PANG. One of the driving forces behind BAS reform was a need to prevent Service members from suffering a pay cut when they deployed. Prior to 1994, when Service members deployed we generally placed them in a ''field duty'' status. This happened during Desert Shield/Desert Storm and Somalia. At that time, we were required by law and policy to stop paying enlisted members BAS. This amounted to an immediate $200 pay cut for most married members, a loss of 22 percent of take-home pay for some junior enlisted families. Further, all Service members, married or single, incurred great inconveniences and incidental expenses associated with long-term, often short-notice, deployments. The problem was somewhat mitigated when we could authorize Imminent Danger Pay (IDP), Family Separation Allowance (FSA), and Certain Places Pay (CPP). However, these pays should be entitled on their own merits—not as a substitute for BAS.
Over the past three years we changed policies to prevent a loss of pay for members deployed in support of joint operations. Our legislative initiative would resolve the remaining problems for members deployed to operational exercises by entitling all enlisted members to BAS at all times. Returning to the traditional policy of denying BAS when government meals are provided would defeat the intent of our reform efforts. It will, however, also eliminate the need to place members in a temporary duty status while deployed to protect their ''take home'' pay. This should result in a cost savings to the Department.
Mr. BUYER. Perhaps the funding that is used to support the additional cost of temporary duty status could be used to pay a special pay to members on long arduous deployments where the Services are concerned about restoring the purchasing power of some portion of the BAS? Would you support a new arduous duty special pay?
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Mr. PANG. Our military forces are increasingly deployed to contingency operations in austere and arduous locations around the globe. We are aware that gaps exist in compensation with members similarly situated in these operations. The Department will form a working group in the near future to examine the adequacy and overall credibility of contingency-related compensation to identify those gaps, explore options, and formulate an appropriate structure and rate(s) of a pay to close those gaps. Our BAS legislative reform initiative should be considered independent of the need for a newly structured special pay for arduous duty. While we support considering creation of a special pay to compensate for the arduousness of duty performed in deployment and contingency situations, we would not want to be compelled to use it every time, regardless of conditions, just to offset BAS.
Mr. BUYER. Could such an arduous duty special pay be used to offset the loss of BAS during extended periods of field training in the United States, such as the Army's National Training Center?
Mr. PANG. Again, BAS reform should be considered independent of the need for a special pay for arduous duty. We do not think that the creation of a separate special pay should be used as a means to offset the loss or reduction of BAS during operational deployments, training, or exercises. Rather, it should be considered independent of the need for a newly structured special pay for arduous duty. While we support considering creation of a special pay to compensate for the arduousness of duty performed in deployment and contingency situations, we would not want to be compelled to use it every time, regardless of conditions, just to offset BAS.
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Mr. BUYER. Could such an arduous duty special pay be used to offset the loss of BAS during extended periods of field training the United States, such as the Army's National Training Center?
Mr. PANG. Again, BAS reform should be considered independent of the need for a special pay for arduous duty. We do not think that the creation of a separate special pay should be used as a means to offset the loss or reduction of BAS during operational deployments, training, or exercises. Rather, it should be considered independent of the need for a newly structured special pay for arduous duty. While we support considering creation of a special pay to compensate for the arduousness of duty performed in deployment and contingency situations, we would not want to be compelled to use it every time, regardless of conditions, just to offset BAS.
Mr. BUYER. What is your assessment of the quality of life for recruiters and their families and what needs to be done to improve it? Is the cost of providing medical care to family members a major concern of recruiters? We are aware of the ongoing pilot program of extending TRICARE to military personnel assigned to locations away from military health care facilities, but shouldn't more be done now to limit out-of-pocket expenses for recruiters? Would the Services support and use an authority to reduce out-of-pocket health care expenses to some extent?
Mr. PANG. While there is frequent speculation on the quality of life for recruiters and families, the Department's only means to measure recruiter quality of life definitively is the recruiter survey that is administered every two years. Results from the 1994 recruiter survey indicate that work hours, special duty assignment pay, child care, health care and housing were the main issues that concern recruiters. While much has been accomplished in some of these areas, there is still much more that needs to be done. The 1996 recruiter survey results will be available in May 1997; these will provide the Department with date to evaluate current recruiter quality-of-life issues. In concert with release of the 1996 recruiter survey results, the Department is scheduling a meeting of the Joint Recruiter Quality-of-Life Committee. The committee will evaluate the findings and will work to identify additional means to improve recruiter quality of life.
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It always would be desirable to provide recruiters immediate relief for out-of-pocket expenses for health care. However, the Department's decision to extend TRICARE to military personnel assigned to locations away from military health care facilities balanced the concerns of cost, timely execution, and consideration for all geographically separated individuals. It is unlikely, given the fiscal constraints and the lack of a program and structure to administer a recruiter-only program, that we could respond any faster than the extension of the TRICARE initiative. It is anticipated that TRICARE will be provided to all recruiters by the end of 1998.
While we are uncertain how the Services would support the authority to reduce out-of-pocket health care expenses, they support the extension of TRICARE. Additional authority would require consideration for the balance of operational do-ability, costs, and timeliness of execution. More specific information is required to evaluate accurately the merits of the question.
Mr. BUYER. Some analysts have contended that the recruitment process would be more cost efficient if there was more cooperation between the Services. What is your perspective on more joint cooperation in recruiting.
Mr. PANG. With a long-range view towards increasing the efficiency and effectiveness of recruiting operations, the Department directed that the viability and cost effectiveness of joint recruiting support concepts be evaluated. In the spring of 1995, a Joint Recruiting Support Study Group (JRSSG) was chartered to examine the feasibility and cost effectiveness of consolidating many of the recruiting support functions, thus leading to the elimination of redundancy and duplication of effort wherever possible, and freeing scarce resources for other uses. The group evaluated these concepts over a nine-month period, and its findings were published in a November 1996 report entitled, ''Evaluation of Joint Recruiting Support Concepts.''
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Based on the findings of the JRSSG, the Services would not support a joint recruiting command or the use of ''joint'' recruiters at this time. On the surface, combining recruiting services appears to be a cost-effective suggestion. However, when you consider that each Service is different in terms of roles and missions, enlistment standards, training, jobs, etc., and the fact that each Service has its own culture, this concept begins to break down. It is not realistic to expect that one Service recruiter would be able to effectively understand, explain, and sell another Service to potential applicants. Moreover, potential conflicts of interest could lead to one or more Services failing to accomplish their recruiting objectives in an area covered by a single recruiter.
Our study indicates that the risks of consolidating recruiting services outweigh the benefits. The recruiting process is so vital to the manning or our Armed Forces that we must not precipitously change it just to save money. This finding is in line with the final analysis of the 1990 Defense Management Report Decision (DMRD), which similarly concluded that the risks were too great.
There are many aspects of the recruiting process that are not Service unique, and that do lend themselves to a joint solution. The Joint Recruiting Facilities Committee (JRFC) manages the DoD Recruiting Facilities Program (RFP), which provides recruiting offices for all Services. Corporate-level advertising and market research are accomplished by the Joint Recruiting Advertising Program and the Joint Market Research Program. Examining and entrance processing is consolidated for all Services with the U.S. Military Entrance Processing Command (USMEPCOM). The Joint Recruiting Information Support System (JRISS) is a major project under development to provide the automated management information support to all Service recruiting programs. The General Services Administration (GSA) provides a cost-effective means to provide vehicles and other logistical support for Service recruiting missions. As the roles and responsibilities of the various joint committees are refined, their effectiveness is expected to increase.
