S. HRG. 114–28 

TESTIMONY OF THE MILITARY COMPENSATION 

AND RETIREMENT MODERNIZATION COMMISSION 

HEARINGS 

BEFORE THE

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE 

AND 

BEFORE THE

SUBCOMMITTEE ON PERSONNEL 

OF THE

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 3, 11, 25, 2015 

Printed for the use of the Committee on Armed Services 

( 

TESTIMONY OF THE MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION 

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WASHINGTON : 

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94–844 PDF 2015

S. HRG. 114–28 

TESTIMONY OF THE MILITARY COMPENSATION 

AND RETIREMENT MODERNIZATION COMMISSION 

HEARINGS 

BEFORE THE

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE 

AND 

BEFORE THE

SUBCOMMITTEE ON PERSONNEL 

OF THE

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 3, 11, 25, 2015 

Printed for the use of the Committee on Armed Services 

( 

Available via the World Wide Web: http://www.fdsys.gov/ 

COMMITTEE ON ARMED SERVICES 

JOHN MCCAIN, Arizona, Chairman 

JAMES M. INHOFE, Oklahoma 

JEFF SESSIONS, Alabama 

ROGER F. WICKER, Mississippi 

KELLY AYOTTE, New Hampshire 

DEB FISCHER, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

JONI ERNST, Iowa 

THOM TILLIS, North Carolina 

DAN SULLIVAN, Alaska 

MIKE LEE, Utah 

LINDSEY GRAHAM, South Carolina 

TED CRUZ, Texas 

JACK REED, Rhode Island 

BILL NELSON, Florida 

CLAIRE MCCASKILL, Missouri 

JOE MANCHIN III, West Virginia 

JEANNE SHAHEEN, New Hampshire 

KIRSTEN E. GILLIBRAND, New York 

RICHARD BLUMENTHAL, Connecticut 

JOE DONNELLY, Indiana 

MAZIE K. HIRONO, Hawaii 

TIM KAINE, Virginia 

ANGUS S. KING, JR., Maine 

MARTIN HEINRICH, New Mexico 

CHRISTIAN D. BROSE, Staff Director 

ELIZABETH L. KING, Minority Staff Director 

SUBCOMMITTEE ON PERSONNEL

LINDSEY GRAHAM, South Carolina, Chairman 

ROGER F. WICKER, MISSISSIPPI

TOM COTTON, Arkansas 

THOM TILLIS, North Carolina 

DAN SULLIVAN, Alaska 

KIRSTEN E. GILLIBRAND, NEW YORK

CLAIRE MCCASKILL, Missouri 

RICHARD BLUMENTHAL, Connecticut 

ANGUS S. KING, JR., Maine 

(II) 

C O N T E N T S 

FEBRUARY 3, 2015

Page 

THE FINDINGS OF THE MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION ................................................................................................. 1 

Maldon, Hon. Alphonso Jr., Chairman, Military Compensation and Retirement Modernization Commission; Accompanied by Commissioners Hon. 

Larry L. Pressler, Hon. Stephen E. Buyer, Hon. Dov S. Zakheim, Michael 

R. Higgins, GEN Peter W. Chiarelli, USA (Ret.), Hon. J. Robert Kerrey, 

and Hon. Christopher P. Carney ........................................................................ 4 

Questions for the Record ......................................................................................... 57 

Appendix A—Final Report of the Military Compensation and Retirement 

Modernization Commission ................................................................................. 74 

Appendix B—Legislative Proposals of the Military Compensation and Retirement Modernization Commission ....................................................................... 366 

Appendix C—Addendum to the Report of the Military Compensation and 

Retirement Modernization Commission ............................................................. 525 

Appendix D—Statement of the Fleet Reserve Association ................................... 590 

Appendix E—Statement of the Air Force Association .......................................... 600 

Appendix F—Statement of the Commissioned Officers Association ................... 604 

Appendix G—Statement of the Concerned Veterans for America ....................... 616 

Appendix H—Statement of the Enlisted Association of the National Guard ..... 622 

Appendix I—Statement of the National Association for Uniformed Services .... 634 

Appendix J—Statement of the National Defense Industrial Association ........... 639 

Appendix K—Statement by the Reserve Officers Association ............................. 646 

Appendix L—Joint Letter ....................................................................................... 655 

Appendix M—Statement of the Veterans of Foreign Wars of the United 

States .................................................................................................................... 668 

Appendix N—Statement of the Warrant Officers Association ............................. 680 

Appendix O—Letter from the Conjoined Military/Veterans Service Organization ........................................................................................................................ 683 

FEBRUARY 11, 2015

THE RETIREMENT AND COMPENSATION PROPOSALS OF THE MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION ............................. 695 

Zakheim, Hon. Dov S., Commissioner, Military Compensation and Retirement 

Modernization Commission; Accompanied by Commissioners Hon. Larry 

L. Pressler, Hon. Dov S. Zakheim, Michael R. Higgins, GEN Peter W. 

Chiarelli, USA (Ret.), and ADM Edmund P. Giambastiani, Jr., USN (Ret.) .. 696 

Parke Holleman, Deirdre, Executive Director, The Retired Enlisted Association ........................................................................................................................ 714 

Frank, Robert L., Chief Executive Officer, Air Force Sergeants Association ..... 719 

(III) 

Page

IV 

Jones, Richard A., Legislative Director, National Association for Uniformed 

Services ................................................................................................................. 723 

Nicholson, Alexander, Legislative Director, Iraq and Afghanistan Veterans 

of America ............................................................................................................. 727 

Questions for the Record ......................................................................................... 736 

FEBRUARY 25, 2015

THE HEALTHCARE RECOMMENDATIONS OF THE MILITARY COMPENSATION AND

RETIREMENT MODERNIZATION COMMISSION ........................................................ 741 

Maldon, Hon. Alphonso, Jr., Chairman, Military Compensation and Retirement Modernization Commission; Accompanied by Commissioners Hon. Stephen E. Buyer, Michael R. Higgins, GEN Peter W. Chiarelli, USA (Ret.), 

and ADM Edmund P. Giambastiani, Jr., USN (Ret.) ....................................... 742 

Raezer, Joyce W., Executive Director, National Military Family Association .... 770 

Ryan, VADM Norbert R., Jr., USN (Ret.), President and Chief Executive 

Officer, Military Officers Association of America .............................................. 795 

Snee, Thomas J., National Executive Director, Fleet Reserve Association ........ 802 

Hargett, Major General Gus L., Jr., ARNG (Ret.), President, National Guard 

Association of the United States ......................................................................... 807 

Questions for the Record ......................................................................................... 818 

(1) 

THE FINDINGS OF THE MILITARY COMPENSATION AND RETIREMENT MODERNIZATION 

COMMISSION 

TUESDAY, FEBRUARY 3, 2015 

U.S. SENATE, 

COMMITTEE ON ARMED SERVICES, 

Washington, DC. 

The committee met, pursuant to notice, at 9:33 a.m. in room SD– 

G50, Dirksen Senate Office Building, Senator John McCain (chairman) presiding. 

Committee members present: Senators McCain, Inhofe, Sessions, 

Wicker, Ayotte, Fischer, Cotton, Rounds, Ernst, Tillis, Sullivan, 

Lee, Graham, Reed, McCaskill, Manchin, Gillibrand, Donnelly, 

Hirono, Kaine, King, and Heinrich. 

OPENING STATEMENT OF SENATOR JOHN MCCAIN, CHAIRMAN 

Chairman MCCAIN. Good morning. The committee meets this 

morning to receive testimony from the commissioners of the Military Compensation and Retirement Modernization Commission. 

I want to thank each commissioner for your diligence and hard 

work over many months to develop the recommendations you will 

present to us today. Our witnesses today are the commission chairman, the Honorable Alphonso Maldon, Jr., the Honorable Larry 

Pressler, the Honorable Stephen Buyer, the Honorable Dov 

Zakheim, Mr. Michael Higgins, General Peter Chiarelli—and I understand that Senator Bob Kerrey is snowed in, in New York—and 

the Honorable Christopher Carney. 

This year, a signature issue for this committee will be thoughtful 

consideration of the commission’s recommendations to modernize 

military compensation and retirement benefits. As we do, I encourage the members of this committee and my colleagues in the House 

and the Senate to keep an open mind. 

We are also eager to hear from any military or other organizations that have constructive ideas to improve the current system. 

No one has a monopoly on good ideas, and we all come to this debate as patriots who love our Nation’s Armed Forces and want to 

improve the quality of life for all who serve and their families. 

We honor the service and sacrifices of servicemembers and their 

families, Active Duty, Guard, and Reserve. We pledge to keep their 

well-being foremost in our thoughts as we deliberate the commission’s recommendations. 

But upholding our sacred obligation to them does not mean resisting change at every turn. We must not shrink from the opporVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
2 

tunity before us to create a modern system of compensation and retirement benefits that would provide greater value and choice for 

those it serves. 

Congress established the commission in the National Defense 

Authorization Act for the Fiscal Year 2013 to conduct a review of 

the military compensation and retirement systems, and to make 

recommendations for modernization. We asked the commission to 

develop recommendations that would, one, ensure the long-term viability of the All-Volunteer Force during all levels of conflict and 

economic conditions; two, improve the quality of life for 

servicemembers and their families to ensure successful recruitment, retention, and careers for those members; and three, modernize and achieve fiscal sustainability for the compensation and 

retirement systems in the 21st century. 

The military’s current compensation and retirement systems are 

decades old and in their current form may be less than suitable for 

modern-day military members. Today, we have a nearly 70-year-old 

military retirement system and TRICARE, the military’s health 

program, was implemented in the mid-1990s. 

Both the retirement system and TRICARE were appropriate for 

their time, but clearly, times have changed. We are here today to 

learn how the commission’s recommendations could make compensation and benefits better for the military members and families of our current forces and forces of the future. 

Moreover, in a world of multiple threats and increasing danger, 

we count on young Americans to enlist or commit to serve in an 

All-Volunteer Force that protects us and our families. As this committee evaluates the commission’s recommendations to modernize 

military compensation and benefits, we must carefully consider 

how any changes in compensation and benefits will motivate young 

people of today to serve in the 21st century. 

In a constrained fiscal environment, we must consider how best 

to achieve the proper balance between providing attractive compensation and benefits for our troops and paying for military modernization and readiness, effective equipment, and advanced training that will enable our military to respond in moments of crisis 

and keep our citizens safe. 

We can meet both of these objectives, and we must. Clearly, we 

will not have enough time today for a complete and thorough review of every recommendation the commission has made. That is 

why I’ve asked Senator Graham, chairman of our Personnel Subcommittee, to hold a series of hearings in the near future to explore 

all of the commission’s recommendations in greater depth, especially in those areas of retirement and health care. 

I thank Senator Graham and Senator Gillibrand for their leadership on these critically important issues. 

Finally, we look forward to the testimony from the commission 

today. Their recommendations come to us unanimously after nearly 

2 years of hard work, research, and debate. I encourage the commissioners to speak freely without reservations. Some of them I 

know and I’m sure will do that. 

Thank you again, commissioners, for your extraordinary efforts. 

Senator Reed? 

Oh, Senator Kerrey arrived. 

3 

Thank you, Senator Kerrey, for arriving. [Laughter.] 

STATEMENT OF SENATOR JACK REED 

Senator REED. Thank you, Mr. Chairman. Let me join you in 

welcoming the witnesses and commending them for a job well done. 

Thank you very, very much. 

I think it is extremely important to have this hearing today for 

the reasons the chairman outlined, and I thank him for holding the 

hearing. 

This hearing comes as the Department of Defense (DOD) yesterday formally submitted its budget for fiscal year 2016. While we 

await the full details of the department’s proposals, there are a few 

immediate notable aspects of the request. 

