Report of the Military Compensation and 

Retirement Modernization Commission

Final Report

January 2015
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

CHAIRMAN

The Honorable Alphonso Maldon, Jr. 

COMMISSIONERS

The Honorable Larry L. Pressler

The Honorable Stephen E. Buyer

The Honorable Dov S. Zakheim

Mr. Michael R. Higgins

General Peter W. Chiarelli, U.S. Army, Retired

Admiral Edmund P. Giambastiani, Jr., U.S. Navy, Retired

The Honorable J. Robert (Bob) Kerrey

The Honorable Christopher P. Carney

EXECUTIVE DIRECTOR 

Mr. Robert B. Daigle

DEPUTY DIRECTOR 

Ms. Nancy C. Crisman

ASSOCIATE DIRECTORS

Ms. Moira N. Flanders, U.S. Navy, Retired

Mr. Christopher T. Meyer, U.S. Navy, Retired

Ms. Susan Schleigh

Mr. James Graybeal, U.S. Navy, Retired

Mr. Christopher Nuneviller, U.S. Army, Retired

GENERAL COUNSEL 

Ms. Elizabeth DiVecchio Berrigan, U.S. Army, Retired
Report of the Military Compensation and 

Retirement Modernization Commission

Final Report

January 29, 2015

COMMISSIONERS’ LETTER 

January 29, 2015 

We are honored to submit to the President and the Congress of the United States the 

enclosed recommendations to modernize the Uniformed Services’ (the Services) 

compensation and retirement system. We are confident these recommendations will 

ensure that the Services can maintain the most professional All-Volunteer Force 

possible, during both peacetime and wartime. Our confidence stems from our 

unwavering commitment to the interests of Service members and their families. In 

fact, our recommendations, which all members of this Commission unanimously 

support, are designed to protect both the overall value of the current benefits package 

and the quality of life of the 21st century Force—those who serve, those who have 

served, and the families that support them. 

The Services’ compensation system provides the Nation with an All-Volunteer Force 

without peer. This fact has been proven during the last 42 years and decisively 

reinforced during the last 13 years of war. After 42 years of an All-Volunteer Force, the 

President and the Congress agreed that it was time to study in detail the pay and 

benefits of the Services. 

The Services require flexible, modern, and relevant compensation tools to continue to 

recruit and retain the high-quality men and women needed to protect and defend our 

Nation into the future. Consequently, the Services must be empowered with flexible 

personnel-management tools to shape the force as security needs change. Our 

proposed reforms provide additional, yet fiscally sustainable, options for Service 

personnel managers to design and manage a balanced force. Pursuant to the National 

Defense Authorization Act for Fiscal Year 2013, our recommendations are limited to 

compensation, retirement, and benefits modernization issues. 

Our volunteer Service members are the strength of our military, and it is our 

continuous duty and obligation to ensure that the Services are properly resourced. 

National security is a Constitutional priority, and fiscal challenges facing our Nation 

cannot be solved by focusing solely on the military. Necessary resources include 

compensation and benefits for our Service members and their families, who also 

deserve long-term stability. It is our view that the current era of ongoing Service 

budget reductions and uncertainty is adversely affecting readiness and is increasing 

risks in our Nation’s ability to meet growing national security requirements. 

Our recommendations improve the efficiency and sustainability of compensation 

benefits, and they enhance the overall value of those benefits. Our military pay and 

retirement recommendations grandfather the retirement pay of existing retirees and 

those currently in the Force. They also maintain the majority of the existing retirement 
structure, which is an important retention tool, while allowing members of a younger, 

more mobile work force to begin investing in their own future. To better meet the 

needs of our Reserve Component, we recommend streamlining Reserve Component 

duty statuses. We further recommend an increase in Service members’ opportunity for 

coverage in the Survivor Benefit Plan. 

In considering the military health benefit, we focused on sustaining medical readiness 

by recommending a new readiness command, supporting elements, and framework for 

maintaining clinical skills. This system would ensure that today’s medically ready 

force would continue to provide the best possible combat care. Our recommendations 

also improve access, choice, and continuity of care for family members, Reserve 

Component members, and retirees. These recommendations maintain or reduce the 

cost of health care for the vast majority of families of active-duty Service members and 

establish a fund to lessen the burden of chronic and catastrophic conditions. We 

recommend ways to increase collaboration and resource sharing between the 

Departments of Defense and Veterans Affairs. The net result of these 

recommendations is a modernized health care system that should benefit our Service 

members, veterans, retirees, and family members far into the 21st century. 

Our recommendations related to quality of life focus on enhancing benefits for Service 

members and their families, while improving cost-effectiveness. We recognize the 

historically transformative power of the GI Bill. In particular, the Post-9/11 GI Bill has 

been effective in improving the education level of numerous Service members, 

veterans, retirees, and their families. Our recommendations improve the sustainability 

of these education benefits. 

Many Service members, retirees, and their families articulated the importance of 

Department of Defense commissaries and exchanges. Our findings reflect their view, 

and we recommend ways to maintain these benefits at lower costs. We propose several 

enhanced benefits for Service members and their families, including additional 

coverage for exceptional family members, budgeting for child care facilities, academic 

monitoring of dependents in public schools, nutritional assistance coverage, access to 

space-available travel, and Service member transition support. 

We thank all who have supported the efforts of the Commission, especially the many 

Service members, veterans, retirees, and family members who engaged with the 

Commission directly. The Commission has received, via in-person and survey 

responses, feedback from more than 100,000 active-duty Service members, Reserve 

Component members, veterans, retirees, and their families. We have met with more 

than 150 Government agencies, military advocates, research institutions, and related 

interest groups. We are confident that the recommendations put forward in this report 

offer an improved compensation and benefits package. 

Ensuring Service members and their families are cared for is a sacred responsibility of 

a grateful Nation. Being part of the public discussion regarding how we, as a Nation, 

modernize their benefits and fulfill this obligation has been our great honor. We are 

confident that implementing these reforms will move the All-Volunteer Force toward a 

future that is in the best interest of our Nation’s security and that can be fiscally 

sustained. We believe, for those who serve and have served to uphold the military’s 
highest traditions and heritage, and the families that support them, the Federal 

Government must fulfill its obligation with its enduring commitment in war and in 

peace. 

Respectfully submitted, 

__________________________________ 

Hon. Alphonso Maldon, Jr. 

Chairman 

__________________________________ 

Hon. Larry L. Pressler 

__________________________________ 

Hon. Stephen E. Buyer 

__________________________________ 

Hon. Dov S. Zakheim 

__________________________________ 

Mr. Michael R. Higgins 

__________________________________ 

Gen. Peter W. Chiarelli, USA (Ret.) 

__________________________________ 

ADM Edmund P. Giambastiani, USN 

(Ret.) 

__________________________________ 

Hon. J. Robert Kerrey 

__________________________________ 

Hon. Christopher Carney 

 
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 PAGE VII

TABLE OF CONTENTS 

COMMISSIONERS’ LETTER .............................................................. III

TABLE OF CONTENTS ..................................................................... VII

LIST OF FIGURES ............................................................................. IX

LIST OF TABLES ............................................................................... XI

LIST OF ACRONYMS ....................................................................... XIII

1. EXECUTIVE SUMMARY ................................................................. 1

2. GENERAL CONCLUSIONS ............................................................ 9

3. RECOMMENDATIONS ................................................................. 19

Pay and Retirement ........................................................................................................................... 19

Recommendation 1: Help more Service members save for retirement earlier in their 

careers, leverage the retention power of traditional Uniformed Services retirement, 

and give the Services greater flexibility to retain quality people in demanding career 

fields by implementing a modernized retirement system. ....................................................... 19

Recommendation 2: Provide more options for Service members to protect their pay for 

their survivors by offering new Survivor Benefit Plan coverage without Dependency 

and Indemnity Compensation offset. ....................................................................................... 42

Recommendation 3: Promote Service members’ financial literacy by implementing a more 

robust financial and health benefit training program. ............................................................ 46

Recommendation 4: Increase efficiency within the Reserve Component by consolidating 

30 Reserve Component duty statuses into 6 broader statuses. ............................................... 52

Health Benefits ................................................................................................................................... 57

Recommendation 5: Ensure Service members receive the best possible combat casualty 

care by creating a joint readiness command, new standards for essential medical 

capabilities, and innovative tools to attract readiness-related medical cases to military 

hospitals. .................................................................................................................................. 57

Recommendation 6: Increase access, choice, and value of health care for active-duty 

family members, Reserve Component members, and retirees by allowing beneficiaries 

to choose from a selection of commercial insurance plans offered through a 

Department of Defense health benefit program. ...................................................................... 79

Recommendation 7: Improve support for Service members’ dependents with special needs 

by aligning services offered under the Extended Care Health Option to those of state 

Medicaid waiver programs. ................................................................................................... 120
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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Recommendation 8: Improve collaboration between the Departments of Defense and 

Veterans Affairs by enforcing coordination on electronic medical records, a uniform 

formulary for transitioning Service members, common services, and reimbursements. ...... 127

Quality of Life .................................................................................................................................. 141

Recommendation 9: Protect both access to and savings at Department of Defense 

commissaries and exchanges by consolidating these activities into a single defense 

resale organization. ............................................................................................................... 141

Recommendation 10: Improve access to child care on military installations by ensuring 

the Department of Defense has the information and budgeting tools to provide child 

care within 90 days of need. .................................................................................................. 152

Recommendation 11: Safeguard education benefits for Service members by reducing 

redundancy and ensuring the fiscal sustainability of education programs........................... 161

Recommendation 12: Better prepare Service members for transition to civilian life by 

expanding education and granting states more flexibility to administer the Jobs for 

Veterans State Grants Program. ........................................................................................... 173

Recommendation 13: Ensure Service members receive financial assistance to cover 

nutritional needs by providing them cost-effective supplemental benefits. ........................... 180

Recommendation 14: Expand Space-Available travel to more dependents of Service 

members by allowing travel by dependents of Service members deployed for 30 days 

or more. .................................................................................................................................. 189

Recommendation 15: Measure how the challenges of military life affect children’s school 

work by implementing a national military dependent student identifier. ............................ 192

4. THE COMMISSION’S PROCESS ............................................... 197

5. THE COMMISSION’S SURVEY .................................................. 209

6. COMMENTS TO THE COMMISSION .......................................... 219

APPENDIX A: GUIDING AND ENABLING DOCUMENTS ................. 233

APPENDIX B: COMMISSION STAFF COMPOSITION ...................... 245

APPENDIX C: COMMISSION OUTREACH ....................................... 247

APPENDIX D: COST DATA ............................................................. 255
 LIST OF FIGURES AND TABLES

 

 PAGE IX

LIST OF FIGURES 

Figure 1. Retirement Assets of a Retiring Active-Duty E7, Current vs. Blended Retirement 

Plans ...................................................................................................................................... 13

Figure 2. Percent of Active-Duty Service Members Who Prefer the Current or Proposed 

Compensation System ........................................................................................................ 14

Figure 3. Continuation Rates for Active-Duty Officers and Enlisted Personnel, FY 2013 ............ 21

Figure 4. Fortune 100 Retirement Plans ............................................................................................... 25

Figure 5. Force Profiles: Current vs. Proposed Retirement Systems ............................................... 29

Figure 6. Active-Duty Service Members’ Perceived Value: TSP Auto-Enrollment ....................... 31

Figure 7. Percent of Active-Duty Service Members Who Prefer the Current or Proposed 

Retirement System .............................................................................................................. 32

Figure 8. Retirement Assets of a Retiring Active-Duty E7, Current vs. Blended Retirement 

Plans ...................................................................................................................................... 33

Figure 9. Retirement Assets of a Retiring Active-Duty O5, Current vs. Blended Retirement 

Plans ...................................................................................................................................... 34

Figure 10. Value of Government TSP Contributions for an E5 Who Leaves After 8 Years of 

Service ................................................................................................................................... 35

Figure 11. Top 10 Inpatient Procedures in Military Treatment Facilities, FY 2013 ........................ 64

Figure 12. Components of Essential Medical Capabilities ................................................................ 74

Figure 13. Comparison of Access to Care for DoD and Civilian Health Care Users, FY 2013 ..... 84

Figure 14. Retirees’ Importance Ratings: Health Care Experiences ................................................ 88

Figure 15. Utilization in TRICARE Prime and Civilian HMOs, FY 2013 ........................................ 99

Figure 16. Average Deductible and Copayment Amounts in TRICARE Prime and Civilian 

HMOs, FY 2013 .................................................................................................................. 100

Figure 17. Annual Family Premiums, TRICARE Prime vs. Private Sector Health Care Plans .. 102

Figure 18. Active-Duty Service Members’ Perceived Value: Provider Choice ............................. 107

Figure 19. Active-Duty Service Members’ Perceived Value: Health Care Experience ............... 108

Figure 20. Illustrative Calculation of Basic Allowance for Health Care ........................................ 111

Figure 21. Active-Duty Services Members’ Perceived Value: Resale Benefit Options ................ 145

Figure 22. Active-Duty Service Members’ Perceived Value: On-Installation vs. 

Off-Installation Child Care .............................................................................................. 156

Figure 23. School District-Reported Challenges in Educating Military Dependent Students ... 194

Figure 24. User Interface for Commission Survey............................................................................ 211

Figure 25. Dashboard Depicting Relative Importance of Various Compensation Features 

(Sum = 100%) ..................................................................................................................... 213
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Figure 26. Relative Importance by Active-Duty Service Member: TSP Matching ....................... 214

Figure 27. Active-Duty Service Members’ Perceived Value: TSP Matching ................................ 215

Figure 28. Relative Importance by Active–Duty Service Members: 0, 5, and 10 percent 

Automatic TSP Contributions to TSP by Pay Group ................................................... 215

Figure 29. Illustration of the Compensation Plan Comparison Capability................................... 216

Figure 30. Active-Duty Service Members’ Preferences Between the Current and 

Recommended Compensation Systems ......................................................................... 217

Figure 31. Assumed percent of Service Member Who Opt in to Blended Retirement ................ 257

Figure 32. Gradual Ramp of Retiree Cost Shares (1 percent annually) ......................................... 263

Figure 33. Comparison of Out-of-Pocket Cost Distributions .......................................................... 267

Figure 34. Current MHS Resourcing .................................................................................................. 269

Figure 35. Proposed MHS Resourcing ............................................................................................... 269
 LIST OF FIGURES AND TABLES

 

 PAGE XI

LIST OF TABLES 

Table 1. Changes to a Leave and Earnings Statement of an Active-Duty E5 with 10 YOS .......... 12

Table 2. AC and RC Continuation Pay Multipliers by Service ......................................................... 30

Table 3. Current Reserve Component Statutory Authorities and Duty Statuses .......................... 52

Table 4. Streamlined Reserve Component Duty Statuses ................................................................. 54

Table 5. Current Reserve Component Duty Statuses to be Amended/Repealed .......................... 55

Table 6. Roles and Responsibilities Regarding Essential Medical Capabilities ............................. 74

Table 7. Frequently Asked Questions Regarding Basic Allowance for Health Care ................... 110

Table 8. Effects of the Commission’s Health Benefit Recommendations by Beneficiary 

Category ............................................................................................................................. 112

Table 9. Effects of the Commission’s Health Benefit Recommendations by Current 

Program .............................................................................................................................. 114

Table 10. Roles and Responsibilities Under the Health Benefits Recommendation .................... 116

Table 11. Monthly Cost-Shares for ECHO Participation ................................................................. 121

Table 12. Statutory Guidelines for HCBS Waivers and ECHO ...................................................... 122

Table 13. HCBS Waiting Lists, FY 2012 .............................................................................................. 125

Table 14. UETF Assessment of Process Commonality in Selected Exchange Functional 

Areas ................................................................................................................................... 146

Table 15. Child Care Spaces by Service as of September 2014 ........................................................ 153

Table 16. Features of Post-9/11 GI Bill, MGIB, and REAP .............................................................. 165

Table 17. SNAP and FSSA Eligibility Requirements ........................................................................ 181

Table 18. Gross Monthly Household Income Eligibility Standards for FSSA and 

SNAP (130 percent of poverty level), FY 2015 .............................................................. 182

Table 19. Maximum Monthly Allotments for SNAP, FY 2015 ........................................................ 183

Table 20. Example of Financial Support under FSSA and SNAP ................................................... 185

Table 21. Minimum Household Size Requirements for a Service Member to Qualify for 

FSSA or SNAP. .................................................................................................................. 187

Table 22. Key Features of the Sample Design for Commission Survey ......................................... 210

Table 23. Topics Addressed in Commission Survey ........................................................................ 211

Table 24. Annual Combatant Command Funding Level ................................................................ 261

Table 25. Comparison of FY 2014 Out-of-Pocket (OOP) Costs for Active-Duty Service 

Members without TRICARE Young Adult ................................................................... 266

Table 26. Comparison of FY 2014 Out-of-Pocket (OOP) Costs for Active-Duty Service 

Members with TRICARE Young Adult ......................................................................... 266 
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 LIST OF ACRONYMS 

 PAGE XIII

LIST OF ACRONYMS 

ACRONYM DEFINITION 

AAFES Army Air Force Exchange System 

AAP American Academy of Pediatrics 

ABA Applied Behavior Analysis 

AC Active Component 

ADFM Active-Duty Family Member 

AIP Assignment Incentive Pay 

APF Appropriated Funds 

ACSI American Customer Satisfaction Index 

BAG Budget Activity Group 

BAH Basic Allowance for Housing 

BAHC Basic Allowance for Health Care 

BAS Basic Allowance for Subsistence 

BEC Benefits Executive Committee 

BOD Board of Directors 

CABG Coronary Artery Bypass Grafting 

CAHPS Consumer Assessment of Healthcare Providers and Systems 

CBO Congressional Budget Office 

CCHHS Cook County Health and Hospital System 

CDC Child Development Center 

CDP Child Development Program 

CEB Cooperative Efforts Board 

CFR Code of Federal Regulations 

CLS Combat Life Saver 

CMAC CHAMPUS Maximum Allowable Charge 

CP Continuation Pay 

C-STARS Centers for Sustainment of Trauma and Readiness Skills (USAF) 

DACMC Defense Advisory Committee on Military Compensation 

DB Defined Benefit 

DC Defined Contribution 

DeCA Defense Commissary Agency 
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ACRONYM DEFINITION 

DEERS Defense Enrollment Eligibility Reporting System 

DeRA Defense Resale Activity 

DFAS Defense Finance and Accounting Service 

DHA Defense Health Agency 

DIC Dependency and Indemnity Compensation 

DMDC Defense Manpower Data Center 

DoDI DoD Instruction 

DoDTR Department of Defense Trauma Registry 

DOL U.S. Department of Labor 

DRM Dynamic Retention Model (RAND) 

DVOP Disabled Veterans’ Outreach Program 

EBT Electronic Benefit Transfer 

ECHO Extended Care Health Option 

EHHC ECHO Home Health Care 

EHR Electronic Health Record 

EFM Exceptional Family Member 

EFMP Exceptional Family Member Program 

EMC Essential Medical Capability 

ERISA Employee Retirement Income Security Act 

ESEA Elementary and Secondary Education Act 

FCC Family Child Care 

FDA U.S. Food and Drug Administration 

FEHBP Federal Employees Health Benefits Program 

FFS Fee-For-Service 

FHCC Federal Health Care Center 

FMR Financial Management Regulation 

FMWG Financial Management Working Group 

FOC Final Operating Capabilities 

FSSA Family Subsistence Supplemental Allowance 

GAO U.S. Government Accountability Office 

HCBS Home and Community-Based Services 

HCSDB Health Care Survey of DoD Beneficiaries 

HEC Health Executive Committee 
 LIST OF ACRONYMS 

 PAGE XV

ACRONYM DEFINITION 

HEDIS Healthcare Effectiveness Data and Information Set 

HMO Health Maintenance Organization 

IC3 Interagency Care Coordination Committee 

IDA Institute for Defense Analyses 

iEHR Integrated Electronic Health Record 

IOC Initial Operating Capabilities 

IPO Interagency Program Office 

IT Information Technology 

JEC Joint Executive Committee 

JIF Joint Incentive Fund 

JMROC Joint Medical Readiness Oversight Council 

JRC Joint Readiness Command 

JSP Joint Strategic Plan 

JVSG Jobs for Veterans State Grant 

LES Leave and Earnings Statement 

LMI Logistics Management Institute 

LVER Local Veterans’ Employment Representative 

MAP Medical Advisory Panel 

MCCS Marine Corps Community Services 

MCRMC Military Compensation and Retirement Modernization Commission 

MCSC Managed Care Support Contract 

MCX Marine Corps Exchange 

MERHCF Medicare-Eligible Retiree Health Care Fund 

MGIB Montgomery GI Bill 

MGIB-AD Montgomery GI Bill Active Duty 

MGIB-SR Montgomery GI Bill Selected Reserve 

MHS Military Health System 

MILCON Military Construction 

MILPERS Military Personnel 

MRF Military Retirement Fund 

MSO Military Service Organization 

MTF Military Treatment Facility 

MWR Morale, Welfare and Recreation 
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ACRONYM DEFINITION 

NAF Nonappropriated Funds 

NCO Non-Commissioned Officer 

NCP Normal Cost Payments 

NDAA National Defense Authorization Act 

NEX Navy Exchange 

NEXCOM Navy Exchange Command 

NEXMART Navy Exchange Market 

O&M Operations and Maintenance 

OACT Office of the Actuary (DoD) 

OEF Operation ENDURING FREEDOM 

OIF Operation IRAQI FREEDOM 

OOP Out-of-Pocket 

OPM U.S. Office of Personnel Management 

PCM Primary Care Manager 

PFM Personal Financial Management 

PPBE Planning, Programming, Budget, and Execution 

PPO Preferred Provider Organization 

PTC Pharmacy and Therapeutics Committee 

PV Perceived Value 

PwC PricewaterhouseCoopers 

RC Reserve Component 

REAP Reserve Education Assistance Program 

RHPO Regional Health Planning Organization 

RI Relative Importance 

RSA Resource Sharing Agreement 

RVU Relative Value Unit 

SAC School-Age Care 

SBA Small Business Administration 

SBP Survivor Benefit Plan 

SDT Second Destination Transportation 

SMC Specialized Military Condition 

SNAP Supplemental Nutrition Assistance Program (USDA) 

SOCOM Special Operations Command 
 LIST OF ACRONYMS 

 PAGE XVII

ACRONYM DEFINITION 

STC Shock Trauma Center 

TA Tuition Assistance 

TAMP Transition Assistance Management Program 

TCCC Tactical Combat Casualty Care 

TFI Total Family Income 

TMA TRICARE Management Activity 

TRANSCOM Transportation Command 

TSP Thrift Savings Plan 

UETF Unified Exchange Task Force 

USDA U.S. Department of Agriculture 

USFHP U.S. Family Health Plan 

VA U.S. Department of Veterans Affairs 

VANF VA National Formulary 

VHA Veterans Health Administration 

VISN Veterans Integrated Service Network 

VistA Veterans Health Information Systems and Technology Architecture 

VSO Veterans Service Organization 

WIC Women, Infants and Children (USDA) 

YOS Years of Service 

 

 

 

 

 

 

 
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1. EXECUTIVE SUMMARY 

The Military Compensation and Retirement Modernization Commission was 

established by the National Defense Authorization Act (NDAA) for FY 2013 to provide 

the President of the United States and the Congress specific recommendations to 

modernize pay and benefits of the Uniformed Services.1 The Commission’s legislative 

mandate, coming after 42 years with an All-Volunteer Force and 13 years of war, was 

to provide recommendations that: 

 ensure the long-term viability of the All-Volunteer Force by sustaining the 

required human resources of that force during all levels of conflict and 

economic conditions; 

 enable the quality of life for members of the Armed Forces and the other 

Uniformed Services and their families in a manner that fosters successful 

recruitment, retention, and careers for members of the Armed Forces and 

the other Uniformed Services; and 

 modernize and achieve fiscal sustainability for the compensation and 

retirement systems for the Armed Forces and the other Uniformed Services 

for the 21st century.2

The President issued a set of eight guiding principles to the Commission.3 This report 

addresses those mandates and principles, discusses in detail the areas where reform 

is required, states the considerations that should guide reform, and offers specific 

recommendations to solve the problems that were identified. For example, the 

Commission recommends moving from a purely defined benefit to a blended defined 

benefit and defined contribution retirement system. It proposes a new command 

dedicated to the oversight of joint readiness, especially readiness of the medical force. 

It recommends improving access, choice, and value of the health benefit for activeduty families, Reserve Component members, and retirees.4 It also outlines ways to 

sustain Service-member education programs and strengthen numerous family support 

programs. These recommendations respond to the preferences of a new generation of 

Service members by improving choice and flexibility within their compensation 

package. The Commission made a conscious decision that its focus would not be 

budget driven. Nevertheless, these recommendations offer efficiencies that 

substantially reduce government expenditures. This approach ensures pragmatic 

 

1 Throughout this report, “Services” refers to the Uniformed Services, which include the Army, Marine Corps, Navy, Air 

Force, Coast Guard, and the Commissioned Officer Corps of the National Oceanographic and Atmospheric 

Administration and U.S. Public Health Service (see Armed Forces, 10 U.S.C. § 101(a)(5)). References to the Military 

Services or Armed Forces include the Army, Marine Corps, Navy, Air Force, and Coast Guard (see Armed Forces, 

10 U.S.C. § 101(a)(4)). 

2 National Defense Authorization Act for FY 2013, Pub. L. No. 112-239 subtitle H, 126 Stat. 1632, 1787 (2013) 

(as amended by National Defense Authorization Act for FY 2014, Pub. L. No. 113-66, § 1095(b), 127 Stat. 672, 879 

(2013)). 

3 The President’s guiding principles can be found in Section 4. Government Printing Office, Principles for Modernizing 

the Military Compensation and Retirement Systems: Message from the President of the United States, accessed 

November 21, 2014, http://www.gpo.gov/fdsys/pkg/CDOC-113hdoc60/html/CDOC-113hdoc60.htm. 4 A retiree is any person who has served at least 20 years in a Service and has been permanently released from duty or 

a person who has been released from duty before 20 years of service and declared by the Service to be retired because 

of medical condition or disability. See Armed Forces, 10 U.S.C. §§ 3911, 3914 (Army); Armed Forces, 10 U.S.C. 

§§ 6323, 6330 (Navy); Armed Forces, 10 U.S.C. §§ 8911, 8914 (Air Force); Coast Guard, 14 U.S.C. §§ 291, 355 (Coast 

Guard); Navigation and Navigable Waters, 33 U.S.C. § 3044 (NOAA Commissioned Officer Corps); The Public Health 

and Welfare, 42 U.S.C. § 212 (U.S. Public Health Service Commissioned Corps). 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 2 

fiscal sustainability. Although there may be additional opportunities to identify 

efficiencies in personnel and force structure programs, the NDAA for FY 2013 limited 

the Commission’s review to compensation modernization issues. 

The profound and constant change that has affected our Nation since the inception of 

the All-Volunteer Force, coupled with an unprecedented 13 years of war, offer a 

compelling backdrop for compensation reform. The Commissioners—comprising more 

than 140 years of military service experience among them—have completed a 

comprehensive review and analysis of the current benefits of Uniformed Service 

members. The Commissioners concluded that several key features of the 

compensation system continue to meet the needs of the All-Volunteer Force. The basic 

pay table provides simplicity, equity, and transparency, and the targeted changes to 

the pay tables in 2000-2001 proved valuable during the 13 years of war. The system of 

allowances is appropriate and strikes the correct balance between Service member 

compensation and financial assistance for expenses. TRICARE for Life continues to 

ensure high-quality health care for retired Service members across the country. 

The recommendations in this report are informed by the valuable insights of a broad 

range of Service members, veterans,5 retirees, and their families. The Commission 

surveyed more than 1.5 million Service members and retirees. It developed an ongoing 

working relationship with more than 30 military and veteran service organizations. It 

also received input from numerous research institutions, private firms, and not-forprofit organizations. The Commission and its staff reviewed nearly 350 distinct 

benefits across the U.S. Government, including programs administered by 

departments of Defense, Veteran Affairs, Homeland Security, Treasury, Health and 

Human Services, Education, Labor, and others. The Military Compensation and 

Retirement Modernization Commission Interim Report,6 issued in June 2014, 

documents these benefits in detail. 

This final report focuses on reforming compensation programs to improve Service 

members’ choice of and access to benefits. The recommendations contained within it 

enhance the flexibility of the compensation system for the Services, which have the 

responsibility to recruit and retain balanced forces and for Service members. The 

recommendations improve the cost-effectiveness of delivering high-quality benefits. 

Within this framework, the report evaluates each program in light of key changes in 

the cultural, generational, and technological landscape since the advent of the 

All-Volunteer Force. Though many programs continue to serve their intended purpose, 

several are duplicative, and many should be more responsive to the needs of the 

contemporary workforce from which the Services draw their personnel. Based on these 

findings, this report offers 15 recommendations that have one thing in common: these 

recommendations were formulated with the benefit to the Service members, and the 

families who support them, as a top priority. 

 

5 A veteran is defined as a “person who served in the active military, naval, or air service, and who was discharged or 

released therefrom under conditions other than dishonorable.” Veterans’ Benefits, 38 U.S.C. § 101(2). 

6 The Report of the Military Compensation and Retirement Modernization Commission: Interim Report is available for 

download at http://www.mcrmc.gov. 
 SECTION 1 

EXECUTIVE SUMMARY

 PAGE 3 

PAY AND RETIREMENT

1. Help more Service members save for retirement earlier in their careers, leverage the 

retention power of traditional Uniformed Service retirement, and give the Services greater 

flexibility to retain quality people in demanding career fields 

The current Uniformed Service retirement system is a useful retention tool for 

midcareer Service members, but does not provide retirement savings to the 

overwhelming majority of Service members. Under the current system, 83 percent of 

the enlisted men and women serving our Nation will never benefit from a traditional 

20-year Uniformed Service retirement.7 The Services’ retirement system should be 

restructured to provide retirement benefits to more than one million current Service 

members who would otherwise leave service without any Government-sponsored 

retirement savings. Doing so eases the transition of Service members to civilian life by 

providing them with retirement savings similar to those of their private-sector peers. 

This recommendation blends the recruiting benefits of a modern 401(k)-type plan, 

with the retention benefits of the current retirement annuity, lump sum career 

continuation pay, and retention bonuses paid at important career milestones in the 

lives of Service members. Modeling has demonstrated that such a blended system 

would maintain the Services’ current force profiles. It also provides additional 

flexibilities to the Services to adjust force profiles if desired to maintain a balanced 

force. It would also sustain, and may improve retention and increase lifetime earnings 

of retirees. 

2. Provide more options for Service members to protect their pay for their survivors 

The Survivor Benefit Plan (SBP) has steadily become more attractive as a low cost way 

to provide lifetime benefits to retirees’ survivors. The Commission received many 

Service member complaints about SBP because of the associated offset from VA 

Dependency and Indemnity Compensation (DIC). To help address this concern, a new 

SBP option should be implemented for which Service members would fully fund SBP 

costs but would no longer be subject to the DIC offset. The existing SBP program with 

the DIC offset should be maintained for Service members who want to retain lowercost coverage. 

3. Promote Service members’ financial literacy 

The lack of choice in current pay and benefit programs results in complacency and 

insufficient knowledge among Service members with regard to managing their 

personal finances. According to the 2013 Blue Star Families Annual Lifestyle Survey, 

only 12 percent of Service member respondents indicated they received financial 

information from their command or installation.8 DoD should increase the frequency 

and strengthen the content of financial literacy training. This enhancement is 

especially important because the Commission’s recommendations on retirement and 

health care require new financial decisions to be made by Service members. Improved 

 

7 Department of Defense, Valuation of the Military Retirement System; September 30, 2012, 24, accessed December 10, 

2014, http://actuary.defense.gov/Portals/15/Documents/MRF_ValRpt2_2012.pdf. 

8 Blue Star Families, 2013 Military Family Lifestyle Survey, Comprehensive Report, accessed December 10, 2014, 

http://www.mcrmc.gov/public/docs/report/pr/BlueStarFamilies_2013MilitaryFamilyLifestyleSurvey_Comprehensive_

Report_May2013_p34_FinLit_FN_12-13-24.pdf. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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financial literacy would also assist Service members from being exploited by predatory 

lenders and other financial manipulators. 

4. Increase efficiency within Reserve Component status system 

Despite the Services’ operational dependence on the Reserve Component (RC) during 

the recent conflicts in Iraq and Afghanistan, the current RC status system “is complex, 

aligns poorly to current training and mission support requirements, fosters 

inconsistencies in compensation, and complicates rather than supports effective 

budgeting.”9 The RC status system causes members to experience disruptions in pay 

and benefits as they transition among different duty statuses.10 Mobilization 

difficulties also impede operational commanders who need to employ RC personnel. 

There are 30 unique statuses under which RC members can be called to duty. The 

number of duty statuses should be streamlined to just six to benefit Service members 

and ease the Services’ management and operational use of RC forces. 

HEALTH BENEFITS

5. Ensure Service members receive the best possible combat casualty care 

The vast majority of Service members who were wounded on the battlefield were able 

to return home from the wars in Iraq and Afghanistan. Many of them are continuing to 

serve our Nation because of the exceptional care they received from our military health 

care providers in the field. This medical expertise, honed during more than a decade of 

saving lives in combat, must be maintained and further improved whenever possible. 

Evidence shows it may be difficult to sustain these combat medical capabilities with 

the typical mix of cases seen in the military health care system during peacetime. The 

Secretary of Defense, together with the Chairman, Joint Chiefs of Staff, should seek to 

enhance dedicated oversight of medical readiness through the creation of a joint 

medical component within a newly established joint readiness command, as well as a 

medical directorate in the Joint Staff. The Congress and DoD should define and 

measure essential medical capabilities (EMCs) to promote and maintain critical 

capabilities within the military medical force. DoD should be granted additional 

authorities to attract EMC-related cases into military treatment facilities to best 

support their mission as a training platform for military medical personnel. 

6. Increase access, choice, and value of health care for active-duty family members, Reserve 

Component members, and retirees 

TRICARE often limits access to care by confining beneficiaries to a lengthy and 

frustrating process for obtaining specialty care and to weak networks of civilian health 

care providers. The adverse effect of weak provider networks is even more profound for 

beneficiaries living in remote locations, including RC members. The Congress should 

replace the current health care program with a new system that offers beneficiaries a 

selection of commercial insurance plans. Costs of these plans should be offset for 

active-duty families with a new Basic Allowance for Health Care (BAHC) and a fund to 

lessen the burden of chronic and catastrophic conditions. Mobilized RC members 

 

9 Office of the Assistant Secretary of Defense for Reserve Affairs, Review of Reserve Component Contributions to National 

Defense, December 2002, 77. 10 Dolfini-Reed, Michelle and Darlene E. Stafford, Identifying Duty Status Reforms Needed to Support an Operational 

Reserve, CRM D0021656.A2 (Alexandria, VA: CNA, 2010), 1. 
 SECTION 1 

EXECUTIVE SUMMARY

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should also receive BAHC to cover the costs of a plan from the new system or of their 

existing insurance plan. All members of the RC should be able to purchase a plan 

from the DoD program at varying cost shares. Non-Medicare-eligible retirees should 

continue to have full access to the military health benefit program at cost 

contributions that gradually increase over many years but remain lower than the 

average Federal civilian employee cost share as recognition of their military service. 

Medicare-eligible retirees should continue to have access to the current TRICARE for 

Life program to supplement Medicare benefits. 

7. Improve support for Service members’ dependents with special needs 

Although the Services provide substantial support for exceptional family members 

through various programs, State programs offer differing and additional services. 

Unfortunately, Service members often lose access to these state-based programs when 

they move between duty stations because of long waiting lists in some states. To 

provide continuous support services, benefits offered through the military’s Extended 

Care Health Option program should be expanded to include services provided through 

state Medicaid waiver programs. 

8. Improve collaboration between Departments of Defense and Veterans Affairs 

DoD and VA expend tremendous national resources to ensure that Service members 

and veterans receive world-class health care. Yet there remain substantial 

opportunities for enterprisewide collaboration through standardization, elimination of 

barriers, and implementation of best practices. Differences in drug formularies for 

transitioning Service members continue to disrupt effective care. Several DoD–VA 

resource sharing projects have generated efficiencies for both organizations, but these 

efforts are mostly local, isolated arrangements. Medical information cannot yet be 

shared seamlessly between DoD and VA, hindering effective care for Service members 

and veterans. To resolve these issues, the current DoD–VA Joint Executive Committee 

should be strengthened with additional authorities and responsibilities to standardize 

and enforce collaboration between the organizations. 

QUALITY OF LIFE PROGRAMS

9. Protect both access to and savings at DoD commissaries and exchanges 

DoD commissaries and exchanges provide valued financial benefits to Service 

members and should be maintained. According to the 2013 Living Patterns Survey 

conducted by Defense Manpower Data Center, more than 90 percent of active-duty 

Service members use commissaries and exchanges.11 Although there are many 

differences between commissaries and exchanges, the Commission found these two 

activities perform similar missions, for similar patrons, with similar staff, using similar 

processes. DoD commissaries and exchanges should be consolidated to leverage these 

similarities. The merger of many back-end operation and support functions, alignment 

of incentives and policies, and consistent implementation of best practices should 

achieve significant efficiencies while maintaining the value of the benefits for Service 

members and their families. 

 

11 Defense Manpower Data Center, Living Patterns Survey, Tabulation of Responses,18, 

http://www.mcrmc.gov/public/docs/report/qol/2013_DMDC_LivingPatternSurvey_Commissary_Usage.pdf . 
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10. Improve access to child care on military installations 

Service members’ operational readiness is directly related to their ability to be at work. 

Access to quality, convenient, and affordable childcare is an important part of 

readiness. Yet the Commission found that demand for military child care often exceeds 

availability, resulting in more than 11,000 children on waiting lists as of September 

2014.12 The Congress should reestablish the authority to use operating funds for 

minor construction projects up to $15 million for expanding or modifying child 

development program facilities serving children up to 12 years of age.13 DoD should 

standardize reporting and monitoring of child care wait times across all types of 

military child care facilities. DoD should also streamline child care personnel policies 

to help ensure proper staffing levels. 

11. Safeguard education benefits for Service members 

The Military Services have repeatedly emphasized the importance of using education 

benefits as recruiting and retention tools. Ensuring the robustness of these programs 

is one of the best ways to guarantee the future of the All-Volunteer Force. There are 

duplicative and inefficient education benefits that should be eliminated or streamlined 

to improve the sustainability of the overall education benefits program. The 

Montgomery GI Bill Active Duty and the Reserve Education Assistance Program should 

be sunset in favor of the Post-9/11 GI Bill. Service members who reach 10 years of 

service and commit to another 2 years should be allowed to transfer their Post-9/11 

GI Bill benefits to dependents. The housing stipend of the Post-9/11 GI Bill should be 

sunset for dependents, as should unemployment compensation for anyone receiving a 

housing stipend. 

12. Better prepare Service members for transition to civilian life 

Transitioning from the Military Services to civilian life is more challenging than it 

needs to be. Unemployment is still a challenge facing far too many of our veterans, 

especially for veterans aged 18 to 24, who had higher unemployment rates in 2013 

than nonveterans of the same age group (21.4 percent and 14.3 percent, 

respectively).14 To better support transition and veteran employment, DoD should 

require mandatory participation in the Transition GPS education track. The 

Department of Labor should permit state departments of labor to work directly with 

state VA offices to coordinate administration of the Jobs for Veterans State Grant 

program. The Congress should require One-Stop Career Center employees to attend 

Transition GPS classes to develop personal connections between transitioning veterans 

and One-Stop Career Centers. 

13. Ensure Service members receive financial assistance to cover nutritional needs 

The Commission recognized that some Service members, particularly those with large 

families, will continue to need financial help to purchase nutritious food for their 

families. The Department of Agriculture’s Supplemental Nutrition Assistance Program 

 

12 Department of Defense and Services Child Development Program Managers, briefing to MCRMC, August 8, 2014. 

DoD, e-mail to MCRMC Staff, September 9, 2014. 

13 See National Defense Authorization Act for FY 2006, Pub. L. No. 109-163, § 2810 (2006). The authority originally 

expired in 2007, but was extended until 2009, when it was allowed to expire. See National Defense Authorization Act 

for FY 2008, Pub. L. No. 110-181, § 2809 (2008). See also Armed Forces, 10 U.S.C. § 2805. 14 U.S. Department of Labor, Bureau of Labor Statistics, Economic News Release, Table 2A: Employment Status of 

Persons 18 Years and Over by Veteran Status, Age, and Period of Service, 2013 Annual Averages, accessed 

September 24, 2014, http://www.bls.gov/news.release/vet.t02A.htm. 
 SECTION 1 

EXECUTIVE SUMMARY

 PAGE 7 

(SNAP), better known as food stamps, should be the means by which they receive that 

help in the United States. The Family Subsistence Supplemental Allowance (FSSA), 

the Military Services’ alternative to SNAP, served only 285 Service members in 

FY 2013,15 in large part because SNAP is more generous and creates fewer potential 

social stigmas for recipient families. FSSA should be retained for Service members in 

overseas locations where SNAP assistance is unavailable, but should be sunset in the 

U.S. and other locations where SNAP is available. 

14. Expand Space-Available travel to more families of Service members 

Dependents of Service members who are deployed for more than 120 days can fly, 

unaccompanied, on military aircraft when there is space available. But shorter 

deployments are becoming routine for some. The quality of life of Service members’ 

dependents should be improved by providing access to unaccompanied travel on 

military aircraft for deployments of 30 days or more. 

15. Measure how the challenges of military life affect children’s school work 

Children of active-duty Service members are not being identified separately in 

nationwide reporting of student performance. These children experience unique 

stresses associated with parental deployments and frequent relocations that can 

adversely affect academic performance. A military dependent student identifier should 

be implemented through Elementary and Secondary Education Act reporting to 

identify students who are children of active-duty Service members. This identifier 

would enable consistent reporting on the academic performance of military 

dependents, as well as identification of the support required to meet their needs. 

 

 

15 Director of Military Compensation, Office of Personnel and Readiness, e-mail to MCRMC, August 5, 2014.
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THIS PAGE INTENTIONALLY LEFT BLANK 
 PAGE 9 

2. GENERAL CONCLUSIONS 

The Commission drew six overarching conclusions regarding the current and future 

state of Uniformed Service compensation. These conclusions reflect general trends and 

overall findings that were observed during the past 18 months of data gathering and 

analysis. They serve as a core framework for the specific recommendations for 

modernization that follow in this report. 

Core Compensation Structure. Though individual compensation programs would 

benefit from modernization, as detailed in the following sections of this report, the 

overall structure of the current compensation system is fundamentally sound and 

does not require sweeping overhaul. A combination of pay, health care, retirement, 

and ancillary benefits is normal for large organizations. Thus, reforms to the current 

compensation package should be judicious, targeted improvements that “do no harm” 

to the bulk of the system. Changes should focus on improving value and outcomes 

through the modernization of specific programs no longer meeting the full 

requirements of the 21st century All-Volunteer Force. 

The basic pay table should be retained in its current form. It has proved an effective 

cornerstone of the compensation system for decades. The pay table, coupled with the 

Services’ personnel management policies, provides strong performance incentives. It is 

simple, transparent, and equitable, thereby contributing to cohesion within the Force. 

It should continue to be supplemented with various special and incentive pays with 

which the Services can adjust compensation levels based on changing economic 

conditions or labor market dynamics. Similarly, the Reserve Component (RC) pay 

system should remain in its current form, as it effectively compensated RC members 

during 13 years of war. It also strikes an appropriate balance between drill weekend 

compensation and ancillary responsibilities for which RC members may not be fully 

reimbursed.1

In addition, the system of allowances (e.g., Basic Allowance for Housing, Basic 

Allowance for Subsistence) should continue to supplement basic and specials pays. 

The Commission examined the allowance system in detail, considering features such 

as the tax-free nature of some allowances and the fairness and equity of differing 

allowance rates. The Commission also investigated whether eliminating the allowance 

system would improve the overall transparency of the compensation system. As 

currently designed, however, the allowance system strikes an appropriate compromise 

between representing compensation to Service members and assistance for their living 

expenses. 

 

1 The Commission reviewed policies associated with RC members in a nonpay status who drill for points for retirement 

purposes, particularly those of the Navy (BUPERSINST 1001.39F) because it represents many of these RC members. 

According to Navy Reserve manpower subject matter experts, most of these Navy RC members reached high-year 

tenure without accumulating 20 years of qualifying service for retirement purposes. Nonpay drilling allows these 

members to reach retirement eligibility requirements. Some members voluntarily request to be in a nonpay drilling 

status to accommodate their individual needs. Others are unable to find a vacant billet for which they would receive 

both pay and drill points, typically because they were promoted out of a paid billet during a time when promotions 

were not connected to vacancies at the next pay grade. Navy RC promotion policies have changed to generally prevent 

promotions independent of paid billets at the next pay grade. The Commission urges the Services to communicate 

policy concerning nonpay drilling to RC members earlier in their careers and to align RC manpower and personnel 

levels to further reduce nonpay drilling. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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Health care benefits have been, and will continue to be, an important element of 

compensation. Health care should continue to be offered across the life-cycle of a 

military member. Active-duty Service members and their families should receive 

access to a health care benefit, as should eligible members of the RC. Retired Service 

members should also have access to health care, with TRICARE For Life to 

supplement Medicare benefits. These benefits should be modernized to provide 

beneficiaries with additional choice, access, and value. The military health system 

needs to be modernized with the best business practices to ensure the very best in 

access and delivery for an efficient and effective health care system. 

Quality of life benefits play a valuable role in Service member compensation. They are 

designed to mitigate many of the effects on Service members and their families 

associated with frequent moves, assignments to difficult locations far away from 

extended family and other support networks, deployments of family members, 

demanding work schedules, and other military lifestyle challenges. Though the 

Commission explored several strategies to modernize quality of life programs, 

including monetizing all “in-kind“ benefits, it recognizes these programs provide peace 

of mind with respect to Service members’ families. Providing the actual benefit instead 

of additional cash compensation ensures important needs are met. Although this 

report contains recommendations related to some quality of life programs, the overall 

suite of benefits does not require sweeping reform. 

Advantages of Targeted Modernization. Modernization of compensation programs 

would provide new substantial benefits to Service members while bending the 

Government’s cost curve. The remainder of this report details recommendations to 

improve benefits and fiscal sustainability. Key examples of the advantages of 

modernization include: 

1. Modernized Retirement System 

- maintains the Services’ existing recruiting and retention levels, promoting 

the continuance of the All-Volunteer Force 

- provides new Government-sponsored retirement assets to the 83 percent of 

Service members who currently leave the Force without vesting for a defined 

benefit annuity 

- increases the expected value of Government-sponsored retirement assets for 

Service members who retire after reaching 20 years of service 

- reduces annual DoD budgetary costs and Federal outlays, in FY 2016 

constant dollars, by $1.9 billion and $4.7 billion, respectively, after full 

implementation 

2. Modernized Readiness Oversight 

- establishes a four-star Command to oversee joint readiness, especially the 

readiness of the military medical force 

- defines essential medical capabilities and clinical skill standards that must 

be sustained during peacetime to prepare for the next conflict 

- improves the workload and case mix in military hospitals to provide 

additional opportunities for military personnel to maintain clinical skills 

3. Modernized Health Benefit 

- improves access and choice in health care by allowing Service members and 

retirees to select from a menu of commercial health care plans 
 SECTION 2

 GENERAL CONCLUSIONS

 PAGE 11 

- eliminates the existing TRICARE referral process, which is a source of 

substantial frustration to Service members and their families 

- provides active-duty Service members with a new Basic Allowance for Health 

Care (BAHC) to offset costs for commercial health care, plus an additional 

program to further offset costs of chronic or catastrophic conditions 

- reduces annual DoD budgetary costs and Federal outlays, in FY 2016 

constant dollars, by $6.7 billion and $3.2 billion, respectively, after full 

implementation 

4. Modernized Service Member Education Benefits 

- maintains the Post-9/11 GI Bill while eliminating redundant education 

programs 

- aligns transferability of education benefits to mid-career retention 

milestones 

- reduces annual Federal outlays, in FY 2016 constant dollars, by $4.8 billion 

after full implementation 

Modernization Without Compensation Reductions. By focusing modernization 

reforms on the structure of various benefits, fiscal sustainability can be improved 

without reducing the value of benefits to Service members. The recommendations in 

this report will result in substantial reductions in Federal spending. They also 

generally improve the value of the compensation system for Service members. Table 1 

presents values from a military Leave and Earnings Statement (LES), including 

estimated changes from the recommendations detailed throughout the remainder of 

this report. In each LES line item, this Service member would receive the same or 

additional benefits. A new BAHC offsets expected out-of-pocket costs for a commercial 

health care plan, including an automatic allotment to pay the health care plan 

premium. Government contributions on behalf of Service members into the Thrift 

Savings Plan (TSP) would provide new retirement savings for the entire Force while 

compensating Service members for a reduced defined benefit (DB) annuity. BAHC and 

TSP contributions would provide additional Federal tax advantages to Service 

members. The increase in end-of-month pay shown on the LES would compensate for 

insurance costs and DB reductions, and Service members would not lose take-home 

pay as a result of the modernization recommendations in this report. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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Table 1. Changes to a Leave and Earnings Statement of 

an Active-Duty E5 with 10 YOS2

Modernizing the retirement system can also provide additional value for Service 

members. Take, for example, a blended retirement system that features a modified 

version of the current DB, a defined contribution (DC) component through TSP, and 

lump-sum continuation pay awarded at 12 years of service (YOS). The DC component 

of this blended plan would provide new retirement benefits to the 83 percent of the 

Force that would otherwise leave service without Government-sponsored retirement 

savings. It would allow Service members over time to increase retirement savings 

through compounding investment returns.3 Service members who contribute to TSP 

would reduce their taxable income because contributions would be invested as pretax 

dollars, which would allow Service members to retain more income. The combination 

of DB and DC assets, plus continuation pay, would be expected to exceed the value of 

the current DB-only retirement system for those who reach 20 YOS. As shown in 

Figure 1, the net present value of the current DB annuity for a typical enlisted Service 

member who retires after 20 YOS would be $201,282. Under a blended retirement 

system in which the Service member contributes 3 percent of their basic pay to the DC 

plan, Government-sponsored retirement assets at 20 YOS would total $217,131, an 

increase of 8 percent. The Service member’s own DC contributions would be valued at 

another $31,518, providing total retirement assets valued at $248,649. The value of 

Government-sponsored retirement assets for officers would be expected to increase by 

10 percent. 

 

2 Assumes an active-duty E5 who has dependents, has 10 YOS, is stationed at Fort Bragg, and is in a 15 percent 

Federal tax bracket. Alternative compensation system values are estimated assuming implementation of the 

Commission’s recommendations and assuming that the Service member will contribute 3 percent of basic pay into the 

Thrift Savings Plan and will participate in the proposed health benefit program (i.e., TRICARE Choice). 3 See Recommendation 1 of this report for details of TSP. 

CURRENT ALTERNATIVE CHANGES

COMPENSATION COMPENSATION IN

SYSTEM SYSTEM COMPENSATION

ENTITLEMENTS

Basic Pay $3,076.20 $3,076.20 $0.00

Basic Allowance for Subsistence $357.55 $357.55 $0.00

Basic Allowance for Housing $1,152.00 $1,152.00 $0.00

Basic Allowance for Health Care $0.00 $305.00 $305.00

Thri ft Savings Plan, Government Automatic Contribution $0.00 $30.76 $30.76

Thri ft Savings Plan, Government Matching Contributions $0.00 $92.29 $92.29

TOTAL ENTITLEMENTS $4,585.75 $5,013.80 $428.05

DEDUCTIONS

Standard Deductions $844.33 $844.33 $0.00

Thri ft Savings Plan, Member Contributions $92.29 $92.29 $0.00

TOTAL DEDUCTIONS $936.62 $936.62 $0.00

ALLOTMENTS

TRICARE Dental $32.89 $32.89 $0.00

TRICARE Choice Health Plan $0.00 $236.91 $236.91

TOTAL ALLOTMENTS $32.89 $269.80 $236.91

MONTHLY PAY $3,616.24 $3,807.38 $191.14
 SECTION 2

 GENERAL CONCLUSIONS

 PAGE 13 

Figure 1. Retirement Assets of a Retiring Active-Duty E7, Current 

vs. Blended Retirement Plans4

Results from the Commission’s survey show that Service members recognize the 

increased benefit of alternative compensation systems. As shown in Figure 2, activeduty survey respondents indicated that they would prefer the modernized 

compensation system detailed in this report over the status quo by a margin of 4 to 1.5

While being more preferable, the proposed compensation system improves fiscal 

sustainability, providing a win-win solution for Service members and the Services. 

 

4 The Commission reviewed policies associated with RC members in a nonpay status who drill for points for retirement 

purposes, particularly those of the Navy (BUPERSINST 1001.39F) because it represents many of these RC members. 

According to Navy Reserve manpower subject matter experts, most of these Navy RC members reached high-year 

tenure without accumulating 20 years of qualifying service for retirement purposes. Nonpay drilling allows these 

members to reach retirement eligibility requirements. Some members voluntarily request to be in a nonpay drilling 

status to accommodate their individual needs. Others are unable to find a vacant billet for which they would receive 

both pay and drill points, typically because they were promoted out of a paid billet during a time when promotions 

were not connected to vacancies at the next pay grade. Navy RC promotion policies have changed to generally prevent 

promotions independent of paid billets at the next pay grade. The Commission urges the Services to communicate 

policy concerning nonpay drilling to RC members earlier in their careers and to align RC manpower and personnel 

levels to further reduce nonpay drilling. Service members would receive CP to promote midcareer retention. This 

comparison of retirement assets assumes CP is saved and invested for retirement. 

5 The figure represents a close approximation of the preferences of the Commission’s recommendations, since the 

survey did not address all compensation recommendations of the Commission. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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Figure 2. Percent of Active-Duty Service Members Who Prefer the 

Current or Proposed Compensation System 

Member Choice, Access, and Quality. A fundamental mismatch has developed 

between the conditions and requirements of a 21st century workforce and some 

Uniformed Service compensation programs. The modern civilian workforce prioritizes 

characteristics such as choice, access, and flexibility over rigid compensation 

structures. While military life is different from that of civilians, the Services necessarily 

recruit and retain Service members from broader labor markets. If the Uniformed 

Services compensation system does not adjust to the preferences of labor market 

participants, the Services will be at a growing competitive disadvantage for attracting 

our Nation’s best workers. 

Substantial changes in demographics and society are not reflected in key aspects of 

the current compensation system, much of which dates back to 1973 and the birth of 

the All-Volunteer Force or earlier. Similarly, demographic changes in the Force, such 

as the increase in women and Service members with children, reflect trends that are 

not accurately incorporated into the current compensation and benefits package. In 

the 21st century, prospective recruits and current Service members considering 

whether to transition to the civilian sector are better educated and more 

technologically savvy than in previous decades.6 Some current programs simply 

comprise piecemeal updates or adjustments to long-standing programs and do not 

fully reflect the changing preferences of both the Force and society. 

The unprecedented operational use of the RC during the last 13 years of war also has 

implications for the compensation system. In particular, mobilization of the RC 

highlighted the need for higher levels of medical and dental readiness during 

peacetime. Recurrent deployments of RC members also showed that processing RC 

orders could be substantially more efficient. The Commission’s recommendations offer 

 

6 MCRMC, Report of the Military Compensation and Retirement Modernization Commission: Interim Report, June 2014, 

248-267, http://www.mcrmc.gov/index.php/reports. 
 SECTION 2

 GENERAL CONCLUSIONS

 PAGE 15 

additional health and dental care choices to RC members and streamline RC duty 

statuses. These improvements would smooth the movement of the RC between 

operational and strategic postures. Nonetheless, DoD should determine the future 

posture of the RC and ensure compensation resources are aligned to support the 

National Guard and Reserves. Such alignment would better meet the needs of Service 

members and positively affect recruitment, retention, and readiness. 

Service Flexibility. The Services, as well as Service members, would benefit from 

additional flexibility in the compensation system. Changing national security 

requirements will necessarily demand adjustments to manpower requirements. 

Compensation requirements will vary with changes in the national economy or labor 

markets. Service personnel managers therefore need a compensation system with 

which they can easily adjust compensation to obtain the appropriate mix of personnel 

skills and experience levels. In particular, the Services may benefit from the authority 

to vary retirement options for different career fields. The retirement system is 

instrumental in determining the shape of the Services’ force profiles.7 Yet the current 

one-size-fits-all retirement system does not address fundamental differences in the 

skill sets, training requirements, and career paths of various professions. For example, 

doctors, linguists, and cyber personnel have skills that are expensive to acquire and 

improve over time. The Force may benefit from a flexible retirement system that 

incentivizes them to remain in service longer than other occupational specialties. 

The Services would also benefit from additional flexibility in the management of the 

Military Health System. A coordinated, strategic framework is required to sustain and, 

whenever possible, improve upon the tremendous medical skills that were 

accumulated during the last 13 years of war. New command oversight, coupled with 

authorities and tools to enhance medical training opportunities during peacetime, 

would prevent the potential atrophy of operational medical skills and expertise that 

are critical to DoD’s operational mission. In particular, DoD would benefit from the 

authority to attract additional cases into Military Treatment Facilities related to 

essential medical capabilities that should be retained within the military’s medical 

force for national security purposes. 

Effective Oversight. The Nation requires strong and dedicated oversight of military 

personnel and readiness programs to maintain the high combat and support 

capabilities that have developed during 13 years of war. The tools that contributed to 

the Force’s success should be sustained and, whenever possible, improved. Lessons 

learned during the wars need to be integrated into peacetime training programs and 

institutionalized throughout the Force. This need for centralized leadership and a 

focus on combat readiness is especially important in military medicine. 

Recommendations in this report address additional oversight and readiness tools 

within DoD. 

Two additional improvements, both beyond the scope of this Commission, may serve 

to further enhance the Nation’s capability to provide the best quality medical care for 

Service members, both on the battlefield and as they transition from DoD to VA care. 

First, Congressional oversight of DoD and VA medical programs is not unified, which 

may contribute to ongoing shortfalls in coordination between the two Departments 

and weaknesses in transitioning Service member care from DoD to the VA. 

 

7 See Section 3, Recommendation 1 for further explanation. 
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Recommendations in this report seek to improve the ways in which DoD and VA work 

together, but coordination would be further improved if Congressional appropriations 

committees were realigned to provide unified oversight of both medical systems. The 

House and Senate Appropriations Subcommittee for Military Construction, Veterans 

Affairs, and related Agencies could expand their jurisdiction to include DoD’s military 

health delivery system. The Subcommittee would have appropriations oversight over 

the construction of DoD and VA hospitals, clinical operations, information 

technologies, supply-chain, operations, and related work streams. Doing so would also 

provide the kind of long-term support and oversight a $100-billion-per-year health 

care system needs. 

The Commission does call for a continuous effort toward increased collaboration 

between DoD Health Affairs and VA Health Administration to capture synergies of 

excellence with the goal of seamless transition of Service members and veterans. It is 

prudent and worthy for the Congress to explore all possibilities and opportunities to 

improve the DoD and VA health systems including the consideration of creating a 

single military health care system for all current military and eligible veterans. To 

determine the structure, authorities, and leadership responsibilities of such a health 

system was beyond the scope of this Commission and would require systemic changes 

that may take years to implement effectively. 

Fiscal Sustainability and Federal Budget Pressures. Though the fiscal 

sustainability of Uniformed Services compensation is both relevant and important, the 

modernization of Service compensation cannot be the cornerstone of attempts to 

address larger political goals or budgetary concerns. Recent trends placing continued 

downward pressures on military budgets are expected to continue. National security is 

a Constitutional priority and fiscal challenges facing the Nation cannot be solved by 

focusing solely on the Services. Any attempts to use changes in Service members' 

compensation and benefits to do so would undermine the effectiveness of the AllVolunteer Force. 

Maintenance of the All-Volunteer Force requires compensation levels that allow 

recruitment and retention of high quality personnel in service to our Nation’s defense. 

Though the men and women of the Services have demonstrated time and again a 

willingness to make substantial sacrifices to serve the Nation, fair and adequate 

compensation and a good quality of life should not be included among the items 

Service members forgo. The Commission does not take a position on compensation 

levels. These items are the appropriate domain of the Congress and the Uniformed 

Services, so they can preserve the flexibility to build and maintain the Force necessary 

to meet national security needs. The Commission does conclude that any general 

reduction in Service member compensation must be part of a larger national 

discussion regarding budgetary constraints and entitlements, which is beyond the 

scope of this Commission. 

It is possible, however, to modernize some compensation programs to improve their 

value to Service members while making them more fiscally sustainable. Improvements 

in the efficiency of some compensation programs would allow for win-win situations 

that improve responsiveness, quality, and outcomes for Service members and their 

families, while lowering cost to the American taxpayer. Where such opportunities 

exist, the Services’ compensation system should be improved to implement efficiencies 

as a means of good stewardship. While maintaining the overall value of the current 
 SECTION 2

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benefits package, these recommendations offer efficiencies that reduce Government 

expenditures by as much as $10 billion per year. 

Other Agency Programs. The Commission reviewed a large number of programs 

affecting Service members across Government agencies, and its recommendations for 

modernization focus primarily on programs funded and administered by the 

Uniformed Services. The recommendations in this report account for benefits that 

Service members receive from other Government agencies; however, this report does 

not, for example, contain recommendations related to Department of Veterans Affairs 

disability compensation or programs such as Department of Education Impact Aid. 

Nevertheless, the targeted modernization of key compensation and benefit programs 

could improve the experiences of Service members across the board. 

Improving choice, access, and quality for Service members and their families should 

be at the heart of any modernized compensation system. This system should retain 

the core strengths that have sustained our Nation’s All-Volunteer Force for 42 years 

and through 13 years of war, while definitively modernizing programs and program 

components that inadequately reflect the conditions and preferences of a 21st century 

workforce. Doing so would improve the value of compensation programs to Service 

members and their families. It would also allow the Services to recruit and retain 

quality personnel in a more competitive employment landscape, and through 

improvements in efficiency and accountability, it would help ensure continued fiscal 

sustainability of the compensation system for years to come. 

 
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THIS PAGE INTENTIONALLY LEFT BLANK 
 PAGE 19 

3. RECOMMENDATIONS 

PAY AND RETIREMENT

Recommendation 1: Help more Service members save for 

retirement earlier in their careers, leverage the retention 

power of traditional Uniformed Services retirement, and give 

the Services greater flexibility to retain quality people in 

demanding career fields by implementing a modernized 

retirement system. 

Background: 

Currently, Service members in the Active Component (AC) may request to retire after 

20 years of service (YOS).1 Beginning the month after retirement, they receive annuity 

payments on the first day of each month.2 These annuity payments are generally 

calculated by multiplying a member’s retired pay base by 2.5 percent for each year of 

creditable service.3 Before January 1, 2007, the multiplier was capped at 75 percent of 

a Service member’s retired pay base; however, this cap has been lifted for Service 

members retiring after January 1, 2007.4 

Service members in the Reserve Component (RC) may also request retired pay after 

20 years of creditable service.5 The formula for calculating their monthly annuity 

payments is the same as for AC Service members; however, years of service are 

calculated by dividing the number of Reserve points by 360.6 There are two major 

distinctions between RC and AC retirement pay. RC annuity payments do not begin 

until retirees reach age 60,7 and only years in which RC Service members accumulate 

50 Reserve points are considered “creditable.”8 

 

1 Each Uniformed Service has its own authority found respectively at Armed Forces, 10 U.S.C. §§ 3911, 3914 (Army); 

Armed Forces, 10 U.S.C. §§ 6323, 6330 (Navy); Armed Forces, 10 U.S.C. §§ 8911, 8914 (Air Force); Coast Guard, 

14 U.S.C. §§ 291, 355 (Coast Guard); Navigation and Navigable Waters, 33 U.S.C. § 3044 (NOAA Commissioned Officer 

Corps); The Public Health and Welfare, 42 U.S.C. § 212 (U.S. Public Health Service Commissioned Corps). 

2 Armed Forces, 10 U.S.C. § 1412(b). 

3 Armed Forces, 10 U.S.C. § 1409(b). Service members’ retired pay base is dependent upon the date they entered 

service. 10 U.S.C. § 1406 provides that for a Service member who entered before September 8, 1980, the retired pay 

base is his or her final month of basic pay. 10 U.S.C. § 1407 provides that for a Service member who entered after 

September 7, 1980, the retired pay base is the total monthly basic pay for the member’s last 36 months divided by 36. 

Pursuant to 10 U.S.C. § 1409(b)(2), if a Service member elects to receive the 15-year Career Status Bonus, his or her 

multiplier is reduced by 1 percent for each full year that the member’s years of creditable service are fewer than 30. 4 National Defense Authorization Act for FY 2006, Pub. L. No. 109-364, § 642, 120 Stat. 2083, 2259-2260 (2006). 5 Armed Forces, 10 U.S.C. § 12731. 

6 10 U.S.C. § 12733. The years of service to be credited to the Service member are calculated by dividing 360 into the 

member’s total points except that the member is capped to 130 points in a 1-year period. That cap does not apply to 

points earned for active service. 

7 Armed Forces, 10 U.S.C. § 12731. Under 10 U.S.C. § 12731(f), a Service member in the Reserve Component may 

begin to receive retired pay before the age of 60. For every 90 days of active service in a designated combat zone, the 

eligibility age is reduced by 3 months. The eligibility age may not be reduced to younger than age 50. 8 Armed Forces, 10 U.S.C. § 12732. Points may be earned for various reasons, including membership in the Reserve 

Component, active service, and drill attendance. 
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Since 2000, Service members have been authorized to participate in the Thrift Savings 

Plan (TSP),9 which is a defined contribution (DC) plan that allows eligible participants 

to contribute a portion of their pay into a tax-deferred investment account.10 The TSP 

was created as part of the reform of the Federal civilian employee retirement plan in 

1986.11 It is maintained by the Federal Retirement Thrift Investment Board, which sets 

the investment policies for the plan.12 Contributions to the TSP can be invested 

through a series of funds with broad market diversification, including short-term 

U.S. Treasury funds, corporate bond funds, and both domestic and international stock 

index funds.13 Over time, funds invested in TSP generally increase in value because of 

compounding investment returns. According to TSP, investments in corporate bonds 

and stocks “have higher potential returns than ... Government securities,” although 

they “also carry the risk of investment losses.”14 The Services do not contribute to 

Service members’ TSP accounts.15

The existing retirement system is effective in providing benefits to Service members 

who retire after 20 years of service. As such, it plays an important role in readiness 

and retention of the All-Volunteer Force, especially among members who have served 

10 or more years, as discussed below.16 The Service retirement system as currently 

constituted, however, provides no benefits for Service members who serve fewer than 

20 years, so these members receive no retirement benefit in compensation for their 

service to the Nation.17 

The All-Volunteer Force increasingly comprises Service members born after 1980, 

members of the “millennial” generation. Research has shown members of this 

generation change jobs frequently and tend to favor flexible retirement options, rather 

than the defined benefit pension plans preferred by previous generations.18 Although 

Service members who separate with fewer than 20 YOS may be eligible for servicerelated benefits, including education benefits,19 preferential hiring,20 and employment 

 

9 National Defense Authorization Act for FY 2000, Pub. L. No. 106-65, §§ 661-663, 113 Stat. 512, 670-674 (1999) as 

amended by National Defense Authorization Act for FY 2001, Pub. L. No. 106-398, § 661, 114 Stat. 1654, 1654A–167 

(2000).

10 Government Organization and Employees, 5 U.S.C. §§ 8432(a), 8440(a). Service members may also contribute to a 

Roth TSP pursuant to Government Organization and Employees, 5 U.S.C. § 8432d. 

11 Federal Employees’ Retirement System Act of 1986, Pub. L. No. 99-335, 100 Stat. 514 (1986). 

12 Government Organization and Employees, 5 U.S.C. § 8472. The Board is required, pursuant to 5 U.S.C. § 8438(b)(1), 

to establish five different index funds: one each for Government Securities, Fixed Income, Common Stock, Small 

Capitalization Stock, and International Stock. The Board has also created lifecycle funds that automatically allocate 

funds in a participant’s account to meet the needs of a participant’s anticipated retirement date. 

13 Thrift Savings Plan, Summary of the Thrift Savings Plan, accessed December 12, 2014, 

http://www.tsp.gov/PDF/formspubs/tspbk08.pdf. 

14 Thrift Savings Plan, Summary of the Thrift Savings Plan, 14, accessed December 12, 2014, 

http://www.tsp.gov/PDF/formspubs/tspbk08.pdf. 

15 5 U.S.C. § 8440e(e) prohibits contributions from the Services unless there was an agreement reached pursuant to 

37 U.S.C. § 211(d). 

16 See e.g., Department of Defense, Report of the Tenth Quadrennial Review of Military Compensation, Volume II Deferred 

and Noncash Compensation, July 2008, 10, accessed December 14, 2014, 

http://www.defense.gov/news/qrmcreport.pdf. See also Baylor University, Reduced Retirement Benefits: Should I stay 

or go?, accessed August 26, 2014, https://bearspace.baylor.edu/J_West/www/retire.pdf. See also Figure 1. 17 Armed Forces, 10 U.S.C. §§ 3911, 3914, 6323, 6330, 8911, 8914. Coast Guard, 14 U.S.C. §§ 291, 355. Navigation 

and Navigable Waters, 33 U.S.C. § 3044. The Public Health and Welfare, 42 U.S.C. § 212. 

18 Transamerica Center for Retirement Studies, Millennial Workers: An Emerging Generation of Super Savers, 15th

Annual Transamerica Retirement Survey, 9, accessed November 10, 2014, 

http://www.transamericacenter.org/docs/default-source/resources/center-research/tcrs2014_sr_millennials.pdf. 19 Veterans Benefits, 38 U.S.C. §§ 3311-3325. 20 Employment, 5 U.S.C. § 2108. 
 SECTION 3 

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assistance,21 the current retirement system does not provide them with any financial 

contribution toward their long-term economic security after separation. 

For additional information on Uniformed Services retirement, please see the Report of 

the Military Compensation and Retirement Modernization Commission: Interim Report 

(Section 3.4). 

Findings: 

Force Profiles 

In developing recommendations to modernize Uniformed Services retirement and 

compensation systems, the Commission’s primary goal was to ensure that the Services 

can maintain the most professional All-Volunteer Force possible, during both 

peacetime and wartime. An important part of this goal was making certain the 

Services are able to maintain their desired rank and experience structures. Figure 3 

displays the current active-duty force profiles.22 Representatives of each of the 

Uniformed Services communicated to the Commission the crucial message that any 

modernized package of pay and benefits should enable the Services to maintain 

similar active-duty force profiles. 

Figure 3. Continuation Rates for Active-Duty Officers and Enlisted 

Personnel, FY 2013 

 The current defined benefit (DB) retirement plan23 is a key determinant in shaping 

these force profiles. The active-duty force constitutes a “closed” personnel system in 

which Service members are generally promoted from a pool of more junior members 

already in the system.24 Many personnel, especially enlisted, separate from service 

 

21 Veterans Assistance, 38 U.S.C. §§ 4100-4114 22 The force profile shows the number of personnel (in a service or skill) according to their years of service. 23 In a defined benefit retirement plan, beneficiaries receive specified monthly payments upon retirement. See 

“Definitions,” Internal Revenue Service, accessed December 10, 2014, http://www.irs.gov/Retirement-Plans/PlanParticipant,-Employee/Definitions. 

24 There are some exceptions to this general rule. For example, enlisted personnel who have successfully completed 

semester hours at accredited colleges or universities may enlist at grades above E1 (see, e.g., Active and Reserve 

Components Enlistment Program, AR 601-210, 15 (2013)), and medical doctors may enter the military at grades from 

O2 through O6 (see Armed Forces, 10 U.S.C. § 532(b)). 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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after their first term. This trend leads to steep declines in the percentage of members 

who remain in service through the end of their first 8 to 10 years. Thereafter, the force 

profile flattens as Service members begin to feel the “pull” of the current 20-year 

retirement system.25 Financial incentives to remain in Service decline substantially 

after the 20-year vesting point,26 leading to another drop in retention. 

Service members feel the 20-year retirement pull most strongly at about their 10th 

year of service. This pull generally occurs because Service members place more value 

on the DB annuity payments as the likelihood they will reach the benefit eligibility 

threshold increases.27 On average, younger members value the benefit less because 

they are less likely to remain in the force for 20 years.28 The value of the annuity 

benefit increases as Service members approach eligibility for earning the benefit29

Ninety percent of enlisted members who remain in service at least 14 years will reach 

retirement eligibility.30 Once Service members reach the vesting point, there is a drop 

in retention as they retire and receive the annuity.31

Service Member Choice 

Over time, the variety of private-sector benefit plans available to employees has 

increased substantially.32 According to the Bureau of Labor Statistics, in March 2014, 

74 percent of full-time, private-sector employees had access to one or more retirement 

plans, and 86 percent had access to medical care benefits.33 Furthermore, privatesector employers often utilize a variety of contribution benefits packages that allow 

employees to opt in, including short- and long-term disability plans, supplemental life 

insurance, and legal services, among others.34 Private-sector employers also normally 

provide a menu of health care insurance plans to meet the needs of employees.35 Data 

on the use of private health exchanges for U.S. employers show “enrollees chose the 

health plan they felt offered the best value for themselves and their family, and liked 

being able to select among multiple carriers.”36

 

25 Paul F. Hogan, “Overview of the Current Personnel and Compensation System,” in Filling the Ranks: Transforming the 

U.S. Military Personnel System, ed. Cindy Williams (Cambridge: MA: Belfer Center for Science and International Affairs, 

John F. Kennedy School of Government, Harvard, 2004), 29-53. 

26 According to Merriam-Webster Dictionary, vesting is “the conveying to an employee of the inalienable right to share 

in a pension fund especially in the event of termination of employment prior to the normal retirement age.” 27 Lazear, E.P. (1990): “Pensions and Deferred Benefits as Strategic Compensation,” Industrial Relations: A Journal of 

Economy and Society, 29(2), 264. See also Tenth Quadrennial Review of Military Compensation, Report of the Tenth 

Quadrennial Review of Military Compensation, Volume II Deferred and Noncash Compensation, July 2008, 10, accessed 

December 14, 2014, http://www.defense.gov/news/qrmcreport.pdf. “Reduced Retirement Benefits: Should I stay or 

go?,” Baylor University, accessed August 26, 2014, https://bearspace.baylor.edu/J_West/www/retire.pdf. 28 Lazear, E.P. (1990): “Pensions and Deferred Benefits as Strategic Compensation,” Industrial Relations: A Journal of 

Economy and Society, 29(2), 264. 29 Ibid. 

30 Department of Defense, Report of the Tenth Quadrennial Review of Military Compensation, Volume II Deferred and 

Noncash Compensation, July 2008, 31, accessed Dec. 10, 2014, http://www.defense.gov/news/qrmcreport.pdf. 31 Lazear, E.P. (1990): “Pensions and Deferred Benefits as Strategic Compensation,” Industrial Relations: A journal of 

Economy and Society, 29(2), 264. 

32 Jeffrey R. Brown and Scott J. Weisbenner, Building Retirement Security through Defined Contribution Plans, 

accessed December 9, 2014, 

https://www.acli.com/Issues/Retirement%20Plans/Documents/Brown%20Weisbenner_FullPaper.pdf. 33 Bureau of Labor Statistics/U.S. Department of Labor, Employee Benefits in the United States – March 2014, 

accessed December 9, 2014, http://www.bls.gov/news.release/pdf/ebs2.pdf. 34 See Department of the Treasury, Internal Revenue Service, Employer’s Tax Guide to Fringe Benefits,

Publication 15-B, 1, accessed January 7, 2015, http://www.irs.gov/pub/irs-pdf/p15b.pdf. 

35 Ibid. 

36 “On Private Health Exchanges, Choice Drives Satisfaction,” Society for Human Resource Management, accessed 

December 9, 2014, http://shrm.org/hrdisciplines/benefits/articles/pages/private-health-exchanges.aspx 
 SECTION 3 

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The Uniformed Services have also begun to recognize the benefits of providing 

members with more choices. For example, Assignment Incentive Pay (AIP) was created 

in 2003 “to attract volunteers to fill jobs/billets that have been identified as 

historically difficult to fill.”37 Under the AIP program, Service members can choose to 

submit bids representing the additional compensation they would accept for hard-tofill assignments.38 By allowing Service members some choice in assignment and 

related compensation, AIP “has become extremely popular and is the military’s 

preferred way to compensate troops from all of the services for certain unusual and 

extended assignments.”39 Similarly, DoD’s experience with voluntary separation 

incentive40 and career status bonuses41 reveals some Service members prefer lumpsum payments to typical annuities.42 Continuing to increase flexibility and Servicemember choice in the compensation system would enable the Services to more readily 

adapt to changing views and values of the next generation of recruits. 

Defined Benefit Inequity 

Observers, including military leaders and past commissions, have commonly criticized 

the current retirement system for its inequity.43 Uniformed Services retirement is 

contingent on 20-year “cliff vesting”—a system in which only those who complete a 

20-year career receive benefits.44 Under the current Uniformed Services retirement 

system, 83 percent of all enlisted personnel and 51 percent of officers receive no 

retirement savings for their service.45 Many comments received by the Commission 

also spoke to this inequity in the current DB-only retirement plan: 

There should be Government matching to TSP. Those members who do not 

serve 20 years have zero support from their employer (DoD) with regard to 

retirement.46

 

37 “Assignment Incentive Pay,” Navy Personnel Command, accessed December 10, 2014, 

http://www.public.navy.mil/bupers-npc/career/payandbenefits/pages/aip.aspx. 

38 Assignment Incentive Pay (AIP) Program, Policy Decision Memorandum 003-06, December 7, 2006, accessed 

January 12, 2015, http://www.public.navy.mil/bupersnpc/career/payandbenefits/documents/TABFAIPPDMOFDEC06.pdf. 

39 “Assignment Incentive Pay (AIP),” Military Compensation, accessed December 10, 2014, 

http://militarypay.defense.gov/pay/aip.html. 40 “VSI/SSB Recoupment,” Defense Finance and Accounting Service, accessed December 10, 2014, 

http://www.dfas.mil/retiredmilitary/plan/separation-payments/vsi-ssb-recoupment.html. 41 “CSB/REDUX,” Defense Finance and Accounting Service, accessed December 10, 2014, 

http://www.dfas.mil/retiredmilitary/plan/estimate/csbredux.html. 42 Curtis J. Simon, John T. Warner, and Saul Pleeter, “Discounting, Cognition, and Financial Awareness: New Evidence 

from a Change in the Military Retirement System,” Economic Inquiry, 53, no. 1, 318-334, accessed December 10, 2014, 

http://onlinelibrary.wiley.com/doi/10.1111/ecin.12146/pdf. 43 See Department of Defense, Report of the Tenth Quadrennial Review of Military Compensation, Volume II Deferred and 

Noncash Compensation, July 2008, 12-16, http://www.defense.gov/news/qrmcreport.pdf. See also Defense Business 

Board, Report to the Secretary of Defense: Modernizing the Military Retirement System, accessed November 10, 2014, 

http://dbb.defense.gov/Portals/35/Documents/Reports/2011/FY11-

5_Modernizing_The_Military_Retirement_System_2011-7.pdf. See also University of Pennsylvania, Wharton School of 

Business, Public Policy Initiative, An Affordable and Equitable Retirement System for our Veterans, accessed November 

10, 2014, http://publicpolicy.wharton.upenn.edu/live/news/317-an-affordable-and-equitable-retirement-system-for. 

See also David B. Newman, Mitigating the Inequity of the Military Retirement System by Changing the Rules Governing 

Individual Retirement Accounts for Service Members, (Monterey, California: The Naval Postgraduate School, 1997), 31-

44. 44 Patrick Mackin, American Enterprise Institute, Expanding Access While Saving Money in the Military Retirement 

System, 4, accessed December 14, 2014, https://www.aei.org/publication/expanding-access-while-saving-money-inthe-military-retirement-system/. 

45 Department of Defense, Valuation of the Military Retirement System; September 30, 2012, 24, accessed December 10, 

2014, http://actuary.defense.gov/Portals/15/Documents/MRF_ValRpt2_2012.pdf. 

46 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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There should be some type of retirement or IRA for those individuals that 

leave the military before 20 years.47

As someone who will very likely retire at or after 20 years, I feel it’s 

important to keep that option for “Career military,” but when I was young 

it seems too little for a large gamble. Think you need matching TSP option 

to provide some vesting in a retirement option for those that choose to 

serve less than a 20 year career, since you lose all personal retirement tax 

benefits with the 20 or nothing option.48

By comparison, the private sector is required by the Employee Retirement Income 

Security Act (ERISA)49 to vest its employees in company-provided retirement plans 

within a much shorter time than the Services’ system vests Service members. The 

timeframe for vesting depends on the type of retirement plan.50 Pursuant to ERISA, 

any DB plan must cliff vest by 5 years of employment, or vest gradually during a 

period of 7 years.51 A DC plan must cliff vest within 3 years, though graduated vesting 

may take up to 6 years.52 As a result of these shorter private-sector vesting times, a 

much higher percentage of private-sector employees receive some type of retirement 

benefit, as compared to Service members who can only receive the retirement annuity 

upon reaching 20 YOS. 

As shown in Figure 4, 70 percent of Fortune 100 companies offered DC retirement 

plans in 2013, and 23 percent offered “blended” plans that combine DC and DB 

elements.53 The Society for Human Resource Management reported that 92 percent of 

all private companies offered a DC plan in 2013, compared to 19 percent that offered 

only a DB plan.54 Accordingly, private-sector employees earn retirement savings much 

earlier in their careers than do Service members, who must currently wait until 

20 years into a career to be eligible for any retirement annuity. 

 

47 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

48 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

49 P.L. 93–406, 88 Stat. 829, enacted September 2, 1974, codified in part at 29 U.S.C. ch. 18 

50 See Internal Revenue Code, 26 U.S.C. § 411. 51 Internal Revenue Code, 26 U.S.C. § 411(a)(2)(A). 52 Internal Revenue Code, 26 U.S.C. § 411(a)(2)(B). 53 Towers Watson, Retirement Plans Offered by 2013 Fortune 100, accessed on November 10, 2014, 

http://www.towerswatson.com/en-US/Insights/Newsletters/Americas/insider/2013/retirement-plans-offered-by2013-Fortune-100. 

54 Society of Human Resource Management, 2013 Employee Benefits, An Overview of Employee Benefits Offerings in the 

U.S., accessed October 23, 2014, 19, http://www.shrm.org/research/surveyfindings/articles/documents/13-0245 

2013_empbenefits_fnl.pdf. 
 SECTION 3 

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Figure 4. Fortune 100 Retirement Plans 

Depending on the structure and rules of the DC plan, employees could receive higher 

investment rewards, may have preretirement access to accumulated retirement funds, 

often receive benefits in lump-sum distributions, could have increased options for 

inheritance by heirs other than a surviving spouse, and benefit from portability.55

Portability is a central feature of DC plans, and though it is available in certain DB 

plans, it is not a feature of the current Uniformed Services’ DB plan.56 The ability to 

move one’s retirement savings throughout a career makes these plans attractive in 

today’s workplace environment with its high rates of job change.57 Studies show that 

younger generations prioritize retirement and health saving through workplace 

benefits58 and that the number of first-time DC plan enrollees in the general economy 

is quickly growing as young workers enter the labor force.59 Approximately 40,000 of 

these younger workers enrolled in their employer’s 401(k) plan for the first time during 

the first half of 2014—a 55 percent increase from the same 6-month period in 2013.60

These trends have important implications for the attractiveness of the Uniformed 

Services retirement system, which is not portable and has a very long vesting period. 

Defined Contribution Plan Features 

Certain features make some DC plans especially attractive to beneficiaries. Of 

particular importance to shaping employees’ perspective on and interest in 

participating in DC retirement plans are automatic contributions made by the 

employer without any participation by the employee, employer matches of 

 

55 David Rajnes, Employee Benefit Research Institute, An Evolving Pension System: Trends in Defined Benefit and 

Defined Contribution Plans, EBRI Issue Report No. 249, September 2002, 44-45, accessed December 10, 2014, 

http://www.ebri.org/pdf/briefspdf/0902ib.pdf. 

56 Ibid, 45. 

57 Ibid, 24. EBRI cites DOL data indicating that the average U.S. worker holds about nine jobs by the age of 32. 

58 “Bank of America Merrill Lynch Report Finds Millennials Prioritizing Retirement and Health Savings Through 

Workplace Benefits,” Bank of America, accessed December 11, 2014, http://newsroom.bankofamerica.com/pressreleases/global-wealth-and-investment-management/bank-america-merrill-lynch-report-finds-mille. 59 “Why Millennials Are Flocking to 401(k)s in Record Numbers,” Money, accessed October 24, 2014, 

http://time.com/money/3532253/401ks-millennials-saving-increase/. 

60 Ibid. 
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contributions made by an employee, employee-friendly vesting policies, and automatic 

enrollment into plans. 

Automatic Contribution: Companies with top-rated DC retirement plans, including 

about a third of the 250 largest U.S. corporations, provide additional contributions to 

employees’ accounts, even when employees choose not to participate.61 Federal civilian 

employees receive automatic contributions equal to 1 percent of their pay into their 

TSP accounts, even if they do not contribute any of their own income.62 Although such 

automatic employer contribution programs are attractive benefits for employees, 

Service members do not currently benefit from automatic or standard contributions.63 

Matching Funds: “The vast majority of employer-sponsored savings plans include an 

employer match.”64 These payments match employee contributions based on a portion 

of each dollar employees invest.65 In a survey of 476 companies, with 71 percent of the 

respondents representing large companies (1,000 or more employees), 94 percent 

reported providing matching contributions in cash versus company stock or a 

combination of cash and company stock.66 Cash matching is the most prevalent form 

of employee 401(k) match offered by employers.67 Data show participation in a plan is 

higher when employers provide a matching contribution and the effect is similar 

across income groups.68 The data show when employers offer matching contributions, 

many employees will contribute at least enough to maximize the match.69 In a joint 

survey conducted by WorldatWork and the American Benefits Institute, 66 percent of 

respondents indicated at least half their retirement plan’s participants are 

contributing enough to receive the full employer match.70 The survey showed 

77 percent of the responding organizations’ employees contribute more than 5 percent 

of their salary per paycheck.71 The Commission received numerous comments 

expressing the sentiment that “TSP should have employer contributions”72 for Service 

members and that the “Military should match a percent of TSP contributions, just as 

DoD civilian contributions are matched.”73

Vesting: The amount of time-in-service required before employees are entitled to retain 

employer contributions to their retirement accounts—known as “vesting”—can affect 

participant behaviors as well. Industry-wide and organization-specific issues can affect 

 

61 “The Best 401(k)s: Retire at 60 From Conoco With $3.8 million; Facebook Last,” Margaret Collins and Carol 

Hymowitz, Bloomberg, accessed December 11, 2014, http://www.bloomberg.com/news/2014-07-22/conocophillipsbest-among-401-k-plans-with-facebook-last.html. 

62 Government Organization and Employees, 5 U.S.C. § 8432(c). 

63 Government Organization and Employees, 5 U.S.C. § 8440e(e). 

64 Brigitte Madrian, National Bureau of Economic Research, Matching Contributions and Savings Outcomes: A 

Behavioral Economics Perspective, 3, accessed December 10, 2014, http://www.nber.org/papers/w18220. 65 Jamie Cowen, Employee Benefits Research Institute, Twenty-Five Years After Federal Pension Reform, 13, accessed 

December 11, 2014, http://www.ebri.org/pdf/briefspdf/EBRI_IB_07-2011_No359_FERS86.pdf. 

66 WorldatWork, Trends in 401(k) Plans and Retirement Rewards, 3, accessed October 22, 2014, 

http://www.worldatwork.org/waw/adimLink?id=71489. 

67 Ibid. 

68 William F. Bassett, Michael J. Flemming and Anthony P. Rodrigues, How Workers Use 401K Plans: The Participation, 

Contribution and Withdrawal Decisions, National Tax Journal, 51 no. 2 (1998), 276, accessed January 7, 2015, 

http://www.ntanet.org/NTJ/51/2/ntj-v51n02p263-89-how-workers-use-401.pdf. 

69 Joanne Summer, Society of Human Resource Management, Finding the Right 401(k) Match, accessed October 22, 

2014, http://www.shrm.org/hrdisciplines/benefits/articles/pages/401k-match-factors.aspx. 70 WorldatWork, Trends in 401(k) Plans and Retirement Rewards, 2, accessed October 22, 2014, 

http://www.worldatwork.org/waw/adimLink?id=71489. 

71 Ibid. 

72 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

73 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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the decisions employers make when it comes to 401(k) plan vesting and eligibility. For 

example, employers in industries with low wages, and therefore low tenure and high 

employee turnover, such as the restaurant and hospitality industries, might delay 

employer contributions. If employees in these industries were immediately eligible for 

plan participation and fully vested upon employment, the plan costs would increase 

without generating a commensurate benefit to the company, such as employee 

longevity.74 For Federal Employee Retirement System employees, there is generally a 

3-year vesting period (2 years for most employees in Congressional and certain 

noncareer positions) before they can keep the agency automatic (1 percent) 

contributions and associated earnings.75 

Auto-enrollment: Studies have shown that “by far the most effective method to 

increase participation in defined contribution saving schemes is automatic 

enrollment.”76 Many studies have found complexity is a deterrent to participation in 

savings plans. Automatic enrollment decouples the savings plan participation decision 

from the contribution rate and asset allocation decision, which are viewed as difficult 

and lead to procrastination.77 With automatic enrollment plans, a person is enrolled at 

a default rate of contribution, and for many, their contributions are invested in a 

default asset allocation. The effect of automatic enrollment is greatest for groups with 

the lowest saving rates, generally younger, lower-income workers.78 Because very few 

people opt out of savings plan participation when they are automatically enrolled, 

automatic enrollment promotes long-term savings for retirement.79 In particular, only 

2 to 3 percent of automatically enrolled employees opt out of savings plan 

participation in a 12-month period.80 The WorldatWork and American Benefits 

Institute joint survey showed 56 percent of respondents reported their company offers 

automatic enrollment in their 401(k) retirement plans.81 Federal agencies 

automatically enroll their newly hired or rehired civilian employees in TSP.82 According 

to recent data, 96.1 percent of federal employees who are automatically enrolled into 

TSP remained enrolled.83 Currently, Service members are exempt from automatic 

enrollment.84

Although defined contribution plans offer Service members greater flexibility and more 

choices, these benefits are accompanied by increased complexity. To take full 

advantage of a DC plan, Service members must be informed of the choices available 

and educated as to the consequences of making each of these choices. Providing such 

 

74 Joanne Summer, Society of Human Resource Management, Finding the Right 401(k) Match, accessed October 22, 

2014, http://www.shrm.org/hrdisciplines/benefits/articles/pages/401k-match-factors.aspx. 75 Government Organization and Employees, 5 U.S.C. § 8432(g). 

76 Brigitte Madrian, “Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective,” in Matching 

Contributions for Pensions: A Review of International Experience, eds. Richard Hinz, Robert Holzmann, David Tuesta, 

Noriyuki Takayama (Washington, DC, The World Bank, 2013), 298-309, accessed January 8, 2014, 

http://www.nber.org/papers/w18220.pdf (citing research of the effectiveness of automatic enrollment). 

77 Ibid. 

78 Ibid. 

79 Ibid. 

80 James J. Choi, David Laibson, Brigitte C. Madrian, Andrew Metrick, Defined Contribution Pensions: Plan Rules, 

Participant Choices, and the Path of Least Resistance, 11, accessed December 11, 2014, 

http://www.nber.org/papers/w8655. 

81 WorldatWork, Trends in 401(k) Plans and Retirement Rewards, March 2013, 4, accessed December 10, 2014 

http://www.worldatwork.org/waw/adimLink?id=71489. 

82 Government Organization and Employees, 5 U.S.C. § 8432(b)(2). 

83 TSP Official, email to MCRMC staff, October, 21, 2014. 

84 Government Organization and Employees, 5 U.S.C. § 8432(b)(2)(D)(ii). 
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information would require renewed emphasis on financial literacy.85 A small 

investment in financial education, however, could have a disproportionately large 

effect on employee participation in a DC plan and in the plan’s effectiveness. A 2008 

study indicated that a provision to newly hired employees of relatively simple planning 

tools designed to aid their understanding of a company’s DC plan increased 

enrollment by 12 to 21 percent.86 This increase is 2 or 3 times the effect of employer 

matching, and more cost effective.87 If Service members are provided the financial 

education necessary to make informed choices when utilizing a DC plan, they would 

be more likely to use the plan and more likely to make choices tailored to their 

individual situations—an important component of a modernized retirement model. 

Retention with Defined Contribution 

The effectiveness of Uniformed Services compensation can be measured by the 

achievement of recruiting and retention goals, which in turn ensures the All-Volunteer 

Force is staffed with sufficient personnel who have the appropriate skill sets.88 As 

described above, the current DB retirement plan has a strong effect on maintaining 

the current force profile, which the Services have stated they want to maintain. The 

Commission analyzed potential changes or improvements to the current Uniformed 

Services retirement system, and examined the retention effects of a blended retirement 

plan for the Services.89 The conclusion reached was that the current force profile could 

be maintained with a retirement plan comprised of a majority of the current DB plan, 

a new DC plan for all Service members, and additional continuation pay to provide 

midcareer retention incentives.90 These results are shown in Figure 5, which displays 

current Active and Reserve Component force profiles (black lines) compared to the 

projected force profiles (red lines) based on a blended retirement plan. The figures 

show that retention under the blended retirement system is virtually identical to that 

of the current DB-only retirement system. 

 

85 For a thorough discussion of financial literacy, see The Report of the Military Compensation and Retirement 

Modernization Commission: Final Report, Recommendation 3. 86 Annamaria Lusardi, Punam Keller, Adam Keller, New Ways to Make People Save: A Social Marketing Approach,” in 

Overcome the Saving Slump: How to Increase the Effectiveness of Financial Education and Savings Programs, 19-20, 

accessed December 11, 2014, http://www.nber.org/papers/w14715 

87 See Brigitte Madrian, National Bureau of Economic Research, Matching Contributions and Savings Outcomes: A 

Behavioral Economics Perspective, accessed December 10, 2014, http://www.nber.org/papers/w18220. 88 Karl Gingrich, Brookings, Making it Personnel: The Need for Military Compensation Reform, 4, accessed November 10, 

2014, 

http://www.brookings.edu/~/media/research/files/papers/2012/2/military%20compensation%20gingrich/02_milita

ry_compensation_gingrich.pdf 

89 RAND Corporation, Analysis of Retirement Reform in Support of the Military Compensation and Retirement 

Modernization Commission Progress Report, November 2014 (RAND performed this analysis pursuant to a contract with 

the Commission). 