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Mr. BUYER. Well, I do not want to get those cards that the Air Force talked about. That is why I ask the question.
Tell me how you came up with that dollar amount. Why did you choose that?
Mr. PANG. We used the USDA food plans as guides to establish a reasonable level of subsistence for Service members. Each food plan is only one of many combinations of food groups or spending levels that could be developed. The original USDA surveys determined that expenditures for many families fell between the minimum-cost and moderate-cost plans. The families of skilled wage earners and business and professional workers spent at the level of the liberal plan. Families of most federal employees and semi-skilled wage earners were spending for food at an amount mid-way between the moderate-cost and liberal plans. Based on this, and the fact that members of the armed forces are presumed to be more physically active than the population as a whole, the best level on which to base the Basis Allowance for Subsistence is the mid-point between the moderate-cost and liberal plan for males 20–50 years of age.
The mid-point between the two plans, currently about $200 a month, represents the USDA index for our reform effort. Today, enlisted BAS is about $20 higher than the index. By limiting BAS growth to one percent a year it will take five years for the USDA index to catch up to enlisted BAS. At that time all enlisted members will be on full BAS.
We also briefed each of the Services' senior enlisted advisors on this reform to get their feedback. They all agreed that the benefits of this reform greatly outweighed any temporary downside. Yes, they too would like to see Congress pay the bill for a one-time fix. but short of this they recognize the need to fix the deployment problem and bring equity and credibility back to the allowance. I would like to reiterate that we are holding the growth rate of BAS to one percent per year for two reasons—first, to allow the USDA cost for food to catch up and, second, to accumulate the money in a cost-neutral manner to pay everyone full BAS. Meanwhile, BAS will still increase for all those who currently received it, from $220 per month to $234 per month, by the end of the transaction. At the same time, more than 406,000 additional enlisted members will be entitled to BAS and will have $47 per month left, even after we charge then for meals. That $47 is about the same amount of money that someone currently receiving BAS would have left if he or she ate meals in the dining hall.
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Basic Allowance for Subsistence (BAS) REFORM
Mr. BUYER. Following the Persian Gulf War, the Department has experimented with a strategy to deploy personnel in a temporary duty status in an effort to overcome the BAS problem and provide fair compensation when deployed. The temporary duty strategy has been criticized for inconsistent application and excessive monetary windfall to some members. Currently the system is rife with inconsistencies between services and between deployment locations. I understand that deployment compensation is very complex, but I believe it might make sense to establish one consistent DOD policy regarding BAS when deployed. Once the correct level of BAS is established, wouldn't it be fairer and more cost effective to terminate the deployment of personnel in temporary duty status and, when appropriate, return to traditional policy of denying BAS when meals are provided?
General VOLLRATH. A major reason for creating BAS reform was to resolve inequities between the Services in payment of BAS during deployments. Once all members are entitled to BAS, we will be able to treat all deployed soldiers in an area of operation the same. Under the BAS reform these soldiers would be entitled to full BAS, have their BAS offset by the cost of their meals, and receive the incidental expense portion of per diem unless the required incidentals are provided in kind. The Army would support the concept that deployed soldiers no longer need to be placed in a full per diem status when serving this type of temporary duty.
Mr. BUYER. Perhaps the funding that is used to support the additional cost of temporary duty status could be used to pay a special pay to members of long arduous deployments where the services are concerned about restoring the purchasing power of some portion of the BAS? Would you support a new arduous duty special pay?
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General VOLLRATH. First, most of these operations are contingencies and therefore have not been included in the requested budget. It is not likely that any savings or cost avoidance of temporary duty funds would be able to pay for a new arduous duty special pay. However, the Army does support the restructuring of Certain Places Pay (CPP). When this pay was first established it was specifically targeted to solders serving in arduous foreign locations and represented 9–10 percent of their pay. With the drawdown of forces overseas, the foreign locations where a soldier must serve on a permanent basis are decreasing, yet deployments in support of contingencies and for contingencies are increasing. Many soldiers supporting the contingency are entitled to different compensations even though the country they are serving in is equally arduous locations. This situation cries for the restructuring of CPP as a contingency pay.
Mr. BUYER. Could such an arduous duty special pay be used to offset the loss of BAS during extended periods of field training in the United States, such as the Army's National Training Center?
General VOLLRATH. The definition of field duty was changed by President Clinton on October 28, 1994. This revision permits payment of BAS in all cases except training and exercises. The Army supports BAS reform and believes that Congressional approval will enable our department leader to define field duty. All soldiers would then be entitled to full BAS and pay for meals provided for by the Government. Hence soldiers, both married and single, while in training at NTC would receive full BAS and have the meals provided them deducted from their BAS. These soldiers would keep the money left over at the end of the month. We believe the restructured CPP would be used for deployments in foreign locations not in a training environment while in the continental United States.
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RECRUITING AND RETENTION
Mr. BUYER. Recruiter quality of life remains a critical concern of the Committee as recruiter morale has been low in recent years and invariably gets worse during periods of high stress like we are currently experiencing. What is your assessment of the quality of life for your recruiters and their families and what needs to be done to improve it?
General VOLLRATH. 60(+) hour work weeks, limited or no access to traditional military installation support, a high employment economy, a low propensity to enlist, and competition from businesses, higher educational institutions, and sister services, all make a recruiter's quality of life arguably the most difficult of any soldier and his or her family in today's Army.
USAREC recently completed a Unit Risk Inventory survey designed to identify high risk behaviors (drugs, alcohol, suicide, et al.), but also included questions on recruiter satisfaction. In a survey of about 6100 recruiters, the results provided some indicators of high stress levels and dissatisfaction, but did not identify the source/cause of the stress. Our analysis of serious incidents and incident reports shows a rise in the number of preventable Government Owned Vehicles (GOV) accidents, domestic violence, and hospitalization for stress-related illnesses. The Department of Defense (DoD) recently conducted a 1996 Recruiter Survey on similar issues, but the results won't be available until late April or May of this year.
To improve the recruiter's quality of life, we need to give the field force a competitive edge with both the recruiting incentives that satisfy our prospects' needs and desires and the associated advertising that generates the interest in our Army. We also need to provide our soldiers, civilians and families with the same adequate, affordable level of support (health care, housing, child care, and other associated benefits) they could expect from any military installation.
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We have already taken some steps to give the recruiter a competitive edge by increasing the amounts of recruiting incentives like enlistment bonuses, the Army College Fund, and the Loan Repayment Program. However, increases beyond these levels will require amending current law in order to keep pace with factors like the economy and rising college costs in order to attract young men and women to fill our most critical skills.
Our recruiters and their families endure expenses for housing, medical bills and child care above the normal compensation. Both the Army and the Department of Defense will continue to work these issues through the Joint Quality of Life Committee. However, even for successful recruiters, the demanding nature of recruiting duty, combined with the inequities they experience compared with life on a traditional military installation, can result in a poorer quality of life than they deserve.
Mr. BUYER. Is the cost of providing medical care to family members a major concern of recruiters?
General VOLLRATH. Access to adequate medical care is the number one quality of life issue of USAREC soldiers and families. Family members must use the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), often traveling great distances to find a provider willing to accept what CHAMPUS will pay. In FY96, USAREC lost 5477 man-days and paid $331,000 for medical temporary duty (TDY). A recruiter's time is his or her most valuable resource. Requiring travel to a military treatment facility instead of civilian care greatly impacts a recruiter's ability to accomplish all of the tasks needed to make the monthly mission. Military treatment facilities are under pressure to reduce costs and recruiters' civilian care costs are the bill payers in some instances.