First, the requested top line is some $35 billion above the Budget 

Control Act of 2011 spending caps for defense. The spending cap, 

which for fiscal year 2016 was $499.8 billion, represents no growth 

in real terms. That the department has requested $35 billion more 

than current law allows shows how deep the funding shortfalls run, 

particularly with respect to force structure and the training and 

the modernization accounts. 

Second, the department has again requested measures to slow 

the growth of personnel costs. The department submitted these 

proposals last year. Congress supported some and elected to defer 

others until after this commission reported its recommendations. 

Many members on both sides of the aisle have been reluctant to 

support compensation and benefit reforms requested by the department in the past several years while this commission deliberated 

and suggested that we should wait until this report is submitted. 

This is the context in which today we hear from this very distinguished panel. These issues are of paramount importance to the 

Nation and to the military members and their families. We charge 

the military with fighting and winning the Nation’s wars. Implicit 

in that responsibility is recruiting and retaining the very best in 

Military Service in sufficient quantities and ensuring that they are 

trained and equipped for their mission, prepared for the arduous 

duty we ask of them. 

Usually when we talk about caring for our men and women in 

uniform, the discussion is focused entirely on their pay. But these 

other elements are equally important if we want our servicemembers to accomplish the mission and come home alive. 

It is important to state from the outset that the goal of the commission is not to save money. It is to strengthen the All-Volunteer 

Force. It is to modernize a retirement system that is 70 years old. 

Importantly, it is to ensure that servicemembers and their families 

enjoy a quality of life and a quality of service that will enable the 

Services to recruit and retain the very best men and women for 

military service needed to meet national defense objectives. 

Under the current budget situation, I fear we are quickly pricing 

ourselves out of having a military sufficiently sized and adequately 

trained to meet the myriad tasks and threats we face all over the 

world. As we heard last week from the Service Chiefs, the budget 

caps currently in law do not allow the Services to meet their national defense objectives. 

4 

Now if these recommendations that you are making are enacted 

and they do provide savings, such savings should be used to address force structure shortfalls and to reinvest in readiness and 

modernization. 

Finally, I would like to highlight one inequity in the current system that the commission has pointed out. Only 17 percent of all 

servicemembers will leave with any retirement benefit under the 

current system, with officers more than twice as likely to leave 

with these benefits than enlisted personnel, even while enlisted 

personnel have always, including in the most recent conflicts, sustained the vast majority of casualties. 

We are told now that under these recommendations as many as 

75 percent of all servicemembers will leave the Services with some 

retirement benefit, even if they do not serve the full 20 years on 

Active Duty, as most servicemembers do not. 

Thank you, Mr. Chairman, and thank you to our panelists for 

this important work. 

Chairman MCCAIN. Again, I would like to thank all of the members of the panel, all of whom have other responsibilities and work 

that needs to be done, and they took their valuable time and effort 

to bring what I think is an excellent, comprehensive report, which 

I know will serve as guidance for us as we move forward with 

much needed reforms. I thank all of you again. 

Mr. Chairman, we are ready to listen to your statement. Thank 

you, again, for your chairmanship. 

STATEMENT OF HON. ALPHONSO MALDON, JR., CHAIRMAN, 

MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION; ACCOMPANIED BY COMMISSIONERS 

HON. LARRY L. PRESSLER, HON. STEPHEN E. BUYER, HON. 

DOV S. ZAKHEIM, MICHAEL R. HIGGINS, GEN PETER W. 

CHIARELLI, USA (RET.), HON. J. ROBERT KERREY, AND HON. 

CHRISTOPHER P. CARNEY 

Mr. MALDON. Thank you, Mr. Chairman. 

Chairman McCain, Ranking Member Reed, distinguished members of the committee, my fellow commissioners and I are honored 

to be here today. We thank you for the opportunity to testify. We 

also thank you for your support of the commission during the last 

18 months and for your leadership in protecting our servicemembers’ compensation and benefits. 

Mr. Chairman, I would like to request that our final report be 

entered into the record. 

Chairman McCain. Without objection. 

[The Final Report of the Military Compensation and Retirement 

Modernization Commission, dated January 29, 2015, follows:] 

See Appendix A at the end of this hearing record. 

Mr. MALDON. The All-Volunteer Force is without peer. Their unwavering commitment to excellence in the service of our Nation has 

never been clearer than during the last 13 years of war. 

As commissioners, we recognize our obligation to craft a valued 

compensation system that is both relevant to contemporary 

servicemembers and able to operate in a modern and efficient manner. We are unanimous in our belief that the recommendations we 

5 

offer in our report strengthen the foundation of the All-Volunteer 

Force, ensure our national security, and truly honor those who 

served and their families who support them now and into the future. 

Our report is, of course, informed by our own lifelong experience 

with military service, public policy, and as public servants. However, our recommendations are most informed by insights of 

servicemembers, veterans, retirees, and families. 

The commission and staff visited 55 military installations worldwide, listened to the views and preferences of hundreds along the 

way. More than 150,000 current and retired servicemembers provided thoughtful responses to the commission’s survey, and we developed working relationships with more than 30 military and veterans service organizations. 

Additionally, the commission received input from more than 20 

Federal agencies, several DOD working groups, numerous research 

institutions, private firms, and not-for-profit organizations. 

The result of this process that included 18 months of comprehensive, independent research, review, and analysis, are 15 unanimous 

recommendations that will improve choice, access, quality, and 

value within the compensation system. Our work represents the 

most comprehensive review of military compensation and benefits 

since the inception of the All-Volunteer Force. 

Consistent with our congressional mandate, we reviewed each 

program to determine if and how modernization might ensure the 

long-term viability of the All-Volunteer Force, enable the quality of 

life for servicemembers and their families, and achieve a greater 

fiscal sustainability for compensation and retirement systems. Our 

recommendations do this and more, improving choice, access, quality, and value within the compensation system. 

Our retirement recommendations propose a blended plan that extends retirement benefits from 17 percent to 75 percent of the 

force, as Ranking Member Reed has already stated. It leverages the 

retention power of traditional military retirement to maintain the 

current force profiles, protects the asset of servicemembers who retire at 20 years of service, and reduces annual Federal outlays by 

$4.7 billion. 

Our health benefits recommendations improve access, choice, and 

value of health care for Active Duty family members, Reserve component members, and retirees while reducing outlays by $3.2 billion. 

Our recommendations on commissaries maintain patrons’ grocery 

discount while also reducing the cost of delivering that benefit by 

more than $500 million annually. 

While these savings to the taxpayer are significant, the commission did not engage in a cost-cutting drill. In fact, our recommendations to improve joint readiness, servicemember financial literacy, 

support for exceptional families, and transition assistance require 

additional funding to ensure program efficacy. 

In summary, our recommendations represent a holistic package 

of reforms that modernize the structure of compensation programs 

rather than adjust the level of benefits delivered to the servicemembers. They sustain the All-Volunteer Force by maintaining or 

increasing the overall value of the compensation and benefits for 

6 

servicemembers and their families, and they provide additional options for Service personnel managers to design and manage a balanced force. 

This approach creates an effective and efficient compensation 

and benefits system that after full implementation saves taxpayers 

more than $12 billion annually, while sustaining the overall value 

of compensation and benefits for those who serve and have served, 

and the families who support them. 

My fellow commissioners and I thank you again for the opportunity to testify today, and we are honored to present our unanimous recommendations. Mr. Chairman, we stand ready to answer 

your questions. 

[The prepared statement of the Military Compensation and Retirement Modernization Commission follows:] 

PREPARED STATEMENT BY THE MILITARY COMPENSATION AND RETIREMENT

MODERNIZATION COMMISSION

Chairman McCain, Ranking Member Reed, distinguished members of the committee: We are honored to be here and thank you for the opportunity to testify 

today. We also want to thank you for your support of the Commission during the 

last 18 months, and your leadership in protecting servicemembers’ compensation 

and benefits. 

Our All-Volunteer Force is without peer. This fact has been proven during the last 

42 years and decisively reinforced during the last 13 years of war. It is our obligation to ensure the Services have the proper resources to support our servicemembers. Those resources include a valued compensation system that is relevant 

to contemporary servicemembers and that is operated in a modern and efficient 

manner. We are unanimous in our belief that our recommendations strengthen the 

foundation of the All-Volunteer Force and ensure our national security, now and 

into the future. 

Our recommendations sustain the All-Volunteer Force by maintaining or increasing the overall value of the compensation and benefit system for servicemembers 

and their families. They also provide additional options for Service personnel managers to design and manage a balanced force. Our recommendations represent a holistic package of reforms that modernize the structure of compensation programs, 

rather than adjust the level of benefits delivered to servicemembers. This approach 

creates an effective and efficient compensation and benefit system that saves the 

Government, after full implementation, more than $12 billion annually, while sustaining the overall value of compensation and benefits of those who serve, those who 

have served, and the families that support them. 

Our work represents the most holistic and comprehensive review of military compensation and benefits since the inception of the All-Volunteer Force. Our Interim 

Report, published in June 2014, documents the relevant laws, regulations, and policies; associated appropriated Federal funding; and historical and contextual backgrounds of more than 350 compensation programs. Consistent with our congressional mandate, programs were reviewed to determine if modernization would ensure the long-term viability of the All-Volunteer Force, enable the quality of life for 

members of the Armed Forces and the other Uniformed Services, and achieve fiscal 

sustainability for compensation and retirement systems. 

Based on the results of this review, our Final Report offers 15 unanimous recommendations that improve choice, access, quality, and value within the compensation system. Our retirement recommendation proposes a blended plan that extends 

retirement benefits from 17 percent to 75 percent of the force, leverages the retention power of traditional military retirement to maintain the Services’ current force 

profiles, protects the assets of servicemembers who retire at 20 years of service, and 

reduces annual Federal outlays by $4.7 billion. Our health benefit recommendation 

improves access, choice, and value of health care for Active-Duty family members, 

Reserve component members, and retirees, while reducing outlays by $3.2 billion. 

Our recommendation on commissaries maintains patrons’ grocery discounts and reduces the costs of delivering that benefit by more than $500 million annually. Yet 

we did not engage in a cost-cutting drill. Our recommendations to improve joint 

readiness, servicemembers’ financial literacy, support for exceptional families, and 

transition assistance require additional funding to ensure program efficacy. Our recVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
7 

ommendations also give the Services greater flexibility to recruit and retain a balanced force. 

Our report is informed by our life-long experiences, but more importantly by the 

insights of a broad range of servicemembers, veterans, retirees, and their families. 

More than 150,000 current and retired servicemembers responded to the Commission’s survey. The Commission visited 55 military installations, affording us the opportunity to discuss compensation issues with servicemembers worldwide. We developed an ongoing working relationship with more than 30 Military and Veteran Service Organizations. We also received input from more than 20 Federal agencies; several Department of Defense (DOD) working groups; and numerous research institutions, private firms, and not-for-profit organizations. Our recommendations align 

compensation and benefit programs to the preferences of the modern Force and societal shifts since the inception of the All-Volunteer Force. 

Taken as a whole, our recommendations create a modern and innovative compensation system that will be relevant to the contemporary and future workforce. 

By maintaining or improving benefits, while concurrently reducing costs, our recommendations address the ongoing tension between maintaining servicemember 

benefits and reducing personnel budgets to meet the demands of the new fiscally 

constrained environment. We are confident that our recommendations to reform the 

compensation system protect the quality of life for servicemembers and their families and ensure the fiscal sustainability of these programs for the future. 

We thank you again for the opportunity to testify today and are honored to 

present our unanimous recommendations that have one thing in common: These recommendations were formulated with the benefit to the servicemembers, and the 

families who support them, as the top priority. 

PAY AND RETIREMENT RECOMMENDATIONS

1. Help more servicemembers 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 current military retirement system for the Active component (AC) is a defined 

benefit retirement system that vests at 20 years of service. Annuity payments are 

generally calculated by multiplying a member’s retired pay base by 2.5 percent for 

each year of service completed. Reserve component (RC) servicemembers may request retired pay after 20 years of ‘‘creditable service’’ as defined in law. Under the 

current military retirement system, 83 percent of enlisted personnel and 51 percent 

of officers receive no retirement savings for their service. 