90 Ibid. 
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Figure 5. Force Profiles: Current vs. Proposed Retirement Systems91

 

Each figure presents the current force profile (in black). They also present (in red) the 

force profiles that would result from a blended retirement system that maintains the 

20-year vesting of the Services’ DB plan with a multiplier of 2.0, a new DC plan for 

Service members, and continuation pay (i.e., midcareer payments to provide additional 

retention incentives). The chart on the left shows projections for the AC and the chart 

on the right shows projections for the RC. These models illustrate there would be no 

appreciable difference in overall force profile when comparing the current retirement 

plan to the blended retirement plan. 

Based on the features of this blended approach, the DRM projects continuation pay 

would be required at 12 YOS to maintain the current force profile. Table 2 shows this 

continuation pay, displayed as multiples of a Service member’s monthly basic pay. 

That is, retaining the Army’s current force profile would require paying Army activeduty enlisted personnel continuation pay equal to 2.8 times their monthly basic pay, 

assuming Service members are auto-enrolled to contribute 3 percent of their basic pay 

in TSP and that the Services match these contributions. To the extent that the 

Services need additional retention incentives, they would have the flexibility to 

increase continuation pay. For each Service, the analysis shows a blended retirement 

 

91 RAND projected these alternative force profiles with its Dynamic Retention Model (DRM), which is a mathematical 

model designed to analyze structural changes in the military compensation system. The DRM projects individual 

decision-making over each Service member’s life cycle assuming that members have various preferences for Active and 

Reserve Component service. The parameters of this model are empirically estimated with data about 25,000 real 

military careers, spanning 20-21 years, drawn from the Defense Manpower Data Center. The DRM relies upon military 

pay and compensation information that was drawn from military pay tables, as well as U.S. Census Bureau data to 

model civilian pay opportunities. The DRM can be used to analyze retention both in steady-state and year-by-year 

during transitions between compensation systems. More information on the DRM and its underlying methodology and 

assumptions is available in RAND’s report, Analysis of Retirement Reform in Support of the Military Compensation and 

Retirement Modernization Commission. Importantly, DoD also relied upon the DRM for retention analyses in its March 

2014 White Paper, Concepts for Modernizing Military Retirement. See Department of Defense, Concepts For 

Modernizing Military Retirement, http://rise.naus.org/documents/2014military-retirement-report.pdf. 
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plan could create a steady-state force level and experience mix equivalent to the 

current retirement plan.92

Table 2. AC and RC Continuation Pay Multipliers by Service 

Enlisted Officer

AC RC AC RC

Army 2.8 0.9 13.0 6.2

Marine Corps 4.2 1.1 11.7 5.8

Navy 4.8 1.2 15.2 6.7

Air Force 2.4 0.8 15.9 6.4

In addition to providing the Services the ability to maintain the current force profiles, 

continuation pay provides flexibility for Service personnel managers to adjust force 

profiles if future manpower requirements change. Continuation pay increases the 

share of Service members’ lifetime compensation that is paid as current, rather than 

deferred, compensation. Studies have repeatedly concluded the current retirement 

system is heavily weighted toward deferred payments, even though typical Service 

members are young and have a preference for current compensation, rather than 

deferred. For example, the President’s Commission on Military Compensation (1978) 

criticized the military retirement system as ineffective because it had little effect on 

recruiting and early retention, but an extremely strong effect on retention after 10 or 

12 YOS.93 The Defense Advisory Committee on Military Compensation (DACMC) 

(2006) also critiqued the compensation system, stating too much compensation is 

deferred. The DACMC concluded that moving some compensation forward to current 

pay would increase efficiency94 and substituting current retention pay for deferred 

retirement pay is preferred by Service members and is less costly to the Government.95

Retirement Value with Defined Contribution 

The blended retirement system has the potential to provide retirement assets that 

Service members would value equal to or greater than those of the current DB-only 

plan. The value of the blended plan can be measured in two ways. First, respondents 

to the Commission’s survey provided their preferences for various potential features of 

the retirement system. The survey methodology enabled the Commission to quantify 

the dollar value of those preferences to easily compare among retirement system 

alternatives (see Section 5 for further explanation of the survey methodology). For 

example, Figure 6 shows that survey respondents preferred to be auto-enrolled in TSP 

at 5 percent of their basic pay. Service members could also raise or lower their TSP 

contributions to adjust their auto-enrollment levels. 

 

92 RAND Corporation, Analysis of Retirement Reform in Support of the Military Compensation and Retirement 

Modernization Commission Progress Report, November 2014. 93 Office of the President of The United States, Report of the President’s Commission on Military Compensation, April 

1978, accessed December 19, 2014, http://babel.hathitrust.org/cgi/pt?id=umn.31951d00830253o;view=1up;seq=1 94 Defense Advisory Committee on Military Compensation, Completing the Transition to an All-Volunteer Force: Report of 

the Defense Advisory Committee on Military Compensation, 23. 95 Ibid. 
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Figure 6. Active-Duty Service Members’ Perceived Value: 

TSP Auto-Enrollment96

As shown in Figure 7, the Commission’s survey also showed that, compared to the 

current DB-only plan, 54 percent of active-duty respondents prefer a blended 

retirement system. The blended retirement system would have a lower DB multiplier, 

and the survey showed a corresponding decrease in perceived value. Yet survey 

respondents indicated increased value for automatic enrollment and Government 

matching of TSP contributions. More recent entrants into service expressed a stronger 

preference for the blended retirement system, with 60 percent of E1-E4 survey 

respondents preferring a blended retirement system. 

 

96 This figure displays the average amount in dollars at which survey respondents valued compensation alternatives. 

Presentation in dollar values allows the value of compensation features to be directly compared. 
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Figure 7. Percent of Active-Duty Service Members Who Prefer the 

Current or Proposed Retirement System97

The second way value can be measured is how much a stream of future annuity 

payments is worth to a Service member at the time of retirement. Research shows that 

the value a person attaches today to a stream of future payments is typically less than 

the cumulative amounts eventually paid out.98 A discount rate is applied to indicate 

the stream of future payments. This total value is commonly referred to as the 

payments’ “discounted net present value.”99 Figures 8 and 9 illustrate the value of 

retirement assets for an E7 and an O5 at their 20th year of service under various 

retirement plans. The first bar shows the net present value of DB payments under the 

current DB-only plan with a 2.5 percent retirement multiplier. The present value of 

those DB payments would be $201,282 for enlisted personnel and $711,948 for 

officers. 

Subsequent bars show the value of retirement assets with a blended retirement 

system with different levels of Service-member contributions into TSP. The light green 

portion of each bar represents the net present value of DB payments, assuming a 

2.0 percent retirement multiplier. The dark green portion represents the value of 

Government TSP on behalf of Service members, including associated investment 

earnings. The blue portion is the value of the continuation pay needed to maintain the 

force profile, including investment earnings until 20 YOS. The gray-shaded portions on 

the top represent the Service member’s TSP contribution, with associated investment 

earnings. 

The figures show that the blended retirement system, depending on investment 

behavior, could result in Service members having greater Government-sponsored 

retirement savings than the current DB-only retirement plan. For example, enlisted 

 

97 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 

98 See e.g., Aswatch Damodaran, Strategic Risk Taking: A Framework for Risk Management (New York: Pearson Prentice 

Hall, 2008), 111. 

99 “Discounted Cash Flow DCF, Net Present Value NPV, Time Value of Money Explained: Definitions, Meaning, and 

Calculated Examples,” Building The Business Case, accessed December 17, 2014, https://www.business-caseanalysis.com/discounted-cash-flow.html. 
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Service members who contribute 3 percent of their basic pay into TSP accounts would 

be expected to have Government-sponsored assets totaling $217,131 at 20 YOS. This 

balance exceeds the $201,282 value they would derive from DB-only payments. In 

addition to Government-sponsored assets, under the blended plan the members would 

have saved $31,518 of their own funds, enhancing their financial status. Retirement 

assets under the blended plan are even higher if Service members contribute 5 percent 

of their basic pay to their TSP accounts, and retirement assets are lower if Service 

members opt out of DC plan participation. 

Figure 8. Retirement Assets of a Retiring Active-Duty E7, 

Current vs. Blended Retirement Plans100

 

100 Assumes: (1) An active-duty E7 who retires at age 38 after 20 YOS and who had a standard promotion path; (2) A 

life expectancy of 85 years; (3) A personal discount rate of 12.7 percent (see RAND report, page XX); (4) An automatic 

Government contribution of 1 percent of basic pay into the Service member’s TSP account; (5) Matching Government 

contributions of 3 percent of basic pay into the Service member’s TSP account; (6) Continuation Pay of 3.37 months of 

basic pay at 12 YOS that is invested (average of AC Enlisted data in Table 2); (7) Service member contributions of 

3 percent of basic pay into the Service member’s TSP account; (8) The accumulated value of the TSP contributions is 

estimated using the historical earnings data from the TSP (2001 – 2014). Assuming an asset distribution similar to the 

life cycle L2050 plan, the average rate of return is 7.3 percent per year. After adjusting for inflation over those years 

(averaging approximately 2.35% per year), the real rate of return for the L2050 plan is 4.95 percent per year. Service 

members would receive CP to promote midcareer retention. This comparison of retirement assets assumes CP is saved 

and invested for retirement. 
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Figure 9. Retirement Assets of a Retiring Active-Duty O5, 

Current vs. Blended Retirement Plans101

As mentioned above, the Commission’s survey indicated that more recent entrants 

into service prefer a blended retirement system over the current DB-only plan. 

Because the majority of Service members do not reach 20 YOS and vest for DB 

payments, a blended retirement system would provide them with Governmentsponsored retirement savings that they would not otherwise obtain. Moreover, these 

new retirement savings could be substantial, even for those who leave before 20 YOS. 

Figure 10 presents the value of Government contributions into an E5’s TSP account at 

8 YOS (in light green). If the E5 contributes nothing into TSP, he or she would still 

have $2,619 of TSP savings at 8 YOS because of automatic Government contributions 

of 1 percent of basic pay. If the E5 contributes 5 percent of his or her basic pay into 

TSP, the Government would have contributed $12,748 of TSP savings by 8 YOS. 

Furthermore, these balances could grow substantially over time because of investment 

returns. As stated previously, funds invested in TSP generally increase in value 

because of compounding investment returns, with investments in corporate bonds and 

stocks having higher potential returns and investment risks.102 Assuming the E5 left 

service after 8 years, his or her TSP savings would grow by age 67 to $18,982 if he or 

 

101 Assumes: (1) An active-duty O5 who retires at age 42 after 20 YOS and who had a standard promotion path; (2) A 

life expectancy of 85 years; (3) A personal discount rate of 6.4% (see RAND Corporation, Analysis of Retirement Reform 

in Support of the Military Compensation and Retirement Modernization Commission Progress Report, November 2014); (4) 

An automatic Government contribution of 1 percent of basic pay into the Service member’s TSP account; (5) Matching 

Government contributions of 3 percent of basic pay into the Service member’s TSP account; (6) Continuation Pay of 14 

months of basic pay at 12 YOS that is invested (average of AC Officer data in Table 2); (7) Service member 

contributions of 3 percent of basic pay into the Service member’s TSP account; (8) The accumulated value of the TSP 

contributions is estimated using the historical earnings data from the TSP (2001 – 2014). Assuming an asset 

distribution similar to the life cycle L2050 plan, the average rate of return is 7.3 percent per year. After adjusting for 

inflation over those years (averaging approximately 2.35% per year), the real rate of return for the L2050 plan is 

4.95 percent per year. Service members would receive CP to promote midcareer retention. This comparison of 

retirement assets assumes CP is saved and invested for retirement. 

102 Thrift Savings Plan, Summary of the Thrift Savings Plan, 12, accessed December 12, 2014, 

http://www.tsp.gov/PDF/formspubs/tspbk08.pdf. 
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she did not contribute to TSP, or to $92,408 if 5 percent of basic pay was contributed 

(dark green bar).103 

Figure 10. Value of Government TSP Contributions for an E5 

Who Leaves After 8 Years of Service104

Conclusions: 

There is substantial Uniformed Services, political, and academic support for a blended 

retirement system. DoD’s March 2014 White Paper, “Concepts for Modernizing Military 

Retirement,” proposed a new DC plan and an adjustment to the DB multiplier to either 

2.0 or 1.75 percent.105 The 10th Quadrennial Review of Military Compensation 

proposed in 2008 a blended retirement system with both DB and DC elements.106 The 

Defense Business Board proposed in 2011 replacing the entire DB plan with a DC 

plan.107 The Defense Business Board’s all-DC proposal is not advisable because it 

would make it more difficult for the Services to maintain their desired force profiles, 

yet the Board’s proposal does provide additional support for the implementation of a 

limited DC plan for all Service members. 

The Uniformed Services retirement system should be modified to provide retirement 

benefits to many more service members and maintain the value of retirement benefits 

 

103 Withdrawals from TSP before age 591⁄2 may incur tax penalties. 104 Assumes: (1) An active-duty E5 who leaves service after 8 YOS and who had a standard promotion path; (2) An 

automatic Government contribution of 1 percent of basic pay into the Service member’s TSP account; (3) Matching 

Government contributions into the Service member’s TSP account; (4) Nominal annual investment returns equal to 

4.95 percent; and (5) Inflation and Cost-of-Living Adjustments equal to 2.0 percent. 

105 Department of Defense, Concepts For Modernizing Military Retirement, http:// 

www.mcrmc.gov/public/docs/report/pr/Concepts_for_Modernizing_Military_Retirement_SBP_FN_15_16_27.pdf. 106 Department of Defense, Report of the Tenth Quadrennial Review of Military Compensation, Volume II Deferred and 

Noncash Compensation, July 2008, xiii, http://www.defense.gov/news/qrmcreport.pdf. 107 Defense Business Board, Modernizing the Military Retirement System: Task Group, Brief, 4-6, accessed Dec. 11, 

2014, http://dbb.defense.gov/Portals/35/Documents/Reports/2011/FY11-

5_Modernizing_The_Military_Retirement_System_2011-7.pdf. 
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for Service members who reach 20 YOS. Such modifications should allow for the 

Services to maintain the requisite force profile.108 To accomplish this goal, the 

Uniformed Services should implement a blended retirement system that offers both 

DB and DC elements, plus continuation pay to maintain midcareer retention rates. 

This approach would allow the Uniformed Services to compete more effectively with 

the private sector for the high quality of personnel they have come to expect as part of 

the All-Volunteer Force. A blended retirement system would also provide additional 

options for Service members, as well as provide the Services the tools needed to 

maintain the balanced forces required to defend our Nation. 

The majority of the current DB plan should be maintained because of its strong 

retention-pull effect on the Services’ force profiles. Both Active and Reserve 

Component Service members should continue to vest for the DB plan after 

20 qualifying YOS. DB retirement annuities for both components should be computed 

as the retired pay base109 multiplied by 2.0 percent multiplied by YOS. All other 

statutes pertaining to the existing DB retirement plan should remain in effect, except 

that Service members whose retirement pay is otherwise grandfathered by existing law 

must be allowed to opt in to the new blended retirement system. 

Implementing a DC plan for all Service members is more equitable than the current 

DB-only plan. A DC plan would promote savings and financial knowledge throughout 

the Force, as well as ease Service members’ transition to civilian life by giving them 

experience with the type of retirement system they would likely have with privatesector employers after separation from service. Each Service member should be 

enrolled automatically in a TSP account, and an amount equal to 1 percent of each 

Service member’s basic pay should be deposited automatically by the Uniformed 

Services into these accounts as a standard contribution from the Services. Service 

members should be auto-enrolled upon entry into Service to contribute 3 percent of 

their basic pay into their TSP accounts. The Uniformed Services should match a 

Service member’s contribution up to 5 percent of basic pay. A period of 2 complete 

YOS should be required before a Service member can vest in the Uniformed Services’ 

matching contributions, due to the high attrition that occurs during the first 2 YOS 

(approximately 25 percent for enlisted personnel and 9 percent for officers).110 

To ensure they are able to maintain their desired force profiles, the Uniformed Services 

should budget additional funds for continuation pay. A new continuation pay should 

be authorized and paid at 12 YOS to all Service members who are willing and able to 

commit to remain in service for an additional 4 years, through 16 YOS. Continuation 

pay should be a lump-sum payment totaling 2.5 times Service members’ monthly 

basic pay. To ensure funding for continuation pay, it should be authorized separately 

from other special and incentive pays and be provided for in its own budget line item. 

The Services should use special and incentive pays currently authorized for additional 

midcareer retention bonuses as needed, thereby increasing Service flexibility to create 

specific force profiles by Service and community. 

 

108 By law, existing retirement pay is grandfathered for current retirees and Service members who joined the Uniformed 

Services prior to legislative enactment of this Recommendation, while also providing the option for these 

“grandfathered” retirees and Service members to opt in to this new blended retirement plan. See National Defense 

Authorization Act for Fiscal Year 2013, Pub. L. No. 112-239 § 674(b)(2) (2013) (as amended by National Defense 

Authorization Act for Fiscal Year 2014, Pub. L. No. 113-66, § 1095(b), 127 Stat. 672, 879 (2013)). 

109 The retired pay base should be calculated according to Chapter 7 of Title 10. 110 Defense Manpower Data Center Data Base, accessed December 18, 2013. 
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This combination of an adjusted DB plan, a new DC plan, and continuation pay, 

provides the Services with the critical ability to maintain their current force profiles. It 

also maintains the value of retirement assets for Service members who serve for at 

least 20 years. To provide additional options to Service members, individuals should 

be authorized to choose full or partial lump-sum payments of their working-age DB 

payments, so as to allow them flexibility to receive retirement benefits based on their 

individual life circumstances. Full monthly retirement annuity payments should 

resume for all Service members at the full retirement age for Social Security benefits 

(age 67 for those born after 1959) to ensure Service members have a stable, regular 

income during normal retirement years. This full annuity should include all cost of 

living adjustments prior to full retirement age, such that monthly annuity payments 

are the same as the Service member would have received without the lump-sum 

payment. 

While a blended retirement system would allow the Services to maintain their current 

force profiles, it may be desirable to alter force profiles in the future. Manpower 

requirements will vary with changes in the security environment, the economy, and 

labor markets. Service personnel managers therefore need a compensation system 

with which they can easily adjust pay and benefits to obtain the appropriate mix of 

skills and experience levels to maintain a balanced force. The Services would benefit 

from additional flexibility to address fundamental differences in the skill sets, training 

requirements, and career paths of various professions, subject to notification to and 

approval by the Congress. Additional flexibility in the compensation system would help 

the services compete for high-demand skill sets in the labor market. 

Recommendations: 

 The Uniformed Services should modernize the current retirement system by 

adding a DC element to the DB plan. The DC element should incorporate the 

following attributes: 

- The DC element should reside entirely in TSP. 

- The Uniformed Services should begin a monthly contribution of 1 percent of 

members’ basic pay to Service members’ respective TSP accounts upon their 

Service entry date. The contribution should continue until Service members 

reach 20 YOS and should not depend upon their participation in TSP. 

- The Uniformed Services should automatically enroll Service members in TSP 

upon entry into service at an amount equal to 3 percent of their basic pay. 

Service members should be allowed to raise or lower their TSP contribution 

amount or to terminate their participation at any time. Service members 

who terminate their participation will be reenrolled automatically the 

following January at the 3 percent of basic pay amount. Service members 

must earn basic pay in a given pay period to make TSP contributions and to 

receive Government contributions into their TSP accounts. 

- The Uniformed Services should begin matching each Service member’s 

contribution to TSP, up to a maximum of 5 percent of monthly basic pay, 

after the completion of each member’s second year of service. The matching 

contribution will continue until the Service member reaches 20 YOS and is 

dependent upon a Service member’s monthly participation in the TSP. 
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- Service members should be vested in their TSP after 2 complete YOS (the 

standard 1 percent contribution and matching contribution provided by the 

Uniformed Services will belong to the Service member upon that date). 

 The Uniformed Services should provide continuation pay for all Service 

members who reach 12 YOS and are willing and able to obligate for 4 additional 

years. 

- All AC Service members should receive basic continuation pay equal to 

2.5 times Service members’ monthly basic pay. 

- All RC Service members should receive basic continuation pay equal to 0.5 

times Service members’ monthly basic pay, as if he/she were an AC Service 

member. 

- Uniformed Services should budget additional funds for continuation pay, in 

addition to basic continuation pay, to provide midcareer retention incentives 

as needed. 

- Basic and additional continuation pay should be paid from an authority to 

be used only for the purpose of continuation pay. Continuation pay should 

be budgeted in a new budget line item. 

 The Uniformed Services should compute AC Service members’ retirement 

annuity using a 2 percent multiplier times YOS, times the retired pay base. For 

RC members, the same calculation should be used except YOS should be 

computed by dividing Reserve points by 360. Both AC and RC members should 

continue to be eligible for retirement after completing 20 YOS. 

 The Uniformed Services should provide AC Service members the choice to 

receive their retirement annuity in various forms: a monthly payment 

beginning at their retirement date; a lump sum amount at retirement, 

combined with a reduced monthly payment until eligibility for full social 

security payments, at which point the full monthly annuity would begin; or a 

(larger) lump sum payment with no monthly payment until eligibility for full 

social security payments, at which point the full monthly annuity would begin. 

 The Uniformed Services should provide RC Service members the choice to 

receive their retirement annuity in various forms: a lump sum amount at 

retirement, combined with a reduced monthly payment until eligibility for full 

social security payments, at which point the full monthly annuity would begin; 

or a (larger) lump sum payment with no monthly payment until eligibility for 

full social security payments, at which point the full monthly annuity would 

begin. RC members should receive lump-sum payments upon their retirement 

from the RC, which will generally be before their retirement annuity begins at 

age 60. 

 The Uniformed Services should allow any AC, RC, or retired member of the 

Uniformed Services who is grandfathered in the current retirement system the 

opportunity to opt in to the new retirement system. 
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 The 75 percent cap on disability retirement when a Service member uses his or 

her disability rating as the multiplier should be lifted. The multiplier for 

disability retirement when a Service member uses his or her YOS as the 

multiplier should be 2.0 times YOS. 

 The Secretary of Defense should be given the authority to modify the years of 

service requirements to qualify for retirement to either fewer or a greater than 

20 years of service. The purpose of these modifications is to facilitate 

management actions to shape the personnel profile or correct manpower 

shortfalls within an occupational specialty or other grouping of members, as 

defined by the Secretary. No modification should involuntarily impose 

retirement program changes on currently serving members. DoD should provide 

notice to the Congress regarding any proposed modification of the retirement 

system and be prohibited from implementing a retirement system modification 

unless a period of one year has elapsed following the day the Congress was 

provided notice of the proposed modification. 

Implementation: 

 5 U.S.C. § 8440e governs the TSP program for members of the Uniformed 

Services. 

- 5 U.S.C. § 8440e(e) should be repealed to allow for the Services to make 

contributions to TSP on behalf of the Service member. 37 U.S.C. § 211(d) 

should also be repealed. 

- 5 U.S.C. § 8440e should be further amended to require the Services to 

match Service member contributions dollar-for-dollar up to 5 percent of 

basic pay and to require additional contributions of 1 percent of basic pay 

beginning at the date of entry regardless of the Service member’s 

participation in TSP. This Code section should also be amended to require 

the Services to begin matching contributions at YOS 3. 

- 5 U.S.C. § 8440e should be amended to include the TSP Spousal Rights 

provisions as found in 5 U.S.C. § 8435. 

 5 U.S.C. § 8432 governs contributions into a participant’s TSP account 

- 5 U.S.C. § 8432 should be amended to vest Service members in the 

automatic 1 percent after 2 years of service. 

- 5 U.S.C. § 8432 should be amended to require automatic enrollment of 

Service members entering service after the effective date or for Service 

members opting into the new retirement system. This section should also 

require automatic re-enrollment of Service members each January. 

 A new section should be added in Chapter 5, Title 37 of the United States Code 

to require continuation pay to be paid at a rate of 2.5 months of basic pay at 

YOS 12 for Active Component Service members and 0.5 months of basic pay at 

YOS 12 for Reserve Component Service members. This new Code section should 

authorize the payment of continuation pay only if a Service member elects a 

4-year service obligation. This new Code section should reference the 

repayment provisions of 37 U.S.C. § 373. 
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 A new section should be added in Chapter 5, Title 37 of the United States Code 

to authorize the Services to pay discretionary continuation pay equal 

to13 months of basic pay at YOS 12. As with Basic Continuation Pay, this new 

Code section should authorize the payment of continuation pay only if a Service 

member elects a 4-year service obligation. This new Code section should 

reference the repayment provisions of 37 U.S.C. § 373. 

 10 U.S.C. § 1409 should be amended to reduce the multiplier from 2.5 percent 

to 2.0 percent for current Service members or retirees who opt in to the new 

system or enter duty on or after the date of enactment. The opt-in period should 

begin 180 days after enactment and remain open for 180 days. 

 10 U.S.C. § 12739 should be amended to reduce the multiplier from 2.5 percent 

to 2.0 percent for those Service members who opt in to the modernized 

retirement system or enter into duty on or after the date of enactment. The 

opt-in period should begin 180 days after enactment and remain open for 

180-days. 

 10 U.S.C. § 1401 should be amended to reduce the multiplier from 2.5 percent 

to 2.0 percent for those Service members who opt in to the new system or enter 

duty on or after the date of enactment. The 75 percent cap should be repealed. 

 33 U.S.C. § 3045 and 42 U.S.C. § 212 should be amended to conform the 

retirement authorities of NOAA and USPHS, respectively, to the modernized 

retirement system. 

 37 U.S.C. § 354 should be amended to sunset the authority to pay the Career 

Status Bonus at the date of enactment, to provide authority for those Service 

members currently receiving the bonus to continue receiving the bonus, and to 

allow for those Service members who are receiving the bonus and who opt in to 

the modernized retirement system to repay the bonus pursuant to 37 U.S.C. 

§ 373. 

 A new section should be added in Chapter 71, Title 10 of the United States 

Code, to authorize the Services to provide a lump sum payout of a Service 

member’s retirement pay that he or she would be entitled to between the date of 

retirement and the attainment of Social Security age. This new Code section 

should mandate the Secretary to promulgate regulations addressing the 

actuarial procedure of determining the amount of the lump sum payment and 

for collection of SBP premiums if a lump sum is elected. The new section should 

allow for a 50 percent lump sum/50 percent annuity option. The new section 

should also allow for the resumption of annuity payments when the retiree 

reaches Social Security Age. This new section should also exclude Chapter 61 

retirees (disability retirees) from eligibility for the lump sum payment. 

 A new section should be added in Chapter 71, Title 10 of the United States 

Code to authorize the Services to provide a lump sum payout of an RC Service 

member’s retirement pay that he or she would be entitled to between the age of 

60 and the attainment of Social Security age. This new section would require 

the payment of the lump sum as of the date of retirement of the Service 

member, which will generally be before the retirement annuity begins at age 60. 

This new Code section should mandate the Secretary to promulgate regulations 
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addressing the actuarial procedure of determining the amount of the lump sum 

payment and for collection of SBP premiums if a lump sum is elected. The new 

section should allow for a 50 percent lump sum/50 percent annuity option. The 

new section should also allow for the resumption of annuity payments when the 

retiree reaches Social Security age. This new section should also exclude 

Chapter 61 retirees (disability retirees) from eligibility for the lump sum 

payment. 

 38 U.S.C. § 5304 should be amended to require a Service member making an 

election to receive a lump sum to pay back the offset from his or her VA 

disability compensation. 

 10 U.S.C. § 1463 should be amended to authorize lump sum payments to be 

paid out of the Military Retirement Fund. 

 A new section should be added in Chapter 74, Title 10 of the United States 

Code to treat the Military Retirement Fund as a qualified trust under Internal 

Revenue Code § 401(a), so a Service member may roll the lump sum payment to 

either TSP or another qualified retirement plan. 

 A new section should be added in Chapter 71, Title 10 of the United States 

Code to authorize the Secretary of Defense to change the years of service 

required of a Service member to be eligible to retire for specific military 

occupations. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. 
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Recommendation 2: Provide more options for Service members 

to protect their pay for their survivors by offering new 

Survivor Benefit Plan coverage without Dependency and 

Indemnity Compensation offset. 

Background: 

The Survivor Benefit Plan (SBP) gives retiring Service members the option to provide a 

lifetime monthly annuity to qualified survivors.111 SBP provides survivors an annuity 

equal to 55 percent of the base retirement pay the Service member elects to cover.112

Service members can elect coverage on any base dollar amount of their retired pay, 

between $300 and their full retired pay.113 In return for this survivor annuity, the 

Service member’s retired pay is reduced by 6.5 percent of the base amount elected.114

The premium for plan participation is deducted from retired pay before taxes.115 Based 

on the number and age of participants, investment rates of return, and mortality rate 

assumptions, these Service member premiums cover approximately two-thirds of the 

full cost of SBP coverage. DoD subsidizes the remaining amount.116 In general, SBP 

payments to the covered survivor are taxable income.117 Once the member has reached 

age 70 and has participated in SBP for 360 months, the reductions in the retired pay 

to cover the retiree’s share cease.118 

Survivors of retirees may also be entitled to Dependency and Indemnity Compensation 

(DIC) payments from the Department of Veterans Affairs (VA),119 if the Service member 

died from: (1) a disease or injury incurred or aggravated in the line of duty while on 

active duty or active-duty training, (2) an injury incurred or aggravated in the line of 

duty while on inactive duty for training, or (3) a disability compensable under laws 

administered by VA.120 DIC payments are nontaxable.121

A survivor is generally restricted by law from receiving the full amounts of both SBP 

and DIC benefits.122 SBP benefits are offset by the amount of DIC received, with the 

total amount paid equal to the greater of the full SBP benefit or the DIC award.123 DoD 

proposed eliminating this offset and terminating the SBP subsidy in its March 2014 

white paper on retirement options.124 

 

111 See generally Armed Forces, 10 U.S.C. §§ 1447-1455. 112 Armed Forces, 10 U.S.C. § 1451(a)(1). 113 Armed Forces, 10 U.S.C. §§ 1447(6), 1448(a)(3). 114 Armed Forces, 10 U.S.C. § 1452(a)(1). Premiums for spouse and child, child only, and insurable interests are 

determined actuarially.

115 Internal Revenue Code, 26 U.S.C. § 122(a). 116 The SBP subsidy for FY 2013 was approximately 36 percent of the total cost per participant. Information provided 

by DoD Office of the Actuary, e-mail to MCRMC, October 7, 2014. 

117 Internal Revenue Code, 26 U.S.C. § 72(n) (provides that if the SBP premiums were excluded from income, then the 

payments received by the beneficiary are taxed; if not excluded, then SBP payments are not taxed until the beneficiary 

receives the same amount that was paid in premiums). 118 Armed Forces, 10 U.S.C. § 1452(j). 119 Veterans’ Benefits, 38 U.S.C. § 1310(a). 120 Veterans’ Benefits, 38 U.S.C. § 1310(a). 121 Veterans’ Benefits, 38 U.S.C. § 5301(a). 122 Armed Forces, 10 U.S.C. § 1450(c). The Veterans Benefits Act of 2003 eliminated the SBP–DIC offset for surviving 

spouses who remarry after attaining the age of 57 (see Veterans Benefits Act of 2003, Pub. L. No. 108-183, § 101, 117 

Stat. 2651, 2652-2653 (2003) (codified at 38 U.S.C. § 103(d)(2)(B)). 

123 Armed Forces, 10 U.S.C. § 1450(c). 124 Department of Defense, Concepts For Modernizing Military Retirement, 39, http:// 

www.mcrmc.gov/public/docs/report/pr/Concepts_for_Modernizing_Military_Retirement_SBP_FN_15_16_27.pdf. 
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For additional information on Survivor Benefit Plan and Dependency and Indemnity 

Compensation, please see the Report of the Military Compensation and Retirement 

Modernization Commission: Interim Report (Section 3.6) and (Section 3.6.1), 

respectively. 

Findings: 

The SBP program has steadily become more attractive as an affordable way to provide 

lifetime monetary benefits to retirees’ survivors. Eighty percent of Service members 

who retired in 2013 enrolled in SBP, compared to only 58 percent who retired in 

1993.125 This growth is even greater for enlisted personnel, 79 percent of whom 

enrolled upon retirement in 2013, compared to 52 percent in 1993.126 The average 

number of families receiving SBP payments in a year grew by 87.9 percent from 1993 

to 2013 (from 172,425 to 323,903).127 In that same time period, SBP payments to 

beneficiaries rose 216.7 percent (from $1.2 billion to $3.8 billion).128 The majority 

(80 percent) of retiring Service members elect SBP coverage on their full retired pay.129

This growth is largely due to DoD’s subsidy of SBP costs. If the program were not 

subsidized, Service member costs would total 11.25 percent of the base amount 

elected based on FY 2013 actuarial figures compared to 6.5 percent currently paid.130 

Service members broadly participate in SBP, yet the current DIC offset of SBP is 

unpopular. For example, the Military Officers Association of America reported, “It is 

apparent that the [SBP–DIC] offset is not only unfair but also unjustly affects so many 

surviving spouses.”131 Similarly, the American Veterans stated, “The offset of SBP 

against DIC is inequitable because it penalizes survivors of military retired veterans 

whose deaths are under circumstances warranting indemnification from government 

separate from the annuity funded by premiums paid by veterans from retired pay.”132

The Disabled American Veterans also concluded, “Any offset between longevity military 

retired pay and VA compensation is unjust because no duplication of benefits is 

involved.”133 In FY 2013, 323,903 survivors received SBP benefits. Of these, 59,302 

(20.7 percent) also received DIC payments, making them subject to the SBP-DIC 

offset.134 The effect of the offset is somewhat mitigated by the reimbursement of SBP 

premiums proportional to the DIC offset provided to survivors. 

 

125 Department of Defense, Office of the Actuary, Statistical Report of the Military Retirement System, Fiscal Year 2013, 

227, accessed December 11, 2014, http://actuary.defense.gov/Portals/15/Documents/statbook13.pdf.

126 Ibid. 127 Ibid, 228. 128 Ibid, 227. Report data and information provided by the Office of the Actuary stated that of the 2013 payments to 

survivors, totaling $3.82 billion, $1.24 billion (32 percent) were funded from SBP premiums and $1.2 

(32 percent) billion (37 percent) from interest earned on past premiums, leaving the remaining $1.38 billion 

(36 percent) subsidized by DoD through appropriated funding.

129 DoD, Office of the Actuary, e-mail to MCRMC, September 19, 2014. E-mail correspondence also stated that another 

8 percent of Service members selected coverage on 50-100 percent of retired pay, with the remaining 12 percent 

choosing to cover less than 50 percent of retired pay. 

130 DoD, Office of the Actuary, e-mail to MCRMC, October 8, 2014. 131 “AMAC Storming the Hill Event 2013,” Military Officers Association of America, accessed November 6, 2014, 

http://www.moaa.org/amacstorming/. 132 American Veterans, Resolution 12-13: Survivor Benefit Plan, accessed October 6, 2014, 

http://www.amvets.org/pdfs/legislative_pdfs/2012/12-13-survivor-benefit-plan.pdf. 133 “DAV Releases Mid-Winter Talking Points,” Disabled American Veterans, accessed October 6, 2014, 

http://www.dav.org/learn-more/news/2012/dav-releases-mid-winter-talking-points/. 134 DoD, Office of the Actuary, e-mail to MCRMC, October 7, 2014. 
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Below are examples of Service member comments received by the Commission on 

SBP–DIC offset: 

SBP and DIC are two separate programs and should not be offset. Retirees 

can get concurrent receipt [if eligible].135

[SBP]—hopefully without [DIC] offset—is going to take care of my wife who 

held things together through my deployments.136

The SBP–DIC offset takes thousands of dollars out of those families’ 

pockets that really need it. I am asking that the SBP–DIC offset be 

eliminated. I know this has been an ongoing issue, but it is time to do the 

right thing.137

The DoD proposal to eliminate SBP–DIC offset would raise the cost of the SBP for all 

Service members, while reducing their choices. The DoD proposal would provide 

Service members a choice to elect base coverage of either 25 percent or 50 percent of 

their retired pay. These options would cost Service members 5 percent and 10 percent 

of their retired pay, respectively.138 These options eliminate the current subsidy and 

would make SBP coverage more expensive for all Service members, including those 

who never receive DIC. Furthermore, offering only two options reduces Service 

members’ flexibility to tailor SBP coverage to their individual financial situations. 

Conclusions: 

Survivor benefits could be improved by granting Service members the option of new 

SBP coverage that is not offset by DIC. Service members should continue to have the 

option to choose the current, subsidized SBP coverage. Alternatively, they should have 

an option of fully funded SBP coverage that would not be subject to offset by DIC. The 

amount paid by Service members should vary according to DoD actuarial calculations 

of cost, based on number and age of participants, investment rates of return, and 

mortality rate assumptions. Based on current figures, this new coverage would require 

an 11.25 percent reduction of the Service members’ retired pay base amount 

selected.139 Survivors of Service members who elect this new SBP coverage could 

derive a greater overall benefit by receiving full SBP and DIC payments. 

Recommendations: 

 The existing SBP program should be maintained for Service members who want 

to elect subsidized coverage that would remain subject to the SBP–DIC offset. 

 A new SBP program should be implemented for which Service members would 

fully fund SBP costs, but would no longer be subject to offset by DIC payments. 

With unsubsidized coverage, Service members’ retired pay should be reduced by 

the full cost of the benefit as determined annually by DoD Office of the Actuary. 

As an example, based on FY 2013 data, the amount would be 11.25 percent of 

the base amount elected. The base amount should not exceed 100 percent of 

 

135 MCRMC letter writer, comment form submitted via MCRMC web site, April 4, 2014. 136 MCRMC letter writer, comment form submitted via MCRMC web site, November 15, 2013. 137 MCRMC letter writer, comment form submitted via MCRMC web site, November 4, 2013. 138 Department of Defense, Concepts For Modernizing Military Retirement, 14, 

www.mcrmc.gov/public/docs/report/pr/Concepts_for_Modernizing_Military_Retirement_SBP_FN_15_16_27.pdf. 139 DoD, Office of the Actuary, e-mail to MCRMC, October 8, 2014. 
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the member’s retired pay consistent with existing statute. Survivors of the 

Service members who select unsubsidized coverage would receive full SBP and 

DIC payments without offset. Although this option has a greater out-of-pocket 

cost to the Service member, it provides a greater overall benefit. 

 The Services should provide retiring Service members and their spouses with an 

individualized, detailed analysis of the costs and benefits of the alternative SBP 

options, including potential costs and income from the current and new SBP 

programs. 

 Those currently participating in SBP should be provided a one-time opportunity 

during the SBP open period to opt in to the new program. 

Implementation: 

 SBP is governed by 10 U.S.C. Chapter 73, Subchapter II. 10 U.S.C. § 1452 

should be amended to allow for Service members to elect the new SBP option. 

Service members who make the election will pay an annually determined 

premium and not be subject to the DIC offset found in 10 U.S.C. § 1450(c). This 

section should be further amended to require the Secretary of Defense to 

promulgate regulations allowing a Service member to elect Spouse and Child 

Coverage or Child Only Coverage without being subject to the DIC offset found 

in 10 U.S.C. § 1450(c). 

 10 U.S.C. § 1452 should be amended to require the Services to provide retiring 

Service members and their spouses with an individualized, detailed analysis of 

the costs and benefits of the alternative SBP options, including potential costs 

and income from the current and new SBP programs. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. 
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Recommendation 3: Promote Service members’ financial 

literacy by implementing a more robust financial and health 

benefit training program. 

Background: 

DoD has established a policy for Service family readiness that sets guidelines for 

personal financial management (PFM) training.140 According to this policy, Service 

members and their families are provided with “tools and information they need to 

develop individual strategies to achieve financial goals and address financial 

challenges.”141 The intent of this policy is to incorporate personal and family financial 

objectives into the “organizational goals related to the recruitment, retention, 

morale, and operational readiness of the military force.”142 Marine Corps policy 

states, “instilling financial responsibility and educating Marines and their families 

about financial matters helps them control their current finances, save for the future, 

and reduces distractions from mission focus.”143 Similarly, Navy “operational 

commanders have identified financial decision making and resultant financial 

problems as having a serious negative impact on the stability of servicemembers and 

families, as well as a debilitating effect on operational readiness, morale, and 

retention.”144

The Services implement PFM training for their members according to their internal 

policies.145 The Army, for example, provides mandatory training to junior enlisted 

personnel prior to their initial permanent change of station move and for personnel 

who “abused and misused check-cashing privileges.”146 The Navy provides a series of 

training courses for enlisted personnel, as well as both personal and leadership 

training for its officers.147 The Air Force provides training for all personnel upon arrival 

at their first duty stations and prior to deployments to facilitate preparation for 

extended absences.148 Each Service provides financial counseling for Service members 

and their families.149 Topics covered by the financial counseling component of PFM 

training include budgeting, banking, saving, credit and debt management, investing, 

taxes, insurance, estate planning, and predatory lending practices.150 

 

140 Military Family Readiness, DoDI 1342.22 (2012). 141 Ibid, 15. 142 Ibid, 2. 143 Personal Financial Management Education Provided by Non-Federal Entities, MARADMIN 061/13 (2013). 144 United States Navy Personal Financial Management Education, Training, and Counseling Program, 

OPNAVINST 1740.5B CH-2, 1-2 (2010). 

145 Army Community Service, Army Regulation 608-1 (2013). Personal Financial Management Education Provided by 

Non-Federal Entities, MARADMIN 061/13 (2013). United States Navy Personal Financial Management Education, 

Training, and Counseling Program, OPNAVINST 1740.5B CH-2 (2010). Airman and Family Readiness Centers, Air 

Force Instruction 36-3009 (2014). 

146 Army Community Service, Army Regulation 608-1, 23 (2013). 147 United States Navy Personal Financial Management Education, Training, and Counseling Program, 

OPNAVINST 1740.5B CH-2, Enclosure 5 (2010). 

148 Airman and Family Readiness Centers, Air Force Instruction 36-3009, 16 (2014). 149 Army Community Service, Army Regulation 608-1 (2013). Personal Financial Management Education Provided by 

Non-Federal Entities, MARADMIN 061/13 (2013). United States Navy Personal Financial Management Education, 

Training, and Counseling Program, OPNAVINST 1740.5B CH-2 (2010). Airman and Family Readiness Centers, Air 

Force Instruction 36-3009, 16 (2014). 

150 Military Family Readiness, DoDI 1342.22, 16 (2012). 
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For additional information on financial literacy in the Military Services, please see the

Report of the Military Compensation and Retirement Modernization Commission: 

Interim Report (Section 3.9). 

Findings: 

Existing financial literacy programs do not adequately educate Service members and 

their families on financial matters. According to the 2013 Blue Star Families Annual 

Lifestyle Survey, only 12 percent of Service member respondents indicated they were 

receiving financial education from Service member training.151 Furthermore, 

90 percent indicated they would like to receive more preventive financial education, 

and 82 percent indicated their spouse should be included in financial readiness 

courses.152 

Academic research showed a correlation between Service member financial readiness 

training and improved financial readiness among Service members.153 A 2012 study by 

the Financial Industry Regulatory Authority (FINRA) concluded that Service 

respondents, though performing well in many areas, often engage in expensive credit 

card and nonbanking practices.154 Specifically, Service personnel regularly make 

minimum payments, pay late fees, or pay over-the-limit charges on credit cards. They 

also commonly borrow from nonbank financial institutions (e.g., pawn shops). Service 

member comments, such as the following, also indicate a desire for additional 

training. 

I wish there was more mandatory education on retirement savings, in 

either the TSP or IRAs. Most enlisted personnel, including higher ranks do 

not understand how they work or the benefits associated with them.155

The key to successful retirement is educating people financially and in the 

art of living well but inexpensively.156

This shortfall in financial literacy training has been a long-standing issue. “In May 

2003, DoD formally launched a financial readiness campaign to address Service 

members’ poor financial habits and increase financial management awareness, 

savings, and protection against predatory practices.”157 DoD’s balanced scorecard, 

developed in FY 2003, included indicators of personal finances for which evaluation 

was based on junior enlisted personnel’s self-reported financial condition and ability to 

make timely payments of bills.158 DoD has formed partnerships with nonprofit 

organizations and Government agencies to provide Service members with financial 

 

151 Blue Star Families, 2013 Military Family Lifestyle Survey, Comprehensive Report, 34, accessed Dec. 10, 2014, 

http://www.mcrmc.gov/public/docs/report/pr/BlueStarFamilies_2013MilitaryFamilyLifestyleSurvey_Comprehensive_

Report_May2013_p34_FinLit_FN_12-13-24.pdf. 

152 Ibid. 153 William Skimmyhorn, Office of Economic and Manpower Analysis, Department of Social Sciences, United States 

Military Academy, Assessing Financial Education: Evidence from a Personal Financial Management Course, accessed 

December 11, 2014, http://www.globalfinlitsummit.com/wp-content/uploads/2013/11/Assessing-FinancialEducation-Skimmyhorn.pdf. 

154 FINRA Investor Education Foundation, Financial Capability in the United States: 2012 Report of Military Findings, 

14, http://www.usfinancialcapability.org/downloads/NFCS_2012_Report_Military_Findings.pdf. 155 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 156 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 157 Government Accountability Office, Military Bankruptcies, GAO 04-465R, 2, accessed December 11, 

http://www.gpo.gov/fdsys/pkg/GAOREPORTS-GAO-04-465R/content-detail.html. 158 Ibid, 7. 
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assistance programs.”159 These partners encourage general financial fitness and wellbeing.”160

Weaknesses in financial literacy are adversely affecting Service members and their 

families. A bad credit report, a debt-collection action, or other financial problem can 

be devastating for a Service member’s career and can affect the mission readiness of a 

unit, which often cannot use a Service member who has lost a security clearance due 

to financial problems.161 In FY 2013, financial issues were the fourth highest-ranking 

reason for losing security clearances, costing 1,129 military Service members their 

security clearance.162 

Costs associated with increasing financial literacy training would be offset, at least 

partially, by associated savings. DoD estimated it would save between $13 million and 

$137 million annually by providing Service members and their families more 

protection against high-cost debt, consequently reducing the number of troops 

involuntarily separated because of financial problems.163 According to these estimates, 

between 4,703 and 7,957 military personnel would otherwise be involuntarily 

separated because of financial distress. The cost of separating one Service member 

can be as much as $57,333.164 Loss of experienced mid-grade noncommissioned 

officers (NCOs) may be even costlier because such losses directly degrade mission 

effectiveness.165 Financial concerns detract from mission focus and often require 

attention from Commanding Officers and senior NCOs to resolve outstanding debts 

and other credit issues.166

Conclusions: 

Service members’ financial literacy should be improved for the benefit of Service 

members, their families, force readiness, and DoD cost-effectiveness. Implementing a 

comprehensive PFM training program would help educate Service members and 

provide them with enhanced tools to better protect their finances. Current training 

programs could be better tailored to the behaviors of today’s Service members. 

Financial education should be provided to Service members to develop a culture of 

personal financial responsibility. Training should contain real-world, practical lessons 

packaged to engage the youngest cohort of Service members. Technology-based 

instruction should be enhanced with in-person coaching as necessary.167 A more 

 

159 Government Accountability Office, Servicemembers Civil Relief Act: Information on Mortgage Protections and Related 

Education Efforts, GAO-14-221, 16, http://www.gao.gov/assets/670/660398.pdf. 160 Ibid, 17. 161 Government Accountability Office, Personnel Security Clearances: Additional Guidance and Oversight Needed at 

DHS and DOD to Ensure Consistent Application of Revocation Process, GAO-14-640, 18, accessed December 11, 2014, 

http://www.gao.gov/products/GAO-14-640. 

162 Ibid. 163 79 Fed. Reg. 58601 (September 29, 2014), See also “Shielding troops from high interest rates may help DoD,” 

Military Times, accessed October 8, 2014, 

http://www.militarytimes.com/article/20141008/NEWS/310080053/Shielding-troops-from-high-interest-rates-mayhelp-DoD. 

164 79 Fed. Reg. 58601 (September 29, 2014), accessed December 11, 2014, 

http://www.gao.gov/assets/320/315051.pdf, estimating each separation costs the Department $52,800 in 2009 

dollars). The cost of $57,333 is calculated in 2013 dollars (through December 2013), using the U.S. Department of 

Labor, Bureau of Labor Statistics, Consumer Price Index, All Urban Consumers (CPI–U). 165 Department of Defense, Report: Enhancement of Protections on Consumer Credit for Members of the Armed Forces and 

Their Dependents, 5, accessed December 11, 2014, http://www.consumerfed.org/pdfs/140429_DoD_report.pdf. 166 Ibid. 167 Consumer Financial Protection Bureau, Office of Service Member Affairs Financial Fitness Forum, Building Bridges 

between the Financial Services Industry and the Department of Defense, accessed December 11, 2014 

http://files.consumerfinance.gov/f/201209_cfpb_Financial-Fitness-Whitepaper.pdf. 
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robust PFM education program could save DoD millions of dollars per year by 

reducing the number of troops involuntarily separated due to financial problems. PFM 

training would become even more important with adoption of the Commission’s 

recommendations on items such as the Thrift Savings Plan (TSP), continuation pay, 

and retirement options (see Recommendation 1). 

Educating Service members on health care benefits would also prepare them for the 

increased choice and personal control that Recommendation 6 in this Report would 

provide Service members. Many members enter the Service shortly after high school or 

college and therefore have not likely purchased or selected through an employer 

various health benefits. Accordingly, Service members should receive mandatory 

health benefits seminars when they register one or more dependents, and when they 

are nearing retirement from the Service. After completing the course, Service members 

should better understand how health insurance works, how plan types are structured 

and the differences among them, how to complete enrollment forms, and how to 

manage the Basic Allowance for Health Care (see Recommendation 6). Such a course 

would also guide Service members as they proceed through their Service careers and 

ultimately reenter the civilian sector. 

Recommendations: 

 DoD should increase the frequency and strengthen the content of financial 

literacy training. At a minimum, training and counseling should be provided 

during initial training, upon arrival at the first duty station (upon arrival at 

each duty station for E4/O3 and below), at the vesting point for the TSP 

program, on dates of promotion (up to pay grades E5 and O4), for major life 

events (e.g., marriage, divorce, birth of first child, disabling sickness or 

condition), during leadership and pre- and postdeployment training, at 

transition points (e.g., AC to RC, separation, and retirement), and upon request 

of the individual. 

 DoD should enhance the content of financial literacy training. One-time 

training should be offered to educate the entire force on implications of this 

Commission’s recommendations. Also, training on health care insurance 

options and other recommendations from this Commission should be added to 

existing curriculum. 

 DoD should hire professional training firms to provide financial literacy 

training. DoD should consider if these professional trainers should be certified 

financial advisors. Outsourcing training requirements may require additional 

funding, but would ensure this critical topic is not assigned as a secondary 

responsibility. Improving financial literacy would also reduce long-term 

personnel costs, which could defray additional training costs. 

 Messaging from the Secretary of Defense; Deputy Secretary of Defense; 

Chairman, Joints Chiefs of Staff; and Service Chiefs should reinforce the 

importance of financial literacy from both readiness and quality of life 

perspectives, and emphasize the popularity of similar programs in other 

countries. The Deputy Secretary of Defense should also be assigned 

responsibility for ensuring financial literacy training in his or her role as DoD’s 

Chief Management Officer. For example, the Australian Defence Force created a 

similar literacy program in 2006, and 95 percent of participants indicated the 
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sessions they attended met their needs.168 Support and messaging from senior 

leaders was instrumental in the success of the Australian financial literacy 

program. 

 DoD should require Defense Manpower Data Center (DMDC) to survey the force 

on the status of financial literacy and preparedness and use the results as a 

benchmark from which to evaluate and update the training and education as 

needed. Results of the initial survey and follow-on surveys should be provided 

to the Congress. 

 DoD should strengthen partnerships with other federal and nonprofit 

organizations (e.g., President’s Advisory Council on Financial Capability for 

Young Americans, the Financial Literacy Education Council, and individual 

Service emergency relief organizations). 

 DoD should provide an online budget planner with archival history capability 

for each Service member. As changes in pay occur (e.g., promotion, arrival at 

duty station with different BAH rate, dependent status), the budget planner 

should update automatically and prompt the Service member to complete it. 

 The Leave and Earnings Statement (LES) should be restructured to reflect 

changes to compensation made as a result of this Commissions’ 

recommendations, to include TSP balances (current value and projected value 

at 20-year point), and also to provide a more accurate accounting by displaying 

the value of benefits paid by the Government for the Service member (similar to 

a Federal civilian employee’s LES). 

Implementation: 

 10 U.S.C. § 992 provides the statutory authority for consumer education 

programs throughout DoD and should be amended to reflect the program 

changes described in the recommendation. This section should be amended to 

provide for changes to the frequency of financial literacy training. The language 

should, at a minimum, indicate that training will be provided: 

- during initial training; 

- upon arrival at the first duty station; 

- upon arrival at each subsequent duty station for each Service member 

ranked E4/O3 and below; 

- on date of promotion (up to pay grades E5 and O4); 

- at the vesting point for the TSP program; 

- major life events (e.g., marriage, divorce, birth of first child, and disabling 

sickness or condition); 

- during leadership training; 

 

168 Air Commodore Robert Brown, briefing with MCRMC, February 19, 2014. 
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- during pre- and postdeployment training; 

- at transition points (e.g., Active Component to Reserve Component, 

separation, and retirement); and 

- upon the request of the individual. 

This section should also mandate the Secretary to implement regulations 

addressing other triggering events when financial literacy training will be 

mandatory. 

 10 U.S.C. § 992 should be further amended to expand the definition of 

“financial services.” This new definition should include health insurance 

options, budget management, TSP matching, retirement lump-sum options 

(including rollover options and tax consequences), SBP options, and any other 

topics the Secretary determines are needed to educate Service members. 

 10 U.S.C. § 992 should be further amended to require DMDC to regularly 

survey the force on the status of financial literacy and preparedness in its 

“Status of Force” survey. Legislation should mandate that the Services use the 

results from this survey as a benchmark to evaluate financial training and to 

update financial training as necessary. The legislation should mandate that 

DoD report the results of the initial survey and any follow-on surveys to the 

Congress. 

 Additional legislation should require current Service members to receive 

education on the implications of the Commission’s recommendations within 

6 months of enactment. 

 A Sense of Congress provision should be enacted to encourage DoD to 

strengthen partnerships with other federal agencies and nonprofit organizations 

to improve the financial literacy and preparedness of members of the Armed 

Forces, as well as to encourage the Chairman of the Joints Chiefs of Staff and 

the Service Chiefs to provide support for the new financial literacy training 

program. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. Such as: 

- Volume 8, Chapter 9 of the DoD Financial Management Regulation (FMR) 

provides the elements required on a Service member’s LES. Chapter 9 

should be amended to reflect the Service member’s Basic Allowance for 

Health Care, TSP balance, and a more accurate accounting of benefits paid 

by the Government for the Service member. 

- Chapter 9 of the DoD FMR should be further amended to require DoD to 

provide an online budget planner for Service members that is updated 

regularly at promotion points and changes in dependency status. 
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Recommendation 4: Increase efficiency within the Reserve 

Component by consolidating 30 Reserve Component duty 

statuses into 6 broader statuses. 

Background: 

Although Active Component members have a single duty status—active duty—Reserve 

Component (RC) members serve under a variety of duty statuses. “Duty status reflects 

a reservist’s availability to perform a specific mission, function, or job, and is linked to 

appropriated funds and legal authorities.”169 Titles 10, 32, and 14 of the U.S. Code 

provide the authorities for the statuses, as well as various DoD policies (see Table 3). 

The status under which an RC member serves differs depending on a variety of 

factors: whether the status is active duty, full-time National Guard duty, or inactive 

duty; whether the duty is voluntary or involuntary; and whether the RC member’s 

mission is training, support, or operations.170 Statuses may differ based on the type of 

appropriation that funds the status, (i.e., Military Personnel, Reserve Personnel, or 

National Guard Personnel appropriation).171 Statutory limitations for overall RC end 

strength and the number of RC members who may be used for a specific purpose may 

require a change in status during an RC member’s period of duty.172 In the current 

system, each time the purpose or the source of appropriation for an RC member’s 

orders changes, existing orders must be cancelled and new orders must be issued.173

Table 3 displays the three RC authorities and various statuses that may be used to 

call an RC member to duty.174

Table 3. Current Reserve Component 

Statutory Authorities and Duty Statuses 

Title 10 United States Code

Full mobilization Disciplinary action   Aid for state governments

Partial mobilization Annual active duty (up to 30 days)   Enforce federal authority

Presidential reserve call‐up Additional training and operational support   National Guard called to federal service

Major disaster/emergency response Medical evaluation and treatment   Additional training periods

Preplanned combatant command Medical care (duty < 30 days)   Additional flight training periods

Captive status Retiree recall   Readiness management periods

Unsatisfactory participation (45 days) Muster duty   Funeral honors duty

Unsatisfactory participation (24

months)

Duty at the National Guard Bureau   

Title 32 United States Code—National Guard

Required training and other duty Additional training periods   Readiness management periods

Additional training and other duty Additional flight training periods   Funeral honors duty

Title 14 United States Code—U.S. Coast Guard

Emergency augmentation    

 

 

169 Michelle Dolfini-Reed and Darlene E. Stafford, Identifying Duty Status Reforms Needed to Support an Operational 

Reserve, CRM D0021656.A2, (Alexandria, VA: CNA, 2010), 1. 170 Department of Defense, Office of the Undersecretary of Defense for Personnel and Readiness, The Report of the 

Eleventh Quadrennial Review of Military Compensation, 133, accessed December 15, 2014, 

http://militarypay.defense.gov/reports/qrmc/11th_QRMC_Supporting_Research_Papers_(932pp)_Linked.pdf. 171 Ibid. 172 Ibid. 173 Michelle Dolfini-Reed and Darlene E. Stafford, Identifying Duty Status Reforms Needed to Support an Operational 

Reserve, CRM D0021656.A2, (Alexandria, VA: CNA, 2010), 24-25. 174 Department of Defense, Office of the Undersecretary of Defense for Personnel and Readiness, The Report of the 

Eleventh Quadrennial Review of Military Compensation, 134, accessed December 15, 2014, 

http://militarypay.defense.gov/reports/qrmc/11th_QRMC_Supporting_Research_Papers_(932pp)_Linked.pdf. 
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Findings: 

The numerous criteria for determining RC statuses can make it difficult for operational 

commanders to call RC members to duty.175 Indeed, the current RC status system “is 

complex, aligns poorly to current training and mission support requirements, fosters 

inconsistencies in compensation and complicates rather than supports effective 

budgeting.”176 Additionally, the RC status system causes members to experience 

disruptions in pay and benefits as they transition among different duty statuses.177

For example, they may have gaps in health care coverage when there are gaps in 

orders. These disruptions discourage volunteerism and impede an ideal continuum of 

service.178 Military Services sometimes use “the RC duty statuses in ways that are 

inconsistent with their intended purposes.”179

The challenges of this complex RC status system have been exacerbated by how the 

RC has been employed during the past 13 years of war. The current duty status 

system was developed to support a “strategic Reserve,” in which RC members mainly 

participated in inactive duty and annual training.180 “Operational missions were 

limited.”181 Since 2001, however, RC members have served more frequently on active 

duty and have had to transition numerous times between active and inactive-duty 

statuses.182 Duty statuses have not evolved to keep pace with how RC members are 

being employed. Instead, they have expanded in piecemeal fashion as the use of the 

RC has changed and grown.183 As a result, both Service members and the Services are 

adversely affected by the complexity of the status system and the consequential issues 

that arise. 

Simplifying RC statuses has broad support. In general, the Reserve Component is 

supportive of a more streamlined, consolidated RC duty status system.184 The 

Commission on the National Guard and Reserves (2008),185 the Eleventh Quadrennial 

Review of Military Compensation (2011),186 the Reserve Forces Policy Board (2013),187

the National Commission on the Structure of the Air Force (2014),188 and the House 

 

175 Commission on the National Guard and Reserves, Transforming the National Guard and Reserves into a 21st-Century 

Operational Force, 2008, 160. 176 Office of the Assistant Secretary of Defense for Reserve Affairs, Review of Reserve Component Contributions to 

National Defense, December 2002, 77. 177 Michelle Dolfini-Reed and Darlene E. Stafford, Identifying Duty Status Reforms Needed to Support an Operational 

Reserve, CRM D0021656.A2, (Alexandria, VA: CNA, 2010), 15. 178 Michelle Dolfini-Reed and Darlene E. Stafford, Identifying Duty Status Reforms Needed to Support an Operational 

Reserve, CRM D0021656.A2, (Alexandria, VA: CNA, 2010), 15, 25. Commission on the National Guard and Reserves, 

Transforming the National Guard and Reserves into a 21st-Century Operational Force, 2008, 160. 179 Michelle Dolfini-Reed and Darlene E. Stafford, Identifying Duty Status Reforms Needed to Support an Operational 

Reserve, CRM D0021656.A2, (Alexandria, VA: CNA, 2010), 25. 

180 Ibid, 24-25. 181 Ibid, 25. 182 Ibid, 24-25. 183 Department of Defense, Office of the Undersecretary of Defense for Personnel and Readiness, The Report of the 

Eleventh Quadrennial Review of Military Compensation, 133, accessed December 15, 2014, 

http://militarypay.defense.gov/reports/qrmc/11th_QRMC_Supporting_Research_Papers_(932pp)_Linked.pdf. 184 MCRMC staff meetings with officials from the Navy Reserve (July 8, 2014), the Marine Corps Reserve (June 23, 

2014), the Army Reserve (September 18, 2014) and Air Force Reserve (September 18, 2014). 

185 Commission on the National Guard and Reserves, Transforming the National Guard and Reserves into a 21st-Century 

Operational Force, 2008, 156. 186 Department of Defense, Office of the Undersecretary of Defense for Personnel and Readiness, The Report of the 

Eleventh Quadrennial Review of Military Compensation, 146, accessed December 15, 2014, 

http://militarypay.defense.gov/reports/qrmc/11th_QRMC_Supporting_Research_Papers_(932pp)_Linked.pdf. 187 Department of Defense, Office of the Secretary of Defense Reserve Forces Policy Board, Report of the Reserve Forces 

Policy Board on Reserve Component Duty Status Reform: Info Memo, 2013, 1. 188 National Commission on the Structure of the Air Force, Report to the President and Congress of the United States, 

2014, 50. 
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Report on the FY 2015 National Defense Authorization Bill (House Report 113-443)189

all recommended the number of RC duty statuses be reduced. 

Conclusions: 

The Services and Service members would benefit from a streamlined, consolidated 

Reserve Component status system. Streamlining the RC statuses reduces challenges 

associated with the current system. Without such changes, RC members may be 

discouraged from volunteering for active duty and commanders would continue to 

have problems calling RC personnel to duty when they are needed to support 

operational missions, impeding the effectiveness of those missions. Simplifying RC 

statuses supports both operational and training missions, better enables the purpose 

of RC duties to be tracked to justify budget requests, and facilitates a seamless 

process for RC members. 

Recommendations: 

 The Congress should replace the 30 current Reserve Component duty statuses 

with six broader statuses (see Table 4). This new RC status structure should 

principally focus on Active Duty, Inactive Duty, and full-time National Guard 

Duty as the three primary statuses. 

 The Congress should stipulate that, in this new system, orders should be 

issued only when an authority changes. When a duty status, purpose, or 

funding source changes, orders need only be amended, accordingly. This 

change would allow uninterrupted RC service. 

Table 4. Streamlined Reserve Component Duty Statuses 

Title 10, United States Code – Armed Forces

New Status Current Statuses to be Consolidated into New Statues

Active Duty

Full mobilization   Disciplinary action

Partial mobilization   Annual active duty (up to 30 days)

Presidential reserve call‐up

Additional training and operational

support

Major disaster/emergency response   Duty at the National Guard Bureau

Preplanned combatant command mission call‐up   Medical evaluation and treatment

Captive status   Medical care (duty < 30 days)

Unsatisfactory participation (45 days)   Retiree recall

Unsatisfactory participation (24 months)   

Inactive

Reserve Service

Muster duty Readiness management periods

Additional training periods Funeral honors duty

Additional flight training periods   

Federal Service

(Presidential call‐up)

Aid for state governments National Guard called to federal service

Enforce federal authority   

    

Title 32, United States Code – National Guard

Full‐Time

National Guard  

Required training and other duty   

Additional training and other duty   

Inactive

National Guard  

Additional training periods   Readiness management periods

Additional flight training periods   Funeral honors duty

Title 14, United States Code – Coast Guard

Active Duty Emergency augmentation   

 

189 National Defense Authorization Act for Fiscal Year 2015 (House Report 113-446), Report of the Committee on Armed 

Services House of Representatives on H.R. 4435, 142-143, 2014. 
 SECTION 3 

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Implementation: 

 Chapter 1209, Title 10 of the United States Code should be amended by adding 

three new sections for the Reserve Component of the Armed Forces to 

consolidate current statuses into Active Duty, Inactive Reserve Service 

(i.e., Inactive Duty Training), or Federal Service (Presidential Call-Up). 

 32 U.S.C. § 502 should be amended to consolidate current statuses into either 

Full-Time National Guard Duty or Inactive National Guard Service. 

 14 U.S.C. § 712 should be amended to reflect the consolidation of statuses. 

 The Active Duty authority statutes in Titles 10, 14, and 32 of the United States 

Code should be amended to contain language that stipulates changes to duty 

statuses, purpose, or funding require amendments to existing orders, rather 

than issuance of new orders. This revised language should also stipulate no 

break in service should be recorded if orders are changed and the break in 

service was 24 hours or fewer. 

 The following statutes that currently authorize calling up Reserve Component 

members should be amended or repealed to reflect the duty status 

consolidation:190

Table 5. Current Reserve Component Duty Statuses to be 

Amended/Repealed 

Legal Authority Purpose of Duty Applies To Type of Duty

Training

10 U.S.C. 10147

10 U.S.C. 12301(b)

10 U.S.C. 12301(d)

32 U.S.C. 502(a)

32 U.S.C. 502(f)(1)(A)

32 U.S.C. 502(f)(1)(B)

Annual Training/Drill Requirement

Annual Training

Additional/Other Training Duty

Annual Training/Drill Requirement  

Additional Training Duty Additional/Other

Training Duty

Reserve Only

Reserve & National Guard  

Reserve & National Guard

National Guard Only  

National Guard Only  

National Guard Only

AD/IDT  

AD

AD  

FTNGD/ID

T FTNGD  

FTNGD

Involuntary

Involuntary

Voluntary

Involuntary

Involuntary

Voluntary

Support

10 U.S.C. 12301(d)

10 U.S.C. 12304b

32 U.S.C. 502(f)(1)(B)

32 U.S.C. 502(f)(1)(A)

AGR Duty/Operational Support/Additional

Duty

Preplanned/Preprogrammed CCDR Support

AGR Duty/Operational Support/Additional

Duty

Other Duty

Reserve & National Guard

Reserve & National Guard

National Guard Only

National Guard Only

AD  

AD

FTNGD

FTNGD

Voluntary

Involuntary

Voluntary

Involuntary

Mobilization

10 U.S.C. 12301(a)

10 U.S.C. 12302

10 U.S.C. 12304

10 U.S.C. 12304a

14 U.S.C. 712

Full Mobilization

Partial Mobilization  

Presidential Reserve Call‐up

Emergencies and Natural Disasters

Emergencies and Natural Disasters

Reserve & National Guard

Reserve & National Guard

Reserve & National Guard

Reserve Only

USCGR Only

AD  

AD  

AD  

AD  

AD

Involuntary

Involuntary

Involuntary

Involuntary

Involuntary

 

190 Uniform Reserve training, and retirement categories for the Reserve Components, DoD Instruction 1215.06, 

Appendix to Enclosure 4, 22, 2014. 
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Legal Authority Purpose of Duty Applies To Type of Duty

Other

10 U.S.C. 12503

32 U.S.C. 115

10 U.S.C. 12319

10 U.S.C. 12301(h)

10 U.S.C. 12322

10 U.S.C. 688

10 U.S.C. 802(d)

10 U.S.C. 10148

10 U.S.C. 12301(g)

10 U.S.C. 12303

10 U.S.C. 12402

10 U.S.C. 331

10 U.S.C. 332

10 U.S.C. 12406

Funeral Honors

Funeral Honors

Muster Duty

Medical Care

Medical Evaluation and Treatment

Retiree Recall

Disciplinary

Unsatisfactory Participation (up to 45 days )  

Captive Status

Unsatisfactory Participation (up to 24

months )  

Duty at National Guard Bureau

Insurrection

Insurrection  

Insurrection

Reserve & National Guard

National Guard Only

Reserve & National Guard

Reserve & National Guard

Reserve & National Guard  

Reserve & National Guard

Reserve & National Guard

Reserve & National Guard

Reserve & National Guard

Reserve & National Guard

National Guard Only

National Guard Only

National Guard Only

National Guard Only

ID

ID

ID

AD  

AD  

AD

AD  

AD  

AD  

AD  

AD

FS

FS  

FS

Voluntary

Voluntary

Involuntary

Voluntary

Voluntary  

Involuntary

Involuntary

Involuntary

Involuntary

Involuntary

Voluntary

Involuntary

Involuntary

Involuntary

AD ‐ Active Duty   •   CCDR ‐ Combatant Command   •   ID ‐ Inactive Duty   •   IDT ‐ Inactive Duty Training      

FTNGD ‐ Full Time National Guard Duty   •   FS ‐ Federal Service   •   PRC – Presidential Reserve Call‐up

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. 
 SECTION 3 

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HEALTH BENEFITS

Recommendation 5: Ensure Service members receive the best 

possible combat casualty care by creating a joint readiness 

command, new standards for essential medical capabilities, 

and innovative tools to attract readiness-related medical 

cases to military hospitals. 

Background: 

Joint military readiness is a critical function of modern military warfare, and the 

failure to be ready is a threat to deployed forces and to our national security. As 

evidenced by the draw-down of military forces following Operation DESERT STORM, 

which includes the end of the Cold War, and leading into the period before 

September 11, 2001, military readiness suffers during peacetime. In the years since 

September 11, 2001, DoD has learned hard lessons in combat and in joint operations. 

Losing or forgetting these hard-won lessons, as the Nation contends with fiscal 

challenges and declining budgets, is a substantial and ill-afforded risk. With the 

drawdown of combat forces in Southwest Asia, and the deployment of smaller 

specialized forces to deal with terror threats, biological outbreaks, and humanitarian 

support missions, losing any joint capability will degrade the effectiveness of future 

military operations. 

An essential component of joint military readiness is the capability of the force to 

provide health and combat-casualty care for Service members in operational 

environments. Joint capabilities include the evacuation of casualties, both ground and 

air, and the support logistics necessary to maintain a forward medical presence, as 

well as the clinical requirements of combat casualty care. The Military Health System 

(MHS) is responsible for maintaining a healthy military force that is ready for 

deployments, as well as a cadre of health care providers who are trained to provide 

quality medical care both during contingency operations and for returning wounded 

Service members.191 The ability of the MHS to provide operational health care is 

measured by the readiness of its medical personnel and related capabilities. 

To train medical personnel, the MHS relies heavily on Military Treatment Facilities 

(MTFs) located on or near major military installations as training platforms to 

maintain the clinical skills of military medical personnel. There are 56 military 

hospitals and medical centers and 360 outpatient facilities worldwide.192 Medical 

personnel assigned to MTFs deliver health care to active-duty Service members, as 

well as to active-duty family members, retirees, and other eligible beneficiaries, on a 

 

191 See generally Armed Forces, 10 U.S.C. ch. 55. See also Assistant Secretary of Defense for Health Affairs, 

DoDD 5136.01, 9-10 (2013). “Defense Health Agency,” Military Health System and Defense Health Agency, accessed 

November 29, 2014, http://health.mil/About-MHS/Organizational-Overview/Defense-Health-Agency. “Global 

Preparedness and Response,” Military Health System and Defense Health Agency, accessed November 29, 2014, 

http://health.mil/Military-Health-Topics/HealthReadiness/Global-and-Domestic-Health-Preparedness-and-Response. 192 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, accessed December 15, 2014, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. 
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space-available basis.193 In locations where local agreements exist, MTFs also provide 

care to patients of the Department of Veterans Affairs (VA) or civilians. For example, 

the San Antonio Military Medical Center is a regional Level-I194 trauma center that 

provides medical care to “military members and other statutorily defined 

beneficiaries,”195 as well as “non-DoD eligible Life and Limb Threatening emergencies 

under [certain] criteria.”196

Military medical personnel may also receive proficiency training in certain civilian 

institutions. For example, the Army Trauma Training Center partners with Jackson 

Memorial Hospital Ryder Trauma Center in Miami, Florida, to “ensure clinical 

readiness for lifesaving Army and Army Reserve forward surgical teams”197 through a 

17-day training rotation.198 The Navy Trauma Training Center partners with Los 

Angeles County, California, and University of Southern California to provide didactic 

and clinical trauma exposure.199 Air Force Centers for Sustainment of Trauma and 

Readiness Skills (C-STARS) provide advanced sustainment training at specific civilian 

Level-I trauma centers200 currently located in Baltimore, Maryland;201 Cincinnati, 

Ohio;202 and St. Louis, Missouri.203 The Air Force also maintains the Sustainment of 

Trauma and Resuscitation Skills Program, in which Air Force medical personnel 

assigned to certain MTFs are regularly immersed in on-going clinical rotations at local 

civilian Level-I trauma centers.204 Military medical personnel also work to maintain 

 

193 See, e.g., Armed Forces, 10 U.S.C. §§ 1074, 1074h, 1077. See generally Armed Forces, 10 U.S.C. ch. 55. Additional 

information and discussion on beneficiary eligibility requirements can be found at http://www.tricare.mil 

(https://www.tricare.mil/Plans/Eligibility.aspx), the official website of the Defense Health Agency (DHA) a component 

of the Military Health System. 

194 Trauma centers receive a designation from state and local authorities, between 1 and 5, based on their capabilities 

Ratings may be verified by the American College of Surgeons. Level-1 trauma centers are those with the most 

capabilities. See “Trauma Center Levels Explained,” American Trauma Society, accessed January 10, 2015, 

http://www.amtrauma.org/?page=TraumaLevels. 

195 Memorandum of Understanding Between Bexar County Hospital District, San Antonio Military Medical Center, 

Trauma Services Cooperative Agreement, signed 2014. 

196 Memorandum of Understanding Between Bexar County Hospital District, San Antonio Military Medical Center, 

Trauma Services Cooperative Agreement, signed 2014. See also Secretary of the Army Memo to Assistant Secretary of 

the Army (Manpower and Reserve Affairs), Delegation of Authority - Secretarial Designee Program, paragraph 6.c. and 

sub paragraphs, April 18, 2013. Memorandum of Understanding Between Bexar County Hospital District, San Antonio 

Military Medical Center, Trauma Services Cooperative Agreement, signed 2014, para 3.01 (c ). See generally Health 

Care Eligibility Under the Secretarial Designee Program and Related Special Authorities, DoDI 6025.23 (2011). 197 “The U.S. Army Trauma Training Center – Training Soldiers to Heal Troops and Save Lives in Battle,” PR Newswire, 

accessed November 29, 2014, http://www.prnewswire.com/news-releases/the-us-army-trauma-training-center---

training-soldiers-to-heal-troops-and-save-lives-in-battle-74798712.html. Army doctrine defines a forward surgical team 

as “a 20-Soldier team which provides far forward surgical intervention to render nontransportable patients sufficiently 

stable to allow for medical evacuation to a Role 3 combat support hospital.” See Casualty Care, Army Training 

Publication 4-02.5, 3-23 (2013). 

198 The Academy of Health Sciences, U.S. Army Medical Department Center and School Course Catalog 2014, 49, 

accessed December 15, 2014, http://www.cs.amedd.army.mil/filedownload.aspx?docid=940c7c87-febd-43fd-981e77a3115f8202. 

199 “Navy Trauma Training Center (NTTC),” Navy Medicine Operational Training Center – Pensacola, accessed 

November 29, 2014, http://www.med.navy.mil/sites/nmotc/nemti/nttc/Pages/default.aspx. 

200 Medical Readiness Program Management, AFI 41-106 (22 April 2014), para 5.4.8. 201 “C-STARS (Center for the Sustainment of Trauma and Readiness Skills),” University of Maryland School of Medicine, 

Program in Trauma, accessed November 29, 2014, http://medschool.umaryland.edu/trauma/CSTARS.asp. 202 “C-STARS,” University of Cincinnati Health, accessed November 29, 2014, http://uchealth.com/education/cstars/. 

203 “USAF Trauma Training Programs at SLU Hospital,” Saint Louis University Hospital, accessed on November 29, 

2014, http://www.sluhospital.com/en-US/ourServices/medicalServices/Pages/USAFTraumaTrainingPrograms.aspx. 204 Medical Readiness Program Management, AFI 41-106, para 5.3.2. (2014). For example, partnership between Nellis 

AFB and University Medical Center, Nevada (MCRMC site visit, 3 Oct 2014); more information, see 

Lt. Gen. (Dr.) Charles B. Green, “The Air Force Medical Service: What is Next?” U.S. Medicine, This Year in Federal 

Medicine – Outlook 2011, accessed November 29, 2014, http://www.usmedicine.com/this-year-in-federal-medicine---

outlook-2011/the-air-force-medical-service-what-is-next/. 
 SECTION 3 

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critical skills through DoD and VA joint ventures and other resource-sharing 

agreements.205

Findings: 

Joint Medical Operations and Oversight 

Service members have benefitted substantially from the joint nature of operations and 

the improvements from the rapid institutionalization of lessons learned during the 

recent wars. For example, the military medical force was highly successful at treating 

combat casualties during the recent wars. Case fatality rates in theater hospitals were 

approximately 10 percent in Operation ENDURING FREEDOM (OEF) and Operation 

IRAQI FREEDOM (OIF), down from 30 percent during WWII and 24 percent during the 

Vietnam and the 1991 Persian Gulf conflicts.206 It is critical to sustain, and whenever 

possible, improve upon, these joint capabilities. Each Military Service, however, 

develops its medical resources to support its own Service-specific mission.207 Although 

the MHS is an interrelated system that coordinates medical services, capabilities, and 

specialties among the Service components, it is not a joint command charged with 

integrating these capabilities and maintaining proficiency. 

For example, several changes in medical logistics saved lives during OEF and OIF. 

Approximately 10,000 Service members wounded in action were medically evacuated 

out of theater.208 En route care and Air Force Critical Care Air Transport Teams 

revolutionized combat care for critically ill Service members.209 This global medical 

capability is considered one of the most important contributions to survival in OEF 

and OIF.210 Forward deployment of blood products to mitigate hemorrhage in the 

prehospital environment, deployment of forward resuscitative surgical-system teams 

in close proximity to the point of engagement, and split-based operations of forward 

surgical teams also contributed to survival.211 Although there has been substantial 

advances in combat medical care, there remains no central oversight of the medical 

evacuation mission, the training requirements necessary to maintain the newly 

developed capabilities during peacetime, or the research and development necessary to 

expand forward surgical capabilities. 

 

205 See generally: Veterans Benefits, 38 U.S.C. § 8111. DoD and Department of Veterans Affairs Health Care Resource 

Sharing Program, DoDI 6010.23 (2013). VA-DOD Direct Sharing Agreements, VHA Handbook 1660.04.Memorandum of 

Understanding Between the Department of Veterans Affairs and the Department of Defense – Health Care Resources 

Sharing Guidelines, accessed January 10, 2015, 

http://www.va.gov/vhapublications/ViewPublication.asp?pub_ID=1776. For further discussion of DoD and VA 

resource sharing, see Recommendation 8 in this report. 206 Nicholas R. Langan, Matthew Eckerts, and Matthew J. Martin, “Changes in Patterns of In-Hospital Deaths Following 

Implementation of Damage Control Resuscitation Practices in US Forward Military Treatment Facilities,” JAMA 

Surgery, 149, no. 9 (September 2014): E5, http://archsurg.jamanetwork.com/article.aspx?articleid=1888411. 207 See, e.g., Army Health System, FM-4-02 (August 2013), ch. 1, Army Health System Overview. 208 Congressional Research Service, American War and Military Operations Casualties: Lists and Statistics, 

February 26, 2010, 13 &16, accessed December 23, 2014, https://www.fas.org/sgp/crs/natsec/RL32492.pdf. 209 U.S. Air Force, Wilford Hall Ambulatory Surgical Center, Lackland AFB, Texas, Critical Care Air Transport Team Fact 

Sheet, accessed December 15, 2014, http://www.whasc.af.mil/shared/media/document/AFD-120810-038.pdf. 210 Jay A. Johannigman, “Maintaining the Continuum of En Route Care,” Critical Care Medicine, 2008, 36 

(Suppl. 7):S377-S382. 

211 See, e.g., John B. Holcomb et al., “U.S. Army Two-Surgeon Teams Operating in Remote Afghanistan—An Evaluation 

of Split-Based Forward Surgical Team Operations,” The Journal of Trauma, 66, 5 Suppl, (2008): S37-47. Lorne H. 

Blackbourne et al., “U.S. Army Split Forward Surgical Team Management of Mass Casualty Events in Afghanistan: 

Surgeon Performed Triage Results in Excellent Outcomes,” American Journal of Disaster Medicine, 4, no. 6, (2009): 321-

329. 
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The military also adopted several improvements in joint medical training that 

improved battlefield survivability during OEF and OIF. The Combat Life Saver (CLS) 

program, which extended medical training to all Service members, including members 

of the Reserve Component, was instrumental in providing immediate medical care to 

wounded Service members.212 CLS was developed as part of the Tactical Combat 

Casualty Care (TCCC) course,213 which was funded by the U.S. Special Operations 

Command.214 CLS and TCCC provide a comprehensive set of battlefield trauma care 

strategies customized for use in combat.215 

CLS and TCCC have been noted in multiple published reports for successfully saving 

lives on the battlefield during the last decade of war.216 Availability of TCCC skills is 

considered a dominant factor in reducing preventable deaths and in achieving a 

casualty case fatality rate of 10 percent.217 Similarly, tourniquet use on the battlefield 

has become widespread,218 saving an estimated 1,000–2,000 lives because they were 

used rapidly and effectively for life threatening extremity hemorrhage.219 Yet, none of 

the military Services had tourniquet policies or programs in place before the beginning 

of hostilities in Afghanistan in 2001.220 Without continuous and focused joint 

integration, the medical capabilities now resident with the total force may degrade or 

atrophy and ongoing improvements in joint capabilities may be limited. 

Joint battlefield data management provides another example of a capability developed 

during the wars that may atrophy during peacetime. Based on a casualty card 

collection program developed by the 75th Ranger Regiment,221 a prehospital Joint 

Theater Trauma Registry also reduced mortality rates. The registry, now known as 

Department of Defense Trauma Registry (DoDTR), was implemented in 2005 to 

evaluate tactical combat casualty care treatment strategies, as well as modifications to 

 

212 Defense Health Board, Tactical Combat Casualty Course and minimizing Preventable fatalities in Combat 

Memorandum, August 6, 2009, accessed January 10, 2015, 

http://www.health.mil/~/media/MHS/Report%20Files/200905.ashx. Defense Medical Readiness Training Institute, 

TCCC Skills Sets by Provider Level,

http://www.dmrti.army.mil/TCCC%20Skill%20Sets%20by%20Provider%20Level%20120917.pdf. 

213 Defense Medical Readiness Training Institute, TCCC Skills Sets by Provider Level, 

http://www.dmrti.army.mil/TCCC%20Skill%20Sets%20by%20Provider%20Level%20120917.pdf. 

214 Frank K. Butler, John Hagmann, and George Butler, “Tactical Combat Casualty Care in Special Operations,” 

Military Medicine, 161, suppl. 3 (1996), 1-15, 

http://www.dmrti.army.mil/TCCC%20Skill%20Sets%20by%20Provider%20Level%20120917.pdf. 

215 Frank K. Butler, John Hagmann, and George Butler, “Tactical Combat Casualty Care in Special Operations,” 

Military Medicine, 161, suppl. 3 (1996), 1-15, 

http://www.dmrti.army.mil/TCCC%20Skill%20Sets%20by%20Provider%20Level%20120917.pdf. Defense Medical 

Readiness Training Institute, TCCC Skills Sets by Provider Level, 

http://www.dmrti.army.mil/TCCC%20Skill%20Sets%20by%20Provider%20Level%20120917.pdf. 

216 See Lorne H. Blackbourne et al., “Military Medical Revolution: Prehospital Combat Casualty Care,” Journal of 

Trauma Acute Care Surgery, 73, no. 6, suppl. 5 (2012), (discussing multiple sources that address battlefield casualties 

during OEF and OIF), 

http://journals.lww.com/jtrauma/Fulltext/2012/12005/Military_medical_revolution___Prehospital_combat.2.aspx#. 217 “Tactical Combat Casualty Course and Minimizing Preventable Fatalities in Combat,” Defense Health Board 

Memorandum, August 6, 2009, accessed November 29, 2014, 

http://www.health.mil/~/media/MHS/Report%20Files/200905.ashx. 

218 Lorne H. Blackbourne et al., “Military Medical Revolution: Prehospital Combat Casualty Care,” Journal of Trauma 

Acute Care Surgery, 73, no. 6, suppl. 5 (2012), S373, 

http://journals.lww.com/jtrauma/Fulltext/2012/12005/Military_medical_revolution___Prehospital_combat.2.aspx#. 219 Lorne H. Blackbourne et al., “Military Medical Revolution: Prehospital Combat Casualty Care,” Journal of Trauma 

Acute Care Surgery, 73, no. 6, suppl. 5 (2012), 

http://journals.lww.com/jtrauma/Fulltext/2012/12005/Military_medical_revolution___Prehospital_combat.2.aspx#. 220 Ibid, S372. 221 Russ S. Kotwal, Harold R. Montgomery, and Kathy K. Mechler, “A Prehospital Trauma Registry for Tactical Combat 

Casualty Care,” U.S. Army Medical Department Journal, 2011. 
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unit medical and nonmedical personnel, training, and equipment requirements.222 The 

joint DoDTR captures injury demographics, anatomic and physiologic parameters, and 

trauma care and outcomes across the continuum of combat casualty care,223 providing 

critical information used to affect improvements in clinical care, drive medically 

related doctrine and policy, and support the creation of new knowledge through 

research.224 Though these advances in data collection have made it possible to 

significantly increase necessary medical training to the entire force and save lives, 

such levels of integration and research are difficult to maintain during peacetime. 

Great advances have also been made in the care of returning wounded warriors, such 

as prostheses research, development, and fielding. These improvements include 

silicone liners that allow better fitting, energy-storing prostheses that allow for higherintensity activity, and motorized prostheses that allow for more normal walking 

gaits.225 The Center for the Intrepid at Fort Sam Houston, Texas, developed custom-fit, 

energy-storing orthotics that offload weight to the leg and relieve pain, improving 

functional performance.226 The advances in prosthetics and orthotics, improved pain 

control, and aggressive rehabilitation have allowed a return-to-duty rate of 

approximately 20 percent for soldiers who have had a lower limb amputation227 and 

limb salvage.228 During long periods of peacetime, advances in wounded warrior care 

are no longer the focus. National treasures such as the Center for the Intrepid will 

require continued joint coordination within the military and a strong relationship with 

military allies and civilian institutions to continue the progress made during the last 

decade. 

Despite these critical examples of wartime medical capabilities, military medical 

requirements neither have a high level joint focus nor are they jointly developed. The 

requirement for military medical personnel and capabilities is determined by each 

Service in response to DoD planning scenarios.229 Each Military Service independently 

completes this process annually. This process then produces requirements estimates 

using separate models and planning assumptions for the provided defense 

scenarios.230 Consequently, the Services take different approaches to equipping and 

 

222 See United States Army, Institute of Surgical Research, Department of Defense Joint Trauma Registry (DODTR) 

Mission, accessed December 23, 2014, http://www.usaisr.amedd.army.mil/joint_trauma_system.html. 223 “Joint Trauma System,” U.S. Army Institute of Surgical Research, accessed November 29, 2014, 

http://www.usaisr.amedd.army.mil/joint_trauma_system.html. 

224 United States Central Command, CENTCOM Joint Theater Trauma System (JTTS) Clinical Practice Guidelines (CPGs) 

Development, Approval, Implementation and Monitoring Process, accessed December 15, 2014, 

http://www.usaisr.amedd.army.mil/assets/cpgs/02_centcom_jtts_cpg_process_2_apr_12.pdf . 225 Lorne H. Blackbourne et al., “Military Medical Revolution: Military Trauma System,” Journal of Trauma Acute Care 

Surgery, 73, no. 6, suppl. 5 (2012): S392, accessed January 10, 2015, 

http://journals.lww.com/jtrauma/Fulltext/2012/12005/Military_medical_revolution___Military_trauma.4.aspx. 226 Commission’s visit to the Center for the Intrepid, January 6, 2014. Joseph R. Hsu et al., “Return To Duty After 

Integrated Orthotic And Rehabilitation Initiative,” Skeletal Trauma Research Consortium (STReC). 227 Daniel J. Stinner et al., “Return to Duty Rate of Amputee Soldiers in the Current Conflicts in Afghanistan and Iraq,” 

Journal of Trauma, 68, No. 6, (2010), 

http://opmarketing.com/storage/Research%20EncyclOPedia/Military/OEF%20OIF%20return%20to%20duty%20rates

_J%20Trauma.pdf. 

228 Jessica D. Cross et al., “Return to Duty Following Type III Open Tibia Fracture,” Journal of Orthopaedic Trauma,

2012, 26:43Y47, abstract accessed December 14, 2014, http://www.ncbi.nlm.nih.gov/pubmed/21885998. 

229 John E. Whitley, Brandon Gould, Nancy Huff, and Linda Wu, Institute for Defense Anlayses, Medical Total Force 

Management, accessed December 19, 2014, 

https://www.ida.org/~/media/Corporate/Files/Publications/IDA_Documents/CARD/P-5047.ashx. 230 Department of Defense, Military Health System Modernization Study, v.28, October 2014. John E. Whitley, Brandon 

Gould, Nancy Huff, and Linda Wu, Institute for Defense Anlayses, Medical Total Force Management, accessed December 

19, 2014, https://www.ida.org/~/media/Corporate/Files/Publications/IDA_Documents/CARD/P-5047.ashx. 
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training personnel to meet medical readiness missions.231 Independent of the Services, 

the Joint Force Surgeon works with combatant command surgeons to assess health 

care needs for contingency operations.232 Together they make recommendations to the 

joint force commander regarding health service support and force health protection 

requirements for contingency operations.233 There is no joint doctrine among the 

Services regarding definitional aspects of medical readiness manpower requirements, 

even though independently developing medical requirements are unlikely to result in 

medical capabilities that are fully integrated. Conversely, jointly developing 

requirements from the beginning would be more efficient and provide an integrated 

medical force that is better prepared for joint operations at the beginning of the next 

conflict. 

The Service Surgeons General stated they neither had a common definition of clinical 

medical readiness, nor associated skills maintenance standards.234 For example, DoD 

recently completed the first phase of a MHS Modernization Study, which analyzed skill 

maintenance by measuring workload volume using the physician work Relative Value 

Unit (RVUs).235 RVUs provide a measurement that accounts for the time, technical 

skill and effort, mental effort and judgment, and stress to provide a service, resulting 

in a measure of workload weighted by the intensity of the procedure.236 RVUs do not 

directly measure the suitability of medical cases for maintaining the military readiness 

of the medical force. Similarly, the MHS monitors 18 Healthcare Effectiveness Data 

and Information Set (HEDIS) measures in MTFs related to health and safety issues.237

HEDIS, used by more than 90 percent of health plans in the country to measure 

quality, consists of 81 measures across five domains.238 While HEDIS measures allow 

for accreditations and comparisons across health plans and facilities, they do not 

measure clinical proficiency or military medical readiness. The Surgeons General of 

the Services stated that DoD had not agreed upon better measurements than RVUs 

and HEDIS to measure skill maintenance.239 Yet there is a clear need for better skills 

measurement. 

The MHS could also benefit from more consistent coordination with the civilian 

medical sector. The Services each have training programs with civilian trauma 

facilities; however, these programs differ substantially in scope and duration. For 

example, there are only isolated instances in which enlisted medics receive skill 

maintenance training in civilian facilities. The Captain James A. Lovell Federal Health 

Care Center has an agreement with Cook County Health and Hospital System 

(CCHHS), Chicago, Illinois, to allow for 2-month training rotations of Navy hospital 

 

231 Department of Defense, Military Health System Modernization Study, v.28, October 2014. 232 Department of Defense, Health Service Support, Joint Publication 4-02, accessed January 10, 2015, 

http://www.dtic.mil/doctrine/new_pubs/jp4_02.pdf 

233 Ibid. 234 Service Surgeons General, meeting with MCRMC Commissioners, June 12, 2014. 235 Department of Defense, Military Health System Modernization Study, v.28, October 2014. 236 National Health Policy Forum, The George Washington University, The Basics – Relative Value Units (RVUs), 

accessed December 15, 2014, http://www.nhpf.org/library/the-basics/Basics_RVUs_02-12-09.pdf. 

237 Department of Defense, Military Health System Review-Final Report, Appendix 4. Quality of Care, Table 4.4-3 percent 

of Eligible Patients Receiving Select Care Measures, External Comparison: MHS vs. HEDIS (2010-2013), accessed 

December 15, 2014, http://www.defense.gov/pubs/140930_MHS_Review_Final_Report_Appendices.pdf. 

238 See “Measuring Performance,” NCQA, accessed December, 16, 2014, 

http://www.ncqa.org/HEDISQualityMeasurement.aspx. 

239 The Navy Surgeon General also commented that the RVU does not account for the fact that the military medical 

force must be ready to deploy for contingency operations and provide medical services necessary to maintain the 

medical readiness of the force, which takes away from beneficiary care. Navy Surgeon General, briefing with MCRMC 

Commissioners, June 12, 2014. 
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corpsmen, as well as nurses and surgeons, through the CCHHS Trauma 

Department.240 Similarly, the Sacred Heart Health System in Pensacola, Florida 

expressed a desire to expand military training opportunities, including developing a 

completely new career track for a medical assistant that is geared toward the medical 

skill necessary to support the basic Navy hospital corpsman.241 Central joint oversight 

and standardization of agreements between civilian institutions and the military could 

help expand civilian training opportunities for military medical staff, which in turn 

would assist in sustaining medical readiness. 