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Mr. BUYER. We are aware of the ongoing pilot program of extending TRICARE to military personnel assigned to locations away from military health care facilities, but shouldn't more be done now to limit out-of-pocket medical expenses for recruiters?
General VOLLRATH. The TRICARE Prime for Geographically Separated Units initiative in the Northwest holds some promise of relief, but providers have little incentive to participate in the program, especially in the remote areas. This program must not fail because it will improve access to affordable medical care, greatly reduce out-of-pocket medical expenses, and place soldiers and their families on an equal basis with their peers stationed on or near a military installation. We are exploring several other possibilities in this area. One initiative involves a demonstration at Fort Leonard Wood to improve payment of recruiter supplemental care medical bills. It involves the automation of the billing and payment process so bills can be paid within 60 days. As of March 1, 1997, Fort Leonard Wood was paying 98% of its medical bills within 30 days and 100% within 60 days for an 11 state area. This type of payment system, when exported to other regional medical commands, will eliminate problems associated with late payment of medical bills, such as harassment by collection agencies, denial of treatment because of past late payments, or requirements to pay up front for medical care.
USAREC has also supported the development of a medical debit card to pay for recruiter medical care, and has also recommended that CHAMPUS supplemental insurance be funded for recruiters. However, neither of these programs have been approved because of the expectations of the TRICARE Prime for Geographically Separated Units.
Mr. BUYER. Would the services support and use an authority to reduce out-of-pocket health care expenses to some extent?
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General VOLLRATH. Yes, but it needs to be funded, instead of taken out of existing program accounts.
Mr. BUYER. It seems logical that better performance could be expected from a recruiting force that was comprised of volunteers. What percentage of recruiters are volunteers?
General VOLLRATH. For the Army, 35.7 percent are volunteers.
Mr. BUYER. Is it important that recruiters be volunteers when possible?
General VOLLRATH. Yes. It's very important.
Mr. BUYER. Why?
General VOLLRATH. Volunteers produce quality soldier contracts at a rate of two to one compared to detailed recruiters (non-volunteers). They have a lower relief rate, and have a higher propensity to reclassify into the recruiter Military Occupational Specialty (MOS).
Mr. BUYER. What is being done to improve that rate?
General VOLLRATH. The US Army Recruiting Command (USAREC) has a ''Recruit the Recruiter'' Team that has been quite effective in recruiting volunteers. USAREC is currently analyzing the ''Recruit the Recruiter'' Team performance to determine future plans or methods of increasing volunteers.
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Attrition
Mr. BUYER. Attrition of first term enlisted personnel has been increasing within each of the services, both within basic training and overall before the end of the first term of service. The General Accounting Office has issued a report that concluded the services could do more to understand the why attrition is going up, screen unqualified recruits before accession, and encourage recruits to prepare physically and mentally before entering basic training. There is no better way to reduce recruiting requirements than to reduce attrition. It would be easy to conclude that attitudes within the general public about drug abuse and personal freedom/discipline, for example, would conflict with standards within the military culture and is causing much of the problem.
What is causing this increase within each service and what is being done to reverse the trend? Will the services make the changes recommended by the GAO? Would attrition be improved if recruiters did not get credit for a recruit until they successfully completed basic training, which I believe is closer to the approach of the Marine Corps? Is part of the problem a ''one mistake and your out'' attitude resulting from the urgency to reduce the force during the drawdown, or are we dealing with a larger problem stemming from the erosion of moral and disciplinary standards within the American culture?
General VOLLRATH. The reasons for the increase in attrition are numerous and include all factors you have mentioned—from up front identification of qualified applicants to the understanding that we are recruiting from a very different population of youth than we did a decade ago. We are taking steps to identify ways to deal with this complex issue and reverse the trend.
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The GAO recommendations with respect to a more rigorous medical screening are supported by the Army. We concur with the need for a review of the standard screening form to insure more directive questions are asked to elicit better responses. MEPCOM data shows that nearly 75% of all applicant failures for existing medical conditions were due to concealment by, or lack of knowledge on the part of, the applicant.
The issue of linking the success of the basic trainee to recruiter credit is not considered to be fertile ground for reducing attrition. The attrition of a soldier in basic training is far more attributable to the pressure of being a trainee than to any identifiable predisposition toward attrition. The quality marks we currently use are sufficient to screen out a large number of high risk recruits while still making the recruiter mission manageable. Still, we are conducting survey analysis to verify that we are focused on the right characteristics. Between now and October 1998 we will survey recruits who both fail and succeed in basic training as well as a survey of those who attrit out of the Delayed Entry Program (DEP) before entering training. Additionally, we will follow the analysis of the recently initiated GAO study on recruiter credit to insure its merit is fully considered.
We have established a standing attrition council with representation from the recruiting, training and medical communities as well as the field army. Their charter is to review attrition trends quarterly and make recommendations on policy measures that require review. The post drawdown period finds us with policies in place which made the discharge of a soldier during that time relatively easy. In light of that fact, we have already implemented changes that restrict the number of voluntary losses in instances where the soldier can be encouraged to continue to serve honorably. Additionally, we have encouraged the use of rehabilitative transfers as a way to insure soldiers are fairly assessed during the training phase. To monitor attrition we have initiated a standard monthly attrition report which assists commanders in the field in identifying trends as they develop. Finally, to focus these efforts, the Chief of Staff delivered an Army wide memorandum in December of 1996, charging the chain of command with the responsibility of insuring leaders do everything possible to motivate soldiers to succeed thereby preserving our most precious resource.
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Recruiting and Retention
Mr. BUYER. Some analysts have contended that the recruiting process would be more cost efficient if there was more cooperation between the services. Would the services support joint recruiters and a joint recruiting command?
General VOLLRATH. Currently, we are not in favor of a joint recruiting command.
Mr. BUYER. Why not?
General VOLLRATH. First, we do not believe a recruiter could sell all services equitably. He or she cannot possibly gain the experience necessary to give insight to the lifestyle, advantages and disadvantages and career opportunities within each service. Second, providing and funding the number of recruiters required for joint recruiting would remain with each Service, so we would still require a structure to manage them and their careers. Third, each Service determines its own personal requirements and resulting recruiting missions, and manages the required number of recruiters and support (training, incentives, advertising) required to achieve those missions. When large scale changes occur, such as the 22 percent increase in mission from FY96 to FY97, the Army is better equipped to adjust to achieve that mission than with a joint recruiting effort.
Mr. BUYER. What is being done to consolidate support operations and save overhead costs?
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General VOLLRATH. The Joint Recruiting Facilities Committee (JRFC) manages the Department of Defense Recruiting Facilities Program (RFP), which provides recruiting offices for all Services. Corporate level advertising and market research are accomplished by the Joint Recruiting Advertising Program and the Joint Market Research Program. Examining and entrance processing is consolidated for all Services with the U.S. Military Entrance Processing Command (USMEPCOM). The Joint Recruiting Information Support System (JRISS) is a major project under development to provide the automation management information support to all Service recruiting programs. The General Service Administration (GSA) provides a cost effective means to provide vehicle support and other logistical support for the Service recruiting missions. These projects lend themselves to a joint solution, as will others in the future.
Mr. BUYER. What does the Department think about increased use of telemarketing?
General VOLLRATH. The Army has many reservations about telemarketing. Each of the military services sells a different product, so we do not see telemarketing, especially if we are considering civilian/privatized organizations, as a viable method to develop the rapport and gain the applicant's interest as well as an effective Army recruiter. Telephone prospecting is especially effective once the recruiter has made an initial face-to-face contact with a prospect. Telemarketing does not accomplish this very essential key to successful recruiting.