The Commission’s recommended retirement system would maintain retirement 

pay for current servicemembers and retirees and set out a blended retirement plan 

for servicemembers entering the force. The blended plan would preserve the 20-year 

retirement with a reduced defined benefit multiplier of 2.0, create a defined contribution plan through a Thrift Savings Plan, and add continuation pay at 12 years 

of service to provide mid-career retention incentives. The recommended plan would 

provide additional options to servicemembers by authorizing them to choose full or 

partial lump-sum payments in lieu of their working-age defined benefit payments. 

The proposed plan would allow the Services to maintain their current force profiles. 

It would provide retirement benefits to potentially more than 1 million servicemembers who, under the current system, would leave Service without any Government-sponsored retirement savings, yet it would maintain the value of the retirement system for servicemembers who serve 20 years or more. A blended retirement 

system would also provide flexibility to the Services to obtain the appropriate mix 

of skill and experience needed to maintain a balanced force. 

2. Provide more options for servicemembers to protect their pay for their survivors by offering new Survivor Benefit Plan coverage without Dependency and 

Indemnity Compensation offset. 

The current Survivor Benefit Plan (SBP) gives retiring servicemembers the option 

to provide a lifetime monthly annuity to qualified survivors. Servicemember premiums cover approximately two-thirds of the full cost of SBP coverage, and DOD 

subsidizes the remaining amount. Eighty percent of servicemembers who retired in 

2013 enrolled in SBP. Survivors of retirees, entitled to Dependency and Indemnity 

Compensation (DIC) payments from the Department of Veterans Affairs (VA), are 

restricted by law from receiving the full amounts of both SBP and DIC benefits 

(SBP benefits are offset by the amount of DIC received). The Commission found the 

DIC offset of SBP very unpopular with servicemembers. 

The Commission recommends maintaining the existing SBP program for 

servicemembers who want to select subsidized coverage and remain subject to the 

8 

SBP–DIC offset, yet also granting servicemembers the option of choosing modernized SBP coverage that balances greater participation cost with no DIC offset. Survivors of servicemembers who elect the new SBP coverage would derive a greater 

overall benefit by receiving full SBP and DIC payments. 

3. Promote servicemembers’ financial literacy by implementing a more robust financial and health benefit training program. 

The Services currently implement personal financial management training for 

their members according to their internal policies. Nevertheless, military personnel 

regularly make minimum payments, pay late fees, or pay over-the-limit charges on 

credit cards, and commonly borrow from nonbank financial institutions (e.g., pawn 

shops). Servicemembers who get in financial trouble often lose their security clearance, which is costly to both the individual and the DOD. These facts demonstrate 

insufficient knowledge among some servicemembers with regard to managing their 

personal finances. The Commission concluded that existing financial literacy programs do not adequately educate servicemembers and their families on financial 

matters. 

The Commission’s recommendations, particularly with regard to retirement and 

health care, would provide increased choice and require educated financial analysis 

on the part of servicemembers. The Commission recommends that DOD increase the 

frequency and strengthen the content of its financial literacy training. Servicemembers should receive financial training throughout their careers, including mandatory health benefits seminars when they register one or more dependents, and 

when they are nearing retirement from the military. Implementing a comprehensive 

training program would help educate servicemembers, provide them with enhanced 

tools to better protect their finances, and develop a culture of personal financial responsibility. 

4. Increase efficiency within the Reserve component by consolidating 30 Reserve 

component duty statuses into 6 broader statuses. 

Although Active component members have a single duty status—Active Duty—Reserve component (RC) members serve under a variety of duty statuses. 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. The current RC status system aligns poorly to current training and mission 

support requirements, complicates effective budgeting, and causes members to experience disruptions in pay and benefits as they transition among different duty 

statuses. 

The Commission recommends replacing the 30 current RC duty statuses with six 

broader statuses. Simplifying RC statuses would support both operational and training missions, better enable the purpose of RC duties to be tracked to justify budgets 

requests, and facilitate a seamless process for RC members. 

HEALTH BENEFIT RECOMMENDATIONS

5. Ensure servicemembers receive the best possible combat casualty care 

The Military Health System (MHS) relies heavily on military treatment facilities 

(MTF) as training platforms to maintain the clinical skills of the military medical 

force. Military medical personnel assigned to MTFs deliver health care primarily to 

active-duty servicemembers and their families, then, as space is available, to military retirees and other eligible beneficiaries. Because most MTFs do not have sufficient case mix and volume to adequately prepare military medical personnel for deployment into an operational environment, each Service has created separate trauma training programs to provide medical personnel additional training prior to deployment. There is, however, no consistency or standardization in the organization 

or requirement for this just-in-time trauma training. Continuing with this method 

for training medical personnel does little to preserve critical skills acquired over the 

last 13 years of war. 

Congress should establish a four-star command to oversee all joint readiness, especially medical readiness. The proposed central oversight would ensure a necessary 

high-level joint focus overall and, more specifically, enhance the MHS as a training 

platform for identified Essential Medical Capabilities required by the medical force 

in support of deployed operations. Increased oversight would afford the medical 

force greater opportunities for continued training, creating a more ready force both 

in peacetime and in preparation for contingency operations. 

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

The DOD’s TRICARE program provides health care benefits for Active and Reserve component servicemembers, retirees, their dependents, survivors and some 

9 

former spouses at MTFs or through a network of civilian health care providers. The 

Commission found that TRICARE’s payment schedule limits available doctors. It 

limits choice to only a small number of plans with a one-size-fits-all approach to covered benefits and determinations of medical necessity. The current benefit lacks 

flexibility in its program design and contracting process, which hinders adoption of 

advances in the health care sector. TRICARE also restricts access to care with a 

frustrating appointment and referral process. Beneficiaries prefer greater choice in 

their health care benefit options. Providing a wide range of different health plan options at different costs incentivizes cost-conscious consumer decision-making in 

health care. 

The Commission recommends that AC families, RC members, and retirees would 

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 the Office of Personnel Management. This program, which we call 

‘‘TRICARE Choice,’’ would increase beneficiaries’ choice, enhance their access to 

care, and deliver a 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. The network of health care providers would be improved, especially in rural areas and areas without a substantial military presence. A broader 

network of providers would particularly assist RC members and retirees, who often 

live away from major active-duty installations. Active-duty servicemembers, for reasons related to operational readiness, would continue to receive their health care 

through their units or the direct care system MTFs. 

7. Improve support for servicemembers’ dependents with special needs by aligning services offered under the Extended Care Health Option to those of state 

Medicaid waiver programs 

Servicemembers with exceptional family members (EFM) require specialized supplies and services that are not provided through TRICARE. State Medicaid waiver 

programs can satisfy these needs, but the frequency with which military families 

are moved between States, combined with the long waiting lists in most States, result in military families not having access to this support. The Extended Care 

Health Option (ECHO) is a DOD alternative, used when State services are unavailable. As it is currently implemented, ECHO does not provide coverage equal to state 

Medicaid waiver programs. As a result, many military families with EFMs do not 

have access to the same level of support as their civilian counterparts. 

Aligning services offered under ECHO with those of state Medicaid waiver programs would enhance coverage for exceptional family members to ensure consistency with civilian programs. This change would improve continuity of support for 

EFMs as servicemembers and their families are relocated to support the DOD mission. 

8. Improve collaboration between Departments of Defense and Veterans Affairs 

The Joint Executive Committee (JEC) coordinates numerous health care activities 

between DOD and VA, including efforts in regards to electronic health records, drug 

formularies, resource sharing, and interagency billing. Yet there remain substantial 

opportunities for enterprise-wide collaboration through standardization, elimination 

of barriers, and adoption of best practices. The Commission found numerous, ongoing weaknesses exist in joint collaboration and cost-effectiveness between the health 

care services of DOD and VA. 

The Commission recommends that the JEC should be granted additional authorities and responsibilities to standardize and enforce collaboration between DOD and 

VA, to include: defining and monitoring expenditures for common services that are 

regularly jointly conducted throughout DOD and VA health-care systems; approving 

in advance any new capital assets acquisition, or sustainment, restoration, and modernization of capital assets, of either DOD or VA medical components; overseeing 

electronic health record compliance with the Office of the National Coordinator for 

Health Information Technology standards across both DOD and VA; ensuring that 

the DOD and VA establish a health care record within the VA electronic health 

record system for all current military servicemembers; creating a uniform formulary 

to include all the drugs identified as critical for transition by the JEC beginning immediately with pain and psychiatric classes of drugs; and establishing a standard 

reimbursement methodology [process] for DOD and VA provision of services to each 

other. These actions should substantially ease the transition of servicemembers and 

improve collaboration between the Departments. 

10 

QUALITY OF LIFE RECOMMENDATIONS

9. Protect both access to and savings at DOD commissaries and exchanges by consolidating these activities into a single defense resale organization. 

DOD operates a system of commissaries and three separate systems of exchanges. 

These four systems, and their associated organizations, provide discounted groceries, 

merchandise, and other services to servicemembers and their families around the 

world, in locations convenient to those living on or near military installations. They 

also facilitate or provide services at sea and in theater. In surveys and testimony, 

many servicemembers have identified this benefit as relevant and valuable and 

some have indicated that the discounts are critical to their personal financial health. 

However, financial pressures within DOD have resulted in proposals to significantly 

reduce the funding appropriated to operate these organizations, primarily focused 

on commissaries. 

Consolidating commissary and exchange activities into a single Defense Resale 

Activity would maintain or improve the benefit, while making changes in structure, 

law, and policy that would enable more aggressive reductions in appropriated funding. Despite their differences, these retail organizations perform similar missions, 

for similar patrons, with similar staff, using similar processes. 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. Multiple DOD-sponsored studies have identified strategies to improve cost-efficiency. Organizational boundaries, different cultures and business 

strategies, competing incentives, and restrictive policies have inhibited the aggressive pursuit of many of these strategies. Creating a consolidated organization would 

reduce these barriers and better position commissaries and exchanges to meet the 

needs of the Military Services and servicemembers. The proposed plan would also 

maintain grocery subsidies at DOD commissaries, while improving the efficiency of 

the benefit delivery. 

10. Improve access to child care on military installations by ensuring DOD has 

the information and budgeting tools to provide child care within 90 days of 

need. 

Military child care is widely acclaimed for its quality, affordability, and ability to 

satisfy the unique needs of military parents, but is frequently a source of frustration 

because of its limited availability. Current models for planning and resourcing fulltime military child care often result in long waiting times, particularly for children 

who are 3 years old and younger, the ages for which care tends to be most expensive 

and least available from other sources. Although DOD has established a goal to provide military child care within 90 days of need, that goal is not yet being met, and 

in some cases waiting times are not being reliably measured or reported. 

Ensuring DOD has the information and budgeting tools to provide child care within 90 days of need would both improve DOD’s understanding of the effect of the 

unmet demand for military child care and enhance DOD’s ability to provide a timely 

response to that demand. DOD should standardize reporting and monitoring of child 

care wait times across all types of military child care to better understand the need 

for services. To quickly respond to the need, the Commissioners recommend reestablishing 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. Recognizing that staffing, rather than facilities, is 

often the limiting factor, DOD should also streamline child care personnel policies 

to help ensure proper staffing levels. 

11. Safeguard education benefits for servicemembers by reducing redundancy and 

ensuring the fiscal sustainability of education programs. 

DOD and the VA provide many programs that deliver educational benefits to 

servicemembers and veterans. Current education assistance programs include the 

Post-9/11 GI Bill, the Montgomery GI Bill Active Duty, the Montgomery GI Bill Selected Reserve, the Reserve Education Assistance Program, and Tuition Assistance. 

There are duplicative and inefficient education benefits that should be streamlined 

to improve the sustainability of the overall education benefits program. 