Training During Peacetime 

Attracting a different mix of medical cases into MTFs could better support combat-care 

training and medical readiness. Research reveals a long history of the military medical 

community needing to refocus its capabilities at the start of wars, after concentrating 

during peacetime on beneficiary health care.242 A recent DoD study stated, “In order to 

meet its deployment mission, our uniformed medical personnel must practice and 

hone their skills in garrison. Therefore, our study assessed the ability of the MHS to 

sustain the medical readiness skills of the uniformed medical force.”243 The study 

further stated, “Our fundamental approach was to focus on medical readiness as the 

principle mission of our treatment facilities.”244

Beneficiary care may not sufficiently provide ideal training opportunities to maintain 

and sustain the military medical capabilities developed during the last 13 years of war. 

For example, prevalent injuries and wounds during operations in Afghanistan and Iraq 

were a result of penetrating or blast trauma.245 As a result, there has been a 

preponderance of extremity, vascular, genital, visual, skeletal, and traumatic brain 

injuries. Yet surgeons were not adequately prepared to treat these injuries. A survey of 

general surgeons from all military Services who deployed between 2002 and 2012 

found that 80 percent of respondents desired additional training on particular surgical 

disciplines or injury types prior to deployment. The most commonly requested types of 

training were extremity vascular repairs, neurosurgery, orthopedics, and abdominal 

vascular repairs.246 Surgeons overwhelmingly cited vascular surgeries as the most 

difficult cases, followed by neurosurgical procedures, burns, and thoracic cases.247

Surgeons reported they had difficulty with these procedures because they had not 

 

240 Memorandum of Understanding For Navy Active Duty Staff between The Captain James A Lovell Federal Health 

Care Center and The Cook County Health and Hospital System. 241 Susan Davis, CEO Sacred Heart Health System, and Henry Stovall, President, Sacred Heart Hospital Pensacola, 

meeting with MCRMC Commissioners, May 21, 2014. 

242 Bernard Rostker details this historic pattern in early U.S. wars in Bernard Rostker, Providing for the Casualties of 

War: The American Experience Through World War II, (Washington, DC: RAND, 2013). National Defense Research 

Institute, Government Accountability Office, Medical Readiness: Efforts Are Underway for DOD Training in Civilian 

Trauma Centers, (GAO/NSIAD-98-75) April 1998, accessed December 16, 2014, 

http://www.gao.gov/assets/160/156122.pdf. 

243 Department of Defense, Military Health System Modernization Study, v. 28, October 2014. 244 Ibid. 245 CNA Analysis Solutions, The Quality-Volume Relationship: Comparing Civilian and MHS Practice, November 2014, 

DIM-2014-009221-Final. 

246 Note that respondents included general surgeons and associated surgical subspecialties who deployed in general 

surgery billets. Joshua A. Tyler et al., “Combat Readiness for the Modern Military Surgeon: Data from a Decade of 

Combat Operations,” Journal of Trauma and Acute Care Surgery, 73, no. 2 (2012): S64-S70, 

http://www.ncbi.nlm.nih.gov/pubmed/22847097. CNA Analysis Solutions, The Quality-Volume Relationship: 

Comparing Civilian and MHS Practice, November 2014, DIM-2014-009221-Final. 247 Ibid. 
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performed them in nondeployed clinical settings, and because there had been a 

substantial time lapse since they had last treated these types of injuries.248 

The increased cohesion of medical teams in military hospitals and clinics is an 

important requirement for battlefield medical readiness; nevertheless, the medical care 

provided in typical military hospital and clinic settings is seldom directly applicable to 

combat-care injuries. Figure 11 provides a breakdown of prevalent inpatient 

procedures in military hospitals, the most predominant of which relate to pregnancy, 

childbirth, and newborn care. Although these procedures can provide valuable 

workload to support the general skill of providers and health care teams, they do not 

represent the ideal case load required to maintain the clinical skills directly related to 

medical readiness. 

Figure 11. Top 10 Inpatient Procedures in Military Treatment 

Facilities, FY 2013249

Relying on existing MTF medical cases as a training platform for combat care can 

result in a misalignment of military medical personnel compared to the medical 

requirements necessary to support the operational missions.250 At the start of the wars 

in Afghanistan and Iraq, the military medical force was understaffed for surgeons, 

anesthesiologists, and other specialties critical to combat casualty care,251 and 

overstaffed in specialties that generally provide peacetime health care.252 Some military 

medical professionals have concluded that the expectation to deliver ongoing, high 

quality, beneficiary health care, while preparing for the possibility of war, creates 

 

248 Ibid. 249 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, February 21, 2014, 78, accessed December 15, 2014, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. Note: The DoD has deliberately decreased inpatient mental health beds. 

250 John E. Whitley, Brandon Gould, Nancy Huff, and Linda Wu, Institute for Defense Anlayses, Medical Total Force 

Management, accessed December 18, 2014, 

https://www.ida.org/~/media/Corporate/Files/Publications/IDA_Documents/CARD/P-5047.ashx. 251 Department of Defense, DoD Force Health Protection and Readiness—A Summary of the Medical Readiness Review, 

2004-2007, June 2008. The report identified that in 2004, the military medical force contained 359 more pediatricians 

and 179 more obstetricians than was required for military missions and was understaffed for its military mission by 

59 anesthesiologists and 242 general surgeons. 

252 Ibid. 
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competing interests and directs resources and training away from maintaining 

battlefield skills.253 

This misalignment of military medical staffing has led the Services to develop a 

medical personnel substitution policy.254 This policy was first established for the Army 

in 1980 to simultaneously support military operations and manage the demands for 

all military health system beneficiaries.255 Under this policy, for example, a 

requirement for general surgeons to staff a combat casualty care hospital might be 

filled, in part, by obstetricians (up to a 35 percent level of replacement).256 In practice, 

not all substituted medical personnel are deployed to support combat operations, 

resulting in a wide range of deployment rates between medical specialties.257 This 

situation caused many physicians with high-demand specialties for combat-casualty 

care to have deployment rates near the levels of the highest deploying combat 

forces.258 High deployment rates among medical personnel are particularly 

burdensome because deployed doctors may not have access to the number and range 

of cases necessary to maintain their certifications. A RAND analysis found that 

shifting manpower requirements to match those specialties that are demanded in 

deployed settings “could improve situations at MTFs, since there would be more health 

care professionals available for deployment in high demand positions.”259 RAND also 

noted, “it could create challenges if there is not enough volume at the MTFs for the 

extra health care professionals to be productive and maintain their skills.”260 Creating 

mechanisms to change the case mix in MTFs could afford military medical personnel 

training opportunities that are more closely aligned to the combat care mission, 

improving medical readiness. 

MHS Workload 

MTFs would benefit from additional workload. As mentioned above, DoD recently 

completed the first phase of its MHS Modernization Study, which compared the volume 

of health care performed by physicians in military hospitals and clinics to that of 

civilian physicians.261 The study presented data on military physician work RVU 

volume compared to civilian physician work RVU volume. For example, the study 

shows that military medical personnel in San Diego, California perform as many 

general surgery procedures as 5 percent of civilian surgeons; the other 95 percent of 

 

253 Robert L Mabry, LTC MC USA, and Robert DeLorenzo, COL MC USA, “Challenges to Improving Combat Casualty 

Survival on the Battlefield,” Military Medicine, 179.5 (May 2014): 480. 254 See, e.g., Personnel Procurement: Army Medical Department Professional Filler System, Army Regulation 601-142, 

April 9, 2007. 

255 See RAND, Arroyo Center and RAND Health, Improving the Deployment of Army Health Care Professionals – An 

Evaluation of PROFIS, accessed December 19, 2014, 

http://www.rand.org/content/dam/rand/pubs/technical_reports/TR1200/TR1227/RAND_TR1227.pdf. 

256 See, e.g., Personnel Procurement: Army Medical Department Professional Filler System, Army Regulation 601-142, 

April 9, 2007. 

257 RAND, Arroyo Center and RAND Health, Improving the Deployment of Army Health Care Professionals – An 

Evaluation of PROFIS, accessed December 19, 2014, 

http://www.rand.org/content/dam/rand/pubs/technical_reports/TR1200/TR1227/RAND_TR1227.pdf. 

258 John E. Whitley, Brandon Gould, Nancy Huff, and Linda Wu, Institute for Defense Anlayses, Medical Total Force 

Management, accessed December 19, 2014, 

https://www.ida.org/~/media/Corporate/Files/Publications/IDA_Documents/CARD/P-5047.ashx. 259 RAND, Arroyo Center and RAND Health, Improving the Deployment of Army Health Care Professionals – An 

Evaluation of PROFIS, accessed December 19, 2014, 

http://www.rand.org/content/dam/rand/pubs/technical_reports/TR1200/TR1227/RAND_TR1227.pdf. 

260 Ibid. 261 Department of Defense, Military Health System Modernization Study, v. 28, October 2014. Note: The RVU measure 

does not account for training a physician may have received while deployed or while providing health care at a civilian 

medical facility. 
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civilian surgeons do more procedures each year and in San Antonio military 

orthopedic surgeons perform as many procedures as 7 percent of civilian orthopedic 

surgeons.262 The study used this RVU data as a proxy for clinical currency or 

proficiency and, as such, presented the data as a tool to advocate for the repurposing 

of MTFs and the reallocation of the medical force to MTFs with access to a greater 

volume of patients. 

Because RVUs, as mentioned above, are not an ideal metric to measure clinical 

proficiency or the readiness of the medical force, the Commission tested the 

MHS Modernization Study findings by examining military hospital workload across a 

range of alternative health care measures.263 The research relied upon academic 

literature that suggests the volume of complex surgical cases performed should be 

measured for individual providers (to measure individual proficiency) and for the 

hospital as a whole (to measure the proficiency of the entire hospital team supporting 

the individual surgeon).264 For example, evidence-based standards for coronary artery 

bypass grafting (CABG) suggest a hospital should do at least 250 CABGs per year to 

get the best outcomes.265 In FY 2013 only 338 CABGs were performed within the direct 

care system of military hospitals. The Eisenhower Army Medical Center performed 

64 procedures, the most for any single facility.266 The Commission found similar 

results in other orthopedic procedures and cardiothoracic surgical procedures.267 The 

Commission also found that 82 percent of intensive care unit admissions occurred in 

MTFs with total admissions below the level at which academic literature suggests the 

best outcomes can be expected.268 

This analysis supports those of the MHS Modernization Study related to low workload 

in military hospitals. These workload issues could be addressed by attracting 

additional cases into MTFs, especially those cases that provide good training 

opportunities for the combat care mission. The MHS Modernization Study concluded 

that 16 of the 41 military inpatient hospitals in the United States required changes to 

their capability.269 DoD determined eight of these military hospitals should transition 

out of inpatient care delivery and be repurposed as outpatient facilities or birthing 

centers.270 Final determination on the other eight facilities was delayed for a year.271

Closing underutilized facilities does not address the necessary mix of complex cases 

required to maintain the readiness of the medical force. 

 

262 Department of Defense, Military Health System Modernization Study, v.28, 35, October 2014. The Commission 

calculated the percentages from the MHS Modernization Study’s chart illustrating median percentages for given 

procedures in selected MTFs. 

263 CNA Analysis Solutions, The Quality-Volume Relationship: Comparing Civilian and MHS Practice, November 2014, 

DIM-2014-009221-Final. (Research and analysis performed for MCRMC.) 

264 Ibid, iii. 265 Ibid, 20. 266 Ibid, 21. 267 Ibid, 23-24, 27. 268 Ibid, 26. 269 Under Secretary of Defense (Personnel and Readiness), Enhancing Military Health System Performance, 

memorandum for members of the Military Health System Executive Review, March 6, 2014. Facilities that required 

changes to their capability were identified based on multiple criteria, including the ability to recapture health care from 

the private network, the availability of local civilian health care providers, and cost-effectiveness to maintain services at 

the military facility. 

270 Under Secretary of Defense (Personnel and Readiness), Enhancing Military Health System Performance, 

memorandum for members of the Military Health System Executive Review, March 6, 2014. 271 Department of Defense, Military Health System Modernization Study, v.28, October 2014. 
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New Tools To Maintain Medical Readiness 

The issues related to workload levels and the mix of medical cases represent 

challenges to maintaining the readiness of the medical force, yet DoD has limited 

means of effecting meaningful change in the amount of medical workload, the mix of 

complex medical cases, or the access to trauma-care cases. An assumption used by 

the MHS Modernization Study was that the MHS can recapture health care currently 

being provided to eligible beneficiaries in local civilian hospitals or clinics.272 Both the 

Army and Navy Surgeons General told the Commission current catchment areas 

around MTFs limit their ability to attract eligible beneficiaries who would like to 

receive care in MTFs.273 Figure 11 indicates that the current beneficiary workload may 

not generate the case mix needed to ideally support training for combat care. In some 

locations the eligible beneficiary population does not require the right type of or 

complexity of surgical or trauma care for maintaining the readiness of the military 

medical force.274 Recapturing beneficiary workload has resulted in reassignment of 

some beneficiaries from civilian to military primary care managers, limiting their 

choice of health care providers and disrupting their current health care delivery.275

There are several new tools that could attract more complex medical cases into the 

MHS to aid in the management of MTF workload and case mix, which in turn would 

contribute to the readiness of the medical force. For example, alternative prices could 

be established for certain procedures that would provide the necessary access to 

complex medical cases and contribute directly to maintaining the readiness of the 

medical force.276 Establishing commercial reimbursement rates and associated billing 

systems,277 improving authorities, and allowing greater access to veterans and 

civilians with relevant complex medical cases and trauma that contribute to essential 

medical capabilities all would provide military hospitals and clinics more opportunities 

for training the military medical force.278 Also, providing additional incentives for 

eligible MHS beneficiaries to use military hospitals and clinics would increase 

utilization of these facilities and provide additional opportunities to maintain clinical 

proficiency. Recommendation 6 details means of accomplishing these goals.

The military has opportunities to sustain or improve the readiness of the medical force 

through partnerships with civilian trauma care facilities. These partnerships were 

originally developed in response to the lack of trauma training available to the medical 

force within the MTFs. The Government Accountability Office (GAO) found that the 

military Services were unprepared for trauma care during the Gulf War.279 According 

 

272 Ibid. 273 Navy and Army Surgeon General, meeting with MCRMC Commissioners, June 12, 2014. 274 Ibid. 275 See, e.g., Madigan Army Medical Center, April Community Update, 2014. Note: a change from a civilian PCM to a 

Military PCM means to change from a civilian medical practice to a military facility, the actual health care provider 

within the military facility can be civilian or military. 276 See Amanda E. Lechner, Rebecca Gourevitch, and Paul B. Ginsburg, Center for Studying Health System Change, 

The Potential of Reference Pricing to Generate Health Care Savings: Lessons from a California Pioneer, Research Brief 

Number 30, accessed December 23, 2014, http://www.hschange.org/CONTENT/1397/. 

277 General Dynamics was awarded a $63 million contract to modernize the military billing and collection system. The 

Armed Forces Billing and Collection Utilization Solution (ABACUS) will provide software-as-a-service to automate, 

consolidate, and centralize billing and collections across 136 medical treatment facilities. “News and Events,” General 

Dynamics Information Technology, accessed November 29, 2014, http://www.gdit.com/News-AndEvents/2014/General-Dynamics-Awarded-63-Million-to-Modernize-Military-Health-Billing-and-Collections-System/. 278 One barrier to providing health care to alternative populations at military hospitals and clinics is that many of the 

facilities are located on secure military installations with restricted access. 279 Government Accountability Office, Operation Desert Storm: Problems With Air Force Medical Readiness, GAO/NSIAD94-58, accessed January 10, 2015, http://www.gao.gov/assets/220/218960.pdf. Operation Desert Storm: 
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to GAO, the Gulf War highlighted that military medical forces were “unprepared to 

provide combat casualty care” and it brought into question the DoD’s “ability to meet 

its wartime medical mission.”280 GAO attributed this lack of readiness to the types of 

training medical forces receive. “Since most military treatment facilities provide health 

care to active-duty personnel and their beneficiaries and do not receive trauma 

patients, military medical personnel cannot maintain combat trauma skills during 

peacetime by working in these facilities.”281 Ultimately, the Congress directed DoD to 

enter into partnerships at civilian facilities to improve predeployment training in 

combat casualty care.282

Subsequent to this directive, each of the Services established trauma training 

programs that partner with nationally renowned level-1 civilian trauma centers.283

These programs are highly regarded for the training resource they afford the military, 

as well as access to civilian medical research infrastructure and the capability to 

maintain a group of highly skilled military trauma care providers.284 They are also 

beneficial to the civilian trauma centers because military providers augment their 

labor force, the partnership provides for the introduction of cutting-edge ideas and 

practices from the battlefield, and the civilian providers have an opportunity to 

participate in DoD-sponsored research.285 A study comparing military personnel at 

the Baltimore Shock Trauma Center (STC) with personnel at the theater hospital in 

Balad, Iraq found that, despite an important difference in patients and settings, “the 

operations performed and outcomes were similar.”286 The authors concluded, “Because 

a higher volume of trauma patient admission correlates with improved outcomes, the 

large-volume, high acuity exposure and training obtained by the C-STARS rotators at 

STC would suggest an advanced level skill set before deployment.”287 

Research on brigade support medical companies that were augmented with forward 

surgical teams found all interviewed physicians and physician assistants who 

attended predeployment trauma training courses or programs at the Services’ trauma 

training centers associated with civilian level-1 trauma centers perceived them 

extremely valuable.288 Those who did not attend such training believed it would have 

greatly improved their ability to treat trauma and mass casualties.289 The Air Force 

Deputy Surgeon General stated as current military operations diminish, a priority is to 

invest more in civilian partnerships to ensure military physicians continue to be 

exposed to cases that are operationally relevant.290 Although this realistic trauma 

 Improvements Required in the Navy’s Wartime Medical Program GAO/NSIAD-93-189, accessed January 10, 2015, 

http://www.gao.gov/assets/220/218210.pdf. Operation Desert Storm: Full Army Medical Capability Not Achieved, 

GAO/NSIAD-92-175, accessed January 10, 2015, http://www.gao.gov/assets/220/218309.pdf. 280 Government Accountability Office, Medical Readiness: Efforts Are Underway for DOD Training in Civilian Trauma 

Centers, GAO/NSIAD-98-75, 12, accessed January 10, 2015, http://www.gao.gov/assets/160/156122.pdf. 281 Ibid. 282 National Defense Authorization Act for FY 1996, Pub. L. No. 106-104, § 744, 110 Stat. 386 (1996). 283 Chad M. Thorson, MD, et al., “Military Trauma Training at Civilian Centers: A Decade of Advancements,” Journal of 

Trauma and Acute Care Surgery, 73, no. 6 (2012): S483-S489. 284 Ibid. 285 Ibid. 286 Maureen McCunn, MD et al., “Trauma Readiness Training for Military Deployment: A Comparison between a 

U.S. Trauma Center and an Air Force Theater Hospital in Balad, Iraq,” Military Medicine, 176, no. 7 (July 2011): 772. 287 Ibid. 288 Emil Lesho, COL MC USA, “Prospective Data, Experience, and Lessons Learned at a Surgically Augmented Brigade 

Medical Company (Level II+) During the 2007 Iraq Surge,” Military Medicine, 176, no. 7 (July 2011): 763-768. 289 Ibid. 290 Air Force Deputy Surgeon General, meeting with MCRMC Commissioners, June 12, 2014. 
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training in a live setting provides beneficial experience, some question whether these 

training platforms will continue after current contingency operations conclude.291

Flow of Health Care Funding 

MHS is currently funded from a variety of sources, including Defense Health Program 

appropriations (operations and maintenance, procurement, and research and 

development),292 the Services’ military personnel appropriations,293 Defense-wide 

military construction appropriations,294 and payments from the Medicare-Eligible 

Retiree Health Care Fund (MERHCF).295 These funds cover medical readiness costs, 

including delivering care to active-duty Service members and training for military 

medical personnel, and the costs of delivering care to beneficiaries. The budgeting 

process, as currently designed, does not allow for distinction between these two 

expenditures.296 This flow of funding can have a negative effect on the MHS. As GAO 

has written, “choices about the method of budget reporting represent much more than 

technical decisions about how to measure cost, rather they reflect fundamental 

choices about the controls and incentives to be provided by the decision-making 

process.”297 

Conclusions: 

The critical nature of joint readiness, including the essential medical readiness 

examples above, make it clear that four-star leadership is needed to sustain dedicated 

focus on the joint readiness of the force. Ensuring that the hard-fought progress 

achieved during the past decade in the delivery of combat casualty care on the 

battlefield, the global capability for evacuating casualties and providing critical care 

while in transit, and the research that has led to advances in wound care and 

hemorrhage control, requires strong oversight at the highest level. The Commission 

thoroughly evaluated the merits of a four-star joint medical command. In fact, 15 out 

of 18 studies between 1948 and 2011 recommended the establishment of a unified, 

joint, or central authority over military medicine. Yet, medicine is only one component 

of joint military readiness. The essential nature of military medicine by itself warrants 

four-star oversight, and the Commission concludes the best course of action is to 

create a four-star Joint Readiness Command to manage the readiness, as well as the 

interoperability, efficiency, and “jointness” of the entire military force, including 

medical readiness. 

 

291 See Chad M. Thorson, MD, et al., “Military Trauma Training at Civilian Centers: A Decade of Advancements,” 

Journal of Trauma and Acute Care Surgery, 73, no. 6 (2012): S483-S489. 292 See, e.g., Defense Health Program, Fiscal Year (FY) 2015 Budget Estimates: Operation and Maintenance Procurement 

Research, Development, Test and Evaluation, accessed December 19, 2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/budget_justification/pdfs/09_Defense_Heal

th_Program/DHP_PB15_Vol_I-II.pdf. 

293 See, e.g., Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 

Report to Congress, accessed December 15, 2014, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. 

294 See, e.g., Department of Defense, Fiscal Year (FY) 2015 Budget Estimates: Military Construction Family Housing 

Defense-Wide, accessed December 19, 2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/budget_justification/pdfs/07_Military_Cons

truction/Military_Construction_Defense-Wide.pdf. 295 See, e.g., Department of Defense, Office of the Actuary, Valuation of the Medicare-Eligible Retiree Health Care Fund,

accessed December 19, 2014, http://actuary.defense.gov/Portals/15/Documents/FY_2012_MERHCF_ Val_report.pdf. 

296 Government Accountability Office, Accrual Budgeting: Experiences of Other Nations and Implications for the United 

States, Report to the Honorable Benjamin L. Cardin, House of Representatives, GAO/AIMD-00-57, accessed December 

19, 2014, http://www.gao.gov/assets/160/156759.pdf. 297 Ibid. 
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Joint Readiness Command 

A four-star command is essential for the proper oversight of joint readiness that 

extends beyond medical readiness. For example, despite repeated inquiries, the 

Commission was unable to obtain a definitive answer as to whether the Reserve 

Component (RC) would remain operational or revert to a strategic posture. This 

question has broad implications for the maintenance of the All-Volunteer Force, as 

well as the proper design of the military compensation system. A four-star commander 

with responsibility for joint readiness would have the stature and resources necessary 

to thoroughly analyze the best posture of the RC, recommend strategic guidance for 

maintenance of the All-Volunteer Force, and provide input to the Secretary of Defense 

and the Chairman of the Joint Chiefs of Staff needed to best align compensation 

programs with maintaining a balanced force.

In addition, a four-star commander is needed to ensure the flexibility inherent in the 

recommendations in this report are best used to maintain the readiness of the entire 

force and, as argued in this recommendation, specifically the readiness of the medical 

force. This report provides new tools with which DoD can adjust workload in MTFs to 

provide the best available training opportunities to maintain the clinic proficiency of 

medical personnel. Because these adjustments may require additional funding to 

attract workload, there would be a natural tension between maintaining readiness and 

budget pressures. A four-star commander is needed to effectively advocate for 

readiness funding and actively participate in the planning, programming, budget, and 

execution (PPBE) process, especially in the current period of declining military 

budgets. 

A four-star command is also consistent with both the Commission’s Congressional 

mandate and Presidential principles. The Commission’s establishing statute mandates 

that its recommendations must “ensure the long-term viability of the All-Volunteer 

Force by sustaining the required human resources of that force during all levels of 

conflict and economic conditions.”298 Strong leadership at the most senior levels, 

including oversight of the readiness of critical medical personnel, is required to 

achieve this mandate. Similarly, a four-star commander best fulfills the President’s 

principles that seek to sustain “our Nation’s ability to sustain an All-Volunteer Force,” 

to ensure “responsive and prudent management” of the Force, and to “actively retain 

the most experienced and qualified service members and align compensation and 

benefits to achieve this end.”299

The President, the Congress, and DoD should therefore create a new four-star 

general/flag officer billet to lead a Joint Readiness Command (JRC) that manages the 

readiness of military personnel. The JRC should focus on the military personnel 

aspects of DoD’s ability to train, mobilize and deploy an integrated and ready active 

and RC force to support assigned missions. The JRC would include readiness issues 

across combat domains, including, of particular concern to the Commission, the area 

of military medical readiness. 

 

298 National Defense Authorization Act for FY 2013, Pub. L. No. 112-239, § 671(a)(1), 126 Stat. 1632, 1787 (2013) 

(amended by National Defense Authorization Act for FY 2014, Pub. L. 113-66, § 1095(b), 127 Stat. 672, 879 (2013)). 

299 President Barack Obama, Principles for Modernizing Compensation and Retirement Systems, accessed December 15, 

2014, http://www.mcrmc.gov/public/docs/statutory/Principles.pdf. 
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Joint Staff Readiness Directorate 

To further ensure the appropriate focus on medical readiness throughout the 

requirements determination and budget processes, medical readiness issues should be 

elevated within the Joint Staff. A Joint Staff Medical Readiness Directorate (J10) 

should be established and directed by a three-star general/flag medical officer. The 

J10 should coordinate with the JRC on medical readiness issues. The current Joint 

Force Surgeon (J4) office should be transitioned to the new J10, which has 

responsibility to include establishing a Joint Medical Readiness Oversight Council 

(JMROC). The JMROC should comprise the J10, the medical section of the JRC, the 

Service Surgeons General, the Medical Officer of the Marine Corps, and, as needed, 

the Combatant Command Surgeons. The JMROC should also include advisory 

representatives from Offices of the Undersecretaries of Defense for Personnel and 

Readiness, Acquisition, Technology and Logistics, and Comptroller; the Assistant 

Secretary of Defense for Health Affairs; and the Directors, Cost Assessment and 

Program Evaluation; Defense Health Agency (DHA); and such others as the J10 

director may deem appropriate. The J10 director should advocate for medical 

readiness matters in the PPBE process, including providing staff representatives to 

PPBE issue teams and the three-star programmers meeting on all medical issues in 

the PPBE process. The J10 director should also provide advice to the Chairman and 

Vice Chairman on all medical issues in the PPBE process. 

Reorienting MTF Capabilities 

MTFs, with their current workload and case mix, are not ideal platforms for training 

military medical personnel for the readiness mission. The predominance of care 

provided at MTFs does not provide direct training opportunities for those medical 

specialties most needed in wartime situations. Military medical personnel are 

misaligned with wartime requirements; deployment rates of medical specialties are 

highly inconsistent; and medical readiness funding is comingled with beneficiary care 

costs. Overall workload in MTFs is below commercial standards, particularly in 

operational specialties. DoD has very limited means of effecting change in the 

underlying causes for MTFs not being ideal training platforms. It can only change 

workload in MTFs by “recapturing” beneficiary care, which restricts beneficiaries’ 

health care choices and does not resolve case mix challenges. Although this report 

suggests new tools to make MTFs better training platforms, DoD has no centralized 

oversight of battlefield health care or the medical readiness mission to ensure those 

tools are implemented and used to best support combat casualty care. 

To ensure the Nation is not left unprepared at the start of the next war, the military 

medical lessons learned during war must be preserved and improved upon whenever 

possible. The military medical force should be provided every opportunity to access the 

best possible training environments. Accordingly, DoD needs to implement a new 

strategic framework to maintain medical readiness, new tools with which to achieve 

this readiness, and new oversight to ensure Service members receive the best care 

possible during the next conflict. 

DoD should clearly identify Essential Medical Capabilities (EMCs)300 the military needs 

for its operational mission, taking into account the experiences during the last 

 

300 Essential Medical Capability (EMC) refers to a limited number of critical medical capabilities that must be retained 

within the military for national security purposes. These capabilities are vital to effective and timely health care during 

contingency operations. EMCs should include clinical and logistical capabilities related to combat casualty care; 
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13 years of war. EMCs should include Specialized Military Conditions (SMCs)301 not 

primarily performed in theater but commonly associated with military operations. 

EMCs should be maintained as a core capability of military medicine. To maintain 

these EMCs, DoD should establish clinical proficiency standards for military medical 

personnel and facilities that are based on widely accepted metrics of the medical 

profession, taking into account military readiness requirements. DoD should also be 

given new authorities to make certain it meets these proficiency standards, including: 

 Allowing beneficiaries to choose from a selection of commercial insurance plans 

offered through a DoD heath benefit program. This approach, which 

Recommendation 6 outlines in greater detail, would improve the health benefit 

for military beneficiaries. It would also create new tools with which DoD could 

attract patients into military hospitals, especially those with complex medical 

cases that are important for medical readiness training that will advance the 

medical readiness mission. 

 Annually adjusting copayments for EMC-related care delivered in MTFs so DoD 

beneficiaries have financial incentives to receive MTF care. 

 Providing care to VA patients and civilians302 who have cases consistent with 

DoD’s EMCs. 

 Annually adjusting procedure reimbursement rates at MTFs. Reimbursement 

rates charged by MTFs should be based, in part, on the need to attract 

sufficient EMC-related workload and case mix to maintain MTFs as appropriate 

readiness training platforms. Such tools require strong oversight to guard 

against budget cutting and ensure they are used to maintain readiness of the 

medical force and the health of the MHS as a training platform. 

 MTF catchment areas303 should be eliminated. By doing so, eligible beneficiaries 

who currently live outside of catchment areas would be able to seek health care 

at military hospital and clinics. Not only would this change provide additional 

choices to beneficiaries, it could provide additional workload to better support 

MTFs in achieving their readiness mission. Recommendation 6 outlines the 

basis for eliminating these catchment areas. 

 medical response to and treatment of injuries sustained from chemical, biological, radiological, nuclear, and explosives 

incidents; diagnosis and treatment of infectious diseases; aerospace medicine; and undersea medicine. EMCs also 

include a limited number of “Specialized Military Conditions” (SMCs) not primarily performed in theater but commonly 

associated with military operations. 

301 Care provided for Specialized Military Conditions (SMC) refers to the diagnosis, treatment, and rehabilitation of 

certain conditions incurred as a direct result of military activity, i.e., amputations, certain musculoskeletal trauma, 

burns, traumatic brain injuries, and post-traumatic stress disorder. SMCs are unusual medical conditions that are 

particularly associated with military action during major operations and training exercises and are not typically 

common among the civilian population. SMCs evolve to reflect emerging medical conditions that result from changes in 

warfighting and advancements in commercial-sector medical treatments. 302 Health care provided to civilians should be limited to EMC-related health care. For example: Burn patients at the 

San Antonio Military Medical Center, Traumatic brain injury rehabilitation at any of the National Intrepid Centers of 

Excellence, or rehabilitation at the Center for the Intrepid for amputations, burns, or functional limb loss. 303 National Defense, 32 CFR 728.2. A specified geographic area surrounding each Uniformed Services Medical 

Treatment Facility (USMTF) or designated Uniformed Services Treatment Facility (USTF). In the United States, 

catchment areas are defined by zip codes and are based on an area of approximately 40 miles in radius for inpatient 

care and 20 miles in radius for ambulatory care. 
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 Standardizing and increasing the number of local agreements to take advantage 

of the opportunities to provide the medical force more trauma-care training at 

civilian facilities. If operational medical requirements exceed the training 

capacity of the MTF system, DoD should have the authority to make training in 

civilian facilities a more prominent program and to seek ways to allow more 

medical forces to participate. To the extent possible, DoD should be able to 

standardize agreements with civilian hospitals to facilitate training by medical 

personnel across the Services. Agreements also need to be structured so that 

military medical personnel can be mobilized without introducing risk to the 

civilian facilities. 

 Segregating funding for beneficiary care from the cost of medical readiness in 

the DoD budget. As Recommendation 6 outlines in detail, beneficiary costs can 

be segregated by funding them through insurance premiums and a new Basic 

Allowance for Health Care. By doing so, additional readiness funds necessary to 

cover MTF costs would be budgeted separately, improving transparency, 

oversight, and allocation to the readiness mission. Improving transparency in 

medical readiness funding also helps ensure ongoing focus on medical research 

contributing to battlefield and expeditionary medicine. 

The MHS Modernization Study concluded that many MTFs without sufficient workload 

should discontinue their inpatient services.304 Although it may be appropriate to close 

inpatient services at some MTFs, doing so is not the only solution to workload and 

case mix shortfalls. In fact, closing or reducing services at MTFs may exacerbate 

workload issues at other facilities. Reducing the capability at too many MTFs has the 

potential to adversely affect the ability of the MHS to maintain sufficient capacity for 

wounded warrior care. Facility reduction may represent long-term risk to military 

medicine, and does not address the underlying problem. The military medical force 

requires access to the desired volume and mix of complex medical cases and trauma 

to maintain medical force readiness. 

Recommendations: 

 The Secretary of Defense, together with the Chairman of the Joint Chiefs of 

Staff, should seek to improve the oversight of joint medical readiness through 

the creation of newly established Joint Readiness Command led by a four-star 

general/flag officer, as well as transitioning the Joint Force Surgeon (J4) office 

to the J10 Medical Readiness Directorate in the Joint Staff. 

- The JRC should be a functional unified command led by a four-star military 

officer with broad responsibilities for readiness across DoD. Much of the 

required structure for this new command can be harvested from the Joint 

Staff which has grown in recent years to provide oversight of many of the 

functions that would be the responsibility of this new command. The JRC 

should include a subordinate joint medical function whose primary 

responsibilities include advising the JRC commander on the readiness 

status of the medical force, determining joint medical doctrine and 

 

304 Department of Defense, Military Health System Modernization Study, v.28, October 2014. 
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requirements,305 and advising joint sourcing of medical assets with Joint 

Staff J3 and J10. 

- The J10 Medical Readiness Directorate should be led by a three-star military 

medical officer whose primary responsibilities include advising the 

Chairman of the Joint Chiefs of Staff on medical readiness issues, advising 

the Joint Requirements Oversight Council, validating joint medical readiness 

requirements, chairing the JMROC, and participating in the PPBE process. 

 The Congress should establish the statutory requirement for DoD to maintain 

EMCs to promote and maintain certain medical capabilities within the military. 

Figure 12 shows components of EMCs, and Table 6 outlines roles and 

responsibilities regarding EMCs. 

Figure 12. Components of Essential Medical Capabilities 

Table 6. Roles and Responsibilities Regarding 

Essential Medical Capabilities 

Congress

1) Establish the statutory requirement for DoD to maintain EMCs

2) Establish requirement for Secretary of  Defense to report annually to the Congress on

EMCs

3) Establish requirement for Comptroller General to review annually DoD’s adherence to

EMC requirements

Secretary of

Defense

1) Approve the capabilities designated as EMCs and establish policies and standards to

maintain them  

2) Report annually to the Congress on EMCs and associated metrics

 

305 Services determine their own medical readiness requirements; the JMC would complete joint medical requirements 

analysis in support of joint combatant command operations. 
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Joint

Readiness

Command

(with regard

to military

medical

readiness)

1) Establish joint readiness requirements consistent with EMCs

2) Identify EMCs in collaboration with the Under Secretary of Defense for Personnel and

Readiness, the Joint Staff, and the Military Services.  

3) Monitor and report on Service adherence to EMC policies, standards, and medical

manning requirements and fill rates for each EMC

4) Participate in PPBE process to recommend allocation of medical readiness funding

from Service O&M Readiness accounts to fulfill EMCs

5) Recommend and coordinate usage of tools designed to assist in maintenance of

EMCs, including providing recommendations to Defense Health Agency (DHA) and the

Office of Personnel Management for annual negotiations with health insurance carriers

(see Recommendation 6)

6) Monitor and recommend allocation of medical personnel to locations to ensure

maintenance of EMCs

J10/Joint

Readiness

Directorate

1) Advise the Chairman on medical readiness issues

2) Advise Joint Requirements Oversight Council (JROC) on medical readiness issues

3) Chair the Joint Medical Readiness Oversight Council (JMROC)

4) Participate in PPBE process on medical readiness issues

Services

1) Develop Service‐specific medical readiness requirements

2) Submit to JRC the core manning requirements that directly fulfill each EMC, by

medical specialty.   

3) Maintain at all times the medical specialties required for EMCs, without substitution

4) Regulate medical manning requirements and fill rates that fulfill each EMC

5) Manage preservation of core skills that are required for each EMC  

6) Adhere to EMC policies and standards

 EMCs should be defined as a limited number of critical medical capabilities that 

must be retained within the military for national security purposes. These 

capabilities are vital to effective and timely health care during contingency 

operations. EMCs should include clinical and logistics capabilities necessary to 

accomplish operational requirements such as combat casualty care; medical 

response to and treatment of injuries sustained from chemical, biological, 

radiological, nuclear, and explosives incidents; diagnosis and treatment of 

infectious diseases; aerospace medicine; and undersea medicine. EMCs also 

include a limited number of SMCs not primarily performed in theater but 

commonly associated with military operations (e.g., therapy for post-traumatic 

stress disorder).306 EMCs should not include medical missions or specialties not 

commonly associated with operational military medicine or SMCs. The Congress 

should require the Secretary of Defense and GAO to report annually on EMCs 

and their associated readiness metrics. 

- The Secretary of Defense should approve the capabilities designated as 

EMCs and establish policies to maintain them, including standards for the 

 

306 Care provided for Specialized Military Conditions (SMC) refers to the diagnosis, treatment, and rehabilitation of 

certain conditions incurred as a direct result of military activity, i.e., amputations, certain musculoskeletal trauma, 

burns, traumatic brain injuries, and post-traumatic stress disorder. SMCs are unusual medical conditions that are 

particularly associated with military action during major operations and training exercises and are not typically 

common among the civilian population. SMCs should evolve to reflect emerging medical conditions that result from 

changes in warfighting and advancements in commercial-sector medical treatments. 
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mix and volume of medical cases based on widely accepted metrics of the 

medical profession and the unique readiness requirements of the military. 

- The JRC should measure adherence to the Secretary’s EMC policies and 

standards using information pertaining to personnel, training, and MTFs 

provided by the Services. The JRC should participate in the PPBE process to 

advise on appropriate funding levels for military medical readiness and the 

allocation of such funds to best maintain EMCs. Upon identifying a shortfall 

in maintaining EMC standards, the JRC should recommend employing the 

following tools based on local market conditions, some of which relate to the 

commercial insurance benefit described in Recommendation 6: 

 Adjustments to procedure prices for EMC-related cases that MTFs 

charge to insurance carriers. 

 Adjustments to beneficiary copayments to incentivize use of the 

MTFs. The JRC should coordinate with the DHA on DoD’s annual 

recommendations to the Office of Personnel Management (OPM) and 

the insurance carriers, as required with implementation of 

Recommendation 6 of this report. 

 Authority to allow veterans and civilians with cases that are needed 

for EMC skill maintenance to be treated in MTFs.307

 Permanent Change of Station assignments of the medical force to 

civilian hospitals or VA facilities to offer alternative venues for skill 

maintenance. 

- The Services should develop the means for adhering to EMC policies and 

clinical skill maintenance standards. 

 The Services should closely manage the preservation of core skills 

that are directly required for each EMC approved by the Secretary of 

Defense. 

 The Services should carefully regulate the manning requirements 

and personnel fill rates, by medical specialty, that directly fulfill each 

EMC. 

 Services should not substitute medical specialties required for EMCs. 

 The Services should submit to the JRC a description of these core 

skills and the actions taken to achieve the Secretary’s skill 

maintenance standards. The Services should submit to the JRC these 

medical personnel requirements and fill rates. 

 

307 The Code of the Federal Regulations specifies the priority level assigned to categories of DoD beneficiaries with 

space-available access to MTFs. Veterans and civilians should be added at a level below the existing priority groups, 

and EMC-related medical cases should be included as a factor in the prioritization. Veterans and civilians seeking 

medical treatment of the same type as DoD beneficiaries should not displace DoD beneficiaries in the existing priority 

groups. 
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 The Congress should adjust the flow of funding to better align DoD medical 

programs with their purpose and operations. 

- Funding for active-duty family, retiree, and Reserve Component health care 

should be contained in Services’ Military Personnel (MILPERS) budget 

accounts. 

- The MERHCF should be expanded to cover the health care and pharmacy 

programs for non-Medicare-eligible retirees. Non-Medicare-eligible retiree 

health care should be accrual funded, similar to how Medicare-eligible 

retiree health care is today. 

- To finance the new health care program for active-duty families, RC 

members and families, and non-Medicare-eligible retirees (see 

Recommendation 6), funds should be transferred as follows: 

 For active-duty families and RC members and families, funds should 

be transferred from the MILPERS accounts to the Employee Health 

Benefits Fund managed by OPM. 

 For non-Medicare-eligible retirees, funds should be transferred from 

the MERHCF to the Employee Health Benefits Fund managed by 

OPM. 

- To finance the existing pharmacy and dental programs for families and RC 

members and families and pharmacy, dental, and health care for active-duty 

Service members, a new trust fund should be created and managed by DoD 

for health care expenditures appropriated in the current year. 

- The MTFs should be funded through a revolving fund using the 

reimbursements they receive for care delivered. 

- In the case of MTF operations that are deemed required for EMC skill 

maintenance, costs that exceed the revenue generated from the delivery of 

care should be paid by the Services’ Operations and Maintenance (O&M) 

accounts. This amount would be a necessary cost of readiness of the 

medical force. 

- The Congress should eliminate the Defense Health Program budget account 

because health care should be funded from MILPERS accounts for transfer 

to the trust funds referenced above and readiness costs should be resourced 

from Services’ O&M accounts. 

 Catchment areas around MTFs should be rescinded, allowing MTFs to attract 

cases unrestricted by geographic vicinity. 

Implementation: 

 10 U.S.C. Chapter 6 governs the Combatant Commands of the military. Chapter 

6 should be amended by adding a new section that establishes a Joint 

Readiness Command (JRC). 
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 10 U.S.C. § 155 governs the Joint Staff. This section should be amended to add 

a new provision that establishes a new directorate (J10) responsible for medical 

readiness. 

 A new chapter, Chapter 174, Sustainment of Essential Medical Capabilities, 

should be created in Title 10 of the United States Code. The chapter should: 

establish a general definition of essential medical capabilities (EMCs); require 

the Secretary of Defense to establish EMCs in consultation with the JRC and to 

develop policies to maintain EMCs; require the Services to maintain EMCs and 

the JRC to track the Services’ capabilities relating to EMCs; and require annual 

reporting to the Congress by both DoD and the Government Accountability 

Office on DoD’s progress establishing EMCs and meeting goals relating to 

EMCs. 

 Chapter 101, Title 10, U.S. Code governs general military training. Chapter 101 

should be amended to add a new section, authorizing the Secretary of Defense 

and each Secretary concerned to permit military medical personnel to train in 

VA or civilian facilities. 

 5 CFR 199.17 should be amended to include veterans and civilians with EMCrelated cases at a priority level below the existing beneficiary groups and to 

include EMC-related medical cases as a factor in the prioritization. The section 

should also be amended to eliminate geographic “catchment areas” for MTFs. 

 Any other regulations (including the Code of Federal Regulations, if applicable) 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. 
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Recommendation 6: Increase access, choice, and value of 

health care for active-duty family members, Reserve 

Component members, and retirees by allowing beneficiaries to 

choose from a selection of commercial insurance plans 

offered through a Department of Defense health benefit 

program. 

Background: 

The Department of Defense’s TRICARE program provides health care benefits for 

Active Component (AC) Service members, Reserve Component (RC) members, retirees, 

their dependents, survivors, and some former spouses at Military Treatment Facilities 

(MTFs) or through a network of civilian health care providers.308 TRICARE comprises 

three main plans:309 TRICARE Prime, which is structured as a health maintenance 

organization (HMO);310 TRICARE Standard, which is a nonnetwork, fee-for-service 

(FFS)311 plan;312 and TRICARE Extra, which is also an FFS plan, but with a preferred 

provider organization (PPO).313 Members of the National Guard and Reserve can 

purchase TRICARE Reserve Select, which is a premium-based health plan.314 

 

308 See generally Armed, Forces, 10 U.S.C. ch. 55. See also Department of Defense, Evaluation of the TRICARE Program: 

Access, Cost, and Quality, Fiscal Year 2013 Report to Congress, 5, accessed June 20, 2014, 

http://tricare.mil/tma/dhcape/program/downloads/TRICARE2013%2002_28_13%20v2.pdf. Members of the 

Uniformed Services and their dependents also are eligible for TRICARE. See MCRMC, Report of the Military 

Compensation and Retirement Modernization Commission: Interim Report, June 2014, 116-117, 

http://www.mcrmc.gov/index.php/reports. The individuals listed are considered eligible “beneficiaries” for the 

TRICARE program. Additional information and discussion on eligibility requirements can be found at www.tricare.mil 

(https://www.tricare.mil/Plans/Eligibility.aspx), the official website of the Defense Health Agency (DHA), a component 

of the Military Health System.

309 The President’s Budget for FY 2015 included a proposal to consolidate TRICARE Prime, Standard, and Extra options 

into one plan. For a description of the PB 2015 health care proposals, see Office of the Undersecretary of Defense 

(Comptroller), United States Department of Defense, Fiscal Year 2015 Budget Request Overview (March 2014), 5-10–

5-14, accessed April 14, 2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pd

f. 

310 National Defense, 32 CFR 199.17(a)(6)(ii)(A). See also Department of Defense, TRICARE Choices at a Glance, 3, 

accessed June 20, 2014, 

http://www.tricare.mil/~/media/Files/TRICARE/Publications/BrochuresFlyers/Choices_Glance_BR.pdf. A Health 

Maintenance Organization (HMO) is “A type of health insurance plan that usually limits coverage to care from doctors 

who work for or contract with the HMO. It generally won’t cover out-of-network care except in an emergency. An HMO 

may require you to live or work in its service area to be eligible for coverage. HMOs often provide integrated care and 

focus on prevention and wellness.” “Health Maintenance Organization (HMO),” Healthcare.gov, accessed October 24, 

2014, https://www.healthcare.gov/glossary/health-maintenance-organization-HMO/. 311 Fee-for-Service is “a method in which doctors and other health care providers are paid for each service performed. 

Examples of services include tests and office visits.” “Fee-for-Service,” Healthcare.gov, accessed October 24, 2014, 

https://www.healthcare.gov/glossary/fee-for-service/. 

312 National Defense, 32 CFR 199.17(a)(6)(ii)(C). National Defense, 32 CFR 199.17(f). Department of Defense, Evaluation 

of the TRICARE Program Fiscal Year 2014 Report to Congress, 5, accessed June 20, 2014, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20%28FY 

%202014%29%201.pdf. 

313 National Defense, 32 CFR 199.17(a)(6)(ii)(B). “TRICARE Standard and Extra,” Defense Health Agency, accessed 

June 20, 2014, http://www.tricare.mil/Plans/HealthPlans/TSE.aspx. A Preferred Provider Organization is “A type of 

health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating 

providers. You pay less if you use providers that belong to the plan’s network. You can use doctors, hospitals, and 

providers outside of the network for an additional cost.” “Preferred Provider Organization,” Healthcare.gov, accessed 

October, 24, 2014, https://www.healthcare.gov/glossary/preferred-provider-organization-PPO/. 

314 National Defense, 32 CFR 199.24(a)(1). Department of Defense, TRICARE Choices at a Glance, 4, accessed June 20, 

2014, http://www.tricare.mil/~/media/Files/TRICARE/Publications/BrochuresFlyers/Choices_Glance_BR.pdf. 
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In TRICARE Prime, beneficiaries must enroll with a primary-care manager (PCM) in an 

MTF or with a civilian provider.315 Care is predominantly accessed by first visiting the 

PCM, who refers patients for additional required care to other providers.316 TRICARE 

Prime involves no costs for AC family members.317 The annual enrollment fees for 

non-Medicare-eligible retirees in fiscal year 2015 are $277.92 for a single person and 

$555.84 for a family.318 Retirees enrolled in Prime pay $12 copayments for outpatient 

visits unless they go to nonnetwork providers, in which case copayments carry a 

point-of-service charge.319 In 2012, there were approximately 5.5 million beneficiaries 

enrolled in TRICARE Prime.320

Beneficiaries are not required to enroll in TRICARE Standard and Extra, but those 

who choose to use the two programs have an annual deductible for outpatient 

services.321 They can see any provider without referral.322 Annual deductibles vary 

from $50 to $300, depending on status (AC, RC, or retired) and pay grade.323

Beneficiaries pay a share of procedure costs, but annual out-of-pocket (OOP) expenses 

are limited to a $1,000 catastrophic cap for AC and RC families per year, and a $3,000 

catastrophic cap for all others, including retirees, per year.324 TRICARE Reserve Select 

has a similar payment structure, except participants also pay monthly premiums of 

$50.75 for an individual or $205.62 for a family, as of January 1, 2015.325 An 

estimated one million beneficiaries used TRICARE Standard and Extra at least once in 

2012.326 More than 240,000 RC members purchased TRICARE Reserve Select in 

2012.327

 

315 National Defense, 32 CFR 199.17(n)(1); Assistant Secretary of Defense (Health Affairs) memorandum, TRICARE 

Policy for Access to Care, February 23, 2011, accessed November 6, 2014, 

http://www.health.mil/~/media/MHS/Policy%20Files/Import/11-005.ashx. 

316 “Book Appointments,” Defense Health Agency, accessed December 19, 2014, 

http://www.tricare.mil/FindDoctor/Appointments.aspx. 

317 Department of Defense, TRICARE Choices at a Glance, 3, accessed June 20, 2014, 

http://www.tricare.mil/~/media/Files/TRICARE/Publications/BrochuresFlyers/Choices_Glance_BR.pdf. 318 “Prime Enrollment Fees,” Defense Health Agency, accessed October 24, 2014, 

http://www.tricare.mil/Costs/HealthPlanCosts/PrimeOptions/EnrollmentFees.aspx. 

319 “Prime Network Copayments,” Defense Health Agency, accessed October 24, 2014, 

http://www.tricare.mil/Costs/HealthPlanCosts/PrimeOptions/Copayments.aspx. When Prime beneficiaries go to 

nonnetwork providers, they pay point-of-service fees instead of regular copayments. The cost for outpatient visits and 

hospitalization under this scenario is 50 percent of the TRICARE allowable charge. “Point of Service Option,” Defense 

Health Agency, accessed November 5, 2014, http://www.tricare.mil/Costs/HealthPlanCosts/PrimeOptions/POS.aspx. 320 “Approaches to Reducing Federal Spending on Military Health Care,” Congressional Budget Office, January 2014, 7, 

accessed November 18, 2014, https://www.cbo.gov/publication/44993. 

321 National Defense, 32 CFR 199.17(m). Department of Defense, TRICARE Standard Fact Sheet, accessed June 20, 

2014, http://www.tricare.mil/~/media/Files/TRICARE/Publications/FactSheets/TSE_FS.pdf. 322 “TRICARE Standard and Extra,” Defense Health Agency, accessed October 24, 2014, 

http://tricare.mil/Plans/HealthPlans/TSE.aspx. 323 “TRICARE Standard and Extra Costs,” Defense Health Agency, accessed October 24, 2014, 

http://www.tricare.mil/Costs/HealthPlanCosts/TSE.aspx. 

324 “Catastrophic Cap,” Defense Health Agency, accessed December 18, 2014, 

http://www.tricare.mil/Costs/CatCap.aspx 

325 “TRICARE Reserve Select Costs,” Defense Health Agency, accessed October 24, 2014, 

http://tricare.mil/Costs/HealthPlanCosts/TRS.aspx. 326 “Approaches to Reducing Federal Spending on Military Health Care,” Congressional Budget Office, January 2014, 7, 

accessed November 18, 2014, https://www.cbo.gov/publication/44993. Note that TRICARE Standard and Extra do not 

require enrollment and retirees often use Standard and Extra to supplement civilian health insurance, making it 

difficult to measure accurately the number of beneficiaries that rely on the program for their health coverage. 

Estimates of Standard and Extra users typically measure the number of beneficiaries who have used medical services 

under Standard or Extra at least once in the year under consideration. 327 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2013 Report to 

Congress, 96, accessed December 18, 2014, 

http://health.mil/Military-Health-Topics/Access-Cost-Quality-and-Safety/Health-Care-Program-Evaluation/AnnualEvaluation-of-the-TRICARE-Program. 
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The findings and recommendations below address the ways beneficiaries access health 

care, the choices they have regarding their care, and the value of this benefit. Under 

the Commission’s recommended changes, AC members, because of readiness 

requirements, would still use their respective unit-level medical capability and, as 

necessary, MTFs as their primary access points for medical care. When referred to the 

private sector, AC members would have access to an unlimited network of providers at 

no cost to the member. DoD beneficiaries would continue to have access to care in 

MTFs.328 

This recommendation would provide new financial tools, such as lower copayments 

and reduced reimbursement rates for certain procedures at MTFs, which could attract 

workload and particular complex cases to MTFs. This additional workload would 

provide training opportunities for military medical personnel to maintain critical 

combat care skills and remain ready for operational missions. These tools require 

strong, centralized oversight to be used efficiently and effectively to support joint 

medical readiness. Such oversight, along with associated definitions and skill 

maintenance standards, are discussed in detail in Recommendation 5 of this Report, 

which should be considered an integral part of this recommendation.

For additional information on TRICARE programs, please see the Health Benefits: 

Department of Defense sections of the Report of the Military Compensation and 

Retirement Modernization Commission: Interim Report (sec. 4.1). 

Findings: 

Since its creation, TRICARE has deteriorated relative to the goals of this Commission. 

The quality of TRICARE benefits as experienced by Service members and their families 

has decreased, and fiscal sustainability of the program has declined. For example, and 

as explained below, TRICARE costs for beneficiaries have not kept pace with inflation, 

increasing budgetary pressures within DoD. In response, DoD has revised TRICARE 

contracts to restrict benefits coverage, including the recent reduction in TRICARE 

Prime service areas; and TRICARE contractors have negotiated provider 

reimbursement rates below Medicare levels that have restricted access to care. 

Alternative means of providing health care to TRICARE beneficiaries could restore both 

quality and fiscal sustainability. 

Access to Care 

According to beneficiaries, timely and convenient access to care is a critical element of 

a high quality, properly functioning health care benefit, yet many TRICARE users 

expressed frustration with this element.329 Typical of this concern was the comment of 

one survey respondent who wrote, “I have an assigned primary care provider, but 

never see them due to lack of available appointments. I usually see a different provider 

each time I make an appointment. There is no continuity of care.”330 Gaining access to 

medical services is largely dependent on the number of providers available to 

beneficiaries and the process and time required for beneficiaries to see those 

 

328 These findings and recommendations do indirectly affect the funding mechanism for MTFs, which is described in 

Recommendation 5. These funding changes, however, will not materially affect patient care or experiences within 

MTFs. 

329 See for example: Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 330 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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providers. The Commission found areas for improvement with respect to both 

variables.

Cumbersome Referral and Authorization Process. The process enabling TRICARE 

Prime beneficiaries to gain access to care is often lengthy and frustrating. The 

Commission heard many complaints regarding the process by which beneficiaries 

make appointments with providers, including specialty providers that require prior 

authorization. One aspect of this process that often exasperates TRICARE Prime users 

is the amount of time that passes before they can see a specialty provider. According 

to DoD guidelines for scheduling appointments, beneficiaries seeking urgent care 

should be seen within 24 hours.331 The goal for routine care is 7 calendar days, and 

wellness or nonurgent specialty care is 28 calendar days.332 

The Commission found, however, that getting access to specialty care under TRICARE 

Prime can, in reality, take much longer and is often a complicated process. To receive 

access to TRICARE Prime services, beneficiaries must first see their primary care 

managers, who give referrals for additional care as needed.333 Beneficiaries are referred 

for treatment in MTFs first, which have priority for providing both inpatient and 

specialty care for all TRICARE Prime enrollees.334 If care is unavailable in an MTF, 

then referrals are given for treatment by civilian providers in the TRICARE network.335 

In all cases, if an appointment cannot be provided within the prescribed timelines 

either in an MTF or the TRICARE network, the beneficiary would be offered the 

opportunity to seek the required care outside the TRICARE network.336 Beneficiaries 

are referred to non-TRICARE network civilian providers “only when it is clearly in the 

best interest of the Government and the beneficiary, either clinically or financially.”337

If beneficiaries receive care without a referral, other than in an emergency situation, 

they may be subject to paying point-of-service OOP fees.338 It can actually take as long 

as 35 days to receive specialty care based on DoD standards: 7 days for the first 

appointment for the primary care manager plus an additional 28 days for the specialty 

appointment. 

There is considerable dissatisfaction with this situation. A survey respondent wrote, “It 

takes 30-60 days to have an appointment to see my primary care physician. That is 

unacceptable.”339 Another stated, “Access time to care is poor. [I] would rather pay for 

civilian service at times. [With the current system] I have to wait months to find out if 

 

331 National Defense, 32 CFR 199.17(p)(5)(ii). 332 National Defense, 32 CFR 199.17(p)(5)(ii). 333 National Defense, 32 CFR 199.17(n)(1). Assistant Secretary of Defense (Health Affairs), TRICARE Policy for Access to 

Care, February 23, 2011, accessed November 6, 2014, 

http://www.health.mil/~/media/MHS/Policy%20Files/Import/11-005.ashx. “Book Appointments,” Defense Health 

Agency, accessed October 23, 2014, http://www.tricare.mil/FindDoctor/Appointments.aspx. 334 Assistant Secretary of Defense (Health Affairs), TRICARE Policy for Access to Care, February 23, 2011, 3, accessed 

November 6, 2014, http://www.health.mil/~/media/MHS/Policy%20Files/Import/11-005.ashx. 

335 When care is unavailable in an MTF, this usually means the care is not provided within the MTF or the care is not 

available within the time frame of the established standards for access to care. Assistant Secretary of Defense (Health 

Affairs), TRICARE Policy for Access to Care, February 23, 2011, 3, accessed November 6, 2014, 

http://www.health.mil/~/media/MHS/Policy%20Files/Import/11-005.ashx. 

336 Assistant Secretary of Defense (Health Affairs), TRICARE Policy for Access to Care, February 23, 2011, 3, accessed 

November 6, 2014, http://www.health.mil/~/media/MHS/Policy%20Files/Import/11-005.ashx. 

337 Ibid. 338 “Book Appointments,” Defense Health Agency, accessed October 23, 2014, 

http://tricare.mil/FindDoctor/Appointments.aspx. “Point-of-Service Option,” Defense Health Agency, accessed 

October 23, 2014 http://tricare.mil/Costs/HealthPlanCosts/PrimeOptions/POS.aspx. 

339 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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something is wrong then it is too late to [the] correct issue.”340 Another survey 

respondent explained, “It takes a month for my wife to get an appointment. This is 

totally unsatisfactory. Part of the reason I joined the Army was for the health care for 

my family.”341 

Numerous organizations have argued on behalf of Service members and their families 

for improved access standards and simplified referral processes. For example, the 

National Association for Children’s Behavioral Health (NACBH) provided the 

Commission a written example of the problems beneficiaries experience when 

attempting to gain access to mental health providers in the TRICARE system: 

“It is not unusual for a family member to be given a list of names and 

phone numbers for 30 to 100 community therapists, only to find that those 

providers are not currently accepting TRICARE patients, or that the first 

available appointment is too far in the future. In one instance, a mental 

health professional at the MTF called over 100 listed mental health 

providers and found only three who would accept new TRICARE referrals. 

Commonly, family members report that they give up after the tenth or 

eleventh call.”342

The Military Officers Association of America recently advocated for better access to 

care by “improving appointing systems, ensuring compliance with access timeliness 

standards by offering civilian appointments when military appointments are 

unavailable, and reducing/eliminating pre-authorization requirements that impede 

timely care delivery.”343 In the words of the National Military Family Association, “The 

current TRICARE Prime referral and authorization process can be cumbersome and 

sometimes prevents timely access to specialty care.”344 DoD survey data on access to 

care provides further evidence of the frustration conveyed by these groups. Figure 13 

shows that civilians generally experience greater ease and timeliness in obtaining 

health care services than beneficiaries in TRICARE.345 For example, as DoD reported, 

 

340 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 341 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 342 National Association for Children’s Behavioral Health, letter to MCRMC, 2, July 31, 2014. 343 “TRICARE Prime and TRICARE Standard Improvements,” Military Officers Association of America, accessed 

November 8, 2014, 

http://www.moaa.org/Main_Menu/Take_Action/Top_Issues/Serving_in_Uniform/TRICARE_Prime_and_TRICARE_Stan

dard_Improvements.html. 

344 National Military Family Association, Statement of the National Military Family Association before the Subcommittee 

on Military Personnel, Armed Services Committee, U.S. Senate, March 26, 2014, 9, http://www.armedservices.senate.gov/imo/media/doc/Moakler_03-26-14.pdf. 

345 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, 38, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. DoD conducts the Health Care Survey of DoD Beneficiaries (HCSDB) to assess customer satisfaction of 

TRICARE beneficiaries. The HCSDB questions are closely worded to, and results compared with, the Consumer 

Assessment of Healthcare Providers and Systems (CAHPS) surveys sponsored by the Agency for Healthcare Research 

and Quality. CAHPS surveys are nationally recognized resources for comparing health care experiences in the civilian 

sector. In the report, Evaluation of the TRICARE Program, DoD adjusts the CAHPS civilian benchmark data to account 

for demographic differences among the civilian and military populations. “Health Care Survey of DoD Beneficiaries 

(HCSDB) Overview,” Defense Health Agency, accessed 23 October 2014, http://www.tricare.mil/survey/hcsurvey/. 

Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, 99-100, accessed November 10, 2014, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf.
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85.3 percent of civilian survey respondents said they received care quickly, as opposed 

to 78.2 percent of DoD health care users.346 

Figure 13. Comparison of Access to Care for DoD and Civilian 

Health Care Users, FY 2013347

Beneficiaries’ preferences regarding access to care are evident in the Commission’s 

survey results. The survey included questions about the perceived value of several 

quality attributes pertaining to the health care benefit. Although choice was the most 

valued attribute (as will be discussed in more detail below), access measures such as 

flexible appointment scheduling, the ability to remain with the same provider, and the 

size of the network of available providers were all rated very highly by survey 

respondents. For retiree survey respondents, improving the flexibility of appointment 

scheduling was perceived higher than the value of a 30 percent grocery discount at 

commissaries.348 

 

346 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, 38, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. In the report, Evaluation of the TRICARE Program, DoD reports a “civilian benchmark” that adjusts 

CAHPS data to account for demographic differences among the civilian and military populations. The CAHPS and 

HCSDB surveys ask respondents about their access to care using composite measures of frequency. See Agency for 

Healthcare Research and Quality, CAHPS Health Plan Surveys; Version: Adult Commercial Survey 5.0, accessed 

December 6, 2014, https://cahps.ahrq.gov/surveys-guidance/survey5.0-docs/2151a_engadultcom_50.pdf and 

“TRICARE Adult Beneficiary Reports Help Index,” Department of Defense, accessed December 6, 2014, 

http://www.tricare.mil/survey/hcsurvey/2014/bene/fy2014/html/help.htm#composite. 

347 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, 38, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. In the report, Evaluation of the TRICARE Program, DoD reports a “civilian benchmark” that adjusts 

CAHPS data to account for demographic differences among the civilian and military populations. 348 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 
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DoD recently reviewed access to care under the Military Health System (MHS). DoD 

reported a range of 7 to 23 days in wait times to see specialty providers in MTFs;349

however, DoD concluded there was a “notable difference between data that reflect 

compliance with access standards and the reported satisfaction of patients with their 

ability to receive timely care in MTFs.”350 The Commission’s review of beneficiary 

comments and satisfaction surveys confirms there is widespread discontent for access 

to care within the MHS. 

DoD also acknowledged that results across the system varied and insufficient data 

from the purchased care network impeded the analysis.351 The number of days Prime 

beneficiaries wait to gain access to specialists in the purchased-care network is not 

available, but whether or not these beneficiaries’ referrals result in an appointment 

within 28 days is known.352 DoD reports the percentage of referrals that met the 28-

day access standard for specialty appointments ranged from 53 percent to 84 percent 

in the purchased care network depending on the location.353 In other words, in some 

locations approximately half of the referrals to the purchased care network resulted in 

beneficiaries waiting more than 28 days to see a specialist; and even in locations with 

the highest reported access to care, 16 percent of referrals still do not get 

appointments within the 28-day standard. 

Gaining access to medical care in the civilian sector through various commercial 

insurance plans can be a simpler, quicker endeavor than under TRICARE. For 

example, a 2014 study surveyed about 1,400 physician offices to determine the 

average delays for physician appointments in 15 metropolitan areas and five 

specialties.354 The study found, “The average cumulative wait time to see a physician 

for all five specialties surveyed in 2014 in all 15 markets was 18.5 days.”355

 

349 Department of Defense, Final Report to the Secretary of Defense: Military Health System Review, August 2014, 47, 

accessed November 7, 2014, http://www.defense.gov/pubs/140930_MHS_Review_Final_Report_Main_Body.pdf. The 

DoD reported a precise range of 6.5 to 22.8 days, which is rounded here. 

350 Department of Defense, Final Report to the Secretary of Defense: Military Health System Review, August 2014, 4, 

accessed November 7, 2014, http://www.defense.gov/pubs/140930_MHS_Review_Final_Report_Main_Body.pdf. 351 “The purchased care component [of the MHS], which is used when care cannot be provided within the military 

system, includes civilian network hospitals and providers operated through TRICARE regional contracts.” Department 

of Defense, Final Report to the Secretary of Defense: Military Health System Review, August 2014, 2 and 4, accessed 

November 7, 2014, http://www.defense.gov/pubs/140930_MHS_Review_Final_Report_Main_Body.pdf. 

352 According to DoD, “purchased care data are not available, primarily due to alternative access measures defined by 

contract specifications, leaving a sizable blind spot for understanding access in the purchased care component.” 

Department of Defense, Final Report to the Secretary of Defense: Military Health System Review, August 2014, 4, 

accessed December 22, 2014, http://www.defense.gov/pubs/140930_MHS_Review_Final_Report_Main_Body.pdf. 

353 Department of Defense, Final Report to the Secretary of Defense: Military Health System Review, August 2014, 66, 

accessed November 7, 2014, http://www.defense.gov/pubs/140930_MHS_Review_Final_Report_Main_Body.pdf. 

The percentage of referrals meeting the 28-day access standard varied from 53 percent and 84 percent based on Prime 

Service Area (PSA), which is the area within 40 miles of an MTF. The TRICARE regional contractors are required to 

establish networks of providers to serve PSAs. Department of Defense, Final Report to the Secretary of Defense: Military 

Health System Review, August 2014, 64, accessed November 7, 2014, 

http://www.defense.gov/pubs/140930_MHS_Review_Final_Report_Main_Body.pdf. 

354 Merritt Hawkins, Physician Appointment Wait Times and Medicaid and Medicare Acceptance Rates, 4, accessed 

October 23, 2014, 

http://www.merritthawkins.com/uploadedFiles/MerrittHawkings/Surveys/mha2014waitsurvPDF.pdf. The 

metropolitan areas were Atlanta, Boston, Dallas, Denver, Detroit, Houston, Los Angeles, Miami, Minneapolis, New 

York, Philadelphia, Portland, San Diego, Seattle, and Washington, D.C. The specialties were cardiology, dermatology, 

obstetrics-gynecology, orthopedic surgery, and family practice. 

355 Merritt Hawkins, Physician Appointment Wait Times and Medicaid and Medicare Acceptance Rates, 6, accessed 

October 23, 2014, 

http://www.merritthawkins.com/uploadedFiles/MerrittHawkings/Surveys/mha2014waitsurvPDF.pdf. 
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Limited Provider Networks. Another important part of good access to care is having 

ample health care providers available to provide treatment. The TRICARE networks of 

civilian health care providers, however, are limited because TRICARE reimburses 

providers for health care procedures at a rate equal to or lower than the Medicare 

reimbursement rate.356 According to the U.S. Government Accountability Office (GAO), 

“Beginning in fiscal year 1991, in an effort to control escalating health care costs, the 

Congress instructed DoD to gradually lower its reimbursement rates for individual 

civilian providers to mirror those paid by Medicare.”357 GAO also reported that 

although TRICARE reimbursement rates are generally limited by law to Medicare 

rates, “network providers may agree to accept lower reimbursements as a condition of 

network membership.”358 As a result of TRICARE reimbursement rates negotiated by 

DoD’s contractors, civilian providers “would not accept new TRICARE patients even 

though they would accept new Medicare patients.”359 

According to the American Academy of Pediatrics, “These discounts [below Medicare 

rates] can be as high as 20 percent, but are usually between 10 and 15 percent.”360

Studies have found because TRICARE offers reimbursement rates below those of other 

health plans, some providers refrain from accepting TRICARE patients or limit the 

number of TRICARE patients they will treat.361 

Provider reimbursement rates have been a concern since TRICARE was implemented 

in the mid-1990s.362 Most recently, GAO studied the breadth of the TRICARE network 

and concluded, “Overall, during 2008-2011, an estimated one in three nonenrolled 

beneficiaries (about 31 percent) experienced problems finding any type of civilian 

provider—primary, specialty, or mental health care provider—who would accept 

TRICARE.”363 The most cited reason why nonenrolled beneficiaries thought they were 

having issues getting access to providers (whether primary care, specialty care, or 

mental health) was “doctors not accepting TRICARE payments.”364 When providers 

themselves were surveyed, the reasons for not accepting new TRICARE patients varied 

by provider type, but the most common reason specialty providers offered was 

“reimbursement.”365 DoD beneficiaries’ access to a full range of high quality doctors 

can be limited, especially in locations that are not robust, mature health care 

markets.366 

 

356 Armed Forces, 10 U.S.C. §§ 1079(h), 1079(j), and 1086(f). 357 Government Accountability Office, Defense Health Care: Access to Civilian Providers under TRICARE Standard and 

Extra, GAO-11-500 (June 2011), 11n, accessed October 19, 2014, http://www.gao.gov/new.items/d11500.pdf. 358 Ibid, 11. 359 Ibid, 15. 360 American Academy of Pediatrics, Letter to Jonathon Woodson, MD, Assistant Secretary of Defense for Health Affairs, 

March 27, 2014, 11, accessed October 12, 2014, 

http://www.autismspeaks.org/sites/default/files/docs/gr/aap_letter_on_fy13ndaa.pdf. 361 See, e.g., Government Accountability Office, Defense Health Care: Access to Care for Beneficiaries Who Have Not 

Enrolled in TRICARE’s Managed Care Option, GAO-07-48 (December 2006), 

http://www.gao.gov/assets/260/255029.pdf. 362 Government Accountability Office, Defense Health Care: Access to Civilian Providers under TRICARE Standard and 

Extra, GAO-11-500 (June 2011), 14, accessed October 19, 2014, http://www.gao.gov/new.items/d11500.pdf. 363 Government Accountability Office, Defense Health Care: TRICARE Multiyear Surveys Indicate Problems with Access 

to Care for Nonenrolled Beneficiaries, GAO-13-364, (April 2013), 18, accessed October 19, 2014, 

http://www.gao.gov/assets/660/653487.pdf. 

364 Ibid, 22. 365 Ibid, 31. 366 Economic analysis can be used to understand the effects of price controls. When price is not allowed to adjust to 

equalize supply and demand in a market, then the market begins to adjust along nonprice margins to clear. Markets 

will use the least distorting nonprice margins first (usually aspects of quality such as timeliness of access, clinical 
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DoD’s recent consideration of reducing payment levels for certain autism services is an 

example of the effect reimbursement rates can have on providers’ willingness to accept 

TRICARE patients. In September 2014, DoD announced it would reduce by 46 percent 

the payment rates for one-on-one therapy with board-certified behavior analysts for 

dependents with autism spectrum disorder.367 As noted in a survey conducted by 

Navigation Behavioral Consulting, 95 percent of TRICARE providers who treat children 

with autism spectrum disorder indicated they would reduce the services they offer, 

and 22 percent declared they would stop accepting TRICARE patients entirely if the 

reimbursement levels were changed.368 DoD has since announced it will postpone the 

change pending further analysis of the prevalent rates in the civilian sector.369 

A leading concern among TRICARE beneficiaries is the lack of doctors available to 

them in the TRICARE network. For example, one respondent to the Commission’s 

survey noted, “TRICARE for my children has been a mess. Health Care Providers drop 

TRICARE frequently and we have to find a new provider often.”370 The Commission 

found that the principal reason TRICARE networks have an insufficient number of 

participating doctors is low provider payments. By reimbursing doctors at rates equal 

to or less than Medicare levels, which are less than market rates, TRICARE has been 

unable to attract enough quality doctors. In contrast, commercial insurance carriers 

in the civilian sector offer fair-market value for physicians’ services. Furthermore, the 

civilian health care industry is able to adjust procedure reimbursement rates in 

response to changes in the supply and demand of physicians, or even to incentivize 

doctors to provide treatment more effectively and at lower cost. In fact, if DoD were to 

contract with commercial insurance carriers to provide beneficiaries health care plans, 

it would have a method for negotiating the rate at which insurance carriers reimburse 

for procedures performed at MTFs. This tool, as well as the others outlined in 

Recommendation 5, would allow DoD to attract cases to military hospitals and clinics. 

For beneficiaries, having a selection of commercial insurance plans would afford them 

the ability to choose a plan based on network, whether that is a robust network in 

general or simply the network that includes a particular provider. 

Choice 

The Commission focused on a few elements of choice most applicable to TRICARE and 

consistently raised by beneficiaries. In general, the Commission found TRICARE 

beneficiaries would prefer greater choice in health care. 

Preference for Greater Choice. A common theme the Commission heard from 

beneficiaries was choice. Because the medical care one receives affects each person 

individually, personal choice is a critical component of a health benefit. Patients can 

exercise choice in a variety of ways—for instance, the selection of benefits that best 

 quality, etc.) and, if all of these margins are exhausted and the market still has not cleared, ultimately refuse to take 

the patients. See Yoram Barzel, Economic Analysis of Property Rights, 2ed, (London: Cambridge University Press, 

1997), for a detailed examination of the effects of price controls. 367 Cheryl Pellerin, Defense Media Activity, “TRICARE Delays Change in Autism Reimbursement to April,” DoD News, 

(October 10, 2014), accessed October 22, 2014, http://www.defense.gov/news/newsarticle.aspx?id=123387. 368 Tim Devaney, “Pentagon to Delay Autism Spending Cuts,” The Hill, (October 8, 2014), accessed October 22, 2014, 

http://thehill.com/regulation/defense/220215-pentagon-to-delay-autism-spending-cuts (discussing Navigation 

Behavioral Consulting’s survey on ABA services provided by TRICARE providers, accessed January 5, 2015, 

http://freeonlinesurveys.com/app/rendersurvey.asp?sid=d5a987g5xf3fjca541500&refer=).

369 Cheryl Pellerin, Defense Media Activity, “TRICARE Delays Change in Autism Reimbursement to April,” DoD News, 

(October 10, 2014), accessed October 22, 2014, http://www.defense.gov/news/newsarticle.aspx?id=123387. 370 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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meets one’s medical needs, the preference for physicians, and trade-offs between a 

health plan’s costs and features. In fact, choice was advocated in sensing sessions 

with the Service members and family members, write-in comments from beneficiaries, 

and the evidence gathered in the Commission’s survey of Service members and 

retirees. For example, a survey respondent explained the importance of choosing one’s 

provider: “I feel that it is very important to be able to choose a health care provider, 

because when you are receiving care, you begin to trust that provider. When you find 

a provider that KNOWS you, and what works for YOU, that is important.”371 The 

Commission specifically asked about several aspects of choice in its survey. For all 

three categories of survey respondents (AC, RC, and retirees), choice of health care 

provider was the highest valued attribute from a list of six health care attributes 

provided.372 For AC and RC members, the second most valued attribute was access to 

a large network of providers, a characteristic that encourages choice (this attribute 

was third for retirees).373 For retirees, the perceived value of increasing choices among 

health care providers, which was only one of the six health care attributes presented, 

was higher than the value of a 35 percent grocery discount at commissaries or a 

20 percent one-time cost of living adjustment.374 Figure 14 provides the importance 

ratings for retiree survey respondents for the six attributes included. 

Figure 14. Retirees’ Importance Ratings: 

Health Care Experiences375

The results of the Commission survey are consistent with research reported in 

academic literature. In a study on employer-sponsored insurance with no or very 

limited choice among health care plans, researchers found that workers would be 

willing to forfeit 16 percent of their employer-provided health care subsidies for the 

 

371 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 372 The six attributes were (in order of preference for AC respondents) ability to choose provider, a large network of 

providers, flexibility in appointment scheduling, ability to remain with same provider (continuity of care), wait times at 

provider office, and travel time to provider. 

373 For active AC respondents, this attribute was second in average ranking but third in median perceived value. 374 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 375 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 
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freedom to use these subsidies to obtain their choice of plan from a menu of plans.376

This research is especially pertinent because it studied workers who have very few 

choices among employer-provided health care plans, sometimes only one option. This 

situation is similar to TRICARE. In a scenario where beneficiaries are provided very 

few choices of plans, “The restriction of employee choice may prevent individuals and 

families from selecting the healthplan that best suits their needs, and from trading off 

added benefits against the associated premium increases.”377 

In the civilian sector, however, it is possible to offer a variety of plans that differ in 

benefits covered as well as program structure, including the procedures for obtaining 

care. Such is the case with respect to the Federal Employees Health Benefits Program 

(FEHBP), a Government-sponsored health program including more than 250 health 

insurance plans from which Federal civilian employees select coverage.378 Enrollees, 

depending on their geographic location, have at least 11 plan options in rural areas 

and dozens of plan choices in metropolitan areas.379 Types of plans range from HMOs 

and FFS plans with PPOs to consumer-driven health plans and high-deductible health 

plans.380 In the FEHBP, all plans cover medical and surgical care, mental health and 

substance abuse treatment, maternity care and pediatrics, preventative care including 

tobacco cessation (with no cost share or copayment), hospitalization and outpatient 

care, diagnostic and laboratory testing, physical, occupational, and speech therapy, 

emergency and ambulance service, and prescription drugs.381 The plan features that 

do vary are monthly premiums, copayments, coinsurance, deductibles, OOP 

maximums, and some covered benefits such as chiropractic care, acupuncture, 

infertility treatments, and dental care.382 In an arrangement like FEHBP, users would 

have the assurance of a core set of standard covered benefits, with the flexibility to 

choose among plans’ coverage and program designs. 

A selection of commercial health insurance plans in the style of FEHBP would greatly 

expand choice in health care and consequently provide beneficiaries demonstrated 

value, as explained above. This could be a great improvement over TRICARE’s three 

main plans or DoD’s FY 2015 proposal to consolidate TRICARE Prime, Standard, and 

Extra into one plan.383 

 

376 Leemore Dafny, Kate Ho, and Mauricio Varela, “Let Them Have Choice: Gains from Shifting Away from EmployerSponsored Health Insurance and Toward an Individual Exchange,” American Economic Journal: Economic Policy, 5, no. 

1, (2013): 33, 56.

377 Ibid, 32. 378 Office of Personnel Management, Federal Employees Health Benefits Program Overview, provided to MCRMC in 

Executive Session, January 15, 2014. FEHBP offered 256 plan choices in 2014. 

379 Office of Personnel Management, The 2015 Guide to Federal Benefits for Federal Civilian Employees, revised 

November 2014, RI 70-1, 32, accessed November 13, 2014, http://www.opm.gov/healthcareinsurance/healthcare/plan-information/guide/2015-guides/70-1.pdf; “Healthcare Plan Information,” Office of 

Personnel Management, accessed November 10, 2014, https://www.opm.gov/healthcare-insurance/healthcare/planinformation/compare-plans/. 380 Office of Personnel Management, Federal Employees Health Benefits Program Overview, provided to MCRMC in 

Executive Session, January 15, 2013. For definitions of consumer-driven health plans and high deductible health 

plans, see “Plan Types,” Office of Personnel Management, accessed November 10, 2014, 

https://www.opm.gov/healthcare-insurance/healthcare/plan-information/plan-types/. 

381 Office of Personnel Management, Federal Employees Health Benefits Program Overview, 9, provided to MCRMC in 

Executive Session, January 15, 2013. 

382 Ibid, 10 383 Office of the Undersecretary of Defense (Comptroller), United States Department of Defense Fiscal Year 2015 Budget 

Request Overview (March 2014), 5-10 – 5-14, accessed November 9, 2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pd

f. 
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Uniform Benefits Coverage Restricts Beneficiary Choice. TRICARE only offers 

three main health care plans, but restricts choice through a one-size-fits-all approach 

to covered benefits and determinations of medical necessity. Currently, the military 

health care benefit is “a uniform program of medical and dental care for members and 

certain former members of [the] Services, and for their dependents.”384 Because it is a 

uniform benefit, the TRICARE plan includes a common set of covered benefits for 

9.6 million eligible dependents, retirees, and RC members across the world.385 DoD 

determines the covered benefits for all beneficiaries based on “whether, from a medical 

point of view, the care is appropriate, reasonable, and adequate for the condition.”386

This uniformity of health care coverage can prevent beneficiaries from accessing 

certain medical treatments and services based on their individual needs. For this 

reason, some groups have advocated for more robust coverage of benefits under 

TRICARE. For example, the American Academy of Pediatrics (AAP) recently 

recommended that DoD broaden its benefit package for children of military members 

by adopting a more comprehensive regimen based on the Early and Periodic 

Screening, Diagnosis, and Treatment principles of care and the Bright Futures 

guidelines for preventative care.387 AAP stated that DoD should change its definition of 

medical necessity to accommodate children’s particular health care needs.388 The 

Military Officers Association of America recently made the case more frankly on its 

website, “One size does not fit all when it comes to meeting the health care needs of 

our military children.”389 

The appeals process for TRICARE coverage and decisions regarding medical necessity 

recently have come under scrutiny for being unfair.390 Military advocacy groups have 

argued that the appeals process is lengthy, confusing, and arbitrary.391 In response to 

a Senate Armed Services Committee inquiry, DoD submitted a report to the Congress 

 

384 Armed Forces, 10 U.S.C. § 1071. The Commission understands that dental care is offered through commercial 

insurance. 

385 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, 12, accessed December 19, 2014, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. 

386 Department of Defense, TRICARE Appeals Fact Sheet, accessed August 13, 2014, 

www.tricare.mil/~/media/Files/TRICARE/Publications/FactSheets/Appeals_FS.pdf. 387 American Academy of Pediatrics, Letter to Jonathon Woodson, MD, Assistant Secretary of Defense for Health Affairs,

March 27, 2014, 3-5, accessed October 12, 2014, 

http://www.autismspeaks.org/sites/default/files/docs/gr/aap_letter_on_fy13ndaa.pdf. AAP notes that TRICARE 

“largely mirrors the federal Medicare program, which is primarily focused on adults. (p. 3)” AAP therefore urges DoD to 

adopt the EPSDT standards, which are used in Medicaid and meet the specific “physical, emotional, and development 

needs of children (p. 4).” Bright Futures is a nationwide health-promotion and preventative-care program for infants, 

children, and adolescents required in section 2713 of the Affordable Care Act. 388 American Academy of Pediatrics, Letter to Jonathon Woodson, MD, Assistant Secretary of Defense for Health Affairs,

March 27, 2014, 3-6, accessed October 12, 2014, 

http://www.autismspeaks.org/sites/default/files/docs/gr/aap_letter_on_fy13ndaa.pdf. 389 “TRICARE for Kids Stakeholders Respond to DoD Study,” Military Officers Association of America, accessed October 

12, 2014, http://moaablogs.org/spouse/2014/09/tricare-for-kids-stakeholders-respond-to-dod-study/. 390 Committee on Armed Services, Report to Accompany S. 1197, the National Defense Authorization Act for Fiscal Year 

2014, S. Rpt 113-44 (June 20, 2013), 134, accessed November 21, 2014, http://www.gpo.gov/fdsys/pkg/CRPT113srpt44/pdf/CRPT-113srpt44.pdf. 

391 Amy Bushatz, “Report: Tricare Appeals Taking a Year,” Military.com, (June 13, 2014), accessed November 21, 2014, 

http://www.military.com/daily-news/2014/06/13/report-tricare-appeals-taking-ayear.html?comp=700001075741&rank=2. 
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on the TRICARE appeals process, which demonstrated the confusing nature of the 

appeals process.392 

DoD described how beneficiaries might appeal medical necessity decisions through a 

multilevel, sequential process that involves requests for the TRICARE contractor’s 

reconsideration, peer reviews conducted by physicians, hearings, and final decisions 

by the Director of the Defense Health Agency (DHA). In cases when a decision will 

establish precedent for the TRICARE program, the Assistant Secretary of Defense for 

Health Affairs makes the final decision.393 

DoD reported that during the period between 2009 and 2013, the time required for 

appeals to proceed from initial submission to the third level of appeal (a hearing) was 

an average of 346 days.394 The longest period was 424 days in 2009.395 The DoD report 

also stated that the Director of the DHA reviews all decisions resulting from appeals 

hearings and either adopts, rejects, or in the case of setting precedent refers the 

decision to the Assistant Secretary of Defense for Health Affairs.396 Between 2009 and 

2013, 15 percent of hearings were overturned at higher levels.397 “Military healthcare 

advocates called Tricare’s ability to simply overturn a hearing officer’s decision 

potentially ‘arbitrary.’ ”398 

TRICARE’s one-size-fits-all approach to covered benefits would not exist if DoD instead 

offered a program that presented a variety of options in commercial insurance plans. 

There are clear benefits to having alternatives among plans. When beneficiaries are 

able to pick their ideal plan from a selection of many offerings, they are empowered to 

choose from among the different plans’ benefits coverage so as to best address their 

medical needs. Whether or not a procedure is medically necessary would no longer be 

a DoD decision. 

Undesirable Choices for Reserve Component. The Commission found that RC 

members are faced with difficult choices during mobilization and demobilization. 

These transitions can be costly for the RC families and disruptive to their health care 

coverage, especially for Service members who are mobilized in support of a mission 

that is not a contingency operation. Currently, when RC members are ordered to 

active duty for more than 30 consecutive days, they and their families gain access to 

the health and dental benefits of active-duty Service members and their dependents.399

If mobilized in support of contingency operations, RC members may be eligible for 

active-duty health benefits starting up to 180 days prior to the date that the active-

 

392 Committee on Armed Services, Report to Accompany S. 1197, the National Defense Authorization Act for Fiscal Year 

2014, S. Rpt 113-44 (June 20, 2013), 134, accessed November 21, 2014, http://www.gpo.gov/fdsys/pkg/CRPT113srpt44/pdf/CRPT-113srpt44.pdf.

393 Department of Defense, TRICARE Appeal Process in Fiscal Year 2014: Report to Congress, June 4, 2014, accessed 

August 13, 2014, http://www.tricare.mil/tma/congressionalinformation/report_cong.aspx. 

394 Ibid, 6. 395 Ibid, 6 396 Ibid, 4 397 Ibid, 7. 398 Amy Bushatz, “Report: Tricare Appeals Taking a Year,” Military.com, (June 13, 2014), accessed November 21, 2014, 

http://www.military.com/daily-news/2014/06/13/report-tricare-appeals-taking-ayear.html?comp=700001075741&rank=2. 

399 Armed Forces, 10 U.S.C. §§ 1074, 1074a, and 1076a. Defense Health Agency, TRICARE Dental Options Fact Sheet, 

accessed December 10, 2014, http://www.tricare.mil/CoveredServices/Dental/NGRDental.aspx. “Dental Plans,” 

Defense Health Agency, accessed June 20, 2014, http://www.tricare.mil/Plans/DentalPlans.aspx. 
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duty service begins.400 Similarly, RC members who are demobilized from active duty 

after supporting a contingency operation for more than 30 days are eligible for 

continued health care benefits for 180 days under the Transition Assistance 

Management Program (TAMP). 401

The Commission has learned the practical effect of this authorized benefit can pose 

great challenges to RC members when they mobilize and demobilize and are moved on 

and off the TRICARE system. For example, the family of an RC member who has a 

private-sector job and employer-sponsored insurance for which the member pays a 

share of the insurance premium could, upon mobilization, transition to TRICARE or 

remain on its existing health care plan. Either of these options has the potential to 

burden the family. If the family transitions to TRICARE, it risks the loss of continuity 

of care if the family’s existing health care providers do not accept TRICARE. Continuity 

again may be lost when the Service member demobilizes and the member and family 

have to transition back to their civilian health insurance plans. Conversely, if the 

family stays on an existing health care plan, it risks trading additional, sometimes 

substantial, costs for continuity of care. In this option, the RC member must continue 

to pay the employee’s share of the insurance premium. In cases where the employer 

stops paying the employer’s share of the premium, the RC member would need to fully 

fund the existing health insurance. This situation could result in substantial financial 

hardship for RC members while they are serving on active duty. 

These issues experienced during transition periods are even more severe when the RC 

member is not supporting a contingency operation. In such cases, TAMP benefits are 

unavailable,402 so TRICARE coverage ends abruptly upon demobilization. This 

situation could result in a break in coverage until coverage can resume under the 

civilian health insurance plan. 

Given the hardships RC families experience when their sponsors mobilize and 

demobilize, it is worth considering a different approach to health care for the RC. In 

particular, providing RC members access to commercial health insurance may better 

suit their families’ needs and the unique RC experience. Instead of the current 

TRICARE program, a menu of DoD-sponsored commercial health insurance plans 

could more closely resemble the plans offered through RC members’ employers, 

especially with regard to provider networks. A DoD-sponsored commercial insurance 

plan could allow for an easier transition with better continuity of care during 

mobilization because it is more likely the RC families’ current physicians would 

participate in traditional commercial insurance networks than the TRICARE network 

for two reasons. 

First, as demonstrated earlier, TRICARE’s low reimbursement rates cause less 

participation among providers. Second, health care markets, including their supply of 

doctors and the rates for procedures, vary substantially by geographic location.403

 

400 Armed Forces, 10 U.S.C. § 1074. Department of Defense, TRICARE Choices for National Guard and Reserve at a 

Glance, 3, accessed December 22, 2014, 

http://tricare.mil/~/media/Files/TRICARE/Publications/BrochuresFlyers/NGR_Choices_Brochure.pdf. The date that 

active-duty service begins is registered in the Defense Enrollment Eligibility Reporting System (DEERS). 

401 Armed Forces, 10 U.S.C. § 1145 (a)(1), a(4). National Defense, 32 CFR 199.3(e). 402 Armed Forces, 10 U.S.C. § 1145 (a)(1), a(4). National Defense, 32 CFR 199.3(e). 403 As an illustration of how local health care markets vary, see the California Health Care Foundation’s (CHCF’s) 

research on six communities in California. CHCF’s study determined that the six regions represent diverse health care 

landscapes due to the local characteristics of health care, including differences in economic, demographic, health care 
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Whether commercial health insurance carriers operate nationally, regionally, or 

locally, they specialize in organizing networks and delivering health care suited to local 

markets. A selection of commercial insurance plans is more likely than TRICARE to 

reflect the conditions of the local health care market, including a network that 

incorporates available doctors. Moreover, DoD is considering the further centralization 

of its TRICARE regional contracts from three regions (North, South, and West) to two 

(East and West),404 even though many assert that health care is local.405 Offering RC 

Service members commercial health insurance could greatly enhance their access to 

doctors and strong networks of providers. 

Alternatively, to aid the financial burden RC members experience when they purchase 

their existing civilian health care plan during service on active duty, DoD could fund 

part of the RC member’s existing health insurance plan instead of requiring transition 

to the DoD-sponsored commercial insurance program.406 The National Military Family 

Association testified before the Commission, “instead of trying to jerry rig a TRICARE 

benefit in rural Pennsylvania [for example] where there isn’t the provider knowledge 

about TRICARE, where we are forcing families to change health plans at a time when 

they already are experiencing enough stress, let’s look for a way to stay with what they 

have because that community understands them. They are used to their providers. 

Their providers are used to their medical condition. So we would recommend for those 

Guard and Reserve families the option of just having some subsidy to remain on their 

employer-sponsored plan.”407 

Both solutions would resolve the issues RC members experience during mobilization 

and demobilization, which in turn could reduce the financial hardship for those who 

pay the total premium and improve the continuity of care they enjoy from their current 

physicians and preferred health care plans.408 Even when not transitioning to active 

duty, a DoD-sponsored commercial insurance plan could provide a better benefit to 

eligible members of the RC who purchase health care through the DoD.409 Instead of 

relying on particularly meager TRICARE provider networks in rural areas far from 

military installations, RC members would have the opportunity to select from several 

commercial health insurance plans operating in their area. Providing better choices to 

the RC, as well as improving other beneficiaries’ choice of benefits and plans, could 

greatly enhance the health benefit available to AC families, the RC, and non-Medicareeligible retirees. 

 delivery, and health care pricing variables. “Briefing—All Health Care Is Local: California’s Diverse Health Economies,” 

California Health Care Foundation, accessed October 23, 2014, http://www.chcf.org/events/2012/briefing-healthcare-local. “Local Markets,” California Health Care Foundation, accessed December 19, 2014, 

http://www.chcf.org/almanac/regional-markets. 

404 Defense Health Agency, TRICARE Managed Care Support T2017, draft request for proposal in preparation of a future 

TRICARE Managed Care Support Solicitation T2017, November 4, 2014, accessed November 9, 2014, 

https://www.fbo.gov/index?id=9535ef216d4e0fa956ea10f9cb4076be. 405 See, e.g., “Briefing—All Health Care Is Local: California’s Diverse Health Economies,” California Health Care 

Foundation, accessed October 23, 2014, http://www.chcf.org/events/2012/briefing-health-care-local. 406 Under the current system, when RC Service members are mobilized and become eligible for TRICARE, some RC 

families choose to stay on their civilian health plans, absorbing the cost of the employee’s portion of the monthly 

premium and sometimes the total premium. Total premium refers to both the employee’s and employer’s share of the 

premium. 

407 Joyce Raezer, National Military Family Association, testimony given at MCRMC public hearing, Fort Belvoir, 

Virginia, November 4, 2013, 30, http://www.mcrmc.gov/index.php/schedule. 408 Total premium refers to both the employee’s and employer’s share of the premium. 409 These Service members purchase TRICARE Reserve Select or TRICARE Retired Reserve. National Defense, 

32 CFR 199.24 and National Defense, 32 CFR 199.25. 
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Value 

The Commission also determined TRICARE needed improvement with respect to value. 