Mr. BUYER. Joint advertising?
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General VOLLRATH. Joint advertising provides an acceptable umbrella for all military service advertising and serves to augment the level of awareness among prospects in the target market. Joint advertising cannot replace service advertising as each service has established its own brand identity. We believe young people select to serve in a branch of the military, not just to serve in the military.
Mr. BUYER. Joint market research?
General VOLLRATH. Joint market research is helpful to the Army and the Army participates in the Joint Marketing Analysis and Research Committee (JMARC). Each of the military services uses data provided from this research in developing their marketing and advertising strategies.
Mr. BUYER. Joint recruiter placement?
General VOLLRATH. The services work through the Joint Recruiting Facilities Committee an the DoD Recruiting Facilities Program in making decisions regarding opening, closing, relocating or upgrading recruiting offices. The services also act jointly through the Defense Manpower Data Center to gain market data with geographic information and past production by county and zip code.
Mr. BUYER. There is considerable evidence that unethical behavior by recruiters remains the occasional problem. Given the likelihood that the threat of misconduct is greater when recruiting is more difficult, what is being done to prevent unethical behavior?
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General VOLLRATH. First and foremost, the chain of command at each level is constantly involved in the prevention of unethical behavior. It does this not only through constant checking (command inspections, assistance visits) to ensure correct practices and procedures are used, but also by making the consequences for any unethical behavior clearly understood. It is critical to the needs of the Army that only fully qualified applicants are processed for enlistment. Our field recruiting force is well trained, motivated, and provided with sufficient ''tools of the trade'' in order to ethically produce high quality enlistments.
The USAREC Inspector General (IG) ensures ethical behavior controls are in place and under constant review. The IG provides commanders with feedback on potential problem areas within their organizations concerning enlistment processing and recruiters' ethical behavior through IG inspections and Quality Assurance Inspections.
Sea/Shore Rotation Policy
Mr. BUYER. Admiral Oliver, I was very surprised to read in the Navy Times that the Navy was extending the time required at sea for a number of specialities. This kind of tampering with sea/shore rotation policy has been an anathema for the Navy for a number of years. This would seem to be a major change in policy. Am I overstating the case? What do you expect will be the effect on morale and retention? Do you envision the need for more bonuses to motivate people to stay longer at sea?
Admiral OLIVER. I believe you are overstating the case, somewhat. Our recent change to sea/shore rotations was relatively small. Overall, we establish sea/shore rotations for over 800 combinations of rate/pay grade/subspecialties. The recent change made adjustments to only 62 of those combinations and each change was carefully evaluated for potential ramifications. Of those, 29 are viewed as positive changes, that is, they either shortened sea tours or lengthened shore tours. The bottom line is that all of the changes were necessary to adjust for ongoing changes in our billet base as we continue to adjust our infrastructure to meet our needs. As a point of fact, the last major change occurred in July, 1995. At that time, the aggregate combinations that were affected included 215 rate/pay grade/subspecialties. Of that number, 111 decreased their sea tour lengths and 52 increased their shore tour lengths.
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In reply to your question on the effects on morale and retention; while this recent change was small, I am certainly concerned with sending a negative signal to the Fleet. We fully understand the impact that longer sea tours have on morale, and the potential impact on retention, and are carefully watching our indicators for any measurable impact. This leads to your third question. Yes, I see bonuses as a necessary part of maintaining sea manning, but only if we move to further reduce the shore infrastructure and the associated shore duty it provides for many of our ratings disproportionately to any sea duty reductions that may occur. We are carefully reviewing several pay options that may prove helpful in offsetting the longer tours which would be necessary for some personnel in that case. We recently completed a survey related to Homebasing and the incentives necessary to get personnel to voluntarily remain at sea longer if given the opportunity to remain in the same geographic area for their follow-on shore assignment. The results showed that Sailors would tend to remain at sea somewhat longer if given a bonus to go along with the follow-on tour in the same area. Of course the longer the required extension at sea, the less the willingness to extend irrespective of the amount of the bonus. Again, we are carefully evaluating our options in this area, although I personally believe that our people in the aggregate, stay at sea too long already.
BAS and Deployment Compensation
Mr. BUYER. Once the correct level of BAS is established, wouldn't it be fairer and more cost effective to terminate the deployment of personnel in temporary duty status and, when appropriate, return to traditional policy of denying BAS when meals are provided?
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Admiral OLIVER. The Basic Allowance for Subsistence (BAS) Reform initiative is the right ''first-step'' in fixing compensation inequities for our deployed personnel and erasing the ''pay cut'' members experience due to losing their BAS when deployed.
The reason we put people in a temporary duty status is to ensure adequate compensation for proper food, lodging and incidentals. A Joint Service/OSD Working Group will be established to study this issue.
Your question about denying BAS implies that personnel should not be dual compensated for meals. We agree; however, the more equitable approach, agreed upon by all Services, is to pay BAS to all members, then charge them for all government meals provided. This puts personnel on ships, ashore and deployed in the field on equal footing, which is one of the major intents of BAS Reform.
Mr. BUYER. Perhaps the funding that is used to support the additional cost of temporary duty status could be used to pay a special pay to members on long arduous deployments where the services are concerned about restoring the purchasing power of some portion of the BAS? Would you support a new arduous duty special pay?
Admiral OLIVER. I would fully support the establishment of a new ''deployment compensation'' pay, or arduous duty special pay if funding is available. This pay would be similar in concept to ''sea pay'' for members deployed ashore. DOD and the Joint Staff (J1) are already investigating another deployment pay—''certain places pay''. A Joint Service and OSD Working Group will be established to discuss this issue, however, prior to establishing this special pay we would have to evaluate the cost versus the benefit of the pay.
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Mr. BUYER. Could such an arduous duty special pay be used to offset the loss of BAS during extended periods of field training in the United States, such as the Army's National Training Center?
Admiral OLIVER. This is an issue which primarily applies to the USAF and USA, and will be reviewed by the upcoming working group. I defer to the Army and Air Force on this issue.
Mr. BUYER. What is your assessment of the quality of life for recruiters and their families and what needs to be done to improve it? Is the cost of providing medical care to family members a major concern of recruiters? We are aware of the ongoing pilot program of extending TRICARE to military personnel assigned to locations away from military health care facilities, but shouldn't more be done now to limit out-of-pocket medical expenses for recruiters? Would the services support and use an authority to reduce out-of-pocket health care expenses to some extent?
Admiral OLIVER. We would welcome the authority to reduce out-of-pocket health care expenses, if funding is available. High out-of-pocket medical costs create financial worries for many recruiting families, especially those of our junior Sailors. Ideally, we would like to provide our recruiters with the same kind of program as TRICARE Prime in Europe, where members and their families do not pay any enrollment fees, deductibles, or co-payments.
Volunteer Recruiters
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Mr. BUYER. What percentage of recruiters are volunteers? Is it important that the recruiters be volunteers when possible? Why? What is being done to improve that rate?
Admiral OLIVER. Ninety percent of recruiters consider themselves to be volunteers when asked at the Enlisted Navy Recruiter Orientation School. We certainly prefer that recruiters be volunteers because they begin their tour with a positive attitude and high level of motivation, both of which are essential for success in recruiting. All career recruiters, who currently make up 17 percent of the recruiting force, are volunteers, and we plan to increase the number of career recruiters to about 40 percent of the recruiting force. Given that recruiting is a challenging tour and we need to assign sufficient recruiters to make our recruiting mission, there will always be non-volunteers. I am pleased with our 90 percent volunteer rate.