Montgomery GI Bill Active Duty should be sunset on October 1, 2015. Reserve 

Education Assistance Program (REAP} should be sunset, restricting any further enrollment and allowing those currently pursuing an education program with REAP 

to complete their studies. Already enrolled servicemembers who elect to switch to 

the Post-9/11 GI Bill should receive a full or partial refund of the $1,200 that was 

paid to buy in to the MGIB–AD. Eligibility requirements for transferring Post-9/11 

GI Bill benefits should be increased to 10 years of service, plus an additional commitment of 2 years of service. The housing stipend for dependents should be sunset 

11 

on July 1, 2017. Eligibility for unemployment compensation should be eliminated for 

anyone receiving housing stipend benefits under the Post-9/11 GI Bill. When providing feedback in comments to the Commission, Servicemembers repeatedly emphasized the importance of education benefits as recruiting and retention tools. Ensuring the robustness of education programs is one of the best ways to guarantee 

the future of the All-Volunteer Force. This recommendation would also support GI 

Bill benefits, including transferability, while improving their fiscal sustainability. 

12. Better prepare servicemembers for transition to civilian life by expanding 

education and granting states more flexibility to administer the Jobs for Veterans State Grants Program 

DOD, in partnership with the Department of Labor (DOL), the VA, and the Small 

Business Administration, maintains the Transition GPS program to help 

servicemembers and their families prepare for a successful transition to civilian life. 

Transition GPS services are delivered through a series of workshops administered 

by each Service. The DOL administers One-Stop Career Centers which offer employment services for job seekers across the country, including veterans after they have 

transitioned to civilian life. These facilities are part of state workforce agencies or 

employment commissions and are partially funded through a number of grants 

under DOL’s Jobs for Veterans State Grants program. Despite these services, 

transitioning from military service to civilian life is more difficult than it needs to 

be. DOD should require mandatory participation in the Transition GPS education 

track for servicemembers planning to attend school after separation or those who 

have transferred their Post-9/11 GI Bill benefits. 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 Grants program. Furthermore, 

One-Stop Career Center employees should attend Transition GPS classes to develop 

personal connections with transitioning veterans. A review of the core curriculum 

for Transition GPS should be required to reevaluate whether the current curriculum 

accurately addresses the needs of transitioning servicemembers, and DOD, VA, and 

DOL should be required to produce a one-time joint report regarding the challenges 

employers face when seeking to hire veterans. 

13. Ensure servicemembers receive financial assistance to cover nutritional needs 

by providing them cost effective supplemental benefits. 

The Department of Agriculture’s Supplemental Nutrition Assistance Program 

(SNAP), better known as the ‘‘food stamps’’ program, and the Family Subsistence 

Supplemental Allowance (FSSA), the Military Services’ alternative to SNAP, have 

the same congressional mandate and overarching goal of providing nutritional assistance to eligible beneficiaries. In many circumstances, however, it is easier to 

qualify for SNAP than it is to qualify for FSSA. SNAP benefits are typically more 

generous, and unlike FSSA, SNAP recipients have no obligation to inform their 

chain of command, thus avoiding perceived embarrassment or stigma. Estimates of 

servicemembers receiving SNAP vary widely because States are not required to collect or share data on servicemembers. DOD needs a better understanding of the 

number of Service families using SNAP and the financial situations of those families. 

Although FSSA should be retained for servicemembers in overseas locations 

where SNAP assistance is unavailable, it should be sunset in the states and territories that provide SNAP benefits. The SNAP program should capture and share information on active-duty servicemembers receiving benefits to better inform military 

compensation and policy decisions. Adopting this recommendation would ensure 

servicemembers receive optimal supplemental nutritional assistance. 

14. Expand Space-Available travel to more dependents of servicemembers by allowing travel by dependents of servicemembers deployed for 30 days or more. 

The Secretary of Defense is authorized to provide air travel for servicemembers, 

certain retirees, and their family members on a space-available basis. Space-Available travel regulations provide eligible passengers access to seats on military air 

transport flights that would otherwise be empty. Unused seats on DOD-owned or 

controlled aircraft are only made available to Space-A travelers once space-required 

(duty) passengers and cargo have been accommodated. Current DOD policy permits 

unaccompanied dependents to use Space-A travel, but only when their sponsor is 

serving a deployment of at least 120 days. In recent years, frequent deployments 

have been a reality for many servicemembers and many were shorter than 120 days, 

making dependents of these deployed servicemembers ineligible for Space-A travel. 

DOD should allow unaccompanied dependents of servicemembers deployed for 30 

days or more to use Space-A travel. The quality of life of servicemembers’ dependVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
12 

ents should be improved by providing this access to unaccompanied travel on military aircraft. 

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

implementing a national military dependent student identifier. 

Children of active-duty servicemembers are not identified separately in nationwide reporting of student performance. Most elementary and secondary school student registration data systems do not include an indicator of students who have a 

military affiliation. These children experience unique stresses associated with parental deployments and frequent relocations that can adversely affect academic performance. As a result, national reports on student performance cannot reliably differentiate military dependent students from all others. 

A military dependent student identifier should be implemented so that Elementary and Secondary Education Act reporting can identify students who are children 

of active-duty servicemembers. This information would enhance support for military 

dependent students by facilitating DOD’s ability to monitor academic performance. 

Thank you again for the opportunity to testify regarding our recommendations. 

We also want to thank all who contributed to our final report. The Commission is 

grateful to have been given the opportunity to make recommendations to strengthen 

the best All-Volunteer Force in the world. Ensuring our servicemembers, veterans, 

retirees, and their families’ get the support they need is a responsibility the Commission took very seriously. Thank you to all those who serve, those who have 

served, and the families that support them. 


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Chairman MCCAIN. Thank you very much, Mr. Chairman. If it 

is okay, I’ll just have a couple of brief questions, because I was 

briefed by you already. If any of the members of the committee 

wish to respond to any questions by me or other members, just signify and you’ll be recognized. 

Just two brief questions, Mr. Chairman. How do you know that 

your recommendations will provide the same force structure to the 

Services, on the issue of the proposed compensation system? In 

other words, right now, there is an incentive to remain for 20 

years. In this present plan, there will be retirement compensation 

literally throughout. So do we have incentive for people to remain 

in for a career or disincentive? 

Mr. MALDON. We do, indeed, Mr. Chairman. In our recommendations, we did a blended plan here. We already have a defined benefit, and we added a defined contribution to this to make sure that 

we can do the retention or provide for the retention that the Services told us that they wanted us to. 

I am going to have Commissioner Higgins talk to the specifics of 

that recommendation, Mr. Chairman. 

Chairman MCCAIN. Thank you. 

Mr. MALDON. Commissioner Higgins? 

Mr. HIGGINS. Thank you very much, Mr. Chairman, and Chairman McCain. 

Sir, the system we have devised includes the incentives, the flexibility, and the choice that people want in force, so we feel, at its 

essence, it’s going to be a very powerful retention tool. When we 

look forward at how the system will operate over time, our belief 

is, and supported by our analysis, and in this case, it was the 

RAND Corporation model, which was the dynamic retention model 

used, we believe that our proposal will exactly model the current 

force profiles. It will have the tools within it, including continuation pay, Thrift Savings Plan, which is with matching, which is 

currently not offered today. It will include the tools that will draw 

people through the 20-year career, much like the defined benefit 

does today, and to some large extent, because the defined benefit 

is retained under our proposal, about 80 percent of that defined 

benefit. 

So these new tools to meet the demands of choice flexibility, 

along with the defined benefit that is retained, we believe will operate very effectively. The modeling that we have done will support 

that. 

Chairman MCCAIN. Thank you. On the issue of health care, how 

does this incentivize beneficiaries to seek the most cost-effective 

means of getting health care? 

Mr. MALDON. Mr. Chairman, thank you for the question. That 

was very important to us as we took a look at the programs that 

are providing the benefits to our servicemembers. 

As we traveled across the country and we talked to families, 

servicemembers, Reserve component members, retirees, after listening very, very carefully to the conversations and discussions 

that we had in terms of what people said they wanted, they preferred as values choice, access, and value of health care. Those 

were the themes that just kept coming time and time again. 

20 

I’m going to ask Commissioner Buyer to speak specifically to that 

question. 

Mr. BUYER. Thank you, Mr. Chairman and members of the committee. Cost-effective means, I look at it from two ways. One is to 

the government. The other is to the families. 

When we looked at this, it was at how we can achieve both. Presently under TRICARE, we don’t, because there really aren’t sufficient utilization management tools. It is a very limited network because of the very low reimbursement rates and how the TRICARE 

contractors actually recruit providers into the networks and pay 

below Medicare rates. 

So with regard to the families, we said, ‘‘can we do better, not 

only for the government with regard to the cost but also with regard to the families and improve the quality of care, give them the 

choice that they want and get better access?’’ We found that if we 

move to a system whereby we have what we call TRICARE Choice, 

which is very similar to a Federal Employee Health Benefit 

(FEHB) model whereby they select from available plans in a particular geographic region. It does call for more empowerment of the 

individual. We are asking that that individual is able to select a 

plan that best fits their family. When we do that, the plans themselves that are then managed and administered by the Office of 

Personnel Management (OPM), those plans will have effective 

management unitization tools, and it becomes more cost-effective 

not only to the families but, in particular, to the government, Mr. 

Chairman. 

Chairman MCCAIN. Thank you. 

Senator Reed? 

Senator REED. Thank you very much, Mr. Chairman. 

Let me direct this question to General Chiarelli, and anyone else 

who would like to respond. 

Part of your recommendation with respect to health care is also 

strengthening the military treatment facilities (MTF), the traditional facilities that have to be ready to deploy, if we deploy. Part 

of it, as I understand the proposal, is that they would be part of 

these health care systems. 

Can you comment from your perspective as former vice chief on 

this whole issue of strengthening the military medical infrastructure along with giving individuals more choices in the health care? 

Or if someone else wants to. 

General CHIARELLI. No, I’m more than happy to. 

Senator REED. Yes, sir. 

General CHIARELLI. I think we are in a death spiral right now 

in our MTF, from the standpoint of they just don’t have the number of reps that they need to keep their doctors up to standard. 

This is a way that we can bring into our MTFs the kind of cases 

that contribute to battlefield medicine. 

That is what makes this system so different than any other system. We need well-trained doctors, not only to treat patients in 

hospitals, but to be ready to deploy wherever we send them and 

provide that same kind of treatment on day one of the conflict. 

This will allow us to attract into our MTFs the kind of cases that 

will keep those skills up, and are so absolutely crucial to our survive-of-wounds rate in the last 14 years of war. 

21 

It will do that on day one of the next conflict. I really believe that 

this is something that is going to ensure that we have that combat 

medical readiness capability we need moving into the future. If we 

don’t do it, we are going to have a very, very difficult time being 

able to provide that. 

Senator REED. So this is not just about the benefits to the individual military personnel. This is about the overall viability of the 

health care system in the military? 

General CHIARELLI. Absolutely, and that is one of the reasons 

why we looked so strongly at a readiness command, because we 

really believe there is going to have to be somebody who is keeping 

an eye on this system to ensure that the Services are doing the 

kinds of things that are necessary to keep those MTFs viable training grounds for our physicians. 

Senator REED. Let me direct this to the chairman. You can decide who is appropriate. 

I’m sure I’m not alone, but when we mobilize National Guardsmen and Guardswomen and reservists, they are the ones who 

sometimes have the most difficultly getting into the health care 

plan, getting their benefits, making sure that their family who is 

not close to a medical facility, who may be far removed. It seems 

to me that this approach that you are suggesting, choosing among 

a set of private insurance plans, would be much more easily 

accessed by Reserve components. Is that accurate, Mr. Chairman? 