Value, as it is used in this report, is described as a high quality health benefit that is 

provided efficiently. Certain structural aspects of the TRICARE program, including its 

contracting procedures, its restrictive framework that prevents adaptation, and its 

lack of tools to limit over-utilization of services, have hindered efficient operations. 

Complexity in Contracting. Under TRICARE, there are three regional contractors in 

the North, South, and West regions of the United States that manage health care 

operations purchased through civilian providers.410 The process by which TRICARE’s 

contracts are awarded is complicated, prolonged, and characterized by protests and 

delays. These contracting delays result in increased program costs. 

DoD’s process for awarding the three most recent TRICARE managed care support 

contracts (MCSCs) for the North, South, and West regions began in 2008.411 Each 

contract award was protested by unsuccessful bidders. These protests were upheld, 

triggering corrective actions that resulted in new award decisions in all three 

regions.412 The new award decisions were further protested in two of the three 

regions.413 Although the new TRICARE contracts were originally scheduled to start in 

2010, these repeated protests were not resolved until 2013.414 “As a result of the bid 

protest process and [TRICARE Management Activity’s (TMA)] implementation of 

corrective actions to address the issues in the sustained bid protests, the performance 

periods of the finalized MCSCs are no longer aligned. According to a TRICARE program 

official, the performance periods for the MCSCs are expected to end in 2015 in the 

North region, in 2017 in the South region, and in 2018 in the West region.”415

Contracting costs are expected to increase because option years will need to be 

exercised to align the MCSCs’ end dates.416 

The TRICARE contracting process has also adversely affected patient experience due to 

difficult transitions between regional contractors. For example, in April 2013 following 

the transition to UnitedHealth in the TRICARE West region, beneficiaries experienced 

issues with referral authorization and customer service.417 The California Medical 

Association conducted a survey of 321 practices that represented more than 

27 different specialties. The study found that 75 percent of practices reported 

problems during the transition to UnitedHealth, including difficulty processing 

authorizations and referral requests. Forty-two percent of those practices that had 

issues with the transition indicated transition issues negatively affected patient 

 

410 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, 5, accessed November 4, 2014, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. 

411 Government Accountability Office, Defense Health Care: Acquisition Process for TRICARE’s Third Generation of 

Managed Care Support Contracts, GAO-14-195, (March 2014), 5, accessed October 20, 2014, 

http://www.gao.gov/products/GAO-14-195 (discussing protests by Health Net Federal Services, LLC (B-401652); 

Humana Military Healthcare Services (B-401652.2, et al.); Health Net Federal Services, LLC (B-401652.3 and 

B-401652.5); and, United Health Military Veterans Services (agency-level protest)). 412 Ibid, 15. 413 Ibid, 15. 414 Ibid, 5. 415 Ibid, 20. 416 Ibid, 20. 417 Ibid, 20-21. 
 SECTION 3 

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care.418 The problems in the delivery of the TRICARE benefit grew so severe that DoD 

eventually stepped in to provide temporary relief by permitting TRICARE Prime 

beneficiaries in the West region to see specialists without prior authorization from the 

managed care support contractor in that region.419 According to GAO, “Despite these 

difficulties, approximately 10 months after the start of health care delivery, TMA paid 

UnitedHealth the remainder of its $10 million transition-in payment after 

UnitedHealth completed its transition requirements.”420 In GAO’s assessment of the 

transition of MCSCs in the West region, it found “numerous deficiencies in TMA’s 

guidance and oversight” that led to a “complacent approach by [TRICARE Regional 

Office-West] officials, who did little to hold the contractor accountable during the 

transition.”421

The TRICARE contracting process has also contributed to the deterioration of 

beneficiary access to medical providers. As mentioned above, TRICARE contractors 

negotiate provider reimbursement rates that are lower than Medicare rates. This 

situation reduces costs for DoD, but it also reduces access to care for TRICARE 

beneficiaries. In addition, DoD’s TMA decided to reduce TRICARE Prime service areas 

effective October 1, 2013.422 This decision also reduced DoD health care costs by 

further restricting access for beneficiaries. A modernized military health benefit should 

rely on a more streamlined contracting process that promotes, rather than further 

restricts, health care access and benefit quality. 

Slowness in Adapting to New Models and Innovation. In addition to the challenges 

noted above that are brought about by the complexity of the TRICARE contracts, the 

program is also limited in its infusion of new ideas from the private sector, which 

inhibits the adoption of the latest technological, clinical, or business advancements in 

the medical industry. This situation can negatively affect beneficiaries, as they are 

sometimes unable to access the medical technology, procedures, or treatments 

available to civilians who have private-sector health insurance. 

In 2013 beneficiaries receiving care in the TRICARE network lost access to molecular 

screening for conditions such as cystic fibrosis, Fragile X Syndrome, spinal muscular 

atrophy, and some cancers due to a technical requirement in the TRICARE contracts. 

TRICARE discontinued coverage of more than 100 molecular diagnostic tests because 

these tests were assigned new medical procedure codes that classified them as 

medical devices.423 Under the TRICARE regional contracts, DoD will only cover medical 

 

418 “CMA Member Survey Confirms Significant Problems with TRICARE Transition,” California Medical Association, 

accessed October 20, 2014, http://www.cmanet.org/news/detail/?article=cma-member-survey-confirms-significant. 419 “TRICARE Eases Authorization Rules for West Region Beneficiaries,” TRICARE Public Affairs Office, (May 7, 2013), 

accessed October 20, 2014, 

http://www.tricare.mil/About/MediaCenter/News/Archives/5_7_13_WestAuthorizations.aspx?p=1. 

420 Government Accountability Office, Defense Health Care: More-Specific Guidance Needed for TRICARE’s Managed 

Care Support Contractor Transitions, GAO-14-505, (June 2014), 22, accessed November 20, 2014, 

http://www.gao.gov/assets/670/664196.pdf. 

421 Ibid. 422 “TRICARE Moves Forward With Prime Service Area Reductions,” Department of Defense, accessed December 17, 

2014, http://www.defense.gov/news/newsarticle.aspx?id=120590. 

423 American Clinical Laboratory Association, Statement submitted for the record, “Defense Health Agency,” Hearing 

before the Subcommittee on Military Personnel, Armed Services Committee, U.S. House of Representatives, February 26, 

2014, accessed December 15, 2014, http://docs.house.gov/meetings/AS/AS02/20140226/101786/HHRG-113-AS02-

20140226-SD001.pdf. 
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devices if the Food and Drug Administration (FDA) has approved them, yet the FDA 

does not review or approve genetic tests.424 

What might appear like an abstruse coding policy, in reality, has great consequences 

for the health benefit available to military families. These tests are considered the 

standard of care by many professional guidelines.425 According to the American 

Clinical Laboratory Association, “Molecular diagnostic tests represent the everadvancing forefront of diagnostic medicine, and ensure that patients receive 

appropriate treatment. Without such testing, TRICARE beneficiaries will receive care 

that is inferior to that available to the general public.”426 

Because the molecular tests continued to be covered at MTFs, this restrictive policy 

also created disparity among beneficiaries who use the on-base military health system 

and those who rely on TRICARE’s networks of purchased care.427 Moreover, the policy 

change was not properly communicated to providers and beneficiaries, who continued 

to use the tests without reimbursement.428 In response, the DHA is establishing a 

demonstration program under which 40 of the lab tests will again be covered under 

TRICARE.429 DHA will also form a panel of in-house experts to review other genetic 

tests for safety and effectiveness.430 This ad-hoc resolution, which does not fully 

address the scope and magnitude of this issue, required intervention by dozens of 

members of the Congress, military service organizations, and nonprofit health 

advocacy groups.431 

 

424 Tom Philpott, “Tricare to Restore Coverage for up to 40 Genetic Lab Tests,” Stars and Stripes, (July 10, 2014), 

accessed October 23, 2014, http://www.stripes.com/news/us/tricare-to-restore-coverage-for-up-to-40-genetic-labtests-1.292815. 

425 For example, “Cystic Fibrosis testing is the Standard of Care under the VA/DoD Clinical Practice Guideline for 

Management of Pregnancy and the American Congress of Obstetricians and Gynecologists’ (ACOG) Guidelines. 

Furthermore, accurate EGFR mutation testing has been shown to both lower treatment costs and improve patient 

outcomes in non-small cell lung cancer (NSCLC), and is recommended for all NSCLC patients prior to initiating 

chemotherapy in the National Comprehensive Cancer Network (NCCN) guidelines.” American Clinical Laboratory 

Association, Statement submitted for the record, “Defense Health Agency,” Hearing before the Subcommittee on Military 

Personnel, Armed Services Committee, U.S. House of Representatives, February 26, 2014, accessed December 15, 2014, 

http://docs.house.gov/meetings/AS/AS02/20140226/101786/HHRG-113-AS02-20140226-SD001.pdf. 

426 Ibid, 2. 427 Richard Burr, Kay Hagan, James Inhofe, et al. (letter signed by 51 senators and representatives), letter to Secretary 

Hagel, February 27, 2014, accessed October 23, 2014, http://www.burr.senate.gov/public/_files/LDTLetter.pdf. 428 Ibid. Note that DoD has authorized retroactive reimbursement to beneficiaries and laboratories for the 

approximately 40 genetic tests it now covers through the Defense Health Agency Evaluation of Non-United States Food 

and Drug Administration Approved Laboratory Developed Tests Demonstration Project. “TRICARE Set to Cover 

Laboratory Developed Tests,” Defense Health Agency, accessed October 23, 2014, 

http://www.health.mil/News/Articles/2014/08/15/TRICARE-Set-to-Cover-Laboratory-Developed-Tests. 429 Tom Philpott, “Tricare to Restore Coverage for up to 40 Genetic Lab Tests,” Stars and Stripes, (July 10, 2014), 

accessed October 23, 2014, http://www.stripes.com/news/us/tricare-to-restore-coverage-for-up-to-40-genetic-labtests-1.292815. 

430 Ibid. 431 See, e.g., Senator Kay Hagan, Department of Defense Authorization of Appropriations for Fiscal Year 2015 and the 

Future Years Defense Program, from U.S. Senate, March 5, 2014, accessed January 12, 2015, http://www.armedservices.senate.gov/imo/media/doc/14-13%20-%203-5-14.pdf. Richard Burr, Kay Hagan, James Inhofe, et al. (letter 

signed by 51 senators and representatives), letter to Secretary Hagel, February 27, 2014, accessed October 23, 2014, 

http://www.burr.senate.gov/public/_files/LDTLetter.pdf. “TRICARE to Restore Coverage for Some Lab Developed 

Tests,” National Military Family Association, accessed October 23, 2014, http://www.militaryfamily.org/featurearticles/tricare-to-restore-coverage.html. American Clinical Laboratory Association, Statement submitted for the record, 

“Defense Health Agency,” Hearing before the Subcommittee on Military Personnel, Armed Services Committee, U.S. House 

of Representatives, February 26, 2014, accessed December 15, 2014, 

http://docs.house.gov/meetings/AS/AS02/20140226/101786/HHRG-113-AS02-20140226-SD001.pdf. “TRICARE 

Letter from Genetic Alliance to House and Senate Armed Services Committee Leadership,” Genetic Alliance, accessed 

October 23, 2014, http://www.acla.com/tricare-letter-from-genetic-alliance-to-house-and-senate-armed-servicescommittee-leadership/. 
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In 2014, the Congress passed legislation that authorized TRICARE to provide 

provisional coverage for emerging medical services and supplies.432 This provisional 

coverage, however, lasts only 5 years and DoD may cancel it at any time.433 After the 

5-year period when provisional coverage of a medical service or supply expires, DoD is 

authorized to determine what coverage, if any, TRICARE will include.434 Although this 

provisional coverage provides beneficiaries some access to medical innovations, it does 

not address fully the slowness with which TRICARE incorporates emerging techniques 

and technology from the medical industry. 

In addition to innovations in technology and clinical treatments, the health care 

industry’s systems for paying for and delivering care are also evolving more rapidly 

than TRICARE. Traditionally, payment and delivery models have been based on either 

the fee-for-service concept, for which every office visit, hospital procedure, and 

laboratory test generates an individual claim, or the health maintenance organization 

concept that coordinates comprehensive services in return for a prepaid, fixed charge. 

However, in the civilian health care sector, the differentiation between types of plans 

has become increasingly less distinct.435 In particular, managed care, with techniques 

like financial incentives and treatment protocols, has become more common across 

the industry.436 Currently there is an upswing in the use of reimbursement systems 

that are based on value over volume.437 By employing value-based models, the 

industry has been able to incentivize physicians and hospitals to coordinate care, 

avoid unnecessary procedures, produce better health outcomes, and ultimately reduce 

costs.438 TRICARE, by contrast, remains tied to the FFS and HMO models.439 Under a 

menu of commercial health insurance plans, however, as the industry evolves to use 

new techniques in payment and delivery of care, the DoD health care program could 

also achieve better value. 

As an illustration of TRICARE’s structural issues, NAHCB informed the Commission of 

TRICARE’s outdated delivery model and processes. Specifically, “TRICARE has not 

kept pace with advances in mental health care delivery, remaining locked in an 

 

432 Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015, H.R. 3979, 

section 704, accessed December 15, 2014, https://www.congress.gov/bill/113th-congress/house-bill/3979/text. 433 Ibid. 434 Ibid. 435 Kaiser Family Foundation and Health Research & Educational Trust, How Private Health Coverage Works: A 

Primer—2008 Update, 4, accessed October 24, 2014, http://kff.org/health-costs/issue-brief/how-private-healthcoverage-works-a-primer/. 

436 Ibid. 437 “In an effort to control the growth of health care costs, risk-based [or value-based] reimbursement methodologies 

are slowly replacing fee-for-service as the predominant means through which physicians and providers will be paid.” 

Catherine I. Hanson, “Introduction: Evaluating and Negotiating Emerging Payment Options,” in Evaluating and 

Negotiating Emerging Payment Options (Chicago, IL: American Medical Association, 2012), 1. 438 Value-based models include capitation, bundled payments, shared savings agreements, and pay-for-performance 

structures. Wes Cleveland, “Capitation,” in Evaluating and Negotiating Emerging Payment Options (Chicago, IL, 

American Medical Association, 2012). Edgar Morrison Jr., “Bundled Payments,” in Evaluating and Negotiating Emerging 

Payment Options (Chicago, IL, American Medical Association, 2012). Wes Cleveland, “Shared Savings Proposals,” in 

Evaluating and Negotiating Emerging Payment Options (Chicago, IL, American Medical Association, 2012). Steve 

Ellwing, “Pay-for-Performance Programs,” in Evaluating and Negotiating Emerging Payment Options (Chicago, IL: 

American Medical Association, 2012). Robert Barbour, “How to Establish Your Baseline Costs,” in Evaluating and 

Negotiating Emerging Payment Options (Chicago, IL, American Medical Association, 2012). 439 Defense Health Agency, Office of General Counsel, Military Health System (including TRICARE and the TRICARE 

Program): Summary of Statutory Limits, revised March 4, 2014, e-mail to MCRMC, March 11, 2014. According to the 

Office of General Counsel at the Defense Health Agency, “The TRICARE program (as implemented in 32 CFR § 199.17) 

has a ‘triple option’ structure: Standard is the default fee-for-service entitlement (10 U.S.C. §§ 1079, 1086 and 1097), 

Extra is the Preferred Provider Option (10 U.S.C. §§ 1079(n) and 1097(a)(2)), and Prime is the enhanced Uniform HMO 

Benefit option added by NDAA FY1994 § 731 and satisfying the separate requirements of the DoD Appropriations Act 

of 1994, § 8025 (10 U.S.C. §§ 1097(a)(1) and 1097a).” 
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antiquated medical model. For example, TRICARE requirements for psychiatric 

residential treatment have not been updated in decades and include standards that 

are more prescriptive than any other public or private payer’s, as well as more 

expensive to implement with no demonstrable relation to quality or effectiveness.”440

NAHCB emphasized these overly burdensome, outdated, and unnecessary TRICARE 

standards and processes discourage providers from participating in TRICARE 

networks.441 This problem is in addition to TRICARE’s use of below-market-value 

reimbursement rates that have already diminished provider participation in TRICARE, 

as was explained above. 

Health care is a constantly changing industry. The features of health care, including 

technology and the models for paying for and delivering care, rapidly evolve. Rather 

than attempting to replicate a private-sector health care system within DoD, and 

consequently following behind, the Commission believes beneficiaries would be better 

served by having direct access to the innovations found in private-sector health care. 

Furthermore, under commercial insurance, carriers have the tools, including the 

advancements in payment and delivery models mentioned above and the monetary 

and nonmonetary incentives described below, to increase value by operating more 

efficiently. 

Insufficient Tools to Manage Utilization. TRICARE beneficiaries use health care 

services at a significantly higher rate than do people with civilian health insurance 

plans. As shown in Figure 15, enrollees in TRICARE Prime during FY 2013 used 

inpatient services 73 percent more than civilians with HMOs.442 Similarly, TRICARE 

Prime outpatient utilization rates were 55 percent higher than their civilian 

counterparts.443 

 

440 National Association for Children’s Behavioral Health, letter to MCRMC, 1, July 31, 2014. “The TRICARE standards 

keep licensed, accredited, willing providers out of the network by their imposition of overly medical standards, an 

institutional treatment environment, a lengthy and expensive application process, and the requirement that TRICARE 

standards be applied to all children and adolescents in the same residential unit as a TRICARE beneficiary, regardless 

of who is paying for their care.” 

441 Ibid. 442 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, 74, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. 

443 Ibid, 79. 
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Figure 15. Utilization in TRICARE Prime and Civilian HMOs, 

FY 2013444

TRICARE is unable to effectively manage the rate at which users consume health care 

because it has limited use of monetary and nonmonetary incentives to influence 

beneficiaries’ behavior and promote better health outcomes. One reason utilization is 

substantially greater in TRICARE than in the civilian sector is the relatively low OOP 

expenses—copayments, deductibles, and coinsurance—experienced by TRICARE 

beneficiaries compared to their civilian counterparts. A military retiree enrolled in 

TRICARE Prime pays nothing for an outpatient visit if it occurs at an MTF and $12 for 

providers in the purchased care network.445 Civilians pay an average of $24 for a 

primary care outpatient visit in private sector employer-provided plans.446 The total 

effect of these differences is that average OOP costs paid in a year are significantly less 

for a TRICARE beneficiary than for their civilian counterparts, as shown in Figure 16. 

 

444 Ibid, 74, 79. TRICARE Standard and Extra users have 2.5 times the inpatient utilization than their civilian PPO 

counterparts, but actually have 32 percent less outpatient utilization (see pages 75 and 80, respectively, of Evaluation 

of the TRICARE Program). 445 “Prime Network Copayments,” Defense Health Agency, accessed December 19, 2014, 

http://www.tricare.mil/Costs/HealthPlanCosts/PrimeOptions/Copayments.aspx. 446 Kaiser Family Foundation and Health Research & Educational Trust, Employer Health Benefits: 2014 Annual 

Survey, 139, accessed October 1, 2014, http://files.kff.org/attachment/2014-employer-health-benefits-survey-fullreport. 
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Figure 16. Average Deductible and Copayment Amounts in 

TRICARE Prime and Civilian HMOs, FY 2013447

If cost shares for DoD beneficiaries were to increase in conjunction with modernization 

of the military health benefit, this could reduce overall compensation. Raising 

beneficiaries’ costs for health benefits without any compensating change elsewhere 

would drive a reduction in their total level of military compensation. Civilian health 

care innovation, however, has developed tools to address this problem. To involve 

patients in decisions of health care usage and expenses, the civilian health care sector 

has developed various funding mechanisms like health savings accounts, flexible 

spending arrangements, and health reimbursement arrangements.448 DoD’s use of 

allowances for subsistence and housing provides precedent for implementing a similar 

type of mechanism for military beneficiaries. 

While OOP costs are an important tool the health care sector uses to manage 

consumption of services, they usually are used together with nonmonetary tools to 

achieve greater results. Nonprice methods lower utilization by, among other things, 

preventing hospital admissions, shortening inpatient stays, and avoiding readmission. 

Many argue these techniques also can lead to better health care outcomes through 

disease management, wellness, and better coordination of care. 

An important example of these available techniques is provided by the U.S. Family 

Health Plan (USFHP), which is a DoD program that offers an alternative to TRICARE 

Prime in six areas of the country. Beneficiaries enroll in USFHP, pay Prime rates, and 

 

447 Department of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to 

Congress, 90, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. Active-duty family members who are Standard and Extra users pay about 46 percent less in 

deductibles and copayments than their civilian PPO counterparts, and retirees and survivors pay about 28 percent less 

(see page 92 of Evaluation of the TRICARE Program). 448 See Internal Revenue Service, Health Savings Accounts and Other Tax-Favored Health Plans, IRS Publication 969, 

accessed November 5, 2014, http://www.irs.gov/pub/irs-pdf/p969.pdf. 
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receive all their care through networks of community-based health care systems.449

Enrollees who use the USFHP program experience the same copayment structure as 

TRICARE Prime enrollees,450 but are in “population health” managed care plans.451 In 

other words, USFHP shares the same price tools as the TRICARE Prime program but 

has at its disposal nonprice tools to manage patient care. These nonmonetary tools 

include strategies such as identifying high-risk patients, managing complex cases, 

keeping chronic diseases under control, and promoting wellness and preventative 

services.452 The goals of these nonprice tools are to lower avoidable inpatient 

admissions, prevent inpatient readmissions, shorten the length of stay in hospitals, 

and reduce emergency room and urgent care visits.453 

For example, all USFHP designated providers use a 24-hour telephone hotline that 

gives patients access to nurses or primary care doctors who offer general health 

information, self-care instructions, assistance scheduling next-day clinic 

appointments, and advice on whether to use emergency services immediately.454

Additionally, registered-nurse case managers identify frequent users of emergency 

services (three or more visits in a year), follow up with the patients to assist them with 

care and medications, and refer the frequent users to high risk patient care programs 

if applicable.455 As a result of these and other nonmonetary techniques, USFHP has 

found that its participants have 33 percent fewer inpatient days and 28 percent fewer 

emergency room visits than TRICARE Prime enrollees.456 

Currently, TRICARE does not employ the complete range of price and nonprice 

techniques to affect beneficiary behavior and health care outcomes. At the 

Commission’s public hearing in San Antonio, Texas, on January 7, 2014, a 

representative from Humana Government Business, which holds the TRICARE MCSC 

in the South region, provided examples of the tools Humana uses in its commercial 

insurance plans. These include both monetary and nonmonetary incentives to 

influence beneficiary behavior, such as reduced deductibles and earning iPods for 

healthy behavior.457 When asked if Humana was able to use these tools from their 

commercial practice as part of their TRICARE contract, the Humana representative 

answered that TRICARE prohibits the MCSCs from incentivizing beneficiaries or 

 

449 For information on USFHP, see MCRMC, Interim Report, 86-87, accessed October 11, 2014, 

http://www.mcrmc.gov/public/docs/reports/MCRMC-Interim-Report-Final-HIRES-L.pdf. 

450 National Defense Authorization Act for FY 1997, Pub. L. No. 104-201, § 726, 110 Stat. 2422, 2596 (1996). “How 

does the US Family Health Plan compare to TRICARE Prime?” US Family Health Care, accessed April 14, 2014, 

http://www.usfhp.net/ask.asp#1. “TRICARE USFHP Enrollment Fees,” US Family Health Plan, accessed June 20, 

2014, http://www.tricare.mil/Costs/HealthPlanCosts/USFHP/EnrollmentFees.aspx. “TRICARE USFHP Copayments,” 

US Family Health Plan, accessed June 20, 2014, 

http://www.tricare.mil/Costs/HealthPlanCosts/USFHP/NetworkCopayments.aspx. “TRICARE Prime Enrollment Fees,” 

Defense Health Agency, accessed June 20, 2014, 

http://www.tricare.mil/Costs/HealthPlanCosts/PrimeOptions/EnrollmentFees.aspx. “TRICARE Prime Network 

Copayments,” Defense Health Agency, accessed June 20, 2014, 

http://www.tricare.mil/Costs/HealthPlanCosts/PrimeOptions/Copayments.aspx. 

451 US Family Health Plan Alliance, letter to MCRMC, October 6, 2014. 452 Ibid. 453 US Family Health Plan Alliance, Managed Care Approach Narrative, memorandum to MCRMC staff, 1, received July 

7, 2014. 

454 Ibid, 3. 455 Ibid, 1. 456 Inpatient hospital utilization equaled 400 days for USFHP and 600 days for TRICARE Prime (measured in days per 

1,000 beneficiaries). Emergency room utilization equaled 325 visits for USFHP and 451 visits for TRICARE Prime 

(measured in visits per 1,000 beneficiaries). US Family Health Plan Alliance, letter to MCRMC, October 6, 2014. 457 Sandra Delgado, Interim Chief Medical Officer for Humana Government Business, testimony given at MCRMC 

public Hearing, 22-23, San Antonio, TX, January 7, 2014 

http://www.mcrmc.gov/public/docs/meetings/20140107/MCRMC_JBSH_7_Jan_14_AM_2.pdf. 
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providers.458 With regard to “the ability for a managed-care support contractor to 

incentivize beneficiaries to take ownership over their own health, as many other 

commercial health plans currently do, [i]t’s something that [MCSCs] are prohibited 

from doing. We cannot incentivize a beneficiary to take responsibility over their 

health.”459

Monthly premiums generally do not affect the day-to-day utilization of services the way 

OOP expenses do, but it is worth noting TRICARE’s unique situation with its 

enrollment fees. First, active-duty families and retirees do not pay an enrollment fee, 

or premium, for TRICARE Standard or Extra. Second, TRICARE Prime enrollment fees 

have largely remained constant for decades. For retirees younger than age 65 enrolled 

in TRICARE Prime, annual premiums were set in 1995 at $230 and $460 for 

individuals and family plans, respectively.460 These premiums remained unchanged 

until 2012, when annual premium increases were tied to military retirement pay 

increases.461 As shown in Figure 17, stagnant TRICARE Prime premiums have resulted 

in wide dispersions between the health costs of military retirees and other health care 

plans. In 1999, military retiree premiums for TRICARE Prime represented 31 percent 

of the civilian HMO average; by 2014, this had fallen to only 10 percent. 

Figure 17. Annual Family Premiums, TRICARE Prime vs. Private 

Sector Health Care Plans462

 

458 Ibid, 23-24. 459 Ibid, 19. 460 Department of Defense, Evaluation of the TRICARE Program, Fiscal Year 2012 Report to Congress, 7, 

accessed December 19, 2014, http://mldc.whs.mil/public/docs/library/health/2012_-_DoD_-

_TRICARE_Evaluation_Report_-_FY12.pdf.

461 Armed Forces, 10 U.S.C. § 1097(e)(2). National Defense Authorization Act for FY 2012, Pub. L. No. 112-81, § 701(b) 

(2011). 

462 Data from the Kaiser Family Foundation and Health Research & Educational Trust, Employer Health Benefits: 2014 

Annual Survey, 98, accessed October 1, 2014, http://files.kff.org/attachment/2014-employer-health-benefits-surveyfull-report. Department of Defense, Evaluation of the TRICARE Program, Fiscal Year 2012 Report to Congress, 7, 

accessed June 20, 2014, 

http://mldc.whs.mil/public/docs/library/health/2012_-_DoD_-_TRICARE_Evaluation_Report_-_FY12.pdf. Department 

of Defense, Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report to Congress, 9, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. 
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When the TRICARE program went into effect in 1996, the cost share for retirees 

younger than 65 was 27 percent of total health care costs.463 By keeping cost-sharing 

for active-duty families and retirees younger than 65 nearly constant for 20 years, the 

beneficiaries’ share of the program costs have declined significantly, causing a growing 

portion of the expense to be passed on to the Government. By FY 2014, the cost 

shares for non-Medicare-eligible retirees had declined to about 4 to 5 percent for 

individuals and 5 to 6 percent for families.464 In comparison to the costs borne by the 

employee or annuitant in the civilian sector, TRICARE beneficiaries’ cost-sharing rates 

are small. On average, civilian employees paid 29 percent of the premium for their 

family health coverage in 2014. Their employers contributed the remaining 

71 percent.465 

Efficiency in Program Operation. Managing the TRICARE program, including 

associated overhead costs, is more expensive than administering a program that offers 

commercial insurance plans. The Commission estimates DoD will have spent 

approximately $314 million in FY 2013 to administer the TRICARE health care 

benefit.466 These figures are calculated based on Budget Activity Group (BAG) 5, 

“Management Activities,” which finances headquarters operations in the Defense 

Health Agency and military Services. Of the seven BAGs, Management Activities is the 

one most closely associated with overhead functions. The Commission found it 

challenging to estimate the true costs to administer TRICARE because such costs are 

not readily visible in the Defense Health Program budget accounts. Although it is 

difficult to calculate the amount of military, civilian, and contractor personnel engaged 

in the administration of TRICARE, the Commission notes DoD allocated almost 

2,900 total personnel to BAG 5, Management Activities in FY 2013.467 

Although it differs from TRICARE, the FEHBP provides health care to more than 

8.2 million participants, making it about the same size as TRICARE in terms of 

beneficiary population.468 FEHBP offers beneficiaries more than 250 insurance plan 

choices provided by nearly 100 different contracts.469 These plans are purchased on 

“evergreen” contracts that are renewed each year, allowing for flexibility, adaptation to 

current trends, and low contracting costs. Yet the Office of Personnel Management 

 

463 Office of the Undersecretary of Defense (Comptroller), United States Department of Defense Fiscal Year 2015 Budget 

Request Overview (March 2014), 5-10, accessed April 14, 2014. 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pd

f. 

464 Commission calculation based on data from Military Health System Management Analysis and Reporting Tool: 

Inpatient Admissions (SIDR), Professional Encounters (CAPER), PC Institutional (TED-I), PC Non-Institutional (TED-N), 

and Pharmacy (PDTS) tables, and FY 2015 Budget Submission, accessed October 28, 2014. 

465 Kaiser Family Foundation and Health Research & Educational Trust, Employer Health Benefits: 2014 

Annual Survey, September 2014, 85, accessed October 1, 2014, http://files.kff.org/attachment/2014-employer-healthbenefits-survey-full-report. 466 Department of Defense, Defense Health Program Fiscal Year 2015 Budget Estimates, Volume 1: Justification 

Estimates, Operations and Maintenance, Management Activities, MACT-3, accessed November 20, 2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/budget_justification/pdfs/09_Defense_Heal

th_Program/VOL_I_Sec_7_E_OP-5_Management_Activities_DHP_PB15.pdf. 

467 Ibid, MACT-9. The figure presented is a sum of active military average strength, civilian full-time equivalents, and 

contractor full-time equivalents in the BAG 5 Personnel Summary. 468 Office of Personnel Management, “Federal Employees Health Benefits Program Overview,” provided to MCRMC in 

Executive Session, January 15, 2014. There was an average of 9.5 million beneficiaries eligible for TRICARE, and an 

average of 8 million actual users of the program in fiscal year 2013. Department of Defense, Evaluation of the TRICARE 

Program: Access, Cost, and Quality, Fiscal Year 2014 Report to Congress, 19, accessed November 20, 2014, 

http://www.tricare.mil/tma/congressionalinformation/downloads/TRICARE%20Program%20Effectiveness%20(FY%20

2014)%201.pdf. 469 Office of Personnel Management, Federal Employees Health Benefits Program Overview, provided to MCRMC in 

Executive Session, January 15, 2014. FEHBP offered 256 plan choices through 97 contracts with carriers in 2014. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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(OPM)470 administers this program with about 100 employees471 who are paid for out of 

the FEHBP trust fund using resources from plan premiums instead of appropriated 

funds.472 

OPM is required by statute to dedicate no more than 1 percent of plan premiums for 

FEHBP administrative expenses.473 In 2014, the total cost of FEHBP premiums (the 

Government share plus the employees’ share) was $47 billion,474 1 percent of which 

equals $470 million. OPM informed the Commission that it routinely requires less 

than 0.1 percent of the premiums to administer FEHBP.475 This means that OPM 

required less than $47 million in 2014 to administer FEHBP. If OPM does not use the 

full 1 percent dedicated for administrative expenses, the unused portion returns to the 

trust fund for contingency reserves.476 

The difference in operating costs and personnel required to manage the TRICARE and 

FEHBP programs is profound. Nevertheless, the TRICARE and FEHBP programs, as 

well as the roles of DoD and OPM, are fundamentally different. Essentially, OPM 

functions as the program manager, while DoD performs that role and others, including 

self-funded insurance carrier477 and hospital administrator.478

Although FEHBP has many attractive features, the Commission believes that it would 

not be appropriate for military beneficiaries to be enrolled with Federal civilians in the 

FEHBP as currently configured because of the unique requirements of the military, 

such as those related to readiness, and recognition of military service. MTFs provide a 

training platform that maintains the readiness of the military medical force. To 

continue to attract the right kind of complex medical cases to support this training 

mission (e.g., trauma surgery), the MTFs need to remain a key element of military 

health care delivery. Typically, FEHBP plans do not incorporate MTFs as venues of 

care. 

 

470 The Office of Personnel Management provided support for the Commission's analysis; however, such support does 

not represent an endorsement of, or suggest any opinion on, the report, study, or recommendations. 

471 Office of Personnel Management, Congressional Budget Justification: Performance Budget Fiscal Year 2015, March 

2014, 182-83, accessed November 20, 2014, http://www.opm.gov/about-us/budgetperformance/budgets/congressional-budget-justification-fy2015.pdf. Office of Personnel Management, e-mail to 

MCRMC, November 20, 2014. 

472 Employees Health Benefits Fund, 5 U.S.C. § 8909(b)(1). 473 Employees Health Benefits Fund, 5 U.S.C. § 8909(b)(1). 474 Office of Personnel Management, Fact Sheet: 2013 Federal Benefits Open Season for Health Benefits, Dental and 

Vision Insurance and Flexible Spending Accounts, provided to MCRMC in Executive Session, January 15, 2014. Office of 

Personnel Management, e-mail to MCRMC, November 21, 2014. 475 Information provided by Office of Personnel Management, e-mail to MCRMC, November 6 and 25, 2014. 476 Employees Health Benefits Fund, 5 U.S.C. § 8909(b)(2). 477 The health benefit provided to military beneficiaries is a version of self-funded insurance. Self-insurance is a “plan 

offered by employers who directly assume the major cost of health insurance for their employees. Some self-insured 

plans bear the entire risk. Other self-insured employers insure against large claims by purchasing stop-loss coverage. 

Some self-insured employers contract with insurance carriers or third party administrators for claims processing and 

other administrative services; other self-insured plans are self-administered.” “Definitions of Health Insurance Terms,” 

Bureau of Labor Statistics, accessed October 19, 2014, http://www.bls.gov/ncs/ebs/sp/healthterms.pdf. Under the 

current system, DoD is obligated to provide health care to its beneficiaries and covers open-ended payments for 

services. In the self-insurance model, “the employer assumes the financial risk for providing health care benefits to its 

employees. In practical terms, self-insured employers pay for each out of pocket claim as it is incurred instead of 

paying a fixed premium to an insurance carrier, which is known as a fully-insured plan.” “Self-Insured Group Health 

Plans,” Self-Insurance Institute of America, Inc., accessed October, 19, 2014, 

http://www.siia.org/i4a/pages/Index.cfm?pageID=4546. 

478 Note that the $339 million in BAG 5, “Management Activities,” does not include the full cost of performing the 

functions cited above, e.g. running the MTFs. 
 SECTION 3 

 RECOMMENDATIONS

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Additionally, military members have made great sacrifices for their country and their 

health benefit should reflect this sacrifice. The Commission believes FEHBP cost 

shares of approximately 30 percent for employees and 70 percent for the 

Government479 are not appropriate for military members. Although it is possible to 

have different cost shares for different subpopulations in FEHBP (e.g., Postal 

employees), doing so could create confusion and might increase the chance that later 

decisions are made to harmonize the cost shares of the populations. Military 

beneficiaries need a concrete recognition of military service that is reflected in their 

cost shares and protected in the basic program design. 

Many of the recent reform proposals to address growing costs in DoD’s health care 

budget have focused principally on low cost shares and consequent over-utilization of 

services.480 DoD has proposed increases to TRICARE fees several times in recent 

years.481 As stated in conjunction with the President’s Budget for FY 2015, the costsharing modifications DoD proposed were intended “largely to control health care 

costs.”482 The Commission believes, however, that to achieve better value and 

modernize the health care benefit, reform efforts must consider other aspects of 

TRICARE’s structure besides cost shares. Increasing beneficiaries’ cost shares is 

merely one way to achieve efficiencies. Other ways include a combination of monetary 

and nonmonetary tools that more effectively manages utilization than monetary tools 

alone and new advancements in payment and delivery models that lower costs. 

Additionally, the FEHBP program demonstrates that OPM is able to administer a 

strong health benefit with relatively low overhead expenses. Under a program of 

commercial health insurance that can use both monetary and nonmonetary tools to 

 

479 Office of Personnel Management, Federal Employees Health Benefits Program Questions & Answers, provided to 

MCRMC in Executive Session, January 15, 2013. By law [Balanced Budget Act of 1997 (Public Law 105-33, approved 

August 5, 1997)], “... the Government contribution equals the lesser of: (1) 72 percent of amounts OPM determines are 

the program-wide weighted average of premiums in effect each year, for self only and for self and family enrollments, 

respectively, or (2) 75 percent of the total premium for the particular plan an enrollee selects.” “Cost of Insurance,” 

Office of Personnel Management, accessed October 24, 2014, https://www.opm.gov/healthcareinsurance/healthcare/reference-materials/reference/cost-of-insurance/#govshare. 

480 For example, see Congressional Budget Office, Approaches to Reducing Federal Spending on Military Health Care

(Washington, DC: Government Printing Office, 2014). Lawrence J. Korb, Laura Conley, and Alex Rothman, Center for 

American Progress, Restoring Tricare: Ensuring the Long Term Viability of the Military Health Care System, accessed 

October 6, 2014, http://cdn.americanprogress.org/wp-content/uploads/issues/2011/02/pdf/tricare.pdf. Maren Leed 

and Brittany Gregerson, Keeping Faith: Charting a Sustainable Path for Military Compensation, (Washington DC: Center 

for Strategic & International Studies, 2011). 

481 Department of Defense, Draft National Defense Authorization Act for Fiscal Year 2007, section 702, 63-64, accessed 

October 3, 2014, http://www.dod.mil/dodgc/olc/docs/FY2007NDAA_BillText.pdf. Office of the Secretary of Defense, 

Operations and Maintenance Overview: Fiscal Year 2007 Budget Estimates, 15, accessed October 2, 2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/docs/fy2007_overview.pdf. Department of Defense, 

Draft National Defense Authorization Act for Fiscal Year 2008, section 701, 87-88, accessed October 3, 2014, 

http://www.dod.mil/dodgc/olc/docs/FY2008NDAA_BillText.pdf. Department of Defense, Draft National Defense 

Authorization Act for Fiscal Year 2009, section 701, 56-57, accessed October 3, 2014, 

http://www.dod.mil/dodgc/olc/docs/FY2009_NDAA_BillText.pdf. Office of the Undersecretary of Defense 

(Comptroller), United States Department of Defense Fiscal Year 2012 Budget Request Overview, 3-3, accessed October 3, 

2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2012/FY2012_Budget_Request_Overview_Book.p

df. Department of Defense, Draft National Defense Authorization Act for Fiscal Year 2013, section 701, 51-57, accessed 

October 3, 2014, http://www.dod.mil/dodgc/olc/docs/14March2012NDAABillText.pdf. Department of Defense, Draft 

National Defense Authorization Act for Fiscal Year 2014, section 701, 40-50, accessed October 3, 2014, 

http://www.dod.mil/dodgc/olc/docs/26April2013NDAABillText.pdf. Department of Defense, Draft National Defense 

Authorization Act for Fiscal Year 2015, section 701, 58-71, 

http://www.dod.mil/dodgc/olc/docs/1April2014NDAABillText.pdf. 482 Office of the Undersecretary of Defense (Comptroller), United States Department of Defense Fiscal Year 2015 Budget 

Request Overview, 5-10, accessed April 14, 2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pd

f. 
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achieve efficiency, DoD, with the assistance of OPM, could offer a robust benefit at a 

better value with far less of the burden and expense required of DoD today. 

Conclusions: 

AC families, RC members, and retirees could receive a better health care benefit by 

allowing them to choose from a selection of commercial insurance plans offered 

through a DoD health benefit program administered by OPM. Through this proposal, 

DoD could increase beneficiaries’ choice, enhance their access to care, and drive better 

value. 

Under an insurance model, the ease and timeliness of patients’ access to health care 

would improve because beneficiaries would not be subject to DoD’s lengthy and 

frustrating process for making appointments and obtaining referrals. Providing such a 

benefit would also increase beneficiaries’ access to care by greatly improving the 

network of health care providers in their insurance networks, especially in rural areas 

or those without substantial military presence. It would particularly assist RC 

members, as well as retirees, who often live away from major active-duty installations. 

Additionally, by allowing them a choice of plans, beneficiaries could select insurance 

coverage that ensures a baseline of high quality health care and best aligns to their 

individual needs. A DoD health benefit program that offers commercial insurance 

would also more closely resemble or overlap with RC families’ health plans they 

purchase from the civilian sector. This approach would aid continuity of care when RC 

members are mobilized and demobilized. 

Finally, instead of relying on TRICARE, a system that structurally does not provide a 

high quality health care program efficiently, DoD would achieve better value by 

sponsoring a selection of existing commercial insurance plans. The insurance plans 

would pay market rates for health care procedures, rather than DoD’s sub-Medicare 

rates, thereby resulting in much more robust provider networks. The plans would be 

contracted through OPM similar to the FEHBP program, which would reduce 

operating expenses and remove the program from the complex, drawn-out DoD 

contracting process that has been leveraged to erode TRICARE benefits because of 

budgetary considerations. Providing commercial insurance plans would give 

beneficiaries access to the medical industry’s most recent innovations and procedures. 

Under this proposal, commercial insurance plans would make use of modern 

monetary and nonmonetary tools to control excessive utilization. Such tools ultimately 

would allow the system to operate more efficiently, which avoids passing increased 

program costs on to beneficiaries. 

AC family members would continue to receive health care generally at no cost. Service 

members with dependents would receive a new Basic Allowance for Health Care 

(BAHC) to cover the premiums and OOP costs for an average health care plan. RC 

members who are mobilized would also receive this BAHC either to apply toward a 

DoD plan or to cover the employee share of their existing health care plans. This 

ability to remain on their existing health care plan would improve the continuity of 

care for RC family members. Non-Medicare-eligible retirees would continue to have 

access to the military health benefit program, at premiums below the civilian levels in 

recognition of their sacrifices for our Nation. Finally, TRICARE-for-Life would be 

maintained in its current form to provide high quality health care for Medicare-eligible 

retirees. 
 SECTION 3 

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The Commission’s survey indicates beneficiaries would strongly prefer this 

recommendation to the status quo. Although AC family members would have the 

option of choosing more (or less) expensive plans with different copayment levels, the 

BAHC would ensure that beneficiaries have an option with no substantive increase to 

their cost shares. The recommendation, more importantly, would increase attributes of 

the health care benefit that are highly valued by these beneficiaries. In a survey 

question on the choices of health care providers their family members were allowed to 

see, AC respondents overwhelmingly valued a broad range of civilian health care 

providers with some MTF care over the status quo of a select network of civilian 

providers with MTF care. Figure 18 provides the valuations for each option in the 

survey question. According to these results, the Commission’s recommendation would 

increase AC members’ valuation of their health benefit by about $2,200 per year from 

this one attribute alone.483

Figure 18. Active-Duty Service Members’ Perceived Value: 

Provider Choice484

In a related survey question, AC respondents evaluated six aspects of their health care 

experience. In a similar result to the previous question, choice was the most highly 

valued attribute followed closely by flexibility in appointment scheduling and the size 

of the network. The Commission’s recommendation could improve these attributes and 

gives beneficiaries direct control over their health benefit through the plans they 

choose. Figure 19 provides the complete break out of the valuations for the six 

attributes for active-duty survey respondents. The survey allows for a comparison of 

valuation of different compensation designs. Examining just health benefits, the 

 

483 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 484 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. This figure displays the average amount in 

dollars that survey respondents valued compensation alternatives. Presentation in dollar values allows the value of 

compensation features to be directly compared. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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survey reveals that up to 90 percent of AC respondents would prefer the Commission’s 

recommendation (for their family members) than the current benefit.485

Figure 19. Active-Duty Service Members’ Perceived Value: 

Health Care Experience486

It is critical that this health care insurance plan be designed to support DoD’s medical 

readiness mission. MTFs must be included in the insurance carriers’ health care 

provider networks so that beneficiaries can continue to receive care at MTFs and MTFs 

can continue to receive the cases necessary to fulfill their training mission. 

Furthermore, copayments and other OOP costs should be lower at MTFs than in other 

medical facilities to provide beneficiaries financial incentives to seek care in MTFs. 

Finally, insurance program contracts should be established as evergreen agreements 

that are renewed annually, to allow regular adjustments of costs shares and to reflect 

the most current innovations in medical practice. 

Recommendations: 

 Active-duty Service members, for reasons related to operational readiness, 

should continue to receive their health care through their units or the direct 

care system (MTFs). As is the case today, some specialist care will be attained in 

the private sector. When active-duty Service members are referred to the private 

sector for care, they should have access to an unlimited network of providers at 

no cost to the Service member. 

 

485 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. The Commission survey allows for comparison of 

different compensation designs. If all six attributes identified in Figure 6 were increased substantially, then the survey 

results predict that 89.9 percent of AC members would prefer the Commission’s recommendation over the current 

health benefit design. The survey does not allow for partial increases in the six attributes, though, and the degree to 

which these attributes are experience in the current health benefit varies by location and other factors. It may be the 

case that the increases in each attribute vary across beneficiaries, making the survey prediction of approximately 

90 percent an upper-bound estimate. 

486 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. This figure displays the average amount in 

dollars that survey respondents valued compensation alternatives. Presentation in dollar values allows the value of 

compensation features to be directly compared. 
 SECTION 3 

 RECOMMENDATIONS

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 For AC families, RC members, retirees not eligible for Medicare, and their 

families, survivors, and certain former spouses, the Congress should establish a 

new health care program that offers beneficiaries a selection of commercial 

insurance plans to replace TRICARE. This new health benefit should: 

- Offer an array of health plan options that vary in type (e.g., preferred 

provider organizations and health maintenance organization), covered 

benefits, and price. 

- Offer a selection of plans that broadly represents what is available in the 

commercial market without unnecessary restrictions, meets or exceeds a 

baseline of health plan quality, and continuously advances with the health 

care industry. 

- Present several choices in any geographic region. 

- Include dental and vision coverage. The TRICARE Dental Program and the 

TRICARE Retiree Dental Program should remain in place. Additionally, the 

new health care program should contain some health plans that include 

partial dental coverage.487 Beneficiaries also should have access to standalone vision plans under the new health care program, which they currently 

do not have under TRICARE. 

- Allow beneficiaries to continue to have access to MTFs as a venue of care. 

Insurance companies should include MTFs in their networks and reimburse 

MTFs for the care delivered as they do any other provider. 

- Allow beneficiaries to change plans during the annual open season or at a 

life-changing event such as a permanent change of duty station. 

- Ensure insurance plans include catastrophic caps to alleviate large, 

unplanned health bills. 

 Active-duty Service members should receive BAHC, a nontaxable allowance, to 

offset health care cost shares for their family members. 

- BAHC should be based on the costs of average plans available in the family’s 

location. 

- DoD should use BAHC to transfer directly to the insurance carrier the 

premium for the plan the family has selected. The remainder of the BAHC 

should be available for the family members to pay copayments, deductibles, 

and coinsurance. DoD should make available to active-duty families an 

account for the accumulation and future use of unused BAHC. 

- BAHC should be set at a level that sufficiently offsets or completely covers 

costs, or even affords families a surplus each month after costs are paid. 

 

487 Partial dental coverage refers to insurance coverage for accidental dental injuries and routine preventative and 

diagnostic services. 
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- Families should be able to use their BAHC to purchase health care through 

a spouse’s employer if desired. 

- When AC families struggle with a high-cost chronic condition or a 

catastrophic event or illness, there should be a DoD program available to 

assist them with medical expenses until they reach their health plan’s 

catastrophic caps and are no longer required to pay OOP costs. Active-duty 

families should apply to this program for additional funding to cover 

copayments that substantially exceed their BAHC. An annual total of 

$50 million should be budgeted for this catastrophic and chronic condition 

assistance. (See Appendix D for more information about costing related to 

this program.) 

Table 7 provides more detail on who would be eligible for BAHC, how it would be computed, 

what would be specified in law, and other details of its implementation. Figure 20 notionally 

displays how BAHC would be calculated. TRICARE Choice is the name used for the proposed 

program that would offer beneficiaries a selection of commercial health insurance plans. 

Table 7. Frequently Asked Questions Regarding 

Basic Allowance for Health Care 

Who would receive a BAHC? BAHC would be provided to every Service member of the Uniformed Services in

active‐duty status who has at least one dependent recorded in Defense

Enrollment Eligibility Reporting System (DEERS). Service members would receive

BAHC for any dependents up to age 26.

How would DoD track and

allocate the BAHC?

Service members or authorized spouses would have to certify in DEERS that they

have purchased health care for their dependents. If they purchase a health plan

through TRICARE Choice, it will automatically be recorded in DEERS. If they

purchase a certified health care plan offered outside of TRICARE Choice, the

Service member would be required to provide the information to DEERS.

Payments from the Defense Finance and Accounting Services (DFAS) are aligned

with DEERS information, therefore DEERS information must be accurate to enable

the DFAS automatic payment function.

How would the insurance

carriers receive the BAHC for

payment of the health plan

premium?

The portion of the BAHC used to pay the premium of the insurance plan selected

by the Service member would appear as an allotment on the Service member’s

Leave and Earnings Statement.  This portion of BAHC would be paid directly into

the OPM trust fund for use by the insurance plan selected. If the Service member

indicates a non‐TRICARE Choice plan in DEERS, DFAS would make payment directly

to that insurance carrier.  

How would active‐duty

Service members receive the

BAHC to pay for their family

members’ out‐of‐pocket

health expenses?

The portion of the BAHC to be used for out‐of‐pocket costs (copayments,

coinsurance, and deductibles) would be paid to active‐duty Service members as a

cash payment in their direct deposit. BAHC would be a nontaxable allowance.
 SECTION 3 

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How would BAHC be

calculated?  

The BAHC formula will be specified in law as 28% of the total premium of the

health plan selected in a location in the prior year by the median active‐duty

family member unit plus the average copayment amount by all active‐duty family

member beneficiaries in that location in the prior year. The geographic unit (e.g.,

state versus metropolitan statistical area) will not be specified in law and will be at

the discretion of the program. In the first year, when no prior year data are

available, a projection of likely plan choices and utilization behavior for the

population will be used to compute the values. The legislative language creating

the BAHC will include the specific formula:  

BAHC=0.28*(Total Premium of Median Plan)+Copayment Amount

Figure 20. Illustrative Calculation of Basic Allowance for 

Health Care488

How BAHC is Computed (Annual Amount)

Total Current Year Premium of Median Plan

Selected in Prior Year $8,507

28% of Total Plan Premium Becomes BAHC

Amount $2,382

Average Copayment Amount  

Added to BAHC $920

Total BAHC Amount (sum of premium and

copayment amount) $3,302

 All RC members should be able to purchase a plan from the DoD program at 

varying cost shares. Members of the Selected Reserve should have a reduced 

cost share of 25 percent to encourage RC health and dental readiness and 

streamline mobilization of RC personnel. Other RC members new to the benefit 

should have higher cost shares corresponding to their category of service. When 

mobilized, RC members should receive active-duty health care. Under this new 

benefit, RC members with families should receive the BAHC and either select a 

plan from DoD’s program or remain on their current (civilian) plan and apply 

the BAHC to those costs. 

 Medicare-eligible retirees should continue to receive health care to supplement 

Medicare benefits consistent with TRICARE for Life. 

 The cost contribution for non-Medicare-eligible retirees should gradually 

increase over many years, but remain lower than the average civilian employee 

cost share as recognition of military members’ service. 

 

488 Actual BAHC values would depend upon local market conditions, Service-member choices, and plans available. 
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 The TRICARE Young Adult program would no longer be necessary, as 

commercial health insurance plans that offer dependent coverage should make 

coverage available to dependents until age 26. 

Tables 8 and 9 describe in more detail how the Commission’s recommendation would affect 

each type of beneficiary and current DoD health care programs. 

Table 8. Effects of the Commission’s Health Benefit 

Recommendations by Beneficiary Category 

Beneficiary Category Impact

Active‐duty Service members No impact on benefit, costs, or where care is delivered. Active‐duty Service

members would continue to receive their health care through the direct care

system (their units or MTFs). When referred to the private sector for specialist

care, they would have access to an unlimited network of providers at no cost to

the Service member. DoD would have the authority to contract with a third‐

party administrator to pay claims for care that active‐duty Service members

receive in the private sector.  

Active‐duty family members

(ADFMs)

Currently use TRICARE Prime, Standard, Extra, etc. These plans would be

eliminated and replaced with TRICARE Choice. Dependents up to age 26 would

be covered under TRICARE Choice. A 28% premium cost share and higher out‐

of‐pocket expenses would be charged to beneficiaries, but sponsors of ADFMs  

would be compensated for this increased cost share with the BAHC. They

would continue to have access to the TRICARE Dental Program.  Under TRICARE

Choice, they also would have access to health plans with partial dental

coverage.489 Under TRICARE Choice, they would have access to vision coverage

not available under TRICARE.

Members of the Selected

Reserve on inactive‐duty  

Currently purchase TRICARE Reserve Select. TRS would be eliminated and

replaced with TRICARE Choice. Premium cost share would reduce to 25% to

improve RC medical and dental readiness. They would continue to have access

to the TRICARE Dental Program.  Under TRICARE Choice, they also would have

access to health plans with partial dental coverage. Under TRICARE Choice,

they would have access to vision coverage not available under TRICARE.

Members of the Selected

Reserve called to active‐duty for

more than 30 consecutive days

(including pre‐ and

postmobilization transition, i.e.,

TAMP)  

Service members would receive the same care as active‐duty at no cost.

Dependents currently receive TRICARE benefits, which would be eliminated

and replaced with TRICARE Choice. Dependents would incur a 28% premium

cost share and out‐of‐pocket expenses but their sponsors would be

compensated for this with a BAHC. They would continue to have access to the

TRICARE Dental Program.  Under TRICARE Choice, they also would have access

to health plans with partial dental coverage. Under TRICARE Choice, they

would have access to vision coverage not available under TRICARE.

 

489 Partial dental coverage refers to insurance coverage for accidental dental injuries and routine preventative and 

diagnostic services. 
 SECTION 3 

 RECOMMENDATIONS

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Beneficiary Category Impact

Other Reserve Component (not

currently eligible for TRICARE,

TRS, or TRR)

No TRICARE benefits today. Would be eligible for TRICARE Choice with cost

shares corresponding to their category of service, but higher than the 25% cost

share afforded the inactive Selected Reserve. They would continue to have

access to the TRICARE Dental Program.  Under TRICARE Choice, they also would

have access to health plans with partial dental coverage. Under TRICARE

Choice, they would have access to vision coverage not available under

TRICARE.

Non‐Medicare‐eligible retirees Currently use TRICARE Prime, Standard, or Extra. These plans would be

eliminated and replaced with TRICARE Choice. When fully implemented, non‐

Medicare‐eligible retirees would pay a 20% premium cost share. The cost share

would gradually increase at a rate of 1% per year for 15 years to adjust from

the current 5% cost share to the ultimate 20% cost share. Non‐Medicare‐

eligible beneficiaries would pay out‐of‐pocket expenses. They would not

receive a BAHC. They would continue to have access to the TRICARE Retiree

Dental Program.  Under TRICARE Choice, they also would have access to health

plans with partial dental coverage. Under TRICARE Choice, they would have

access to vision coverage not available under TRICARE.

Medicare‐eligible retirees Currently use TRICARE for Life and would continue to do so.

Retired Reserve Component

members (after retirement but

under age 60)

Currently use TRICARE Retired Reserve (TRR). TRR would be eliminated and

replaced with TRICARE Choice. Like today, the Government would not subsidize

the cost. They would continue to have access to the TRICARE Retiree Dental

Program.  Under TRICARE Choice, they also would have access to health plans

with partial dental coverage. Under TRICARE Choice, they would have access to

vision coverage not available under TRICARE.

Dependent survivors, certain

former spouses, Medal of Honor

recipients and their families, and

others registered in DEERS

Currently use TRICARE, which would be eliminated and replaced with TRICARE

Choice. These beneficiaries would pay a premium cost share at a level

consistent with their cost shares today. They would have access to the dental

coverage they receive under TRICARE, as well as partial dental coverage

available under some health plans in TRICARE Choice. Under TRICARE Choice,

they would have access to vision coverage not available under TRICARE.

Other Uniformed Services and

their dependents (Coast Guard,

Public Health Service

Commissioned Corps, and

National Oceanic and

Atmospheric Administration

Commissioned Officer Corps)

Currently use TRICARE, which would be eliminated and replaced with TRICARE

Choice. They would have access to the dental coverage they receive under

TRICARE, as well as partial dental coverage available under some health plans

in TRICARE Choice. Under TRICARE Choice, they would have access to vision

coverage not available under TRICARE.
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Table 9. Effects of the Commission’s Health Benefit 

Recommendations by Current Program 

Program Impact

TRICARE Prime Program would be eliminated and replaced by TRICARE Choice for ADFMs. For active‐

duty Service members, there would be no impact on benefits, costs, or where care is

delivered. DoD would have the authority to contract with a third‐party administrator to

pay claims for care active‐duty Service members receive in the private sector.

TRICARE Standard Program would be eliminated and replaced by TRICARE Choice.  

TRICARE Extra Program would be eliminated and replaced by TRICARE Choice.  

TRICARE for Life (TFL) Benefit would remain in place and would not be directly affected by Commission

recommendation. Care would still be provided and claims would still be paid first through

Medicare in most cases. DoD would still contract with a third‐party administrator to pay

claims and coordinate claims processing with Medicare administrators and medical

providers. There would be an indirect impact on the minimal cases in which TFL is

primary payer because of the elimination of TRICARE Prime, Standard, and Extra

programs and infrastructure. DoD must retain certain responsibilities related to the TFL

program, including upholding and, as appropriate, seeking changes to policies on medical

services allowable under the DoD Medicare wrap‐around program. When Medicare does

not cover services but TFL does, TFL beneficiaries would obtain care through an unlimited

network of providers that the third‐party administrator verifies are licensed by the state

and credentialed within the specialty in which they are providing services. The providers

would submit claims to the third‐party administrator, which would handle claims

processing. In overseas settings in which Medicare does not operate, TFL would remain

the primary payer and DoD would retain the authority to contract with a third‐party

administrator to process the claims. TFL users would continue to have access to

pharmacy benefits through DoD.

TRICARE Young Adult

(TYA)

Program would be eliminated. Plans under TRICARE Choice would cover dependents up

to age 26 even if these dependents are married, not living with their parents, attending

school, not financially dependent on their parents, or eligible to enroll in their employer’s

plan.

TRICARE Reserve

Select (TRS)

Program would be eliminated and replaced by TRICARE Choice. Premium cost share

would be 25%.

TRICARE Retired

Reserve (TRR)

Program would be eliminated and replaced by TRICARE Choice. Like today, the

Government would not subsidize the cost.  

Active‐Duty Dental

Program (ADDP)

Program remains in place and operates as it does today.

TRICARE Dental

Program (TDP) for

active‐duty families

Program remains in place and operates as it does today. ADFMs would retain the same

premium cost share they experience under TDP. Additionally, TRICARE Choice would

contain some health plans with partial dental coverage.
 SECTION 3 

 RECOMMENDATIONS

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Program Impact

TRICARE Dental

Program (TDP) for RC

families

Program remains in place and operates as it does today. RC members would retain the

same premium cost share they experience under TDP. Additionally, TRICARE Choice

would contain some health plans with partial dental coverage.

TRICARE Retiree

Dental Program

(TRDP)

Program remains in place and operates as it does today. Retirees would retain the same

premium cost share they experience under TRDP. Additionally, TRICARE Choice would

contain some health plans with partial dental coverage.

TRICARE Pharmacy The pharmacy benefit  would remain in place.  DoD would manage the pharmacy

program and continue to use the DoD formulary and Federal Supply Schedule pricing.

Beneficiaries using TRICARE Choice, as well as Medicare‐eligible retirees using TFL, would

obtain medications from retail, mail‐order, and MTF settings.  DoD would retain the

authority to contract with a third‐party administrator to perform functions such as

managing the retail pharmacy network, distributing mail‐order medications, and

processing claims. Such contracts would require the pharmacy benefits manager to

integrate pharmaceutical treatment with health care and to implement robust

medication therapy management.

U.S. Family Health

Plan (USFHP)

The USFHP program would continue but would no longer be associated with TRICARE

Prime. USFHP designated providers could participate in TRICARE Choice by contracting

with OPM to offer health plans to beneficiaries.

TRICARE Prime

Remote

Program would be eliminated and replaced by TRICARE Choice for ADFMs. For active‐

duty Service members, there would be no effect on benefit, costs, or where care is

delivered. DoD would have the authority to contract with a third‐party administrator to

pay claims for care active‐duty Service members receive in the private sector.

TRICARE Prime

Overseas

Program would be eliminated and replaced by TRICARE Choice for ADFMs. For active‐

duty Service members, there would be no effect on benefit, costs, or where care is

delivered. DoD would have the authority to contract with a third‐party administrator to

pay claims for care active‐duty Service members receive in the private sector.

TRICARE Prime

Remote Overseas

Program would be eliminated and replaced by TRICARE Choice for ADFMs. For active‐

duty Service members, there would be no effect on benefit, costs, or where care is

delivered. DoD would have the authority to contract with a third‐party administrator to

pay claims for care active‐duty Service members receive in the private sector.

TRICARE Standard

Overseas

Program would be eliminated and replaced by TRICARE Choice for ADFMs. For active‐

duty Service members, there would be no effect on benefit, costs, or where care is

delivered. DoD would have the authority to contract with a third‐party administrator to

pay claims for care active‐duty Service members receive in the private sector.

 To ensure affected Service members and beneficiaries can navigate the new 

insurance program with ease, DoD should institute a program of education and 

benefits counseling (see Recommendation 3). 

 The proposed health care program should be administered by OPM in a way 

that incorporates the experience and knowledge of both the DoD and OPM to 

achieve the best health care benefit possible, with the greatest amount of 

flexibility and industry innovation, and in the most efficient manner available. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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- DoD should develop and provide to OPM recommendations on the unique 

needs of the eligible Uniform Services beneficiary population. DoD should 

also make recommendations to OPM on matters involving MTFs, namely the 

inclusion of MTFs in carriers’ networks, copayments levels at MTFs, and 

adjustments to procedure reimbursement rates for EMC-related care 

delivered in MTFs. Details of the benefit, as well as contract negotiations, 

should be the responsibility of OPM. DoD should not exclude from the 

program any benefits that OPM determines are commonly available in 

FEHBP. DoD should retain the budget authority for the health care provided 

to AC dependents, members of the RC, and non-Medicare-eligible retirees 

and transfer funds to OPM for insurance operations, as it does today for 

DoD civilian employees. 

- The Congress should leverage OPM’s experience in administering similar 

health care programs to manage the routine business operations of the 

program, such as the contracts with and distribution of funds to insurance 

carriers. This arrangement should include managing annual “evergreen” 

contracts, performing a strict evaluation of financial solvency of carriers, 

transmitting annual call letters to carriers, reviewing potential plans against 

DoD requirements, and managing the trust fund and its associated 

payments. 

Table 10 provides more detail on the roles and responsibilities of OPM, DoD, insurance carriers, 

and beneficiaries under the Commission’s recommendation. 

Table 10. Roles and Responsibilities 

Under the Health Benefits Recommendation 

OPM DoD

 Contracting for and approving or disapproving

carriers for participation in the health benefit

program;

 Taking action to ensure the offering of plans broadly

represents what is available in the commercial

market without unnecessary restrictions and meets

a baseline of health‐plan quality

 Negotiating benefit and rate changes with carriers;

 Approving the certified text on benefits for the

brochures;

 Publishing regulations, instructions, forms, and

documents pertaining to the program;

 Receiving and depositing premium withholdings and

contributions, remitting premiums to carriers, and

accounting for the Employees Health Benefits Fund;

 Making final determinations of the applicability of

the health benefit program law to specific

employees or groups of employees;

 Auditing carriers' operations under the law;

 Performing a strict evaluation of carriers’ financial

solvency;

 Resolving disputed health insurance claims between

the enrollee and the carrier.

 Providing recommendations to OPM on the unique

needs of the eligible Uniformed Services beneficiary

population, without excluding from the program any

benefits OPM determines are commonly available in

FEHBP;

 Providing recommendations to OPM on the inclusion

of MTFs in carriers’ networks and rate negotiation

for copayments at MTFs and procedure

reimbursement rates for EMC‐related care delivered

in MTFs;

 Retaining budget authority for the health benefit for

active‐duty dependents, members of the RC, and

non‐Medicare‐eligible retirees and transferring

funds to OPM for insurance operations, as it does

today for DoD civilian employees;

 Remitting and accounting for withholdings and

contributions;

 Administering and dispersing BAHC through Defense

Finance and Accounting Services;

 Providing eligible persons with information on their

rights and responsibilities under the health benefit

program;

 Conducting a program of education and benefits
 SECTION 3 

 RECOMMENDATIONS

 PAGE 117 

counseling to ensure affected Service members and

beneficiaries can navigate the health benefit

program;

 Establishing a DoD office responsible for interacting

with eligible beneficiaries on the health benefit

program, including counseling and advising

employees; determining individual eligibility for

enrollment, effective dates of health benefits

actions, and other related matters; processing health

benefits actions and ensuring that election forms are

properly completed; reviewing enrollment

reconsideration requests; stocking and distributing

health benefits forms and literature; maintaining

records; and managing the catastrophic‐ and

chronic‐condition assistance program.

Insurance Carriers Beneficiaries

 Adjudicating claims of, and providing health benefits

to, beneficiaries in accordance with its contract with

OPM;

 Typesetting, printing, and distributing brochures;

 Furnishing each person enrolled in its health plan an

identification card or other evidence of enrollment;

 Acting on enrollee requests for reconsideration of

disputed claims;

 Maintaining financial and statistical records and

reporting on the operation of its plan;

 Developing and maintaining effective

communication and control techniques to ensure

that its subcontractors and local offices comply with

regulations and OPM instructions.

 Being aware of their plan’s benefit package,

premium charges, exclusions and limitations,

precertification and preauthorization requirements,

and provider networks (if applicable);

 Reviewing the benefit and rate changes made to

their plan during open season and determining

whether their plan will still meet their needs in the

upcoming year;

 Filing the appropriate forms on a timely basis to

enroll, change, or cancel enrollment;

 Filing claims on a timely basis with the necessary

documentation (if necessary);

 Updating DEERS when their address changes or

when a dependent is added to or removed from

dependent status.

 All health care programs should be financed through trust funds. 

- To finance the new health care program for active-duty families, RC 

members and families, non-Medicare eligible retirees, and all other eligible 

beneficiaries, the Departments of Defense, Homeland Security, Commerce, 

and Health and Human Services should transfer funding to the Employee 

Health Benefits Fund managed by OPM. OPM should keep the funding for 

FEHBP and the new health care program segregated in the trust fund. 

- The Medicare-Eligible Retiree Health Care Fund (MERHCF) should be 

expanded to cover the health care and pharmacy programs for non-Medicare 

eligible retirees. The health care for non-Medicare eligible retirees should be 

accrual funded, similar to how Medicare-eligible retiree health care is today. 

A portion of the outlays from the MERHCF should be paid to the OPM 

Employee Health Benefits Fund to purchase insurance plans for nonMedicare eligible retirees. 

- To finance the existing pharmacy and dental programs for active-duty 

families and RC members and families and pharmacy, dental, and health 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 118 

care for active-duty Service members, a new trust fund should be created 

and managed by DoD for health care expenditures appropriated in the 

current year. 

 Catchment areas around MTFs, an element of TRICARE Prime today, should be 

rescinded, allowing MTFs to attract cases unrestricted by geographic vicinity. 

Implementation: 

 Title 10, U.S. Code, addresses matters concerning the Armed Forces. A new 

chapter should be added to Title 10 to create a new health care program for 

dependents of members of the Uniformed Services, members of the Uniformed 

Services in reserve status, and non-Medicare-eligible retirees. The new program 

should be similar in nature to the Federal Employees Health Benefits Program 

currently administered by OPM, found at Chapter 89, Title 5, U.S. Code. The 

new chapter should provide for authorities and requirements that are similar 

but not identical to those found in Chapter 89, Title 5, U.S. Code. The new 

chapter should authorize DoD to make recommendations regarding the 

requirements of the new health care program, while requiring OPM to be 

responsible for administering the program. 

 Title 5, U.S. Code, should be amended to authorize and set forth requirements 

for OPM to administer the new health care program on behalf of DoD. 

 Chapter 55, Title 10, U.S. Code, governs medical and dental care for Uniformed 

Services members and certain former members, and for their dependents. The 

laws providing for the benefits for active-duty Service members and Medicareeligible retirees should remain substantially the same except for technical and 

conforming amendments necessitated by the other changes to Title 10 resulting 

from the new health care program. 

 Chapter 55, Title 10, U.S. Code, governs the pharmacy and dental benefits for 

the Uniformed Services. The laws providing for pharmacy and dental benefits 

should remain substantially the same except for technical and conforming 

amendments necessitated by the changes to Title 10 resulting from the new 

health care program. 

 Various titles of the U.S. Code address the issue of allowances for the Uniform 

Services. These titles should be amended to authorize receipt of BAHC as an 

allowance. 

 Relevant sections of Title 10 of the U.S. Code should be amended to 

authorize receipt of BAHC as an allowance. 

 Title 26, U.S. Code, contains the provisions of the Internal Revenue Code. 

Title 26 should be amended to allow BAHC to receive similar tax treatment 

as other non-taxable allowances received by members of the Uniformed 

Services, such as BAH and BAS. 

 Title 37, U.S. Code, governs pay and allowances of the Uniformed Services. 

Chapter 7, Title 37, U.S. Code, should be amended to authorize the receipt 

of BAHC as an allowance. 37 U.S.C. § 101(25) should be amended to include 

BAHC in the definition of “regular military compensation.” 
 SECTION 3 

 RECOMMENDATIONS

 PAGE 119 

 Title 10, U.S. Code, should be amended to add a new section which establishes 

and governs a trust fund for monies appropriated for provision of pharmacy, 

dental, and health care for active-duty Service members, pharmacy and dental 

care for Reserve Component Service members, and pharmacy and dental care 

for the dependents of the Uniformed Services. 

 Chapter 56, Title 10, U.S. Code, governs the DoD Medicare-Eligible Retiree 

Health Care Fund. Chapter 56 should be amended to expand coverage to 

include all retirees, not just Medicare-eligible retirees. 

 Section 8909, Title 5, U.S. Code, governs the Employees Health Benefits Fund, 

which finances health insurance for Federal civilian employees. Section 8909 

should be amended to include funding for the proposed health care program 

herein with the requirement that funding for the Federal Employees Health 

Benefits Program and the proposed health care program remain separate in the 

trust fund. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. Such as: 

- Replace instructions for TRICARE with instructions for the new health care 

program; and 

- Define roles and responsibilities of DoD and OPM in administering the new 

health care program. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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Recommendation 7: Improve support for Service members’

dependents with special needs by aligning services offered 

under the Extended Care Health Option to those of state 

Medicaid waiver programs. 

Background: 

The Exceptional Family Member Program (EFMP) provides support to Service members 

who have family members with special medical or educational needs.490 Exceptional 

Family Members (EFMs) may be spouses, children, or dependent parents who require 

special medical or educational services for a diagnosed physical, intellectual, or 

emotional condition.491 EFMP provides assignment coordination to ensure EFMs have 

access to needed medical and educational services.492 When appropriate assignment 

coordination occurs, family members receive the care and support they require, and 

the Service member can focus more clearly on mission-related responsibilities. EFMs 

who meet specific eligibility criteria493 can also register for TRICARE Extended Care 

Health Option (ECHO) program. This program provides financial assistance for 

services and supplies not available through TRICARE that are certified by TRICARE to 

confirm, arrest, or reduce the severity of the disabling effects of a qualifying 

condition.494

The ECHO program provides coverage for assistive services, durable medical 

equipment, and other services to support EFMs.495 ECHO members may receive 

expanded in-home medical services through TRICARE ECHO Home Health Care 

(EHHC) or applied behavior analysis (ABA) reinforcement services under the DoD 

Enhanced Access to Autism Services Demonstration.496 ECHO provides up to 16 hours 

of respite care during any month when at least one other ECHO benefit is received.497

Respite care must be received from a TRICARE-authorized home health agency.498

EHHC beneficiaries may receive respite care for up to 8 hours per day for 5 days per 

week for EFMs with a plan of care that requires more than two interventions during 

the 8-hour period per day that the primary caregiver would normally be sleeping.499 

 

490 Military Family Readiness, DoDI 1342.22, Enclosure 3, 18-19 (2012). 491 DoDI 1315.19 defines “family member” the same as “dependent.” DoDI 1342.22 provides that “dependent” will be 

given the same definition as that found in 37 U.S.C. § 401(a), which defines “dependent” as a spouse, a dependent 

parent, or an unmarried child who is either under a given age or is incapable of self-support due to a mental or 

physical incapacity. DoDI 1315.19 provides criteria to be used in determining when a family member is a “family 

member with special needs.” Criteria include certain diagnosed physical, intellectual, and emotional conditions. 492 Military Family Readiness, DoDI 1342.22, Enclosure 3, 19 (2012). 493 Conditions that qualify for ECHO coverage may include, but are not limited to, a diagnosis of moderate or severe 

mental retardation, serious physical disability, extraordinary physical or psychological condition of such complexity 

that the beneficiary is homebound, diagnosis of a neuromuscular developmental condition or other condition in an 

infant or toddler (younger than age 3) that is expected to precede a diagnosis of moderate or severe mental retardation 

or a serious physical disability, and multiple disabilities, which may qualify if there are two or more disabilities 

affecting separate body systems. National Defense, 32 CFR 199.5(b)(2). See also U.S. Department of Defense Military 

Health System, Extended Care Health Option Fact Sheet, accessed November 20, 2014,

http://www.tricare.mil/~/media/Files/TRICARE/Publications/FactSheets/ECHO_FS.pdf. 494 National Defense, 32 CFR 199.5(c). See also U.S. Department of Defense Military Health System, Extended Care 

Health Option Fact Sheet, accessed November 20, 2014,

http://www.tricare.mil/~/media/Files/TRICARE/Publications/FactSheets/ECHO_FS.pdf. 495 Ibid. 496 Ibid. 497 Ibid. 498 Ibid. 499 National Defense, 32 CFR 199.5(e). See also U.S. Department of Defense Military Health System, Extended Care 

Health Option Fact Sheet, accessed November 20, 2014,

http://www.tricare.mil/~/media/Files/TRICARE/Publications/FactSheets/ECHO_FS.pdf.
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As shown in Table 11, Service members with dependents registered in ECHO pay a 

monthly cost-share, based on their rank, for every month beneficiaries use ECHO 

benefits.500 The current ECHO benefit cap is $36,000 per fiscal year per dependent.501

EHHC is not included in this cap, but is capped at the maximum fiscal-year amount 

TRICARE would pay if the beneficiary resided in a skilled nursing facility based on the 

beneficiary’s geographic location.502 As of July 25, 2014, the ABA Autism 

Demonstration is no longer subject to this cap.503 

Table 11. Monthly Cost-Shares for ECHO Participation504

Sponsor  

Pay Grade

Monthly  

Cost‐Share

Sponsor

Pay Grade

Monthly

Cost‐Share

Sponsor  

Pay Grade

Monthly

Cost‐Share

E1 to E5 $25 E9, W1,

CWO2, O3 $45 O7 $100

E6 $30 W3, W4, O4 $50 O8 $150

E7, O1 $35 W5, O5 $65 O9 $200

E8, O2 $40 O6 $75 O10 $250

Service families are also eligible to apply to receive state Medicaid services for their 

EFM(s) in the state where they currently reside, including services available through 

state Medicaid waiver programs.505 Waivers are used by states to develop new services 

and extend benefits to new populations beyond those typically provided by 

Medicaid.506 Multiple types of waiver programs are available. The home- and 

community-based services (HCBS) waiver most closely aligns with the services activeduty family members with EFMs often express they need, including respite care, 

transportation support, and day-care for those with intellectual or developmental 

disabilities.507 Unlike Medicaid, in which the family’s income is considered as part of 

the eligibility process, income eligibility for HCBS waivers is based solely on the EFM’s 

income,508 allowing states to extend the Medicaid benefit to families that may not 

otherwise have access.509 The purpose of the HCBS waiver is to meet the needs of 

individuals who choose to receive their long-term care services and support in their 

home or community, rather than in institutional settings.510 ECHO participants are 

required to access these state and local services prior to accessing services under 

ECHO.511 Table 12 summarizes the services offered under the HCBS waiver and ECHO 

programs.

 

500 National Defense, 32 CFR 199.5(f)(2)(i). 501 National Defense, 32 CFR 199.5(f)(3)(i). 502 Ibid. 503 See Federal Register, A Notice by The Defense Department on 06/16/2014, Comprehensive Autism Care 

Demonstration, accessed October 24, 2014, https://www.federalregister.gov/articles/2014/06/16/2014-

14023/comprehensive-autism-care-demonstration#table_of_contents. 504 National Defense, 32 CFR 199.5(e). See also U.S. Department of Defense Military Health System, Extended Care 

Health Option Fact Sheet, accessed June 20, 2014, http://www.tricare.mil/Plans/SpecialPrograms/Echo.aspx. 505 The Public Health and Welfare, 42 U.S.C. § 1396a(a)(10)(ii)(VI). The Public Health and Welfare, 42 U.S.C. § 1396n. 506 West Virginia University, Medicaid and Military Families with Children with Special Healthcare Needs: Accessing 

Medicaid and Waivered Services, 16, accessed June 26, 2014, 

http://www.militaryonesource.mil/12038/MOS/EFMP/EFMP_MedicaidReport.pdf. 507 Ibid. 508 The Public Health and Welfare, 42 U.S.C. § 1396a(a)(10)(A)(ii)(VI). The Public Health and Welfare, 42 U.S.C. § 1396n. 509 West Virginia University, Medicaid and Military Families with Children with Special Healthcare Needs: Accessing 

Medicaid and Waivered Services, 21-22, accessed June 26, 2014, 

http://www.militaryonesource.mil/12038/MOS/EFMP/EFMP_MedicaidReport.pdf. 510 See The Public Health and Welfare, 42 U.S.C. § 1396n, originally enacted as § 1915(c) of the Social Security Act of 

1935. 

511 Armed Forces, 10 U.S.C. §1079(f)(4). 
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Table 12. Statutory Guidelines for HCBS Waivers and ECHO 

HCBS Waiver512   ECHO513

Adult Day Care: Daytime, community‐based program for functionally

impaired adults that provides a variety of health, nutrition, social,

and related services in a protective setting to those who are

otherwise being cared for by family members. Its purpose is to

enable individuals to remain at home and in the community and to

encourage family members to care for them by providing relief from

the burden of constant care.

Training, rehabilitation, special education,

and assistive technology devices.  

Adult Day Habilitation Services: Day program usually serving

individuals with mental retardation/developmental disabilities, teach

skills such as cooking, recreation, and work skills. The individual may

work part of the day with other individuals with disabilities in

assembly and production work for piece rate wages or below

minimum wages (Work Activities Center). In some sites, the recipient

attends a center with peers learning nonvocational or prevocational

skills.

Training, rehabilitation, special education,

and assistive technology devices.

Adult Day Health Services: Adult day care setting that provides more

health‐related services.

Inpatient, outpatient, and comprehensive

home health care supplies and services

that may include cost effective and

medically appropriate services other than

part‐time or intermittent services (within

the meaning of such terms as used in the

second sentence of section 1861(m) of the

Social Security Act).

Assistive Technology: A range of equipment, machinery and devices

that share the purpose of assisting or augmenting the capabilities of

individuals with disabilities in almost every area of daily community

life, including mobility, independence in activities of daily life,

communication, employment learning and so forth. Specialized

examples include wheelchairs and ramps, and electronic and printed

picture/icon communication devices, but also can include tape

recorders and tapes for messages, materials, instructions and so forth

normally presented on paper, special large or punch switches

available at a local electronics store, level door handles (as opposed

to knobs) that are available at any hardware store, and telephones

with single function keys for dialing certain numbers that are

available at most department stores.

Training, rehabilitation, special education,

and assistive technology devices.

 

512 The Public Health and Welfare, 42 U.S.C. § 1396n, originally enacted as § 1915(c) of the Social Security Act of 1935. 

West Virginia University, Medicaid and Military Families with Children with Special Healthcare Needs: Accessing 

Medicaid and Waivered Services, 100-01, accessed June 26, 2014, 

http://www.militaryonesource.mil/12038/MOS/EFMP/EFMP_MedicaidReport.pdf. 513 Armed Forces, 10 U.S.C. § 1079(f)(4). National Defense, 32 CFR 199.5. 
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HCBS Waiver512   ECHO513

Adaptive Equipment: Physical and/or mechanical modifications to the

home, vehicle or the recipient’s personal environment.

N/A, although the law states “such other

services and supplies as determined

appropriate by the Secretary,

notwithstanding the limitations in

subsection (a)(13).”

Case Management: Services that assist individuals’ access to needed

medical, social, educational, and other services.

...and case management services with

respect to the qualifying condition of such

a dependent...

Personal Care Attendant: Services such as help balancing a

checkbook, grocery shopping, developing a budget, paying bills, etc.  

Custodial care, notwithstanding the

prohibition in section 1077 (b)(1) of this

title.

Habilitation Services: Services designed to assist individuals in

acquiring, retaining, and improving the self‐help, socialization, and

adaptive skills necessary to reside successfully in home and

community based settings; and includes prevocational, educational,

and supported employment.

Training, rehabilitation, special education,

and assistive technology devices.

Homemaker Services: Assistance with general household activities

and ongoing monitoring of the well‐being of the individual.

Custodial care, notwithstanding the

prohibition in section 1077 (b)(1) of this

title.

Home Health Aide: Health care professional who assists with specific

health problems.

Inpatient, outpatient, and comprehensive

home health care supplies and services

that may include cost effective and

medically appropriate services other than

part‐time or intermittent services (within

the meaning of such terms as used in the

second sentence of section 1861(m) of the

Social Security Act).

Nursing Care Services: Services provided by or under the direction of

a registered nurse.

Inpatient, outpatient, and comprehensive

home health care supplies and services

that may include cost effective and

medically appropriate services other than

part‐time or intermittent services (within

the meaning of such terms as used in the

second sentence of section 1861(m) of the

Social Security Act).

Personal Care Services: Direct supervision and assistance in daily

living skills and activities (e.g., assisting the individual with bathing

and grooming).

Custodial care, notwithstanding the

prohibition in section 1077 (b)(1) of this

title.
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HCBS Waiver512   ECHO513

Respite Care: Short‐term supervision, assistance, and care provided

due to the temporary absence or need for relief of recipient’s

primary caregivers. This may include overnight, in‐home or out‐of‐

home services. Training for the family in managing the individual. Day

treatment or other partial hospitalization, psycho‐social

rehabilitation services and clinical services for people with a mental

illness.

Respite care for the primary caregiver of

the eligible dependent.

Vocational Services: Supported employment, prevocational

education, and other services not covered by other sources.

Training, rehabilitation, special education,

and assistive technology devices.

For additional information on ECHO and EFMP, please see the Report of the Military 

Compensation and Retirement Modernization Commission: Interim Report (Section 

4.1.13.4 and Section 5.1.10.8). 

Findings: 

The list of HCBS waiver benefits authorized by the Social Security Act514 and the list of 

ECHO benefits authorized through TRICARE515 are very similar, although actual 

implementation of the two programs varies.516 A DoD-commissioned study published 

in November 2013 by West Virginia University found that Service families with special 

needs use Medicaid as a resource to obtain specific supplementary services and 

coverage.517 Examples include respite care, transportation, supplies like diapers for 

older children, durable medical equipment, and nutritional products such as formula 

that are either not provided or not fully covered by TRICARE.518

Respite care is one of the greatest needs among families that have children with 

intellectual and developmental disabilities, such as autism.519 Home and communitybased waiver programs are seen as a lifeline to supplement the limited respite care 

benefits provided by the military health system or by the respite care programs of the 

various Services.520 

Access to HCBS waiver benefits is a substantial issue for military families with EFMs. 

Service members are required to re-apply for benefits each time they move to a new 

state.521 Many Service members encounter waiting lists that exceed their time assigned 

to a location.522 Table 13 provides waiver waiting list estimates indicating the number 

of people waiting for services in each of the top 10 states with the largest active-duty 

 

514 The Public Health and Welfare, 42 U.S.C. § 1396n. 515 Armed Forces, 10 U.S.C. § 1079. 516 Military Family Advisory Network (MFAN), briefing to MCRMC, February 28, 2014. 517 West Virginia University, Medicaid and Military Families with Children with Special Healthcare Needs: Accessing 

Medicaid and Waivered Services, 4, accessed June 26, 2014, 

http://www.militaryonesource.mil/12038/MOS/EFMP/EFMP_MedicaidReport.pdf. 518 Ibid. 519 Ibid. 520 Ibid. 521 West Virginia University, Medicaid and Military Families with Children with Special Healthcare Needs: Accessing 

Medicaid and Waivered Services, 19, accessed June 26, 2014, 

http://www.militaryonesource.mil/12038/MOS/EFMP/EFMP_MedicaidReport.pdf. 522 Ibid, 5. 
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military populations for FY 2012.523 The average waiting period during this time across 

all HCBS enrollment groups and all states was 27 months and the average waiting 

period for the largest enrollment group (EFMs with intellectual or developmental 

disabilities, representing 303,909 of the total 523,710 individuals on HCBS waiver 

waiting lists) was 47 months.524 

Table 13. HCBS Waiting Lists, FY 2012 

State Waiting List Estimate State Waiting List Estimate

California 2,117 Washington 1,281

Virginia 7,816 Florida 51,379

Texas 160,243 Hawaii 0

North Carolina 16,869 Kentucky 0

Georgia 11,242 South Carolina 6,004

As a result, there are reported cases in which military family members leave a child in 

one state to live with relatives while the Service member is assigned to a new 

installation in a different state.525 This situation occurs when the child is receiving 

waivered services in the current state of residence and the same service is either not 

available or only available after a long waiting period in the state to which the Service 

member has been assigned.526 

In FY 2013, 8,094 individuals participated in ECHO,527 representing 6.3 percent of 

EFMP families.528 Of these, 423 accessed ECHO only for primary services such as 

equipment, supplies, education, and training services.529 The total cost of these 

primary services was $1.7 million.530 The other 7,671 individuals also participated in 

either EHHC or ABA, at a cost of $152.6 million.531

Conclusions: 

As evidenced by the similarity in benefits authorized under the HCBS and ECHO 

programs, as well as the directive to use state and local services before accessing 

ECHO, the Congress intended ECHO as an alternative to unavailable waiver benefits. 

Yet ECHO benefits, as currently implemented, are not robust enough to replace state 

waiver programs when those programs are inaccessible to Service members and their 

EFMs. With the exception of home health care services and ABA therapy services, the 

ECHO program is not highly utilized. This is due to a lack of needed services. 

 

523 Kaiser Family Foundation, Medicaid Home and Community-Based Services Programs: 2010 Data Update, accessed 

November 10, 2014, http://kff.org/medicaid/report/medicaid-home-and-community-based-service-programs. 524 Ibid. 525 West Virginia University, Medicaid and Military Families with Children with Special Healthcare Needs: Accessing 

Medicaid and Waivered Services, 40, accessed June 26, 2014, 

http://www.militaryonesource.mil/12038/MOS/EFMP/EFMP_MedicaidReport.pdf. 526 Ibid. 527 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, October 

20, 2014. 

528 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, October 

20, 2014 and Department of Defense Annual Report to Congress on Plans for DoD for Support of Military Family 

Readiness, FY 2013, 45, received from Department of the Army, e-mail to MCRMC, May 22, 2014. 

529 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, October 

20, 2014. 

530 Ibid. 531 Ibid. 
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Recommendations: 

 Services covered through ECHO should be increased to more closely align with 

state Medicaid waiver programs, to include allowing for consumer-directed 

care.532 Expanded services should be subject to the ECHO benefit cap of 

$36,000 per fiscal year, per dependent. Specific examples include, but are not 

limited to: 

- expanding respite care hours to align more closely with state offerings as 

well as allowing families to access those hours without receiving another 

ECHO benefit during the same month the respite care is received 

- providing custodial care

- providing adult diapers where necessary and appropriate 

Implementation: 

 10 U.S.C. § 1079 governs medical care for dependents of Uniformed Services 

members. No change to this governing statute is recommended. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. Such as: 

- 32 CFR 199.5(e) should be amended to align ECHO-provided services with 

those provided by state Medicaid waiver programs. As described above, 

these changes should include, but should not be limited to, expanding 

respite care hours to align more closely with state offerings, removing 

requirements that respite care is only available to households that receive 

another ECHO benefit, providing custodial care, and providing adult diapers 

when necessary and appropriate. 

 

532 See The Public Health and Welfare, 42 U.S.C. § 1396n(k)(3)(B). 
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Recommendation 8: Improve collaboration between the 

Departments of Defense and Veterans Affairs by enforcing 

coordination on electronic medical records, a uniform 

formulary for transitioning Service members, common 

services, and reimbursements. 

Background: 

The Department of Defense (DoD) and the Department of Veterans Affairs (VA) operate 

two of the nation’s largest health care systems, providing health care to approximately 

16 million active-duty Service members, retirees, veterans, and their families each 

year.533 To coordinate efforts and improve cost effectiveness between these systems, 

which together provide health care to Service members throughout their lives, the 

Congress established the DoD–VA Joint Executive Committee (JEC).534 The JEC is 

cochaired by the Under Secretary of Defense (Personnel & Readiness) and the Deputy 

Secretary of Veterans Affairs,535 who determine the Committee’s size and structure, its 

administrative and procedural guidelines for the operation of the Committee, and 

staffing and resources.536 Subcommittees include the Health Executive Committee 

(HEC), the Benefits Executive Committee (BEC), DoD–VA Interagency Program Office 

(IPO), Interagency Care Coordination Committee (IC3), and subordinate working 

groups.537 The JEC’s current charter (signed 14 October 2014) states it has 

responsibility to do the following: 

• oversee development and execution of VA/DoD Joint Strategic Plan (JSP) 

• provide oversight to the JEC sub-committees (HEC, BEC, IPO, IC3) and their 

working groups 

• identify opportunities to coordinate and share services and resources that would 

improve delivery of services for qualified beneficiaries 

• submit an Annual Report to Secretaries and Congress on decisions made and 

actions taken by JEC, its subcommittees, and independent working groups 538

The JEC is working to coordinate numerous health care activities between DoD and 

VA. For example, its Acquisition and Medical Materiel Management Working Group 

identifies, reviews, and implements joint medical materiel sharing initiatives.539 The 

Pharmacy Ad Hoc Working Group explores joint initiatives “with the goal of reducing 

redundancies, increasing efficiencies, and maximizing buying power.”540 The 

Psychological Health/Traumatic Brain Injury Working Group works to increase and 

sustain communication and collaboration between VA and DoD on related medical 

 

533 Government Accountability Office, Electronic Health Records, VA and DOD Need to Support Cost and Schedule 

Claims, Develop Interoperability Plans, and Improve Collaboration, GAO-14-302 (2014), Highlights, accessed October 15, 

2014, http://www.gao.gov/products/GAO-14-302. 

534 National Defense Authorization Act FY 2004, Pub. L. No. 108-136, § 583, 117 Stat. 1392, 1490 (2003) (codified at 

Veterans’ Benefits, 38 U.S.C. § 320). 

535 Veterans’ Benefits, 38 U.S.C. § 320, JEC Membership, accessed November 19, 2014, 

http://www.tricare.mil/DVPCO/downloads/JEC4-1.ppt. 

536 Veterans’ Benefits, 38 U.S.C. § 320. 537 Veterans’ Benefits, 38 U.S.C. § 320, JEC organization chart obtained from DoD-VA Collaboration Office, October 16, 

2014. 

538 DoD-VA Collaboration Office, new JEC charter, e-mail to MCRMC, October 16, 2014. 539 Department of Veterans’ Affairs, VA/DoD Joint Executive Committee Annual Report Fiscal Year 2013, 61, accessed 

November 19, 2014, 

http://www.va.gov/op3/docs/StrategicPlanning/VA_DoD_JEC_Annual_Report_for_FY_2013_signed_3.pdf. 

540 Ibid, 82. 
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conditions, including identification, evaluation, and provision of associated services.541

DoD is a member of VA’s Medical Advisory Panel (MAP) and VA is a member of DoD’s 

Pharmacy and Therapeutics Committee (PTC). These groups determine their respective 

department’s drug formulary.542 

The JEC is responsible for coordinating efforts between DoD and VA with regard to 

electronic health records (EHR), drug formularies and deliveries, resource sharing, and 

interagency billing.543 DoD’s EHR relies on multiple legacy medical information 

systems, such as the Armed Forces Health Longitudinal Technology Application (for 

ambulatory clinical documentation), the Composite Health Care System (for 

pharmacy, radiology, and laboratory order management), and Essentris (for inpatient 

treatment).544 The VA operates Veterans Health Information Systems and Technology 

Architecture (VistA), which was developed by VA clinicians and IT personnel and 

consists of more than 100 separate computer applications.545 To improve information 

sharing between these systems, the departments have conducted numerous initiatives 

since 1998. These efforts to achieve interoperability included linking and sharing 

computable data between the departments’ health data repositories, establishing and 

addressing interoperability objectives to meet specific data-sharing needs, developing a 

virtual lifetime electronic health record to track patients through active service and 

veteran status, and implementing information technology capabilities for the first joint 

federal health care center.546 The Congress has mandated further interoperability on 

multiple occasions, including pharmacy data sharing in the National Defense 

Authorization Act (NDAA) for FY 2003547 and full interoperability in the NDAA for 

FY 2008548 and NDAA for FY 2014.549

The JEC is also responsible for developing strategies to ensure transitioning Service 

members have access to consistent medication. For example, its Pain Management 

Working Group is responsible for developing processes to make certain “eligible 

beneficiaries receive the highest standards of pain care, delivered seamlessly across 

both health care systems.”550 DoD’s drug formulary is developed by its PTC.551 The VA 

has a national formulary (VANF) as the only drug formulary authorized for use in the 

Veterans Health Administration (VHA).552 The VANF is developed by VA’s Pharmacy 

 

541 Ibid, 14. 542 U.S. Department of Defense Pharmacy & Therapeutics Committee Charter, 4, accessed January 8, 2015, 

http://pec.ha.osd.mil/P&T/PDF/Charter DoD P&T Committee May 2009 - signed.pdf. Department of Veterans Affairs, 

Veterans Health Administration, VHA Handbook 1108.08 2009, 1, accessed December 20, 2014, 

http://www.pbm.va.gov/directive/vhadirective.pdf. 