Mr. BUYER. What is causing this increase within each service and what is being done to reverse the trend? Will the services make the changes recommended by GAO? Would attrition be improved if recruiters did not get credit for a recruit until they successfully completed basic training, which I believe is closer to the approach of the Marine Corps? Is part of the problem a ''one mistake and you're out'' attitude resulting from the urgency to reduce the force during the drawdown, or are we dealing with a larger problem stemming from the erosion of moral and disciplinary standards within the American culture?
Admiral OLIVER. The Center for Naval Analyses, which has been a member of Navy's task force for our War on Attrition since FY96, indicates that over the past several years, the rise in first term attrition has been almost entirely due to the rise in recruit training center (RTC) attrition. The most significant increase in RTC attrition has been in the areas of psychological and drug attrition. Drug involvement was the number one cause of boot camp attrition in both FY95 and FY96. The accompanying graph demonstrates that overall drug attrition usage trend at boot camp (largely marijuana) is similar to the trend for THC usage by that age group. Sadly, this same general pattern of increase was also shown by 8th, and 10th graders (based on data from Monitoring the Future Study University of Michigan, 1996). One of the GAO actions recommended was that Navy commence initial drug testing at the Military Entrance Processing Stations (MEPS) rather than wait until recruits are transferred to boot camp. DOD has recently approved MEPS drug testing, which will commence as soon as funding is available. The Navy also intends to continue to test at RTC to determine whether recruits tested at MEPS truly arrive at boot camp ''drug-free.'' We are also continuing to evaluate the GAO attrition recommendations for feasibility. Many of them require DOD facilitation and guidance prior to implementation. Regarding only giving recruiters credit if recruits graduate, previous Navy policy only allowed recruiters to receive partial credit for recruits who fail to graduate. This policy was just recently changed to eliminate all credit for those who attrite within the first 30 days of boot camp (when the majority of attrition which might be attributed to the recruiter occurs).
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Psychological attrition at RTC (formerly the number one cause of attrition) remains high, reflecting the changing psycho-social and adolescent experiences of today's recruit trainees. More of today's youth are being exposed to domestic and street violence. Many others lack the discipline or self-motivation required to ensure successful completion of boot camp. RTC views one of their greatest challenges as just making the enlistee ''ready'' to train, preparing them mentally (and emotionally) to complete the transition from civilian to Sailor. This can be helped by reducing the number of recruits who ship directly to boot camp without the benefit of spending time in the delayed entry program (DEP). DEP posture has been a concern for the past few years. Our goal is to improve beginning DEP posture for FY98 to help level our quality profile throughout the entire year.
Joint Recruiting
Mr. BUYER. Would the Navy support joint recruiters and a joint recruiting command? If not, why not? What is being done to consolidate support operations and save overhead costs? What does Navy think about increased use of telemarketing? Joint advertising? Joint market research? Joint recruiter placement?
Admiral OLIVER. The OSD sponsored Joint Recruiting Support Study Group (JRSSG) found that the potential savings and efficiencies resulting from wholesale consolidation of all recruiting functions under a single organization do not outweigh the substantial risks, especially in view of past recruiting success. However, many recruiting functions already operate jointly or in coordinated fashion through Joint Service committees.
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Navy's view on specific joint recruiting concepts:
Joint Advertising: Joint and service-specific advertising, together, is more cost effective than either by itself; however, current Service budgets do not support investment in joint advertising. DOD's joint program could/should be enhanced.
Telemarketing: Navy was the first Service to ''move'' on national telemarketing. Based on two years of actual experience and data collection, telemarketing has significant potential, but is not the ''end all'' marketing tool. It can augment, but not replace, more traditional methods.
Joint Market Research: Navy supports consolidation of selected market research activities and databases to avoid duplication of effort.
Joint Station Location: Navy supports market-based research to jointly locate recruiting stations. Research suggests, however, that recruiting stations are not simply domiciles for recruiters, that stations provide visible military presence in the community and that arbitrarily reducing stations results in reduced production.
Preventing Unethical Behavior
Mr. BUYER. Given the likelihood that the threat of misconduct is greater when recruiting is more difficult, what is being done to prevent unethical behavior?
Admiral OLIVER. The Navy's approach to promoting recruiter integrity and reducing potential for improprieties involves education, detection and deterrence.
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Every Navy recruiter receives instruction in standards of conduct at our school in Pensacola, Fl. This initial training is reinforced through an ongoing field training program which is stressed and evaluated during periodic inspections. The Navy Recruiting Inspector General is specifically tasked with investigating and resolving complaints received from a nation-wide hotline and tracking key indicators of potential impropriety in recruiting, such as substantiated hotline complaints and Congressional inquiry rates, number of separations attributed to drug involvement or personality disorder, recruiter suitability boards and fault/no-fault transfer rates.
Twelve months after initial training, all recruiters now return to Recruit Training Command, Great Lakes for Refresher Training. This training re-enforces the skills and standards of conduct required by recruiters as well as provides an opportunity for them to see first hand the training with changes that may have occurred since they were at Recruit Training Command. They have an opportunity to talk to new graduates of Recruit Training Command to enable them to go back to the field and better prepare the new recruit for training. Additionally, CNRC has produced video tapes on recruiter professionalism and Delayed Entry Program (DEP) leadership, which have been distributed command wide and are viewed on a periodic basis by all recruiting staff.
Mr. BUYER. My question to the personnel chiefs is: What is the status of recruiting advertising funding within each of your services? Are you all right? Holding the line? Short? Need more?
Admiral OLIVER. In a review of FY97 unfunded requirements, we have determined we are $8 million short to fully fund media advertising and collateral costs, provide continued expansion of new market technologies and support costs associated with lead generation initiatives. Navy advertising is vital to the success of total Navy Recruiting. Navy advertising creates public awareness of opportunities and maximizes recruiter productivity. Recruiter productivity is dependent on a variety of media (i.e. television, radio, magazines, collateral's, etc.) to generate awareness necessary for mission attainment. As awareness declines, the recruiter must work longer for each accession. Building awareness on a one-to-one basis is an extremely inefficient method. The preferred method of creating awareness is on a mass scale. Navy advertising, in support of recruiting, requires multiple media with repeated exposures, to be effective. The national advertising plan is complimented by local advertising and a public service campaign. Navy advertising also provides vital recruiter support in the form of pamphlets and informational material.
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Mr. BUYER. Do you believe then that the active duty professors of military science—since you have agreed that there is a benefit to their direct contact in mentoring with the academies, do you agree that the active duty professors of military science at the six military colleges should have direct contact with the corps as TAC officers for mentoring and recruitment?
Admiral OLIVER. My short answer to this question is no, not because they cannot or should not help with mentoring and recruitment, but because they are detailed to instructor billets vice TAC officer billets. I would like to explain my response.
There are two types of billets for officers that instruct at the Naval Academy. The first type of billet is for officers who instruct in a full time capacity. These officers teach at a minimum, four classes per semester. The second type of is for company officers. These officers teach one course in leadership each semester, in addition to their duties associated with their company.
The full time instructors, as a collateral duty, are assigned as company advisors. In this capacity, they interact with students in areas of professional development, counseling, and mentoring. Additionally, all instructors are eligible to be assigned as officer representatives on extra curricular activities. However, any additional participation of the full time instructors would be difficult, given the full course load taught by these officers. If this is the correct parallel to the situation at the six military colleges, then assigning them duties as TAC officers would overburden these officers and I am opposed to that.
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Mr. BUYER. Once the correct level of BAS is established, wouldn't it be fairer and more cost effective to terminate deployment of personnel in temporary duty status and, when appropriate, return to traditional policy of denying BAS when meals are provided?