Mr. MALDON. That is correct, Senator Reed. One of the things 

that happens with our proposal for the Reserve components is, anytime they are mobilizing or being activated, the family members 

normally will go without coverage. There is a period of time that 

they just don’t have coverage when that happens. This will solve 

that problem for them because they won’t have to worry about 

going long periods of time without coverage of health care when the 

Reserve component member activates and deactivates. 

Mr. BUYER. Senator Reed, I mean, that is an excellent question. 

That strategic reserve that we built over time really wasn’t prepared operationally. We know that. You funded it. You did a lot of 

things to bring it up, round it out, and make the total force better 

in the 13 years of war. But with regard to the undesirable choices 

that reservists and their families had to make upon those mobilizations to be part of those contingency operations, you are absolutely 

right, Senator. 

So when we looked at this and said, with regard to that total 

force, even though we really pressured the chiefs, do we really 

want an operational reserve versus a strategic reserve? They really 

do, but they don’t want to call it that because they don’t want to 

fund it. 

But what is realistic is, when we talk about the war after next 

or how to fund the war after next, and caring for the people, when 

it comes to the health care, that benefit needs to be for the total 

force. So for the Reserve components, that continuity of care that 

your questioning goes to, it is so disruptive for the family. 

If we say from day one when you join the Reserve component 

that health care is part of that benefit, you can select the type of 

plan that best fits your family, your premium is 25 percent. We 

22 

capped it at 25 percent for the premium. Then there is no disruption in the continuity. They like their local providers. 

Then if they are on for a longer period of time, they’ve come, 

gone on Active Duty, they are part of the contingency operation, 

then they go on to the Active Duty plan, they receive their basic 

allowance for health care that takes care of the premium for that 

of their family. 

Senator REED. Thank you very much, Mr. Chairman. 

Mr. MALDON. Senator Reed, if you don’t mind, I would like to 

have another member of our commission speak to that as a reservist, please, Commissioner Carney. 

Mr. CARNEY. Thank you, Mr. Chairman. 

Mr. Reed, those of us who lived in sort of rural areas and were 

on Reserve duty, it wasn’t TRICARE exactly. It was more like ‘‘try 

to find care.’’ This takes care of that. 

What we are offering now is a system that provides a network 

that is robust enough to care not only for the member when they 

are on their civilian side, but also for the families when the member is deployed. That is exactly what we are trying to do here and 

do it in a way that is fiscally sustainable. 

Medical readiness as well as dental readiness are critical aspects 

of the overall readiness mission. If we can do that with this kind 

of system, with a TRICARE Choice system, then I think this is a 

good step forward. 

Senator REED. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman MCCAIN. Senator Inhofe? 

Senator INHOFE. Thank you, Mr. Chairman. 

I would say to my good friend Steve Buyer, who I used to sit next 

to on the House Armed Services Committee, that I agree with you, 

except I’m more concerned about today’s war than I am the war 

after next. Right now is when we are having the problems that we 

are having. 

We had a hearing last week. We had Schlesinger, George 

Schultz, Madeleine Albright. They went back and reminisced about 

what our capabilities were at that time, and what is expected, and 

even read the charge that President Reagan had made at one time 

in determining what a defense budget should be. 

The reason I’m saying this is I look and I agree with Senator 

Reed who talked about the inadequacy in meeting the threats. I 

agree with Director Clapper when he says, ‘‘Looking back over my 

now more than half a century in intelligence, I have not experienced a time when we have been beset by more crises and threats 

around the globe’’ than we are right now. That in light of the fact 

that we also have the force structure problems. 

I’m very proud of all of our chiefs. General Odierno has been before us, and all of the rest of them, talking about how significant 

this is and it is something that is unprecedented. 

The reason I bring this up, we have a quality group here, I would 

say, Mr. Chairman. I just think after this is over, you should reconvene and get into this thing as to the current threat that is out 

there and the inadequacy that we are facing. It is one thing for the 

chiefs to come forward and talk about what is going to happen with 

sequestration. But when you folks with your backgrounds come 

23 

forth, to me that gives a different sense of meaning. I would hope 

that we might consider that. 

I was a product of the draft and look at things a little bit differently than others. In fact, I was one that was not at all optimistic that the All-Volunteer Force would be the quality force that 

it is. I was wrong, although there were some advantages to the 

draft at that time. 

I think that when you are examining the charge that were given 

to you, and I would ask you the question, what have you decided 

motivates the young people to serve in the All-Volunteer Force? 

Then, why are so many of them leaving, if you could zero in on two 

or three reasons as to why they don’t stay on? 

Quite often, we go back and talk about how much cheaper it is 

for us to retain than to retrain. The extreme example is to get a 

pilot to the point where they can do an F–22 quality and the reenlistment bonus is $250,000 but the cost to retrain is $17 million. 

Now scale that down to whatever forces that we have here. 

What is the major reason that they come in and then they leave? 

Mr. MALDON. Thank you for the question, Senator Inhofe. 

We spent a lot of time looking at that, that specific issue that 

you address. It is a very important one. As we think about how to 

modernize the compensation programs, compensation programs for 

tomorrow, we are thinking about exactly what is required for the 

military to be able to recruit and retain people. We have to think 

about the way the new generation think, what they value, what 

they prefer. Those are the kind of things that we listened to and 

heard as we talked to people. 

As it was already indicated here today, 83 percent of the enlisted 

force actually wind up leaving without any kind of retirement benefits, which is one of the reasons that we made the recommendation 

that we did, to be able to extend some of the retirement benefits 

for those servicemembers who will serve and then move on to do 

other things from 17 percent to 75 percent. 

I’d also like to point out that a couple of things that we were told 

specifically by the servicemembers is that they are concerned about 

the service to their country and the G.I. Bill. Those were two of the 

things that were very important to them in terms of why they 

would come in, what they were looking for. Get an education benefit, be able to take advantage of that, which is a strong recruiting 

tool, and then move on to something else. 

Senator INHOFE. Very good. Thank you, Mr. Chairman. 

Chairman MCCAIN. Senator Manchin? 

Senator MANCHIN. Thank you, Mr. Chairman. Thank you all for 

being here. 

I guess this would be to anybody who wants to answer the question. But my thing is, is that it is a very difficult position you are 

being put into and we all are, because I don’t think anyone questions the commitment the Service people and all people in military 

have to the United States of America. 

I know in West Virginia we feel very strongly about that, people 

willing to take a bullet. I have always been able to explain when 

I was Governor, when they would explain or complain about whether it be our state police retirement or our fireman’s retirement, 

they are willing to put their life on the line every day for you. 

24 

So people are willing to pay a higher price for that but they still 

want it to be fairly comparable. Do you all look at that from the 

standpoint—I can tell you, in most all State budgets or municipality budgets, the firemen and police pensions are out of whack, 

they are under water, and we are trying to get them back. There 

is going to have to be some sacrifices. But to the point, we have 

to recognize the sacrifice they are making for us. 

How do you balance this out? What would I tell the National 

Guardsmen of my State that have been deployed maybe three and 

four times, and we are looking at changing some of the compensation? What type of literacy training are we giving to help them on 

their retirement? Why do we have so many that leave at 10 years 

of service in the military to go into private contracting for the extra 

pay overseas in Afghanistan and Iraq? What is the magic number 

of 10 years? I find most of our soldiers of fortune that leave our 

military that we spent an awful lot of time and energy training 

them, leaving and going for the higher pay. Can you give me that 

magic thing at 10 years what they lock in and what gives them 

that freedom to do that? Whoever wants to chime in on this. 

Mr. MALDON. Yes, Senator. Senator, thank you very much for 

that question. We, certainly, have spent a lot of time talking about 

that. I am going to ask Commissioner Kerrey, Bob Kerrey, to share 

the specifics of that. 

Senator KERREY. Well, first of all, I think you would be having 

a difficult time retraining men and women to serve in the military 

had this Congress not made all of the changes that it made since 

we have been fighting this war for the last 14 years. I mean, if you 

just look at what you’ve done with pay and compensation, it is now 

better than market. It needs to be. 

The changes that have been enacted by Republicans and Democrats have not been given enough praise, in my view, because had 

those changes not been done, given the stress on families today— 

I’m a very proud geezer father. I have a 13-year-old. If we think 

about having to move our son once every 4 or 5 years, it is a traumatic thing inside of our household. That is way more stability 

than anybody in the military gets. 

So the stress on the families has increased over the past 14 

years. Thanks to congressional action, the pay and benefits now are 

quite strong, and they need to be in my opinion. Otherwise, we are 

going to have a difficult time retaining men and women. 

The second thing that has happened, and the Senator and fellow 

draftee referenced the good old days, the American people now are 

quite proud of their military. They are quite confident that they are 

getting the kind of support that they need. But Americans are a 

lot more patriotic and they care deeply about the men and women 

who are serving. 

I think that attitude makes a big difference to people’s willingness to serve. I would say the combination of patriotism and the 

combination of pay and benefits, those two things together have 

made a big difference. 

When I looked at the recommendations, Senator, that we are 

making, the two big questions that I ask are, are we keeping faith 

with the men and women who have served? Those of you who have 

25 

understand that what happens is that you give up your freedom. 

If you get ordered to do something or go some place, you do it. 

So are we keeping faith with those who have served and are 

serving? I answer emphatically yes. 

Second, the recommendations that we make, will it enable us to 

continue to recruit and retain in the All-Volunteer Force. Again, I 

answer emphatically yes. 

But it is something that you constantly have to pay attention to. 

I think there is a qualitative difference between the public pensions 

at the fire and police level. Those firemen can get a little ornery, 

and the police can get a little ornery. They don’t have a Commander in Chief that tells them exactly what to do. I get orders 

to report to so and so location, I say yes, sir, and go. 

Whereas in negotiation with the fire union and the police union, 

you have serious negotiations about where they’re going to go and 

what they’re going to do. 

So I think there is a qualitative difference between the relationship of the American people and the men and women who have 

signed up and sworn that oath, given up their freedoms, and even 

in training exercises, put their lives and health at risk. 

Senator MANCHIN. Well, it’s not a hard sell. Basically, in my 

State and most States around the country are very committed to 

our military force, and they want to make sure they are compensated and taken care of and given the care they need. They just 

want to make sure we are doing it in an efficient manner, and if 

we are giving them the training and expertise and literacy training 

they need to make decisions. 

Senator KERREY. I would say, Senator, I think the moment that 

ends, no matter what you pay men and women, they are not going 

to sign up. The moment that that attitude changes, as it was in 

the 1970s, it is going to be difficult to recruit people to Service. 

Senator PRESSLER. We have a tradition on our Indian reservations. A lot of people serve 3 or 4 years and very rarely go for a 

career. I always had a difficult time getting our Native Americans 

to go to the Military Academies. But it seems that, aside from 

whatever we do, there is a tradition in our country of a lot of people wanting to serve 3 to 5 years. Of course, we need those people. 

That is particularly true in rural areas in States such as mine and 

with Native Americans. 

Senator MANCHIN. Thank you, Mr. Chairman. 

Chairman MCCAIN. Senator Fischer? 

Senator FISCHER. Thank you, Senator McCain. 

Mr. Chairman, you’ve mentioned flexibility a couple of times here 

in your statements. In the report, it says that the force may benefit 

from a flexible retirement system that incentivizes them to remain 

in Service longer than other occupational specialties with regard to 

doctors, cyber-personnel. 

Do you have specific proposals? I would like to dig down a little 

bit into this. Do you have any specific proposals that the commission recommended? Do you see each Service setting a different requirement there? If so, do you anticipate any problems? Do you see 

competition among the Services? 

26 

Mr. MALDON. Thank you very much, Senator, for the question. I 

am going to ask Commissioner Zakheim to respond to the specifics 

of your question first. 

Mr. ZAKHEIM. Thank you, Mr. Chairman. 

Senator, each of the Services already has different types of bonuses to keep people on. For instance, nuclear engineers and specialists get special bonuses from the Navy and so on. 

Our proposal does not tell the Services how they should do it. 