543 See generally: The Department of Veterans Affairs (VA) and the Department of Defense (DoD) Joint Executive 

Committee (JEC), Joint Strategic Plan (JSP), accessed December 20, 2014, 

http://www1.va.gov/op3/docs/StrategicPlanning/VA_DoD_JEC_JSP_FY_2013_2015.pdf 

544 Government Accountability Office, Electronic Health Records, VA and DOD Need to Support Cost and Schedule 

Claims, Develop Interoperability Plans, and Improve Collaboration, GAO-14-302 (2014), 4, accessed October 15, 2014, 

http://www.gao.gov/products/GAO-14-302. 

545 Ibid, 3. 546 Ibid, 6, 11. 547 Bob Stump National Defense Authorization Act for FY 2003, Pub. L. No. 107-314, § 724, 116 Stat. 2458, 2598 

(2002). 

548 National Defense Authorization Act for FY 2008, Pub. L. No. 110-181, § 1635, 122 Stat. 3, 460 (2008). 549 National Defense Authorization Act for FY 2014, Pub. L. No. 113-66, § 713, 127 Stat. 672, 794 (2013). 550 VA/DoD Joint Executive Committee, Annual Report Fiscal Year 2013, 40, accessed December 20, 2014, 

http://www.va.gov/op3/docs/StrategicPlanning/VA_DoD_JEC_Annual_Report_for_FY_2013_signed_3.pdf. 

551 Armed Forces, 10 U.S.C. § 1074g, National Defense, 32 CFR 199.21(c). DoD Pharmacy and Therapeutics 

Committee Charter, 1, accessed January 13, 2015, http://pec.ha.osd.mil/PT_min_charter.php?submenuheader=5. 

552 U.S. Department of Veterans Affairs, Veterans Health Administration, VHA Handbook 1108.08: Formulary 

Management Process (February 26, 2009), 3, accessed June 20, 2014, 

http://www.pbm.va.gov/directive/vhadirective.pdf. 
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Benefits Management office,553 which works with the VA MAP and Veterans Integrated 

Service Network (VISN) formulary leaders.554 VISNs are prohibited from maintaining 

local drug formularies at individual medical care facilities.555 To facilitate patient care, 

VA maintains a process to request nonformulary drugs determined to be clinically 

necessary.556 Requests are subject to a list of pharmaceutical products for which 

substitution is not permitted,557 and denied requests can be appealed by the 

requesting physician.558 As mentioned above, DoD and VA have representatives on the 

MAP and PTC, respectively.559 

The JEC also identifies opportunities for resource sharing agreements (RSA), which 

improve joint coordination and cost-effectiveness between the departments.560 There 

are currently approximately 200 RSAs in place561 covering clinical and nonclinical 

services such as inpatient services, radiology, and laundry services.562 Larger strategic 

alliances between the departments, with commitments of 5 years or more, include 

10 department-initiated DoD and VA joint ventures and the Congressionally mandated 

DoD–VA Medical Facility Demonstration Project Federal Health Care Center (FHCC) in 

North Chicago.563 These joint ventures, which generally involve joint capital planning 

and shared risk,564 include facilities in Charleston, South Carolina;565 Las Vegas, 

Nevada;566 and El Paso, Texas. 567 To provide financial encouragement for increased 

resource sharing, the Congress established the Joint Incentive Fund (JIF) in 2002. The 

JIF is a DoD and VA program that identifies, incentivizes, implements, funds, and 

 

553 Ibid, 2. 554 Ibid, 2. 555 Ibid, 3. 556 Ibid,6. 557 Ibid,14. 558 Ibid, 8. 559 Armed Forces, 10 U.S.C. § 1074g, National Defense, 32 CFR 199.21(c), DoD Pharmacy and Therapeutics Committee 

Charter, accessed January 13, 2015, http://pec.ha.osd.mil/PT_min_charter.php?submenuheader=5. 

560 Veterans’ Benefits, 38 U.S.C. § 320. Veterans’ Benefits, 38 U.S.C. § 8111. Armed Forces, 10 U.S.C. § 1104. 

DODI 6010.23, DOD and Department of Veterans Affairs (VA) Health Care Resource Sharing Program (October 3, 2013). 561 DoD/VA Coordination Office, Defense Health Agency, e-mail to MCRMC, October 9, 2014. 562 Department of Veterans Affairs, Veterans Health Administration, VHA Handbook 1660.04, para 6.b., 

http://www.va.gov/vhapublications/ViewPublication.asp?pub_ID=1776. Gulf Coast Veterans Health Care System, 

briefing to MCRMC, May 21, 2014. 

563 Memorandum of Understanding Between the Department of Veterans Affairs and the Department of Defense Health 

Care Resources Sharing Guidelines, 3, accessed December 20, 2014, 

http://www.tricare.mil/dvpco/downloads/MOU.pdf. National Defense Authorization Act for FY 2010, Pub. L. No. 111-

84, tit. XVII, 123 Stat. 2190, 2567. DoD/VA Coordination Office, Defense Health Agency, e-mail to MCRMC, October 

19, 2014. DoD/VA Coordination Office, Defense Health Agency, email to MCRMC, October 9, 2014. VA/DOD Joint 

Executive Committee, Annual Report Fiscal Year 2013, 64, accessed December 17, 2013, 

http://www.va.gov/op3/docs/StrategicPlanning/VA_DoD_JEC_Annual_Report_for_FY_2013_signed_3.pdf. 

564 Memorandum of Understanding Between the Department of Veterans Affairs and the Department of Defense Health 

Care Resources Sharing Guidelines, para. IV(D)(2), (31 Oct 2008), http://www.tricare.mil/dvpco/downloads/MOU.pdf. 

NDAA for FY 2010, Pub. L. No. 111-84, tit. XVII, 123 Stat. 2190, 2567. DoD/VA Coordination Office, Defense Health 

Agency, email to MCRMC, October 9, 2014. VA/DOD Joint Executive Committee, Annual Report Fiscal Year 2013, 64, 

accessed December 17, 2013, 

http://www.va.gov/op3/docs/StrategicPlanning/VA_DoD_JEC_Annual_Report_for_FY_2013_signed_3.pdf. 

565 Naval Health Clinic Charleston, Ralph H. Johnson VA Medical Center, 628th Medical Group-Joint Base Charleston 

and Naval Hospital Beaufort, accessed October 16, 2014 

http://www.charleston.va.gov/features/VA_DoD_Joint_Venture_Wins_Federal_Executive_Award.asp. 566 “Mike O’Callahan Federal Medical Center,” 99th Medical Group-Nellis AFB and VA Southern Nevada Healthcare 

System, accessed October 16, 2014, 

http://www.lasvegas.va.gov/locations/Mike_O_Callahan_Federal_Medical_Center.asp. 567 “History,” William Beaumont Army Medical Center- Fort Bliss and El Paso VA Health Care System, accessed 

October 16, 2014, http://www.elpaso.va.gov/about/history.asp.VA/DoD Joint Executive Committee, Annual Report 

Fiscal Year 2013, 64, accessed Jan. 9, 2015, 

http://www.va.gov/op3/docs/strategicPlanning/VA_DOD_JEC_Annual_Report_for_FY_2013_signed_3.pdf/ 
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evaluates creative coordinating and sharing initiatives at the facility, intraregional, and 

national levels.568 

General RSA guidelines are outlined in DoD Instruction (DoDI) 6010.23: DoD and 

Department of Veterans Affairs (VA) Health Care Resource Sharing Program and 

Veterans Health Administration Handbook 1660.04: VA–DoD Direct Sharing 

Agreements.569 DoDI 0010.23 states, “the HEC shall oversee the DoD–VA Health Care 

Resource Sharing Program activities of each agency”570 and “the heads of [military] 

medical facilities [will] participate in regular meetings with VA counterparts to monitor 

emerging opportunities...for resource sharing.”571 Similarly, the VA Handbook states, 

“VA medical facilities and VISNs [have] the flexibility to negotiate sharing 

agreements”572 and “VA TRICARE Regional Office Liaisons responsibilities 

include...identifying new areas for economies of scale.”573 These documents further 

indicate each component engaged in interaction will designate points of contact and 

establish DoD–VA sharing program offices within respective departments, to be 

overseen by the HEC.574 DoDI 6010.23 also mandates the annual military treatment 

facility (MTF) and regional business planning process must include assessment of 

opportunities for resource sharing with the VA.575 Given this general guidance, along 

with DoD and VA’s interpretation of 38 U.S.C. § 8111 “as intending resource sharing 

to be largely a grassroots endeavor,”576 most RSAs are negotiated and implemented 

within local markets by local commanders.577 Sharing is accomplished when it is 

mutually beneficial [financially] for both organizations.578

To further facilitate RSAs, the statute stipulates, “the [DoD and VA] Secretaries shall 

jointly develop and implement guidelines for a standardized, uniform payment and 

reimbursement schedule for [health care] services.”579 The HEC developed a health 

care resource sharing reimbursement methodology.580 The Financial Management 

Work Group (FMWG), under the HEC, developed a discounted national rate 

structure.581 The methodology basically applies “CHAMPUS Maximum Allowable 

Charge (CMAC) rates less 10 percent...as the reimbursement methodology for health 

care reimbursement between medical facilities, for institutional and professional 

 

568 38 U.S.C. § 8111 (d). 569 Resource sharing is also outlined in Veterans’ Benefits, 38 U.S.C. § 8111, Sharing of Department of Veterans Affairs 

and Department of Defense health care resources and Armed Forces, 10 U.S.C. § 1104, Sharing of health-care resources 

with the Department of Veterans Affairs.

570 DoDI 6010.23, Jan 23 2014, Enclosure 3, para 1.a.(3) 

http://www.dtic.mil/whs/directives/corres/pdf/601023p.pdf 

571 Ibid, enclosure 2, para 3.d.(3) 572 Department of Veterans Affairs and Veterans Health Administration, VHA Handbook 1660.04 para 5.a. and b 

http://www.va.gov/vhapublications/ViewPublication.asp?pub_ID=1776. 573 Ibid. para 5.c.(2) 574 DoDI 6010.23, January 23, 2012, para 2 and 3b http://www.dtic.mil/whs/directives/corres/pdf/601023p.pdf. 

Department of Veterans Affairs and Veterans Health Administration, VHA Handbook 1660.04 para 5.a. and b 

http://www.va.gov/vhapublications/ViewPublication.asp?pub_ID=1776. 575 DoDI 6010.23, January 23, 2012, Enclosure 3, 3.a. http://www.dtic.mil/whs/directives/corres/pdf/601023p.pdf 576 Government Accountability Office, VA And DoD Health Care: Department-Level Actions Needed to Assess 

Collaboration Performance, Address Barriers, and Identify Opportunities, GAO 12-992, 44 and 48, accessed December 

20, 2014, http://www.gao.gov/assets/650/648961.pdf. 577 38 U.S.C. § 8111 € (3) (A). DoDI 6010.23 (January 23, 2012), Enclosure 2, 3d(4). 578 38 U.S.C. § 8111 and DoDI 6010.23, January 23, 2012, Enclosure 3, para 3.b.(1). 579 38 U.S.C. § 8111 papa € (2). 580 Veterans Affairs/Department of Defense Health Executive Council, Memorandum of Agreement Health Care Resource 

Sharing Reimbursement Methodology, 1, accessed October 14, 2014, 

http://tricare.mil/DVPCO/downloads/MOA/MOA-ReimbursementMethodology.pdf. This methodology does not apply 

to TRICARE Managed Support Contractors. 

581 Ibid. 
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charges.”582 The FMWG also developed billing guidance for inpatient583 and outpatient 

services.584 These standard rates can be regionally adjusted to account for local 

variations.585 

Findings: 

The Commission found numerous, ongoing weaknesses exist in joint collaboration and 

cost-effectiveness between the health care services of DoD and VA. For example, 

although DoD and VA have identified many common health care business needs and 

shared interests related to ensuring quality health care for Service members, veterans, 

and their families, the departments continue to spend large sums of money on 

separate EHR systems and capabilities to achieve interoperability between the 

systems.586 The EHRs and data interoperability applications to date have yet to 

achieve seamless electronic sharing of health data between the departments, to the 

detriment of Service members, veterans, retirees, and taxpayers. The NDAA for 

FY 2008 required DoD and VA to jointly develop and implement an EHR system or 

capabilities that allow for full interoperability between the two agencies to accelerate 

the exchange of health care information and support health care delivery.587 It also 

directed the departments to establish the DoD–VA Interagency Program Office (IPO) to 

be a single point of accountability for their efforts to implement these systems or 

capabilities by the September 30, 2009 deadline.588 The departments indicated they 

met the interoperability objectives required at that time, and they continued to plan 

additional initiatives to increase the interoperable capabilities, stating that clinicians’ 

needs for interoperable EHRs are not static.589 In 2011, to avoid continued challenges 

in trying to achieve interoperability between two separate systems, the departments 

committed to developing and fielding a joint, integrated EHR (iEHR) by 2017.590 The 

departments also rechartered the IPO with increased authority and expanded 

responsibilities for leading the iEHR effort.591 In 2013, however, DoD and VA 

abandoned this plan, citing challenges meeting deadlines, expense, and excessive time 

to deliver capabilities as reasons for doing so.592

Although data-sharing initiatives have increased the amount of information shared in 

various capacities overall, a number of them have faced persistent challenges, 

including project planning and management weakness, inadequate accountability, and 

poor oversight, limiting the departments’ ability to achieve full interoperability.593 The 

departments announced in early 2013 they would pursue separate paths to modernize 

 

582 Ibid, para 3.A. 583 Veterans Affairs/Department of Defense Health Executive Council, Department of Veterans Affairs (VA)-Department 

of Defense (DoD) Health Care Resource Sharing Rates-Billing Guidance Inpatient Services, accessed October 14, 2014, 

http://tricare.mil/DVPCO/downloads/BillingGuidance-signed.pdf. 584 Veterans Affairs/Department of Defense Health Executive Council, VA-DoD Health Care Resource Sharing RatesBilling Guidance Outpatient Services, accessed October 14, 2014, http://tricare.mil/DVPCO/downloads/MOA/MOABillingGuidanceOutpatientServices.pdf. 

585 Veterans Affairs/Department of Defense Health Executive Council, Memorandum of Agreement Health Care Resource 

Sharing Reimbursement Methodology, 1, accessed October 14, 2014, 

http://tricare.mil/DVPCO/downloads/MOA/MOA-ReimbursementMethodology.pdf. 

586 Defense Healthcare Management Systems, Program Executive Office, e-mail to MCRMC, October 27, 2014. 587 National Defense Authorization Act for FY 2008, Pub. L. No. 110-181, § 1635(d), 122 Stat. 3, 461 (2008) 588 Ibid. 589 Government Accountability Office, Electronic Health Records, VA and DOD Need to Support Cost and Schedule 

Claims, Develop Interoperability Plans, and Improve Collaboration, GAO-14-302 (2014), 9, accessed October 15, 2014, 

http://www.gao.gov/products/GAO-14-302. 

590 Ibid, 15. 591 Ibid, 15-16. 592 Ibid, 17. 593 Ibid, 9. 
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their EHRs and ensure interoperability between the two systems rather than develop a 

single system.594 VA announced VistA Evolution as the upgrade to the existing VistA, 

with initial operating capabilities (IOC) and full operating capabilities (FOC) expected 

by FY 2014 and 2017, respectively.595 DoD decided to pursue a competitive acquisition 

of a completely new commercial EHR system, releasing a request for proposals in 

August 2014.596 DoD’s new comprehensive EHR is intended to replace current legacy 

systems, including outpatient, inpatient, and operational level capabilities.597 IOC and 

FOC for the new system are planned for FY 2017 and FY 2022, respectively.598 

Given the history of challenges in achieving interoperability, whether current 

interoperability efforts will be successful or cost-effective is questionable. When the 

departments decided to pursue separate EHR systems, they rechartered the IPO as the 

entity responsible for establishing, monitoring, and approving the clinical and 

technical standards profile and processes to ensure seamless integration of health 

data between the two departments and private health care providers.599 Additionally, 

the IPO is to work with the Office of the National Coordinator for Health Information 

Technology of the Department of Health and Human Services to ensure the new EHRs 

comply with national data standards and architectural requirements.600 When the 

departments abandoned the iEHR, they asserted their new, multiple-system approach 

would be less expensive and more expedient.601 These assertions are questionable 

because the departments have not developed collective, comprehensive, comparative 

cost and schedule estimates to substantiate this claim or justify their decision to 

implement separate systems.602 

The departments are, however, continuing to make progress with sharing data and 

increasing interoperability efforts as outlined in their briefs to the Congress, as 

directed per the NDAA for FY 2014.603 In a January 27, 2014 presentation on their 

EHR plans, the DOD and VA EHR Program Plans brief outlined the program 

objectives, organization, responsibilities of the departments, technical objectives, 

including design principles and milestones, data standards being adopted by the 

programs, outcome-based metrics proposed to measure the performance and 

effectiveness of the programs, and the level of funding for fiscal years 2014 through 

2017.604 VistA Evolution funding, however, only reflected the FY 2014 Budget 

 

594 Ibid, 17. 595 Ibid, 21. 596 Secretary of Defense Memorandum, Integrated Electronic Health Records (May 21, 2013), Defense Healthcare 

Management Systems, Program Executive Office, e-mail to MCRMC, October 27, 2014. Defense Healthcare 

Management Systems, Program Executive Office, e-mail to MCRMC, November 13, 2014.. 

597 Defense Healthcare Management Systems, Program Executive Office, e-mail to MCRMC, September 30, 2014. 598 Defense Healthcare Management Systems, Program Executive Office, e-mail to MCRMC, April 30, 2014, Defense 

Healthcare Management Systems, Program Executive Office, e-mail to MCRMC, October 27, 2014.. 

599 Defense Healthcare Management Systems, Program Executive Office, e-mail to MCRMC, October 27, 2014. DoD/VA 

Interagency Program Office Charter, December 2013. See also Government Accountability Office, Electronic Health 

Records, VA and DOD Need to Support Cost and Schedule Claims, Develop Interoperability Plans, and Improve 

Collaboration, GAO-14-302 (2014), 25, accessed October 15, 2014, http://www.gao.gov/products/GAO-14-302. 600 National Defense Authorization Act for FY 2014, Pub. L. No. 113-66, § 713, 127 Stat. 672, 794 (2013). 601 Government Accountability Office, Electronic Health Records, VA and DOD Need to Support Cost and Schedule 

Claims, Develop Interoperability Plans, and Improve Collaboration, GAO-14-302 (2014), 19, accessed October 15, 2014, 

http://www.gao.gov/products/GAO-14-302. 

602 Ibid, 33. 603 Defense Healthcare Management Systems, Program Executive Office, e-mail to MCRMC, October 27, 2014. 

Department of Defense, Department of Veterans Affairs, U.S. DoD/DVA Data Sharing Progress Quarterly Report, 3rd

QTR, FY 2014. 604 Ibid. 
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requirements.605 The departments have been working together to move forward from 

read-only data shared through the Federal Health Information Exchange and 

Bi-Directional Health Information Exchange applications to enhance interoperability 

that provides data that is more integrated into clinical workflow.606 These efforts 

include mapping data domains to existing national data standards and integrating 

them into the Joint Legacy Viewer, thereby improving clinicians’ ability to examine 

DoD or VA patient records.607 

Record sharing is vital to transitioning Service members who are leaving the DoD 

system with complex medical issues and ongoing health care needs. The Commission 

heard from several beneficiaries about the difficulties that poor records sharing can 

cause during the transition from the DoD to the VA system. One survey respondent 

wrote, “The [DoD] medical software should be linked with the VA clinics, so when 

people get out, their records can be transferred into the VA system automatically.”608

One person wrote in a letter to the Commission, “Hold DoD to [a] system of medical 

records compatible with [the] VA system.... [There are] too many excuses and wasted 

funds to date.”609 

Another critical example of insufficient coordination between the departments is when 

drug formularies for transitioning Service members continue to differ between the DoD 

and VA. Currently, several key drugs appear on the DoD formulary that do not appear 

on the VA formulary.610 For example, the VA formulary does not contain two pain 

medications (celecoxib and acetaminophen with codeine) and two psychiatric 

medications (escitalopram oxalate and duloxetine HCL) that are among DoD’s top-10 

prescribed drugs in these classes.611 Similarly, the Government Accountability Office 

(GAO) conducted a study of all psychiatric and pain medications on DoD’s and VA’s 

formularies and found that 43 percent of the medications on DoD’s formulary were not 

on VA’s formulary.612 

GAO found inconsistencies in the nonformulary request process and identified a lack 

of metrics for the adjudication of the requests. 

“VISNs and medical centers are responsible for implementing the 

nonformulary drug request process, and there is variation in the 

approaches that VISNs and medical centers take. For example, some 

VISNs and medical centers have more automated approaches to 

adjudicating nonformulary drug requests and collecting and reporting 

required data than others. In response to recommendations we made in 

 

605 Ibid. 606 Ibid. 607 Defense Healthcare Management Systems, Program Executive Office, e-mail to MCRMC, October 27, 2014. 608 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 609 MCRMC letter writer, comment form submitted via MCRMC web site, October 18, 2013. 610 Based on comparison of the following: Department of Veterans Affairs, Veterans Affairs National Formulary 

(February 2014), http://www.pbm.va.gov/nationalformulary.asp. Department of Veterans Affairs, Veterans Health 

Administration, pharmacy data provided by email from VHA (April 16, 2014). U.S. Department of Defense, Defense 

Health Agency, Basic Core Formulary, http://pec.ha.osd.mil/bcf.php?submenuheader=1, U.S. Department of Defense, 

Defense Health Agency, Extended Core Formulary, http://pec.ha.osd.mil/ecf.php?submenuheader=1, U.S. Department 

of Defense, Defense Health Agency, DOD Nonformulary Drugs, http://pec.ha.osd.mil/nonform.php?submenuheader=1, 

Defense Health Agency, DOD Pharmacy Data for FY 2013 provided by email to MCRMC, May 1, 2014. 

611 Ibid. 612 See generally Government Accountability Office, VA and DOD Health Care: Medication Needs During Transitions May 

Not Be Managed For All Servicemembers, GAO 13-26 November 2012, accessed December 20, 2014, 

http://www.gao.gov/products/GAO-13-26. 
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our 2001 report, VA established a requirement for routine nonformulary 

drug requests to be adjudicated within 96 hours. However, some 

adjudications continue to surpass this threshold, and data reported to 

monitor timeliness are not always accurate or complete for all VISNs and 

their medical centers. Additionally, reported data are only required to 

include average adjudication times for nonformulary drug requests, which 

do not capture the total number of adjudications that fall outside VA’s 96-

hour standard. Finally, VA does not require that appeals of denied 

nonformulary drug requests are resolved within a certain time frame or 

that the outcomes of appeals are tracked. Given these limitations, 

additional steps are needed to ensure that veterans receive clinically 

necessary nonformulary drugs in a timely manner.” 613

The unavailability of these drugs for transitioning Service members causes 

unnecessary hardship because finding the ideal medication and dose takes time, and 

abrupt changes for these medications are not medically advisable.614 Because of the 

potential adverse health effects that could arise if medication is not taken as intended, 

medication management is critical to effective continuity of care for Service members 

transitioning out of the military.615 As early as 2002, GAO found there was an 

increased risk for patient medication errors because DoD and VA have separate and 

uncoordinated information and formulary systems.616 GAO recommended the 

departments improve their capabilities for sharing electronic information.617 In 2003, 

GAO reported DoD and VA providers and pharmacists were still unable to 

electronically access health information to aid in making medication decisions for 

veterans, such as verifying drug allergies and interactions.618 A decade later, in 2013, 

GAO again found DoD and VA efforts to manage transitioning Service members’ 

medications somewhat limited because not all DoD MTFs offered assistance to 

facilitate transition of care.619 GAO recommended DoD and VA identify and apply best 

practices for managing Service members’ medication needs during transitions of 

care.620 Although both agencies agreed with GAO recommendations, neither DoD nor 

VA identified actions to address the GAO recommendations.621 

Additional collaboration between DoD and VA in drug purchasing could reduce costs 

for both departments. In addition to having access to discount-priced drugs through 

the Federal Supply Schedule and federal price ceilings, DoD and VA can jointly 

 

613 Government Accountability Office, VA Drug Formulary: Drug Review Process Is Standardized at the National Level, 

but Actions Are Needed to Ensure Timely Adjudication of Nonformulary Drug Requests, GAO 10-776, 29, accessed 

January 9, 2014, http://www.gao.gov/new.items/d10776.pdf 

614 Government Accountability Office, DOD and VA Health Care Medication Needs During Transitions May Not Be 

Managed for All Service Members. GAO-13-26, November 2012, 2, accessed December 22, 2014, 

http://www.gao.gov/products/GAO-13-26. 

615 Ibid, Title Page. 616 Government Accountability Office, VA and Defense Health Care: Increased Risk of Medication Errors for Shared 

Patients, GAO-02-1017, September, 2002, 3, accessed December 22, 2014, http://www.gao.gov/products/GAO-02-

1017. 

617 Ibid , 4. 618 Major Management Challenges and Program Risks- Department of Veterans Affairs, GAO-03-110, January 2003, 32, 

accessed December 22, 2014, http://www.gao.gov/products/GAO-03-110. 

619 Government Accountability Office, DOD and VA Health Care: Medication Needs During Transitions May Not Be 

Managed for All Servicemembers, GAO-13-26. November 2012, 14, access December 22, 2014, 

http://www.gao.gov/products/GAO-13-26. 

620 Ibid, 28. 621 Government Accountability Office, Veterans Affairs-Better Understanding Needed to Enhance Services to Veterans 

Readjusting to Civilian Life, GAO-14-676, September 2014, 27, accessed December 22, 2014, 

http://www.gao.gov/products/GAO-14-676. 
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negotiate national contracts and other agreements, for example prime vendor 

contracts, which reduce procurement prices even more.622 In fact, the HEC Acquisition 

and Medical Materiel Management Working Group reported that DoD and VA reduced 

costs $468 million from 2012 to 2013 by using acquisition programs based on the use 

of joint requirements.623 The DoD and VA pharmacy team identified 28 commonly 

used pharmaceutical products and manufacturers for potential joint contracting 

action.624 It is evident that additional collaboration between DoD and VA in drug 

purchasing could further reduce costs for both departments. 

Regarding RSAs, DoD and VA currently have nonstandardized policies and 

individualized pricing structures that discourage interaction and make both 

departments’ operations less cost-effective. As reported in September 2012 by GAO, 

“VA and DOD do not have a fully developed process and a sufficient strategic direction 

to work across agency boundaries to fully identify collaboration opportunities. 

Specifically, the departments have not fully developed and formalized a systematic 

process to review all possibilities for new and expanded collaboration, but instead 

largely leave the identification of new or enhanced collaboration opportunities to 

leaders at local VA and DOD medical facilities.”625 During the Commission’s public 

hearings and site visits, those who testified, raised concerns repeatedly that most 

successful sharing agreements are personality driven, rather than policy directed. For 

example, during a site visit to Nellis Air Force Base, the Commander, 99th Medical 

Group, said DoD and VA need to “codify [the successes of agreements] in a deliberate 

manner at a high level versus relying on personality-driven relationships [between 

organizations].”626

Nonstandard policies have resulted in inconsistent implementation of RSAs, as well as 

numerous instances of inefficiencies or lost opportunities for collaboration. For 

example, the GAO highlighted the “incompatible policies and practices” for 

collaborative efforts between the DoD and VA in business and administrative 

processes such as credentialing of medical personnel, capturing patient workload, and 

inpatient access to military bases.627 Other, more costly examples can be seen in 

instances of separate medical facility construction. The Naval Hospital Pensacola and 

the Biloxi VA wanted to build a joint facility on a Navy site in Panama City, Florida. 

Building a joint facility would have exceeded the VA’s statutory limits for minor 

construction projects (the total funding amount contributes to the statutory limit, 

rather than only the VA share of cost).628 The departments could have moved forward 

with the joint facility as a major construction project, but doing so would have 

required Congressional authorization.629 Department officials told GAO major 

construction projects must first go through an internal priority determination process, 

and the departments said they would not necessarily have approved this joint major 

 

622 Veterans’ Benefits, 38 U.S.C. § 8126(a)(2) ) retrieved from http://www.gpo.gov/fdsys/granule/USCODE-2011-

title38/USCODE-2011-title38-partVI-chap81-subchapII-sec8126. 

623 VA/DoD Joint Executive Committee, Annual Report Fiscal Year 2013, 62, retrieved from 

http://www.va.gov/op3/docs/StrategicPlanning/VA_DoD_JEC_Annual_Report_for_FY_2013_signed_3.pdf. 

624 Ibid, 83. 625 Government Accountability Office, VA and DoD Health Care, GAO 12-992, September 2012, 34, accessed December 

22,2014, http://www.gao.gov/assets/650/648961.pdf. 626 99th Medical Group Commander and Senior Executive Staff, Nellis AFB, 99th Medical Group, meeting with 

MCRMC, October 3, 2014. 

627 Government Accountability Office, VA and DoD Health Care, GAO 12-992, September 2012, introduction page, 

elaborated in 18-29, http://www.gao.gov/assets/650/648961.pdf. 

628 Ibid, 31. 629 Ibid, 32. 
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construction process.630 Consequently, Navy and VA built two separate clinics in close 

proximity to each other.631 “Officials were not certain of the cost impact of providing 

services in two clinics rather than one, but believed doing so would be less efficient 

and potentially more costly.”632 

Several examples of effective DoD and VA collaboration do exist and should be used to 

identify lessons learned and best practices. Most notable among them is the Captain 

James A. Lovell FHCC in Chicago, Illinois, the first fully integrated DoD–VA medical 

facility. This facility has made great strides in integrating the two cultures of DoD and 

VA.633 Joint Patient Registration registers active-duty Service members into the VA 

system, allowing Service members to have a seamless transition to Veteran status. 

Medical Orders Portability allows medical orders entered into one system (either VA or 

DoD), to be transmitted to the other system, so providers and medical personnel can 

easily and efficiently manage consultations and other medical orders for their 

patients.634 The successful integration of the two departments’ facilities and staff into 

one FHCC, with the ultimate goal of providing effective and compassionate health care 

to Service members and veterans, shows the potential for further integration of DoD 

and VA medical centers. 

Similar coordination issues also exist with DoD–VA billing. Although a uniform 

payment and reimbursement schedule has been developed, it is only for clinical 

services, and the reimbursement methodology still allows for variances and waivers. 

These rates are not used for nonclinical services; the departments have indicated rates 

for nonclinical services should be “negotiated independently.”635 Joint ventures and 

colocated facilities may further adjust the standard rates to account for these more 

involved sharing arrangements (e.g. staffing, square footage).636 Waivers to the 

national rating methodology are allowed when the “standardized rate does not cover 

marginal costs or is higher than local market rates and both parties desire a larger 

discount from CMAC.”637 Waivers are discouraged, but if desired, must be approved 

by both cochairs of the HEC Financial Management Work Group (FMWG).638

The reimbursement methodology does not provide the right incentives to minimize 

Federal spending. For care provided to a VA beneficiary in an MTF, the VA will have 

to reimburse to DoD the full established rate.639 If VA sends the patient to another VA 

facility (as opposed to a closer MTF with capability and access), the subsequent “bill” 

is only for the cost of travel and per diem, which is typically less than the established 

rate for the care.640 From a Federal perspective, however, it is clearly less expensive to 

 

630 Ibid, 32. 631 Ibid, 31. 632 Ibid. 633 “Top 10 Innovations” publication, Captain James A. Lovell Federal Health Care Center, received as part of the 

MCRMC visit to North Chicago, June 10, 2014. 

634 Ibid 635 Department of Defense and Department of Veterans Affairs, VA-DoD Health Care Resources Sharing Rates-Billing 

Guidance Outpatient Services, accessed December 22, 2014, http://www.tricare.mil/DVPCO/downloads/MOA/MOABillingGuidanceOutpatientServices.pdf. 

636Outpatient Billing Guidance, page 2, paragraph 3C, accessed 14 October 2014, 

http://www.tricare.mil/DVPCO/downloads/MOA/MOA-BillingGuidanceOutpatientServices.pdf. 

637 Ibid, para 5. 638 Ibid, para 5. 639 VA/DoD Health Executive Council, Memorandum of Agreement Health Care Resource Sharing Reimbursement 

Methodology, accessed December 22, 2014, http://www.tricare.mil/dvpco/downloads/MOU.pdf. 640 VA/DoD Health Executive Council, Memorandum of Agreement Health Care Resource Sharing Reimbursement 

Methodology, accessed December 22, 2014, http://www.tricare.mil/dvpco/downloads/MOU.pdf. “CHAMPUS National 
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care for the patient locally and avoid transportation costs. From a patient care 

perspective, it would be better for the veteran to receive treatment locally, because of 

increased likelihood of having support systems nearby, such as family and friends. In 

testimony at the Commission’s Norfolk, Virginia, public hearing, RADM Elaine 

Wagner, Commander Naval Medical Center, Portsmouth, Virginia, stated one of the 

issues with DoD treating VA patients “is money. We still charge the VA when we do 

surgeries [on VA patients. And so, for [VA] to send their, for example, open heart 

surgeries to us. It...costs the VA system money. They can send them to Richmond at 

no cost. So, when you have an elderly man or woman who needs open heart surgery 

they and their family now, for the most part, are driving to Richmond because...they 

get their care free.”641 The DoD/VA Resource Sharing Agreement between VA Southern 

Nevada Healthcare System and Michael O’Callahan Federal Medical Facility at Nellis 

Air Force Base includes a “Right of First Refusal” clause.642 According to such a clause, 

if one facility is unable to provide care, that facility will first contact the other joint 

venture facility to determine if capability and capacity exist there before sending the 

patient elsewhere. There is no evidence of monitoring compliance with this kind of 

provision. 

GAO found there has been a substantial backlog with VA reimbursements to DoD in 

part because of differences in business practices for assigning diagnostic codes and 

capturing patient workload.643 The HEC is working to resolve this backlog and is 

developing a methodology for streamlined reimbursement.644 According to this plan, 

VA will pay prospectively for care, with DoD and VA reconciling reimbursements 

quarterly. This methodology is consistent with traditional intra-agency agreements in 

which payment is made up-front based on historical workload.645 When executed, this 

methodology will facilitate implementation of RSAs and further collaboration between 

DoD and VA. 

Conclusions: 

Service members would benefit substantially from enhanced collaboration between 

DoD and VA. Joint health care could be accomplished, and would be more costeffective. To accomplish these goals, the JEC must be granted additional authorities 

and responsibilities to standardize and enforce collaboration between DoD and VA. For 

example, the JEC should define common services that routinely would be coordinated 

between DoD and VA across all local markets. Such a policy would ensure local DoD 

and VA leaders are collaborating and would help with implementation, 

standardization, and efficient operation of RSAs. 

To ensure DoD and VA make joint decisions, the JEC should be required to certify in 

advance all expenditures of funds by DoD or VA associated with common services are 

in compliance with the JEC’s strategic plan. Certified expenditures should include, at 

 Pricing System (CMAC System), accessed January 9, 2015, http://www.tricare.mil/CMAC/home.aspx. (The CHAMPUS 

National Pricing System (CMAC System) is a query-based system that will allow users to review pricing/prevailing fees 

for a particular procedure code within a selected locality. Payment rates may be calculated based on user data inputs.) 

641 Military Treatment Facility Commanders and the Veterans Administration, Norfolk Public Hearing Testimony, 

December 13, 2013, http://www.mcrmc.gov/public/docs/meetings/20131203/MCRMC-Norfolk-Dec03-Panel1-

20131203.pdf. 

642 VA and DoD Resource sharing Agreement between Southern Nevada Healthcare System and the Michael 

O’Callaghan Federal Medical Center, Nellis AFB, para 8. 

643 Government Accountability Office, VA and DOD Health Care: Departmental-Level Actions Needed to Assess 

Collaboration Performance, GAO 12-992, September 2012, 18-21, http://www.gao.gov/assets/650/648961.pdf 644 HEC Decision Brief, October 3, 2014, provided by DHA to MCRMC, October 10, 2014. 645 Ibid. 
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a minimum, acquisition of any new capital assets or sustainment, restoration, and 

modernization of capital assets, for both DoD and VA medical components. The JEC’s 

annual report should include a list of the common-service projects funded during the 

fiscal year by DoD and VA, identifying which of the projects were certified as 

consistent with the JEC’s strategic plan and, if any were not certified, the reasons 

such projects were funded without certification. 

Common services for DoD and VA should include, at a minimum, EHRs and a uniform 

DoD/VA formulary for transitioning Service members. A single EHR system is the 

ideal solution for improving Service member health care and minimizing overall EHR 

costs. Should DoD and VA adopt separate EHR systems, these systems must have 

complete interoperability between the departments and with civilian institutions in 

accordance with the national data standards and architectural requirements of the 

Office of the National Coordinator for Health Information Technology, Department of 

Health and Human Services. To further facilitate transition and viewability, VA records 

should be established for all Service members at all Services points of entry, similar to 

the Joint Patient Registration Process established at Lovell FHCC.646 Creating a 

uniform DoD and VA formulary for certain key drugs frequently prescribed to Service 

members would help provide continuity of care for those who are transitioning from 

the DoD to the VA health system. Ensuring psychiatric and pain medications, for 

example, are continued during transition is particularly important given the potential 

adverse effects that can be experienced in response to misusing or abruptly 

discontinuing such drugs. 

The reimbursement methodology should be standardized and automated. Local 

reimbursement variations, as seen in the current methodology, cause payment delays 

and decrease incentives for further collaboration and resource sharing. DoD medical 

facilities should be the first choice for VA patients who are not seen in local VA 

facilities. The rates charged by these facilities for care, which should be based on the 

standard reimbursement methodology, should not be considered when determining 

the venue of outside care because both DoD and VA facilities are funded by the 

Federal Government. The prospective reimbursement arrangements being coordinated 

through the JEC would improve collaboration and merit support from both 

departments. Additional processes should be implemented to automate 

reimbursements to the extent possible, thereby streamlining and encouraging 

additional collaboration. 

Recommendations: 

 The JEC should be granted additional authorities and responsibilities to 

standardize and enforce collaboration between DoD and VA, including: 

- Defining common services that will regularly be jointly conducted 

throughout DoD and VA health care systems. 

- Creating standard terms for RSAs on common services that can quickly and 

efficiently be implemented by local commanders. 

 

646 “Top 10 Innovations” publication, Captain James A. Lovell Federal Health Care Center, received as part of the 

MCRMC visit to North Chicago, June 10, 2014. 
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- Monitoring planned expenditures for common services by both DoD and VA, 

comparing these expenditures to the JEC’s strategic plan, and certifying 

whether the planned expenditures are consistent with that strategic plan. 

- Approving in advance any new capital assets acquisition, or sustainment, 

restoration, and modernization of capital assets, of either DoD or VA medical 

components. 

- Reporting quarterly to the Congress on DoD and VA expenditures, their 

consistency with the JEC’s strategic plan, and reasons for any inconsistent 

expenditures. 

- Overseeing EHR compliance with the Office of the National Coordinator for 

Health Information Technology standards across both DoD and VA, 

ensuring health care data can be quickly and easily shared between the 

departments. 

- Ensuring that the DoD and VA immediately begin the process of establishing 

a health care record within the VA EHR system for all current military 

Service members. The VA should also immediately begin the process of 

establishing a health care record within the VA EHR system for all military 

service members who complete Service-specific enlisted and officer accession 

programs. 

- Monitoring and reporting on the percentage of the military force that is 

represented with a health care record in both DoD and VA EHR systems. 

- Creating a uniform formulary to include all the drugs identified as critical 

for transition by the JEC beginning immediately with the pain and 

psychiatric classes of drugs. The JEC should determine classes of drugs 

critical to ensuring seamless and smooth transition of Service members from 

the Military Health System to VA Health System. The JEC should review its 

list of critical drug classes periodically and as the need arises. The JEC 

must mandate, oversee, and report to the Congress on employment of all 

joint procurement options, for example joint contracts and prime vendor 

contracts, to maximize cost savings for the strategic uniform formulary. 

- Establishing a standard reimbursement methodology for DoD and VA 

provision of services to each other. Reimbursements should be real time and 

automated to the extent possible. The JEC should establish policies under 

which DoD and VA do not consider reimbursement rates when determining 

where to send patients, because the reimbursement rates represent only 

transfer prices within the Federal Government. 

Implementation: 

 38 U.S.C. § 320 governs the JEC. 38 U.S.C. § 320 should be amended to 

require the JEC to define “common services.” “Common services” will be 

evaluated for coordination between the DOD and VA not less than annually. 

38 U.S.C. § 320 should be amended to require quarterly reporting to the 

Congress on DOD and VA expenditures, their consistency with the JEC’s 

strategic plan, and reasons for any inconsistent expenditures. Language 

should be added to 38 U.S.C. § 320 to expand JEC authority to require the 
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DOD–VA reimbursement process be executed as an interagency agreement 

where the JEC ensures successful resolution, which will be included in its 

annual report to the Congress. 

 10 U.S.C. § 1104 and 38 U.S.C. § 8111 govern the coordination and sharing of 

health care resources between VA and DOD. These code sections should be 

amended to create RSA categories that JEC determines can be quickly and 

efficiently implemented by heads of local medical facilities in a standard 

manner across all DOD–VA. 

 10 U.S.C. § 1104 and 38 U.S.C. § 8111 should be amended to make the JEC’s 

review and approval a mandatory step in the acquisition, sustainment, 

restoration, or modernization of any DOD or VA capital assets. DOD and VA 

should be prohibited from obligating or expending funds for such acquisition, 

sustainment, restoration, or modernization until the JEC’s review and approval 

occurs. 

 10 U.S.C. § 1074g governs the DOD uniform formulary. It should be amended 

to establish a process under JEC to determine classes of drugs critical for 

transition and review them periodically and as the need arises and to create a 

strategic uniform formulary to include all drugs determined by JEC to be 

critical for transition. 38 U.S.C. § 320, which governs JEC, should be amended 

to reflect the JEC’s new role in developing a strategic uniform formulary. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. Such as, but not limited to: 

- VHA Handbook 1108.08, which governs the VA National Formulary. 

- DOD Instruction 6010.23 

- VHA Handbook 1660.04 
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QUALITY OF LIFE

Recommendation 9: Protect both access to and savings at 

Department of Defense commissaries and exchanges by 

consolidating these activities into a single defense resale 

organization. 

Background: 

The Defense Commissary Agency (DeCA) operates “a worldwide chain of commissaries 

providing groceries to military personnel, retirees, and their families.”647 DoD operates 

a separate system of exchanges, providing goods and services similar to commercial 

department or discount stores.648 This system includes the Army Air Force Exchange 

System (AAFES), the Navy Exchange (NEX), and the Marine Corps Exchange (MCX).649

Together, commissaries and exchanges provide goods and services with total annual 

sales of more than $17 billion in 2013.650 There are a limited number of cases where a 

commissary and an exchange are operated together as a single store including Navy 

Exchange Markets (NEXMARTs) overseas and a limited number of combined stores in 

the United States.651

In addition to the main commissary and exchange stores that form the foundation of 

the defense resale system, the exchange systems operate thousands of smaller retail 

outlets, providing a wide range of services such as convenience stores, gas stations, 

barber and beauty shops, florists, optical shops, auto repair, car washes, vending, 

residential services, lunches for military schools, financial services, repair/installation 

services, and rental services.652 Over time, exchanges have also assumed responsibility 

for military uniform stores, book stores, liquor stores, and personal phone and 

telecommunication services for Service members around the world.653 Exchanges also 

support small retail outlets on Navy ships and field tactical exchanges, provide 

services through embedded Marines in combat zones, and, when called upon, assist 

with disaster recovery and other emergency response missions.654 In addition, the 

Navy Exchange Command (NEXCOM) manages Navy Lodges and the Navy Clothing 

 

647 “About Us,” Defense Commissary Agency (DeCA), accessed October 17, 2014, 

http://www.commissaries.com/about_us.cfm. 

648 See Armed Services Exchange Regulations, DoDI 1330.21 (2005). See also Armed Forces, 10 U.S.C. § 2481. 649 Army and Air Force Exchange Service Operations, AR 215-8 and AFI 34-211(I) (2012). Responsibility and Authority 

for Navy Exchange Operations, OPNAVINST 5450.331A (2008). MCCS Policy Manual, MCO P1700.27B (2007). 

650 AAFES, Army and Air Force Exchange Service, 2013 Annual Report, 22, accessed December 16, 2014, 

http://www.aafes.com/images/AboutExchange/PublicAffairs?2013_annualrpt.pdf. NEXCOM, Navy Exchange 

Command 2013 Annual Report, 14, accessed December 16, 2014, 

http://www.mynavyexchange.com/assets/Static/NEXCOMEnterpriseInfo/AR13.pdf. Marine Corps Exchange data 

provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, December 16, 

2014. DECA, Defense Commissary Agency, FY 2013 Annual Report, 7, accessed December 16, 2014, 

http://www.commissaries.com/documents/whatsnew/afr/afr-2013.pdf. 

651 Armed Forces, 10 U.S.C. § 2487(a)(2). See also Armed Forces, 10 U.S.C. § 2488. 652 Armed Services Exchange Regulations, DoDI 1330.21 (2005), Enclosure 3, 13-14. 653 Ibid. 654 Tom Shull, Chief Executive Officer, Army & Air Force Exchange Service Overview, briefing to MCRMC, June 10, 

2014. AAFES, meeting to discuss AAFES response to Commissary legislative proposals with MCRMC, July 2, 2014. 

Robert Bianchi, Chief Executive Officer, Navy Exchange Service Command Overview for Military Compensation and 

Retirement Modernization Commission, briefing to MCRMC, September 18, 2014. Robert Bianchi, Chief Executive 

Officer Navy Exchange Service Command Overview, briefing to MCRMC, December 2013. Robert Bianchi, Chief 

Executive Officer, Navy Exchange Service Command Overview, briefing to MCRMC, September 18, 2014. NAF Business 

& Support Services (MR) Division, Manpower and Reserve Affairs, HQMC, 23, briefing to MCRMC, September 17, 2014. 
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and Textile Research Facility, sharing a common IT infrastructure, staff support, and 

other resources.655 The MCX shares support staff and other resources with the Marine 

Corps’ Morale, Welfare and Recreation (MWR); Warfighter and Family Services; and 

Child, Youth, and Teen programs.656

Commissaries and exchanges have evolved from loosely organized systems of sutlers 

and post traders into a complex “ecosystem” of services and benefits. Although the two 

systems are, by law, operated as separate entities,657 there are strong interactions 

between them. For example, AAFES estimates that 20–30 percent of its foot traffic, 

representing at least $1 billion in sales, is attributable to proximity to commissaries.658

To limit direct competition, laws, policies, and decisions made by the Defense Resale 

Board restrict the categories of products and services that each can sell.659

Although both commissaries and exchanges provide discounted goods to Service 

members, they operate using different business models. The commissaries sell 

groceries at cost660 plus a 5 percent surcharge661 and their operations are funded with 

appropriated funds (APF).662 Exchanges sell merchandise for profit, more like 

commercial retailers. Gross profits are used to support the exchange system, covering 

operating and other expenses; recapitalize facilities and systems; or are provided as 

dividends to fund MWR programs.663 Both commissaries and exchanges provide access 

to U.S. goods in areas of military concentration around the world, and both provide a 

nonpay financial benefit to patrons through discounts. 

Commissaries and exchanges also have different models of coordination with the 

Military Services. DeCA, as a separate defense agency, reports to the Office of the 

Secretary of Defense.664 DeCA also has a Board of Directors (BOD) with representation 

from all the Military Services.665 This BOD promotes alignment of commissary 

services, investments, and operations with the needs of the individual Military 

Services.666 AAFES relies on its BOD, which includes Army and Air Force 

representation, for such alignment.667 In addition to having a BOD, the NEX is part of 

 

655 Robert Bianchi, Chief Executive Officer, Navy Exchange Service Command Overview, briefing to MCRMC, 

September 18, 2014. 

656 NAF Business & Support Services (MR) Division, Manpower and Reserve Affairs, HQMC, 23, briefing to MCRMC, 

September 17, 2014. 

657 Armed Forces, 10 U.S.C. § 2487(a)(1). 658 Army and Air Force Exchange Service, Memorandum for ASD (R&FM), Army and Air Force Exchange Service (AAFES) 

Response to Commissary Legislative Proposal, March 17, 2014. 659 See, e.g., Armed Forces, 10 U.S.C. § 2481(a) (establishing “a world-wide system of commissary stores and a separate 

world-wide system of exchange stores”). See also Armed Forces, 10 U.S.C. § 2484 (stating that commissary stores are 

intended to be similar to commercial grocery stores); Armed Services Exchange Regulations, DoDI 1330.21, 

Enclosure 3, 13-14 (2005) (permitting exchanges to engage only in enumerated retail activities and stating that 

commissaries have “primary” role in selling groceries); and Army and Air Force Exchange Service Operations, AR 215-8 

and AFI 34-211(I), 61-62, (2012) (enumerating specific items that may be sold by AAFES and stating that food items 

sold by AAFES “supplement the primary full-line grocery service provided by the commissary system”). 

660 Armed Forces, 10 U.S.C. § 2484(e). 661 Armed Forces, 10 U.S.C. § 2484(d). See also Armed Forces, 10 U.S.C. § 2484(h). 662 Armed Forces, 10 U.S.C. § 2483. 663 Based on data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, 

March 31, 2014. In FY 2012, $333 million of $496 million in net income was provided to MWR. 664 See DoD Commissary Program, DoDI 1330.17 (2014), Enclosure 7, 45. 665 DoD Commissary Program, DoDI 1330.17 (2014), Enclosure 8, 47. 666 Ibid. 667 Board of Directors, Army and Air Force Exchange Service, Army Regulation 15–110, 2 (2009). Board of Directors, 

Army and Air Force Exchange Service, AFI 34–203(I), 2 (2009). 
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NEXCOM, which is more integrated with the operational Navy.668 For example, NEX 

general managers report to the installation commander to ensure that exchanges are 

responsive to the needs of the command.669 Installation commanders review financial 

performance and facility planning and provide input on the general manager’s 

performance evaluation.670 The MCX is also tightly integrated as part of Marine Corps 

Community Services (MCCS). Falling under the same organization as MWR and 

Marine and Family Programs, allocation of resources and exchange profits between all 

these programs are made in an integrated fashion.671

In 2013, the commissaries received $1.4 billion in APF, of which $152 million was 

spent on second destination transportation costs for transporting U.S. goods 

overseas.672 That same year, the exchanges received approximately $397 million in 

APF.673 This amount included $170 million for contingency support, covering expenses 

associated with the transportation of merchandise from warehouses to remote 

exchange sites, incremental inventory variances above the noncontingency average, 

danger pay, deployment bonuses, overtime, and foreign post differentials for deployed 

associates.674 Also included was $179 million for second destination transportation,675

and $47 million for direct and indirect exchange operating costs, including a limited 

number of active-duty military personnel, military travel, and utilities for authorized 

overseas locations and a limited number of CONUS remote and isolated locations.676 

For additional information on defense resale, please see the Report of the Military 

Compensation and Retirement Modernization Commission: Interim Report 

(Section 5.1.1 and Section 5.8.2). 

Findings: 

In the Commission’s survey, town halls, and other public forums, commissary and 

exchange benefits frequently received strong support, with a primary focus on 

commissary discounts, yet some Service members did challenge the value of the 

commissary and exchange benefits. Typically they were skeptical of the claimed 

savings and the quality of nonbranded products such as produce.677 Even among 

skeptics, however, there was consistent acknowledgment of the additional benefit 

offered overseas, and in remote and isolated locations, where commercial alternatives 

are either not available or not comparable.678 

 

668 Morale, Welfare and Recreation (MWR)/Navy Exchange (NEX) Board of Directors (BOD), OPNAVINST 1700.13B, 1 

(2004). 

669 Responsibility and Authority for Navy Exchange Operations, OPNAVINST 5450.331A, 3 (2008). 670 Ibid. 671 NAF Business & Support Services (MR) Division, Manpower and Reserve Affairs, HQMC, 23, briefing to MCRMC, 

September 17, 2014. 

672 Information provided by DeCA, e-mail to MCRMC, May 6, 2014. 673 Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, November 6, 2014. For a 

description of the authorized use of APF in military exchanges, see also Armed Services Exchange Regulations, DoDI 

1330.21 (2005), Enclosure 9, and Establishment, Management, and Control of Nonappropriated Fund 

Instrumentalities and Financial Management of Supporting Resources, DoDI 1015.15 (2008), Enclosure 4. 

674 Ibid. 675 Pursuant to 10 U.S.C. § 2643, second-destination transportation funding covers the expenses of transporting 

exchange supplies and products to destinations outside the continental United States. 

676 Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, November 6, 2014. 677 Survey respondents, comments submitted via MCRMC survey, July 1, 2014 to October 10, 2014. See also, e.g.,

MCRMC letter writer, comment form submitted via MCRMC website, June 18, 2014 (“In addition, we MUST do a better 

job of providing fresh produce that is nice and fresh and not rotten, which is not the case in most commissaries.”) 

678 Examples include audience member comments made at MCRMC town hall meeting, Joint Base San Antonio, San 

Antonio, Texas, January 7, 2014. 
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In FY 2013, DeCA reported the average discount for commissary patrons to be 

30.5 percent679 and the exchanges reported savings between 20 and 24 percent.680 In 

Defense Manpower Data Center’s 2013 Living Patterns Survey, 92 percent of activeduty respondents indicated they had purchased goods or services at a military 

commissary in the previous 12 months.681 For military exchanges, the level was 

96 percent.682 In surveys conducted by the commissaries and exchanges, patrons 

indicate a high level of overall satisfaction as compared to industry averages. 

Exchange surveys in 2013, based on the American Customer Satisfaction Index 

(ACSI), reported overall patron satisfaction scores of 75 (AAFES), 79 (NEX) and 

83 (MCX),683 compared to the average department and discount store rating of 77.684

The commissary ACSI score for 2013 was 82 as compared to the industry average of 

77.685 The 2014 Military Lifestyle Survey conducted by Blue Star Families ranked 

commissaries and exchanges as the most utilized service, with the third highest 

satisfaction rate, behind MWR and chaplain services.686 Comments made during the 

Commission’s town halls and other meetings as well in survey responses supported 

these findings: 

While there are some items that may be found at a lower individual price 

on the economy the total combined savings remains constant.687

 The prices at competing grocery stores are what they are because these 

outfits know that the Commissary Store exists in the community. If that 

competition goes away we will all pay more.688

When I went out in town and we tried to get the same amount, we got 

about half of the groceries that we could afford at the Commissary.689 

 

679 “New Price Study Validates 30% Savings,” Defense Commissary Agency (DeCA) web site, January 9, 2014, accessed 

June 11, 2014, http://www.commissaries.com/press_room/press_release/2014/DeCA_01_14.cfm. DeCA reported an 

average patron savings of 30.5% in FY 2013. If this level of savings is accurate, then the total financial benefit to 

Service members in FY 2013 was approximately $2.8 billion. Although multiple groups in discussions with MCRMC 

have challenged this estimate as being overstated, the evidence offered to support these challenges has typically been 

small, local, market basket surveys that are not structured to represent a world-wide, appropriately weighted average. 

That being said, DeCA’s estimation method has limitations. For example, it only compares products that have identical 

Universal Price Codes (UPCs) and thus does not consider store brands (private labels) or some very large sizes at 

commercial grocery and discount stores. Estimated discounts vary based on location and individual shopping patterns, 

but these variations are typically not communicated to patrons. 

680 “AAFES Media Advisory 12-059, Don’t Shop ‘til you Drop – Survey Says Make the Exchange your First Stop!,” Army 

Air Force Exchange Service, October 10, 2012, accessed May 7, 2014, 

http://publicaffairssme.com/pressrelease/?p=1000. See also NEXCOM Fall 2013 Savings by Market report, survey 

conducted by RetailData, LLC, December 19, 2013, e-mail to MCRMC, May 21, 2014. 

681 Defense Manpower Data Center, Living Patterns Survey, Tabulation of Responses,18, 

http://www.mcrmc.gov/public/docs/report/qol/2013_DMDC_LivingPatternSurvey_Commissary_Usage.pdf . 682 Ibid, 19. 683 David Turner, NAF Business & Support Services (MR) Division, Manpower and Reserve Affairs, HQMC, briefing to 

MCRMC, September 17, 2014. 

684 “Department and Discount Stores,” American Customer Satisfaction Index, accessed October 15, 2014, 

http://theacsi.org/index.php?option=com_content&view=article&id=147&catid=&Itemid=212&i=Department+and+Disc

ount+Stores. 

685 Statement of Joseph H. Jeu, Director, Defense Commissary Agency before the Military Personnel Subcommittee of 

the Committee on Armed Services, U.S. House of Representatives, First Session, 113th Congress, November 20, 2013, 

accessed October 20, 2014, 

https://www.commissaries.com/foia/documents/director_statement_before_congress_2013.pdf.

686 Blue Star Families, 2014 Military Family Lifestyle Survey, Comprehensive Report, 24, accessed December 14, 2014, 

https://www.bluestarfam.org/sites/default/files/media/stuff/bsf_report_comprehensive_reportfinal_single_pages.pdf 

687 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 688 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 689 Audience member, comment made at MCRMC town hall meeting, Norfolk, VA, December 2, 2013. 
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The Commission’s survey found similar results.690 For the commissary benefit, 

discounts and convenience were ranked higher than other features such as product 

assortment, a wide selection of name brand products, or a sense of military 

community. As the level of discount was hypothetically increased, the perceived value 

placed on discounts increased even faster.691 

The Commission’s survey also showed that Service members and retirees value 

commissaries and exchanges that are collocated.692 As seen in Figure 21, beneficiaries 

expressed a strong preference for the availability of both benefits in the same location 

or same store. Conversely, survey respondents did not prefer availability of either store 

without the other nearby.693 This result reaffirms the complementary offerings of 

commissaries and exchanges and reinforces the preference for convenience. 

Figure 21. Active-Duty Services Members’ Perceived Value: 

Resale Benefit Options694

The commissaries and the three exchange systems perform similar missions, for 

similar patrons, with similar staff, using similar processes. In 2003, the Deputy 

Secretary of Defense directed the development of a plan to form a “single optimized 

Armed Service exchange system.”695 Soon thereafter, the Unified Exchange Task Force 

(UETF) was formed to perform the associated analysis.696 Focusing on five areas of 

support, finance and accounting (FA), human resources (HR), information technology 

(IT), logistics, and procurement, the UETF worked with exchange staffs to inventory 

and analyze the processes in each of these areas of support, for each exchange. 

Table 14 summarizes the task force’s assessment of commonality. 

 

690 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 691 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 692 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 693 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 694 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. This figure displays the average amount in 

dollars that survey respondents valued compensation alternatives. Presentation in dollar values allows the value of 

compensation features to be directly compared. 

695 Paul Wolfowitz, Deputy Secretary of Defense, Memorandum for Secretaries of the Military Departments Chairman of 

the Joint Chiefs of Staff regarding Future of the Armed Services Exchange Systems, May 9, 2003. 696 Unified Exchange Task Force, Modified Business Case Analysis for Military Exchange Shared Services, August 26, 

2005, provided to MCRMC by the Office of the Under Secretary of Defense for Personnel and Readiness, June 11, 2014. 
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Table 14. UETF Assessment of Process Commonality in 

Selected Exchange Functional Areas697

Functional Areas Processes Estimated Number of

Common Processes

Percent

Commonality

FA 147 146 99%

HR 121 109 90%

IT 67 67 100%

Logistics 55 55 100%

Procurement* 23 21 91%

TOTAL 413 398 96%

Numerous studies commissioned by DoD or other Federal entities have recommended 

some form of consolidation or increased cooperation in pursuit of improved costeffectiveness. Following the “Jones commission,” which led to the consolidation of 

commissaries, in 1990,698 the “Jones II commission” produced a “DoD Study of the 

Military Exchange System.”699 The study recommended that, “the military exchange 

systems be consolidated into a single organization in order to eliminate current 

redundancies, improve operational efficiencies, and achieve projected annual savings 

from consolidation of $35 million.”700 In 1991, the Logistics Management Institute 

(LMI) reviewed the methodology, findings, financial analyses, and conclusions of the 

1990 DoD study.701 The LMI assessment estimated the annual savings associated with 

exchange consolidation to be $36.6 million,702 but recommended against immediate 

consolidation in favor of a series of “first steps”703 that would “make sound business 

sense whether or not the exchange systems are eventually consolidated.”704 The LMI 

assessment recommended waiting 3 years to reevaluate the situation, stating that, 

“After 3 years, the results of those first steps, together with a clearer picture of troop 

reductions and the evolving retail environment, will substantially lower the risks of 

any decision.”705 Most of the first step recommendations were not implemented.706

A 1995 review by the Government Accountability Office (then known as the General 

Accounting Office) concluded that “appropriated fund support to the commissaries 

and exchanges could be reduced about $331.5 million by merging some commissaries 

and exchanges ($319.5 million) and closing certain other commissaries 

($12 million).”707 An SRA International Inc. review in 1996 determined that full 

 

697 Ibid, 3. The asterisk following “Procurement” refers to a footnote in the UETF report, which notes that this line of 

the figure refers only to non-resale procurement, and further notes that no comparable data was available to the UETF 

regarding revenue-generating contracts or real property processes. 698 See MCRMC, Report of the Military Compensation and Retirement Modernization Commission: Interim Report, June 

2014, 124-25, http://www.mcrmc.gov/index.php/reports. 

699 Office of the Assistant Secretary of Defense (Force Management and Personnel), DoD Study of the Military Exchange 

System, September 7, 1990. 700 Ibid, ch. 1, 10. 701 “Toward a More Efficient Military Exchange System,” Logistics Management Institute, Report PL110R1, July 1991, 

accessed November 20, 2014, 

http://oai.dtic.mil/oai/oai?verb=getRecord&metadataPrefix=html&identifier=ADA255738. 702 Ibid, iii. 703 Ibid, iv. 704 Ibid, Ch. 1, 7. 705 Ibid, Ch. 1, 7-8. 706 Office of the Deputy Assistant Secretary of Defense, Director, Morale, Welfare, Recreation, and Resale Policy, e-mail 

to MCRMC, October 2, 2014. 

707 General Accounting Office, Potential Reductions to Operation and Maintenance Program, GAO/NSIAD-95-200BR, 

September, 1995, 12, accessed December 21, 2014, http://www.gpo.gov/fdsys/pkg/GAOREPORTS-NSIAD-95-

200BR/pdf/GAOREPORTS-NSIAD-95-200BR.pdf. Note that this recommendation was rejected by a DoD Study group 

in December 1995. Although the study group did not have the resources available to come to any definitive 
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integration was viable, and estimated annual savings to be $176 million.708 The 

UETF’s 2005 report examined a 1999 PricewaterhouseCoopers (PwC) study which 

recommended a “Unified Exchange” model, predicting that the use of best-practice 

processes and systems would produce a more creative, more flexible, and more 

responsive organization.709 PwC estimated $206 million in annual savings as a result 

of full integration.710 The UETF, originally chartered to evaluate full exchange 

integration, was redirected by its executive board to limit its study to partial 

integration, establishing Shared Services Business Units in five areas of support.711

Using this model, the UETF estimated steady-state annual savings to be $151 million 

to $162 million.712 Most of these studies started with an assumption that there would 

be no reduction in patron benefits and cited ways in which the benefit would improve 

from a patron perspective as a result of increased cooperation, partial integration, or 

full consolidation. 

In 2000, as an alternative to consolidation, the Under Secretary of Defense for 

Personnel and Readiness directed the establishment of a formal process to identify 

efficiencies by individual service exchanges and collectively through cooperative 

efforts.713 That same year, the Exchange Cooperative Efforts Board was created. In 

2012, DeCA became a voting member of the board, and the board was renamed the 

Cooperative Efforts Board (CEB).714 In its 2013 annual report, the CEB cited 

33 examples of cooperation,715 with quantified 2013 savings of approximately 

$16 million,716 about 0.4 percent of the combined operating expenses of the exchanges 

and commissaries.717 A large portion of these savings resulted from long standing 

arrangements such as avoidance of merchant fees through NEXCOM’s and MCX’s use 

 conclusions with regard to the savings, the GAO recommendation was rejected because it did not maintain the 

commissary pricing model (cost plus 5%) and guarantee no loss of MWR dividend. 708 Systems Research and Applications (SRA) International, Integrated Exchange System Task Force Analysis, 1996, 

accessed December 21, 2014, http://www.mcrmc.gov/public/docs/report/qol/1996_Exchange_StudySRA_International-Provided_by_OSD-11JUN2014_DeRA-FN45.pdf. 

709 See Unified Exchange Task Force, Modified Business Case Analysis for Military Exchange Shared Services, 5-6, 

August 26, 2005, provided to MCRMC by the Office of the Under Secretary of Defense for Personnel and Readiness, 

June 11, 2014 (citing PricewaterhouseCoopers, Joint Exchange Due Diligence, 1999). 710 Ibid. 711 Unified Exchange Task Force, Modified Business Case Analysis for Military Exchange Shared Services, E-1, 

August 26, 2005, provided to MCRMC by the Office of the Under Secretary of Defense for Personnel and Readiness, 

June 11, 2014. 

712 Ibid. 713 Under Secretary of Defense, Review of Exchange Systems in the Department of Defense, July 31, 2000, accessed 

December 21, 2014, http://www.mcrmc.gov/public/docs/report/qol/Review_of_Exchange_Systems_in_the_DoDUSD_PR_Memo-31JUL2000_DeRA-FN50.pdf. 

714 Cooperative Efforts Board (CEB) Guiding Charter, March 28, 2012. 715 Department of Defense, Memorandum for Principal Deputy Under Secretary of Defense (Personnel and Readiness), 

2013 Annual Report on Exchange Systems Cooperative Efforts, April 29, 2014. 716 Ibid. Note that the $16 million total does not include savings that are implied but not quantified, savings that occur 

in years other than FY 2013 (e.g., 9 of the 10 years of the CCTV contract savings), and savings that occurred but were 

not the result of cooperation between the defense resale organizations (e.g., merchant fees avoided by AAFES as a 

result of its private-label credit card). The actual savings may be less than $16 million because not all relevant savings 

were validated. 

717 The 0.4% figure is based on an overall operating expense of $2,467 million, as calculated by combining financial 

statements provided by the several exchanges and DECA to the commission. See AAFES, Army and Air Force Exchange 

Service, 2013 Annual Report, 22, accessed December 16, 2014, 

http://www.aafes.com/images/AboutExchange/PublicAffairs?2013_annualrpt.pdf; NEXCOM, Navy Exchange 

Command 2013 Annual Report, 14, accessed December 16, 2014, 

http://www.mynavyexchange.com/assets/Static/NEXCOMEnterpriseInfo/AR13.pdf; Marine Corps Exchange data 

provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, December 16, 

2014; DECA, Defense Commissary Agency, FY 2013 Annual Report, 7, accessed December 16, 2014, 

http://www.commissaries.com/documents/whatsnew/afr/afr-2013.pdf. 
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of the MILITARY STAR® card,718 and not from recent efforts to cooperatively reduce 

costs. The deeper level of cooperation proposed in many of the studies mentioned 

above, including consolidated support processes and staffing, consolidated 

infrastructure, convergence to common IT systems, and aggressively combined 

procurement and logistics, have not been achieved under the current structure. 

DeCA stated to the Commission that it has already reduced annual operating costs by 

more than $700 million since 1992 through operating efficiencies.719 It has also shifted 

a portion of its costs to military patrons by including distribution and shelf-stocking 

costs in the cost of goods. Yet the FY 2015 DoD budget submission proposed a 

71 percent reduction in the DeCA budget, from $1.4 billion to $.4 billion, over a 3-

year period.720 Such a significant reduction in funding would necessitate a change in 

the commissary business model. Groceries could no longer be sold at cost, discounts 

would be significantly reduced, and the financial benefit to Service members would be 

diminished. Respondents to the Commission’s survey indicated that a commissary 

discount of 10 percent or less offers little to no value.721 In response to the reductions 

proposed by DoD, DeCA recommended fundamental changes in the laws and policies 

governing its operations. DeCA proposed a relaxation of many restrictions imposed 

upon it as an APF organization engaged in retail sales, allowing it to operate more like 

commercial grocery stores. DeCA also proposed relaxation of restrictions that limit its 

ability to compete with the exchanges.722

Although they have been able to maintain their MWR contributions, there are also 

indicators of significant financial pressures on the exchanges. AAFES saw a 6 percent 

drop in sales from 2011 to February 2014, from $6.5 billion to $6.1 billion, and 

projects a 23 percent drop in sales between 2011 and 2017, to $5 billion, based largely 

on expected reductions in the force structure.723 In the current environment, AAFES 

would have little to no net profit without the income derived from its private-label 

credit card, concessions, or the sale of alcohol and tobacco.724 In December 2013, 

Moody’s downgraded AAFES’s long-term issuer rating to Aa3,725 due to a deterioration 

in its credit profile as a stand-alone entity.726 Public discussions and Congressional 

hearings have included proposals to reduce or eliminate the appropriated funding 

currently provided to exchanges to cover costs such as overseas utilities and second 

 

718 The MILITARY STAR® card is a private-label credit card managed by AAFES. Although originally accepted only at 

AAFES, its use has been expanded to the other military exchanges. 719 Director, Defense Commissary Agency, briefing to MCRMC, 10, October 7, 2013. 720 Department of Defense, Office of the Under Secretary of Defense (Comptroller), National Defense Budget Estimated 

for FY 2015, April 2014, 112, 119, accessed October 20, 2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/FY15_Green_Book.pdf. 

721 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 722 Army and Air Force Exchange Service, Memorandum for ASD (R&FM), Army and Air Force Exchange Service (AAFES) 

Response to Commissary Legislative Proposal, March 17, 2014. 723 Army and Air Force Exchange Service brief from Director, AAFES, e-mail to MCRMC, February 2014. 724 Army and Air Force Exchange Service, Statement of Earnings 2012, 19, accessed November 7, 2014, 

http://aafes.imirus.com/Mpowered/book/vaar12/i1/p20. 

725 Moody’s rates the creditworthiness of securities on a 9-point scale, ranging from Aaa (the highest) to C (the lowest). 

Ratings from Aa (the second-highest) to Caa (the third-lowest) can be modified by adding a 1, 2, or 3. AAFES’s longterm issuer rating was Aa2 before being downgraded one unit, to Aa3. See Moody’s Investors Service, Rating Symbols 

and Definitions, accessed October 27, 2014, 

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004. 726 “Rating Action: Moody’s downgrades Army and Air Force Exchange’s issuer rating to Aa3,” Moody’s Investors 

Service, https://www.moodys.com/research/Moodys-downgrades-Army-and-Air-Force-Exchanges-issuer-rating-to--

PR_289276. 
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destination transportation.727 Absent changes to the overseas benefit, such cuts would 

further reduce profitability, patron discounts, and/or MWR distributions. 

Conclusions: 

The commissary and exchange benefits are valued by many Service members, retirees, 

and their families, and should be maintained. These resale organizations provide 

familiar U.S. goods and services, meeting basic needs of Service members and their 

families, particularly in remote, isolated, and overseas locations. The discounts 

provide nonpay compensation that contributes to the financial health and readiness of 

many military families. No evidence was found to show a positive effect on recruiting 

or retention, but multiple sources confirmed that commissaries and exchanges are 

considered by many to be a relevant and important contributor to military quality of 

life. 

A consolidated resale organization, with combined resources, increased operational 

flexibility, and better alignment of incentives and policies, would improve the viability 

and stability of these systems. It would sustain the benefit while reducing the 

combined reliance on appropriated funding over time. The increased flexibility and 

opportunities available to a consolidated organization could enable a deeper level of 

cooperation to improve quality and drive the efficiencies recommended by numerous 

studies. The many similarities, overlaps, and redundancies in processes, staffing, and 

support infrastructures favor the consolidation process. Establishing an executive 

structure and means of oversight that ensures alignment with the needs and goals of 

Service members and the Military Services is critical. 

Recommendations: 

 A single organization should be established that consolidates DoD’s 

commissaries and three exchange systems into a single defense resale system, 

herein referred to as the Defense Resale Activity (DeRA). 

 A DeRA Executive Director should be appointed who reports to a consolidated 

and simplified BOD. The BOD should replace the boards that currently oversee 

each of the separate exchange systems and DeCA. The consolidated DeRA BOD 

should also assume the responsibilities of the Executive Resale Board and the 

Cooperative Efforts Board and should incorporate expertise from private-sector 

retail. Supporting committees should be established and empowered as needed. 

 A DeRA executive team, along with operational advisors from the current 

organizations, should immediately be established to define the key attributes of 

the new organization and plan the transition. This discussion should include a 

consideration of the recommendations made in this Report and in other 

consolidation studies. Creation of a single organization should facilitate 

consolidation of many back-end operation and support functions, alignment of 

incentives and policies across commissaries and exchanges, as well as 

consistent implementation of best practices for aligning with the needs of 

Service members and the Military Services. Core commissary and exchange 

benefits should be maintained at military installations around the world by 

continuing the sale of groceries and essential items at cost (plus a surcharge) 

 

727 See e.g., S. 2289, 113th Congress, National Defense Authorization Act for FY 2015, § 907, accessed October 27, 

2014, http://www.gpo.gov/fdsys/pkg/BILLS-113s2289is/pdf/BILLS-113s2289is.pdf. 
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and other merchandise at a discount. Under the combined organization, some 

or all commissary staff could be converted from APF to nonappropriated funds 

(NAF) employees to reduce commissary employee costs. 

 The branding of the current exchange systems and commissaries initially 

should be retained. A director for each of these branded exchange systems and 

the commissaries should be appointed under the DeRA Executive Director. 

These directors should oversee operation of these systems as needed to 

represent the unique needs of each military service. Personnel evaluations for 

these executives should be cosigned by the DeRA executive director and 

appropriate Service representatives. Branding and organizational structure can 

be modified over time by the BOD. 

 DeRA should assume responsibility for the operation of exchanges but not the 

other organizations currently managed by NEXCOM and MCCS. If approved by 

the BOD, the current points of integration and shared resources can be 

maintained through liaison positions and formal memoranda of agreement. For 

example, if it is mutually advantageous to share support staff between DeRA 

and Marine Corps MWR, options are available to continue the arrangement that 

currently exists with the MCX. 

 A portion of Military Service MWR programs should continue to be funded from 

DeRA profits. The BOD should approve the amount of net revenue to be 

contributed as MWR dividends and should ensure an equitable distribution 

among the Military Services. 

 Laws and policies should be updated to reflect this consolidated structure and 

allow greater flexibility related to how products are sourced, where they are 

sold, and how they are priced, as noted below: 

- Allow the sale of convenience items in commissaries at a profit, including 

products and services typically found in commercial grocers. Food and other 

essential items should continue to be sold at cost when sold in 

commissaries or combined commissary and exchange stores (excluding 

convenience stores). This expanded commissary product line would include 

beer and wine, but those sales must align with DoD’s efforts to deglamorize 

alcohol and reduce its abuse. 

- Allow for the payment of second destination transportation costs with NAF. 

Allow significant flexibility on local sourcing overseas, particularly when it is 

beneficial to the Service member. 

- Allow more flexibility in the creation of combined stores, as currently 

controlled by Section 2488 of Title 10 of the U.S. Code. 

- Allow the use of the commissary 5 percent surcharge for similar expenses in 

the exchanges. Conversely, allow the use of exchange profits to cover 

commissary costs currently covered by the surcharge. 

- Adjust policies on the sale of “brand name” groceries in commissaries to 

better accommodate the sale of private-label products. 
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Implementation: 

 10 U.S.C. Chapter 147 governs the activities of the commissary and exchange systems, as 

well as other MWR entities. It should be amended throughout, with section and subsection headings changed to reflect the consolidation of the several exchanges and the 

commissary system, and statutory text amended as follows: 

- 10 U.S.C. § 2481 should be amended to make clear that commissary and 

exchange stores may be combined into single stores, and that commissary 

stores or the commissary sections of combined stores must still sell grocery 

items at reduced prices. It should also state that the Secretary of Defense 

will designate the defense resale system’s executive director and the DeRA 

BOD described above. 

- 10 U.S.C. § 2483 should be amended to authorize the defense resale system 

to receive appropriated and nonappropriated funds, and to use 

nonappropriated funds generated by the system to cover the expenses of 

operating the system. 

- 10 U.S.C. § 2484 should be amended to state that the commissaries’ 

requirement to sell items at reduced prices should be limited to the following 

categories of items: (A) Meat, poultry, seafood, and fresh-water fish. (B) 

Nonalcoholic beverages. (C) Produce. (D) Grocery food, whether stored 

chilled, frozen, or at room temperature. (E) Dairy products. (F) Bakery and 

delicatessen items. (G) Nonfood grocery items.728

- 10 U.S.C. § 2485 should be amended to establish the DeRA BOD described 

above, granting the Secretary of Defense the authority to establish the 

board, which should include five voting members—a senior representative 

from each Military Service and the Under Secretary of Defense for Personnel 

and Readiness—as well as nonvoting members with experience related to 

logistics military personnel and entitlements, and other relevant areas. The 

section should also be amended to allow the Secretary to assign a limited 

number of active-duty Service members to the defense resale system, when 

necessary, including to serve as the Executive Director. 

- 10 U.S.C. § 2487 should be amended to eliminate references to the 

separation of commissaries and exchanges and disestablish the Defense 

Commissary Agency. 

- 10 U.S.C. § 2488, which sets forth limited conditions under which 

commissary and exchange stores may be combined, should be repealed. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. 

 

728 Nonfood grocery items are further defined in DoD Commissary Program, DoDI 1330.17 (2014), Enclosure 4, 28-29. 

In conjunction with the consolidation of commissaries and exchanges, the Commission recommends redefining 

nonfood grocery items to specifically include categories of personal health such as aspirin and diapers, omitting beauty 

products such as makeup and perfume. 
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Recommendation 10: Improve access to child care on military 

installations by ensuring the Department of Defense has the 

information and budgeting tools to provide child care within 

90 days of need. 

Background: 

DoD Child Development Programs (CDPs) are intended to “support the mission 

readiness, family readiness, retention, and morale of the total force,”729 as well as 

“reduce the stress of families who have the primary responsibility for the health, 

safety, and well-being of their children and help them balance the competing demands 

of family life and the DoD mission.”730 To achieve these outcomes, DoD offers child 

care services for children from birth through 12 years of age on a full-day, part-day, 

short-term, or intermittent basis.731 Children are eligible for care if their sponsors are 

active-duty military, DoD civilian employees paid from either appropriated funds (APF) 

or nonappropriated funds (NAF), Reserve Component military personnel on active-duty 

or inactive-duty training status, combat-related wounded warriors, surviving spouses 

of Service members who died from a combat-related incident, those acting in loco 

parentis for the dependent child of an otherwise eligible patron, eligible employees of 

DoD contractors, or others as authorized on a space available basis. Special rules 

apply to unmarried and legally separated parents.732

Child care services are currently delivered through DoD facilities, including 768 child 

development centers (CDCs) and 293 school-age care (SAC) facilities; more than 

3,000 private homes associated with family child care (FCC) programs; and DoDapproved private-sector programs that participate in community-based child care 

arrangements.733 Standards and oversight are in place to ensure basic health, safety, 

and quality of the delivery options, each of which offers different advantages to DoD 

and to military families. DoD child care programs on military installations must be 

nationally accredited and meet DoD certification standards.734 DoD supported offinstallation programs are required to be licensed by state authorities, meet 

background check requirements, and meet DoD standards or be nationally 

accredited.735 DoD certifies each program,736 conducts inspections737 and background 

checks,738 and imposes limits on the ratio of child care staff to children, as well as the 

size of groups.739 Child care costs are subsidized to support affordable, systemwide 

 

729 Child Development Programs (CDPs), DoDI 6060.02, 2 (2014). (Note: The DoDI 6060.02, Child Development 

Programs, was updated August 5, 2014. Information in this recommendation reflect changes made since the 

publication of the Interim Report.) 

730 Child Development Programs (CDPs), DoDI 6060.02, 2 (2014). 731 Ibid, Enclosure 3, 15 (2014). 732 Ibid, 2-3 (2014). 733 Ibid, Enclosure 3, 15, 27 (2014). Numerical information provided by Office of the Deputy Assistant Secretary of 

Defense, Military Community and Family Policy, e-mail to MCRMC, October 7, 2014. 734 Ibid, Enclosure 3, 19, (2014). 735 Ibid, Enclosure 3, 18 and 27 (2014). 736 Ibid, Enclosure 3, 18 (2014). 737 Child Development Programs (CDPs), DoDI 6060.02, Enclosure 3, 18 (2014). 738 Ibid, 15. 739 Ibid, 46. 
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fees based on total family income (TFI).740 DoD specifies that the amount of APF used 

to operate CDPs shall be no less than the amount collected through child care fees.741 

Each Military Service and installation determines the type and mix of child care 

services that best meets the needs of its military families at each location.742 Table 15 

provides a snapshot of child care capacity across the various Military Services and 

delivery methods as of September 2014.743 In CDCs and SAC facilities, these figures 

represent the number of physical spaces available. The capability to deliver services to 

a child requires both an appropriate physical space and adequate staffing. The 

number of children served by a space can vary with the type of care provided 

(e.g., full-time, part-day, short-term, intermittent). 

Table 15. Child Care Spaces by Service as of September 2014 

Army Navy Air Force USMC DoD Total

CDC   27,561 18,599 22,952 6,629 75,741

SAC 12,351 11,174 11,021 2,049 36,595

FCC 4,050 11,502 3,588 1,022 20,162

Community‐based 20,807 5,512 2,153 945 29,417

TOTAL 64,769 46,787 39,714 10,645 161,915

When military child care is requested but not available, the child is placed on a 

waiting list and assigned a priority based on the status of the family’s sponsor.744 The 

priority system has four levels and provides priority to sponsor groups such as single 

or dual active-duty Military Service members, combat-related wounded warriors, 

sponsors with spouses employed full-time or actively seeking employment outside the 

home, and sponsors with spouses enrolled in an accredited post-secondary 

institution.745 

For additional information on military child care, please see the Report of the Military 

Compensation and Retirement Modernization Commission: Interim Report (Section 

5.1.9.2.1). 

Findings: 

In FY 2013, military child care served approximately 200,000 children ages 12 and 

younger.746 Child care is an important element of family readiness and well-being, and 

is a critical supplement to other forms of care, such as private-sector child care, 

parental and family care, and cooperative care. The military child care network often 

 

740 Ibid, 27-28. 741 Ibid, 15. Exceptions are made for certain child development centers operating under a long-term facility’s contract 

or lease-purchase agreement. 

742 Ibid, Enclosure 2, 9-12. See also Princeton University and the Brookings Institution, “The Future of Children,” 

Military Children and Families, 23, no. 2, (2013), 84, accessed on November 10, 2014, 

http://futureofchildren.org/futureofchildren/publications/journals/article/index.xml?journalid=80&articleid=587. 743 Department of Defense Office of Personnel and Readiness, Annual Summary of Program Operations for FY13, 

provided in an e-mail from OSD P&R, October 7, 2014. 

744 Child Development Programs (CDPs), DoDI 6060.02, Enclosure 3, 14 (2014). 745 Ibid. See also the Child, Youth, and School Support Services section of The Report of the Military Compensation and 

Retirement Modernization Commission: Interim Report (Section 5.1.9.2.1). 746 Department of Defense, Annual Report to the Congressional Defense Committees on Plans for the Department of 

Defense for Support of Military Family Readiness, Fiscal Year 2013, 8, accessed December 21, 2014, 

http://www.militaryonesource.mil/12038/MOS/Reports/FY2013-Report-MilitaryFamilyReadinessPrograms.pdf. 
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offers services with convenient locations for those living or working near military 

installations; flexibility to support demanding military schedules; a staff 

understanding of military lifestyles; and, in many cases, lower fees. 

Of the input received through the Commission’s survey, town halls, and other 

meetings, many Service members and families were complimentary of the quality of 

military child care. They did, however, frequently express concern about an 

insufficient number of overall spaces to meet the local demand or unavailability during 

evenings, nights and weekends. 

I think there should be more child-care slots provided as more members 

often have working spouses or single-parents.747

Regarding child care, the child development centers on base are wonderful 

and the staff is very loving and nurturing toward the children. My 

complaint is that at bases with 24-hour operations, there are no 24-hour 

child care facilities, limited local options, and no family child care homes 

willing to care for children on nights, weekends, or overnight when activeduty parents have to work. Military parents who are shift workers have to 

find nannies or some form of alternative care for their children, which is a 

huge additional expense that is not factored in and a huge stressor.748

At many locations, the demand for military child care exceeds the supply, resulting in 

waiting lists and associated waiting times. This situation is particularly true for young 

children. Even though most military parents choose options other than military child 

care,749 as of September 2014, DoD reported that there were more than 

11,000 children on waiting lists.750 It is important to note, however, that the waiting 

list numbers may not accurately reflect unmet demand. Factors such as duplicative 

entries (i.e., families placing their child’s name on multiple, uncoordinated waiting 

lists) and inefficient updating of the list to remove the names of children who no longer 

require service can inflate these numbers. Waiting lists can also understate the true 

demand in situations in which parents who desire military child care instead pursue 

other options and do not add their child’s name to a list due to long waiting times. 

Despite these inaccuracies, some general conclusions may be drawn. Waiting lists are 

generally longer for young children. Based on the September 2014 data, a 

disproportionate number of children on waiting lists are ages 3 and younger 

(73 percent).751 There are multiple factors that could explain this high percentage: 

 Evidence indicates that private-sector child care does not provide spaces for 

infants and toddlers proportional to the demand.752 According to the National 

 

747 MCRMC letter writer, comment form submitted via MCRMC web site, May 2014. 748 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 749 According to the 2012 Demographics of the Military Community, there were nearly 1 million children of AC Service 

members 12 years old or younger, and more than half a million who were 5 years old or younger. See Department of Defense, 

2012 Demographics: Profile of the Military Community. As reported in the Annual Summary of Program Operations for FY13, 

provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, October 7, 2014. DoD Child 

Development programs in FY 2013 provided 161,915 spaces serving more than 200,000 children (12 years old or younger). 750 Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, September 9, 2014. 751 Ibid. Of 10,979 children on waiting lists between ages 5 or younger, 8035 were ages 3 and younger. 752 National Association of Child Care Resource & Referral Agencies, Making Quality Child Care Possible: Lessons 

Learned from NACCRRA’s Military Partnerships, accessed November 10, 2014, 

http://www.naccrra.org/sites/default/files/default_site_pages/2011/lessons_learned_report_2008.pdf. 
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Association of Child Care Resource & Referral Agencies, based on data provided 

by child care resource and referral agencies and an analysis of 32 states, “only 

20 percent of child care spaces are for infants and toddlers...In contrast, 

48 percent of all requests for child care referrals are for infant and toddler care, 

and data collected by the U.S. Census Bureau show that 57 percent of all 

mothers return to work by the time their children are a year old.”753

 The private sector typically charges more for children younger than 3 years of 

age than it charges for older children.754 Because military child care fees do not 

vary with age, the military option is more likely to be less expensive than the 

private sector for younger children. The average annual cost of full-time care for 

an infant in private-sector, center-based care ranges from $4,863 in Mississippi 

to $16,430 in Massachusetts.755 The maximum annual cost for DoD CDCs 

ranges from $3,328 to $7,696, depending on TFI.756

 Despite a history of longer waiting lists for the youngest children, military child 

care spaces tend to be evenly distributed across the age groups, or slightly 

biased toward older children. For example, guidelines provided to Army garrison 

commanders recommend allocating 30 percent of spaces to children younger 

than age 2757 (who represent approximately 35 percent of military children 

younger than age 6, according to the 2012 DoD demographics report).758 

 From a financial perspective, costs are reduced and revenues are increased 

when fewer spaces are allocated to younger children. This situation occurs 

because older children have a lower required ratio of staff to children and tend 

to come from military families with higher income, who pay higher fees. Basing 

fees on TFI offers the greatest benefit to the most financially vulnerable military 

families. However, it can financially discourage provision of more spaces for 

younger children. A direct care staff member can generate between $11,232 and 

$49,920 more in fees per year (depending on the TFI of the parents), when 

caring for the maximum allowed number of 5-year-olds as compared to the 

maximum number of infants.759 Assuming that older children tend to have older 

parents with higher military income, the potential increase in fee revenue moves 

toward the higher end of this range. If that same staff member is caring for 

kindergarten or school-age children, the allowed ratios are even higher (15 

children per staff), and the ability to generate additional fees is also higher 

(between $19,968 and $73,008 additional annual revenue per staff member 

depending on the TFIs). 

 

753 Ibid, 24. 754 Child Care Aware, Parents and the High Cost of Child Care 2013 Report, Appendix 1, 40-41. 755 Ibid, 14, 40–41. 756 Based on the School Year 2014-2015 fee schedule, assuming care for 52 weeks per year. This is a maximum 

because it assumes the high end of all fee ranges and includes a market adjustment fee for high cost markets. For the 

fee schedule, see Stephanie Barna, Acting Assistant Secretary of Defense for Readiness and Force Management, Memorandum: 

Department of Defense (DoD) Child Development Program Fee Ranges for School Year (SY) 2014-2015, August 8, 2014. 757 Department of the Army, Child Care 101, 2007. 758 Department of Defense, 2012 Demographics: Profile of the Military Community. 759 The stated range in revenue assumes that the same direct-care staff member, based on maximum DoD care ratios, 

can care for four infants or 12 preschool children (age 5). This is based on DoD maximum staff-to-child ratios as found 

in Child Development Programs (CDPs), DoDI 6060.02, 38 (2014). To calculate the maximum difference, it was 

assumed that all infants are from the lowest TFI category and all preschool children are from the highest TFI category. 

The opposite approach was used to calculate the minimum difference. Similarly, when a range in fees is permitted, the 

minimum or maximum fees were selected to produce the minimum and maximum differences. Local market 

exceptions, which are sometimes permitted, were not included in this calculation. 
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 Although the salaries of direct care staff are primarily paid from fees, most 

support costs are paid using APF. The APF cost of providing a preschool (5-

year-old) space is significantly lower than the cost for an infant space. An 

estimate from 2010 showed the annual APF cost for a preschool space ($2,484), 

to be approximately one-third the cost of an infant space ($8,545).760 Similarly, 

the annual APF cost for a school-age space ($1,427) was approximately onesixth the APF cost of an infant space.761 These financial incentives can also be 

seen in the budget request and justification process. When quantifying the 

expected benefit of additional funding, or assessing the impact of proposed 

budget cuts, the number of children affected increases if the provided services 

are calculated using average costs biased by older children. 

The Commission’s survey also pointed to higher demand for child care services for 

younger children.762 The survey’s results showed that respondents most valued child 

care spaces serving children 5 years old and younger in on-installation settings.763

Figure 22 shows the weighted dollar values provided by respondents for oninstallation and off-installation care. Respondents rated on-installation care for 

children ages 5 and younger as more than twice as valuable as similar care for 

children ages 6 and older.764 Respondents rated off-installation care for both age 

groups as substantially less valuable.765

Figure 22. Active-Duty Service Members’ Perceived Value: 

On-Installation vs. Off-Installation Child Care766

 

760 Department of Defense, Deputy Secretary of Defense, Annual APF Cost per Center Space Estimated by Age of Child, 

PBD 023. 

761 Ibid. 762 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 763 Ibid. 764 Ibid. 765 Ibid. 766 Ibid. This figure displays the average amount in dollars that survey respondents valued compensation alternatives. 

Presentation in dollar values allows the value of compensation features to be directly compared. 
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Although waiting lists are important indicators of the unmet demand, waiting times 

are more important to parents than the number of names ahead of them on the list, 

because it is on the basis of waiting times that families typically make decisions about 

employment, education, and alternate forms of care. Recognizing the importance of 

waiting times, DoD established a goal to provide care across all age categories within 

90 days of need.767 Waiting times are currently not reliably tracked and are not 

consistently available.768 The Army confirmed that the 90-day goals were not being 

met for young children, citing 6- to 9-month waiting times for infants and 3- to 5-

month waits for toddlers.769 It also reports “freezing” waiting lists at 75 percent of their 

locations until temporary staffing measures, like asking managers to provide direct 

care, can be reversed.770 In some cases, this means that new names are not being 

added to the waiting lists. The Navy confirmed that the average waiting time for 

infants was 3 to 5 months, but cautioned that the manual methods used to track and 

report this data may affect its accuracy.771 The Air Force does not consistently collect 

or track waiting time data, but was able to provide data for one of its large overseas 

child care programs. For that location the waiting times for toddlers stand out as 

being particularly long, up to 7 months.772 Although not tracked everywhere, the 90-

day service goal for child care is formally tracked at joint bases, as part of their 

common output level standards.773 As of second quarter FY 2014, only five of 12 joint 

bases reported meeting the 90-day service standard.774 Not only do most joint bases 

not meet the goal, the average waiting time across all 12 bases exceeded the 3-month 

goal.775

DoD is currently fielding MilitaryChildCare.com, an online system for managing child 

care waiting lists. Among other capabilities, this tool allows parents to see all available 

DoD-supported child care options in a chosen area, place their child’s name on 

multiple waiting lists, and receive an estimated placement date (waiting time) for each 

option. If fielded and operated as planned, within 2 years this tool would provide a 

standardized approach to documenting and tracking waiting times.776 Based on data 

from five pilot sites,777 this system reportedly reduced waiting lists by 12 percent and 

reduced waiting times by 30-45 days through elimination of duplicative counting, 

improvements in waiting list management, clearer presentation of options to parents, 

 

767 Based on information provided by Office of the Deputy Assistant Secretary of Defense for Military Community and 

Family Policy, e-mail to MCMRC, October 23, 2014. Common output level standards (COLS) are contained in the 

Cost & Performance Visibility Framework Handbook for Joint Basing, an online resource for joint installation 

commanders. The authority to establish COLS originated with the Initial Guidance for BRAC 2005 Joint Basing 

implementation. Note that placement includes approved child development programs on and off the joint base, and in 

authorized FCC homes. Once a viable option has been offered, this standard has been met. 768 Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, September 9, 2014. 769 Ibid. 770 Ibid. 771 Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, September 30, 2014. 772 Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, September 9, 2014. 773 Based on information provided by Office of the Deputy Secretary of Defense, Military Community and Family Policy, 

e-mail to MCMRC, October 23, 2014. Common output level standards (COLS) are contained in the Cost & Performance 

Visibility Framework Handbook for Joint Basing, an online resource for joint installation commanders. The authority to 

establish COLS originated with the Initial Guidance for BRAC 2005 Joint Basing implementation. Note that placement 

includes approved child development programs on and off the joint base, and in authorized FCC homes. Once a viable 

option has been offered, this standard has been met. 