General MCGINTY. The Joint Staff, OSD, and Services recently conducted a study on near-term fixes to deployment compensation inequities. One of the recommendations from that study was to establish a Services/OSD Working Group to address long-term fixes to deployment compensation inequities, particularly in the areas of BAS. Your proposal is one that has already been identified for study. While we want to develop policies which make sense from a compensation perspective, we also want to avoid perceptions of a loss of benefits such as arose during Desert Storm when airmen lost their BAS (which they perceived as ''pay'') while fighting for their country.
Mr. BUYER. Perhaps the funding that is used to support the additional cost of temporary duty status could be used to pay a special pay to members on long arduous deployments where the services are concerned about restoring the purchasing power of some portion of the BAS? Would your support a new arduous duty special pay?
General MCGINTY. If the decision is made to withdraw BAS when members are deployed, implementation of a deployment pay may be appropriate to help eliminate the perception of a loss of benefits. Whether or not this recommendation is feasible will be addressed by the Services/OSD Working Group. This group will also consider how much deployment pay should be and how best to fund it.
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Mr. BUYER. Could such an arduous duty special pay be used to offset the loss of BAS during extended periods of field training in the United States, such as the Army's National Training Center?
General MCGINTY. If the decision is to adopt a deployment pay, it would be specifically for the purpose of compensating members who deploy and face a variety of hardships as a result of that deployment. While training in the United States may be arduous, it does not constitute the same risk and hardships faced by airmen during mission deployments.
Mr. BUYER. What is your assessment of the quality of life for recruiters and their families and what needs to be done to improve it? Is the cost of providing medical care to family members a major concern of recruiters? We are aware of the ongoing pilot program of extending TRICARE to military personnel assigned to locations away from military health care facilities, but shouldn't more be done now to limit out-of-pocket medical expenses for recruiters? Would the services support and use an authority to reduce out-of-pocket health care expenses to some extent?
General MCGINTY. Over the last three years, we have focused our attentions on improving the quality of life for all recruiters and their families through numerous initiatives. We added 80 new recruiter authorizations and moved 36 out of staff support areas to the field to reduce the workload of our enlisted program recruiters. We authorized a First Sergeant in each recruiting squadron. These members have the responsibility of establishing contact with recruiters and their families, helping in identifying any special needs, and seeking the resources to meet those needs. Recruiting Service implemented a Risk Management Program to help our recruiters transition into their new duties and responsibilities. The establishment of a CONUS COLA provided assistance in meeting the higher cost of living for recruiters assigned to duties in one of the 65 designated high cost areas and our implementation of a Leased Family Housing Program is providing affordable and adequate housing for over 100 members and their families. The recent increase in Special Duty Assignment Pay (SDAP) from $275 to $375 per month has served us well in attracting and retaining quality recruiters We believe these efforts have improved our recruiters' quality of life. We expect to receive the DoD recruiter survey results soon so we can evaluate our progress.
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The establishment of TRICARE has simplified the process for recruiters' families for those locations where implemented; however, recruiters are still required to seek medical assistance at military treatment facilities (MTF). The Office of the Assistant Secretary of Defense for Health Affairs is attempting to address this with a test to extend TRICARE to military members geographically separated from a military installation.
We would support an authority to reduce out-of-pocket health care expenses for all independently assigned personnel, including recruiters.
Mr. BUYER. What percentage of recruiters are volunteers? Is it important that the recruiters be volunteers when possible? Why? What is being done to improve that rate?
General MCGINTY. All Air Force recruiters are volunteers, and we are convinced this contributes to our success. Volunteers are ''satisfied customers'' who believe enough in the Air Force to want to encourage others to join. For most communities, the only contact with the Air Force is through our recruiters. We believe volunteers are the best ambassadors for the Air Force.
Mr. BUYER. What is causing this increase within each service and what is being done to reverse the trend? Will the services make the changes recommended by the GAO? Would attrition be improved if recruiters did not get credit for a recruit until they successfully completed basic training, which I believe is closer to the approach of the Marine Corps? Is part of the problem a ''one mistake and your out'' attitude resulting from urgency to reduce the force during the drawdown, or are we dealing with a larger problem stemming from the erosion of moral and disciplinary standards with the American culture?
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General MCGINTY. All first term separation categories have been stable over the past years with the exception of miscellaneous (voluntarily requested by the member). As a result of the drawdown, commanders were given greater flexibility in granting early release under miscellaneous reasons. In FY87, for example, only 9.2% of total first term separations were due to miscellaneous. In FY92, during the height of the drawdown, 48% were for miscellaneous. Since FY92, the rate has consistently dropped, and is 25% for FY97, through Feb. 97.
Air Education and Training Command implemented methods during the Feb. 96 time period to reduce Basic Military Training (BMT) losses, with emphasis on medical and mental health attrition. They've adopted a break-in period for combat boots designed to reduce lower extremity problems associated with a change in footwear, established a ''rehab flight'' to keep training new recruits with minor muscular/skeletal problems, many of whom were previously placed on medical hold, introduced stress management courses designed to help trainees overcome initial adjustments to military training and reduce losses for mental health problems, and instituted ''motivational flights'' (more intense military training) designed for trainees displaying signs of trouble adapting to the military and to decrease performance or misconduct losses
We are concerned about first term attrition and are reviewing all the GAO's recommendations and others. We remain open to consider all avenues to reduce attrition.
Recruiters receive feedback on the success of their recruits through Basic Military Training and Technical Training. The Air Force has tried programs to tie recruiting quotas and incentive programs with attrition from basic training. In these trials, we could not correlate reduced attrition and a recruiters success.
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Our efforts to adjust our training and motivational methods in BMT could be viewed as necessary because today's youth have a different value system than 20 years ago.
Mr. BUYER. Would the services support joint recruiters and a joint recruiting command? If not, why not? What is being done to consolidate support operations and save overhead costs? What does the Department think about increased use of telemarketing? Joint advertising? Joint market research? Joint recruiter placement?
General MCGINTY. The Air Force is not an advocate of joint recruiting. Today, we rely on recruiters who have lived the life of the service they represent. These recruiters understand the mission of that service and what that service has to offer; hence, today's recruiter can sell the uniform, quality of life, job opportunities, and career opportunities unique to the individual service. At some point, a prospect must make an individual decision about the choice of service—just as student would choose a college. Individual choice is a prime motivator in military service, essential to the esprit de corps long recognized as a fundamental element in military service. Service identity feeds esprit de corps and generates a special sence of belonging which helps our people fulfill assigned missions and overcome the hardships they may face in their chosen service. Individual service recruiters are the best representatives and salespeople for each Service.
There a number of examples which represent our efforts to work jointly to consolidate support operations and save overhead. We rely on the Army corps of Engineers to be the responsible agency for meeting our real estate needs. We also rely on a jointly developed Armed Services Vocational Aptitude Battery test to help us identify military-interested prospects, which military service a prospect is interested in and identify an individual's vocational qualifications. Via the US Military Entrance Processing Command, we jointly process our applicants and work our joint recruitment issues. The services are presently cooperating on the development of the Joint Recruiting Information Support System, a modern information processing system to streamline and reduce costs for all accession-related activities.
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Telemarketing is widely viewed as an intrusion into a home and family life and has a tarnished image due to previously publicized fraudulent practices. Associating military recruiting with an industry that already causes negative reactions to unwanted phone calls can make recruiting more difficult. When our recruiters prospect by phone, they are a known and normally accepted military member of the community, rather than an outside, unknown caller. We do not support telemarketing as a recruiting tool.