What we are trying to do here is give them maximum flexibility, 

so that if there are, as you pointed out, certain specialties that, 

frankly, like doctors, you actually get better with more time in your 

practice, then the Services upfront can decide that they want to recruit an individual and have that individual stay on longer than 

the normal term. But it works both ways, actually. It is not just 

to keep people longer. They can sign up some for less. 

We wanted to give them maximum flexibility, so at the same 

time that we are giving the individual choice, we are giving the 

Services flexibility. Again, it goes back to the question about what 

kind of a force do you want to shape? The Services are the ones 

who know that best, of course. 

Senator FISCHER. When you looked at the surveys, were there 

any issues identified that the commission did not make recommendations on? I guess I’m thinking specifically of the housing 

allowance. That has been a big issue in the past. The President has 

made proposals but yet it was not addressed by the commission. 

Are there other instances there? Really, why didn’t you address the 

housing? We hear about that a lot. 

Mr. MALDON. Senator, thank you so much for the question. We, 

indeed, took a very, very hard look at the Basic Allowance for 

Housing (BAH)/Basic Allowance for Substance, and we actually 

looked at the pay table. We looked at the structure of all of those 

programs. 

We clearly asked ourselves three questions. Number one, were 

these programs delivering the benefits that they were intended to? 

Number two, were the benefits being delivered in the most cost-effective way possible? Third, could this commission design a clear 

path for modernization to those programs, in terms of improving 

those programs. 

After looking at those, we did not feel that we could design a 

clear path to modernization for those programs, and instead we 

could provide a much better benefit to the servicemembers and do 

it in the most cost-effective way by making the recommendations 

that we have made. 

Senator FISCHER. Would it be fair to say that the commission 

supports with what the Congress did then with the housing allowance? Or do you support the President’s proposal? 

Mr. MALDON. Senator, again, thank you for the question. I am 

going to ask Commissioner Higgins to respond to the specifics of 

that question 

Senator FISCHER. Thank you. 

Mr. HIGGINS. Thank you, Mr. Chairman, Senator. 

Clearly, BAH, in our view, is operating effectively to provide the 

housing that our servicemembers need. There are a number of the 

elements of the compensation system that drew our attention very 

27 

dramatically that we did not elect to meddle in, if you will, because 

we believe they are operating effectively. Others would include the 

pay raise mechanism. The pay table itself we believe is operating 

correctly, special pays and allowances, and BAH, I think along with 

that. 

Now on each, if you believe that you need to save money, then 

obviously the Congress could act to reduce programs. That is your 

choice. Our objective was modernization, and systemized modernization where we go into the structure of a program. We did not 

believe that the structure of those programs were deserving of modernization. 

If I could go back to your other question as well, Senator, the 

Service Chiefs asked for flexibility. One of the primary complaints 

about the retirement system as it exists today is that it is overtly 

rigid, inflexible. Service Chiefs implored us to seek opportunities 

for greater flexibility. We delivered that section you are referring 

to. 

Are there some potential frictions between the Services? Would 

it cause some concern? Do we believe it is going to be used instantaneously? No. There will be uncertainty, and I think that will 

keep that proposal in check, perhaps for years. But there will come 

a day when greater flexibility in the retirement system will be 

needed. That provision will be there to deliver that to the managers. 

Senator FISCHER. It would also allow the Services then to compete for the men and women that they need to perform in different 

areas, correct? 

Mr. HIGGINS. Always a difficult issue, controlling competition between the Services. The service cultures are, indeed, incredibly 

strong. You always want to endeavor to limit competition and create systems that operate for the best interest of the total force. But 

there will be some insecurity, and I think that will cause this, as 

enticing as it may be to some people inside the Pentagon. Whether 

or not it rises to a level where it is implemented is a serious question that is going to take time to resolve. 

Senator FISCHER. Thank you, sir. 

Thank you, Mr. Chairman. 

Chairman MCCAIN. Senator Gillibrand? 

Senator GILLIBRAND. Thank you, Mr. Chairman, for this hearing. 

Thank you to all of you for your very hard work. 

One of the most important considerations for me in terms of potential changes to benefits and compensation is that the approach 

be holistic and that we ensure the lower enlisted troops and families do not disproportionately feel the impact. Can you please walk 

me through why you believe this is holistic and how it will impact 

lower enlisted troops and their families? Anyone can answer. 

Mr. MALDON. Thank you, Senator, for your question. I am going 

to ask Commissioner Chiarelli if he would please respond to the 

question. 

General CHIARELLI. I think we have done everything we possibly 

can to make it holistic and apply to everyone. We have two charts 

that go into the retirement. One enlisted E–7 to show what his retirement is under the current system, and what it would be under 

the new system. I think you can see that it is clear that he or she 

28 

would do much better under our proposed system than they would 

under the current system. 

We have one for officers that shows the same thing. 

I don’t think it’s just the retirement system you should look at. 

I think you should look at what we are doing with health care. We 

are giving them the ability in health care to go out and immediately go to see a private provider that is in their insurance network. Or if they would rather choose to go to the MTF because that 

is where they feel they can get the best care, they can go to the 

MTF. 

Today, under most of the TRICARE programs, it takes a period 

of time before you can get that TRICARE referral, and it is up to 

30 or 40 days from the time you want to see somebody until you 

can get out to see them, if you can find a provider. 

This applies not only to officers and warrant officers, but it applies to our enlisted soldiers. So I think everything in our recommendations was geared to ensure that whatever we recommended was holistic and applied to both officer and noncommissioned officer in the same way. 

Senator PRESSLER. In a holistic sense, we included exceptional 

family provisions and childcare issues in our report, which normally might not be in such a report. But a lot of the lower ranking 

servicemembers have a very hard time with waiting lists on 

childcare and so forth, so we tried to be holistic in that sense. 

Mr. BUYER. Ma’am, holistic was not only of the moment. We were 

very reverent to the past for our military traditions and heritage. 

Senator GILLIBRAND. Thank you. 

Senator KERREY. If I could? 

Senator GILLIBRAND. Please. 

Senator KERREY. There is one area we have not talked about. 

First of all, you completely destroyed me, because I tried to get the 

chairman and the rest of the commissioners to stop using the world 

‘‘holistic.’’ 

Senator GILLIBRAND. Sorry. 

Senator KERREY. Obviously, I failed in that effort. 

Among the things you really need to think about is all these men 

and women at some point are going to transition back into the civilian life. The changes we are recommending in the health care 

side and the changes we are making on the retirement side make 

it much easier to do that, because there isn’t an abrupt differential 

between what we are recommending and what the civilian population is doing. 

Senator GILLIBRAND. So to continue along that line, I’d love to 

understand better the health care proposal. I understand that part 

of the recommendation is to create a basic allowance for health 

care based on the average family’s out-of-pocket costs to cover the 

cost of premiums and the co-pays. So how do you account for families with extraordinary needs? Will they pay more? I’m especially 

concerned about families with the special needs dependents, children with special needs specifically. 

Mr. MALDON. Senator, thank you for the question. We spent an 

inordinate amount of time talking to families across the country 

about the challenges they had with exceptional family members. 

29 

I’m going to as Commissioner Buyer to speak to that, the specifics 

of that question. 

Mr. BUYER. There are two parts to the question. I’ll do the health 

care and then the extraordinary families piece. 

To the basic allowance for health care, you are correct. In order 

to make that determination, it will be decided by OPM. OPM will 

manage the plans and they will take the average of those premiums of the plans that were selected in the prior year. They also 

then will look at that average to come up with the co-pays and the 

deductibles. 

Senator GILLIBRAND. Does OPM help families navigate it, because this is a new system for them. 

Mr. BUYER. Part of our recommendations with regard to literacy 

training, literacy is not only for financial literacy, because now, as 

we move into the Thrift Savings Plan and government contribution, 

there is a financial literacy piece. But there is also a health piece 

to help people navigate. 

This really is calling for more empowerment of the individual. It 

goes to that opening question that Mr. Higgins really posed to all 

of us on day one, which is that we are very used to our military 

being paternalistic. So as we look at what is happening in society 

and how dynamic, I want to say the new generation is, not that 

they are the selfie generation. They are the generation who want 

to have greater controls about themselves. They watch their peers 

making contributions into 401(k). ‘‘How about me? I am in the military. I want to participate, too.’’ So we have come up with that 

blended. 

With regard to health care, we are also making that empowerment of choice in educating them about how important it is to 

make the best plan for themselves and their family. When we give 

them the financial literacy and the health literacy, when they leave 

the Service, it is a better individual and it is a better family. 

Mr. MALDON. Senator, if you don’t mind, I’d like to have Commissioner Higgins follow up on the latter part of the question. It was 

two pieces. 

Senator GILLIBRAND. My time has expired. It is up to the chairman. 

Chairman MCCAIN. That is okay. Go ahead, Mr. Higgins. 

Mr. MALDON. Thank you, Mr. Chairman. 

Mr. HIGGINS. Thank you, Mr. Chairman, Chairman McCain. 

Senator, we had a great deal of concern about exceptional family 

members and how we would care for them. We have a proposal, of 

course, that would add a new level of benefits for those families. 

It was one of those areas where we would increase costs, so we 

were not all about cutting. We were about making life better for 

servicemembers. 

In addition, if you had a catastrophic situation in a family where 

you had extreme cost that was related to an exceptional family 

member, there is also a fund that we would propose to ensure that 

those out-of-pocket costs did not get excessive. We plan on that for 

about 5 percent of the people. So there is help there. 

Chairman MCCAIN. Senator Ayotte? 

Senator AYOTTE. Thank you, Mr. Chairman. 

30 

I want to thank all of you for the hard work and thoughtfulness 

you put into this commission and for having this important discussion with us. 

I do have to say, today, I’m walking back and forth between this 

committee and the Budget Committee. As I look at where we are, 

Senator Kerrey, to use the word ‘‘holistic’’ in a way that I think the 

point needs to be made here, is that if you look at where we are, 

for example, the President’s budget that was just submitted, by 

2021, our interests costs, what we are paying in interest, is going 

to exceed the Defense budget. 

As I look at the work that you have done, a bipartisan commission, and we look at what the biggest drivers in our debt are overall, looking at the big budget, mandatory spending, programs that 

we need to have similar looks at—Medicare, Social Security, that 

are very, very important programs to people. 

I appreciate that you have done all this work. I think we are 

looking at our military stepping forward first in making many 

changes. I think that we need to look across the entire budget too, 

because where we are is that we are going in 2016 to defense budget only 3.1 percent of GDP and 14.3 of Federal spending, which is 

the bottom of the historic range since 1950. 

The reason I want to put that in perspective in the big picture 

for everyone, we look at the sacrifices that our men and women in 

uniform make—the separations from family, obviously the sacrifices they make putting their lives on the line, all of that. I think 

that the work you have done is really important, and we look forward to delving into it more deeply. 

But I hope in the bigger Congress, as we scoot between here and 

the Budget Committee today, that we look at the big picture and 

we won’t be sitting in a situation where we are going to continue 

to shrink the defense of a Nation because we won’t take on the 

other hard challenges that need to be taken on for this Nation. 

It would be great to see a group like you look at the bigger picture as well. I just wanted to say that, and thank all of you for 

your work. 

In terms of a specific question, I wanted to follow up on the retention issue, because obviously that is important to all of us in 

terms of keeping the very best military in the world and wanting 

our best and brightest to join the military. 

As we look at your proposals on recruitment and retention, what 

assumptions did the commission use regarding economic conditions 

in the country and operational tempo (OPTEMPO)? So meaning, 

what did you assume would be the rest of the private economic 

growth, because that always drives, obviously, what opportunities 

our best and brightest have? Also OPTEMPO? 

Mr. MALDON. Senator, thank you very much for the question. We 

took quite a bit of time actually looking at that and deliberating 

over those issues. We actually had experts come in and talk to us 

about the millennials and what that means, as well as what it 

means with the social environment and those kind of societal 

changes that have taken place and how that would affect retention. 