774 Second Quarter FY 2014 Cost and Performance Visibility Framework (CPVF) Report Card, Child and Youth COLS 

number 1: 100% of children are placed within 3 months of request, provided by the Under Secretary of Defense for 

Personnel and Readiness, e-mail to MCRMC, October 28, 2014. 

775 Ibid. 776 Office of Commander, Navy Installations Command, e-mail to MCRMC, January 7, 2015. 777 Pilot sites included Navy and USMC installations in Hawaii, Navy installations in metro San Diego, Key West, and 

Bahrain, and Nellis Air Force Base in Nevada. 
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and more efficient purging of expired requests.778 Although MilitaryChildCare.com 

currently estimates placement dates (waiting times) using historical averages, there 

are plans to incorporate a more sophisticated inventory management model based on 

a projection of available resources.779

Even when demand is reliably measured and monitored, and the DoD budget supports 

expanding child care capabilities, responding to that demand with appropriate 

facilities and staff in a timely fashion can be challenging. DoD offers competitive wages 

and emphasizes the importance of a career path for those who start as direct care 

providers;780 however, difficulties finding and hiring interested staff members, and the 

time required for mandated security checks, may inhibit the expansion of services and 

sometimes result in available space sitting idle.781 The Commission heard from DoD 

Child and Youth Program managers that position descriptions for direct care staff do 

not accurately reflect the duties and responsibilities required. This mismatch between 

position descriptions and performance expectations sometimes results in staff 

resignations.782 Another challenge to meeting the demand for child care occurs when 

DoD or the Services implement a civilian personnel hiring freeze. In 1991 and 2013 

DoD announced civilian personnel hiring freezes that included child care staff, but 

later issued exemptions to meet the staffing requirements of the Military Child Care 

Act of 1989.783

From a space perspective, CDC and SAC facilities must meet Occupational Safety and 

Health Administration requirements as well as DoD configuration requirements.784

Reconfiguring or expanding existing facilities, as well as building new facilities to meet 

new or changing demand, can require military construction (MILCON) funding. 

MILCON funding may also be required to reconfigure leased spaces, which can be a 

preferred alternative from the perspectives of speed and flexibility for providing space. 

MILCON funds are limited and managed in a way that can result in lengthy approval 

and funding allocation processes, inhibiting responsiveness to changes in child care 

demand. As an alternative, in 2006, the Congress authorized the Secretary of Defense 

to establish a temporary program to engage in unspecified minor military construction 

projects, using operation and maintenance funds to construct new CDCs and improve 

or expand existing ones. Using this authority, DoD increased child care capacity by 

more than 10,000 spaces before the authority expired in FY 2009.785

 

778 Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, September 9, 2014. 779 Ibid. 780 See Armed Forces, 10 U.S.C. § 1792(c). See Armed Forces, 10 U.S.C. § 1800(3). 781 Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, September 9, 2014. 782 Department of Defense and Services Child Development Program Managers, discussion with MCRMC Quality of Life 

staff, August 8, 2014. 

783 Department of Defense, Secretary of Defense Memorandum, Military Child Care Hiring Allocations, August 6, 1991, 

17, accessed December 4, 2014, 

http://www.dod.mil/pubs/foi/Personnel_and_Personnel_Readiness/Personnel/417.pdf. General Accounting Office, 

Defense Budget Issues: Effect of Civilian Hiring Freeze on Fiscal Year 1991 Budget, GAO Report, 5, accessed December 

21, 2014, http://www.gao.gov/assets/80/77823.pdf. “MCOM Plans To Fill Critical Support Jobs, Despite Army-Wide 

Hiring Freeze,” Stars and Stripes, (January 31, 2013), http://www.stripes.com/news/imcom-plans-to-fill-criticalsupport-jobs-despite-army-wide-hiring-freeze-1.205957. See also Department of Defense Authorization Act of 1989, 

Pub. L. No. 101-189, 103 Stat. 1352 (codified as amended at Armed Forces, 10 U.S.C. §§ 1791-1798 (1999)). 

784 Child Development Programs, DoDI 6060.02, Enclosure 3, 30-31 (2014). See also Department of Defense, Policy 

Memorandum on Department of Defense Unified Facilities Criteria, May 29, 2002, See also Department of the Army, 

Policy Memorandum, Army Standard for Child Development Center (October 2004). 785 National Defense Authorization Act for FY 2006, Pub. L. No. 109-163 § 2810 (2006). The authority originally expired 

in 2007, but was extended until 2009, when it was allowed to expire. See National Defense Authorization Act for 

FY 2008, Pub. L. No. 110-181 § 2809 (2008). See also Armed Forces, 10 U.S.C. § 2805. 
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Conclusions: 

Military child care is widely acclaimed for its quality and affordability, but is frequently 

a source of frustration for military families because of its limited availability. While not 

intended to serve the needs of all military children and families, DoD child care is 

often the preferred option for military families, addressing the unique challenges of 

military lifestyles, and providing support that can be critical to the psychological and 

financial health of the families who need it most. In particular, it can improve family 

and Service member readiness, yielding an improved ability to cope with demanding 

schedules, extended deployments, and frequent moves, far away from extended family. 

The priority system emphasizes care for sponsor groups like single and dual activeduty parents and the means-tested fees reduce the financial burden for the most 

financially vulnerable families. These prioritization and fee strategies help focus 

delivery of services to families who are more likely to need assistance, but if the total 

demand is not reasonably and consistently met, it can become a source of 

dissatisfaction for some, and worse, a source of family hardship for others, possibly 

leading to performance and readiness issues. 

Current models for planning and resourcing full-time military child care can result in 

long waiting times, particularly for children who are 3 years old and younger, the ages 

for which care is typically most expensive and least available from other sources. 

Service members and their families have communicated to the Commission that the 

long waiting times sometimes results in situations where they cannot afford 

alternatives, find it difficult to meet demanding military work schedules, and have to 

forgo opportunities for spouse employment or education. Although DoD policy clearly 

states that its child care services are not an entitlement786 and not every military 

parent wants or needs military child care, unavailability of this benefit for those who 

do was an often cited source of frustration affecting quality of life and willingness to 

serve or accept certain assignments. These effects can be amplified if Service members 

are frequently relocated to meet the needs of the Military Services, and repeatedly end 

up at the bottom of long waiting lists with waiting times that consume a substantial 

portion of their period of assignment. 

Recommendations: 

 DoD should immediately establish mandatory, standardized monitoring and 

reporting of child care wait times, disaggregated by age groups, across all types 

of military child care. This reporting is needed to evaluate performance against 

the DoD goal of providing care within 90 days of need. 

 DoD should implement the changes contained in the proposed rule for 

Background Checks on Individuals in DoD Child Care Services Programs, 

published in the Federal Register on October 1, 2014. 787

 The Secretary should direct that APF and NAF child direct care and professional 

staff are exempt from future departmental hiring freezes and furloughs. 

 

786 Child Development Programs (CDPs), DoDI 6060.02, 2 (2014). 787 Under Secretary for Defense for Personnel and Readiness, Proposed Rule: Background Checks on Individuals in DoD 

Child Care Services Programs, accessed December 21, 2014, http://www.gpo.gov/fdsys/pkg/FR-2014-10-

01/pdf/2014-23061.pdf. 
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 DoD should revise child and youth direct care staff position descriptions for 

staff in CC-2 through CC-5 positions to more accurately describe the 

requirements and responsibilities of these positions. 

 The Congress should reestablish the authority to use operating funds for minor 

construction projects when creating new, expanding, or modifying CDP facilities 

serving children from birth to 12 years of age with an emphasis on adding 

spaces for children ages birth to 3. This authority should allow projects up to 

$15 million. This proposal has no direct effect on APF as this legislation only 

grants the associated authority. A budgetary impact would only occur if the 

Military Services chose to fund construction projects under this authority. 

Implementation: 

 10 U.S.C. § 2805 governs unspecified minor military construction. 10 U.S.C. 

§ 2805 should be amended to raise the threshold for minor military 

construction to $15 million, when the minor military construction project is to 

create a new child development facility or to expand or modify an existing child 

development facility. 

 10 U.S.C. Chapter 88, Subchapter II, governs military child care. No change to 

this governing statute is recommended. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. Such as: 

- DoD Instruction 6060.02 should be amended to require annual reporting by 

each installation managing CDPs. The reports should include, by age group 

and by location, 1) the number of persons on each waiting list at the time of 

the report; 2) the average length of time spent on the waiting list over the 

previous year; and 3) the total number of persons over the previous year 

whose time on the waiting list exceeded DoD’s 90-day goal with planned or 

recommended remediation actions. DoD should implement the changes 

contained in the proposed rule for Background Checks on Individuals in 

DoD Child Care Services Programs, published in the Federal Register on 

October 1, 2014. The Secretary should amend DoD policy to identify APF 

and NAF child direct care and professional staff as essential personnel and 

exempt such staff from any and all future hiring freezes and furloughs. 

- DoD should revise its official descriptions of child and youth direct care staff 

position descriptions for positions CC-2 through CC-5, to more accurately 

describe the requirements and responsibilities of these positions. 
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Recommendation 11: Safeguard education benefits for Service 

members by reducing redundancy and ensuring the fiscal 

sustainability of education programs. 

Background: 

DoD and the Department of Veterans Affairs (VA) provide myriad programs that deliver 

educational benefits to Service members and veterans. Current education assistance 

programs include the Post-9/11 GI Bill, the Montgomery GI Bill Active Duty 

(MGIB-AD), the Montgomery GI Bill Selected Reserve (MGIB-SR), the Reserve 

Education Assistance Program (REAP), and Tuition Assistance (TA). Key features of 

these various programs are outlined below.

Post-9/11 GI Bill 

Education assistance is available to active-duty members of the military services and 

veterans with an honorable discharge who have at least 90 days of aggregate service 

after September 10, 2001, or to individuals who have a minimum of 30 continuous 

days of service who were discharged due to a service-connected disability.788 The Post9/11 GI Bill covers all tuition and fees for in-State students or up to $19,198.31 at 

private or foreign schools per academic year.789 

The amount covered varies based on the beneficiary’s time in service.790 A Service 

member is eligible for 100 percent of the maximum amount payable after 36 aggregate 

months on active duty.791 Recipients who are not on active duty and who meet 

additional eligibility criteria receive a monthly housing stipend equal to the Basic 

Allowance for Housing (BAH) payable to an E5 with dependents in the same ZIP code 

as the school.792 They receive an annual stipend for books and supplies793 and may 

also receive a one-time rural relocation benefit payment.794 

Approved educational programs include graduate and undergraduate degrees, 

vocational and technical training, on-the-job training, flight training, correspondence 

training, licensing and national testing programs, entrepreneurship training, and 

tutorial assistance.795 Beneficiaries receive up to 36 months of education benefits,796

which may be used for up to 15 years following separation from active duty.797 Tuition 

 

788 Veterans’ Benefits, 38 U.S.C. § 3311. See also Pensions, Bonuses, and Veterans’ Relief, 38 CFR 21.9520. 789 Veterans’ Benefits, 38 U.S.C. § 3313. See also “Education and Training,” Department of Veterans Affairs, accessed 

September 25, 2014, 

http://www.benefits.va.gov/gibill/resources/benefits_resources/rates/ch33/Ch33rates080113.asp. 790 Veterans’ Benefits, 38 U.S.C. §§ 3311 and 3313. Pensions, Bonuses, and Veterans’ Relief, 38 CFR 21.9520. 

Pensions, Bonuses, and Veterans’ Benefits, 38 CFR 21.9525. Pensions, Bonuses, and Veterans’ Relief, 38 CFR 

21.9640. See also “Federal Benefits for Veterans, Dependents, and Survivors, Chapter 5 Education and Training,” 

Department of Veterans Affairs, accessed June 1, 2014, 

http://www.va.gov/opa/publications/benefits_book/benefits_chap05.asp. 

791 Veterans’ Benefits, 38 U.S.C. §§ 3311 and 3313. 792 Veterans’ Benefits, 38 U.S.C. § 3313. 793 Ibid. 794 Veterans’ Benefits, 38 U.S.C. § 3318. Pensions, Bonuses, and Veterans’ Relief, 38 CFR 21.9660. 795 Veterans’ Benefits, 38 U.S.C. § 3301(3). See also Pensions, Bonuses, and Veterans’ Relief, 38 CFR 21.9590. See also 

“Post-9/11 GI Bill,” Department of Veterans Affairs, accessed September 25, 2014, 

http://www.benefits.va.gov/gibill/post911_gibill.asp.

796 Veterans’ Benefits, 38 U.S.C. § 3312. 797 Veterans’ Benefits, 38 U.S.C. § 3321.
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is paid directly to schools, and the housing stipend, book stipend, and rural relocation 

payment are paid directly to beneficiaries.798

The Post-9/11 GI Bill allows Service members, under certain conditions, to transfer 

their benefits to their spouses or children. Since August of 2009, Service members 

who have served 6 years and commit to an additional 4 years of service (YOS) may 

transfer all or a portion of their benefits to a spouse or children.799 The spouse may 

use the benefit for up to 15 years after the Service member’s last separation from 

active duty.800 Dependent children may use the benefit as soon as they attain a 

secondary school diploma or reach 18 years of age but may not use the benefit after 

reaching 26 years of age.801 Children are entitled to the same monthly housing stipend 

as a separated Service member, equal to the BAH payable to an E5 with dependents in 

the same ZIP code as the school, as well as a books and supplies stipend.802 Spouses 

of separated Service members are also entitled to a monthly housing stipend. Spouses 

of active-duty Service members do not receive the stipend, making the level of benefit 

the same as if the Service member were using it himself or herself while on active 

duty.803

MGIB-AD 

Education benefits are provided to Service members who first entered active duty after 

June 30, 1985,804 have a remaining entitlement under the Vietnam Era GI Bill,805 were 

involuntarily separated under the Voluntary Separation Incentive or Special 

Separation Benefit program,806 or are Veterans Educational Assistance Program807

participants who elected to convert to the Montgomery GI Bill during the open window 

periods.808 Service members enroll and pay $100 per month for 12 months.809 

All incoming Service members, except Service Academy graduates and ROTC 

scholarship graduates, are automatically enrolled unless they choose to opt out.810

Participants are entitled to receive monthly education benefits once they have 

completed a minimum of 3 YOS.811 Effective October 1, 2014, the basic monthly rate 

for beneficiaries is $1,717.00.812 This benefit can be used for degree programs, 

certificate or correspondence courses, cooperative training, independent study 

programs, apprenticeship or on-the-job training, and vocational flight training 

 

798 Veterans’ Benefits, 38 U.S.C. § 3313(h). 799 Veterans’ Benefits, 38 U.S.C. § 3319. See also Post-9/11 GI Bill, DoDI 1341.13, 11 (2013). See also Report of the 

Military Compensation and Retirement Modernization Commission: Interim Report, 255-256. 800 Veterans’ Benefits, 38 U.S.C. § 3321. 801 Veterans’ Benefits, 38 U.S.C. § 3319(g)(2). See also Veterans’ Benefits, 38 U.S.C. § 3319(h)(5)(A); Pensions, Bonuses, 

and Veterans’ Relief, 38 CFR 21.9530(e). 

802 Veterans’ Benefits, 38 U.S.C. § 3319(h). 803 Ibid. 804 Veterans’ Benefits, 38 U.S.C. § 3011(a)(1). 805 Pensions, Bonuses, and Veterans’ Relief, 38 CFR 21.7045. 806 Veterans’ Benefits, 38 U.S.C. §§ 3018A-3018B. Pensions, Bonuses, and Veterans’ Relief, 38 CFR 21.7045. 807 Veterans’ Benefits, 38 U.S.C. § 3018C. 808 Veterans’ Benefits, 38 U.S.C. § 3018. See also Montgomery GI Bill (MGIB) Program, DoDD 1322.16 (2002). 809 Veterans’ Benefits, 38 U.S.C. § 3011(b). 810 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, 

September 18, 2014.

811 Veterans’ Benefits, 38 U.S.C. § 3011(b). If the Service member becomes eligible for the Montgomery GI Bill under 

38 U.S.C. § 3011(a)(1)(A), then the $100 reduction in pay for 12 months is applicable. Otherwise, it is not. 812 See “Education and Training, Montgomery GI Bill Active Duty (Chapter 30) Increased Educational Benefit,” 

Department of Veterans Affairs, accessed October 2, 2014, 

http://www.benefits.va.gov/GIBILL/resources/benefits_resources/rates/ch30/ch30rates100114.asp. 
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programs.813 Before using these benefits, Service members must complete a high 

school diploma or the equivalent of 12 semester hours in a program of education 

leading to a standard college degree.814 All education benefits are paid directly to 

Service members.815

MGIB-SR 

The Montgomery GI Bill is also available to members of the Selected Reserve if they 

meet the eligibility requirements which include a 4-year obligation to serve in the 

Selected Reserve, completion of a 2-year obligation as an active-duty Service member, 

and completion of a high school diploma or equivalency certificate.816

REAP 

REAP was created in 2004817 to provide educational assistance to members of the 

Reserve Component who are called or ordered to active duty in response to a 

contingency operation as declared by the President or the Congress.818 To be eligible 

for benefits, Service members need to have been activated on or after September 11, 

2001, for at least 90 consecutive days.819 Effective October 1, 2014, the basic monthly 

rate for trainees under REAP is $1,373.60.820 REAP can be used for college or 

university degree programs, vocational programs, independent study or distance 

learning programs, correspondence courses, flight training, on-the-job training and 

apprenticeship programs, licensing and certification test reimbursement, and 

entrepreneurship courses.821 

Tuition Assistance 

The Military Services also offer financial assistance for tuition and fees for voluntary, 

off-duty educational programs in support of Service members’ personal and 

professional goals through TA.822 TA is available to active-duty Service members, 

Reservists, and National Guardsmen in an active-duty status.823 Services may pay all 

or a portion of tuition and expenses for TA participants.824 TA was originally created 

because Service members were not allowed to use their GI Bill benefits while on active 

duty.825 Service members can now use Post-9/11 GI Bill benefits while on active 

duty.826 

 

813 Veterans’ Benefits, 38 U.S.C. § 3014(a) provides that “the Secretary shall pay to each individual entitled to basic 

educational assistance who is pursuing an approved program of education a basic educational assistance allowance to 

help meet, in part, the expenses of such individual’s subsistence, tuition, fees, supplies, books, equipment, and other 

educational costs.” Veterans’ Benefits, 38 U.S.C. § 3002 provides that the term “program of education” has the same 

meaning as that found in 38 U.S.C. § 3452(b). 

814 Veterans’ Benefits, 38 U.S.C. § 3011(a)(2). 815 Pensions, Bonuses, and Veterans’ Relief, 38 CFR 21.7130-21.7144. 816 Veterans’ Benefits, 38 U.S.C. § 3012(a). 817 National Defense Authorization Act for FY 2005, Pub. L. No. 108-375, § 527 (2004). 818 Armed Forces, 10 U.S.C. § 16161. 819 Armed Forces, 10 U.S.C. § 16163. 820 See “Education and Training, Reserve Educational Assistance Program Increased Educational Benefit,” Department 

of Veterans Affairs, accessed October 2, 2014, 

http://www.benefits.va.gov/GIBILL/resources/benefits_resources/rates/ch1607/ch1607rates100114.asp. 821 Armed Forces, 10 U.S.C. § 16162(b) states all education assistance programs approved for assistance under the 

Montgomery GI Bill are approved for REAP. 

822 Armed Forces, 10 U.S.C. § 2007. 823 Armed Forces, 10 U.S.C. § 2007. See also Voluntary Education Programs, DoDI 1322.25, 16-17 (2014). 824 Armed Forces, 10 U.S.C. § 2007. 825 “Part V: Chapter 10 - Tuition Assistance Top-up,” Department of Veterans Affairs, accessed April 11, 2014, 

http://www.benefits.va.gov/warms/docs/admin22/m22_4/part05/ch10.htm#s1004. 826 See Veterans’ Benefits, 38 U.S.C. § 3311. 
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For additional information on education assistance, please see the Report of the Military 

Compensation and Retirement Modernization Commission: Interim Report (Section 

5.8.1). 

Findings: 

Education benefits are strong recruiting and retention tools. The 2014 Blue Star 

Families Military Family Lifestyle Survey determined that approximately 74 percent of 

Service member respondents indicated they joined the military to receive educational 

benefits.827 The number of veterans using GI Bill benefits increased 67 percent, from 

564,487 to 945,052 students, between FY 2009 and FY 2012.828 The Commission’s 

survey indicated tuition assistance was perceived to be more than twice as valuable as 

quality of life programs such as child care, family support services, and military 

housing.829 The Commission also received numerous comments related to the high 

value that recipients place on education benefits: 

Post-9/11 GI Bill wonderful benefit.830

Post-9/11 GI Bill program is the best education benefit offered by the 

military. Please do not reduce it.831

I am very satisfied with the Post-9/11 GI Bill, and I believe education 

benefits are extremely important.832

There are substantial duplications between various education programs that are 

available to Service members. Originally, the Post-9/11 GI Bill did not cover the same 

education courses as the MGIB,833 but the Congress has since enacted legislation to 

align the programs to ensure both cover the same courses.834 In addition, the amount 

of education benefits payable under both the Post-9/11 GI Bill835 and REAP836 are 

based on the number of continuous days served on active duty after September 10, 

2001. Table 16 compares these programs.837

 

827 Blue Star Families, 2014 Military Family Lifestyle Survey, Comprehensive Report, 31, accessed December 14, 2014, 

https://www.bluestarfam.org/sites/default/files/media/stuff/bsf_report_comprehensive_reportfinal_single_pages.pdf. 828 U.S. Department of Veterans Affairs, National Center for Veterans Analysis and Statistics, Education Program 

Beneficiaries, January 2014. See also Lauren Kirkwood, More veterans taking advantage of Post-9/11 GI Bill, 

McClatchy DC, March 17, 2014. Accessed January 7, 2015, 

http://www.mcclatchydc.com/2014/03/17/221479_more-veterans-taking-advantage.html?rh=1#storylink=cpy. 829 Survey results, MCRMC survey, July 1, 2014 to October 10, 2014. 830 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 831 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 832 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 833 See Post-9/11 Veterans Educational Assistance Act of 2008, Pub. L. No. 110-252 (2008), § 5003. The Post-9/11 

GI Bill originally did not provide educational benefits for vocational or technical education, unlike the Montgomery GI 

Bill, but was subsequently amended by Congress in 2009. 

834 See Post-9/11 Veterans Educational Assistance Improvement Act, Pub. L. No. 111-377 (2011) § 102. 835 Veterans’ Benefits, 38 U.S.C. § 3311. See also Department of Veterans Affairs, Post-9/11 GI Bill: It’s Your Future, VA 

Pamphlet 22-09-01, May 2012, accessed September 25, 2014. 

836 Armed Forces, 10 U.S.C. § 16161. See also Department of Veterans Affairs, Reserve Education Assistance Program 

(REAP): Summary of Educational Benefits under the Reserve Educational Assistance Program, VA Pamphlet 22-05-1, 

revised September 2008, 29. 

837 “Education and Training, Comparison Toll and Payment Chart,” Department of Veterans Affairs, accessed 

October 9, 2014, http://www.benefits.va.gov/gibill/comparison_tool.asp. 
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Table 16. Features of Post-9/11 GI Bill, MGIB, and REAP 

Post‐9/11 GI Bill MGIB REAP

Minimum Length of

Service

90 days active aggregate

service (after 9/10/01) or

30 days continuous if

discharged for disability

(after 9/10/01)

2 year continuous

enlistment (minimum

duty varies by service

date, branch, etc.)

90 days active continuous

service (after 9/10/01)

Maximum # of Months

of Benefits 36 36 36

How Payments Are

Made

Tuition: Paid to school

Paid to student Paid to student

Housing stipend: Paid

monthly to student

Books & Supplies: Paid to

student at the beginning of

the term

Duration of Benefits Generally 15 years from

last day of active duty

Generally 10 years from

last day of active duty

Generally 10 years from the

day student leaves the

Selected Reserve or the day

student leaves the IRR  

Degree Training Yes Yes Yes

Non College Degree

Training Yes Yes Yes

On‐the‐Job &

Apprenticeship Training Yes Yes Yes

Flight Training Yes Yes Yes

Correspondence

Courses Yes Yes Yes

Licensing & Certification Yes Yes Yes

National Testing

Programs Yes Yes Yes

Work‐Study Program Yes Yes Yes

Tutorial Assistance Yes Yes No

Yellow Ribbon Program Yes No No

Transferability Yes Yes No

Maximum amount of

benefits (full time)

Up to $19,198.31 (not

including BAH equal to E5

with dependents)838

$15,453.00839 $12,362.40840

 

838 Veterans’ Benefits, 38 U.S.C. § 3313. See also “Education and Training,” Department of Veterans Affairs, accessed 

September 25, 2014, 

http://www.benefits.va.gov/gibill/resources/benefits_resources/rates/ch33/Ch33rates080113.asp. Figure shown is 

per 9-month academic year. 

839 “Education and Training, Montgomery GI Bill Active Duty, Increased Educational Benefit, Effective October 1, 

2014,” U.S. Department of Veterans Affairs, accessed October 9, 2014, 

http://www.benefits.va.gov/GIBILL/resources/benefits_resources/rates/ch30/ch30rates100114.asp. Figure shown is 

per 9-month academic year. 

840 Ibid. Figure shown is per 9-month academic year. 
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Even though the features of these programs are similar, participants in the various 

programs received very different levels of benefits. The average Post-9/11 GI Bill 

benefits paid in FY 2013 was $13,465 per person.841 The MGIB and REAP average perparticipant benefit in FY 2013 was $8,551842 and $4,028,843 respectively. Reservists 

also qualify for Post-9/11 GI Bill benefits at a greater rate than REAP.844 Although 

benefits are greater under the Post-9/11 GI Bill, 878,961 Service members have 

enrolled in the MGIB since 2008, an average of 146,494 per year.845 

In addition, there are several features of the Post-9/11 GI Bill that are somewhat 

misaligned with retention goals or with historical implementation of new education 

benefits. For example, transferability of Post-9/11 GI Bill benefits at 6 YOS plus an 

additional 4-year commitment means that Service members as young as 24 can 

transfer their Post-9/11 GI Bill benefits, and may be only 28 when they leave.846 The 

average DoD continuation rate from 1980 to 2010 for a Service member at 6 YOS is 

35.3 percent,847 while the average continuation rate for a Service member at 10 YOS is 

19.3 percent.848 Offering transferability at 10 YOS instead of 6 would enable the 

Services to increase retention at this critical point in a military career. Even though 

transferability is a very popular benefit, the Commission received a wide variety of 

comments related to the requirements for earning transferability: 

I believe that the Post-9/11 GI Bill Education Benefit Transferability should 

go back to a 6 year requirement instead of the 4 additional years 

required.849

Post 9/11 GI bill is spot on, but I would agree for a minimum time in 

service to receive the benefit of greater than 10 years.850

If we keep Tuition Assistance, then the transferability of the Post-9/11 GI 

Bill should require a longer commitment in order to be transferred, say 15 

or 20 years.851

I think post 9/11 GI Bill should be transferable to spouse but not children.852

 

841 Department of Veterans Affairs, Congressional Budget Submission for FY 2015 Volume III Benefits and Burial 

Programs and Departmental Administration, VBA-33. 842 Ibid. 843 Ibid. 844 Department of Veterans Affairs, Post-9/11 GI Bill: It’s Your Future, VA Pamphlet 22-09-01, May 2012, accessed 

December 21, 2014, https://www.pritzkermilitary.org/explore/library/online-catalog/view/oclc/823319653. 

Department of Veterans Affairs, Reserve Education Assistance Program (REAP): Summary of Educational Benefits under 

the Reserve Educational Assistance Program, VA Pamphlet 22-05-1, revised September 2008, 29. 845 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, 

September 26, 2014. 

846 Veterans Benefits, 38 U.S.C. § 3319. Post-9/11 GI Bill, DoDI 1341.13, 11 (2013). 847 Military Continuation Rates DMDC Data–Average from 1980-2010, data provided by DMDC, e-mail to MCRMC, 

March 2014. 

848 Ibid. 849 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 850 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 851 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 852 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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I don’t think the post 9/11 GI bill should be transferrable. I think 

dependents should have to earn it themselves or the member who earned 

it should use it. It’s too costly of a benefit to be educating the next 

generation regardless of their affiliation to the military in their adult 

years.853

Another issue is a misalignment of Departmental incentives related to transferability. 

While the policy for transferring benefits to dependents is set by DoD,854 the VA pays 

for all Post-9/11 GI Bill benefits including transferred benefits.855 As a result, DoD 

allows all Service members who meet the requirements to transfer their benefits,856

although the law states the Secretary “may” permit transfers but is not required to do 

so.857 Between August 2009 and September 2014, there were 423,355 Service 

members who transferred their Post-9/11 GI Bill benefit to 928,078 dependents.858 Of 

the Service members who transferred their benefits, 38.5 percent were officers and 

61.5 percent were enlisted Service members,859 compared to a total force that is 

16.4 percent officers and 83.6 percent enlisted.860 As of August 2014, 52 percent of 

children who received transferred benefits were younger than age 14 at the time of 

transfer.861 Between August 2009 and April 2014 VA paid $5.6 billion for dependents 

who received transferred benefits.862 VA does not currently have a robust model for 

out-year cost projections for the Post-9/11 GI Bill or transferability.863 The 

Commission estimates the VA would pay an additional $76.5 billion between FY 2015 

and FY 2024 for transferred benefits.864

The Post-9/11 GI Bill housing stipend often exceeds the actual housing costs of 

dependent beneficiaries. For example, in academic year 2013-2014, New School 

University in New York reportedly had the highest estimated room and board cost in 

the country at $18,490.865 The BAH per month for an E5 with dependents in New York 

City in 2013 was $3,258, and for 2014 it was $3,744.866 Assuming a 9-month 

academic year, a student using Post-9/11 GI Bill benefits at New School for 2013-

2014 would receive $31,752, which is $13,262 more than the estimated cost of room 

and board. Northwestern Oklahoma State University in Alva, OK reportedly had the 

 

853 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 854 Post-9/11 GI Bill, DoDI 1341.13, 11 (2013). 855 Veterans Benefits, 38 U.S.C. § 3319. 856 Information provided by DoD OSD P&R, meetings with MCRMC staff, July 10, 2014, July 18, 2014, and 

September 8, 2014. 

857 Veterans Benefits, 38 U.S.C. § 3319. 858 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, 

September 18, 2014. 

859 Data calculated from information provided by Office of the Under Secretary of Defense for Personnel and Readiness, 

e-mail to MCRMC, February 6, 2014 and September 18, 2014. 860 Department of Defense, 2012 Demographics: Profile of the Military Community, 10. 861 Data calculated from information provided by Office of the Under Secretary of Defense for Personnel and Readiness, 

e-mail to MCRMC, February 6, 2014 and September 18, 2014. 

862 Data provided by VBA, CD-ROM to MCRMC, April 14, 2014. 863 Information provided by VA, VBA, Education officials, meetings with MCRMC staff, March 7, 2014, July 3, 2014, 

and August 27, 2014. 

864 The Commission created a model for cost-estimate projections, including estimated rates of inflation for education 

and housing, which historically exceed general inflation. That model produced an estimate of VA expenses beginning at 

$4.4 billion in FY 2015 and rising to $9.1 billion in FY 2024; the projected expenses totaled $76.5 billion over that 

span. 

865 Kelsey Sheehy, “10 Colleges That Charge the Most for Room and Board,” U.S. News & World Report, (October 29, 

2013), accessed November 19, 2014, http://www.usnews.com/education/best-colleges/the-short-listcollege/articles/2013/10/29/10-colleges-that-charge-the-most-for-room-and-board. 

866 “BAH Calculator,” Department of Defense, Defense Travel Management Office, accessed September 25, 2014, 

http://www.defensetravel.dod.mil/site/bahCalc.cfm. 
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lowest estimated room and board cost in the United States in academic year 2013-

2014, at $3,900.867 Using the same assumptions, a student using Post-9/11 GI Bill 

benefits would receive $8,658 in BAH, $4,758 more than the estimated cost of room 

and board.868

The Post-9/11 GI Bill’s housing stipend is also inconsistent with other education 

benefits. Veterans may receive Post-9/11 GI Bill benefits, including the housing 

stipend, while receiving unemployment compensation.869 Other VA education 

programs that provide a living allowance prohibit participants from also receiving 

unemployment compensation. For example, Section 8525(b) of title 5 U.S.C. prohibits 

receipt of unemployment compensation by those receiving a subsistence allowance 

under the MGIB-AD or an educational assistance allowance under the Survivors’ and 

Dependents’ Educational Assistance program. 

TA was originally created because Service members were not allowed to use their GI 

Bill benefits while on active duty.870 Service members can now use TA or their 

Post-9/11 GI Bill871 benefits while they are on active duty. In FY 2013 there were 

333,001 TA participants taking undergraduate or graduate level courses. Of the 

FY 2013 participants, 91.2 percent were enlisted personnel, and only 8.8 percent were 

officers.872 TA is not restricted to “professional development” courses; Service members 

may take courses in any area of study.873 The Government has only limited 

educational data about recipients of the Post-9/11 GI Bill and TA programs. For 

example, neither DoD nor VA is currently collecting data on the education level and 

YOS of Service members transferring their Post-9/11 GI Bill.874 Schools receiving 

Federal funds through the Post-9/11 GI Bill and TA are not required to provide 

information to DoD or VA regarding students using the Post-9/11 GI Bill or TA to pay 

for education programs.875 This has led to the inability for DoD and VA to identify 

schools that may be aggressively and deceptively targeting Service members, veterans, 

and their families using the Post-9/11 GI Bill and TA.876

 

867 Delece Smith-Barrow, “10 Colleges with Low Fees Room and Board,” U.S. News & World Report, (October 8, 2013), 

accessed November 19, 2014, http://www.usnews.com/education/best-colleges/the-short-listcollege/articles/2013/10/08/10-colleges-with-low-fees-for-room-and-board. 

868 “BAH Calculator,” Department of Defense, Defense Travel Management Office, accessed September 25, 2014, 

http://www.defensetravel.dod.mil/site/bahCalc.cfm. 

869 See Government Organization and Employees, 5 U.S.C. § 8525(b), which limits access to federal unemployment 

benefits by individuals receiving some types of public assistance. The statute does not prohibit those receiving a 

monthly housing allowance under the Post-9/11 GI Bill from also receiving unemployment insurance. 870 “Part V: Chapter 10 - Tuition Assistance Top-up,” Department of Veterans Affairs, accessed April 11, 2014, 

http://www.benefits.va.gov/warms/docs/admin22/m22_4/part05/ch10.htm#s1004. 871 Veterans’ Benefits, 38 U.S.C. § 3311. 872 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, 

October 15, 2014. 

873 See Armed Forces, 10 U.S.C. § 2007. 874 Information provided by VA VBA staff, meeting with MCRMC, July 3, 2014. Also provided by Office of the Under 

Secretary of Defense for Personnel and Readiness, phone conversation with MCRMC staff, February 5, 2014. 

875 Such data collection is not required in law under either Armed Forces, 10 U.S.C. § 2007 (which governs tuition 

assistance) or Veterans’ Benefits, 38 U.S.C. Chapter 33 (governing the Post-9/11 GI Bill). 876 See U.S. Senate, Committee on Health, Education, Labor and Pensions, For Profit Higher Education: The Failure to 

Safeguard the Federal Investment and Ensure Student Success, Washington: Government Printing Office, July 30, 2012 

(“2012 Report”). See also U.S. Senate, Committee on Health, Education, Labor and Pensions, Benefitting Whom? ForProfit Education Companies and the Growth of Military Educational Benefits, Washington: Government Printing Office, 

December 8, 2010 (“2010 Report”). See also U.S. Senate, Committee on Health, Education, Labor and Pensions, Is the 

New GI Bill Working?: For-Profit College Increasing Veteran Enrollment and Federal Funds, July 30, 2014. 
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Conclusions: 

Duplicative education assistance programs should be sunset to reduce administrative 

costs and to simplify the education benefit system. Both MGIB and REAP provide 

similar benefits to the Post-9/11 GI Bill. Yet Service members are enrolling and paying 

$1,200 for MGIB, while the Post-9/11 GI Bill is a more valuable benefit for most 

Service members because there is no enrollment or fees. REAP and the Post-9/11 GI 

Bill both provide education benefits to activated RC members. Sunsetting MGIB-AD 

and REAP would also be consistent with historical implementation of new educational 

programs. In the past, when GI Bills were created, they replaced existing benefits.877

Such replacement did not take place when the Post-9/11 GI Bill was enacted.878 

Transferability of Post-9/11 GI Bill benefits should be revised to better promote 

retention. Increasing eligibility requirements to 10 YOS plus an additional 

commitment of 2 YOS would encourage younger Service members who leave the 

Service before 10 years to use their educational benefit for themselves. Increasing the 

eligibility requirement would also align transferability with the Commission’s 

Recommendation on retirement (see Recommendation 1) and better focus 

transferability on career Service members. 

The value of a transferred Post-9/11 GI Bill benefit should be adjusted to match the 

value of the benefit when used by the Service member on active duty, thus eliminating 

the housing stipend for dependents of both active-duty and separated Service 

members. Beneficiaries who are receiving housing stipends should not also be entitled 

to unemployment compensation, consistent with other military education programs. 

TA should be used for professional development, and Service members should use the 

Post-9/11 GI Bill to pursue personal academic development while on active duty. 

DoD and the VA should collect additional information regarding usage of the Post9/11 GI Bill and TA. It is important to know the education levels of Service members 

when they leave the Service, as well as the education levels of those Service members 

who elect to transfer their Post-9/11 GI Bill to their dependents, to better understand 

the effects of transferability. The VA should collect information related to, but not 

limited to, graduation rates, course competition rates, course dropout rates, course 

failure rates, certificates and degrees being pursued, and employment rates after 

graduation. Educational institutions should be required to provide non-personally 

identifiable information on students who receive Post-9/11 GI Bill benefits. 

Recommendations: 

 MGIB-AD should be sunset on October 1, 2015. REAP should be sunset 

restricting any further enrollment and allowing those currently pursuing an 

education program with REAP to complete their studies. Service members who 

switch to the Post-9/11 GI Bill should receive a full or partial refund of the 

 

877 Starting with the Servicemen’s Readjustment Act of 1944, Pub. L. No. 78-346, 58 Stat. 284 (1944). The Veterans 

Readjustment Assistance Act of 1952, Pub. L. No. 82-550 (1952) provided for the vocational readjustment and 

restoration of lost educational opportunities to individuals serving in the Armed Forces after June 26, 1950, and before 

a date to be determined by the President or Congress. The Veterans’ Readjustment Benefits Act of 1966, 

Pub. L. No. 89-358 (1966) provided an educational assistance program to individuals serving after January 31, 1955, 

and required that individuals entitled to benefits under both laws elect which benefits they would receive. The 

Veterans’ Education and Employment Assistance Act of 1976, Pub. L. No. 94-502 (1976) was replaced by MGIB in 

1985. 

878 See Veterans Benefits, 38 U.S.C. Chapter 33. 
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$1,200 they paid to become eligible for MGIB benefits. The refund should be 

proportional to the amount of the Post-9/11 GI Bill benefit used. 

 Eligibility requirements for transferring Post-9/11 GI Bill benefits should be 

increased to 10 YOS plus an additional commitment of 2 YOS. This change 

strengthens transferability as a true retention tool and aligns transferability 

eligibility to the Commission’s Recommendation on retirement.879

 The housing stipend for dependents should be sunset on July 1, 2017. 

 Eligibility for unemployment compensation should be eliminated for anyone 

receiving housing stipend benefits under the Post-9/11 GI Bill. 

 DoD should track the education levels of Service members leaving the Service, 

as well as the education levels of Service members who transfer their Post-9/11 

GI Bill to their dependents. 

 The VA should collect information related to, but not limited to, graduation 

rates, course competition rates, course dropout rates, course failure rates, 

certificates and degrees being pursued, and employment rates after graduation, 

and include that information in an annual report to the Congress. 

 Educational institutions should be required to provide non-personally 

identifiable information on students who receive Post-9/11 GI Bill and TA 

benefits, when requested by DoD or VA. 

Implementation: 

MGIB and REAP: 

 MGIB: 38 U.S.C. Chapter 30 governs the MGIB. The Chapter should be

amended to sunset MGIB, restricting eligibility for MGIB benefits to those 

Service members who have enrolled in the program before October 1, 2015.

 REAP: 10 U.S.C. Chapter 1607 governs the REAP program. The Chapter should

be amended to sunset REAP, allowing Service members currently receiving 

REAP benefits to exhaust their entitlement, but transferring all other REAPeligible Service members to the Post-9/11 GI Bill and barring any further 

applications for REAP benefits.

 MGIB and REAP: Any other regulations (including the Code of Federal

Regulations, if applicable), instructions, directives, or internal policies

necessary to conform to the recommendation described above should be 

reissued, updated, amended, retracted, or otherwise changed as needed. 

Tuition Assistance: 

 Require TA to be used for “professional development” courses only: 10 U.S.C.

Chapter 101 governs general military training, including TA. 10 U.S.C. § 2007 

 

879 DoD policy determines the conditions under which Service members may transfer Post-9/11 GI Bill benefits to their 

dependents, yet the VA actually funds transferred benefits. Although the Commission recognizes a misalignment of 

departmental incentives in this structure, to avoid subjecting funding for transferred benefits to ongoing DoD budget 

pressures a recommendation to realign the funding with decision-making was not made. 
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should be amended to limit TA payments to courses designated as providing 

“professional development” by the Secretary or his designee.

 Any other regulations (including the Code of Federal Regulations, if applicable),

instructions, directives, or internal policies necessary to conform to the

recommendation described above should be reissued, updated, amended,

retracted, or otherwise changed as needed. 

Post-9/11 GI Bill Transferability: 

 Extend the time commitment required to obtain the transferability benefit: 38

U.S.C. Chapter 33 governs the Post-9/11 GI Bill, including the transferability

benefit. 38 U.S.C. § 3319 should be amended to increase the YOS requirement 

for transferability to 10 YOS, plus a commitment to an additional 2 YOS.

 The Congress should approve a Sense of Congress resolution affirming that

DoD and the Military Services may approve or deny requests to transfer post9/11 GI Bill benefits in such a way that encourages retention of individuals in

the Military Services, and recommending that they be more selective in granting 

transferability of Post-9/11 GI Bill benefits, citing their authority in 38 U.S.C. 

§ 3319(a)(2).

 Require report on educational attainment of Service members who transfer their 

education benefit: 38 U.S.C. § 3325 should be amended to require reporting of 

information of the highest level of education obtained by individuals 

transferring their Post-9/11 GI Bill benefits.

 Require report on education levels of Service members at separation: 10 U.S.C. 

§ 1142 should be amended to require that information be obtained at time of 

separation, on the highest level of education attained by a Service member prior 

to separating from military service, and that the education levels of separating 

Service members be reported annually to the Congress.

 End housing stipend payments to dependents using transferred education 

benefits: 38 U.S.C. § 3319 should be amended to cease payment of a monthly

housing stipend to spouses and children receiving transferred benefits after 

July 1, 2017.

 Any other regulations (including the Code of Federal Regulations, if applicable),

instructions, directives, or internal policies necessary to conform to the

recommendation described above should be reissued, updated, amended,

retracted, or otherwise changed as needed. 

Unemployment Compensation: 

 Unemployment compensation: 5 U.S.C. Chapter 85 governs the unemployment 

insurance program, and Subchapter II of that chapter governs unemployment 

insurance for ex-Service members. 5 U.S.C. § 8525 should be amended to 

prevent individuals receiving Post-9/11 GI Bill benefits from simultaneously 

receiving unemployment benefits. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 
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recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. 

Education Data Collection:

 Require report on student progress: Subchapter III of 38 U.S.C. Chapter 33 

governs administration the Post-9/11 GI Bill, including data reporting. 

Subchapter III should be amended to require institutions receiving payments 

under the Post-9/11 GI Bill to report annually to the Secretary of Veterans 

Affairs “such information regarding the academic progress of the individual as 

the Secretary may require.” Also, 38 U.S.C. § 3325 should be amended to 

require the Secretary of Veterans Affairs to include this information in the 

mandated annual report to the Congress. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. 
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Recommendation 12: Better prepare Service members for 

transition to civilian life by expanding education and 

granting states more flexibility to administer the Jobs for 

Veterans State Grants Program. 

Background: 

On January 31, 2013, seven Executive Branch agencies entered into a Memorandum 

of Understanding regarding the parties’ collaboration on the redesigned Transition 

Assistance Program for separating Service members.880 DoD, in partnership with the 

Department of Labor (DOL), the Department of Veterans Affairs (VA), and the Small 

Business Administration (SBA), maintains the Transition GPS881 program to help 

Service members and their families prepare for a successful transition to civilian life. 

Transition GPS services are delivered through a series of coordinated workshops 

administered by each Service. Transition GPS participants receive preseparation 

counseling, presentations on the Transition GPS core curriculum,882 briefings on 

various Transition GPS tracks,883 a DOL Gold Card884 and a capstone event that 

verifies “a viable plan for transition.”885 

Transition GPS tracks are optional, 2-day workshops that Service members may 

attend to gain transition assistance tailored to their specific interests.886 These include 

an education track, for those pursuing or intending to pursue a higher education 

degree; a technical and skills training track, for those seeking job-ready skills and 

industry-recognized credentials in shorter-term training programs; and an 

entrepreneurship track, administered by SBA, called “Boots to Business,” which 

focuses on feasibility analysis for business planning for those wanting to start a 

business.887

Veterans can present their DOL Gold Card at their local One-Stop Career Center 

(discussed below) to receive enhanced intensive services such as a job readiness 

assessment, including interviews and testing; creation of an Individual Development 

Plan; career guidance through group or individual counseling that helps veterans 

make training and career decisions; information on labor markets and skills 

transferability that informs educational, training, and occupational decisions; referrals 

to job banks, job portals, and job openings; referrals to employers and registered 

apprenticeship sponsors; referrals to training funded by the Workforce Investment Act 

 

880 Transition Assistance Program for Separating Service Members, (V62-8) MOU (2013). Parties to the MOU are: DoD, 

VA, DOL, ED, DHS (USCG), SBA, and OPM. This MOU supersedes the September 19, 2006 TAP MOU. 

881 Although never spelled out in the official program name, the “GPS” in “Transition GPS” represents goals, plans, and 

success. See Implementation of Mandatory Transition Assistance Program Participation for Eligible Service Members, 

DTM-12-007, 14 (2014). 

882 Transition GPS core curriculum includes workshops on transition overview, military occupation code crosswalk, 

resilient transitions, financial planning, and VA benefits, and an Individual Transition Plan review. See Implementation 

of Mandatory Transition Assistance Program Participation for Eligible Service Members, DTM-12-007, Attachment 2, 5 

(2014). 

883 Implementation of Mandatory Transition Assistance Program Participation for Eligible Service Members, DTM-12-

007, Attachment 2, 5-6 (2014). 

884 Ibid, Attachment 3, 8. 885 Ibid, Attachment 4, 11. 886 Ibid, Attachment 2, 5. See also “Transition Assistance Program (TAP) Information,” U.S. Department of Labor, 

accessed September 30, 2014, http://www.dol.gov/vets/programs/tap/. 

887 Implementation of Mandatory Transition Assistance Program Participation for Eligible Service Members, DTM-12-

007, 6 (2014). “Transition Assistance Program (TAP) Information,” U.S. Department of Labor, accessed September 30, 

2014, http://www.dol.gov/vets/programs/tap/. 
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or third-party service providers; and monthly follow-ups by an assigned case manager 

for up to 6 months.888

One-Stop Career Centers offer employment services for all job seekers across the 

country, including veterans, after they have transitioned to civilian life. These facilities 

are part of state workforce agencies or employment commissions889 and are partially 

funded through a number of grants under DOL’s Jobs for Veterans State Grants 

(JVSG) program.890 “The JVSG program functions mainly as a staffing grant, providing 

salaries and benefits for state merit employees who provide specialized services to 

veterans with significant barriers to employment, and in limited circumstances, 

transitioning Service members who were wounded and injured.”891 The JVSG program 

funds two distinct positions, the Disabled Veterans’ Outreach Program (DVOP) 

employees892 and the Local Veterans’ Employment Representative (LVER).893 Services 

such as job search assistance workshops, career counseling, résumé assistance, and 

job referrals are provided as a priority to all veterans and eligible spouses.894 In 

addition to these core support services, DVOP specialists develop expertise in labor 

market and employment services that are specifically relevant to disabled veterans895

and LVERs directly contact businesses, Federal agencies, and associations of 

contractors and employers to encourage the hiring and advancement of qualified 

veterans.896 JVSG programs are currently administered by state departments of labor 

or their equivalent.897

For additional information on transition programs for veterans, please see the Report of 

the Military Compensation and Retirement Modernization Commission: Interim Report 

(Section 5.5.1 and Section 5.8.4.1). 

Findings: 

Although overall veterans’ unemployment has remained lower than that of 

nonveterans during the last two decades,898 since 2005, veterans age 18 to 24 have 

consistently had a higher unemployment rate than nonveterans of the same age 

group. In 2013, veterans age 18 to 24 had an unemployment rate of 21.7 percent, 

compared to nonveterans of the same age group at 14.3 percent.899 This trend has the 

potential to become more severe as active-duty end strength is currently set to draw 

 

888 See “New Employment Initiative for Veterans,” Department of Labor, accessed October 27, 2014, 

http://www.dol.gov/vets/goldcard.html. 

889 Labor, 29 U.S.C. § 2864(c). Labor, 29 U.S.C. § 2841. 890 Employees’ Benefits, 20 CFR 1001. 891 Department of Labor, FY 2014 Congressional Budget Justification, Veteran’s Employment and Training Service,

VETS-21. 

892 Veterans’ Benefits, 38 U.S.C. § 4103A. Employees’ Benefits, 20 CFR 1001.140. 893 Veterans’ Benefits, 38 U.S.C. § 4104. Employees’ Benefits, 20 CFR 1001.123. 894 Veterans’ Benefits, 38 U.S.C. § 4215. Employees’ Benefits, 20 CFR 1001.101. 895 Employees’ Benefits, 20 CFR 1001, 1001.123. 896 Department of Labor, Employment Services for Veterans Brochure. 897 Employees’ Benefits, 20 CFR 1001.101. 898 See Department of Labor, Bureau of Labor Statistics, Archived BLS News Releases, Employment Situation of 

Veterans, (biennial reports, 1993-2013), accessed November 5, 2014, 

http://www.bls.gov/schedule/archives/all_nr.htm#VET. 

899 “Economic News Release, Table 2A: Employment status of persons 18 years and over by veteran status, age, and 

period of service, 2013 annual averages,” U.S. Department of Labor, Bureau of Labor Statistics, accessed 

September 24, 2014, http://www.bls.gov/news.release/vet.t02A.htm. 
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down from a post-September 11, 2001 high in 2010,900 increasing the number of 

veterans who are, or will soon be, in transition. 

Inadequate preparations during the Transition GPS program may contribute to the 

relatively high unemployment rates among separated Service members. Employers 

seeking to hire veterans often have trouble finding or connecting with qualified 

veterans.901 A large company that focuses on hiring veterans stated that veterans who 

complete Transition GPS do not necessarily have the networking skills to be able to 

find a job in the private sector.902 A recent survey on veteran employment challenges 

revealed that a large majority of recently transitioned Service members identified jobseeking skills as an area where assistance is needed.903 Veterans would like help with 

résumé writing, interview skills, and targeting companies for employment. These 

veterans said networking skills were one of their greatest needs.904 The same survey 

revealed that most job seekers believed in-person and online networking to be an 

effective tool. Actual reported usage of these networking resources is lower than their 

perceived effectiveness,905 possibly because of veterans’ overall lack of confidence in 

their skills in this area. 

There are still areas of Transition GPS that can be improved.906 Because of these 

unemployment rates and improved Federal education benefits provided through the 

Post-9/11 GI Bill, the number of Service members and veterans furthering their 

education is at nearly unprecedented levels. The number of veterans using GI Bill 

benefits increased 67 percent, from 564,487 to 945,052 students, between FY 2009 

and FY 2012.907 A recent survey shows that 44 percent of veterans report either a fulltime (30 percent) or part-time (14 percent) student status.908 Yet the Transition GPS 

education track is optional, and the parties to the MOU have not performed a joint 

review of the core curriculum since the program was established.909 In addition, a 

Government Accountability Office report examining the metrics used by Transition 

GPS to measure outcomes such as education or employment after separation 

concluded the metrics were “incomplete.”910 

 

900 See Report of the Military Compensation and Retirement Modernization Commission: Interim Report, 22 (Figure 15, 

showing decline in active-duty end strength). See also National Defense Authorization Act for FY 2014, Pub. L. No. 113-

66, § 401 (2013). See also “Budget Cuts to Slash U.S. Army to Smallest Since Before World War Two,” Reuters, 

accessed October 28, 2014, http://www.reuters.com/article/2014/02/24/us-usa-defense-budgetidUSBREA1N1IO20140224. 

901 Panel discussion, Defense One and Iraq and Afghanistan Veterans of America, The New Battleground: Veterans 

Conference, July 31, 2014. MCRMC staff attended the conference and observed the panel discussion but did not 

participate. 

902 Information provided by JPMorgan Chase official, phone interview with MCRMC, August 11, 2014. 903 Prudential Financial, Inc., Veterans’ Employment Challenges: Perceptions And Experiences Of Transitioning From 

Military To Civilian Life, May 2012. 904 Ibid. 905 Ibid. 906 DoD OSD P&R, meeting with MCRMC, January 14, 2014. DOL VETS, meeting with MCRMC, April 5, 2014. VA, 

meeting with MCRMC, March 7, 2014 and August 27, 2014. 

907 Department of Veterans Affairs, National Center for Veterans Analysis and Statistics, Education Program 

Beneficiaries, January 2014. Also see Lauren Kirkwood, McClatchy DC, More Veterans Taking Advantage of Post-9/11 

GI Bill, accessed January 7, 2015, http://www.mcclatchydc.com/2014/03/17/221479_more-veterans-takingadvantage.html?rh=1#storylink=cpy. 

908 Prudential Financial, Inc., Veterans’ Employment Challenges: Perceptions And Experiences Of Transitioning From 

Military To Civilian Life, May 2012. 909 Information provided by Veterans Benefits, Administration, conference call with MCRMC staff, November 17, 2014. 910 Government Accountability Office, Transitioning Veterans: Improved Oversight Needed to Enhance Oversight of 

Transition Assistance Program, GAO-14-144, 2 (2014), accessed January 7, 2015, http://www.gao.gov/products/GAO14-144. 
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Veterans may benefit from an additional focus within One-Stop Career Centers. With 

the exception of Texas, states administer JVSG programs, which provide staff funding 

for One-Stop Career Centers, through their departments of labor or their equivalent.911

Texas does this differently, by coordinating administration of its JSVG program 

through the Texas Veterans Commission.912 Of the 10 states with the highest veteran 

populations,913 Texas has one of the lowest veterans’ unemployment rates.914 Though 

state departments of labor or their equivalent agencies have the subject matter experts 

who understand the challenges of the employment market, state departments of 

veterans affairs directors or offices have a better understanding of the challenges 

veterans face. Rear Admiral W. Clyde Marsh, USN (Ret.), President of the National 

Association of State Directors of Veterans Affairs, testified before the House and 

Senate Veterans Affairs’ Committees on March 6, 2014. He stated that the JVSG 

program’s effectiveness could be improved with coordination with state Veteran Affairs 

directors.915 In fact, several people commented to the Commission that some civilian 

employers do not fully understand military careers or skills, which increased 

coordination with state VAs could help address: 

Civilian employers don’t understand military veterans either. On 

interviews I was actually asked if I had shot at anyone or if I had been 

shot at. Civilian employers told me I didn’t have the skills they needed to 

work in accounting even though I had worked in accounting and budget in 

the military my entire career.916

When our service members retire from the military, they do so having been 

out of the civilian work force for twenty years—their peers are already 

established and will likely be our retirees’ bosses. Veteran unemployment 

is high, and the age of the average retiree makes many companies 

reluctant to hire them at a competitive wage. Many will go into second 

careers, such as teaching, where they will start at the bottom of the pay 

scale in an already-underpaid job.917

Veterans’ unemployment may be reduced by increasing face-to-face connections 

between veterans and employees from the One-Stop Career Centers. Currently, OneStop Career Center employees are not required to attend Transition GPS workshops.918

Their participation in veteran-focused jobs fairs is not monitored or reported.919 This 

lack of a face-to-face introduction impairs the connection these two groups require to 

best ensure a strong working relationship once the Service member has been 

separated. 

 

911 Employees’ Benefits, 20 CFR 1001.101. 912 Kyle Mitchell, Deputy Executive Director, Texas Veterans Commission, witness testimony to the U.S. Congress Joint 

Economic Committee, July 10, 2013, accessed on September 30, 2014, 

http://www.jec.senate.gov/public//index.cfm?a=Files.Serve&File_id=bea3dd52-9403-4fa7-b720-94c19db526d3. 913 Texas Workforce Investment Council, Veterans in Texas: A Demographic Study, December 2012, 6, access 

September 30, 2014, http://governor.state.tx.us/files/twic/Veterans_in_Texas.pdf. 

914 Joint Economic Committee Democratic Staff, Post-9/11 and Total Veterans’ Unemployment Rates by State, 2013 

Annual Averages, accessed September 30, 2014, 

http://www.jec.senate.gov/public//index.cfm?a=Files.Serve&File_id=21290f66-e2bf-4af1-855d-33ad4ce95445. 915 Rear Admiral W. Clyde Marsh, USN (Ret.), President, National Association of State Directors of Veterans Affairs, 

testimony to Joint Hearing of the House and Senate Veterans’ Affairs Committees, March 6, 2014. 916 MCRMC letter writer, comment form submitted via MCRMC website, DATE 917 MCRMC letter writer, comment form submitted via MCRMC website, DATE 918 Implementation of Mandatory Transition Assistance Program Participation for Eligible Service Members, 

DTM-12-007, 5, 6, and 11 (2014). 

919 Ibid. 
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Conclusions: 

Unemployment is a major challenge facing recently separated Service members, and 

existing programs are not yet sufficient to meet their needs. Service members would 

benefit from a greater understanding of the education benefits available to them. The 

existing Transition GPS program can be strengthened by improving Service members’ 

networking skills and identifying existing barriers to private-sector companies seeking 

to hire veterans. DoD, VA, DOL, and SBA have put forward great effort in 

implementing Transition GPS. A joint review of the program would ensure the most 

relevant information is provided to transitioning Service members. The JSVG program 

and One-Stop Career Centers can be improved to better assist veterans seeking 

employment. States should have their departments of labor and departments of 

veterans affairs (or equivalents) work together to implement the JVSGs to ensure they 

are being put to the best use possible. One-Stop Career Center employees should 

attend the Transition GPS program whenever possible to encourage separating Service 

members to access services at the One-Stop Career Centers. One-Stop Career Center 

employees should report the number of job fairs they attend and the number of 

veterans they contact at each fair. 

Recommendations: 

 DoD should require mandatory participation in the Transition GPS education 

track for those planning to attend school after separation or those who have 

transferred their Post-9/11 GI Bill benefits. This track is currently an optional 

portion of the program. DoD should ensure these classes provide vital 

information regarding education benefits for Service members during the 

education track such as information regarding types of institutions of higher 

learning, tuition and fees, admission requirements, accreditation, transferability 

of credits, credit for qualifying military training, time required to complete a 

degree, and retention and job placement rates; information that addresses 

important questions that veterans should consider when choosing an 

institution of higher learning; and information about the Postsecondary 

Education Complaint System.920

 The Congress should require DoD, VA, and DOL to review and report on the 

core curriculum for Transition GPS to reevaluate if the current curriculum most 

accurately addresses the needs of transitioning Service members. This report 

should include review of the current curriculum; the roles and responsibilities 

of each Department and whether they are adequately aligned; and the 

distribution of time between the three departments in the core curriculum and 

whether it is adequate to provide all information regarding important benefits 

that can assist transitioning Service members. This review should indicate 

whether any of the information in the three optional tracks should be addressed 

 

920 In January 2014, agency partners including the departments of Veterans Affairs, Education and Defense launched 

online feedback tools that provide a centralized system for filing student complaints. Military and veteran students and 

their family members are able to submit feedback on their experiences with education institutions. The online 

complaint system empowers students to be more active in fulfilling their own education goals and positively influencing 

the decision of others looking for an institution to attend in the future. Students are encouraged to report on their 

experiences regarding the quality of instruction, recruiting practices, and post-graduation employment placement. 

“Postsecondary Education Complaint System Launches—January, 2014,” Military One Source, accessed December 22, 

2014, http://www.militaryonesource.mil/voluntary-education?content_id=272426. For more information regarding 

the Postsecondary Education Complaint System please visit: “Post Secondary Education Complaint System,” Military 

One Source, accessed December 22, 2014, http://www.militaryonesource.mil/voluntaryeducation?content_id=274604. 
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instead in mandatory tracks. It should also include a standard implementation 

plan of long-term outcome measures for a comprehensive system of metrics. 

This review should identify any areas of concern regarding the program and 

recommendations for addressing those concerns. 

 The Congress should amend the relevant statutes to permit state departments 

of labor or their equivalent agencies to work directly with state Veterans Affairs 

directors or offices to coordinate implementation of the JVSG program. 

 The Congress should encourage One-Stop Career Centers to have employees 

attend Transition GPS classes, to ensure personal connections between 

veterans and One-Stop Career Centers. The Congress should require DOL to 

track when and where its employees attend Transition GPS classes, and the 

number of veterans they interact with and follow up with after separation. This 

information should be included in DOL’s annual report to the Congress. 

 DOL should require One-Stop Career Centers to track the number of job fairs 

their employees participate in and the number of veterans they connect with at 

each job fair. This information should be included in each state’s annual report 

to the DOL, and provided to the Congress. 

 The Congress should require a one-time joint report from DoD, VA, and DOL to 

the Senate and House Committees on Armed Services and Veterans’ Affairs 

regarding the challenges employers face when seeking to hire veterans. The 

report should identify the barriers employers face gaining information 

identifying veterans seeking jobs. It should also include recommendations 

addressing barriers for employers and improving information sharing between 

Federal agencies that serve veterans and separating Service members, so they 

may more easily connect employers and veterans. The report should also review 

the Transition GPS career preparation core curriculum and recommend any 

improvements that can be made to better prepare Service members trying to 

obtain private-sector employment. 

Implementation: 

 29 U.S.C. Chapter 30 governs workplace investment systems, including the 

One-Stop Career Centers. 29 U.S.C. § 2871 should be amended to require each 

state to include, in its report to DOL, information on the number of job fairs 

attended by One-Stop Career Center employees at which they contacted 

veterans in the previous year, and the number of veterans they contacted at 

each fair. 

 38 U.S.C. Chapter 41 governs job counseling, training, and placement services 

for veterans. 38 U.S.C. § 4103 should be amended to require that the director 

for veterans’ employment and training for a state coordinate his or her activities 

with both the state’s department of labor, or its equivalent, and the state’s 

department of veterans affairs, or its equivalent. 

 The Congress should require DoD, VA, and DOL to review and report on the 

core curriculum for Transition GPS to reevaluate if the current curriculum most 

accurately addresses the needs of transitioning Service members. This report 

should include review of the current curriculum; the roles and responsibilities 

of each Department and whether they are adequately aligned; and the 
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distribution of time between the three departments in the core curriculum and 

whether it is adequate to provide all information regarding important benefits 

that can assist transitioning Service members. This review should indicate 

whether any of the information in the three optional tracks should be addressed 

instead in mandatory tracks. It should also include a standard implementation 

plan of long-term outcome measures for a comprehensive system of metrics. 

This review should identify any areas of concern regarding the program and 

recommendations for addressing those concerns. 

 The Congress should require a one-time joint report from DoD, VA, and DOL to 

the Senate Committees and House on Armed Services and Veterans’ Affairs 

regarding the challenges employers face when seeking to hire veterans. The 

report should identify the barriers employers face gaining information 

identifying veterans seeking jobs. It should also include recommendations 

addressing barriers for employers and improving information sharing between 

Federal agencies that serve veterans and separating Service members, so they 

may more easily connect employers and veterans. The report should also review 

the Transition GPS career preparation core curriculum and recommend any 

improvements that can be made to better prepare Service members trying to 

obtain private-sector employment. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. Such as the following: 

- DoD DTM-12-007 should be changed to provide more information about 

education assistance available to separating Service members, and to make 

the education track of Transition GPS mandatory for those planning to 

attend school after separation or those who have transferred their Post-9/11 

GI Bill benefits. 
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Recommendation 13: Ensure Service members receive financial 

assistance to cover nutritional needs by providing them

cost-effective supplemental benefits. 

Background: 

Family Subsistence Supplemental Allowance (FSSA) is a voluntary benefits program 

that increases participating Service members’ incomes above the threshold of eligibility 

for the U.S. Department of Agriculture’s (USDA) Supplemental Nutrition Assistance 

Program (SNAP),921 formerly called the Food Stamp Program.922 FSSA and SNAP have 

the same Congressional mandate and overarching goal of providing nutritional 

assistance to eligible beneficiaries.923 FSSA does this by raising a Service member’s 

household income to 130 percent of the Federal poverty level through an increase in 

Basic Allowance for Subsistence (BAS). SNAP provides money on Electronic Benefit 

Transfer (EBT) cards, bringing household monthly food spending up to the maximum 

allotment for the household size, assuming 30 percent of net household income is 

spent on food.924

Service members applying for SNAP are required to pass through two eligibility gates, 

while FSSA applicants are required to pass only through the first gate. SNAP and 

FSSA eligibility requirements are summarized in Table 17.925

 

921 Pay and Allowances of the Uniformed Services, 37 U.S.C. § 402a(a)(1).   922 See U.S. Department of Agriculture, Food and Nutrition Service, Supplemental Nutrition Assistance Program (SNAP), 

A Short History of SNAP, accessed May 1, 2014, http://www.fns.usda.gov/snap/short-history-snap.   923 Family Subsistence Supplemental Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11, 2 (2008). 

Agriculture, 7 U.S.C. § 2013.

924 Family Subsistence Supplemental Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11, 3 (2008). 

Agriculture, 7 U.S.C. § 2014. As an example, if a one-person household has net income of $200 per month and 

maximum SNAP allotment is $194, the monthly SNAP benefit would be $134, which is calculated by multiplying net 

income by 0.3 and subtracting that amount ($60) from $194. See also U.S. Department of Agriculture, Food and 

Nutrition Service, Supplemental Nutrition Assistance Program (SNAP) Eligibility, accessed November 6, 2014, 

http://www.fns.usda.gov/snap/eligibility.

925 Family Subsistence Supplemental Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11, 3 (2008). 

Agriculture, 7 U.S.C. § 2014. Military personnel stationed in foreign countries and applying for FSSA are subject to 

Alaska’s income eligibility standard. Also it should be noted some States have raised their SNAP gross income limit 

above 130 percent of poverty (up to a maximum of 200 percent) through broad-based categorical eligibility. See 

Agriculture, 7 CFR 273.2(j). See also U.S. Department of Agriculture, Food and Nutrition Service, Characteristics of 

Supplemental Nutrition Assistance Program Households: Fiscal Year 2012, accessed September 19, 2014, 

www.fns.usda.gov/characteristics-supplemental-nutrition-assistance-program-households-fiscal-year-2012.  
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Table 17. SNAP and FSSA Eligibility Requirements 

Program GATE 1

Gross Monthly Income Eligibility

GATE 2

Net Monthly Income Eligibility

SNAP Household monthly gross income must be

less than 130 percent of the Federal

poverty level, based on household size.926

 Households with an elderly (60 years or

older) or disabled individual bypass this

gate.927

 43 states use broad‐based categorical

eligibility to increase the gate from

130% to as high as 200%. More than

half of these set gross income

requirements above 185 percent of the

Federal poverty level.928

 BAH is counted as income when paid to

the Service member, but not when

living in Government‐owned “in‐kind”

housing.929

 Loans, grants, and scholarships for a

variety of educational programs are

not counted as income.930

Monthly net income must be less than 100 percent of

the Federal poverty level, based on household size (net

income = gross income – the deductions listed

below).931

Deductions include:

 20% of earned income for all household members.

 A standard deduction based on household size.

 A dependent care deduction when needed for work,

training, or education.

 Medical expenses for elderly or disabled members

exceeding $35 per month, if they are not paid by

insurance or a third party.

 Legally owed or court directed child support

payments.

 Cost of shelter, if shelter accounts for more than

half of household’s income after the other

deductions. Allowable costs include the cost of fuel

to heat and cook with, electricity, water, the basic

fee for one telephone, rent or mortgage payments

and taxes on the home. (Some States allow a set

amount for utility costs instead of actual costs.)

Shelter deduction cannot be more than $490 unless

a person in the household is elderly or disabled.

(Higher limits in AK, HI, and Guam.)

FSSA Household monthly gross income must be

less than 130 percent of the Federal

poverty level, based on household size.932

 BAH and Government‐owned “in‐kind”

housing are counted as income.933

 Loans, grants, and scholarships for

post‐secondary students are not

counted as income.934

Not applicable.

 

926 Family Subsistence Supplemental Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11, 3 (2008). 

Agriculture, 7 U.S.C. § 2014. Military personnel stationed in foreign countries and applying for FSSA are subject to 

Alaska’s income eligibility standard. Also it should be noted some States have raised their SNAP gross income limit 

above 130 percent of poverty (up to a maximum of 200 percent) through broad-based categorical eligibility. See 

Agriculture, 7 CFR 273.2(j). See also U.S. Department of Agriculture, Food and Nutrition Service, Characteristics of 

Supplemental Nutrition Assistance Program Households: Fiscal Year 2012, accessed September 19, 2014, 

www.fns.usda.gov/characteristics-supplemental-nutrition-assistance-program-households-fiscal-year-2012.   927 Agriculture, 7 U.S.C. § 2014(c). 928 See Agriculture, 7 CFR 273.2(j). See also U.S. Department of Agriculture, Food and Nutrition Service, Broad-Based 

Categorical Eligibility, accessed November 6, 2014, http://www.fns.usda.gov/sites/default/files/snap/BBCE.pdf. See 

also Congressional Research Service, The Supplemental Nutrition Assistance Program (SNAP): Categorical Eligibility, July 

22, 2014, http://nationalaglawcenter.org/wp-content/uploads/assets/crs/R42054.pdf. 

929 Agriculture, 7 U.S.C. §2014(d)(1). 930 Agriculture, 7 U.S.C. § 2014(d)(3). 931 See Agriculture, 7 U.S.C. § 2014. See also U.S. Department of Agriculture, Food and Nutrition Service, Supplemental 

Nutrition Assistance Program, accessed November 6, 2014, http://www.fns.usda.gov/snap/eligibility. 932 Family Subsistence Supplemental Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11, 3 (2008). 

Agriculture, 7 U.S.C. § 2014. Military personnel stationed in foreign countries and applying for FSSA are subject to 

Alaska’s income eligibility standard. Also it should be noted some States have raised their SNAP gross income limit 

above 130 percent of poverty (up to a maximum of 200 percent) through broad-based categorical eligibility. See 
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Gross monthly household income eligibility standards for FY 2015 are summarized in 

Table 18. This table is used to determine household eligibility for both FSSA and SNAP 

(Gate 1). As an example, a Service member with a spouse and three children stationed 

in the lower 48 states must have total gross household income less than $3,024 to 

qualify for FSSA or to pass through the first eligibility gate for SNAP. Exceptions in 

SNAP include households with elderly or disabled members, who automatically bypass 

this gate, and households in states using broad-based categorical eligibility to increase 

this gate to as high as 200 percent of the Federal poverty level. 

Table 18. Gross Monthly Household Income Eligibility Standards 

for FSSA and SNAP (130 percent of poverty level), FY 2015935

Household Size

Lower

48 States* Alaska Hawaii

1 $1,265 $1,580 $1,454

2 $1,705 $2,130 $1,960

3 $2,144 $2,681 $2,466

4 $2,584 $3,231 $2,972

5 $3,024 $3,781 $3,478

6 $3,464 $4,332 $3,984

7 $3,904 $4,882 $4,490

8 $4,344 $5,432 $4,996

Each Additional

Member $440 $551 $506

*Includes District of Columbia, Guam, and the Virgin Islands

FSSA is available to Service members stationed in the United States and overseas.936

SNAP is only available to Service members in the United States, D.C., Guam, and the 

U.S. Virgin Islands.937 As indicated in Table 17, SNAP eligibility also depends on 

meeting requirements for net monthly household income (Gate 2). Net income 

thresholds in SNAP, along with associated standard income deductions, vary by 

household size. 

The maximum FSSA benefit is capped at $1,100 per month.938 FSSA is distributed as a cash 

payment without purchasing restrictions.939 SNAP sets maximum payments based on 

 Agriculture, 7 CFR 273.2(j). See also U.S. Department of Agriculture, Food and Nutrition Service, Characteristics of 

Supplemental Nutrition Assistance Program Households: Fiscal Year 2012, accessed September 19, 2014, 

www.fns.usda.gov/characteristics-supplemental-nutrition-assistance-program-households-fiscal-year-2012.   933 Family Subsistence Supplemental Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11, 

Enclosure 2, 11 (2008). 

934 Pay and Allowances of the Uniformed Services, 37 U.S.C. § 402a(b). See also Family Subsistence Supplemental 

Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11, Enclosure 2, 10 (2008).

935 United States Department of Agriculture FY 2015 Income Eligibility Standards, accessed November 20, 2014, 

http://www.fns.usda.gov/sites/default/files/FY15_Income_Standards.pdf and Information provided by USDA through 

Director of Military Compensation, Office of Personnel and Readiness, e-mail to MCRMC, October 7, 2014. 936 Family Subsistence Supplemental Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11, 4 (2008), 

http://dtic.mil/whs/directives/corres/pdf/134111p.pdf, accessed November 13, 2014. 

937 United States Department of Agriculture, Memorandum on SNAP – Fiscal Year 2015 Cost-of-Living Adjustments dated 

August 1, 2014, accessed November 20, 2014, 

http://www.fns.usda.gov/sites/default/files/snap/SNAP_%20FY_2015_Cost_of_Living_Adjustments.pdf. See also 

Agriculture, 7 U.S.C. § 2014. 

938 Pay and Allowances of the Uniformed Services, 37 U.S.C. § 402a(a). 939 Family Subsistence Supplemental Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11, 3 (2008). 
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household size.940 A household’s monthly benefit level is calculated by subtracting 30 percent of 

the household’s net income from the maximum allotment for the household size as summarized 

in Table 19.941 Monthly SNAP benefits can only be used to purchase nutritional food items for 

the household942 or to purchase plants and seeds to grow food.943 

Table 19. Maximum Monthly Allotments for SNAP, FY 2015944

Household Size Lower  

48 States Alaska* Hawaii Guam Virgin Islands

1 $194 $227/$290/$353 $332 $287 $250

2 $357 $417/$532/$648 $609 $526 $459

3 $511 $598/$762/$928 $872 $753 $657

4 $649 $759/$968/$1,178 $1,107 $957 $835

5 $771 $902/$1,150/$1,399 $1,315 $1,136 $991

6 $925 $1,082/$1,380/$1,679 $1,578 $1,364 $1,189

7 $1,022 $1,196/$1,525/$1,856 $1,744 $1,507 $1,315

8 $1,169 $1,367/$1,743/$2,109 $1,994 $1,723 $1,503

Each Additional Member $146 $171/$218/$265 $249 $215 $188

 *Urban/Rural 1/Rural 2

Service members are also eligible to receive supplemental nutritional assistance 

through USDA’s Women, Infants and Children (WIC) program. WIC provides support 

for low-income; nutritionally at risk pregnant women; breastfeeding women; 

nonbreastfeeding, postpartum women; infants until they reach 1-year of age, and 

children until they reach their fifth birthday.945 Participants receive supplemental 

nutritious foods, nutrition education, and counseling, as well as screening and 

referrals to other welfare, health, and social services.946 There are USDA-sponsored 

WIC program offices on a number of military installations that provide support to 

Service member families as well as others with installation access.947 The overseas 

WIC program for Service members is provided by DoD,948 and includes support for 

Service members, civilian employees, DoD contractors and family members.949

Although Service members may receive WIC support in addition to SNAP or FSSA, 

 

940 Information provided by USDA through Director of Military Compensation, Office of Personnel and Readiness, e-mail 

to MCRMC, October 7, 2014. See also Department of Agriculture, Food and Nutrition Service, Supplemental Nutrition 

Assistance Program, accessed November 6, 2014, http://www.fns.usda.gov/snap/eligibility. 941 Information provided by USDA through Director of Military Compensation, Office of Personnel and Readiness, e-mail 

to MCRMC, October 7, 2014. See also Department of Agriculture, Food and Nutrition Service, Supplemental Nutrition 

Assistance Program, accessed November 6, 2014, http://www.fns.usda.gov/snap/eligibility. Agriculture, 7 U.S.C. 

§ 2017.

942 See U.S. Department of Agriculture, Food and Nutrition Service, Supplemental Nutrition Assistance Program, 

accessed November 6, 2014, http://www.fns.usda.gov/snap/eligibility. 943 Agriculture, 7 U.S.C. § 2012(k). 944 United States Department of Agriculture FY 2015 Allotments and Deduction Information, accessed November 20, 

2014, http://www.fns.usda.gov/sites/default/files/FY15_Allot_Deduct.pdf. See also, United States Department of 

Agriculture FY 2015 Maximum Allotment Amounts for Alaska, Hawaii, Guam and U.S. Virgin Islands, accessed 

November 20, 2014, http://www.fns.usda.gov/sites/default/files/FY15_Allot_Deduct_AKHIGUVI.pdf. 

945 The Public Health and Welfare, 42 U.S.C. § 1786. “About WIC - WIC at a Glance,” United States Department of 

Agriculture, http://www.fns.usda.gov/wic/about-wic-wic-glance, accessed November 13, 2014. 

946 Ibid. 947 “Special Programs: Women, Infants, and Children Overseas Program,” Defense Health Agency, accessed January 12, 

2015, http://www.tricare.mil.wic. 

948 Ibid. 949 Ibid. 
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increased BAS payments associated with FSSA may raise household income above the 

WIC threshold. 

For additional information on FSSA, please see the Report of the Military Compensation 

and Retirement Modernization Commission: Interim Report (Section 5.1.5). 

Findings: 

In many circumstances, it is easier to qualify for SNAP than it is for FSSA. FSSA 

provides enough supplementary benefits to raise Service member’s household income 

to 130 percent of the Federal poverty level. Most states, however, have increased the 

gross income eligibility threshold above this 130 percent standard.950 For example, 

residents of Texas pass the first eligibility gate of SNAP if their monthly household 

gross income is below 165 percent of the Federal poverty line.951 Of the 8,486 FSSA 

applications nationwide in FY 2013, 96.6 percent were denied.952 Yet because of 

differences in the evaluation of gross income and SNAP deductions associated with net 

income, Service members who are denied FSSA may qualify for SNAP.953 

Furthermore, SNAP may provide more benefits to Service members than FSSA. FSSA 

payments are enough to fill the gap between Service members’ total household income 

and 130 percent of poverty level. The lower a Service member’s income, the more 

additional pay they receive, up to the $1,100 per month cap. SNAP pays a set amount 

for a given household size, subtracting 30 percent of net income. As a result, for a 

given household size, Service members with very low income levels can receive more 

money under FSSA and those with a higher income, just low enough to qualify, can 

receive more money from SNAP. Table 20 provides an example of FSSA and SNAP 

benefits that would be received by an E4 with 2 years of service with a spouse and 

four children located at Fort Leonard Wood, Missouri. 

 

950 See Agriculture, 7 CFR 273.2(j). See also Department of Agriculture, Food and Nutrition Service, Broad-Based 

Categorical Eligibility, accessed November 6, 2014, http://www.fns.usda.gov/sites/default/files/snap/BBCE.pdf. See 

also Congressional Research Service report on The Supplemental Nutrition Assistance Program (SNAP): Categorical 

Eligibility, July 22, 2014, http://nationalaglawcenter.org/wp-content/uploads/assets/crs/R42054.pdf. 951 See Agriculture, 7 CFR 273.2(j). See also Department of Agriculture, Food and Nutrition Service, Broad-Based 

Categorical Eligibility, accessed November 6, 2014, http://www.fns.usda.gov/sites/default/files/snap/BBCE.pdf. See 

also Congressional Research Service report on The Supplemental Nutrition Assistance Program (SNAP): Categorical 

Eligibility, July 22, 2014, http://nationalaglawcenter.org/wp-content/uploads/assets/crs/R42054.pdf. 952 Data supplied by Director of Military Compensation, Office of Personnel and Readiness, e-mail to MCRMC, 

August 13, 2014. It is important to note a Service member can apply multiple times for FSSA; therefore, this number 

does not directly correlate to the total number of households who applied for the benefit.

953 Information provided by USDA through Director of Military Compensation, Office of Personnel and Readiness, e-mail 

to MCRMC, October 7, 2014. See also Agriculture, 7 U.S.C. § 2014. See also Family Subsistence Supplemental 

Allowance (FSSA) Program, Instructions and Guidance, DoDI 1341.11 (2008). 
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Table 20. Example of Financial Support under FSSA and SNAP 

FSSA SNAP*

130% of Poverty                           $3,464.00

‐Income (Basic Pay/BAH/BAS)   $3,386.35

Monthly Increase in BAS                 $77.65

Income (Basic Pay/BAH/BAS)          $3,386.35

‐20% Deduction                                     $677.27

‐Standard Deduction954                        $221.00

Net Income                                          $2,488.08

Maximum SNAP Allotment                 $925.00

‐30% of Net Income                              $746.42

Monthly Allotment on EBT Card      $178.58

                 *130 percent of poverty test met ($3,464); 100 percent of poverty test met ($2,665); assumes only guaranteed net income deductions

Military recipients of SNAP have no obligation to inform or obtain permission from 

their Military Service to utilize these benefits unless they are already receiving 

FSSA.955 Service members applying for FSSA support may be required to work with 

their local financial counselors and chain of command.956 This requirement may 

stigmatize Service members. Examples of this perspective can be seen in feedback 

from Service members in a 2014 joint survey by the advocacy group Esposas Militares 

Hispanas USA Armed Forces and the Military Spouse Advocacy Network.957 The goal of 

the survey was to get information on FSSA awareness and utilization. Feedback 

included these responses: 

We looked into FSSA when my husband was E3, but was told by his COC 

that he shouldn’t apply for it because his basic pay “should” have been 

enough.958

I think it’s more embarrassing than hard to get the signature which is why 

we decided to just bear with it and see what we could eliminate from our 

expenses959

For these reasons, many more Service members enroll in SNAP than in FSSA. The 

FSSA program has very limited participation; only 285 Service members received FSSA 

benefits in FY 2013.960 Meanwhile, USDA estimates that between 2,000 and 22,000 AC 

Service members received SNAP benefits in FY 2012.961 The lower estimate is based on 

data from 50,000 random households provided by states to USDA only for the purpose 

of auditing SNAP payment verification, not for the purpose of estimating active-duty 

 

954 Department of Agriculture, FY 2015 Allotments and Deduction Information, accessed November 20, 2014, 

http://www.fns.usda.gov/sites/default/files/FY15_Allot_Deduct.pdf. 955 Family Subsistence Supplemental Allowance (FSSA) Program, DoDI 1341.11 (2008). 956 Family Subsistence Supplemental Allowance (FSSA) Program, DoDI 1341.11, 4 (2008). For example, the Army, 

which has 99 percent of FSSA participants, requires applicants to receive military financial counseling before 

submitting an FSSA application through the chain of command. See ALARACT Family Subsistence Supplemental 

Allowance, dated January 29, 2010, 

https://www.dmdc.osd.mil/fssa/consent?continueToUrl=%2Ffssa%2Fgetfile.do%3FfileNm%3DArmy%2520ALARACT%

2520FSSA%2520Guidance.pdf%26filePathNm%3Dresources%26appId%3D496%26app_key_id%3Dh20n283kfmw2a3.

957 Information supplied by Esposas Militares Hispanas USA Armed Forces, e-mails to MCRMC, October 3, 2014. 958 Information supplied by Esposas Militares Hispanas USA Armed Forces, e-mail to MCRMC, August 19, 2014. 959 Ibid. 960 Data supplied by Director of Military Compensation, Office of Personnel and Readiness, e-mail to MCRMC, 

August 13, 2014.

961 Department of Agriculture, Food and Nutrition Service, Quick Facts: SNAP Participation Among Members of the 

Armed Forces, February 2014, provided by USDA FNS Office of Policy Support, e-mail to MCRMC, June 25, 2014. 
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households using SNAP.962 The higher estimate is based on the U.S. Census Bureau’s 

American Community Survey data, which requires randomly selected households to 

indicate if any person in the household is in the military and if SNAP benefits were 

received during the last 12 months.963 

Estimates of SNAP usage by military members vary widely because states that 

administer these benefits964 are not required to collect data on the actual number of 

active-duty Service members in households receiving SNAP.965 If a state does ask 

whether the applicant is a Service member, it does not always receive a clear 

indication as to whether the member is on active duty or in the Reserve Component. 

During town halls and other meetings, there was concern expressed over Service 

members’ continued reliance on supplementary benefits, whether FSSA or SNAP. The 

Commission received numerous website and survey comments related to “food 

stamps” highlighting the perception that many Service member households rely on 

SNAP:

A majority of young enlisted military families are currently being paid so 

little that they qualify for Government assistance programs such as WIC 

and food stamps.966

Active-duty enlisted military members are often receiving food stamps in 

order for their families to survive.967

Many members of our armed services will need to use food stamps.968

We still have junior enlisted and officers who are able to get food 

stamps.969 

E1s with a spouse and children in the military can’t afford to feed their 

own family without food stamps.970

A lot of the military are eligible for food stamps, and other low income 

programs.971

The benefits for the family are extremely important to enlisted personnel 

retention. When the service member is deployed he doesn’t want to know 

his wife is scrapping together money go shopping for their kids.972 

 

962 U.S. Department of Agriculture, Food and Nutrition Service, Characteristics of Supplemental Nutrition Assistance 

Program Households: Fiscal Year 2012, accessed September 19, 2014, https://www.fns.usda.gov/characteristicssupplemental-nutrition-assistance-program-households-fiscal-year-2012. 963 See U.S. Department of Agriculture, Food and Nutrition Service, Quick Facts: SNAP Participation Among Members of 

the Armed Forces, February 2014, provided by USDA FNS Office of Policy Support, e-mail to MCRMC, June 25, 2014. 

See also United States Census Bureau, American Community Survey: Methodology, accessed January 7, 2015, 

http://www.census.gov/acs/www/methodology/methodology_main/. 

964 Agriculture, 7 U.S.C. § 2013. 965 Information supplied by U.S. Department of Agriculture, Food and Nutrition Service officials, meeting with MCRMC, 

September 5, 2014. 

966 MCRMC letterwriter, comment form submitted via MCRMC Website, June 8, 2014. 967 MCRMC letterwriter, comment form submitted via MCRMC Website, July 18, 2014. 968 MCRMC letterwriter, comment form submitted via MCRMC Website, May 8, 2014. 969 MCRMC letterwriter, comment form submitted via MCRMC Website, April 7, 2014. 970 MCRMC letterwriter, comment form submitted via MCRMC Website, December 3, 2013. 971 MCRMC letterwriter, comment form submitted via MCRMC Website, November 28, 2013. 
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Table 21 presents the minimum number of people that Service members would need in their 

households to become eligible for FSSA or SNAP, based on the 130 percent gross income 

threshold (Gate 1). In these estimates, gross monthly income includes basic pay, Basic 

Allowance for Housing (BAH), and BAS.973 This table shows that households need at least six 

members for Service members to be eligible for either program in the lower 48 states. 

Households can be smaller in Alaska and Hawaii because of increased costs of living. 

Table 21. Minimum Household Size Requirements for a Service 

Member to Qualify for FSSA or SNAP. 

   Minimum  Household Size**

Rank Basic Pay* Average BAH BAS Total U.S. Alaska Hawaii

E1 $1531.50 $1295.00 $357.55 $3184.05 6 4 5

E2 $1716.90 $1295.00 $357.55 $3369.45 6 5 5

E3 $1805.40 $1295.00 $357.55 $3457.95 6 5 5

E4 $1999.50 $1295.00 $357.55 $3652.05 7 5 6

E5 $2181.00 $1408.00 $357.55 $3946.55 8 6 6

O1 $2905.20 $1431.00 $246.24 $4582.44 N/A 7 8

O2 $3347.10 $1614.00 $246.24 $5207.34 N/A 8 N/A

O3 $3873.90 $1831.00 $246.24 $5951.14 N/A N/A N/A

           *Assumes minimum years of service

           **For SNAP, assumes no households in states using broad‐based categorical eligibility or with elderly or disabled members

Conclusions: 

FSSA is duplicative and, in many cases, less generous than SNAP, which is a much 

broader Federal program that successfully addresses the same goal of nutritional 

assistance. In addition, stigmas associated with FSSA may impair the quality of life 

and careers of Service members and their dependents. For these reasons, FSSA 

should be sunset in places where SNAP or similar programs974 are available. 

SNAP administrators should capture information to track the number of active-duty 

Service members who rely upon supplemental nutritional benefits to better inform 

military compensation decisions. 

Recommendations: 

 The FSSA program should be retained for Service members in overseas 

locations where no SNAP assistance is available. 

 The FSSA program should be sunset in the United States, Puerto Rico, Guam, 

and other U.S. territories where SNAP or similar programs exist, thereby 

reducing the administrative costs of a duplicative program. 

 972 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 973 Other household income, such as other allowances, special pays, or income from other household members is not 

included. 

974 An example of a similar program to SNAP is the National Assistance Block Grants program, which provides 

nutrition assistance similar to SNAP benefits to eligible residents of Puerto Rico, American Samoa, and the 

Commonwealth of the Northern Mariana Islands. These jurisdictions do not have SNAP programs. See Agriculture, 

7 U.S.C. § 2028. See also United States Department of Agriculture, Food and Nutrition Service, Nutrition Assistance 

Block Grants: Quick Facts, accessed January 7, 2015, 

http://www.fns.usda.gov/sites/default/files/NABGP_Quick_Facts.pdf. 
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 Based on the unavailability of data on Service member households using SNAP, 

states and counties should provide this data to DoD on a regular basis. DoD 

should analyze the data to determine if there are systemic issues related to 

location or pay that should be rectified to provide for adequate nutrition for 

Service member households. 

Implementation: 

 37 U.S.C. § 402a governs the FSSA program. The section should be amended to 

restrict eligibility only to Service member households stationed outside the 

United States, following a 2-year adjustment period to ensure eligible Service 

members have sufficient time to apply for replacement benefits. 

 7 U.S.C. Chapter 51 governs the SNAP program, including the administrative 

and data-sharing provisions of the program. 7 U.S.C. § 2020 should be 

amended to permit states to disclose information, upon request, to DoD on the 

number of households in the state which receive SNAP benefits and contain one 

or more active-duty or RC Service member. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. 
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Recommendation 14: Expand Space-Available travel to more 

dependents of Service members by allowing travel by 

dependents of Service members deployed for 30 days or more. 

Background: 

The Secretary of Defense is authorized to provide air travel for Service members, 

certain retirees, and their family members on a space-available basis.975 Space 

Available (Space-A) travel regulations provide eligible passengers access to seats on 

military air transport flights that would otherwise be empty. Unused seats on DoDowned or controlled aircraft are only made available to Space-A travelers once spacerequired (duty) passengers and cargo have been accommodated.976 

The program classifies passengers into Categories I through VI, by priority of travel, 

and potential passengers are processed in priority order.977 Current DoD policy 

permits unaccompanied dependents to use Category IV Space-A travel, but only when 

the dependent’s sponsor is serving a deployment of at least 120 days.978 

For additional information on Space-A travel, please see the Report of the Military 

Compensation and Retirement Modernization Commission: Interim Report (Section 

5.1.12). 

Findings: 

Issues of expanding Space-A eligibility for dependents were first raised during a Town 

Hall at Joint Base Lewis-McChord.979 The Commission heard accounts of how 

important Space-A travel benefits can be to Service families, improving access to 

extended family and other support during periods of deployment.980 When available, 

this benefit was able to improve Service families’ quality of life by reducing the 

psychological and financial stresses placed on them by the military obligations of their 

deployed Service member.981 

In recent years, frequent deployments have been a reality for many Service members. 

Since September 11, 2001, 66 percent of Service members have deployed.982 The 

average Service member deployed 2.6 times, with many specialties deploying more 

often.983 For example, special operations Service members are likely to be sent on 

frequent, 30- to 60-day deployments.984 A 2012 analysis of 678,382 active-duty 

personnel from 2001 to 2006 showed that many deployments as part of Operation 

ENDURING FREEDOM (OEF) and Operation IRAQI FREEDOM (OIF) were for fewer 

 

975 Armed Forces, 10 U.S.C. § 2641b. 976 Armed Forces, 10 U.S.C. § 2641b. Air Transportation Eligibility, DoD 4515.13-R (1994). 977 Air Transportation Eligibility, DoD 4515.13-R (1994). 978 Department of Defense, Policy Memorandum on Space Available (Space-A) Travel for Dependents of Deployed Military 

Members (Dec. 6, 2007). Air Transportation Eligibility, DoD 4515.13-R (1994). 979 Public testimony, MCRMC Town Hall, Joint Base Lewis-McChord, Seattle, WA, December 12, 2013. 980 Public testimony, MCRMC Town Hall, Joint Base Lewis-McChord, Seattle, WA, December 12, 2013. 981 Public testimony, MCRMC Town Hall, Joint Base Lewis-McChord, Seattle, WA, December 12, 2013. 982 Department of Defense, February 2012 Status of Forces Survey of Active Duty Members, 146. 983 Department of Defense, February 2012 Status of Forces Survey of Active Duty Members, 148. 984 Military Family Advisory Network (MFAN), meeting with MCRMC, Alexandria VA, October 25, 2014. 
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than 120 days making dependents of these deployed Service members ineligible for 

Space-A travel.985

Deployments are a well-documented period of increased stress for military families.986

In the 2014 Blue Star Families Military Family Lifestyle Survey, deployments and 

separations were identified as top causes of stress by 69 percent of spouses and 

60 percent of Service members.987 A 2010 study of more than 250,000 spouses of 

active-duty Army members determined that deployments to OEF/OIF were associated 

with elevated rates of treatment for, and diagnoses of, depression, sleep problems, 

anxiety disorders, acute stress reactions, and adjustment disorders.988 Multiple 

studies have shown similar effects on military children.989

Conclusions: 

The increased stress experienced by families of deployed Service members can 

sometimes be reduced through access to Space-A travel benefits. Current policy allows 

unaccompanied Space-A travel for military dependents of Service members deployed 

for 120 days or more, under priority category IV. Shortening the deployment length 

needed to qualify for this benefit from 120 days to 30 days would expand availability 

to this group of people who experience challenges resulting from the deployment of a 

Service member. 