The services are all participants in DoD's Joint Market Analysis and Research Committee (JMARC). The committee provides input to DoD on joint research and market data requirements. The majority of market data is purchased in consolidated data purchases by the Defense Manpower Data Center.
We support continued use of joint advertising. The Joint Recruiting Advertising Advisory Committee, composed of all service advertising directors, provides advertising guidance to the joint advertising program director on how the program can best support the Services. This program provides the corporate relevancy to America's youth.
The Air Force, through the Army Corps of Engineers, attempts to collocate its recruiters with our sister Services. We support DoD's efforts to build a model that measures efficiency by predicting cost and production impacts of management decisions to close, open, and relocate recruiting stations.
[See Chart 1 & 2]
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Mr. BUYER. Given the likelihood that the threat of misconduct is greater when recruiting is more difficult, what is being done to prevent unethical behavior?
General MCGINTY. Recruiting Service has five active elements to prevent inappropriate conduct from becoming a problem.
First, before becoming a recruiter, NCO's go through a rigorous application process. Their family life, personal finances, past performance, recommendations, and personality traits are all weighed to determine if they can handle the stress and responsibility of being a recruiter.
Second, we have a series of checks-and-balances throughout the recruiting process to ensure there are no policy violations. Our front-line flight supervisors meticulously review each recruiter's records. Air Force Liaison NCOs at the Military Entrance Processing Stations (MEPS) independently review each applicant's qualifications and probe for any unreported information. Additionally, we have on-site recruiting liaisons at Basic Military Training who again ensure that all applicant processing is done according to regulations.
Third, the Air Force core values of integrity, service, and quality performance are emphasized at all levels in recruiting. They are briefed and discussed at each recruiting squadron Annual Training Conference. The Air Force zero tolerance policy on sexual misconduct and integrity violations has been widely publicized and is constantly reinforced. In addition, all applicants are given 1–800 ''hotline'' cards to report any concerns they have regarding their enlistment process.
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Fourth, all allegations of inappropriate behavior are thoroughly investigated and when substantiated, result in timely administrative or disciplinary actions. Field commanders are required to report all allegations and all disciplinary actions for command-wide tracking. Case studies are publicized to all recruiting personnel. Newly-established inspector general (IG) and judge advocate (JA) positions at Recruiting Service provide independent review/oversight of this program and provide recommendations directly to the Recruiting Service Commander.
Finally, numerous steps have been taken to relieve pressure on individual recruiters. A Risk Management Program, intended to identify and monitor distressed recruiters, has been established. Several Quality of Life initiatives have been implemented such as leased family housing, special duty pay, home basing, and the addition of First Sergeants. A new policy requires squadrons to provide recruiters a two-week leave with a goal break to give them a rest. And finally, a comprehensive Recruiter Transition Program gives new recruiters no goals for their first three months in the field to allow them time to focus on training and orientation to their new assignment.
Mr. BUYER. Once the correct level of BAS is established, wouldn't it be fairer and more cost effective to terminate the deployment of personnel in temporary duty status and, when appropriate, return to traditional policy of denying BAS when meals are provided?
General MUTTER. Yes, as an issue of fairness, we believe all Services should deploy in an Essential Unit Messing (EUM) status.
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Mr. BUYER. Perhaps the funding that is used to support the additional cost of temporary duty status could be used to pay a special pay to members on long arduous deployments where the services are concerned about restoring the purchasing power of some portion of the BAS? Would you support a new arduous duty special pay?
General MUTTER. No, the Marine Corps does not support a new arduous duty special pay. Currently the Marine Corps deploys in an Essential Unit Messing (EUM) or a field duty status. Per diem is not paid when service members deploy in a field duty or EUM status. Therefore, changing the way the Services deploy will have no effect on the Marine Corps. Changing the way the Services deploy will not generate any additional funds for the Marine Corps.
Mr. BUYER. Could such an arduous duty special pay be used to offset the loss of BAS during extended periods of field training in the United States, such as the Army's National Training Center?
General MUTTER. No. Training, similar to what is conducted at the Army's National Training Center, should be considered field duty. If an arduous duty pay is established it should be used solely for real world operations.
Mr. BUYER. What is your assessment of the quality of life for recruiters and their families and what needs to be done to improve it? Is the cost of providing medical care to family members a major concern of recruiters? We are aware of the ongoing pilot program of extending TRICARE to military personnel assigned to locations away from military health care facilities, but shouldn't more be done now to limit out-of-pocket medical expenses for recruiters? Would the services support and use an authority to reduce out-of-pocket health care expenses to some extent?
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General MUTTER. The Marine Corps appreciated the attention given to QOL issues for service members throughout DOD over the last several years. Most service personnel located in the vicinity of major military bases have benefited from the initiatives to improve QOL issues. However, for our remotely located recruiters, their families, and all service members on independent duty, QOL support is an expensive challenge. QOL will always be adversely affected by mission requirements and the pressure to achieve the monthly mission. Additionally, generally expensive housing costs, lack of access to base commissaries and exchanges and MWR facilities, and extra out-of-pocket medical and dental costs negatively impact the recruiters' family and put additional pressure on the recruiter. These factors result in a generally low level of morale as indicated in various recruiter quality of life surveys.
Special Duty Allowance Pay is provided to recognize the arduous nature of many different jobs in the military, not as an offset for cost of living.
In regard to housing, the Marine Corps continues to support the set-aside and CONUS Cola programs that enable our personnel to afford off-base housing.
In medical, we support TriCare Prime for our geographically separated personnel. There is no enrollment fee for active duty personnel and their families. The fee per visit is comparable to the existing CHAMPUS fee.
Mr. BUYER. What percentage of recruiters are volunteers? Is it important that the recruiters be volunteers when possible? Why? What is being done to improve that rate?
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General MUTTER. Over the last three years, 25% of the Marine Corps' recruiting force has been volunteers. Volunteers are preferred as individuals going into a job voluntarily generally perform better.
We are attempting to increase volunteers in two ways. First through incentives, (SDA pay, award ribbon, CMC meritorious promotions, Recruiter of the year at the national level, and medals for others). We are in the process of expanding our current incentives program. Second, through quality of life, with the goal to increase it to the same level as those assigned to major military bases.
Mr. BUYER. What is causing this increase within each service and what is being done to reverse the trend? Will the services make the changes recommended by the GAO? Would attrition be improved if recruiters did not get credit for a recruit until they successfully completed basic training, which I believe is closer to the approach of the Marine Corps? Is part of the problem a ''one mistake and you're out'' attitude resulting from the urgency to reduce the force during the drawdown, or are we dealing with a larger problem stemming from the erosion of moral and disciplinary standards within the American culture?
General MUTTER. The Marine Corps Recruiting Command has a thorough and comprehensive screening program that starts at first contact with the applicant and continues until the poolee starts training at the depot. Police checks are required on every applicant with an arrest record and we do a random 20% check on others. We are the only service that screens and requires waivers for a one time use of marijuana. Screening is designed to be intense and intimidating, conducted by a minimum of seven different individuals and nine levels, including the Military Entrance Process Station (MEPS). We always look for ways to add to the efficiency of the process in an effort to not ship unqualified persons.
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We support most of GAOs recommendations and have or will initiate the changes with the following exceptions, requiring all applicants to provide names of medical insurers with release authority and have an independent organization obtain the information. We would support this, as long as the personnel and funding does not come out of our budget.
Yes, attrition would be improved if recruiters did not get credit for a recruit until they successfully completed basic training, as evidenced by current Marine Corps policy.