I am going to ask Commissioner Chiarelli to speak to the specifics of your question. 

31 

General CHIARELLI. I would totally agree with the chairman, 

Senator. We did. 

A good example where we provided flexibility is at the 12-year 

mark with continuation pay. That is not a fixed amount someone 

is going to get. We were going to allow the Services to set that 

amount based on the economic conditions that they have at the 

particular time to maintain the retention rates, not only the total 

retention rate but the retention rates by specialties that they need 

to continue past that 12-year mark. 

So everything we did was based around an OPTEMPO from 

peacetime to the fact that we would have to deploy the entire force. 

If you had told me when I was in the Army Operation Center on 

September 11 that we would be able to maintain the All-Volunteer 

Force at the OPTEMPO that we did for 13 years, I would have told 

you there was no way whatsoever. We did. 

I had aviators that literally knew that, on the 365th day of the 

year, they were going to be back down range. They would stay 

down for a year and come back and get another year at home before they were going back down range. 

Why they did that? A lot of it is pure patriotism, love of country, 

and a mission they believed in. 

I think it is absolutely critical that in times where we don’t have 

that OPTEMPO, we give the Services the tools they need. I think 

you will find throughout our report we have done that, everything 

we can to give them that flexibility to maintain those retention 

rates. 

I would argue, in the earlier question, as I live around Fort 

Lewis, WA, today, the biggest issue for retention today is uncertainty. They just don’t know whether they are going to have a job 

tomorrow. There is real concern in the force, as you wander around 

that post and see folks, how far the cut is going to go. Is there a 

future for me here? 

I think our retirement plan speaks to that and puts us in much 

better position, should we ever have to cut the force again to provide people who are leaving something when they leave. 

Senator AYOTTE. I want to thank all of you. I have some additional questions I’ll I submit for the record. 

I would just say, General, to your point, that goes to the sequester issue too, in terms of continuing to diminish what we are going 

to spend on the overall force and our readiness, and that is issue 

we already had hearings on, and we need to do something about. 

Thank you. 

Mr. MALDON. Senator, thank you. Senator, there was a modeling 

component to your question. I would like to take that for the record 

and then get back to you, too, because we do have very specific 

data and details for that. 

Senator AYOTTE. Thank you. 

Chairman MCCAIN. General Chiarelli, I wish that every member 

of the Senate could have heard your last comment, because we are 

going to be in a very significant struggle here in regard to sequestration. You reflect the views that were expressed to this committee by our four Service Chiefs last week, and I thank you for 

that. 

Senator Donnelly? 

32 

Senator DONNELLY. Thank you, Mr. Chairman. 

I want to thank all of you for your service to the country. You 

have all done so many extraordinary things for us. 

My fellow Hoosier, Congressman Buyer, is here. Thank you for 

all your work, and to all of you. 

I also want to say the importance of the extended care that you 

are providing for exceptional family members, what you have done 

in that area is really significant, and will change lives for family 

after family. 

General Chiarelli, I wanted to ask you about the unified drug 

formulary between DOD and the Department of Veterans Affairs 

(VA). You have done exceptional work in trying to stop the scourge 

of suicide. You have worked tirelessly to provide solutions and answers here. 

If you would tell us a little bit the challenge when you transfer 

from DOD to VA with the drug formulary and what that is causing? 

General CHIARELLI. Thank you for that question, Senator. I really appreciate that. 

When I was vice chief of staff in the Army, I had no idea there 

were two different drug formularies between DOD and VA I really 

believed every single soldier who used drugs the way they were 

supposed, who had posttraumatic stress or traumatic brain injury 

and was taking an off-label antidepressant that was developed 30 

to 40 years ago, not for the disease that they had, that their doctor 

had to work through a whole bunch of the different drugs to get 

them to the right one, that when they showed up to their VA on 

day one, they would be able to provide that prescription to their 

doctor, and he would automatically refill it. That is not the case. 

We have two different drug formularies. The DOD is very expansive, just about anything FDA has approved, they can prescribe 

them, and they do. When an individual finally gets on the right 

drug at the right dosage and goes over to the VA, many, many 

times in this particular area, antipsychotics and antidepressants 

and antipain medications, they find themselves in a situation 

where the doctor looks at them and says I’m sorry, I cannot refill 

that prescription. 

You are going to hear a lot of different stories from folks, but I 

continue to have soldiers come to me, sailors, airmen, and marines 

today—just last week, I met with one for coffee who had the exact 

same thing happen to him. 

If there is anything we can fix to get at this suicide problem, it 

would be to make sure that once we get a kid on the right drug 

and at the right dosage, wherever he goes in the system, he is able 

to get that same drug and not be told, ‘‘I’m sorry, that’s not in our 

drug formulary.’’ 

Senator DONNELLY. Isn’t there also a confidence factor for that 

person, that they feel comfortable with the drugs they are receiving, with the treatment they are on, and changing it up is like a 

life-changing experience? 

General CHIARELLI. Most of them don’t, Senator. What they do 

is they go find a private doc to go ahead and give them the prescription and they pay for it out-of-pocket. 

33 

So here we have told them, ‘‘We are going to take care of you. 

We really care for your service. This is your benefit.’’ They go over 

and say, ‘‘I’m sorry, you can’t have that drug.’’ 

I’m telling you, no one cares if you get St. Joseph aspirin in DOD 

and Bayer aspirin in VA That is not an issue. But on this drug formulary issue for antidepressants, antipsychotics, pain medications, 

these things you have to be weaned off of, we should not put our 

service men and women in this situation when they transfer over 

to the VA 

If it is not on the drug formulary, somebody should hand them 

a card and say go to your local pharmacy and get the drug. 

Senator DONNELLY. As the General and all of you know, we are 

losing 22 veterans a day to suicide. In the Active Duty, we lost 132 

young men and women in combat in 2013. We lost 475 to suicide, 

almost four times as many. So your efforts on this are life-changing. 

I would like to then follow up with a question. As we transition 

from DOD to VA, for a number of our young men and women, obviously, there are electronic health record challenges. What do you 

think is the next largest challenge we have to tackle and knock 

out? 

Mr. MALDON. Senator Donnelly, thank you very much for the 

question. We spent a lot of time talking about the DOD–VA collaboration and what that really means, what effect it has on health 

care for veterans. 

I am going to ask Commissioner Buyer to speak to the specifics 

of that question first. 

Senator DONNELLY. Great. Thank you. 

Mr. BUYER. When you look at our recommendation eight, Senator 

Donnelly, we are asking that the Joint Executive Committee that 

has authority, it doesn’t have power now. That is pure heterodox. 

We are asking that you give it statutory power to actually implement the recommendations. 

When we met with Secretary McDonald, two things we learned. 

One is they said they agree with the commission. But could you 

also—this wasn’t in our recommendation and I throw this to you, 

because I anticipate the Secretary of the VA would say I would like 

to have parity, so when the Joint Executive Committee meets, the 

Deputy of the VA meets with the Under Secretary for Personnel. 

It is not the same. If you raise that so that the Deputy Secretary 

of the VA and the Deputy Secretary of the DOD meet at the Joint 

Executive Committee, and give them the authority with the power 

to implement, big difference. 

So with regard to the blended recommendations and the exact 

antidepressants or antipsychotics General Chiarelli spoke of, or 

pain medications, let the experts make that decision with regard to 

where in the formulary it should be blended. With respect to large 

capital projects, never again should we have the scenario where we 

all struggle trying to get the timelines for the building of an Army 

hospital and a VA hospital. That shouldn’t ever occur to us again. 

With regard to your specific question, ‘‘What do you really anticipate, Steve, the biggie that is going to happen next?’’ It really is 

this challenge, as the country moves to set these national standards for the electronic health records. So we have the scenario 

34 

whereby you are responsive with regard to the VA and the scheduling debacle. We said that we will move to this Choice program, 

Senator McCain, that you talked about. We will have this increase 

of more non-VA care. When you are on the Committee on Veterans’ 

Affairs in the House, around the 2004, 2005 timeframe, we were 

spending about $400 million for non-VA care. Today, $6 billion. It 

is only going up. 

So think of this, DOD has a contract let to create their own new 

version of their electronic health record. VA is doing the evolution 

of VistA, and they want to make sure, as they move to their new 

programs, that they have data standards so they can be 

bidirectional. 

At the same time, the VA is doing more non-VA-based care in the 

private sector. In order for there to be continuity of care, those private docs have to be able to communicate then with the VA So we 

are talking about bidirectional, so they can communicate. That is 

a huge challenge. 

Now in DOD, as they move to their new electronic health record, 

and as we make recommendations to you to move toward the selection of plans, meaning there is going to be a lot of care provided 

in the private sector. 

So this setting of national standards on how the country will 

communicate is extremely important. That is what I would see, 

Senator Donnelly, as the biggie that is about to come. It is about 

your leadership on setting those national standards. 

Senator DONNELLY. Thank you to all of you, and thank you for 

your extraordinary service across-the-board. 

Thank you, Mr. Chairman. 

Chairman MCCAIN. Senator Sullivan? 

Senator SULLIVAN. Thank you, Mr. Chairman. 

I wanted to also thank the members of the commission for the 

great work that you have been doing for the country, now and before. 

I first want to get a sense of kind of the big macro issues, the 

competing issues that you have seen, Mr. Chairman, as part of 

your mandate. In particular, what I was interested in, is there a 

concern about the projected growth of benefits, of retirement, that 

ultimately will be or could be taking away from training and readiness? I think we all want to make sure we are taking care of our 

troops. I think, though, sometimes what gets lost is ultimately the 

best way to take care of them is to make sure, if and when they 

need to go fight, that they come home alive. 

Is that an issue that the commission has had to deal with on a 

broad scale? This kind of tension between competing issues that we 

are looking at with regard to military expenditures? 

Senator KERREY. Mr. Chairman, can I take that question? 

Mr. MALDON. Senator Sullivan, thank you very much for your 

question. I knew that Commissioner Kerrey would want to answer 

this question, so I’m going to ask him to respond. 

Senator KERREY. Since I’m notoriously holistic in my thinking 

about such things. 

I argued and I think commissioners were persuaded that for us 

to address this problem that you have identified, without addressVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
35 

ing the big one—the big one is Social Security and Medicare. That 

is crushing all the appropriation accounts. 

It would be unfair to identify military retirement as the big problem, because it isn’t. The big problem is Social Security and Medicare. 

So it seems to me to address military retirement without going 

after Social Security and Medicare is basically saying we are going 

to balance the budget on the back of our military retirees, and I 

think that would be a wrong thing to do and send a terrible signal. 

Mr. ZAKHEIM. Could I jump in here? 

Senator SULLIVAN. Yes, sir. 

Mr. ZAKHEIM. Since I had to deal with exactly that question at 

DOD when I was comptroller. 

First of all, there is a huge misunderstanding as to how much 

is being spent on military, as part of the defense budget. People 

think it is 50 percent. It is not. It is 29 percent. We write about 

that in our report. 

If you add the civilians, the defense civilians, that brings it up 

to about 40 percent. But that is a whole other category. That is not 

something we focused on. 

The real issue is, can you modernize what you are offering to 

your military at the amount of money that you are spending? If you 

can spend a little less and modernize a little more, so much the 

better. 

That is where we started. We started with modernizing. We 

started with choice. We started with what my fellow commissioner 

doesn’t like, holistic approaches. But that is where we began. 

Then we looked how things fell out. It turned out, it fell out that 

you could actually save the government money as well. You could 

actually do better by your people and still save the government 

money, which tells you how inefficient the current system is. 

The reason it is inefficient is not that it was deliberately so. 

When the All-Volunteer Force started, who was in it? Mostly young 

men, unmarried. Now look at what we have. A completely different 

kind of force. 

So we have to be concerned about Extended Care Health Option 

(ECHO) programs. We have to be concerned about childcare. We 

have to be concerned about a lot of different things that just 

weren’t paramount in 1975. 