Recommendations: 

 DoD should allow unaccompanied dependents of Service members deployed for 

30 days or more to use Space-A travel, under priority category IV. 

Implementation: 

 10 U.S.C. § 2641b governs Space-A travel on DoD aircraft. No change to this 

governing statute is recommended. 

 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. Such as the following: 

- DoD should amend the Air Transportation Eligibility Regulation, DoD 

4515.13-R (1994) (as modified by the December 6, 2007, memorandum of 

 

985 Yu-Chen Shen, Jeremy Arkes, Thomas V. Williams, “Effects of Iraq/Afghanistan Deployments on Major Depression 

and Substance Use Disorder: Analysis of Active Duty Personnel in the US Military,” American Journal of Public Health, 

102, Suppl. 1 (2012): S80-S87, abstract accessed November 13, 2014, 

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3496458. (The researchers used data obtained from DoD’s Contingent 

Tracking System. MCRMC requests to independently obtain Contingent Tracking System data for confirmation were 

unsuccessful.) 

986 Department of Defense, Report on the Impacts of Deployment of Deployed Members of the Armed Forces on Their 

Dependent Children, October 2010, 1. Blue Star Families, 2014 Military Family Lifestyle Survey, Comprehensive Report,

78, accessed December 14, 2014, 

https://www.bluestarfam.org/sites/default/files/media/stuff/bsf_report_comprehensive_reportfinal_single_pages.pdf 

987 Blue Star Families, 2014 Military Family Lifestyle Survey, Comprehensive Report, 78, accessed December 14, 2014, 

https://www.bluestarfam.org/sites/default/files/media/stuff/bsf_report_comprehensive_reportfinal_single_pages.pdf. 988 Alyssa J. Mansfield, Jay S. Kaufman, Stephen W. Marshall, Bradley N. Gaynes, Joseph P. Morrisey, Charles C. 

Engel, “Deployment and the use of mental health services among U.S. Army wives,” New England Journal of Medicine, 

362, no. 2, (2010): 101-109. 

989 See Abigail H. Gewirtz, Christopher R. Erbes, Melissa A. Polusny, Marion S. Forgatch, David S. DeGarmo, “Helping 

Military Families Through the Deployment Process: Strategies to Support Parenting,” Professional Psychology, 42, 

no. 1, (2011): 56-62. 
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the Deputy Undersecretary of Defense for Logistics and Materiel Readiness, 

authorizing Space-A travel by spouses and dependent children of Service 

members deployed for 120 consecutive days or more), to add “dependents of 

Service members deployed for at least 30 consecutive days” as Item 23, 

Table C6.T1. 
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Recommendation 15: Measure how the challenges of military 

life affect children’s school work by implementing a 

national military dependent student identifier. 

Background: 

Most elementary and secondary school student registration processes and associated 

data systems in the Nation do not include an indicator of students who have a military 

affiliation.990 For example, the Elementary and Secondary Education Act (ESEA) 

currently recognizes four subgroups of students: economically disadvantaged 

students, students from major racial and ethnic groups, students with disabilities, 

and students with limited English proficiency.991 The U.S. Department of Education’s 

Impact Aid program does collect data on military dependent students because school 

districts applying for Impact Aid collect and report their numbers of militaryconnected students.992 But not all schools with military dependent students apply for 

Impact Aid,993 and Impact Aid data is not included in or correlated to the ESEA 

academic performance and attendance data submitted for national-level reporting.994

As a result, national reports on student performance cannot reliably differentiate 

military dependent students from all others. 

Military dependent student identifiers have been implemented or directed in at least 

12 states.995 Alaska,996 Arkansas,997 Illinois,998 Indiana,999 Nevada,1000 North 

Carolina,1001 Tennessee,1002 and Texas1003 have enacted legislation requiring local 

education authorities to identify and report on military-connected students. The state 

education departments in Florida,1004 Maine,1005 Michigan,1006 and South Carolina1007

have adopted identifiers for military-connected students independent of legislative 

requirements. 

Even in the states that have implemented a military dependent student identifier, 

there are inconsistencies that affect the quality of the data and associated reports. 

 

990 “Issue 9: Assign an identifier for military children in education data systems,” USA4Military Families Initiative, 

accessed September 17, 2014, http://www.usa4militaryfamilies.dod.mil/MOS/f?p=USA4:ISSUE:0::::P2_ISSUE:9. 991 Education, 20 U.S.C. § 6311. 992 Education, 20 U.S.C. § 7703b. 993 Of the more than 14,000 school districts nationwide, 902 received Education Impact Aid payments for federally 

connected children in fiscal year 2009. Government Accountability Office, Education of Military Dependent Students, 

Better Information Needed to Assess Student Performance, March 2011, GAO-11-231, 5. 994 “Issue 9: Assign an identifier for military children in education data systems,” USA4Military Families Initiative, 

accessed September 17, 2014, http://www.usa4militaryfamilies.dod.mil/MOS/f?p=USA4:ISSUE:0::::P2_ISSUE:9. 995 Jennifer Dounay Zinth, Education Commission of the States, ECS Analysis of Military Student Identifier Policies, 

August 2014. 

996 Alaska Stat. § 14.03.120(d) (2014), as amended. 997 Ark. Code Ann. § 6-18-107 (2014). 998 105 Ill. Comp. Stat. 5/22-70 (2014). 999 Ind. Code § 20-19-3-9.4 (2014), as amended. 1000 Nev. Rev. Stat. § 386.650(b)(3) (2013), as amended. 1001 N.C. Gen Stat. § 115c-12(18)(f) (2014), as amended. 1002 Tenn. Code Ann. § 49-6-5101(b) (2014). 1003 Tex. Education Code Ann. § 25.006(c) (2013). 1004 See Florida Department of Education, DOE Information Database Requirements Vol. 1 (2013). 1005 See “Military Families,” Maine Department of Education, accessed October 7, 2014, 

http://maine.gov/doe/special/military.html. 

1006 See Michigan Department of Education, Reporting Military-Connected Children, accessed September 25, 2014, 

http://www.michigan.gov/documents/mde/Mil_children_470904_7.pdf. 

1007 See South Carolina State Department of Education Office of Research and Data Analysis, Power School South 

Carolina State Reporting Specific Fields Manual, 69, accessed September 25, 2014. 
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One example is the definition of a military dependent student. In Alaska,1008

Illinois,1009 Michigan,1010 Nevada,1011 South Carolina,1012 and Tennessee,1013 military 

dependent students are defined as those who have either a parent or guardian who is 

military-connected. Indiana1014 and Maine1015 simply specify a parent and do not 

mention guardians. The laws of the remaining five states have definitions that vary 

greatly. Arkansas includes children who reside in the household of a person on active 

duty or in the Reserve Component (RC).1016 North Carolina counts any student living 

in the same household with an active-duty or RC Service member.1017 Florida refers to 

the “child of a military family” and includes prekindergartners in data collection.1018

Texas requires that a student be a “dependent” of a person in the military.1019 

Findings: 

A 2011 GAO study found, “There are no national public data on military dependent 

students’ academic progress, attendance, or long-term outcomes, such as college 

attendance or workplace readiness.”1020 This situation is particularly attributable to 

the absence of a consistently implemented indicator across all states. The Commission 

agrees with the GAO that, “without more specific data, educators, base commanders, 

and community leaders are not able to provide military dependent students with 

appropriate resources because they do not have information on their specific 

educational needs or the effectiveness of the schools and programs serving them.”1021 

Military dependent students are often subjected to additional challenges such as 

family separation and more frequent moves.1022 A 2010 study by researchers at Johns 

Hopkins University examined mobility among military families and determined, 

“Approximately 20 percent of American families move annually, and individuals and 

families in the military move even more frequently, with approximately 33% relocating 

each year.”1023 In a survey of local educational activities conducted in 2010, the GAO 

reported, “Officials at three-quarters of the school districts responding to the survey 

reported that issues associated with military dependent students’ frequent moves to 

 

1008 Alaska Stat. § 14.03.120(d) (2014), as amended. 1009 105 Ill. Comp. Stat. 5/22-70 (2014). 1010 Michigan’s data collection is not required by statute. Instead, the policy was created by the Michigan Department of 

Education’s Office of School Support Services. See Michigan Department of Education, Reporting Military-Connected 

Children, accessed September 25, 2014, http://www.michigan.gov/documents/mde/Mil_children_470904_7.pdf. 1011 Nev. Rev. Stat. § 386.650(b)(3) (2013), as amended. 1012 South Carolina’s data collection is not required by statute. The policy was created by the South Carolina 

Department of Education alongside the reporting requirements imposed by ESEA. See South Carolina State 

Department of Education Office of Research and Data Analysis, Power School South Carolina State Reporting Specific 

Fields Manual, 69. 1013 Tenn. Code Ann. § 49-6-5101(b) (2014). 1014 Ind. Code § 20-19-3-9.4 (2014), as amended. 1015 Maine’s data collection is not required by statute. Instead, Maine’s Department of Education has enacted policies 

conforming to the Military Interstate Children’s Compact Commission, of which Maine is a member, though Maine’s 

legislature has not yet formally enacted laws requiring compliance. See “Military Families,” Maine Department of 

Education, accessed October 7, 2014, http://maine.gov/doe/special/military.html. 1016 Ark. Code Ann. § 6-18-107 (2014). 1017 N.C. Gen Stat. § 115c-12(18)(f) (2014), as amended. 1018 Florida’s data collection is not required by statute. The policy was enacted by the Florida Department of Education 

in response to Florida’s joining the Interstate Compact on Educational Opportunity for Military Children. See Florida 

Department of Education, DOE Information Database Requirements Vol. 1 (2013). 1019 Tex. Education Code Ann. § 25.006(c) (2013). 1020 Government Accountability Office, Education of Military Dependent Students, Better Information Needed to Assess 

Student Performance, March 2011, GAO-11-231, 16. 1021 Ibid, 17. 1022 Catherine P. Bradshaw, May Sudhinaraset, Kristin Mmari, Robert W. Blum, “School Transitions Among Military 

Adolescents: A Qualitative Study of Stress Appraisal and Coping,” School Psychology Review, 39, no. 1, (2010): 84-105. 1023 Ibid. 
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new schools were moderately, very, or extremely challenging. Mobility increased 

academic needs due to differences in state and district curricula, lack of 

connectedness with school, and behavioral issues in the classroom. The largest 

challenge reported by school districts in our survey was the increased academic need 

of children in military families who transfer to a school with different curricula or 

academic standards than those in their previous school and thus need additional 

support.”1024 Figure 23 summarizes challenges encountered in the education of 

military dependent students as reported in the GAO survey. 

Figure 23. School District-Reported Challenges in Educating 

Military Dependent Students 

Studies have shown that these children are more likely to experience difficulties and 

anxieties that can affect how they perform in the classroom.1025 A study in the journal 

Social Forces found “[h]ighly mobile students tend to report having fewer close friends 

and are more likely to be on the periphery of peer social networks.”1026 The National 

Association of School Psychologists published a study titled “School Transitions 

Among Military Adolescents: A Qualitative Study of Stress Appraisal and Coping,” 

which found, “One-third of school-age military children show psychosocial behaviors 

 

1024 Government Accountability Office, Education of Military Dependent Students, Better Information Needed to Assess 

Student Performance, March 2011, GAO-11-231, 18. 1025 Catherine P. Bradshaw, May Sudhinaraset, Kristin Mmari, Robert W. Blum, “School Transitions Among Military 

Adolescents: A Qualitative Study of Stress Appraisal and Coping,” School Psychology Review, 39, No. 1, (2010): 84-105. 

See also Eric M. Flake, Beth Ellen Davis, Patti L. Johnson, Laura S. Middleton, “The Psychosocial Effects of 

Deployment on Military Children,” Journal of Developmental & Behavioral Pediatrics, 30, no. 4 (2009): 271-278, 

abstract accessed November 10, 2014, 

http://journals.lww.com/jrnldbp/Abstract/2009/08000/The_Psychosocial_Effects_of_Deployment_on_Military.1.aspx. 1026 Dana L. Haynie, Scott J. South, “Residential Mobility and Adolescent Violence,” Social Forces, 84, no. 1, (2005): 

363-376, accessed November 10, 2014, http://sf.oxfordjournals.org/content/84/1/361. 
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such as being anxious, worrying often, and crying more frequently.”1027 Adolescents 

who experience school transitions may be particularly vulnerable to experiencing 

adjustment problems (e.g., academic failure, health risk behaviors, drug use, and 

complaints about body-related illnesses) following a stressful family event such as 

relocation.1028 

Implementation of an identifier would not involve the creation of new information 

systems. It would merely require the modification of existing processes and systems. 

According to the Military Child Education Coalition, “97 percent of the school districts 

(with military students) have existing information systems that could be modified to 

include a military identifier.”1029

Conclusions: 

Consistent, national-level reporting on the performance and attendance of military 

dependent students is currently not available. Doing this inhibits efforts to better 

understand and support these children. Adding a military dependent student identifier 

to the ESEA datasets submitted annually to the National Center for Educational 

Statistics would provide the basic information needed to justify, inform, develop, 

implement, and evaluate policies and programs that specifically address and support 

military dependent students based on their increased risk of experiencing academic 

and behavioral challenges at school. National implementation standards are needed to 

ensure that data are consistent from one location to another. This identifier should be 

implemented in a way that avoids identification of individual students in aggregated 

reporting or tracking of individuals from one location to another. 

Recommendations: 

 A national military dependent student identifier should be implemented by 

requiring school data systems and processes that serve as sources for ESEA 

reporting to identify students who have parents or guardians who are activeduty members of the Uniformed Services. This identifier would enable 

consistent reporting on the attendance and academic performance of military 

dependent students across the United States, a capability that is not available 

today. This identifier should create a report-only subgroup in ESEA data sets 

and should also identify the branch(es) of the Uniformed Services for the 

active-duty parent(s) or guardian(s) of the military dependent student. 

Implementation: 

 20 U.S.C. § 6311 should be amended to add students with at least one parent 

or guardian who is an active-duty member of the Armed Services (further 

disaggregated by branch of Service) to the categories of data required for 

reporting under the Elementary and Secondary Education Act. 

 

1027 Catherine P. Bradshaw, May Sudhinaraset, Kristin Mmari, Robert W. Blum, “School Transitions Among Military 

Adolescents: A Qualitative Study of Stress Appraisal and Coping,” School Psychology Review, 39, no. 1, (2010): 84-105. 

See also Eric M. Flake, Beth Ellen Davis, Patti L. Johnson, Laura S. Middleton, “The Psychosocial Effects of 

Deployment on Military Children,” Journal of Developmental & Behavioral Pediatrics, 30, no. 4 (2009): 271-278, 

abstract accessed November 10, 2014, 

http://journals.lww.com/jrnldbp/Abstract/2009/08000/The_Psychosocial_Effects_of_Deployment_on_Military.1.aspx. 1028 Hamilton I. McCubbin, Richard H. Needle, Marc Wilson, “Adolescent Health Risk Behaviors: Family Stress and 

Adolescent Coping as Critical Factors,” Family Relations, 34, no. 1, (1985): 51-62, accessed November 10, 2014, 

http://www.jstor.org/discover/10.2307/583757?uid=3739584&uid=2&uid=4&uid=3739256&sid=21104478986301. 1029 “Issue 9: Assign an identifier for military children in education data systems,” USA4Military Families Initiative, 

accessed September 17, 2014, 

http://www.usa4militaryfamilies.dod.mil/MOS/f?p=USA4:ISSUE:0::::P2_ISSUE,P2_STATE:9,DC. 
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 Any other regulations (including the Code of Federal Regulations, if applicable), 

instructions, directives, or internal policies necessary to conform to the 

recommendation described above should be reissued, updated, amended, 

retracted, or otherwise changed as needed. 
 PAGE 197 

4. THE COMMISSION’S 

PROCESS 

With the Congress’ mandates and the President’s principles as keystones, the 

Commission has spent its time with a singular focus—developing a modern benefits 

package that is valued by, and protects the quality of life of, the 21st century force. 

The Commission’s process was divided into three phases of work: the formation of the 

Commission, information gathering and data analysis, and deliberation and 

development of the Commission’s recommendations. The results of our work are 

reflected in the June 2014 Report of the Military Compensation and Retirement 

Modernization Commission: Interim Report and in this final report. 

COMMISSION FORMATION

The Military Compensation and Retirement Modernization Commission was 

established by the Congress in the National Defense Authorization Act for FY 2013.1

The statute designated a nine-person Commission, with the Commission Chairman 

appointed by the President of the United States and two Commissioners each 

appointed by the majority and minority leadership of both chambers of the Congress. 

In May 2013, President Barack Obama appointed the Hon. Alphonso Maldon, Jr., 

former Assistant Secretary of Defense for Force Management and Policy and a retired 

U.S. Army officer, to chair the Commission. Congressional leaders appointed the Hon. 

Larry L. Pressler, the Hon. Stephen E. Buyer, the Hon. Dov S. Zakheim, Mr. Michael 

R. Higgins, General Peter W. Chiarelli, USA (ret.), Admiral Edmund P. Giambastiani, 

Jr., USN (ret.), the Hon. J. Robert (Bob) Kerrey, and the Hon. Christopher P. Carney. 

These Commissioners represented extensive depth and breadth of relevant experience, 

including former Senators, former Members of the House of Representatives, former 

Congressional Staff, Presidential appointees, and career military officers. The 

Commissioners had more than 14 decades of military service among them. They also 

collectively had more than 10 decades of military, personnel policy, budget, and 

legislative experience. 

The Commission’s staff of 50 personnel included Uniformed Services members, civil 

servants, and contractors, including eight current Active Component and Reserve 

Component Service members and nine military retirees. Five staff members were 

nonretired veterans of military service, and 13 were current or former military 

dependents. All Military Services except the Coast Guard were represented on staff. 

Nearly every program examined by the Commission was part of the personal 

experience of the Commission’s staff and those closest to them. 

The Commission’s establishing documents are found in Appendix A, “Guiding and 

Enabling Documents.” Additional information on the Commissioners, as well as the 

composition of the Commission staff is found in Appendix B, “MCRMC Composition.” 

 

1 National Defense Authorization Act for FY 2013, Pub. L. No. 112-239, 126 Stat. 1632, 1787 (2013) (as amended by 

National Defense Authorization Act for FY 2014, Pub. L. No. 113-66, § 1095(b), 127 Stat. 672, 879 (2013)). 
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PRINCIPLES FOR MODERNIZING THE MILITARY COMPENSATION AND 

RETIREMENT SYSTEMS

Sections 671-680 of the National Defense Authorization Act for FY 2013 establish the 

Military Compensation and Retirement Modernization Commission. Section 674(c) 

requires the President to provide the Commission and the Congress with principles to 

guide the Commission’s review and recommendations. 

For over a decade, our men and women in uniform have participated in one of the 

most extraordinary chapters of service in the history of our Nation. They have served 

multiple tours of duty in distant, different, and difficult places. They come from all 

walks of life and all stations; Active, Reserve, and National Guard; serving together to 

protect our people, while giving others a chance to lead a better life. We owe each and 

every one of them and their families a tremendous debt of gratitude for their sacrifice, 

service, and patriotism. 

Our Nation requires a strong military for our security and for the defense of American 

values and principles abroad. While we have successfully transitioned from a 

conscripted force to an All-Volunteer Force, sustaining this force requires responsive 

and prudent management, especially given the fiscal challenges we face as a Nation. 

In conducting the Commission’s review and in developing recommendations, you 

should ensure that the Commission examines all areas outlined in section 671(b)(1) 

and considers the full breadth of the military compensation and retirement systems, 

including health care programs, programs supporting military families, as well as 

programs of the Federal Government that may influence decisions of current and 

future members of the military to join and remain in the service of our Nation. The 

Commission’s review should also consider and examine: our Nation’s ability to sustain 

an All-Volunteer Force; the retention of our most experienced and qualified service 

members and the alignment of compensation and management to achieve this end; 

our current promotion system and associated force shaping tools; and our 

responsibilities to the American taxpayers. The review should provide 

recommendations for sustaining the long-term viability of the All-Volunteer Force in a 

fiscally responsible manner. 

The Commission’s recommendations and analysis for reforming and modernizing the 

military’s compensation and retirement systems should be based upon the priorities 

outlined in sections 671(b)(2) and 674, and upon the longstanding principles of 

military compensation developed by the 5th Quadrennial Review of Military 

Compensation, as outlined below. The Commission’s recommendations for change 

must grandfather any currently serving military members and current retirees in the 

current military retirement systems, but may allow currently serving members and 

current retirees the choice to change to your proposed retirement system. 

The Commission’s recommendations should also be guided by the following principles: 

1. Manpower and Compensation Interrelationship. Military compensation and 

retirement systems are an integral part of the military’s overall human resource 

management system and are key tools for recruiting, managing, and retaining the 

best military personnel. The military compensation and retirement systems should 

consider differences between service in the Military Services and service in other 
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Uniformed Services. They should also consider differences between regular and 

reserve military service and facilitate, as appropriate, the use of reserve service to 

support regular military forces. 

2. Efficiency. The military compensation and retirement systems must attract, retain, 

and motivate a sufficient quantity of military personnel and those of the highest 

quality to sustain the All-Volunteer Force. While the military compensation and 

retirement systems should provide a reasonable standard of living, they should be 

fiscally sustainable and impose the least burden possible on the American 

taxpayer, consistent with maintaining a high-quality, All-Volunteer Force. 

3. Equity. Military members, whether in the active or reserve components, must be 

allowed to compete equally for pay and promotion according to their own abilities 

and should receive equal pay for substantially equal work under the same general 

working conditions. 

a. To the extent possible, compensation should be comparable with pay in the 

American economy. 

b. Compensation should be competitive externally with private sector pay. It 

should also be competitive internally, to incentivize acquiring skills and 

accepting challenging assignments, to recognize hardships and danger, and to 

facilitate the distribution and separation of military members at appropriate 

times. 

4. Effectiveness. The military compensation and retirement systems must be effective 

in times of peace, war, and other levels of conflict. These systems must be robust 

and assist in expanding and contracting the force as appropriate, including the 

seamless use of reservists and retirees. 

5. Flexibility. The military compensation and retirement systems must be flexible to 

adjust to changing conditions in the American economy, to changes in the labor 

markets, and to changes in military force structure requirements. These systems 

should be capable of rapid and equitable adjustments. They should facilitate the 

mobility required to employ the force in time of war and in peacetime support the 

need of force managers to professionally develop future military leaders. 

6. Motivation. The military compensation and retirement systems should encourage 

meritorious performance and the desire to seek and perform in positions of greater 

responsibility. 

7. Fiscal Sustainability. The military compensation and retirement systems should be 

fiscally sustainable in order to ensure long-term certainty for service members and 

retirees. 

8. Force Management. The military compensation and retirement systems must 

actively retain the most experienced and qualified service members and align 

compensation and benefits to achieve this end. Along with the review of 

compensation the interrelationship of the military’s current promotion system 

should be reviewed, as well as associated force shaping tools. 
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Together, these principles form a useful foundation to guide the Commission’s review 

and development of recommendations to modernize the military compensation and 

retirement systems. 

INFORMATION GATHERING AND DATA ANALYSIS

To gain an understanding of their perceptions, priorities, and concerns regarding 

Uniformed Services pay and compensation programs, the Commission met with 

numerous groups of Service members, veterans, retirees, and their family members. It 

held several public hearings and town hall meetings across the country. The 

Commission and staff also met with key representatives of each of the Uniformed 

Services; numerous military and veterans service organizations; academic and 

research institutions; and private, commercial, and not-for-profit organizations. This 

comprehensive information gathering and data analysis phase provided important 

insights for the development of the Commission’s recommendations to modernize pay 

and compensation. 

PUBLIC HEARINGS AND TOWN HALL MEETINGS

The Commission conducted eight public hearings and eight town hall meetings 

between November 2013 and October 2014 at military installations throughout the 

United States. These meetings provided local military leadership and community 

representatives with opportunities to provide testimony on pay and retirement, health 

benefits, and quality of life programs. Members of the public, including Active 

Component, Reserve Component, and retired Service members and their spouses, 

were invited to speak to and ask questions of the Commissioners. The Commission 

also heard from representatives of advocacy groups and private-sector organizations 

with specific experience in Uniformed Services compensation issues. 

Several public hearings illuminated issues specific to military health benefits. In San 

Antonio, Texas, the Commission heard from local medical commanders, national 

private health insurance companies, and a TRICARE regional contractor. In 

Portsmouth, Virginia, the Commission engaged with representatives of the local 

military and civilian medical communities. It gained perspective on the issues raised 

by coordinating DoD, Veterans Affairs, and civilian medical facilities. The Commission 

also learned about civilian best practices and noted those with relevance to military 

health care benefits. 

Issues related to the daily needs and experiences of Service members and families 

were also a frequent topic at public hearings and town halls. At public hearings, the 

Commission heard testimony from representatives of the National Military Family 

Association, Blue Star Families, the Gold Star Wives of America, the Navy and Marine 

Corps Relief Society, and representatives of the Services’ Morale, Welfare, and 

Recreation programs among other organizations. This testimony provided insight on 

aspects of Uniformed Services quality of life. 
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Transcripts of public hearings and town halls are available for download at 

www.mcrmc.gov.2 Comments provided to the Commission during town halls are 

incorporated into the summary of public inputs found in Section 4, “Comments to the 

Commission.” A full list of Commission public hearings and town halls is found in 

Appendix C, “Commission Outreach.” 

MILITARY INSTALLATION VISITS AND SENSING SESSIONS

To maximize face-to-face opportunities with Service members and their families, as 

well as gain a thorough understanding of the effects of compensation and benefit 

programs, the Commission and staff visited more than 55 military installations 

around the world. These installations included rural and isolated sites, so the 

Commissioners could understand the experiences of Service members and families 

assigned to those locations. The Commission and staff also visited overseas 

installations and, through various mechanisms, received feedback from deployed 

Service members and those serving at sea. 

During visits to military installations, the Commission and staff met with installation 

and unit leaders, managers of key installation benefits and services, and groups of 

Service members and their families. Staff visited more than 10 military recruiting 

stations around the country to understand the role of military pay and benefits in 

recruiting efforts. Staff also visited a Military Entrance Processing Station to engage 

with newly accessed Service members, spoke with cadets from multiple Service 

academies, and visited U.S. Navy Transient Personnel Units in Virginia and California 

to gather perspectives on compensation, savings, and retirement programs. The 

Commission spoke with military recruiters, as well as new and prospective recruits 

regarding their knowledge of and value placed on various military benefits. 

The Commission also visited the Captain James A. Lovell Federal Health Care Center 

(FHCC) in North Chicago, Illinois. It is the Nation’s first FHCC, and a first-of-its-kind 

partnership between DoD and the Department of Veterans Affairs (VA). The 

Commission learned about the challenges faced as the separate Naval Hospital Clinic 

Great Lakes and the North Chicago VA Hospital transitioned to the FHCC. It gained an 

understanding of differing DoD and VA processes, including the ongoing difficulties 

with the development and implementation of a common electronic health record. 

Additional insight into military health care was gained during visits to two Army 

installations. Sensing sessions with dependent spouses at Fort Bragg, North Carolina 

provided valuable insight into the perception of health care quality at local military 

medical facilities and civilian health care providers. Similarly, the Commission’s visit 

to Fort Drum, New York, provided information about the effectiveness of health care at 

a military base without a military treatment facility. 

The Commission paid particular attention to the experiences of Service members and 

their families assigned to remote installations in service to the Nation. Commissioners 

and staff visited rural and semi-isolated installations throughout the country and 

overseas including, for example, Coast Guard Air Station Kodiak in Alaska and Fort 

Irwin, California (where a trip to the nearest town entails a nearly 80-mile round trip). 

The experience of personally traveling to such isolated locations gave the Commission 

 

2 Due to technical issues, the recording from the public hearing at MacDill Air Force Base in Tampa, Florida on 

May 22, 2014, was not available for transcription. 
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a valuable understanding of the unique challenges faced by many Service members 

and families, as well as the role of benefits in improving the quality of life for these 

populations. 

Comments provided to the Commission during installation visits and sensing sessions 

are incorporated into the summary of public input found in Section 4, “Comments to the 

Commission.” 

SERVICE MEMBER SURVEY

The Commission conducted a broad survey of preferences for changes to various 

compensation programs to gather views directly from Active Component members, 

Reserve Component members, and retirees. The survey was sent to a random sample 

of 457,033 active-duty and Reserve Component Service members. The sample was 

designed so results were statistically representative of key demographic groups of the 

military populations (such as rank/grade, family status, deployment history, 

geographic location, etc.). Additionally, the Commission sent surveys to every retired 

Service member with a current e-mail address on file with the Defense Financial 

Accounting System—nearly 1.3 million military retirees. In total, the Commission 

received more than 150,000 completed surveys, substantially exceeding the minimum 

number required to achieve statistical precision for most subgroups. 

The survey included data-gathering, modeling, and simulation to capture, validate, 

and analyze military compensation preference data. Using these tools and data, the 

Commission was able to gauge how selected subgroups of each target population 

valued current and alternative configurations of military compensation. Moreover, the 

modeling and simulation functions enabled the Commission to identify and compare 

reconfigured military compensation scenarios that showed promise in terms of 

perceived value to Service members and cost to the Government. 

Comments provided to the Commission during the survey process are incorporated into 

the summary of public input found in Section 4, “Comments to the Commission.” 

Additional information regarding survey methodology can be found in Section 5 “The 

Commission’s Survey.” Additional survey data is available at www.mcrmc.gov. 

PUBLIC COMMENT

In addition to surveying current and retired Service members, the Commission wanted 

to receive as much feedback as possible on the topics of pay and retirement, health 

benefit, and quality of life programs. Multiple mechanisms were put in place to 

facilitate a comprehensive collection of public comments. The Commission established 

a website3 on which it posted notices of its public hearings, visits to installations 

around the country, and meetings with public and private organizations. The website 

contained a mailing address, e-mail address, and a web form via which members of 

the general public could send comments to the Commission. As of October 2014, more 

than 2,200 letter, e-mail, or web-form comments were received and read by the 

Commission. The Commission also took numerous comments by phone. 

 

3 The Commission’s website address is http://www/mcrmc.gov. 
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Comments provided to the Commission through these mechanisms are incorporated into 

the summary of public input found in Section 4, “Comments to the Commission.” 

GOVERNMENT ENGAGEMENT

The Commission met with representatives from 29 relevant Government agencies to 

gather their perspectives, data, and other inputs to inform the deliberation and 

decision-making process. Ongoing dialogue with specific Government agencies, 

including DoD and VA, facilitated various aspects of the Commission’s work in all 

phases of its process. 

In particular, the Commission repeatedly met with the Uniformed Services’ chiefs of 

manpower and personnel affairs, comptrollers, and Reserve Component affairs 

directors. It also met with each of the Services’ and the Joint Staff’s Senior Enlisted 

Advisors on multiple occasions. Through these meetings, the Commissions gained a 

better understanding of the Services’ recruiting and retention requirements. It also 

had an opportunity to discuss issues related to the implementation of particular 

benefit programs and to learn from the Services’ best practices regarding benefit 

administration. These meetings also helped the Commission gain an understanding of 

issues and concerns of enlisted Service members. 

The Commissioners engaged directly on multiple occasions with the Surgeons General 

of the Armed Services to gain an in-depth understanding of the requirements and 

administration of the military health care system. The Surgeons General and other 

DoD officials provided important context for the Commission’s analysis of the military 

health care benefit and offered knowledgeable insight into potential courses of action, 

particularly as they relate to medical readiness. The DoD Office of the Actuary 

provided valuable information on existing compensation and retirement programs, 

such as regular and disability retirement and the Survivor Benefit Program. Meetings 

with the Office of Personnel Management,4 Federal Retirement Thrift Investment 

Board, the Pension Benefit Guaranty Corporation, the Consumer Financial Protection 

Bureau, and the Financial Literacy and Education Commission, among others, 

provided the Commission opportunities to explore lessons learned and best practices 

regarding other Government programs. 

To best understand issues surrounding the grocery and retail benefit, the 

Commissioners and staff met on multiple occasions with the directors and senior staff 

of the Defense Commissary Agency and of the three military exchanges organizations. 

These meetings allowed the Commission to better understand the varying approaches 

to providing military retail benefits, such as differences in how each organization 

serves its respective customers, how they interact with senior leadership of the 

military services, and how they integrate with the private sector. Representatives of 

each agency provided perspectives on a variety of proposals to modify their 

organizations, as well as their cooperative efforts. 

A complete list of the Commission’s Government engagements is found in Appendix C, 

“Commission Outreach.” 

 

4 The Office of Personnel Management provided support for the Commission’s analysis; however, such support does not 

represent an endorsement of, or suggest any opinion on, the report, study, or recommendations. 
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FOREIGN MILITARIES

The Commissioners and staff met with representatives of the British Armed Forces 

and the Australian Defence Force to discuss several issues related to pay and 

retirement. The military in the United Kingdom recently introduced a reformed pay 

and retirement system. Staff discussed the lessons learned from the development and 

implementation of the new system with British military leadership, noting areas of 

similarity and differences that could inform the Commission’s work. The Commission 

held similar discussions with officials from the Australian Defense Force regarding 

financial education and training provided to their members. 

Engagements with foreign militaries also offered important insights into issues 

concerning the military health benefit. Commission staff met with the British Armed 

Forces to gain an understanding of the lessons learned during the United Kingdom’s 

move from a traditional military medical command and control structure to a Joint 

Medical Command. The staff also met with the German Bundeswehr Medical Service 

to discuss Germany’s transition to a single medical service, the cultural difficulties 

involved in such a transition and the resulting structure and responsibilities within 

the new organization. Officials in both countries explained how their military medical 

forces maintain critical medical skills and how they interact with their respective 

civilian health care systems. 

A complete list of the Commission’s foreign military engagements is found in 

Appendix C, “Commission Outreach.” 

MILITARY SERVICE ORGANIZATIONS AND VETERANS SERVICE 

ORGANIZATIONS

The Commission benefitted from extensive consultation with many military service 

organizations (MSOs) and veterans service organizations (VSOs). These groups 

represent the Service members, veterans, retirees, and their families who are directly 

affected by the work of this Commission. They actively work within legislative and 

policy circles to preserve and improve the value of military pay and retirement, health 

care, and quality of life benefits. The assistance of these groups, including their 

interactions with the groups’ own membership, has been invaluable to the 

Commission. Dialogue with MSOs and VSOs improved the Commission’s knowledge of 

their issues and allowed it to understand the groups’ positions and priorities. In 

particular, Senior Commission staff met individually with the chief executive officers 

and directors of legislative and government affairs for more than 25 members of the 

Military Coalition.5 More than half of the Coalition’s members participated in public 

hearings and executive sessions. Additionally, the Coalition’s subcommittees on Pay 

and Retirement and Health Care engaged directly with Commission staff throughout 

the life of the Commission. Interactions with MSOs and VSOs allowed the Commission 

to gather key insight into the issues and concerns most pressing to the Service 

members, retirees, veterans, and their families. They also provided important feedback 

 

5 The Military Coalition is “a group of 32 military, veterans, and uniformed services organizations in joint pursuit of 

[common] goals” related to military recruiting, retention, compensation, and benefits, among others. “Who We Are,” The 

Military Coalition, accessed October 8, 2014, http://www.themilitarycoalition.org/whoweare.htm. 
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on the aspects of a modernized compensation system that beneficiaries would find 

most valuable. 

A complete list of the Commission’s organizational engagements is found in Appendix C, 

“Commission Outreach.” 

PRIVATE-SECTOR ORGANIZATIONS

The Commission and staff met with representatives of numerous nonprofit and 

private-sector organizations to gain knowledge of topics under exploration. These 

meetings were informational in nature, designed to gain necessary context for some 

programs and benefits in relation to private-sector standards, best practices, and 

lessons learned. For example, the Commission met with companies such as USAA and 

Prudential to discuss facets of savings and retirement planning. The Society of Human 

Resource Management provided insights into current experiences with, and historic 

trends regarding, employer-sponsored retirement plans in the private sector. Members 

of the staff also met with individual subject-matter experts on issues relevant to pay 

and retirement, including personal finance experts, who offered opinions regarding 

financial literacy education. 

The private sector also provided valuable context and perspective for the Commission’s 

examination of the health care benefit. The Commission met with multiple 

organizations representing collaborative efforts between military and civilian medical 

communities. These organizations included the Fort Drum Regional Health Planning 

Organization (RHPO) in New York and the University Medical Center of Southern 

Nevada in Las Vegas, Nevada. The RHPO is a partnership that enables a synchronized 

health care system in a military community without a local military treatment facility. 

In Nevada, military and civilian medical communities have partnered to provide a 

trauma training environment for military medical personnel. The Commission and 

staff also met with representatives of the Sacred Heart Health System in Pensacola, 

Florida, and several private health insurance companies, to gain a deeper 

understanding of how civilian providers view the provision of health care to military 

beneficiaries under TRICARE. Additionally, staff met with the Children’s National 

Health System and representatives of the TRICARE for Kids organization to become 

better acquainted with the needs of military children, how the current system of 

TRICARE works, and where difficulties and challenges are perceived in relation to 

health care for military child dependents. 

To learn about issues related to military grocery and retail programs, Commission staff 

met with multiple retail associations including the American Logistics Association, the 

Armed Forces Marketing Council, and the Military Produce Group. Staff also met with 

individual vendors such as Procter & Gamble, Coca-Cola, and Kraft. The meetings 

helped the Commission better understand the perspectives of these types of 

organizations with respect to the commissary and exchange systems. They also 

provided valuable information on the ways in which military resale organizations differ 

from commercial grocers, department stores, and discount outlets. 

A complete list of the Commission’s private-sector engagements is found in Appendix C, 

“Commission Outreach.” 
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THINK TANKS AND RESEARCH SUPPORT

The Commission met with more than a dozen policy, research, and academic 

organizations. Each organization had dedicated substantial time and resources to 

studying the complexity of the Service’s compensation system. Insights gained during 

these encounters informed multiple Commission efforts, including the development of 

the Commission survey, and directly contributed to the deliberations of the 

Commissioners. For example, the Commission and staff visited the Office of Economic 

and Manpower Analysis at the United States Military Academy at West Point on 

multiple occasions to discuss issues related to pay and retirement. The Chief 

Executive Officer of the Institute for Defense Analyses (IDA) spoke to the Commission 

in a public hearing and an executive session, offering insights on Service 

compensation policy. 

The Commission also contracted with several organizations for research, modeling, 

and analysis support. The Commission contracted with RAND Corporation (RAND) to 

use its Dynamic Retention Model (DRM), a proprietary modeling capability designed to 

support workforce-management policy decision-making. The use of the DRM enabled 

the Commission to assess potential effects on Service force profiles, including 

accession and retention, due to alternative changes to pay and retirement. RAND also 

provided research and cost analysis in support of the Commission’s examination of 

pay and retirement. IDA and CNA Corporation (CNA) prepared multiple briefings to 

support the Commission’s analysis of the military health benefit. IDA delivered a 

report analyzing aspects of the veterans’ disability benefit and another providing a 

comparison of military and private-sector hospital costs. CNA provided an analysis of 

military hospital workloads. Additionally, both organizations performed specific 

research and analysis tasks regarding various health benefit options considered by the 

Commission. 

LEGAL AND POLICY REVIEW

As directed by statute, the Commission performed a thorough review of current 

Uniformed Services compensation and benefit programs; relevant laws, regulations, 

and policies; associated appropriated Federal funding; and historical and contextual 

background for the Uniformed Services’ compensation and benefit programs across 

the Federal Government.6 The results of our review are found in the Report of the 

Military Compensation and Retirement Modernization Commission: Interim Report. 

Throughout all phases of our work, the Commissioners and staff received legal 

guidance and support from the Commission’s Office of the General Counsel. This 

support included review of laws and policies, legal interpretation, and legal review of 

the Commission’s work products, final recommendations, and this final report. 

DELIBERATION AND DEVELOPMENT OF RECOMMENDATIONS

The Commission’s deliberation and recommendation development process was 

ongoing and iterative. The Commission held regular executive sessions in Arlington, 

Virginia, increasing in frequency over the life of the Commission. These executive 

 

6 National Defense Authorization Act for FY 2013, Pub. L. No. 112-239, 126 Stat. 1632, 1787 (2013) (as amended by 

National Defense Authorization Act for FY 2014, Pub. L. No. 113-66, § 1095(b), 127 Stat. 672, 879 (2013)). 
 SECTION 4 

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sessions offered the opportunity for the Commission to hear testimony from and 

engage in meaningful discussion with many of the stakeholders discussed above, 

including Government agency officials and members groups representing active-duty, 

Reserve Component, and retired Service members and their families. The executive 

sessions allowed for regular face-to-face discussion and deliberation among the 

Commissioners, including decision-making on final recommendations. 

With each piece of information gathered during the Commission’s process, the 

preferences, priorities, and requirements of the 21st century All-Volunteer Force came 

into sharper relief. The discussions provided the Commission with the necessary 

insights and information to achieve its mission: developing a Service-member focused 

compensation package that preserves or improves value for the men and women who 

serve and have served our Nation, and the families that support them. 

 
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5. THE COMMISSION’S SURVEY 

To conduct a comprehensive review of military compensation, the Commission needed 

to gather opinions directly from current and retired Service members. As described in 

Section 6 of this report, the Commission gathered comments from town halls, sensing 

sessions, its website, and other means. Although that input provided valuable insights 

into the issues of predominant interest to Service members, the Commission wanted 

to ensure it gathered opinions from a representative cross-section of all Service 

members. For that reason, the Commission conducted a broad survey to gain feedback 

on aspects of military compensation from a large, statistically representative sample of 

current and retired Service members. 

Although DoD and the Services maintain an extensive library of survey research on a 

wide variety of topics, including compensation, those surveys focus on satisfaction 

with current components of compensation. They do not provide information on 

whether Service members would prefer compensation programs different than those in 

the current compensation system. To gather such information, a preference-based 

survey was required. Preference-based survey methods have been researched 

extensively for decades1 and can be used to quantify the incremental value associated 

with a change in a benefit, as well as the total perceived value for a combination of 

benefit changes. 

SURVEY SAMPLE DESIGN

The Commission contracted for the design, implementation, and analysis of a 

preference-based survey.2 As shown in Table 22, the target populations for the survey 

consisted of subpopulations for Active Component members, Reserve Component 

members, and retirees. The sample was further stratified so results were statistically 

representative of key demographic groups of the military populations (e.g., 

rank/grade, family status). The Commission chose these stratification variables to 

provide results that were relevant to its deliberations. The definitions for these 

variables match those developed and used by the Defense Manpower Data Center 

(DMDC) in drawing samples for its own use on behalf of DoD clients. The size of each 

sample was more than sufficient to provide the number of completed surveys required 

to have a statistically valid sample. DMDC provided e-mail addresses for these sample 

groups based on particular specifications. 

 

1 Substantial research has been conducted on the subject of preference measurement, including designs for the data 

collection instruments, choice of analytical methods, and type of software to engage participants in adaptive, 

interactive sessions. See, for example, P.E. Green, A.M. Krieger, and Y. Wind, “Thirty Years of Conjoint Analysis: 

Reflections and Prospects,” Interfaces, 31, no. 3, (2001): S56-S73. See also, Ryan O. Murphy and Kurt A. Ackermann, 

A Review of Measurement Methods for Social Preferences, accessed April 4, 2014, 

http://vlab.ethz.ch/svo/SVO_rev_paper.pdf. 

2 National Capital Contracting Ltd. (NCC) served as the prime contractor and project manager; True Choice Solutions 

Inc. served as a subcontractor to NCC and provided expertise to develop and field a web-enabled interactive survey 

instrument, along with specialized survey analysis tools; Mathematica Policy Research served as a subcontractor to 

NCC and supported the development of the sample design and related statistical matters. The consortium of 

contractors supporting the survey work have published a report that documents in considerable detail the design of 

the survey samples, including measures of statistical precision used to estimate minimum sample sizes for reporting 

results representative of the broader military populations. 
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Table 22. Key Features of the Sample Design 

for Commission Survey 

Target

Population

Groups

Sampling variables

Target

Population

Group Size

Total Sample

Size to

Contact

Variables used to

stratify the samples

# Strata

per

Variable

Total #

of

strata

Other

variables

retained in

the samples

# Strata

per

Variable

Active duty

Family status

Pay group

Deployment status

Region/duty location

4

6

2

2

96

Service

Gender

5

2 1,394,807 180,765

Reserve

Family status

Pay group

Deployment status

4

6

2

48 Component

Gender

4

2 834,621 276,268

Retiree

Family status

Age group

Rank group

Duty status

4

3

2

2

48

Service

Gender

Retire Type

5

2

2

2,142,189 1,273,337  

SURVEY IMPLEMENTATION 

The Commission sent the survey to a random sample of 457,033 active-duty and 

Reserve Service members and to nearly 1.3 million military retirees.3 In total, the 

Commission received more than 150,000 completed surveys, substantially exceeding 

the minimum number required to report results for most subgroups with sufficient 

statistical precision. 

The data collection took place from July through October 2014, allowing about 6 to 8 

weeks for each target population group to respond. To maximize response rates, 

sample members from the Active and Reserve Components were contacted several 

times with notices prompting them to take the survey. The retired population was 

contacted only once because the Commission sent the invitation to more than 

a million e-mail addresses. 

Sample members received an e-mail invitation to participate in the survey that 

directed them to a website hosting the preference-based analytic tool. The survey 

typically took respondents 20-25 minutes to complete. Unlike more traditional surveys 

that employ either some form of multiple-choice or Likert-type scale (often 1 to 5) to 

capture respondent information, this survey employed a web-enabled interactive 

interface for which respondents moved sliders, shown on their computer screen, to 

express their preferences for various alternatives presented. Figure 24 shows an 

example of how a question item is portrayed on the user interface. 

 

3 The Commission decided to contact all 1.3 million (approximate) military retired with a viable e-mail address and 

invite them to participate (this is about 60 percent of the 2.2 million on the military retired rolls) because the military 

retired population is rarely contacted by DOD, VA, or other agencies to gather their views on important topics. 
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Figure 24. User Interface for Commission Survey 

Table 23 shows the compensation topics covered in the survey. The basic survey 

instrument’s content was modified for each of the three Service member populations. 

Table 23. Topics Addressed in Commission Survey 

Pay and Retirement Health Care Quality of Life

 Pay Increases

 Retirement

 Allowances

 Monthly Premiums

 Copayments

 Provider

Arrangements

 Service Delivery

 Education

 Commissary

 Child Care

 Housing

 Other MWR

NOTE: Question items vary somewhat for Active, Selected Reserve, or retiree surveys

Part one of the survey asked participants to express their degree of preference for each 

of several alterative levels or features of a particular benefit. In part two of the survey, 

respondents were asked to rate the importance of these same benefit features. This 

second step added another layer of information that, together with part one, 

essentially provided an “importance-weighted preference metric” for each benefit 

feature in the survey. 

Part three presented a series of six to eight screens prompting participants to express 

their relative preference between two pairs of benefit features. The content captured 

from this activity in essence provided an internal consistency check on each 

respondent’s choices in parts one and two of the survey. After completing this third 

step, the survey program can flag responses that contain logically inconsistent results. 

No survey responses were excluded from the Commission’s survey for this reason. 
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Part four was a standard Likert-type, scaled-satisfaction exercise. It presented each 

respondent with a series of benefit features based on what was rated as important in 

the respondent’s previous answers. Respondents were asked to rate their satisfaction 

with the current benefit feature (for example, the BAH with-dependents). This part 

provided a third layer of detail, and it gave the Commission insight into how satisfied 

or dissatisfied the respondent was with the benefit feature as currently offered. 

Part five captured self-reported information by respondents on six to 10 attributes. 

This section included some items already known through administrative records 

provided by DMDC when the sample was drawn such as family status and grade 

group (officer or enlisted). It also included items such as time to travel to a military 

facility for services and the type of health benefit plan family members use, data that 

cannot easily be obtained through administrative record files. 

Approximately 20 percent of respondents took the opportunity to offer comments at 

the end of the survey (part six). More than 32,500 respondents from the three Service 

member populations surveyed submitted comments. These comments were separately 

analyzed using qualitative data analysis techniques and the aid of special qualitative 

data management software (see Section 6). 

SURVEY ANALYSIS AND MODELING

The survey process has two major components: the data-gathering (survey) component 

and a back-end modeling and simulation component. After the data were gathered and 

weighted, the modeling and simulation functions allowed the Commission to explore 

and compare reconfigured military compensation scenarios in terms of perceived value 

and cost for the target populations and their subgroups. 

Figure 25 shows elements of the survey analysis dashboard used to examine the 

collected survey data. The dashboard was available to the Commission and staff for 

exploring various compensation and benefit alternatives. The panel on the side 

enables the user to select and display results for various subgroups of the surveyed 

population. The dashboard then displays the results for the type of analysis chosen. 

The center panel on Figure 25 illustrates a simple rank ordering by Relative 

Importance (RI) for benefit features surveyed for the Active Force.
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Figure 25. Dashboard Depicting Relative Importance of Various 

Compensation Features (Sum = 100%) 

RELATIVE IMPORTANCE AND PERCEIVED VALUE METRICS

Figures 26 and 27 show examples of results from the survey analysis dashboard. All 

the question items in the survey show both relative importance and the corresponding 

perceived value measures. 

Relative Importance (RI) Measure 

The row of bars depicted in Figure 26 shows how Service members (total AC force) 

assigned levels of importance to increases in the Thrift Savings Plan (TSP) match if it 

were offered by DoD. Relative Importance (RI) measures the degree (from 0-10) of 

importance-weighted preference for each benefit feature in the survey. As depicted in 

Figure 26, offering a 5 or 10 percent TSP match generates 3.7 and 5.9 RI units 

(59 percent increase), respectively. Thus, doubling the match from 5 to 10 percent 

produces a less-than-proportional increase in this RI metric. It appears that Service 

members attach very little additional importance (from 3.7 to 3.9 in the RI metric) 

when increasing the DoD match from 5 to 7.5 percent. The implication is that offering 

a 7.5 percent match—relative to a 5 percent match—is not worth the additional cost 
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when Service member perceptions are taken into account. This pattern of 

nondisproportional change in output (such as the 59 percent improvement in RI 

metric when doubling the TSP match) is a common phenomenon when measuring 

consumer preferences. Importantly, this standard RI measure enables direct 

numerical comparisons for alternative levels of a specific benefit feature, as well as 

comparisons across all 24 benefit features in the survey. 

Figure 26. Relative Importance by Active-Duty Service Member: 

TSP Matching 

Perceived Value (PV) Measure 

The row of bars in Figure 27 provides the equivalent result in terms of Perceived Value 

(PV). This variable measures how much each alternative benefit (or each level for the 

benefit) is worth in dollar terms. More specifically, the graphic illustrates how much 

active-duty Service members value each TSP match percent in the form of an 

equivalent permanent pay raise. 

As this row of bars in Figure 27 shows, a 5 percent TSP match is perceived by activeduty Service members (average across the active force) as worth the equivalent of a 

$2,712 permanent pay raise. Note, as well, that increasing the TSP match from 5 to 

7.5 percent generates only a very modest change in perceived value from $2,712 to 

$2,954 (equivalent to a permanent pay raise). 

An important inference from such findings is that the costs to deliver a benefit can 

differ markedly from the worth a person perceives it to have. These PV metrics become 

especially meaningful when the actual (per capita) cost of providing a benefit feature is 

compared to its value as perceived by Service members. 
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Figure 27. Active-Duty Service Members’ Perceived Value: TSP 

Matching 

Comparisons among Subgroups of the Population 

The survey results can be examined for a variety of population subgroups. Figure 28 

shows results for the question item on how Service members value alternative 

differentials for the automatic withholding of contributions to TSP. 

Figure 28. Relative Importance by Active–Duty Service Members: 0, 

5, and 10 percent Automatic TSP Contributions to TSP by Pay Group 
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COMPARING ALTERNATIVE COMPENSATION CONFIGURATIONS

In addition to examining benefit features one at a time as shown in the previous 

sections, the survey analysis dashboard also provides the capability to analyze 

combinations of benefit features, and then compare one package of benefits against 

another. 

Figure 29 illustrates this capability within the dashboard. The dashboard lets the user 

work with several benefit features at once to compare the results in terms of Service 

member preferences for one combination of benefit features compared to another 

combination. In this example, Plan A (left panel) shows the settings for the current 

compensation system and Plan B (right panel) shows the settings for the Commission’s 

recommended compensation system.4

Figure 29. Illustration of the Compensation Plan Comparison 

Capability 

On the bottom half, the leftmost columns show the results in terms of aggregate 

preference for one plan (A) to another (B). In this example, Plan A (the current 

compensation system) is preferred by 19.8 percent of the Service-member population 

and Plan B (the Commission’s recommended alternative) by 80.2 percent. The three 

columns on the far right show a measure of intensity for Service members’ preference 

for the respective plans. 

 

44 The figure represents a close approximation of the preferences of the Commission’s recommendations, because the 

survey did not address all compensation recommendations of the Commission. 
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Plan comparisons can also be examined by demographic subgroups. Figure 30 

illustrates results of relative preference between these two compensation systems for 

two subpopulations defined by pay grades and family status. 

Figure 30. Active-Duty Service Members’ Preferences Between the 

Current and Recommended Compensation Systems 

This feature enables the user to explore what the effect on preferences may be across 

key groups within the military populations. In this example, those in pay group E1-E4 

exhibit a relatively greater preference for Plan B (orange portion of the columns). 

Because the E1-E4 subgroup comprises 43 percent of the active force, this difference 

in preference may be an important consideration. 

The Commission considers this preference-based survey approach highly useful in 

identifying compensation plans that appeal to a broad cross section of Service 

members and that are fiscally sustainable. This survey, along with the compensation 

system analysis described in this report, guided the Commission’s deliberations.5 

 

 

5 In the interests of openness and because the data results far exceed what could reasonably be included in this Final 

Report, the Commission is making the entire data base of survey results available for examination and analysis on the 

MCRMC website: http://www.mcrmc.gov. 

Family Status

Blue:  Prefers Current Compensation System

Orange:  Prefers Recommended Compensation System
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6. COMMENTS TO THE 

COMMISSION 

All comments to the Commission—including more than 35,000 letters, e-mails, web 

submissions, town hall comments, and survey free-response comments—were 

reviewed by Commission staff, with specific areas of concern identified for further 

consideration in the Commission’s deliberation process.1 In addition, transcripts from 

town hall meetings and public hearings were thoroughly reviewed by Commission 

staff. Feedback was regularly reviewed for emerging trends, areas of repeated concern, 

and general sentiment. All passages and recurrent themes relevant to the work of the 

Commission were identified and forwarded to the appropriate Commission research 

teams. 

A sampling of comments is included in this chapter. The quotations below have been 

selected to both represent trends in public feedback to the Commission, as well as the 

range of sentiment expressed. Other than minor edits for length and to correct 

typographical or grammatical errors, no changes have been made to the content or 

substance of any comment. 

OVERARCHING COMMENTS AND CONCERNS ABOUT REFORM

Comments to the Commission overall struck a cautious and, at times, skeptical tone. 

Respondents from all sectors and across all methods of communication expressed 

concerns that the process of modernization could unfairly affect current and former 

Service members and their families or result in a package of pay and benefits that 

does not adequately compensate members for their service to the Nation. 

I’m not fully confident that a civilian commission is the best way to 

determine cost-saving measures in relation to military service. I certainly 

understand the need to reduce defense spending (and I feel my responses 

in this very thorough survey will indicate that), but some of the suggested 

measures don’t consider the unique hardships that military members and 

families must endure when compared to the other 99 percent of the 

population.2

My fear is that this commission is soliciting input in the hopes that current 

service members, those of the younger, non-long-term-thinking variety, will 

provide input that asks for more compensation now and puts less 

emphasis on enduring compensation.3

The conversation related to the reduction of pay and services is disturbing. 

The idea that I place the well-being of myself and my family in the care of 

 

1 Section 4 details the Commission’s Process and Section 5 discusses the design, methodology, and administration of 

the survey. 

2 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

3 MCRMC letterwriter, comment form submitted via MCRMC website, June 16, 2014. 
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the Government at the cost of the rights and privileges afforded to civil 

society requires commitment on both parts. Furthermore, when the right to 

refuse a directive becomes punishable, the obligation by society at large 

should be equally burdensome.4

Service members who have served at least 20 active-duty years, have 

sacrificed their lives, bodies, families (wife and kids to not being around 

for parents and grandparents’ late years), etc. and should be rewarded 

with the promised compensation of retirement pay and medical benefits.5

I would ask that you honor the Government’s commitments and promises 

to those who have served and protect their retirement and medical care 

entitlements. Many promised benefits have been taken away over the 

years due to cutting costs.6

All this talk about “reforming” benefits causes a great deal of stress and 

uncertainty...I didn’t expect to be worrying about stuff like this after 

serving for 30 years.7

Numerous respondents also expressed satisfaction with some or all aspects of the 

current compensation system, and many stated a desire to minimize any changes to a 

system with which they were largely satisfied.

Overall my spouse and I are satisfied with the current military benefits 

provided. The commissary, exchanges, MTFs, and MWR facilities are a 

very important part of military cohesion and unit readiness and should all 

remain intact. Only changes should be to enhance or improve upon these 

services provided to military members.8

[I am] very happy with my benefits, just wish we could get a raise more 

often to help with the cost of living adjustments.9

I do not think the current system is broken. I have been retired for 9 years, 

have received excellent medical care, and I am very happy with my base 

access, commissary, and exchange.10

I am very happy with the medical care I receive at my MTF. I also consider 

the commissary and exchange benefits to be among the most important for 

both active-duty military and retirees.11

[I] am very happy with current benefits. My family made large sacrifices 

(we endured a 5+ year separation at 25-year point in my 30-year career) to 

pay off a home near a base and medical treatment facility. We would be 

 

4 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

5 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

6 MCRMC letterwriter, comment form submitted via MCRMC website, October 30, 2013. 

7 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

8 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

9 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

10 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

11 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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extremely resentful if the value of those sacrifices were eroded due to 

changes in current benefits.12

Feedback reflected concerns that potential cuts and reductions in compensation and 

benefits should only happen within the context of a larger conversation about 

Government spending, and that reductions in Uniformed Services’ compensation 

represent an attempt to resolve larger budgetary concerns disproportionately on the 

backs of the Services. 

[Service members and families] are often the most abused when the 

country finds itself overspending. The Government likes to dip into the 

accounts of those who served the nation. If you are to cut benefits, it would 

be very helpful if it included a provision to prevent the Government from 

using the funds promised to veterans for other purposes.13

I am very happy with the benefits as they are. To keep with the promises 

we were made, our benefits should NOT be eroded. Increases in copays 

and premiums that match our annual COLA are more than reasonable. 

Other savings should come from cost cutting in the bloat of other 

Government spending.14

As far as I’m concerned, the Federal Government is guilty of a breach of 

contract. For the majority of my 24 years in the Air Force, I struggled to 

make ends meet for me and my family. I fulfilled my portion of the 

contract, but the same Government that I gave my all to protect is trying to 

screw me and all the others out of our EARNED benefits.15

I feel the major problem is the Governmental DEBT that is presently being 

solved by severe cuts to the Military.16

I am very happy with the current military retirement system, and it worries 

me that all the talk and budget problems will cause the Government to 

break faith with current and future retirees.17 

The fastest way to undermine morale among military personnel is to make 

a promise that will not be kept....The military is not a laboratory in which 

to conduct experiments to find solutions to the problems of a dysfunctional 

civilian society.18 

Some comments from current and former Service members expressed an 

understanding of the need for reform and modernization of the current compensation 

and benefits structure, but stated that any reform should be fair and sensitive to the 

unique concerns of military Service members and their families. 

 

12 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

13 MCRMC letterwriter, comment form submitted via MCRMC website, August 7, 2014. 

14 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

15 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

16 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

17 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

18 MCRMC letterwriter, comment form submitted via MCRMC website, April 7, 2014. 
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The decisions you have to make are hard and will not be popular, as the 

system costs so much to maintain, but please be considerate and do your 

best....Thank you for your efforts on this very important issue.19

I’m very happy with the retirement plan I signed up for, but can see that it 

is probably not a sustainable option for the future, so I’m happy that you 

are looking into options for future retirees (as long as they get the 

retirement benefit that they sign up for).20

Although I think everyone would like to have more entitlements, we must 

balance that with the overall cost. I risked my life in war and now feel the 

Army promises were lived up to the maximum extent. I am very happy 

with the current system.21 

I just want a fair and comparable compensation package [commensurate] 

to the civilian sector, the number of hours I work, along with the sacrifice 

me and my family make on a daily basis.22

COMMENTS REGARDING PAY AND RETIREMENT

Feedback to the Commission encompassed the full breadth of pay and retirement, 

offering diverse comments from all perspectives, including that of active, Reserve 

Component, veteran, and retired Service members. 

When facing 20-plus years of relocating, and extended periods of isolation 

from family, it takes a significant group of benefits to compensate for the 

loss of stability a military career brings. When every day you voluntarily 

place your life on the line, your compensation cannot be compared to the 

average office or retail worker who goes home to the same house for years 

on end. The promise of lifetime medical coverage and a retirement check 

helps to compensate for inequities suffered by the average military 

person....I cherish my experiences in my 23-year career, but had the 

promise of the retirement pay, medical coverage, and other benefits such 

as the commissary not been there, my decision to continue after 4 or 6 

years would have been much harder and probably would have been 

different.23

Retirement is the most important thing. If you take away retirement, then 

you are going to get rid of the most valuable people in the military, 

quickly.24

Above all else, if my retirement is changed, I will get out as soon as 

possible with no second thoughts.25

 

19 MCRMC letterwriter, comment form submitted via MCRMC website, August 7, 2014. 

20 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

21 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

22 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

23 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

24 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

25 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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I don’t think that we should change anything for retirement. A significant 

portion of the reason that I have decided to stay in is the option to retire 

after only 20 years of work while I am still young enough to enjoy the 

childhood of my (future) children. If I had to wait until age 65, had to 

receive a lump sum and then wait until age 65, or had to work longer 

before I could retire, then I would have gotten out of the Army a lot 

sooner.26

Reducing in any way the retirement pay or benefits of those who have 

served with honor and retired is a breach of faith. Doing it to military 

retirees is still immoral and unethical [and] reducing or changing retirement 

plans for active-duty members, particularly those in initial obligated 

service, is morally [unreasonable]...any reduction in compensation or 

change in compensation structure will alter the willingness of our best and 

brightest to commit to careers.27 

Many of the comments regarding potential changes to compensation supported 

retirement savings for those who do not serve the 20 years required for retirement 

benefits eligibility under the current system. 

There is no reason that 85 percent of the military separates with nothing to 

show for it when you could do a standard retirement system with 

increasing contributions the more senior you get.28 

There should be some type of retirement or IRA for those individuals who 

leave the military before 20 years. Twenty years is the gold standard for 

service to receive a retirement benefit. In a 20-year career you can expect a 

combat deployment, peace keeping mission, or unaccompanied tour. The 

toll is enough that after 20 years you should be able to enjoy the financial 

stability that a retirement pension would offer.29

What needs to be addressed is personnel who either voluntarily, or 

otherwise, are separated. They should have a matching TSP/401(k) 

because walking away with nothing after 10 years of service is wrong...I 

know of no company that doesn’t let you leave with your 401(k) 

contributions and vesting after 5 years.30 

Other comments noted the value of retirement savings programs—and encouraged 

potential DoD matching of retirement contributions—as an additional savings tool, 

regardless of whether Service members pursue a traditional retirement track. 

Mandatory TSP enrollment is a good idea, with matching Government 

contributions, but the military retirement system should not be changed.31 

 

26 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

27 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

28 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

29 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

30 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

31 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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There was no Thrift Savings when I served, and I did not save! In my USG 

jobs I participated in TSP fully and saved a lot in 18 years. Young soldiers 

need the push of a required percentage contribution to TSP, and a 

substantial match will, over a 20-year career, make all the difference. The 

required contribution should be the same as the match.32

I think that the current military retirement system is broken and 

unsustainable. The Army needs to adopt some kind of TSP matching that 

encourages Soldiers to make responsible saving decisions with their own 

money...[ and with] proper financial counseling. The system sets people 

without financial literacy up for failure.33

Some feedback regarding pay and retirement addressed more specific concerns and 

suggestions for modernizing the current compensation structure. 

I am pleased with my military retirement structure as it stands today; 

however, I also see the need for a restructure....I feel strongly that 

50 percent should be a minimum, but with more individuals retiring at a 

“working age,” I could see a small lump sum, with reduced annuities, and 

full restoration at 65 as a viable alternative. Although the retirement is not 

a “living wage,” the retirement pay, specifically when combined with the 

medical coverage, offers the flexibility to seek employment, without the 

worry that a marginal employment situation (far too common in today’s 

workforce) and the cost of health care will leave a family destitute.34

Bottom line is that some of the changes to the military can be done, but we 

need higher pay. For the lower-ranking individuals (the meat and potatoes 

of the military), they earn significantly less than your officers and highranking enlisted members. Military members should never qualify for extra 

Government assistance because they don’t make enough money.35

Our payment structure should be based upon rank, qualifications/ 

education, and hardship/deployment activities. A solution might be to 

have a base pay 75 percent equal to what we have now and offer an extra 

money per month for those with degrees, certifications, and specialized 

skills. Each skill, language, degree would add additional dollar amounts 

depending on what the Navy, COs, and mission needed (members could 

seek out training and schools with their own money if they knew they 

would be paid more).36

Equalize and standardize Active versus RC retirement. If Active can collect 

checks immediately upon retirement after 20 good years, why can’t RC do 

the same? Why does RC have to wait until age 60 to collect? Make AC wait 

until age 60 to collect retirement checks also and save the 

 

32 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

33 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

34 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

35 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

36 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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Government billions of dollars! Help them transition to civilian careers or to 

RC and keep growing their retirement.37

The increases in military retired pay each year should be tied to the same 

rates as with the active duty. I am very happy with my retired pay, but felt 

very slighted that once I retired, active-duty pay scales have skyrocketed, 

while the retired pay scale has inched its way up about 1 percent per 

year.38

Traditional pay scale for retirement is a significant benefit; however, if we 

HAD TO, I could see a two-step scale, with a lower percentage from 

retirement date until 55 or 60, then full payment per current scale 

thereafter.39

SBP and DIC are two separate programs and should not be offset. Retirees 

can get concurrent receipt. Widows should get what the Military promised 

and spouses paid [for] with their lives. I read that only 3 percent of all 

veterans that have ever served actually retire. The widows deserve what 

is promised for their sacrifice.40 

The SBP-DIC offset takes thousands of dollars out of those families’ 

pockets that really need it. I am asking that the SBP-DIC offset be 

eliminated. I know this has been an ongoing issue, but it is time to do the 

right thing.41

Several respondents emphasized that issues of Uniformed Services pay and retirement 

should not be viewed through the lens of civilian society because the choice to commit 

to serve places limits on the amount Service members and their families can earn and 

save for retirement. 

Military professionals now have a lot of comparative professions in the 

community, and when a service member makes that decision of going into 

the military they may be foregoing something out in the civilian community. 

They should be compensated similarly.42

The life of a Service member greatly impacts the ability of the service 

member’s spouse to gain employment, build a career, generate income, 

and save retirement funds. Regardless of branch or specialty, active-duty 

Service members move frequently...This proves extremely difficult for many 

spouses regardless of profession or education level. Spouses may need to 

acquire new certificates and licenses from state to state, which takes time 

and money. Many employers avoid hiring military spouses because they 

are seen as temporary workers. Even if a military spouse finds 

employment he/she most likely will not work long enough at that company 

 

37 MCRMC letter writer, comment form submitted via MCRMC website, June 13, 2014. 

38 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

39 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

40 MCRMC letterwriter, comment form submitted via MCRMC web site, April 8, 2014. 

41 MCRMC letterwriter, comment form submitted via MCRMC website, November 4, 2013. 

42 Audience member, comment made at MCRMC town hall meeting, Joint Base Lewis-McChord, Tacoma, Washington, 

December 12, 2013, http://www.mcrmc.gov/public/docs/meetings/20131212/JBLM_Town_Hall_20131212.pdf. 
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[to] earn promotions or build retirement benefits with the company. Serving 

in the military is truly a sacrifice for the entire family. Today’s American 

families often depend on dual income spouses to pay the bills and save for 

retirement. When one spouse serves as an active-duty service member, 

dual income is often not possible.43

COMMENTS REGARDING HEALTH BENEFITS

Health care was an important concern expressed across all demographics and 

generated passionate responses. Feedback focused primarily on health care quality, 

access, and cost. For many respondents, especially retirees, the primary concern was 

continued access to military health benefits. Many perceived the provision of health 

benefits to be a “promise” made by the military to those retired from Service and 

expressed concern about an erosion or elimination of health care benefits. 

The medical benefits of retiring from the military and being able to count on 

reliable, cost effective, and timely health care will be important for me 

when I do retire. If I put in the time and endure the sacrifices that go along 

with being deployed and serving 20 years, the light at the end of the 

tunnel is retiring and having the comfort of having good health care after 

I do retire.44 

Copays and TRICARE fees are not the free health care we were promised. 

Forced enrollment in Medicare-B at 65 is not free health care. This country 

should keep the promises it made. God knows we kept our promises to 

serve at risk of life and limb.45

[I was] overall very happy serving 22 years in the Navy. Had a great time; 

wish I was still active. My only concern is during my entire career I was 

told, “do a career and the Navy will take care of you with medical care for 

life.” [I] did not find out this was not true until my preretirement class.46

Though many Service members and retirees felt that increases in costs erode the 

health care benefit they believe they were promised, some respondents indicated a 

limited support for modest increases in costs to preserve or improve the quality of the 

health benefit. 

I’m one of those promised free lifetime medical care by my recruiter. 

I already think the Government broke a promise by making us pay for 

TRICARE. But I’m still willing to pay a little more as long as benefits 

remain essentially the same.47

[I am] very happy with current medical care (TRICARE Prime); I recognize 

that the premiums are unreasonably low. [I] would not be averse to a onetime significant raise in premiums (say to $1,000 per year) with inflation 

 

43 MCRMC letterwriter, comment form submitted via MCRMC web site, July 14, 2014. 

44 MCRMC letterwriter, comment form submitted via MCRMC web site, August 17, 2014. 

45 MCRMC letterwriter, comment form submitted via MCRMC website, July 31, 2014. 

46 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

47 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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adjustment in the future in order to retain quality of service provided by 

TRICARE Prime. But I need assurance it would not be the first step to 

many more significant raises.48 

I would be happy to pay a copay if my family and I had access to quality 

insurance....TRICARE Prime means we can’t see good doctors, we have to 

waste our time jumping through hoops to ever be seen by a specialist or 

get preventive tests or screening. My family doesn’t meet the “criteria” for 

any quality screening like genetic cancer predisposition, so we are forced 

to spend our meager savings for mammograms, blood tests, chiropractors, 

and quality health care that the military won’t allow us to see.49 

Paying minimal cost for health care is very important and I think the most 

underrated military benefit. However, I think we need more freedom to 

choose civilian providers especially with children with special needs.50

Some respondents expressed support for the current TRICARE and military treatment 

facility (MTF) systems and concern about potential changes to those systems. 

I have only the greatest appreciation for all of my military benefits. In 

general, all medical services provided seem to be done with both care and 

competence. Delays in medical services seem to occur everywhere—in both 

the civilian and military worlds—as so many (too many?) people seek them 

out. 51

I am very happy with my pay and TRICARE. I worried at the many 

changes I hear of and see coming down the pike. I feel sorry for soldiers 

now serving because they are “not” being taken care of as I was. I believe 

they will lose more benefits and TRICARE will be watered down or 

eliminated.52

I am sold on my MTF. It takes approximately 50 minutes to get to it 

because I live in the country. I have tried using civilian doctors, but they 

are not as organized and fluid as my MTF. When necessary, the MTF has 

always provided great doctors outside the MTF. I am very happy with my 

current health care. Don’t mess with it in a negative manner. Add to it in a 

positive manner.53

A substantial number of comments from Service members and families reflected 

concerns about access to health care, including a desire for increased choice and 

flexibility in seeking quality medical care. 

Currently I am not allowed to see a civilian provider even if it’s 3 minutes 

away. I have to wait almost 2 months to see a specialist. Current rules 

state if no appointments are available within 2 months, I can see a civilian; 

 

48 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

49 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. (TRICARE does 

provide coverage for routine mammograms and blood tests.) 

50 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

51 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

52 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

53 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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however the hospitals have found a way around that by not putting out 

schedules for 2 months and making you continually call back for 

appointments instead of allowing you to see a civilian.54

I live an hour or so from the nearest base....I only access military medical 

care for overseas travel preparation. Am very happy with my pension and 

medical care on TRICARE Standard/Extra, [but] it is very important to me 

to have access to a nearby medical facility since I am single and must get 

myself there if I am ill.55 

Quality health care is very limited in this area. Almost all specialists are a 

minimum of a 90-minute drive one way. The MTF has only two 

unexperienced doctors and one PA assigned. Quality of care at the MTF is 

as bad as or worse than what has been reported for the VA.56 

[I] recommend dependents and retirees be cared for by civilian providers of 

their choice, paid for by savings from contracting this expensive service 

out to civilian sector.57

My family and I made an informed decision to purchase health care. If we 

need a specialist, we can see a specialist without going through countless 

appointments at the MTF before a referral to a specialist is provided. It is a 

cost we have knowingly absorbed to have access to quality health care. 

The military would perhaps be best served if we integrated our military 

medical services with the civilian services so that we would not have 

military hospitals with only one surgeon, limited internists, and few 

specialists. I feel that our civilian medical services could only benefit if our 

military medical officers were required to be credentialed at civilian 

facilities, and were in fact entitled to practice, and even required to 

practice, at these civilian facilities.58 

COMMENTS REGARDING QUALITY OF LIFE BENEFITS

The Commission received a substantial number of comments regarding the many 

quality of life programs across the Services. Feedback illuminated the importance of 

these programs that are, in many cases, beloved by Service members, retirees, and 

their families. They are often perceived as central to the positive experience of Service 

life. The quality of life benefit the Commission heard most about was the commissary. 

Though some respondents expressed ambivalence about the commissary benefit or 

concern about its cost, many expressed a desire for preservation of the benefit, both as 

a means of providing discounted retail offerings and as a unique experience that 

brings the military community together. Similar opinions were often expressed about 

military exchanges. 

 

54 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

55 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

56 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

57 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

58 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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If you want to keep an all-volunteer military, you must keep the benefits 

that are in place as of today and for the future. All that are serving and 

have served depend on the commissary and exchange for low-cost goods. 

If the Commission does not recommend a pay increase, all benefits are 

extremely needed.59

Commissary (I earned it, don’t mess with it!) Exchanges (I earned it, don’t 

mess with it!)60

I am very happy to have a small commissary within a 30-minute drive—

not just because of the savings, but because it’s there just for U, and 

I enjoy seeing the military members, retirees, and their families taking 

advantage of the benefit.61 

I love the commissary benefit and think it would be horrible to remove it. 

The benefit goes further than grocery savings, the jobs it provides to 

spouses and retirees (bagging) and the great sense of community when 

you walk through there.62

Many respondents noted lower-paid Service members, retirees on fixed budgets, and 

their families disproportionately rely on the savings provided by the commissaries and 

exchanges. 

We depend on the commissary to survive the high prices on the outside. 

We [can’t] afford to eat on what our financial status allows. We can’t do 

without it!!!! Please keep it open!!!!!!!63

The commissary for your people who—I’m talking about your young people 

who are E4 and below, with families—and everybody else—it’s much 

cheaper for them to buy stuff at the commissary. And if you walk up and 

down the aisles, it is so prevalent that people are getting WIC...it’s labeled 

what items are available for WIC at the commissary.

Where we live there is only one commissary to serve the lower half of the 

state. At and just after the first of the month (and at case lot sales) the 

commissary is filled with retirees (some who travel great distances) taking 

advantage of the discounts afforded by this valuable benefit. In our area, 

access to the commissary provides my family with a savings of 30 percent 

over local stores. While there are some items that may be found at a lower 

individual price on the economy, the total combined savings remains 

constant. In closing, while we generally understand the funding 

constraints, it is unfathomable that the DoD and the services would 

acquiesce to plans that seriously degrade our hard earned benefits.64 

 

59 MCRMC letterwriter, comment form submitted via MCRMC web site, June 18, 2014. 

60 MCRMC letterwriter, comment form submitted via MCRMC web site, November 13, 2013. 

61 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

62 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

63 MCRMC letterwriter, comment form submitted via MCRMC web site, June 20, 2014. 

64 MCRMC letterwriter, comment form submitted via MCRMC web site, April 8, 2014. 
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Some who offered feedback observed that exchange profits fund Morale, Welfare, and 

Recreation (MWR) services, which benefit Service members and families, and they 

expressed concern that a cut to retail services may adversely affect MWR services. 

[Exchanges are] also providing a dividend back to MWR every year, which 

is then recycled into bowling centers and sailor Liberty centers. I’m 

reinvesting into my facilities. So, I would offer to you that if you only have 

limited dollars then if you’ve got a...Government funded program that’s 

giving you a [return] on your tax-payer dollar, then I think you’re getting 

high leverage.65 

They do provide something good to the post—or to the base, whichever 

service you may be in. And the morale fund, there’s a lot of that feedback. 

And if that goes, who’s gonna be supporting the teen centers and the 

swimming pools for the families that can use it?66

Some feedback did, however, suggest closing commissaries to reduce military 

spending. Alternatively, some respondents suggested giving Service members 

permanent raises in lieu of a commissary benefit. 

The commissary is a waste of Government money stateside. The whole 

agency should be reduced to only support OCONUS bases—then it would 

not have to be its own agency either. Wrap it up under DLA.67

Eliminate the commissary and pay people slightly more (2.5-5 percent) 

[instead] and you would eliminate all the overhead of running a grocery 

store.68

The Commission also heard substantial feedback regarding education programs and 

benefits, including dependent education, tuition assistance, and the GI Bill. 

Sir, I’ll give you an example that’s been a great retention tool for 

individuals that have children, and that is the GI Bill and the ability to gift 

that to either their spouse or to their children.69

A lot of people coming in already have an undergraduate degree. There are 

very few graduate level programs for your enlisted. A lot of the programs 

are only for officers. But I was meeting people straight out of boot camp 

who had undergraduate degrees, and they were E3s....because a lot of 

your Force coming in now, because there [are not] any jobs, are very well 

educated.70

 

65 RADM Robert Bianchi, testimony given at MCRMC public hearing 3, Naval Base Norfolk, Norfolk, VA, December 13, 

2013, http://www.mcrmc.gov/index.php/schedule?id=60. 

66 Audience member, comment made at MCRMC town hall meeting, Joint Base San Antonio, San Antonio, Texas, 

January 7, 2014, http://www.mcrmc.gov/public/docs/meetings/20140107/JBSA_Town_Hall_20140107.pdf. 

67 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

68 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

69 Col. Kevin McMahan, testimony made at MCRMC public hearing, Joint Base Lewis-McChord, Tacoma, Washington, 

December 13, 2013, http://www.mcrmc.gov/public/docs/meetings/20131213/MCRMC_JBLM_13_Dec_13_AM.pdf. 

70 Audience member, comment made at MCRMC town hall meeting, BASE, Naval Station Norfolk, Norfolk, Virginia, 

January 7, 2014, http://www.mcrmc.gov/public/docs/meetings/20131202/MCRMC-Norfolk-Dec02-Panel3-

20131202.pdf. 
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 COMMENTS TO THE COMMISSION

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Programs and assistance for Service members transitioning to the civilian workforce 

were a key concern of those who communicated with the Commission. 

Transition centers and plans from military to civilian life are poorly set-up 

and do little to actually help the transitioning service member. [The] 

program needs to get fixed! Job placement should be the focus.71 

Prepare the service member throughout their career [for transition].72 

We need to develop partnerships and get students out of the classroom, 

start the conversation. Networking is an art form.73

I never received any retirement transition program information.74

Military commanders need to be held accountable for not allowing Service 

members to properly schedule appointments for and complete the Army 

Career and Alumni Program/Transition Assistance Program.75 

I think a good step toward a real fix would be to make the VA and DoD to 

work together [on military transition]. Have both under the same roof and 

same office. When a service member in transition—like retirement, both 

normal and medical—their records are not looked at after the service 

member leaves service, but before. Make it a part of the out processing. No 

Service member should be released from service until it is done and 

appeals are exhausted. I have seen many Service members retire only to 

face months or even years waiting on backlogs, and unable to work.76

Dependent programs, especially DoD schools and the Exceptional Family Member 

Program (EFMP), were praised as key to the quality of life of Service families. Others, 

such as child care services, were identified as in need of improvement. 

DoD schools provide a wonderful service. They’re popular with the families 

that use them. They’re popular with the commands at the installation 

where they’re located. And they’re also popular in the communities where 

they’re located.77

Respite care and the programs through EFMP that offer assistance to those 

with special needs family members are great.78 

Regarding child care, the Child Development Centers on base are 

wonderful and the staff are very loving and nurturing toward the children. 

My complaint is that at bases with 24-hour operations, there are no 24-

hour child care facilities, limited local options, and no Family Child Care 

 

71 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 

72 Summary report, MCRMC sensing sessions, North Carolina, South Carolina, Georgia, August 18-20, 2014. 

73 Summary report, MCRMC sensing sessions, North Carolina, South Carolina, Georgia, August 18-20, 2014. 

74 Summary report, MCRMC sensing sessions, North Carolina, South Carolina, Georgia, August 18-20, 2014. 

75 Summary report, MCRMC sensing sessions, North Carolina, South Carolina, Georgia, August 18-20, 2014. 

76 MCRMC letterwriter, comment form submitted via MCRMC web site, March 20, 2014. 

77 Audience member, comment made at MCRMC town hall meeting, Fort Belvoir, Alexandria, Virginia, November 4, 

2013, http://www.mcrmc.gov/public/docs/meetings/20131104/Transcript_Nov_4_13_Town_Hall.pdf. 78 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
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homes willing to care for children on nights, weekends, or overnight when 

active-duty parents have to work. Military parents who are shift workers 

have to find nannies or some form of alternative care for their children, 

which is a huge additional expense that is not factored in and a huge 

stressor.79

Together, the letters, e-mails, testimony, and survey comments painted a deeply 

personal picture of the experiences regarding pay and benefits of our Service 

members, current and retired, and their families. These personal observations and 

suggestions helped the Commission develop avenues of inquiry, informed our 

discussions and deliberations, and directly contributed to the recommendations put 

forth in this report. The Commission thanks each person who provided comments and 

helped make the recommendations in this report better. 

 

79 Survey respondent, comment submitted via MCRMC survey, July 1, 2014 to October 10, 2014. 
 PAGE 233 

APPENDIX A: GUIDING AND 

ENABLING DOCUMENTS 

NATIONAL DEFENSE AUTHORIZATION ACT (NDAA)

FOR FISCAL YEAR 2013 

[112th Congress, Public Law 112-239, Section 671, 126 Stat. 1632, 1787 (2013)] 

SEC. 671. PURPOSE, SCOPE, AND DEFINITIONS. 

(a) PURPOSE.—The purpose of this subtitle is to establish the Military Compensation 

and Retirement Modernization Commission to conduct a review of the military 

compensation and retirement systems and to make recommendations to modernize 

such systems in order to— 

(1) ensure the long-term viability of the All-Volunteer Force by sustaining the 

required human resources of that force during all levels of conflict and economic 

conditions; 

(2) enable the quality of life for members of the Armed Forces and the other 

uniformed services and their families in a manner that fosters successful 

recruitment, retention, and careers for members of the Armed Forces and the other 

uniformed services; and 

(3) modernize and achieve fiscal sustainability for the compensation and retirement 

systems for the Armed Forces and the other uniformed services for the 21st 

century. 

(b) SCOPE OF REVIEW.— 

(1) REQUIRED ELEMENTS OF REVIEW.—In order to provide the fullest 

understanding of the matters required to balance the primary purpose of the review 

specified in subsection (a), the Commission shall make its recommendations for 

changes to the military compensation and retirement systems only after— 

(A) examining all laws, policies, and practices of the Federal Government that 

result in any direct payment of authorized or appropriated funds to— 

(i) current and former members (veteran and retired) of the uniformed 

services, including the reserve components of those services; and 

(ii) the spouses, family members, children, survivors, and other persons 

authorized to receive such payments as a result of their connection to the 

members of the uniformed services named in clause (i); 

(B) examining all laws, policies, and practices of the Federal Government that 

result in any expenditure of authorized or appropriated funds to support the 

persons named in subparagraph (A) and their quality of life, including— 

(i) health, disability, survivor, education, and dependent support programs of 

the Department of Defense and the Department of Veterans Affairs, including 

outlays from the various Federal trust funds supporting those programs; 
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(ii) Department of Education impact aid; 

(iii) support or funding provided to States, territories, colleges and 

universities; 

(iv) Department of Defense morale, recreation, and welfare programs, the 

resale programs (military exchanges and commissaries), and dependent 

school system; 

(v) the tax treatment of military compensation and benefits; and 

(vi) military family housing; and 

(C) such other matters as the Commission considers appropriate. 

(2) PRIORITIES.—In weighing its recommendations on those matters necessary to 

sustain the human resources of the All-Volunteer Force, the Commission shall— 

(A) pay particular attention to the interrelationships and interplay of impact 

between and among the various programs of the Federal Government, especially 

as those programs influence decisions of persons about joining the uniformed 

services and of members of the uniformed services about remaining in the those 

services; and 

(B) closely weigh its recommendations regarding the web of interrelated programs 

supporting spouses and families of members of the uniformed services, so that 

changes in such programs do not adversely impact decisions to remain in the 

uniformed services. 

(3) EXCEPTION.—The Commission shall not examine any program that uses 

appropriated funding for initial entry training or unit training of members of the 

uniformed services. 

(c) DEFINITIONS.—In this subtitle: 

(1) The term ‘‘Armed Forces’’ has the meaning given the term ‘‘armed forces’’ in 

section 101(a)(4) of title 10, United States Code. 

(2) The term ‘‘Commission’’ means the Military Compensation and Retirement 

Modernization Commission established by section 672. 

(3) The term ‘‘Commission establishment date’’ means the first day of the first 

month beginning on or after the date of the enactment of this Act. 

(4) The term ‘‘military compensation and retirement systems’’ means the military 

compensation system and the military retirement system. 

(5) The term ‘‘military compensation system’’ means provisions of law providing 

eligibility for and the computation of military compensation, including regular 

military compensation, special and incentive pays and allowances, medical and 

dental care, educational assistance and related benefits, and commissary and 

exchange benefits and related benefits and activities. 

(6) The term ‘‘military retirement system’’ means retirement benefits, including 

retired pay based upon service in the uniformed services and survivor annuities 

based upon such service. 

(7) The term ‘‘Secretary’’ means the Secretary of Defense. 
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(8) The term ‘‘uniformed services’’ has the meaning given that term in section 

101(a)(5) of title 10, United States Code. 

(9) The terms ‘‘veterans service organization’’ and ‘‘military related advocacy group 

or association’’ mean an organization whose primary purpose is to advocate for 

veterans, military personnel, military retirees, or military families. 

SEC. 672. MILITARY COMPENSATION AND RETIREMENT MODERNIZATION 

COMMISSION. 

(a) ESTABLISHMENT.—There is established in the executive branch an independent 

commission to be known as the Military Compensation and Retirement Modernization 

Commission. The Commission shall be considered an independent establishment of 

the Federal Government as defined by section 104 of title 5, United States Code, and a 

temporary organization under section 3161 of such title. 

(b) MEMBERSHIP.— 

(1) NUMBER AND APPOINTMENT.—The Commission shall be composed of nine 

members appointed as follows: 

(A) The President shall appoint one member. 

(B) The Majority Leader of the Senate, in consultation with the Chairman of the 

Committee on Armed Services of the Senate, shall appoint two members. 

(C) The Minority Leader of the Senate, in consultation with the Ranking Member 

of the Committee on Armed Services of the Senate, shall appoint two members. 

(D) The Speaker of the House of Representatives, in consultation with the 

Chairman of the Committee on Armed Services of the House of Representatives, 

shall appoint two members. 

(E) The Minority Leader of the House of Representatives, in consultation with the 

Ranking Member of the Committee on Armed Services of the House of 

Representatives, shall appoint two members. 

(2) DEADLINE FOR APPOINTMENT.—Members shall be appointed to the 

Commission under paragraph (1) not later than four months after the Commission 

establishment date. 

(3) QUALIFICATIONS OF INDIVIDUALS APPOINTED.—In appointing members of the 

Commission, the President and Members of Congress specified in paragraph (1) 

shall ensure that, collectively, there are members with significant expertise 

regarding the matters described in section 671. The types of specific expertise and 

experience to be considered include the following: 

(A) Federal civilian employee compensation and retirement. 

(B) Military compensation and retirement. 

(C) Private-sector compensation, retirement, or human resource systems. 

(D) Active-duty service in a regular component of the uniformed services. 

(E) Service in a reserve component. 

(F) Experience as a spouse of a member of the uniformed services. 

(G) Service as an enlisted member of the uniformed services. 
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(H) Military family policy development and implementation. 

(I) Department of Veterans Affairs benefit programs. 

(J) Actuarial science. 

(4) LIMITATION.—An individual who, within the preceding year, has been employed 

by a veterans service organization or military-related advocacy group or association 

may not be appointed to the Commission. 

(c) CHAIR.—The President shall designate one of the members of the Commission to be 

Chair of the Commission. The individual designated as Chair of the Commission shall 

be a person who has expertise in the military compensation and retirement systems. 

The Chair, or the designee of the Chair, shall preside over meetings of the Commission 

and be responsible for establishing the agenda of Commission meetings and hearings. 

(d) TERMS.—Members shall be appointed for the life of the Commission. A vacancy in 

the Commission shall not affect its powers, and shall be filled in the same manner as 

the original appointment was made. 

(e) STATUS AS FEDERAL EMPLOYEES.—Notwithstanding the requirements of section 

2105 of title 5, United States Code, including the required supervision under 

subsection (a)(3) of such section, the members of the Commission shall be deemed to 

be Federal employees. 

(f) PAY FOR MEMBERS OF THE COMMISSION.— 

(1) IN GENERAL.—Each member, other than the Chair, of the Commission shall be 

paid at a rate equal to the daily equivalent of the annual rate of basic pay payable 

for level IV of the Executive Schedule under section 5315 of title 5, United States 

Code, for each day (including travel time) during which the member is engaged in 

the actual performance of duties vested in the Commission. 

(2) CHAIR.—The Chair of the Commission shall be paid at a rate equal to the daily 

equivalent of the annual rate of basic pay payable for level III of the Executive 

Schedule under section 5314, of title 5, United States Code, for each day (including 

travel time) during which the member is engaged in the actual performance of 

duties vested in the Commission. 

SEC. 673. COMMISSION HEARINGS AND MEETINGS. 

(a) IN GENERAL.—The Commission shall conduct hearings on the recommendations it 

is taking under consideration. Any such hearing, except a hearing in which classified 

information is to be considered, shall be open to the public. Any hearing open to the 

public shall be announced on a Federal website at least 14 days in advance. For all 

hearings open to the public, the Commission shall release an agenda and a listing of 

materials relevant to the topics to be discussed. 

(b) MEETINGS.— 

(1) INITIAL MEETING.—The Commission shall hold its initial meeting not later than 

30 days after the date as of which all members have been appointed. 

(2) SUBSEQUENT MEETINGS.—After its initial meeting, the Commission shall meet 

upon the call of the Chair or a majority of its members. 
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(3) PUBLIC MEETINGS.—Each meeting of the Commission shall be held in public 

unless any member objects. 

(c) QUORUM.—Five members of the Commission shall constitute a quorum, but a 

lesser number may hold hearings. 

(d) PUBLIC COMMENTS.— 

(1) SOLICITATION.—The Commission shall seek written comments from the general 

public and interested parties on measures to modernize the military compensation 

and retirement systems. Comments shall be requested through a solicitation in the 

Federal Register and announcement on the Internet website of the Commission. 

(2) PERIOD FOR SUBMITTAL.—The period for the submittal of comments pursuant 

to the solicitation under paragraph (1) shall end not earlier than 30 days after the 

date of the solicitation and shall end on or before the date on which the Secretary 

transmits the recommendations of the Secretary to the Commission under section 

674(b). 

(3) USE BY COMMISSION.—The Commission shall consider the comments 

submitted under this subsection when developing its recommendations. 

(e) SPACE FOR USE OF COMMISSION.—Not later than 90 days after the date of the 

enactment of this Act, the Administrator of General Services, in consultation with the 

Secretary, shall identify and make available suitable excess space within the Federal 

space inventory to house the operations of the Commission. If the Administrator is not 

able to make such suitable excess space available within such 90-day period, the 

Commission may lease space to the extent the funds are available. 

(f) CONTRACTING AUTHORITY.—The Commission may acquire administrative 

supplies and equipment for Commission use to the extent funds are available. 

SEC. 674. PRINCIPLES AND PROCEDURE FOR COMMISSION 

RECOMMENDATIONS. 

(a) CONTEXT OF COMMISSION REVIEW.—The Commission shall conduct a review of 

the matters described in section 671, including current military compensation and 

retirement systems, force management objectives, and changes in life expectancy and 

the labor force. 

(b) DEVELOPMENT OF COMMISSION RECOMMENDATIONS.— 

(1) CONSISTENCY WITH PRESIDENTIAL PRINCIPLES.—Subject to paragraph (2), 

the Commission shall develop recommendations that are consistent with the 

principles established by the President under subsection (c) and section 671. 