Our attrition is being reduced through several means, one of the most important being the poolee training program. Poolees are required to take an inventory strength test before shipping. They are also provided with Marine Corps education courses, fundamentals of drill, training films on boot camp and when possible, exposed to a drill instructor. The focus of the Delayed Entry Program (DEP) is to prepare the poolee for recruit training.
Mr. BUYER. Would the services support joint recruiters and a joint recruiting command? If not, why not? What is being done to consolidate support operations and save overhead costs? What does the Department think about increased use of telemarketing? Joint advertising? Joint market research? Joint recruiter placement?
General MUTTER. No, we do not support joint recruiters and a joint recruiting command. There are too many problems concerning structure and accountability in a proposed joint organization. There are too many differences in recruiting philosophy, screening, sales, preparation and training, to allow for an efficient command structure capable of responding to the specific concerns of each service. The Marine Corps would not support turning over the requirement of accessions to another service who does not understand or appreciate the intent and focus of the Marine Corps. Our training and therefore, philosophy is different from all of the other services. There is no empirical data indicating a move of this magnitude would work. Additionally, it has the potential to destroy the services' recruiting successes built upon since the inception of the all volunteer force.
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The joint facilities task force, chaired by OSD is used to consolidate and coordinate these issues. It works and should continue to be the lead agency for consolidation issues.
Telemarketing would work only as an additional tool for the Marine Corps. Our sales approach requires someone knowledgeable about the requirements of being a Marine to first contact the applicant. We are committed to a personal presentation to every applicant, realizing the difference between buying a product and committing yourself to 4–6 years of service. The Navy's recent telemarketing experiment provided some new accessions but, while the effectiveness was higher, the cost per accession was considerably higher than other marketing tools.
Our studies indicate joint advertising does not provide the same level of awareness as our Service specific advertising. It serves a purpose, but we feel we would be better served if the money for joint advertising was given directly to the individual services for their own use.
We support and use joint marketing to the fullest extent possible.
We support joint recruiter placement when it serves the benefit of everyone involved. Requiring joint placement in lieu of smart market placement is not efficient and only causes expenses to be obligated from other sources. Each service needs to be able to assign recruiters to areas in support of their accession requirements. The Marine Corps and Air Force for example, will require more one-man facilities as we have fewer recruiters to cover the same geographical area.
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Mr. BUYER. What is your perspective on more joint cooperation in recruiting?
General MUTTER. Joint cooperation in recruiting could be very advantageous to all services as long as the peculiarities of each service are considered.
Mr. BUYER. Given the likelihood that the threat of misconduct is greater when recruiting is more difficult, what is being done to prevent unethical behavior?
General MUTTER. The Marine Corps has always had a policy to ensure all unethical behavior is investigated through formal investigation or inquiry. Recently, the MCRC published amplifying instructions on sexual harassment and hazing. We will continue to take aggressive action to attempt to ensure our recruiters conduct themselves with utmost ethical behavior.
Mr. BUYER. Do you agree that the active duty professors of military science at the six military colleges should have direct contact with the corps as TAC officers for mentoring and recruitment?
General MUTTER. Every Marine Corps officer assigned to NROTC duty assumes the solemn responsibility of providing the midshipmen with an impeccable example of leadership and personal integrity. Mentoring of mids is an integral component of duty as NROTC instructor, whether at a civilian university or one of the six senior military colleges.
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I am concerned, however, over some of the unique difficulties that arise for our NROTC instructors at some of the senior military colleges. In those instances where they are contracted by the school to serve in a part time capacity as TAC officers, they are often faced with conflicting demands. Although they may be paid a modest stipend for their TAC officer duties, their primary responsibility is still to the performance of their normal NROTC duties. However, in their capacity as TAC officers, they serve as an extension of the Commandant's staff in the daily execution of the Corps schedule. This can become a very time-intensive duty, given the wide spectrum of activities at which they are expected to be present. Some of these functions are inappropriate for active duty officers, such as the adjudication of punishment within the Corps when most of the students are not even associated with the NROTC program. Other ''traditional'' Corps activities could conflict with a commissioned officer's sense of property.
Each of the senior military colleges has its own unique traditions and relationships with the ROTC units. Therefore, I believe that the ROTC Commanders are best suited for working with the school to determine the type and amount of support the ROTC officers can and should provide. I am confident that with this arrangement, NROTC officers will continue to provide the Corps of Cadets with valuable leadership and individual mentoring.
QUESTIONS SUBMITTED BY MR. TAYLOR
Mr. TAYLOR. My question is: Isn't there a huge disconnect with having people put their lives on the line, such as the airmen who were shot out of the C130 by Peruvians a few years ago, on the one hand, and then on the other not even bothering to demand those civilians who work for the Department of Defense to take a drug test, at least giving the people of this country some sense of certainty that those people who work for them are not on drugs?
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Mr. PANG. Executive Order 12564, of September 12, 1986, ''Drug Free Federal Workplace,'' requires all Federal agencies to have in place a drug free workplace program. That program must include, among other features, employee and supervisory training and drug testing of employees in sensitive positions known as Testing Designated Positions (TDPs). TDPs involve job functions having a direct impact on public health and safety, the protection of life and property, law enforcement, and national security. All Military Services and the vast majority of Defense Agencies have in place such programs, covering approximately 80,000 DoD civilians. types of tests conducted include random, applicant, reasonable suspicion, follow-up to treatment, and accident or unsafe practice. Anyone testing positive is removed from his or her sensitive position and referred to an Employee Assistance Program for help in arranging appropriate treatment. Persons refusing to agree to a rehabilitation program and persons testing positive a second time are removed from Federal Service. The rate of positive test results has never exceeded one percent.
[See Chart 3]
Mr. UNDERWOOD. Recently, the Air Force has withdrawn its recruiter presence from Guam. I understand that Guam is currently served by a roving recruiter based in Japan. Since Guam is the only U.S. territory in that part of the region it seems that the pattern is backwards. Please explain why the recruiter team is not based on Guam and travels to Japan as needed. In addition, please provide a cost analysis of the two approaches.
General MCGINTY. We maintained a full-time recruiting presence in Guam until 1993. After a review of the market potential, Recruiting Service elected to close the Guam recruiting office.
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Data from the Defense Manpower Data Center reflects an average of 25 enlisted accessions a year in the last 5 years (FY 92–96). The Guam market includes only 4 high schools. We believe this market and the historical accession level does not warrant an assigned recruiter.
We have one recruiter assigned to our office in Japan. This recruiter is responsible for the market in 12 high schools and other DoD dependent market within Japan, Okinawa, and Korea. In FY96, we accessed 44 enlisted members from our Japan recruiter's zone compared to 6 from Guam.
We are supporting Guam with a ''roving recruiter,'' based in Hawaii who travels TDY to Guam once a quarter. The average cost of this 7-day TDY from Honolulu to Guam is approximately $2200. The average cost of a 7-day TDY to travel from Guam to Japan is also approximately $2200, however since the Japan recruiting market is larger it would require the recruiter to be in this market more often. Assigning a recruiter in Guam to recruit the Japan market would triple the current rate of TDY and may require one additional manning authorization.
The accession history of the markets covered by our Hawaii and Japan based recruiters tell us our current operating locations are logistically sound.
"The Official Committee record contains additional material here."
Next Hearing Segment(3)
(Footnote 1 return)
Hoechst Marion Roussel, Managed Care Digest Series, HMO–PPO Digest, 1996.
(Footnote 2 return)
From GAO/HEHS–96–45, PHARMACY BENEFIT MANAGERS: Early Results on Ventures With Drug Manufacturers.