(2) GRANDFATHERING OF RETIRED PAY.— 

(A) CONDITIONS.—In developing its recommendations, the Commission shall 

comply with the following conditions with regard to the treatment of retired pay 

for members and retired members of the uniformed services who joined a 

uniformed service before the date of the enactment of an Act to modernize the 

military compensation and retirement systems: 
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(i) For members of the uniformed services as of such date, who became 

members before the enactment of such an Act, the monthly amount of their 

retired pay may not be less than they would have received under the current 

military compensation and retirement system, nor may the date at which they 

are eligible to receive their military retired pay be adjusted to the financial 

detriment of the member. 

(ii) For members of the uniformed services retired as of such date, the 

eligibility for and receipt of their retired pay may not be adjusted pursuant to 

any change made by the enactment of such an Act. 

(B) VOLUNTARY ELECTION EXCEPTION.—Nothing in subparagraph (A) prevents 

a member described in such subparagraph from voluntarily electing to be covered 

under the provisions of an Act to modernize the military compensation and 

retirement systems. 

(c) PRESIDENTIAL PRINCIPLES.—Not later than five months after the Commission 

establishment date, the President shall establish and transmit to the Commission and 

Congress principles for modernizing the military compensation and retirement 

systems. The principles established by the President shall address the following: 

(1) Maintaining recruitment and retention of the best military personnel. 

(2) Modernizing the regular and reserve military compensation and retirement 

systems. 

(3) Differentiating between regular and reserve military service. 

(4) Differentiating between service in the Armed Forces and service in the other 

uniformed services. 

(5) Assisting with force management. 

(6) Ensuring the fiscal sustainability of the military compensation and retirement 

systems. 

(7) Compliance with the purpose and scope of the review prescribed in section 671. 

(d) SECRETARY OF DEFENSE RECOMMENDATIONS.— 

(1) DEADLINE.—Not later than nine months after the Commission establishment 

date, the Secretary shall transmit to the Commission the recommendations of the 

Secretary for modernization of the military compensation and retirement systems. 

The Secretary shall concurrently transmit the recommendations to Congress. 

(2) DEVELOPMENT OF RECOMMENDATIONS.—The Secretary shall develop the 

recommendations of the Secretary under paragraph (1)— 

(A) on the basis of the principles established by the President pursuant to 

subsection (c); 

(B) in consultation with the Secretary of Homeland Security, with respect to 

recommendations concerning members of the Coast Guard; 

(C) in consultation with the Secretary of Health and Human Services, with 

respect to recommendations concerning members of the Public Health Service; 
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(D) in consultation with the Secretary of Commerce, with respect to 

recommendations concerning members of the National Oceanic and Atmospheric 

Administration; and 

(E) in consultation with the Director of the Office of Management and Budget. 

(3) JUSTIFICATION.—The Secretary shall include with the recommendations under 

paragraph (1) the justification of the Secretary for each recommendation. 

(4) AVAILABILITY OF INFORMATION.—The Secretary shall make available to the 

Commission and to Congress the information used by the Secretary to prepare the 

recommendations of the Secretary under paragraph (1). 

(e) COMMISSION HEARINGS ON RECOMMENDATIONS OF SECRETARY.—After 

receiving from the Secretary the recommendations of the Secretary for modernization 

of the military compensation and retirement systems under subsection (d), the 

Commission shall conduct public hearings on the recommendations. 

(f) COMMISSION REPORT AND RECOMMENDATIONS.— 

(1) REPORT.—Not later than 15 months after the Commission establishment date, 

the Commission shall transmit to the President a report containing the findings and 

conclusions of the Commission, together with the recommendations of the 

Commission for the modernization of the military compensation and retirement 

systems. The Commission shall include in the report legislative language to 

implement the recommendations of the Commission. The findings and conclusions 

in the report shall be based on the review and analysis by the Commission of the 

recommendations made by the Secretary under subsection (d). 

(2) REQUIREMENT FOR APPROVAL.—The recommendations of the Commission 

must be approved by at least five members of the Commission before the 

recommendations may be transmitted to the President under paragraph (1). 

(3) PROCEDURES FOR CHANGING RECOMMENDATIONS OF SECRETARY.—The 

Commission may make a change described in paragraph (4) in the 

recommendations made by the Secretary only if the Commission— 

(A) determines that the change is consistent with the principles established by 

the President under subsection (c); 

(B) publishes a notice of the proposed change not less than 45 days before 

transmitting its recommendations to the President pursuant to paragraph (1); 

and 

(C) conducts a public hearing on the proposed change. 

(4) COVERED CHANGES.—Paragraph (3) applies to a change by the Commission in 

the recommendations of the Secretary that would— 

(A) add a new recommendation; 

(B) delete a recommendation; or 

(C) substantially change a recommendation. 

(5) EXPLANATION AND JUSTIFICATION FOR CHANGES.—The Commission shall 

explain and justify in its report submitted to the President under paragraph (1) any 

recommendation made by the Commission that is different from the 

recommendations made by the Secretary under subsection (d). 
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(6) TRANSMITTAL TO CONGRESS.—The Commission shall transmit a copy of its 

report to Congress on the same date on which it transmits its report to the 

President under paragraph (1). 

SEC. 675. CONSIDERATION OF COMMISSION RECOMMENDATIONS BY THE 

PRESIDENT. 

(a) REPORT OF PRESIDENTIAL APPROVAL OR DISAPPROVAL.—Not later than 60 

days after the date on which the Commission transmits its report to the President 

under section 674, the President shall transmit to the Commission and to Congress a 

report containing the approval or disapproval by the President of the recommendations 

of the Commission in the report. 

(b) PRESIDENTIAL APPROVAL.—If in the report under subsection (a) the President 

approves all the recommendations of the Commission, the President shall include with 

the report the following: 

(1) A copy of the recommendations of the Commission. 

(2) The certification by the President of the approval of the President of each 

recommendation. 

(3) The legislative language transmitted by the Commission to the President as part 

of the report of the Commission. 

(c) PRESIDENTIAL DISAPPROVAL.— 

(1) REASONS FOR DISAPPROVAL.—If in the report under subsection (a) the 

President disapproves the recommendations of the Commission, in whole or in part, 

the President shall include in the report the reasons for that disapproval. 

(2) REVISED RECOMMENDATIONS FROM COMMISSION.—Not later than one 

month after the date of the report of the President under subsection (a) 

disapproving the recommendations of the Commission, the Commission shall 

transmit to the President revised recommendations for the modernization of the 

military compensation and retirement systems, together with revised legislative 

language to implement the revised recommendations of the Commission. 

(3) ACTION ON REVISED RECOMMENDATIONS.—If the President approves all of 

the revised recommendations of the Commission transmitted pursuant to 

paragraph (2), the President shall transmit to Congress, not later than one month 

after receiving the revised recommendations, the following: 

(A) A copy of the revised recommendations. 

(B) The certification by the President of the approval of the President of each 

recommendation as so revised. 

(C) The revised legislative language transmitted to the President. 

(d) TERMINATION OF COMMISSION.—If the President does not transmit to Congress 

an approval and certification described in subsection (b) or (c)(3) in accordance with 

the applicable deadline under such subsection, the Commission shall be terminated 

not later than one month after the expiration of the period for transmittal of a report 

under subsection (c)(3). 
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SEC. 676. EXECUTIVE DIRECTOR. 

(a) APPOINTMENT.—The Commission shall appoint and fix the rate of basic pay for an 

Executive Director in accordance with section 3161 of title 5, United States Code. 

(b) LIMITATIONS.—The Executive Director may not have served on active duty in the 

Armed Forces or as a civilian employee of the Department of Defense during the oneyear period preceding the date of such appointment and may not have been employed 

by a veterans service organization or a military-related advocacy group or association 

during that one-year period. 

SEC. 677. STAFF. 

(a) IN GENERAL.—Subject to subsections (b) and (c), the Executive Director, with the 

approval of the Commission, may appoint and fix the rate of basic pay for additional 

personnel as staff of the Commission in accordance with section 3161 of title 5, United 

States Code. 

(b) LIMITATIONS ON STAFF.— 

(1) NUMBER OF DETAILEES FROM EXECUTIVE DEPARTMENT.—Not more than 

one-third of the personnel employed by or detailed to the Commission may be on 

detail from the Department of Defense and other executive branch departments. 

(2) PRIOR DUTIES WITHIN EXECUTIVE BRANCH.—A person may not be detailed 

from the Department of Defense or other executive branch department to the 

Commission if, in the year before the detail is to begin, that person participated 

personally and substantially in any matter concerning the preparation of 

recommendations for military compensation and retirement modernization. 

(3) NUMBER OF DETAILEES ELIGIBLE FOR MILITARY RETIRED PAY.—Not more 

than one-fourth of the personnel employed by or detailed to the Commission may be 

persons eligible for or receiving military retired pay. 

(4) PRIOR EMPLOYMENT WITH CERTAIN ORGANIZATIONS.—A person may not be 

employed by or detailed to the Commission if, in the year before the employment or 

detail is to begin, that person was employed by a veterans service organization or a 

military-related advocacy group or association. 

(c) LIMITATIONS ON PERFORMANCE REVIEWS.—No member of the uniformed 

services, and no officer or employee of the Department of Defense or other executive 

branch department, may— 

(1) prepare any report concerning the effectiveness, fitness, or efficiency of the 

performance of the staff of the Commission or any person detailed to that staff; 

(2) review the preparation of such a report; or 

(3) approve or disapprove such a report. 

SEC. 678. JUDICIAL REVIEW PRECLUDED. 

The following shall not be subject to judicial review: 

(1) Actions of the President, the Secretary, and the Commission under section 674. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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(2) Actions of the President under section 675. 

SEC. 679. TERMINATION. Except as otherwise provided in this title, the Commission 

shall terminate not later than 26 months after the Commission establishment date. 

SEC. 680. FUNDING. Of the amounts authorized to be appropriated by this Act for 

the Department of Defense for fiscal year 2013, up to $10,000,000 shall be made 

available to the Commission to carry out its duties under this subtitle. Funds made 

available to the Commission under the preceding sentence shall remain available until 

expended. 

NATIONAL DEFENSE AUTHORIZATION ACT (NDAA)

FOR FISCAL YEAR 2014 

[113th Congress, Public Law 113-66, Section 1095(b), 127 Stat. 672, 879 (2013)] 

 (b) MILITARY COMPENSATION AND RETIREMENT MODERNIZATION 

COMMISSION.— 

(1) SCOPE OF MILITARY COMPENSATION SYSTEM.—Section 671(c)(5) of the 

National Defense Authorization Act for Fiscal Year 2013 (Public Law 112–239; 126 

Stat. 1788) is amended by inserting before the period the following ‘‘, and includes 

any other laws, policies, or practices of the Federal Government that result in any 

direct payment of authorized or appropriated funds to the persons specified in 

subsection (b)(1)(A)’’. 

(2) COMMISSION AUTHORITIES.—Section 673 of such Act (126 Stat. 1790) is 

amended by adding at the end the following new subsections: 

‘‘(g) USE OF GOVERNMENT INFORMATION.—The Commission may secure 

directly from any department or agency of the Federal Government such 

information as the Commission considers necessary to carry out its duties. Upon 

such request of the Chair of the Commission, the head of such department or 

agency shall furnish such information to the Commission. 

‘‘(h) POSTAL SERVICES.—The Commission may use the United States mails in 

the same manner and under the same conditions as departments and agencies of 

the United States. 

‘‘(i) AUTHORITY TO ACCEPT GIFTS.—The Commission may accept, use, and 

dispose of gifts or donations of services, goods, and property from non-Federal 

entities for the purposes of aiding and facilitating the work of the Commission. 

The authority in this subsection does not extend to gifts of money. 

‘‘(j) PERSONAL SERVICES.— 

‘‘(1) AUTHORITY TO PROCURE.—The Commission may— 
 APPENDIX A 

 GUIDING AND ENABLING DOCUMENTS

 PAGE 243 

‘‘(A) procure the services of experts or consultants (or of organizations of 

experts or consultants) in accordance with the provisions of section 3109 

of title 5, United States Code; and 

‘‘(B) pay in connection with such services travel expenses of individuals, 

including transportation and per diem in lieu of subsistence, while such 

individuals are traveling from their homes or places of business to duty 

stations. 

‘‘(2) LIMITATION.—The total number of experts or consultants procured 

pursuant to paragraph (1) may not exceed five experts or consultants. 

‘‘(3) MAXIMUM DAILY PAY RATES.—The daily rate paid an expert or 

consultant procured pursuant to paragraph (1) may not exceed the daily 

rate paid a person occupying a position at level IV of the Executive Schedule 

under section 5315 of title 5, United States Code.’’. 

(3) COMMISSION REPORT AND RECOMMENDATIONS.—Section 674(f) of such Act 

(126 Stat. 1792) is amended— 

(A) in paragraph (1)— 

(i) by striking ‘‘15 months’’ and inserting ‘‘24 months’’; and 

(ii) by inserting ‘‘and recommendations for administrative actions’’ after 

‘‘legislative language’’; and 

(B) in paragraph (6), by inserting ‘‘, and shall publish a copy of that report on an 

Internet website available to the public,’’ after ‘‘its report to Congress’’. 

(4) PRESIDENTIAL CONSIDERATION OF COMMISSION RECOMMENDATIONS.—

Section 675 of such Act (126 Stat. 1793) is amended by striking subsection (d). 

(5) COMMISSION STAFF.— 

(A) DETAILEES RECEIVING MILITARY RETIRED PAY.—Subsection (b)(3) of 

section 677 of such Act (126 Stat. 1794) is amended— 

(i) in the paragraph heading, by striking ‘‘ELIGIBLE FOR’’ and inserting 

‘‘RECEIVING’’; and 

(ii) by striking ‘‘eligible for or receiving military retired pay’’ and inserting ‘‘who 

are receiving military retired pay or who, but for being under the eligibility age 

applicable under section 12731 of title 10, United States Code, would be 

eligible to receive retired pay’’. 

(B) PERFORMANCE REVIEWS.—Subsection (c) of such section is amended— 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

FINAL REPORT

PAGE 244 

(i) in the matter preceding paragraph (1), by inserting ‘‘other than a member of 

the uniformed services or officer or employee who is detailed to the 

Commission,’’ after ‘‘executive branch department,’’; and 

(ii) in paragraph (2), by inserting ‘‘(other than for administrative accuracy)’’ 

before the semicolon. 

(6) TERMINATION OF COMMISSION.—Section 679 of such Act (126 Stat. 1795) is 

amended by striking ‘‘26 months’’ and inserting ‘‘35 months’’. 

(7) FUNDING.—Section 680 of such Act (126 Stat. 1795) is amended— 

(A) by striking ‘‘$10,000,000’’ and inserting ‘‘$15,000,000’’; and 

(B) by adding at the end the following new sentence: ‘‘Amounts made available 

under this section after the date of the enactment of the National Defense 

Authorization Act for Fiscal Year 2014 shall be derived from fiscal year 2013 

balances that remain available for obligation on that date.’’ 
 PAGE 245 

APPENDIX B: COMMISSION 

STAFF COMPOSITION 

EXECUTIVE DIRECTOR

Robert B. Daigle 

DEPUTY EXECUTIVE DIRECTOR

Nancy C. Crisman 

PAY AND RETIREMENT PORTFOLIO

Moira N. Flanders, Associate 

 Director 

Lyle J. Hogue, Deputy 

Cheryl Blackstone, Col, USMCR 

Edna Falk Curtin 

Steven C. Cylke 

Ronald Garner, Maj, USMCR 

Matthew G. Reardon, CAPT, USNR 

Albert J. Smith, Maj, USMCR 

Derek Vestal, CDR, USN 

Jeni Tasken, Intern 

HEALTH BENEFITS PORTFOLIO

Christopher T. Meyer, Associate 

 Director 

Alexis Lasselle Ross, Deputy 

Deidra Briggs-Anthony, LTC, USA 

Trupti N. Brahmbhatt, PhD, CAPT, USN 

Gretchen S. Dietrich, Lt Col, USAF 

QUALITY OF LIFE PORTFOLIO

Susan E. Schleigh, Associate 

 Director 

Mark A. Murphy, Deputy 

Jennifer R. Knowles 

John R. O’Hara 

Pamela K. Tomlinson 

ADMINISTRATION AND OPERATIONS

Christopher Nuneviller, Associate 

Director 

Claire Zipf Giambastiani, Deputy 

Alicia Kuhar 

Tywana Sutton 

Denise L. Thompson 

Molly Ferguson, Intern 

GENERAL COUNSEL

Elizabeth DiVecchio Berrigan

OFFICE OF THE GENERAL COUNSEL

Allison C. George, Deputy General 

Counsel 

Mark Koster, Legislative Counsel 

Brandon Ford 

Mariam Gillis 

Collin Mickle 

Patrick Gunson, Legal Administrator 

Intern 

SPECIAL ADVISORS TO THE 

COMMISSION

Daniel F. Huck 

Frank Thorp IV 

PUBLIC RELATIONS AND OUTREACH

James Graybeal, Associate Director 

Shawn Woodbridge, Deputy 

LEGISLATIVE AFFAIRS

Jennifer R. Knowles 

MODELING 

Garrett Summers, Lead 

Jacqueline DePaulitte, Deputy 

Wiley Rittenhouse, LTC, USA 

WRITING, EDITING, AND REPORT 

PRODUCTION

Benjamin Bryant, Lead 

Jennifer E. McKinney, Deputy 

Donald J. Cicotte 

Wendy J. LaRue, PhD 

Christy Samuels 

WEB & TECHNICAL OPERATIONS

Thomas J. Zamberlan, Lead 

Alex Estep 

Christin Keophila Kenny, Intern 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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APPENDIX C: 

COMMISSION OUTREACH 

The Commission has conducted extensive outreach efforts with diverse stakeholders to 

gain their input and a better understanding of perceptions, concerns, and priorities 

regarding military pay and compensation programs. In particular, the Commission has 

met with numerous groups of Service members, veterans, retirees, and their family 

members to discuss the pay and benefits that support the All-Volunteer Force. In 

addition, the Commission has conducted outreach efforts through public hearings, 

town hall meetings, and conversations with representatives from Government 

Agencies, Uniformed Services, military and veterans service organizations, research 

institutions, and other commercial and not-for-profit organizations, as listed below. 

These interactions have helped create a foundation of information from which the 

Commission developed recommendations to modernize pay and compensation 

programs to do the following 

 ensure the long-term viability of the All-Volunteer Force by sustaining the 

required human resources of that force during all levels of conflict and 

economic conditions 

 enable the quality of life for members of the Armed Forces and the other 

Uniformed Services and their families in a manner that fosters successful 

recruitment, retention, and careers for members of the Armed Forces and 

the other Uniformed Services 

 modernize and achieve fiscal sustainability for the compensation and 

retirement systems for the Armed Forces and the other Uniformed Services 

for the 21st century1

PUBLIC HEARINGS AND TOWN HALL MEETINGS 

 Date Location 

November 4, 2013 Public Hearing – Fort Belvoir, Virginia 

November 4, 2013 Town Hall Meeting – Fort Belvoir, Virginia 

November 5, 2013 Public Hearing – Arlington, Virginia 

November 13, 2013 Public Hearing – Arlington, Virginia 

December 2, 2013 Town Hall Meeting – Norfolk, Virginia 

December 2-3, 2013 Public Hearings – Norfolk, Virginia 

December 11, 2013 Town Hall Meeting – Seattle, Washington 

December 11-12, 2013 Public Hearings – Seattle, Washington 

January 6, 2014 Town Hall Meeting – San Antonio, Texas 

January 6-7, 2014 Public Hearings – San Antonio, Texas 

March 25, 2014 Town Hall Meeting – Carlsbad, California 

March 26, 2014 Public Hearings – San Diego, California 

 

1 National Defense Authorization Act for FY 2013, Pub. L. No. 112-239, 126 Stat. 1632, 1787 (2013) (as amended by 

National Defense Authorization Act for FY 2014, Pub. L. No. 113-66, § 1095(b), 127 Stat. 672, 879 (2013)). 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 248 

May 22, 2014 Town Hall – Tampa, Florida 

June 25, 2014 Public Hearing – Fayetteville, North Carolina 

June 25, 2014 Town Hall – Fayetteville, North Carolina 

October 16, 2014 Town Hall – Killeen, Texas 

MILITARY INSTALLATIONS VISITED

 Beale Air Force Base, California 

 Camp Atterbury, Indiana 

 Camp Casey, South Korea 

 Commander Fleet Activities Yokosuka, Japan 

 Creech Air Force Base, Nevada 

 Defense Language Institute Foreign Language Center, California 

 Edwards Air Force Base, California 

 Eglin Air Force Base, Florida 

 Fleet Anti-Submarine Warfare Training Center, California 

 Fort Belvoir, Virginia 

 Fort Benning, Georgia 

 Fort Bragg, North Carolina 

 Fort Campbell, Kentucky 

 Fort Drum, New York 

 Fort Hood, Texas 

 Fort Hunter Liggett, California 

 Fort Indiantown Gap National Guard Training Center, Pennsylvania 

 Fort Irwin, National Training Center, California 

 Fort Rucker, Alabama 

 Fort Stewart, Georgia 

 Fort Wainwright, Alaska 

 Hunter Army Airfield, Georgia 

 Joint Base Charleston, South Carolina 

 Joint Base Elmendorf-Richardson, Alaska 

 Joint Base Lewis-McChord, Washington 

 Joint Base San Antonio-Fort Sam Houston, Texas 

 Joint Force Headquarters, California National Guard, California 

 Landstuhl Regional Medical Center, Germany 

 Marine Corps Air Ground Combat Center Twenty-Nine Palms, California 

 Marine Corps Base Camp Lejeune, North Carolina 

 Marine Corps Base Camp Pendleton, California 

 Marine Corps Base Kaneohe, Hawaii 

 Marine Corps Base Quantico, Virginia 

 Marine Corps Recruit Depot Parris Island, South Carolina 

 Marine Corps Recruiting Station 

- Chesapeake, Virginia 

 Army Recruiting Station 

- Chesapeake, Virginia 

- Hampton Roads, Virginia 

- San Antonio, Texas 

- Tampa, Florida 

 MacDill Air Force Base, Florida 

 Military Entrance Processing Station, Brooklyn, New York 

 Naval Air Station Pensacola, Florida 
 APPENDIX C 

 COMMISSION OUTREACH

 PAGE 249 

 Naval Base Point Loma, California 

 Naval Base San Diego, California 

 Naval Postgraduate School, California 

 Naval Recruiting Station 

- Chesapeake, Virginia 

- Hampton Roads, Virginia 

- San Antonio, Texas 

- San Diego, California 

- Seattle, Washington 

- Tampa, Florida 

 Naval Station Mayport, Florida 

 Naval Station Norfolk, Virginia 

 Naval Support Activity Mid-South, Tennessee 

 Nellis Air Force Base, Nevada 

 Osan Air Base, South Korea 

 Texas Army National Guard, 2/149th General Support Aviation Battalion, 

Texas 

 Travis Air Force Base, California 

 U.S. Army Garrison Stuttgart (Patch Barracks), Germany 

 U.S. Coast Guard Station Kodiak, Alaska 

 U.S. Coast Guard Station Portsmouth, Virginia 

 United States Military Academy, West Point, New York 

 United States Naval Academy, Annapolis, Maryland 

 United States Pacific Fleet, Pearl Harbor Naval Base, Hawaii 

 Wright-Patterson Air Force Base, Ohio 

 Yakota Air Base, Japan 

 Yongsan Garrison, Korea 

UNITED STATES GOVERNMENT ENGAGEMENT

Executive Agencies and Offices 

 Executive Office of the President 

- Office of Management and Budget 

 Department of the Treasury 

 Department of Defense 

- Office of the Secretary of Defense 

- Office of the Joint Chiefs of Staff 

- U.S. Army 

- U.S. Marine Corps 

- U.S. Navy 

- U.S. Air Force 

- National Guard Bureau 

 Department of Agriculture 

 Department of Commerce 

- National Oceanic and Atmospheric Administration 

 Department of Labor 

 Department of Health and Human Services 

- Centers for Medicare & Medicaid Services 

- U.S. Public Health Service 

 Department of Education 

 Department of Veterans Affairs 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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- National Cemetery Administration 

- Veterans Benefits Administration 

- Veterans Health Administration 

 Captain James A Lovell Federal Health Care Center, North Chicago, 

Illinois 

 Gulf Coast Veterans Health Care System-Joint Ambulatory Care Center, 

Pensacola, Florida 

 Veterans Affairs Southern Nevada Healthcare System, North Las Vegas, 

Nevada 

 Hampton VA Medical Center, Hampton, Virginia 

 South Texas Veterans Health Care System, San Antonio, Texas 

 VA San Diego Health Care System, San Diego, California 

 Department of Homeland Security 

- United States Coast Guard 

 U.S. Maritime Administration 

- United States Merchant Marine Academy 

 Office of Personnel Management 

 Pension Benefit Guaranty Corporation 

 Federal Retirement Thrift Investment Board 

 Quadrennial Defense Review Independent Panel 

Legislative Bodies and Offices 

 U.S. Senate 

 U.S. House of Representatives 

 Congressional Budget Office 

 U.S. Government Accountability Office 

 Congressional Research Service 

FOREIGN MILITARIES

 Australian Defence Force 

 Bundeswehr Zentraler Sanitätsdienst (Joint Medical Service), 

Federal Republic of Germany 

 United Kingdom Ministry of Defence 

- Armed Forces’ Pay Review Body 

- Joint Forces Command, Defense Medical Services, Surgeon General 

- Office of the Director General of the Army Medical Services 

OTHER ORGANIZATIONS

 Acosta Sales and Marketing 

 Air Force Aid Society 

 Air Force Association 

 Air Force Sergeants Association 

 American Academy of Actuaries 

 American Enterprise Institute 

 The American Legion 

 American Logistics Association 

 America’s Health Insurance Plans 

 Armed Forces Marketing Council 

 Army Emergency Relief 
 APPENDIX C 

 COMMISSION OUTREACH

 PAGE 251 

 Army Wife Network 

 Association of the United States Army 

 Association of the United States Navy 

 Blinded Veterans Association 

 Blue Cross and Blue Shield of Texas 

 Blue Cross Blue Shield Association 

 Blue Star Families 

 Business Executives for National Security 

 Carthage Area Hospital, Carthage, New York 

 Center for a New American Security 

 Center for Strategic and Budgetary Assessments 

 Center for Strategic and International Studies 

 Chief Warrant and Warrant Officers Association, United States Coast Guard 

 Children’s National Medical Center 

 Cigna-HealthSpring 

 Clear Channel Communications 

 ClearPoint Credit Counseling Solutions 

 CNA Corporation 

 The Coalition to Save our Military Shopping Benefits 

 The Coca-Cola Company 

 Commissioned Officers Association of the United States Public Health Service 

 Concerned Veterans for America 

 Consumer Financial Protection Bureau 

 Consumers’ Checkbook 

 Disabled American Veterans 

 Doorways to Dreams 

 Employee Benefits Research Institute 

 Enlisted Association of the National Guard of the United States 

 EverFi 

 Fairfax County Retirement Administration Office 

 FINRA Investor Education Foundation 

 Fisher House Foundation 

 Fleet Reserve Association 

 Fort Drum Regional Health Planning Organization, New York 

 George Mason University 

 George Washington University 

 Gold Star Wives of America 

 Health Net 

 Health Care Integrators 

 Humana 

 Huron Healthcare 

 Institute for Defense Analyses 

 Iraq and Afghanistan Veterans of America 

 JP Morgan Chase & Company 

 Kaiser Family Foundation 

 Kaiser Permanente 

 KeepYourPromise Alliance 

 Kraft Foods Group, Inc. 

 Lend Lease Group 

 Lewin Group 

 Lowe Campbell Ewald 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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 Macho Spouse 

 Marine Corps League 

 Marine Corps Reserve Association 

 MAZON: A Jewish Response to Hunger 

 Military Chaplains Association-United States of America 

 Military Child Education Coalition 

 Military Family Advisory Network 

 Military Officers Association of America 

 Military Order of the Purple Heart 

 The Military Produce Group/The Vectre Corporation 

 Military Saves 

 Military Spouse Magazine 

 Military.com 

 MITRE 

 National Academy of Public Administration 

 National Association for Uniformed Services 

 National Association of Chain Drug Stores 

 National Association of Counties 

 National Association of Federally Impacted Schools 

 National Guard Association of the United States 

 National Military Family Association 

 National Veterans Transition Services, Inc. 

 Naval Enlisted Reserve Association 

 Navy-Marine Corps Relief Society 

 Non-Commissioned Officers Association 

 Office of Economic and Manpower Analysis 

 Pacific Medical Centers 

 Procter & Gamble 

 Project Hope 

 Prudential Insurance 

 RAND 

 Red Sox Foundation and Massachusetts General Hospital Home Base Program 

 Reserve Officers Association 

 The Retired Enlisted Association 

 River Hospital, Inc., Watertown, New York 

 Sacred Heart Health System 

 Sacred Heart Hospital, Pensacola, Florida 

 Samaritan Medical Center, Watertown, New York 

 Scott & White Health Plan 

 Sentara Healthcare 

 SNAP administering agencies in 25 states 

 Society for Human Resources Management 

 The Spectrum Group 

 Stimson Center 

 Student Veterans of America 

 Suzi Orman Media, Inc. 

 Tampa General Hospital, Tampa, Florida 

 TRICARE for Kids Initiative 

 Troops to Engineers, San Diego State University 

 United Healthcare 

 United Services Automobile Association 
 APPENDIX C 

 COMMISSION OUTREACH

 PAGE 253 

 United States Army Warrant Officers Association 

 United States Coast Guard Chief Petty Officers Association 

 University Medical Center of Southern Nevada, Las Vegas Nevada 

 University of San Diego 

 US Family Health Plan Alliance 

 USAA Federal Savings Bank 

 USMC Life 

 Veterans of Foreign Wars 

 WEBCO General Partnership 

 WIC administering agencies on four military installations 

 Wounded Warrior Project 

 Zeiders Enterprises 

 
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APPENDIX D: COST DATA 

The Commission estimates that its modernization recommendations would reduce 

DoD budgetary costs, in FY 2016 constant dollars,1 by $31.8 billion during FY 2016–

FY 2020 and result in annual steady-state savings of $8.7 billion by FY 2046. Federal 

outlays would decrease by $11.0 billion during FY 2016–FY 2020 and by $12.6 billion 

annually starting in FY 2053. In then-year (current) dollars, Federal outlays would 

decline by $12.0 billion during FY2016-FY 2020 and by $40 billion in FY 2055. Overall 

results are shown in the following summary table, which presents expected costs to 

implement the Commission’s recommendations, costs or savings (presented as 

negative dollars shown in parentheses) within the budgets of affected Federal agencies, 

and increases or decreases in both constant and then-year Federal outlays. All costs 

and savings are presented net of implementation costs. 

For each of the Commission’s recommendations, this appendix presents cost estimates 

and key assumptions related to those estimates. For example, current Service 

members and retirees are grandfathered in to the existing retirement system,2 but may 

opt in to the modernized retirement system. The cost estimate for the Commission’s 

retirement recommendation therefore estimates the percentage of current Service 

members who will opt in to the new retirement system. 

Recommendation 1: Help more Service members save for retirement earlier in their careers, 

leverage the retention power of traditional Uniformed Services retirement, and give the 

Services greater flexibility to retain quality people in demanding career fields by 

implementing a modernized retirement system. 

The Commission estimates that its retirement recommendation would reduce DoD 

budgetary costs by $6.1 billion during FY 2016–FY 2020 and result in annual steadystate savings of $1.9 billion by FY 2046. Federal outlays would increase by $7.2 billion 

during FY 2016–FY 2020, but decrease by $4.7 billion annually starting in FY 2053. In 

this estimate, DoD budgetary reductions are the net result of decreases in DoD’s 

normal cost payments (NCPs) into the Military Retirement Fund (MRF), increases in 

automatic and matching contributions for the Service members’ Thrift Savings Plan 

(TSP) accounts, increases in Continuation Pay (CP) for midcareer retention bonuses, 

and minor funding effects from associated changes in the disability retirement system. 

Reductions in Government outlays are the net result of changes in payments from the 

MRF to retired Service members for defined benefit (DB) annuities and increases in 

 

1 Unless otherwise noted, all costs and savings are presented in FY 2016 constant dollars, which do not account for 

expected inflation. Each costing table in this appendix includes a line for Federal outlays in then-year (current) dollars, 

which do include expected inflation to better compare to estimates of National debt. 

2 National Defense Authorization Act for FY 2013, Pub. L. No. 112-239, § 674(b)(2), 126 Stat. 1632, 1791 (2013). 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation 348 218 111 120 89 ‐‐‐

DoD Budget (4,789) (4,895) (7,113) (7,367) (7,608) (8,677) (8,677) (8,677)

VA Budget 120 (2,126) (4,667) (4,478) (4,542) (4,757) (4,757) (4,757)

USDA Budget ‐ 1111 1 1 1

Federal Outlays 961 (160) (3,850) (3,858) (4,100) (12,609) (12,609) (12,609)

Federal Outlays (Then‐Year $) 961 (175) (4,073) (4,199) (4,553) (37,564) (38,748) (39,972)
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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TSP contributions and CP. Outlays are higher in the near years because Government 

contributions to Service members’ TSP accounts begin immediately upon 

implementation of the blended retirement system, yet reductions in DB payments are 

realized over time as Service members retire under the blended retirement system. 

Assumptions 

 TSP (defined contribution): The Government automatically contributes 

1 percent to Service members’ TSP accounts upon entry through 20 years of 

service (YOS). Service members are automatically enrolled to contribute 

3 percent of basic pay upon entry in to service. Service members continue to 

contribute 3 percent of basic pay annually throughout their service. The 

Government matches Service member contributions of 3 percent of basic pay 

from YOS 3-20. Service members are vested into TSP beginning at YOS 3 (for 

matching and automatic contributions from DoD). 

 DB: The defined benefit retirement multiplier is established at 2.0 and is paid to 

Active Component (AC) and Reserve Component (RC) members who serve at 

least 20 years of qualifying service. Service members have the flexibility to 

receive DB annuities prior to full Social Security retirement age as monthly 

payments, full lump sums, or partial lump sums with partial monthly 

payments. 

 CP: Basic CP is paid to Service members at 12 YOS. AC members receive 

2.5 times their monthly basic pay as Basic CP and RC members receive 

0.5 times the monthly basic pay of an AC Service member of the same rank and 

YOS as Basic CP. Additional CP is paid to Service members consistent with 

projections of the CP necessary to maintain the Services’ current force profiles 

(see Figure 31). 

 Current AC members opt in to the blended retirement system according to the 

following figure. No current RC members opt in. 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation 154 ‐‐‐‐ ‐ ‐ ‐

DoD Budget (990) (1,185) (1,238) (1,297) (1,357) (1,894) (1,894) (1,894)

Federal Outlays 522 1,564 1,645 1,719 1,792 (4,666) (4,666) (4,666)

Federal Outlays (Then‐Year $) 522 1,579 1,684 1,791 1,934 (14,853) (15,346) (15,855)
 APPENDIX D 

 COST DATA

 PAGE 257 

Figure 31. Assumed percent of Service Member Who Opt in to 

Blended Retirement3

 Implementation costs include training sessions for all AC and RC Service 

members on the Commission’s recommendations,4 as well as development of 

the necessary processes to record Service member opt-in decisions and TSP 

investment choices. The cost is estimated at $25 for each Service member.5

Using the FY 2013 total force end-strength population of 2,272,410,6 total cost 

is $113.6 million. 

 For the high-cost (low-savings) estimate, all Service members contribute 

5 percent of basic pay into their TSP accounts, the Government matches all 

5 percent of these TSP contributions, and nobody elects a lump sum DB option. 

For the low-cost (high-savings) estimate, no Service members contribute to their 

TSP accounts, there are therefore no Government matching contributions, and 

all Service members elect the full lump-sum DB option. 

Validation 

Current contributions to and future payments from the MRF are actuarially 

determined.7 The Commission therefore procured the services of RAND to assist with 

 

3 RAND Corporation, Analysis of Retirement Reform in Support of the Military Compensation and Retirement 

Modernization Commission Progress Report, November 2014 (RAND performed this analysis pursuant to a contract with 

the Commission). 

4 It is expected that these training events will provide Service members with information on the Commission’s other 

recommendations, including health benefit changes. 

5 The Department of the Army estimated that effective one-time personal financial management training could be 

delivered for $22 per soldier. Office of Economic and Manpower Analysis, Department of Social Sciences, United States 

Military Academy, Assessing Financial Education: Evidence from a Personal Financial Management Course, December 

10, 2013. 

6 End Strength Data, Military Compensation & Retirement Modernization Commission Interim Report, June 2014, 6. 7 NCPs are based on economic assumptions including annual rates of interest used to discount future cash flows; 

retirement cost of living adjustments; future across-the-board salary increases; withdrawal and retirement 

assumptions; and retiree death and “other loss” rates. Estimated NCPs related to the Commission’s recommendations 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 258 

developing estimates of NCP changes, in conjunction with DoD’s Office of the Actuary 

(OACT). RAND also estimated CP that would be necessary to maintain the Services’ 

current force profiles using its Dynamic Retention Model.8 RAND further assisted the 

Commission by estimating the percentage of existing Service members who would 

opt in to the blended retirement system, as well as the number of DB annuities that 

would be chosen as full or partial lump-sum payments. These methods were similar 

to those used in DoD’s March, 2014 white paper on military retirement.9

Recommendation 2: Provide more options for Service members to protect their pay for their 

survivors by offering new Survivor Benefit Plan coverage without Dependency and 

Indemnity Compensation offset. 

The Commission estimates that its recommendation related to the Survivor Benefit 

Plan would reduce DoD budgetary costs by $382 million during FY 2016–FY 2020 and 

result in annual steady-state savings of $160 million by FY 2042. Federal outlays 

would increase by $8 million during FY 2016–FY 2020, but be unaffected thereafter.10

In this estimate, DoD budgetary reductions are the net result of decreases in DoD’s 

NCPs into the MRF, as well as increases from new receipts from retirees opting into 

the new SBP option and therefore paying greater premiums. 

Assumptions 

 DB: SBP payments depend upon retired Service member’s DB annuity 

payments, which are consistent with the assumptions of Recommendation 1. 

 Current SBP plan: Service members’ premiums and survivors’ benefits 

(e.g., premium of 6.5 percent of retired pay for benefits of 55 percent of retired 

pay) remain the same. SBP benefits under the current SBP continue to be offset 

by Department of Veterans Affairs (VA) Dependency and Indemnity 

Compensation (DIC) payments. 

 SBP option: Service members fully fund SBP coverage with greater premiums 

(e.g., 11.25 percent of retired pay for benefits of 55 percent of retired pay).11

 are relative to baseline NCPs that were calculated using the most recent methods, assumptions, and law that underlay 

the September 30, 2014, Military Retirement Fund actuarial valuation and FY 2016 NCPs, which were approved by the 

DoD Board of Actuaries at their July, 2014, meeting. Department of Defense, Office of the Actuary, Statistical Report of 

the Military Retirement System, Fiscal Year 2013, May 2014, accessed November 22, 2014, 

http://actuary.defense.gov/Portals/15/Documents/statbook13.pdf. 

8 RAND’s Dynamic Retention Model, (DRM) involves simulations of the impact of compensation and retirement policy 

changes on active and reserve retention as well as on cost and outlays, in the steady state as well as in the transition 

to the steady state. 

9 Department of Defense, Concepts For Modernizing Military Retirement, http:// 

www.mcrmc.gov/public/docs/report/pr/Concepts_for_Modernizing_Military_Retirement_SBP_FN_15_16_27.pdf. 10 SBP payments are partly based on the DB retirement multiplier. Changes in Federal outlays associated with SBP 

payments that result from establishing the DB retirement multiplier at 2.0 are included in the costs and savings of 

Recommendation 1. 

11 Annual premiums for the recommended SBP options will be established annually by DoD’s Office of the Actuary. For 

FY 2013, the premium to fully fund SBP payments would have been 11.25 percent of retired pay. 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation 4 4 ‐‐‐ ‐ ‐ ‐

DoD Budget (66) (66) (80) (80) (90) (160) (160) (160)

Federal Outlays 4 4 ‐‐‐ ‐ ‐ ‐

Federal Outlays (Then‐Year $) 4 4 ‐‐‐ ‐ ‐ ‐
 APPENDIX D 

 COST DATA

 PAGE 259 

SBP benefits under this option are not offset by DIC payments. Approximately 

16 percent of retiring Service members choose the new SBP option. 

 Implementation costs include communication of the new SBP option to retiring 

Service members, retirees, and their families. For retiring Service members, 

communication is achieved during the mandatory transition assistance 

program. For current retirees, a mail campaign is initiated to inform them of the 

open season opportunity to choose the SBP option. 

 For the high-cost (low-savings) estimate, no Service member elects the lump 

sum DB option. For the low-cost (high-savings) estimate, every Service member 

elects the full lump-sum DB annuity payment option. Service members who 

choose the lump sum DB annuity payment option have their lump-sum 

payment amount reduced by the total amount (for 360 months) of their SBP 

premium cost. 

Validation 

Current contributions to and future payments from the MRF are actuarially 

determined. The Commission therefore developed estimates of NCP changes in 

conjunction with the OACT and RAND. RAND further assisted the Commission by 

estimating the percentage of existing Service members who would opt in to the SBP 

option. These methods were similar to those used in DoD’s March, 2014 white paper 

on military retirement.12

Recommendation 3: Promote Service members’ financial literacy by implementing a more 

robust financial and health benefit training program. 

The Commission estimates that its recommendation related to financial literacy would 

increase DoD budgetary costs and Federal outlays by $400 million during FY 2016–

FY 2020 and result in annual steady-state cost increases of $75 million by FY 2019. In 

this estimate, increased costs fund a substantial enhancement in the financial 

training provided to Service members and their families, including training by 

professional certified financial advisors and an online budget planner that is linked 

electronically to Service members’ restructured Leave and Earnings Statements 

(LESs). Costs are estimated by multiplying costs per training event by the number of 

Service members to be trained. 

Assumptions 

 Training is provided, on average, to each Service member annually. This 

training includes initial-entry training for all new entrants and for all personnel 

ranked E4/O3 and below upon arrival at each duty station, all members at the 

 

12Department of Defense, Concepts For Modernizing Military Retirement, http:// 

www.mcrmc.gov/public/docs/report/pr/Concepts_for_Modernizing_Military_Retirement_SBP_FN_15_16_27.pdf. 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation 10 10 5 ‐‐ ‐ ‐ ‐

DoD Budget 85 85 80 75 75 75 75 75

Federal Outlays 85 85 80 75 75 75 75 75

Federal Outlays (Then‐Year $) 85 87 83 80 81 156 159 162
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 260 

vesting point for the TSP program, on dates of promotion (up to pay grades E5 

and O4), for major life events, during leadership and pre- and postdeployment 

training, at transition, and upon the request of Service members. Using the 

FY 2013 total force end-strength population, there are 2,272,410 training 

events annually.

 The cost per training is $33 per Service member. 

 DoD estimates enhanced financial literacy training would reduce the number of 

Service members involuntarily separated due to financial problems, thereby 

saving $13 million to $137 million annually.13 These estimates are not included 

in the Commission’s cost estimates. 

 Implementation costs include development of training curriculum, procurement 

of professional trainers services, and development of an online budget planner 

linked to Service members’ LESs.

 For the high-cost (low-savings) estimate, the cost per training event is 

$44 (twice the Army’s estimate). For the low-cost (high-savings) estimate, the 

cost per training event is $22 (equal to the Army’s estimate). 

Validation 

The Department of the Army estimated that effective one-time personal financial 

management training could be delivered for $22 per soldier.14 Because the 

Commission’s recommendation includes professional training, the Army’s estimate is 

increased by 50 percent. 

Recommendation 4: Increase efficiency within the Reserve Component by consolidating 

30 Reserve Component duty statuses into 6 broader statuses. 

The Commission estimates that its recommendation related to RC duty statuses would 

reduce annual DoD budgetary costs and Federal outlays by streamlining paperwork 

and other processes related to mobilizations of RC Service members. These savings are 

expected to be minimal and are not included in the Commission’s cost estimates.

Recommendation 5: Ensure Service members receive the best possible combat casualty care 

by creating a joint readiness command, new standards for essential medical capabilities, and 

innovative tools to attract readiness-related medical cases to military hospitals. 

The Commission estimates that its recommendation related to medical readiness 

would increase DoD budgetary costs and Federal outlays by $1.1 billion during 

FY 2016–FY 2020 and result in annual steady-state cost increases of $298 million by 

FY 2018. In this estimate, these costs result from increases in operating expenses 

associated with establishing a new four-star Joint Readiness Command (JRC). 

 

13 79 Fed. Reg. 58601 (September 29, 2014). See also “Shielding troops from high interest rates may help DoD,” 

Military Times, accessed October 8, 2014, 

http://www.militarytimes.com/article/20141008/NEWS/310080053/Shielding-troops-from-high-interest-ratesmayhelp-DoD. 

14 Office of Economic and Manpower Analysis, Department of Social Sciences, United States Military Academy, 

Assessing Financial Education: Evidence from a Personal Financial Management Course, December 10, 2013.
 APPENDIX D 

 COST DATA

 PAGE 261 

Assumptions 

 Annual JRC operating costs equal the average operating costs of the existing 

Combatant Commands,15 excluding U.S. Transportation Command 

(TRANSCOM) and U.S. Special Operations Command (SOCOM) because of their 

unique funding situations.16 Although actual costs may be less, because some 

functions may be transferred to the JRC from existing DoD organizations 

(e.g., the Joint Staff), estimates of such transfers are not included in this cost 

estimate. 

Table 24. Annual Combatant Command Funding Level17

 Implementation costs represent 10 percent of the baseline steady-state cost 

estimate to fund detailed planning for JRC establishment. 

 For the high-cost (low-savings) estimate, JRC operating costs are set at the 

highest cost of a Combatant Command, excluding TRANSCOM and SOCOM. 

For the low-cost (high-savings) estimate, JRC operating costs are set at the 

lowest cost of a Combatant Command, excluding TRANSCOM and SOCOM. 

Validation 

Costs are based on internal Commission assessments of existing Combatant 

Command funding. 

Recommendation 6: Increase access, choice, and value of health care for active-duty family 

members, Reserve Component members, and retirees by allowing beneficiaries to choose 

from a selection of commercial insurance plans offered through a Department of Defense 

health benefit program. 

The Commission estimates that its health benefit recommendation would reduce DoD 

budgetary costs by $26.5 billion during FY 2016–FY 2020 and result in annual steady-

 

15 Feickert, Andrew, “The Unified Command Plan and Combatant Commands: Background and Issues for Congress,” 

Congressional Research Service, January 3, 2013, 12. 

16 Ibid. TRANSCOM is predominantly funded through customer orders and SOCOM receives operational funding. 17 Ibid. FY 2016 costs extended from 2013 by using DoD Comptroller inflation rates from the National Defense Budget 

Estimates for 2015, Table 5-2, 52. 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation 20 10 ‐‐‐ ‐ ‐ ‐

DoD Budget 20 159 298 298 298 298 298 298

Federal Outlays 20 159 298 298 298 298 298 298

Federal Outlays (Then‐Year $) 20 162 310 316 322 619 631 644

FY13 FY16

USAFRICOM $285,022,000 $299,805,477

USCENTCOM $179,266,000 $188,564,141

USEUCOM $119,267,000 $125,453,122

USNORTHCOM $200,114,000 $210,493,482

USPACOM $300,097,000 $315,662,385

USSOUTHCOM $206,342,000 $217,044,515

USSTRATCOM $689,821,000 $725,600,529

Average $282,847,000 $297,517,664
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 262 

state savings of $6.7 billion by FY 2033. Federal outlays would decrease by 

$3.9 billion during FY 2016–FY 2020 and $3.2 billion annually starting in FY 2033. In 

this estimate, these reductions are the net result of decreases in costs for providing 

the health care benefits, decreased cost shares for some beneficiaries, and increased 

cost shares for other beneficiaries. The decline in DoD budgetary costs also results 

from accrual funding non-Medicare-eligible retiree health benefit costs. In developing 

this estimate, the Commission worked closely with the Office of Personnel 

Management (OPM); procured the services of the Institute for Defense Analyses (IDA) 

to conduct health benefit pricing analyses; and relied upon data from OPM related to 

beneficiary demographics, choices, and health care plans in the Federal Employees 

Health Benefit Program (FEHBP).18 

Assumptions 

Assumptions used in this estimate are detailed in IDA’s report titled “Analyses of 

Military Healthcare Benefit Design and Delivery: Study in Support of the Military 

Compensation and Retirement Modernization Commission.”19 Key assumptions 

include the following: 

 The commercial health insurance plan choices of Federal civilians of similar 

age, income, and state are a proxy for the choices of DoD military beneficiaries. 

 The plans offered to DoD military beneficiaries are managed separately 

(i.e., a separate risk pool) from Federal civilians with their own plan types, 

coverage requirements, and pricing. 

 Each AC Service member with at least one dependent receives a Basic 

Allowance for Health Care (BAHC) that covers the median health insurance plan 

premium and average copayments in the dependent’s location. 

 AC Service members pay 28 percent of the premium for their families’ health 

insurance plan (covered by BAHC), retirees pay 20 percent of their plan 

premiums, and all beneficiaries pay copayments (covered by BAHC for 

AC family members). 

 Retiree cost shares increase to 20 percent of plan premiums according to the 

ramp shown in Figure 32. 

 

18 The Office of Personnel Management provided support for the Commission’s analysis, however such support does not 

represent an endorsement of, or suggest any opinion on, the report, study, or recommendations. 

19 Horowitz, S., P. Lurie, and S. Burns, “Analyses of Military Healthcare Benefit Design and Delivery: Study in Support 

of the Military Compensation and Retirement Modernization Commission,” Institute for Defense Analyses, November, 

2014, http://www.mcrmc.gov. 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation 100 100 ‐‐‐ ‐ ‐ ‐

DoD Budget (3,900) (3,900) (6,173) (6,234) (6,292) (6,666) (6,666) (6,666)

Federal Outlays 100 100 (1,242) (1,374) (1,507) (3,229) (3,229) (3,229)

Federal Outlays (Then‐Year $) 100 104 (1,341) (1,541) (1,756) (13,295) (13,813) (14,352)
 APPENDIX D 

 COST DATA

 PAGE 263 

Figure 32. Gradual Ramp of Retiree Cost Shares 

(1 percent annually)20

 The percentage of eligible beneficiaries who do not use TRICARE health benefits 

remains constant. 

 Approximately one-fifth of non-Medicare-eligible retirees and a very small 

number of AC family members do not use TRICARE.21 These beneficiaries have 

historically been referred to as “ghosts” because they are not visible in the 

TRICARE system, but could return and become active users in the future. 

Although IDA’s baseline estimate holds these nonuse rates constant, the 

Commission’s recommendation improves the quality of the health benefit 

(choice, access, etc.) and raises cost shares for beneficiaries. Improving quality 

could increase the number of users; higher costs shares could reduce the 

number of users. IDA estimated that increasing the number of users with 

higher quality benefits would reduce annual cost savings by $1 billion.22

Conversely, decreasing the number of users because of greater cost share would 

increase annual savings by $1 billion.23 These reductions and increases to 

annual savings form the basis for the Commission’s high and low cost 

estimates. 

 IDA analyzed a wide range of other excursions to test its cost estimates, 

including sensitivity to plan-choice behavior, effects of demographic changes on 

plan prices, and ways in which different beneficiary incentives may affect plan 

choices. The results of these excursions are described in detail in the IDA 

report. 

 

20 The FEHBP premium cost share can vary with the plan selected, 28 percent is used here for illustrative purposes. 21 Horowitz, S., P. Lurie, and S. Burns, “Analyses of Military Healthcare Benefit Design and Delivery: Study in Support 

of the Military Compensation and Retirement Modernization Commission,” Institute for Defense Analyses, November, 

2014. 

22 Ibid. 

23 Ibid. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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Validation 

The Commission validated the results of this cost estimate with several high-level 

estimation methods. For example, the estimate is consistent with testimony received 

by the Commission, as well as DoD reporting on health care costs, and may 

understate likely savings from modernizing the health care benefit: 

 Outside Experts: The Commission received testimony that moving to a 

commercial insurance program could reduce health care costs by 24 percent,24

which equates to approximately $5 billion annual reduction to Federal outlays. 

This is greater than IDA’s baseline estimate of health care cost reductions,25 in 

part because IDA assumes some potential savings will be reinvested to provide 

health benefit improvements (i.e., better health care plans with more access, 

choice of providers, etc.). 

 DoD Proposals: Testimony to the Commission from health care experts also 

indicated that slightly more than half of health care savings would result from 

increased cost shares for beneficiaries, with the remainder resulting from 

nonprice tools used by civilian health insurers.26 DoD has estimated that 

increasing cost shares within the current TRICARE system, which does not use 

nonprice tools, would save approximately $2 billion annually.27 DoD’s estimated 

savings are somewhat more than half of IDA’s estimate, which is consistent 

with the expert testimony received by the Commission.28

 Congressional Budget Office (CBO) Proposals: CBO’s 2014 report on TRICARE 

reform options provides two validations of IDA’s estimate.29 First, CBO reports 

that current annual per-person costs to provide health benefits to TRICARE 

Prime enrollees and Standard/Extra users are $4,800 and $3,900, 

respectively.30 These values imply the total cost of health benefits for the 

relevant DoD military beneficiary population is similar to IDA’s estimate. 

Second, CBO estimates annual savings from only changes in beneficiary cost 

shares to be approximately $2 billion.31 Like DoD estimates, CBO’s proposals 

are consistent with IDA’s estimate for a reform that combines both price and 

nonprice reform tools. 

 DoD Reporting to the Congress: On March 5, 2014, DoD provided to the 

Congress a comparison of the costs of TRICARE beneficiaries to 

demographically similar civilians.32 Multiplying the savings identified in the 

 

24 Testimony of Dr. Gail Wilensky, Project Hope, to the Commission on April 9, 2014. 

25 Horowitz, S., P. Lurie, and S. Burns, “Analyses of Military Healthcare Benefit Design and Delivery: Study in Support 

of the Military Compensation and Retirement Modernization Commission,” Institute for Defense Analyses, November, 

2014, 8. 

26 Testimony of Dr. Gail Wilensky, Project Hope, to the Commission on April 9, 2014. 

27 Department of Defense, Fiscal Year 2015 Budget Request, Overview, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/fy2015_Budget_Request_Overview_Book.pd

f, p. 5-13. 

28 Testimony of Dr. Gail Wilensky, Project Hope, to the Commission on April 9, 2014. 

29 Congressional Budget Office, Approaches to Reducing Federal Spending on Military Health Care, 8, January 2014, 

http://www.cbo.gov/sites/default/files/44993-MilitaryHealthcare.pdf. 

30 Ibid. 

31 Ibid, 28. 

32 Department of Defense, The Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report, 

91 & 93, accessed January 12, 2015, 

http://www.health.mil/~/media/MHS/Report%20Files/TRICARE2014_02_25_14v5%201.ashx. 
 APPENDIX D 

 COST DATA

 PAGE 265 

report by the number of affected military beneficiaries suggests annual savings 

of approximately $5 billion in Federal outlays, which is very similar to the 

expert testimony described above and greater than IDA’s savings estimate. 

 Review of Previous Comparisons: The Commission also reviewed available 

previous studies of health benefit costs under TRICARE and civilian health 

insurance. These studies compared proposals that differ from the Commission’s 

recommendation (e.g., placing DoD beneficiaries in the FEHBP).33 For example, 

these studies generally assumed that the DoD beneficiary population was 

demographically similar to the Federal civilian workforce, implying similar 

health risk, plan choices, and premium costs.34 As IDA’s report demonstrates, 

DoD’s military beneficiary population is substantially younger than the Federal 

civilian workforce, resides in different locations, and has different income 

levels.35 Each of these factors affects health care costs, commercial insurance 

plan premiums, and therefore, estimated costs savings. For these reasons, the 

Commission found IDA’s estimate to be more realistic than previous studies. 

Out-of-Pocket (OOP) Costs 

The Commission’s recommendation balances two competing factors: the desire to 

preserve low-cost health benefits (particularly for active-duty family members 

(ADFMs)) and the need to give beneficiaries “skin in the game” to incentivize more 

efficient health care utilization. The introduction of BAHC enables the use of a 

common and well understood compensation tool (an allowance) to bring an important 

innovation from civilian health care (first-dollar responsibility for routine health care). 

Allowing beneficiaries to keep BAHC amounts not spent on health care provides 

appropriate incentives to use health benefits efficiently. To determine appropriate 

BAHC levels, out-of-pocket (OOP) costs were compared under the current TRICARE 

system and the Commission’s recommended health benefit. As shown below, annual 

OOP costs for the average ADFM household that does not currently have an individual 

enrolled in TRICARE Young Adult would be $500 less under the recommended health 

benefit.36 OOP costs would be $2,500 less under the recommended health benefit for 

the average ADFM household that has an individual currently enrolled in TRICARE 

Young Adult. 

 

33 See Congressional Budget Office Cost Estimate, H.R. 1222, Keep Our Promise to America’s Military Retirees Act, 

February 28, 2007, and Department of Defense, T4 Study Group Final Report, January 17, 2012. 

34 Ibid. 

35 Horowitz, S., P. Lurie, and S. Burns, “Analyses of Military Healthcare Benefit Design and Delivery: Study in Support 

of the Military Compensation and Retirement Modernization Commission,” Institute for Defense Analyses, November, 

2014. 

36 Actual out-of-pocket costs will depend on the health plan selected by the ADFM household. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 266 

Table 25. Comparison of FY 2014 Out-of-Pocket (OOP) Costs for 

Active-Duty Service Members without TRICARE Young Adult37

Table 26. Comparison of FY 2014 Out-of-Pocket (OOP) Costs for 

Active-Duty Service Members with TRICARE Young Adult38

Some families, predominantly those with chronic conditions or a catastrophic illness, 

have OOP costs that exceed the average. For example, in the United States in 2009, 

the lowest-cost half of the population accounted for approximately 3 percent of 

national health care spending, and the highest-cost 5 percent of the population 

accounted for half of national health care spending.39 ADFM households that were 

 

37 In the following tables and figure, “copay” is used to represent all nonpremium out-of-pocket costs. MCRMC 

calculations based on data from pages 90 and 92 of Department of Defense, The Evaluation of the TRICARE Program: 

Access, Cost, and Quality, Fiscal Year 2014 Report, accessed January 11, 2015, 

http://www.health.mil/~/media/MHS/Report%20Files/TRICARE2014_02_25_14v5%201.ashx. 

38 MCRMC calculations based on data from pages 90 and 92 of Department of Defense, The Evaluation of the TRICARE 

Program: Access, Cost, and Quality, Fiscal Year 2014 Report, accessed January 11, 2015, 

http://www.health.mil/~/media/MHS/Report%20Files/TRICARE2014_02_25_14v5%201.ashx. “TRICARE Young 

Adult Costs,” TRICARE, accessed January 11, 2015, http://www.tricare.mil/Costs/HealthPlanCosts/TYA.aspx. 39 National Institute for Health Care Management, “The Concentration of Health Care Spending,” July 2012, accessed 

December 8, 2014, http://www.nihcm.org/pdf/DataBrief3%20Final.pdf. 

Current State Enrolled in Prime Standard/Extra User Average

Current OOP Costs $97 $493 $177

Recommended State Enrolled in HMO Enrolled in PPO Average

OOP w/ Private Insurance $561 $920 $830

BAHC Payment $920 $920 $920

Delta of BAHC and Actual Cost $359 $0 $90

Net Effect on ADFM

Savings to Family $457 $493 $464

Current State Enrolled in Prime Standard/Extra User Average

Current OOP Costs $97 $493 $177

TRICARE Young Adult Premium $2,160 $1,872 $2,102

TRICARE Young Adult OOP Costs $0 $194 $39

Total ADFMCosts $2,257 $2,559 $2,318

Recommended State Enrolled in HMO Enrolled in PPO Average

OOP w/ Private Insurance $561 $920 $830

BAHC Payment $920 $920 $920

Delta of BAHC and Actual Cost $359 $0 $90

Net Effect on ADFM

Savings to Family $2,617 $2,559 $2,605
 APPENDIX D 

 COST DATA

 PAGE 267 

enrolled in TRICARE Prime in FY 2013 had a similar cost distribution.40 The lowestcost half of the ADFM households accounted for 9 percent of the costs of ADFM 

households in TRICARE Prime, and the highest-cost 5 percent of households 

accounted for 34 percent of the total cost.41 

To mitigate the financial risks of chronic and catastrophic illnesses to ADFM 

households, the Commission recommends establishing a program to provide these 

households with additional support for OOP expenses. The following chart displays a 

comparison of net current ADFM household OOP costs to estimated OOP costs under 

the recommended health benefit. The comparison assumes that ADFM households 

would receive $920 of BAHC to cover OOP costs; the total effect of the recommended 

health benefit is the combination of this BAHC and commercial insurance copayments 

and deductibles. When a household experiences a catastrophic illness or has a 

member who is diagnosed with a high-cost chronic condition, the Service member will 

be able to apply to this program for additional funding to cover OOP expenses. Based 

on the analysis below, funding this program with $50 million annually would allow for 

the complete coverage of excess net medical expenses greater than $2,000 per year for 

all ADFM households that find themselves in such a situation. This estimate was 

created by taking the estimated OOP amount for the top 4 percent of the distribution 

and setting aside the difference between that forecasted expense amount and $2,000 

above the BAHC amount. 

Figure 33. Comparison of Out-of-Pocket Cost Distributions42

 

40 Commission calculation based on data from Military Health System Management Analysis and Reporting Tool: 

Inpatient Admissions (SIDR), Professional Encounters (CAPER), PC Institutional (TED-II), PC Non-Institutional (TED-N). 

Data for family units, not individuals, was used, making the comparison different. 41 Ibid. 

42 Ibid. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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Based on this analysis, ADFM households can be divided into several categories: 

 Approximately 7 percent of ADFM households would have no OOP expenses in 

a year. The $920 BAHC amount would be equivalent to a $920 pay raise. 

 Approximately 70 percent of ADFM households would have some OOP expenses 

that would be totally covered by the $920 BAHC amount. These households 

would have some remaining BAHC that would be the equivalent of a pay raise. 

 Approximately 8 percent of ADFM households would have OOP expenses in 

excess of the $920 BAHC amount, but their net OOP expense would still be less 

than their payment under the current TRICARE program.43 These households 

would get the equivalent of a pay raise for the difference between their projected 

(lower) expenses under the Commission’s recommendation and their existing 

(higher) expenses under the current TRICARE program.44

 Approximately 15 percent of ADFM households would have higher OOP 

expenses under the Commission’s recommendation. Approximately one-quarter 

of these households would experience a substantial increase in their expenses. 

It is for this category that the Commission recommends a secondary program to 

assist with OOP costs for chronic or catastrophic illnesses. 

Health Care Funding 

The Commission’s recommendation substantially improves the transparency of 

funding of the Military Health System (MHS). As shown in the following charts, the 

MHS is currently resourced by multiple funding categories (operations and 

maintenance, procurement, military personnel, etc.), rather than supported mission 

(readiness vs. beneficiary health care). 45 

 

43 Commission calculation based on data from Military Health System Management Analysis and Reporting Tool: 

Inpatient Admissions (SIDR), Professional Encounters (CAPER), PC Institutional (TED-II), PC Non-Institutional (TED-N). 44 Commission calculation based on data from Military Health System Management Analysis and Reporting Tool: 

Inpatient Admissions (SIDR), Professional Encounters (CAPER), PC Institutional (TED-II), PC Non-Institutional (TED-N). 45 Department of Defense, The Evaluation of the TRICARE Program: Access, Cost, and Quality, Fiscal Year 2014 Report,

20, accessed January 11, 2015, 

http://www.health.mil/~/media/MHS/Report%20Files/TRICARE2014_02_25_14v5%201.ashx. Abbreviations: 

MILCON = Military Construction, MILPERS = Military Personnel, DHP = Defense Health Program, O&M = Operations 

and Maintenance, RDT&E = Research, Development, Test, and Evaluation, MERHCF = Medicare-Eligible Retiree Health 

Care Fund.
 APPENDIX D 

 COST DATA

 PAGE 269 

Figure 34. Current MHS Resourcing 

The Commission recommendations result is a more streamlined, efficient flow of MHS 

resources, thereby improving MHS transparency, effective management, and the 

ability to identify and protect readiness funding. 

Figure 35. Proposed MHS Resourcing46

Under the Commission’s recommendation, medical readiness operations would be 

funded from the Services, with oversight from the JRC. Beneficiary costs would be 

 

46 Abbreviations: MILCON = Military Construction, MILPERS = Military Personnel, O&M = Operations and 

Maintenance, RDT&E = Research, Development, Test, and Evaluation, MERHCF = Medicare-Eligible Retiree Health 

Care Fund, OPM = Office of Personnel Management, MTF = Military Treatment Facility, WCF = Working Capital Fund. 

The reimbursement rates received by MTFs for the care they deliver to beneficiaries covered by the commercial 

insurance will contain funding for military construction. That funding would likely be transferred to MILCON accounts 

for execution. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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funded from the Services’ Military Personnel (MILPERS) and Military Construction 

(MILCON) accounts. This approach makes these costs separately identifiable and 

allows for the direct monitoring of readiness funding. The key flows of funding 

illustrated in the figure above include the following:

 AC Service member health benefits are funded from MILPERS accounts and 

transferred to the DoD trust fund for use in paying for health care.

 ADFM health benefits are funded from MILPERS accounts and transferred to 

the DoD Trust Fund for dental and pharmacy benefits and OPM Trust Fund for 

commercial health plans.

 Retiree (both Medicare eligible and non-Medicare-eligible) health benefits are 

funded from MILPERS and paid into the Medicare Eligible Retiree Health Care 

Fund. Major disbursements from the fund include payments to the OPM Trust 

Fund for commercial health plans for non-Medicare-eligible retirees and to the 

Military Treatment Facility revolving fund and purchased care for the pharmacy 

benefit of non-Medicare-eligible retirees and for all benefits for Medicare-eligible 

retirees.

Recommendation 7: Improve support for Service members’ dependents with special needs 

by aligning services offered under the Extended Care Health Option to those of state 

Medicaid waiver programs. 

The Commission estimates that its recommendation related to the Extended Care 

Health Option (ECHO) would increase DoD budgetary costs and Federal outlays by 

$715 million during FY 2016–FY 2020 and result in annual steady-state cost 

increases of $190 million by FY 2018. In this estimate, increased costs result from the 

expansion of services that are covered under the ECHO program, which lead current 

ECHO participants to use more services and additional eligible Service families to 

enroll in ECHO. The existing funding cap of $36,000 per fiscal year per dependent 

remains in place.47

Assumptions 

 The average FY 2016 cost per participant for capped services under ECHO 

increases from $2,490 to $18,748.48 In 2011, the average per-person cost of 

services provided by Medicaid Home and Community Based Services (HCBS) 

program, which offers services similar to those under the proposed ECHO 

 

47 National Defense, 32 CFR 199.5(f)(3)(i). 48 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, October 

20, 2014 and Department of Defense Annual Report to Congress on Plans for DoD for Support of Military Family 

Readiness, FY 2013, 45, received from Department of the Army, e-mail to MCRMC, May 22, 2014. 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation 2 1 ‐‐‐ ‐ ‐ ‐

DoD Budget 49 96 190 190 190 190 190 190

Federal Outlays 49 96 190 190 190 190 190 190

Federal Outlays (Then‐Year $) 49 99 205 213 221 782 813 844
 APPENDIX D 

 COST DATA

 PAGE 271 

expansion, varied by state from $7,702 to $40,049, with an overall average cost 

of $17,174 per person.49

 ECHO enrollment increases by 25 percent. In FY 2013, 8,094 DoD Exceptional 

Family Members (EFMs) received ECHO benefits.50 Under the proposed 

expansion 10,118 EFMs would receive ECHO benefits. 

 Implementation costs include analyzing HCBS waivers across states to 

determine which services should be added to ECHO, how best to add them, and 

how to create a model to support consumer-directed care for select services. 

 The implementation timeline assumes the current restriction on respite care 

will be removed and substantially more EFMs will access this benefit in 

FY 2016. Based on the analysis performed by DoD in FY 2016, new services will 

be added and accessed in FY 2017, with full implementation by FY 2018. 

 For the high-cost (low-savings) estimate, costs are increased by 20 percent to 

adjust for the uncertainty related to increased ECHO enrollment and average 

per-person costs. For the low-cost (high-savings) estimate, costs are decreased 

by 20 percent to adjust for the uncertainty related to increased ECHO 

enrollment and average per-person costs. 

Validation 

The Commission validated the expected increase in average cost for ECHO 

beneficiaries using the current average patient cost reported by the Medicaid HCBS 

program. Given that this recommendation aligns ECHO benefits with the HCBS 

program, this should be a strong indicator of the resulting costs. The estimated 

increase in ECHO program participants was validated through discussions with 

military family support and advocacy groups. These discussions indicated that 

increased access to benefits such as respite care is a frequently discussed topic and 

would clearly motivate additional participation in the ECHO program. 

Recommendation 8: Improve collaboration between Department of Defense and Veterans 

Affairs by enforcing coordination on electronic medical records, a uniform formulary for 

transitioning Service members, common services, and reimbursements. 

The Commission estimates that its recommendation related to collaboration between 

DoD and VA would reduce annual DoD budgetary costs and Federal outlays by 

reducing costs for electronic health record development and maintenance, as well as 

by increasing resource-sharing between the Departments. Costs would increase from 

expanding VA’s drug formulary to ensure continuity of medical care for transitioning 

Service members. Net funding changes depend upon the collaboration initiatives that 

are pursued by the Departments and are not included in the Commission’s cost 

estimates.

 

49 The Henry J. Kaiser Family Foundation, Medicaid Home and Community-Based Services Programs: 2010 Data 

Update, 2, accessed January 12, 2015, http://files.kff.org/attachment/report-medicaid-home-and-community-basedservices-programs-2011-data-update. 

50 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, 

October 20, 2014 and Department of Defense Annual Report to Congress on Plans for DoD for Support of Military 

Family Readiness, FY 2013, 45, received from Department of the Army, e-mail to MCRMC, May 22, 2014. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 272 

Recommendation 9: Protect both access to and savings at Department of Defense 

commissaries and exchanges by consolidating these activities into a single defense resale 

organization. 

The Commission estimates that its recommendation related to DoD commissaries and 

exchanges would decrease DoD budgetary costs and Federal outlays by $1.0 billion 

during FY 2016–FY 2020 and result in annual steady-state savings of $515 million by 

FY 2021. In this estimate, these reductions result from a series of efficiencies, 

primarily in consolidating back office functions, logistics systems, and staffing. 

Numerous studies have projected that both financial savings and nonfinancial benefits 

can be achieved through a consolidation of the three exchanges.51 Including the 

commissaries in such a consolidation increases potential efficiencies. The 

recommendation proposes a new defense resale executive team that would be 

responsible for evaluating, selecting, and implementing these potential efficiencies. 

Realized costs and savings therefore depend upon the set of efficiencies selected for 

implementation. 

Assumptions 

 Consolidation of logistics networks: Various studies have estimated the annual 

savings achievable through a consolidation of logistics networks among the 

three exchanges.52 In 2005, the Unified Exchange Task Force (UETF) estimated 

that $75 million in annual savings was initially available and an additional 

$75 million to $150 million could be achieved with more aggressive integration. 

Combining these saving estimates, adjusting for inflation, and applying a 

30 percent reduction to account for efficiencies implemented since 2005, 

annual savings are estimated to be $149 million. Additional savings achieved by 

including commissaries are not reflected in this estimate. 

 Consolidation of staffing: The UETF estimated that 8.9 percent of exchange 

support staff could be reduced through consolidation of the three exchanges.53

Applying this percentage to above-store management and support positions of 

commissaries and exchanges, annual savings are $112 million. 

 

51 Office of the Assistant Secretary of Defense (Force Management and Personnel), DoD Study of the Military Exchange 

System, September 7, 1990. See also Logistics Management Institute, Report PL110R1, Toward a More Efficient Military 

Exchange System, July 1991. See also Systems Research and Applications (SRA) International, Integrated Exchange 

System Task Force Analysis, 1996. See also PricewaterhouseCoopers, Joint Exchange Due Diligence, 1999, See also

Unified Exchange Task Force, Modified Business Case Analysis for Military Exchange Shared Services, August 26, 

2005. 

52 Office of the Assistant Secretary of Defense (Force Management and Personnel), DoD Study of Military Exchanges, 

September 7, 1990, 1-7. See also Unified Exchange Task Force, Modified Business Case Analysis for Military Exchange 

Shared Services, August 26, 2005, 64. 53 Unified Exchange Task Force, Modified Business Case Analysis for Military Exchange Shared Services, Appendix B: 

Alternative Descriptions, August 26, 2005, B-61 (based on a reduction from a baseline of 7,690 full-time equivalents to 

7,005). 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation 58 93 106 120 89 ‐‐‐

DoD Budget 17 (78) (184) (313) (426) (515) (515) (515)

Federal Outlays 17 (78) (184) (313) (426) (515) (515) (515)

Federal Outlays (Then‐Year $) 17 (79) (192) (332) (461) (1,071) (1,092) (1,114)
 APPENDIX D 

 COST DATA

 PAGE 273 

 Consolidation of supplies and services procurement: The cost of operating 

supplies and services is reduced by jointly procuring these items across 

commissaries and exchanges. The UETF estimated $37 million in associated 

annual savings for the exchanges.54 This cost estimate includes the same 

annual savings, adjusted for inflation, even though the UETF did not include 

consolidation of the commissaries. This savings estimate does not include the 

procurement of goods for resale. 

 Consolidation of capital expenditures: Capital expenditures are reduced by 

collectively planning, negotiating, and executing capital purchases, such as 

facilities and information technology (IT) systems, for commissaries and 

exchanges. The UETF analysis estimated $10 million could be saved annually 

through consolidation of routine procurements of IT equipment.55 This cost 

estimate includes the same annual savings, adjusted for inflation, even though 

the UETF did not incorporate potential savings from common procurement, 

refresh of major IT systems, or consolidation of the commissaries.56 

 Consolidation of retail space: In some areas of military concentration, multiple 

exchanges and commissaries are operated within close proximity. Consolidation 

of some of these facilities provides annual savings of $8 million.57

 Use of the MILITARY STAR® Card at commissaries: The MILITARY STAR® Card 

is a “private label” credit card provided by AAFES that allows the exchanges to 

avoid credit card processing fees and to profit from the interest that card 

holders pay on outstanding balances.58 Based on data and analysis provided by 

AAFES, exchange customers, on average, make 20 percent of their purchases 

using the MILITARY STAR® Card, maintain a balance approximately equal to 

15 percent of their purchases, and pay a 10.24 percent financing rate.59 

Expanding use of the MILITARY STAR® Card to 15 percent of commissary 

purchases yields approximately $11 million in additional annual revenue. 

 Reduction of second destination transportation (SDT) costs: In FY 2013, 

approximately $331 million of appropriated funds (APF) was spent on shipping 

goods from the United States to overseas commissaries and exchanges.60

Increased local sourcing reduces annual SDT costs by 10 percent, or 

$33 million. 

 

54 Unified Exchange Task Force, Modified Business Case Analysis for Military Exchange Shared Services, Executive 

Summary, August 26, 2005. 55 Ibid, E-1. 

56 Unified Exchange Task Force, Modified Business Case Analysis for Military Exchange Shared Services, Appendix D: 

Cost Basis of Estimate, August 26, 2005. 57 Based on information provided by DeCA, the average cost of operating a commissary was approximately $4 million in 

FY 2012, e-mail to MCRMC, May 6, 2014. 

58 Army and Air Force Exchange Service, Memorandum for ASD (R&FM), Army and Air Force Exchange Service (AAFES) 

Response to Commissary Legislative Proposal, March 17, 2014. Tom Shull, Chief Executive Officer, Army & Air Force 

Exchange Service Overview, briefing to MCRMC, June 10, 2014. AAFES, briefing to discuss AAFES response to 

Commissary legislative proposals with MCRMC, July 2, 2014. 59 Ibid. 

60 Commissary SDT data ($152 million for FY 2013) provided by Defense Commissary Agency, e-mail to MCRMC, 

May 6, 2014. Exchange SDT data ($179 million for FY 2013) provided by Office of the Under Secretary of Defense for 

Personnel and Readiness, e-mail to MCRMC, November 6, 2014. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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 Expansion of commissary sales with variable pricing: Changes to laws and 

policies, combined with a consolidation of commissaries and exchanges 

facilitates the commissaries selling new items at a profit, including beer and 

wine, convenience items (e.g., greeting cards, school supplies, cosmetics), and 

private-label (store brand) products. Based on an overall increase in the sale of 

these products by the consolidated organization, annual profits increase by 

$45 million. 

 Conversion of the commissary workforce from APF to nonappropriated fund 

(NAF) employees: Commissary personnel continue to be funded by APF. Based 

partially on a 2002 DoD internal study,61 however, converting the commissary 

workforce to NAF employees who are funded by APF reduces staffing costs by 

$110 million. This estimate includes an increase in staffing costs for exchanges 

associated with adding grocery employees to NAF wage surveys. 

 Implementation cost estimates are based, where possible, on estimates provided 

in source studies. When scaling exchange estimates to apply to commissaries, 

the relative sizes of their sales, infrastructures, and staffs were considered. 

Implementation periods are assumed to be between 1 and 5 years, depending 

on the complexity of the change. Implementation costs are distributed across 

these years, accounting for time to modify laws and policies and dependencies 

on other changes. For conversion of commissary staff, 30 percent of the 

assumed transition-period savings are assumed as transition-period costs. 

 High-cost (low-savings), and low-cost (high-savings) estimates, for each 

efficiency or cost-saving effort, wherever possible, are based on ranges provided 

in the cited studies. In other cases, cost uncertainty is made using consistent 

categories: high (+100, -50 percent), medium (+50, -30 percent), and low 

(+20, -10 percent) uncertainty. Similar categories are for savings: high 

(+50, -80 percent), medium (+50, -30 percent), and low (+20, -10 percent) 

uncertainty. These categories were assigned based on the availability of reliable 

analysis. 

Validation 

The Commission validated the results of this cost estimate using several high-level 

estimation methods. For example, the estimate is consistent with testimony received 

by the Commission, discussions with leadership of the commissaries and exchanges, 

and multiple studies conducted by DoD. Information drawn from studies was 

validated, where possible, against similar information in other studies and reports, 

including the following: 

 DoD Study of the Military Commissary System, DoD62

 Study of the Military Exchange System, DoD63

 

61 DeCA Nonappropriated Fund Workforce – Feasibility and Desirability, DASD (MC&FP) and DASD (CPP) In-Progress 

Review, June 26, 2002. 

62 The Jones Commission, DoD Study of the Military Commissary System, December 18, 1989, provided by OSD (P&R) 

via CD on June 11, 2014. 
 APPENDIX D 

 COST DATA

 PAGE 275 

 Toward a More Efficient Military Exchange System, Logistics Management 

Institute64

 Potential Reductions to the Operation and Maintenance Programs, United 

States General Accounting Office (GAO)65

 DoD Review of GAO Report on Military Commissaries and Exchanges, DoD66

 Military Exchange System Study, Systems Research and Applications (SRA) 

International67

 Joint Exchange Due Diligence, PricewaterhouseCoopers68

 Briefing on Joint Exchange Due Diligence Study, Assistant Secretary of Defense 

(Force Management Policy)69

 Modified Business Case, UETF70

Recommendation 10: Improve access to child care on military installations by ensuring the 

Department of Defense has the information and budgeting tools to provide child care within 

90 days of need. 

The Commission’s child care recommendation would not have a direct effect on annual 

DoD budgetary costs or Federal outlays. The recommendation reestablishes the 

authority to use operating funds for minor construction projects to create or modify 

Child Development Program (CDP) facilities. The proposal only has financial 

implications if the Services chose to fund projects under this authority. DoD may also 

address local needs and waiting times by funding additional CDP staff or expanding 

home- or community-based child care programs. Existing staff will track wait time 

data and implement the position description changes, as well as those contained in 

the proposed rules for background checks on individuals employed by DoD in child 

care services programs. These costs are expected to be minimal and are not included 

in the Commission’s cost estimates. 

 63 Office of the Assistant Secretary of Defense (Force Management and Personnel), DoD Study of the Military Exchange 

System, http://www.mcrmc.gov/public/docs/report/qol/DoD_Study-of-Military-Exchange-System_Sep1990.pdf. 64 “Toward a More Efficient Military Exchange System,” Logistics Management Institute, Report PL110R1, July 1991, 

accessed November 20, 2014, 

http://oai.dtic.mil/oai/oai?verb=getRecord&metadataPrefix=html&identifier=ADA255738. 65 Government Accountability Office, Potential Reductions to Operation and Maintenance Program, GAO/NSIAD-95-

200BR, September, 1995, 12, accessed December 21, 2014, http://www.gpo.gov/fdsys/pkg/GAOREPORTS-NSIAD-95-

200BR/pdf/GAOREPORTS-NSIAD-95-200BR.pdf. 

66 DoD Review of GAO Report on Military Commissaries and Exchanges, December 9, 1995, provided by OSD (P&R) via 

CD on June 11, 2014. 

67 Systems Research and Applications (SRA) International, Integrated Exchange System Task Force Analysis, 1996, 

accessed December 21, 2014, http://www.mcrmc.gov/public/docs/report/qol/1996_Exchange_StudySRA_International-Provided_by_OSD-11JUN2014_DeRA-FN45.pdf. 

68 PricewaterhouseCoopers, Joint Exchange Due Diligence, 1999. 69 Briefing on Joint Exchange Due Diligence Study, Assistant Secretary of Defense (Force Management Policy), 16 

October 2000, provided by OSD (P&R) via CD on June 11, 2014. 

70 Unified Exchange Task Force, Modified Business Case Analysis for Military Exchange Shared Services, August 26, 

2005, provided to MCRMC by the Office of the Under Secretary of Defense for Personnel and Readiness, June 11, 2014. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 276 

Recommendation 11: Safeguard education benefits for Service members by reducing 

redundancy and ensuring the fiscal sustainability of education programs. 

The Commission estimates that its recommendation related to Service member 

education would reduce DoD budgetary costs by $87 million during FY 2016–FY 2020 

and result in annual steady-state savings of $17 million upon implementation. Federal 

outlays would decrease by $15.6 billion during FY 2016–FY 2020 and $4.8 billion 

annually starting in FY 2025. In this estimate, changes in DoD budgetary costs result 

from elimination of unemployment benefits for veterans who are using Post-9/11 

GI Bill benefits. Reductions in Government outlays primarily accrue to VA, which 

funds the Montgomery GI Bill-Active Duty (MGIB-AD), Reserve Education Assistance 

Program (REAP), and the Post-9/11 GI Bill. 

Assumptions 

 These cost estimates are based on a model developed by the Commission to 

estimate future costs of the Post-9/11 GI Bill and its components,71 including 

Service member/veteran tuition, Service member/veteran housing stipend, 

transferred tuition, and transferred housing stipend. The model is populated 

with historical data from DoD and VA on utilization and transference of Post9/11 GI Bill and force structure data for FY 2009 through FY 2013. Future 

force structure and Service member YOS are projected. Future transfer of 

benefits to spouses and children, as well as the utilization of benefits by Service 

members, veterans, and their dependents, are consistent with historical data. 

 Sunsetting the MGIB-AD increases annual costs of education benefits by 

$98 million initially. In FY 2013, the average payment to a MGIB-AD student 

was $8,551, compared to the average payment to a Post-9/11 GI Bill student of 

$13,465.72 This cost estimate includes reductions to payments to the 

Department of the Treasury, which currently receives $1,200 from each Service 

member signing up for the MGIB-AD.73 These costs decrease over time because 

MGIB-AD participation is already decreasing as more Service members choose 

the Post-9/11 GI Bill.74

 Sunsetting REAP increases annual costs of education benefits by $22 million 

initially. In FY 2013, REAP students received an average payment of only 

 

71 The Commission was unable to obtain such cost projections from DoD or VA. 72 U.S. Department of Veterans Affairs, Congressional Budget Submission for FY 2015 Volume III Benefits and Burial 

Programs and Departmental Administration, VBA-33. 73 Veterans’ Benefits, 38 U.S.C. § 3011(b). 74 Data provided by Office of the Under Secretary of Defense for Personnel and Readiness, e-mail to MCRMC, 

September 26, 2014. 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation ‐‐‐‐‐ ‐ ‐ ‐

DoD Budget (17) (17) (17) (17) (17) (17) (17) (17)

VA Budget 120 (2,126) (4,667) (4,478) (4,542) (4,757) (4,757) (4,757)

Treasury Budget 48 42 36 30 24 ‐‐‐

Federal Outlays 151 (2,102) (4,649) (4,466) (4,535) (4,774) (4,774) (4,774)

Federal Outlays (Then‐Year $) 151 (2,144) (4,836) (4,739) (4,909) (9,929) (10,127) (10,329)
 APPENDIX D 

 COST DATA

 PAGE 277 

$4,028.75 These incremental costs are expected to decrease over time because 

REAP participation is already declining.76

 Eliminating unemployment benefits of veterans receiving housing stipend 

payments as part of Post-9/11 GI Bill reduces DoD unemployment payments by 

approximately 2 percent.77 In FY 2013, the Services paid $828 million in 

unemployment benefits.78 A 2 percent reduction decreases annual 

unemployment costs by $17 million. 

 Eliminating the housing stipend for dependents who receive Post-9/11 GI Bill 

benefits through transfer, and changing the eligibility requirement for 

transferring Post-9/11 GI Bill benefits from 6 years of service (YOS), with a 

4-year additional commitment, to 10 YOS, with a 2-year additional 

commitment, reduces annual costs by $4.8 billion. 

 DoD and VA currently collect some limited data on students enrolled in 

programs with the Post-9/11 GI Bill and Tuition Assistance. Expanded data 

collection for those enrolled in these programs should be incorporated into the 

existing system, limiting the cost to the VA and DoD. Because these costs are 

expected to be limited, they are not estimated. 

 No significant implementation costs are identified. 

 For the high-cost (low-savings) estimate, 10 percent is added to all cost 

estimates to adjust for uncertainties. For the low-cost (high-savings) estimate, 

10 percent is reduced from all cost estimates to adjust for uncertainties. 

Validation 

The Commission validated the results of this estimate using the internally generated 

cost model described above. As expected, this model predicted cost increases beyond 

simpler projections that were based solely on historical growth and general inflation. 

This accelerating growth in cost is also consistent with the inputs received from 

Service members and advocacy groups indicating the increasing awareness and 

utilization of education assistance, either by Service members or their dependents. 

Estimated costs for the MGIB-AD and REAP programs were also validated against 

historical costs and trends. 

Recommendation 12: Better prepare Service members for transition to civilian life by 

expanding education and granting states more flexibility to administer the Jobs for Veterans 

State Grants Program. 

The Commission estimates that its recommendation related to transition benefits 

would increase DoD budgetary costs and Federal outlays by $65 million during 

 

75 U.S. Department of Veterans Affairs, Congressional Budget Submission for FY 2015 Volume III Benefits and Burial 

Programs and Departmental Administration, VBA-33. 76 Ibid. 

77 Data was not available to precisely calculate the number of Service members simultaneously receiving 

unemployment compensation and BAH benefits under the Post-9/11 GI Bill. 78 Department of Defense, Budget Amendment to the Fiscal Year 2015 President’s Budget Request for Overseas 

Contingency Operations (OCO), June 2014, accessed September 25, 2014, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2015/amendment/fy2015_m1a.pdf. 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

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PAGE 278 

FY 2016–FY 2020 and result in annual steady-state cost increases of $13 million upon 

implementation. In this estimate, these cost increases result from requiring greater 

participation in the Transition GPS education track, which is currently optional, 

thereby increasing the number of mandatory transition classes. 

Assumptions 

 In FY 2013 DoD spent $123 million for Transition GPS.79 Increasing mandatory 

training is expected to increase DoD program costs by 10 percent, or 

$13 million in FY 2016. 

 Increasing attendance of One-Stop Career Center employees at Transition GPS 

classes, and expanding their reporting, is not expected to affect costs. 

 Requiring a one-time report to the Congress regarding the challenges employers 

face when seeking to hire veterans is not expected to be substantial and was 

not estimated. 

 Implementation costs are expected to be negligible. 

 For the high-cost (low-savings) estimate, costs are increased by 10 percent to 

adjust for the uncertainty of current participation in the Transition GPS 

education track. For the low-cost (high-savings) estimate, costs are decreased 

by 10 percent to adjust for the uncertainty of current participation in the 

Transition GPS education track. 

Validation 

The Commission validated the cost increases associated with modifications to the 

Transition GPS course using historical program funding costs. The assessment that 

One-Stop Career Center employees can increase their participation in Transition GPS 

classes with no significant increase in personnel costs was validated through 

discussions with individuals serving as Disabled Veterans’ Outreach Program 

Specialists and/or Local Veterans’ Employment Representatives.80

Recommendation 13: Ensure Service members receive financial assistance to cover 

nutritional needs by providing them cost-effective supplemental benefits. 

The Commission estimates that its recommendation related to the Family Subsistence 

Supplemental Allowance (FSSA) program would reduce DoD budgetary costs by 

$4 million during FY 2016–FY 2020 and result in annual steady-state savings of 

$1 million by FY 2017. Federal outlays would not be substantially affected by this 

 

79 MCRMC, Report of the Military Compensation and Retirement Modernization Commission: Interim Report, June 2014, 

248-267 and 284, http://www.mcrmc.gov/index.php/reports. 

80 Virginia Employment Commission Workforce Center, discussion with MCRMC, October 3, 2014. 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation ‐‐‐‐‐ ‐ ‐ ‐

DoD Budget 13 13 13 13 13 13 13 13

Federal Outlays 13 13 13 13 13 13 13 13

Federal Outlays (Then‐Year $) 13 13 14 14 14 27 28 28
 APPENDIX D 

 COST DATA

 PAGE 279 

recommendation. In this estimate, these reductions result from elimination of the 

FSSA program in the United States and other regions in which benefits are available 

under the Department of Agriculture’s Supplemental Nutrition Assistance Program 

(SNAP). Government outlays would not change substantially, because benefits received 

under FSSA would instead be provided under SNAP. 

Assumptions 

 FY 2013 funding for the FSSA program was $1.1 million.81 Assuming 

75 percent of FSSA recipients reside in locations in which SNAP is available, 

sunsetting FSSA in such locations reduces DoD costs by approximately 

$0.9 million. 

 SNAP costs increase by approximately $1 million. As discussed in the findings 

section for this recommendation, SNAP payments are often larger than those 

received through FSSA. 

 Implementation costs are expected to be negligible. 

Validation 

The Commission validated estimates of cost reductions in DoD and the additional cost 

imposed on the Department of Agriculture through an internal analysis of data from 

the Defense Manpower Data Center. These data included much of the input used in 

the determination of SNAP and FSSA payments for Service members, allowing the 

Commission to validate estimates of the difference between the payments an 

individual might receive under each program and the demographics of eligible Service 

member households. 

Recommendation 14: Expand Space-Available travel to more dependents of Service members 

by allowing travel by dependents of Service members deployed for 30 days or more. 

The Commission estimates that its recommendation related to space-available travel 

would not have a noticeable effect on annual DoD budgetary costs or Federal outlays. 

This recommendation reprioritizes the use of available spaces for unofficial travel, but 

does not propose any change in the operation of military aircraft. The only costs 

expected with this recommendation are those associated with changing DoD 

regulations, local waiting list processes, and associated informational material. These 

costs are expected to be minimal and are not included in the Commission’s cost 

estimates.

 

81 Seventy-five percent of FY 2013 FSSA recipients resided in CONUS. Director of Military Compensation, Office of 

Personnel and Readiness, data supplied by e-mail to MCRMC, August 13, 2014. Of the 80 recipients stationed 

overseas, 62 were in Germany. Director of Military Compensation, Office of Personnel and Readiness, data supplied by 

e-mail to MCRMC, September 5, 2014. 

$ Millions 2016 2017 2018 2019 2020 2053 2054 2055

Implementation ‐‐‐‐‐ ‐ ‐ ‐

DoD Budget ‐ (1) (1) (1) (1) (1) (1) (1)

USDA Budget ‐ 1111 1 1 1

Federal Outlays ‐‐‐‐‐ ‐ ‐ ‐

Federal Outlays (Then‐Year $) ‐‐‐‐‐ ‐ ‐ ‐
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

FINAL REPORT

PAGE 280 

Recommendation 15: Measure how the challenges of military life affect children’s school 

work by implementing a national military dependent student identifier. 

The Commission estimates that its recommendation related to a military dependent 

student identifier would not have a noticeable effect on annual DoD budgetary costs or 

Federal outlays. Establishing a national military student identifier requires changes to 

processes and data systems at the local, state, and national levels, which rely upon a 

variety of technologies. Some advocates have described the necessary modification 

costs to be small,82 and they are not included in the Commission’s cost estimates. 

 

82 “Issue 9: Assign an identifier for military children in education data systems,” USA4Military Families Initiative, 

accessed September 17, 2014, http://www.usa4militaryfamilies.dod.mil/MOS/f?p=USA4:ISSUE:0::::P2_ISSUE:9. 

(Adding a field in an existing student information system should cause minimal additional cost, especially if the state 

has a single statewide system for collecting education data.) 
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

SPECIAL ADVISORS TO THE COMMISSION

Mr. Daniel F. Huck

Mr. Frank Thorp IV

DEPUTY GENERAL COUNSEL

Ms. Allison C. George

LEADERSHIP DEPUTIES AND TEAM LEADS

Mr. Benjamin Bryant

Ms. Claire Zipf Giambastiani

Dr. Lyle J. Hogue

Ms. Jennifer R. Knowles

Mr. Mark A. Murphy

Ms. Alexis Lasselle Ross

Mr. Garrett Summers

Ms. Shawn Woodbridge

Mr. Thomas J. Zamberlan

REPORT CREDITS

INTERIM AND FINAL REPORT VOLUMES

Mr. Benjamin Bryant, Lead Writer, Editor, and Production Manager

Ms. Jennifer E. McKinney, Managing Editor

Dr. Wendy J. LaRue, Senior Editor

Mr. Donald J. Cicotte, Portfolio Writer and Editor

Ms. Christy Samuels, Portfolio Writer and Editor

PROPOSED LEGISLATIVE LANGUAGE VOLUME

Mr. Mark Koster, Legislative Counsel

GRAPHIC DESIGN (ALL VOLUMES)

Mr. Carl B. Berry III

WWW.MCRMC.GOV
MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION

WWW.MCRMC.GOV