That is how we approached it. We did save some money, but that 

wasn’t the driver, and it shouldn’t be. 

Mr. BUYER. Senator, I’d be very careful about getting sucked into 

this debate of people versus procurement. 

Senator SULLIVAN. I’m not talking about just procurement. I am 

talking about hard training for our troops. 

Mr. ZAKHEIM. Again, frankly, this is not the issue, because the 

amount of spending on personnel has been level. 

The real problem, and I think Senator Ayotte pointed it out, and 

several others, is there is just not enough money going to defense, 

full stop. That is the issue. 

Mr. BUYER. When you hear that personnel costs are 

unsustainable, the baseline that is used for that is year 2000. The 

question you should and is why was the year 2000 chosen as the 

baseline to prove that somehow personnel costs were 

36 

unsustainable? Congress made a lot of the conscious decisions to 

improve the personnel system. We did REDUX reform. We did the 

VA formulary reform. We changed the pay tables, and we did 

TRICARE for life. Then as you went into war, we did the G.I. Bill 

and the pay raises. 

So there was a reason, a clever reason, why the year 2000 was 

chosen. 

General CHIARELLI. I would only add, and I’m telling on myself 

now, my staff used to tell me to come up here 21 times, and if you 

go back and look at my testimony, I always quoted the fully burdened cost of a soldier. 

I learned through this commission work that the cost of a soldier 

hasn’t really gone up. It is what you hang on that soldier. 

Look at an M16 rifle and what it looked like in Vietnam, and 

look at that same weapon system today with all the sights and 

bells and whistles that we are putting on it. When you look at the 

fully burdened cost, you are rolling in the additional costs of other 

things and applying that to personnel accounts, which I was totally 

wrong in doing that. I apologize. 

Mr. ZAKHEIM. One last point, which is really important. General 

Chiarelli pointed out that he couldn’t imagine, and neither could I 

when I came in in 2001, that we would be at war for 13 years and 

be able to keep all the people we kept. Well, if Congress and the 

executive branch had not done what it had done, as Congressman 

Buyer said, in 2000, 2001, 2002, do you think we would have kept 

them? 

Senator PRESSLER. Let me add to that, that when this commission was created legislatively, we were very limited in the sense we 

had to assume an All-Volunteer Force and we would not take anything away from anybody who has it now in certain areas. 

So really a lot of the commissioners might have had great, grand 

ideas, but we tried to stay within the confines of our legislative directives. 

Senator SULLIVAN. Thank you. 

Thank you, Mr. Chairman. 

Chairman MCCAIN. General Chiarelli, it is very rare we get an 

apology from a General before this committee. I hope we will mark 

this as a historic moment. I thank you. [Laughter.] 

Senator MCCASKILL. Mr. Chairman, I’m surprised balloons and 

confetti didn’t drop from the sky. [Laughter.] 

Chairman MCCAIN. Senator Heinrich? 

Senator HEINRICH. Thank you, Mr. Chairman. 

I want to thank all of you. Lord knows what a difficult charge 

this was. Coming from a State with incredibly high rates of volunteerism, I want to say how much I appreciate the fact that you 

came to these recommendations unanimously. Serving in this body 

right now we don’t hear that word ‘‘unanimously’’ as often as we 

would like to. 

But I wanted to ask you if you could elaborate a little more for 

everyone here and, certainly, for this panel about the process you 

used in terms of gathering feedback from our servicemembers, from 

their families, at military installations and at veterans service organizations (VSO)? That was one of the things I was concerned 

37 

about in this process, but I was quite impressed with the level of 

feedback as you move towards your recommendations. 

Mr. MALDON. Senator Heinrich, thank you so much for the question. We spent a lot of time traveling across the country meeting 

at different military installations. We met with servicemembers— 

that is, Active Duty servicemembers, Reserve component members, 

as well as retirees. 

We held sessions. We held town hall meetings. We held public 

hearings as we traveled. We would spend a lot of time trying to 

really listen. We listened very carefully to the comments that the 

servicemembers and their families shared with this commission, 

about things that they really were concerned about. 

They talked about OPTEMPO, the challenges with that. They 

talked about the long waiting list of trying to get their child into 

a childcare center. They talked about not getting access to health 

care and the problems that they had with trying to get specialty 

care and waiting to get through the referral system. All of those 

kind of things are what we used. 

We received tens of thousands of comments that came in to the 

office from across the country from servicemembers about things 

they were concerned about. Then we also received the many, many 

responses from the survey. The survey was a very, very instrumental part of this process. We sent out surveys to over 1.3 million 

retirees. We sent it out to our Active components and Reserves. We 

received over 150,000 responses back that said, ‘‘Here is what it is 

that is important to us. Here is what we prefer. Here is what we 

value.’’ 

They basically stack ordered one benefit over the other, so we 

have a pretty good indication of exactly what is important to them. 

Senator HEINRICH. I want to thank you for that. I want to move 

my next question to Senator Pressler, because I really appreciated 

your comments about the culture of service that exists in our Native American communities. Certainly, that is one of the reasons 

why New Mexico has had such an enormous overall rate of volunteerism, military volunteerism, over the years. 

I was wondering if you had looked at the recommendations in 

terms of having the sort of TSP model and a contribution portion, 

if you serve as an enlisted person for 4 years, very much at the beginning of your lifetime career, and you build that early nest egg 

through this process, what that looks like at aged 65-plus, whenever you actually retire? What impact would that have on tribal 

communities, as well as on rural communities, where there are 

very, very high rates of volunteerism? 

Senator PRESSLER. We do have a problem, in the sense of the Native Americans. I just couldn’t get mine to go through the Academies, but they do join the Service for 3 or 4 years. They have a 

very high rate of service, and they are very proud of it. You go on 

the reservations, and I know your State, they have American Legion veterans and Vietnam veterans groups and so forth. 

The component that they would take out at least, and most of 

them go with no retirement, but they would have at least 1 percent 

the government would contribute to a TSP. After 2 years—one of 

my colleagues might correct me—they can contribute up to 6 percent, through the match. 

38 

But when they are elderly, they will have something, something. 

It depends how our stock markets work out. 

But I think, in our country, we have to the depend on the citizen 

soldier. In my view, it isn’t just to retain everybody for 20 years. 

It is for 3, 5, 6. In my case, I served for 3 years. I got no retirement, but my percentage counted when my Federal civil service retirement came. So I did get something. I got 2 percent a year for 

the time I was in the military. 

Most Native Americans don’t get to that, and we also have the 

compounded thing that most of them do not go back to careers. 

They go back to unemployment, and they do have all the problems 

that you know about it. But for them to have some connection to 

some small retirement benefit at the end I think would be a very 

good thing for us to have in our country. 

Mr. MALDON. Senator, I’d like Commissioner Higgins also follow 

up on that question, if you don’t mind, very quickly. 

Senator HEINRICH. Chairman, I’m out of time. Would you be willing to indulge? 

Chairman MCCAIN. Not a problem. 

Senator HEINRICH. Thank you. 

Mr. MALDON. Thank you, Mr. Chairman. 

Senator HEINRICH. Commissioner Higgins? 

Mr. HIGGINS. Thank you, Mr. Chairman. 

Senator, tapping into the economic power of the United States 

through the Thrift Savings Plan is, indeed, a really powerful financial incentive. 

We looked at your point about examining what kind of growth 

would be experienced when the individual arrived at retirement 

age, say 67. The individual who had done no personal contributions 

would still, if they leave at 8 years of service, would still have 

$18,000 available to them in the their Thrift Savings Plan. 

But if they contributed and received the full matching of 5 per- cent of their base pay, they receive at age 67 over $90,000 in benefits that would be available to them. So it is a pretty powerful 

mechanism, and I think would serve any community, including Native American. 

Chairman MCCAIN. Senator Rounds? 

Senator ROUNDS. Thank you, Mr. Chairman. 

Gentlemen, I most, certainly, echo the message from the rest of 

the committee up here when we talk about the work that you have 

done. Senator Pressler and I have been on the campaign trail together for a couple of months in the last year and we have met 

with a lot of members of the Native American tribes. They truly 

are a warrior society and we respect what they have provided to 

our country in terms of service to the Armed Forces. 

My question to you today is that you are trying to put together 

a system that while it is similar or at least you want similarities 

for services being provided, you are trying to provide these services 

and benefits to a whole lot of different groups. You have the folks 

that are over the age of 65, those between 60 and 65, retirees who 

have left with 20 years of service but not yet reached retirement 

age. Then you are also looking at those individuals who are still 

there within the military. Then you are looking at those who are 

coming into the military. 

39 

How do you transition this from what it is today? I got a letter 

from a man who served over in Iraq, and he had 20 years in, came 

back. He says, after sequestration, the message he gets is, my retirement because I’ve done my 20 years but I’m not yet 60 is I get 

my retirement, but instead of having an inflation factor, I get inflation factor minus 1 percent. 

The savings to us was $6 billion, but he says, in the middle of 

sequestration, the first thing people do is come back to the service 

men and women who have served to be the first to give back. Why 

are we the first in line to get cut? 

Now today, I think the challenge this commission has and the 

challenge that this committee is going to have is to go back to a 

lot of those same individuals and say, look, here is $12 billion that 

is being reduced, or at least being reallocated. Are they doing it on 

our backs? Those of us who came in and thought we had a deal, 

knew what we had for retirement, knew what we had for health 

care, what is it? How are we being taken care of? Is there a transition plan that says we get a chance to choose A or B? 

If you could, please, I think the work you are doing here is important to do, but I think the challenge we are going to do have 

is how do you convince these men that are serving or have served 

that they have some options available? Is there a transition plan 

that you have thought about for those individuals? 

Mr. MALDON. Senator Rounds, thank you very much for the 

question. We, indeed, spent quite a bit of time talking about that 

very issue that you raised in your question. As we thought through 

all the transition assistant kind of challenges that a servicemember 

faces when they are transitioning out, we took all of that into consideration. 

I’m going to ask Commissioner Chris Carney to talk to the specifics of that. 

Mr. CARNEY. Thank you, Mr. Chairman. 

Once again, with my colleague right here to my right, the holistic 

approach that we took to consider the retirement and to make sure 

that we first of all did no harm, was one of the mandates given us 

to. Senator Kerrey also mentioned something very important, and 

that is that we don’t try and balance the bank on the backs of the 

military. We tried to not do that. 

So in terms of specifics, some of the programs, and we could talk 

about this in further committees later on if you want to, but when 

we talk about ramp programs, so we don’t transition automatically 

into something that might cost a little more to a retiree or a servicemember, that there would be build-ups over 15 years, for example. 

But one of the things that we thought was vitally important in 

all the things we recommend is a good sense of financial literacy. 

So if our recommendations are adopted, there would be a very robust financial literacy component for all the troops. That starts 

when they are in boot camp or basic training, and at various points 

in their career, so they can make good financial decisions going forward. 

What the Federal Government does often impacts them, and that 

cannot always be accounted for. Promises have been made, and 

40 

sometimes promises have been, I don’t want to say broken, but perhaps bent a little bit. 

But when you do the financial planning, when you enable the 

servicemember to have the tools at their disposal to make good financial decisions, the impact of the bending of the promise by the 

government may be reduced somewhat. 

So I have a son who is a lance corporal in the Marine Corps. He’s 

making a little money now and came to me on his last leave and 

said, ‘‘Dad, what do you know about Ford F–250s?’’ I said, ‘‘I don’t 

know much, but I know you can’t afford one.’’ But a lot of kids 

aren’t making those decisions. They are going ahead and buying 

that expensive vehicle, so they don’t have the money necessary 

later on. 

We want to have a robust, as I said before, financial training system so they understand the value of money, they understand the 

value of money later in their careers. So when they hit the 12-year 

mark and they are making that decision, do I want to stay in and 

continue on, or do I want to go out, the money is there to make 

a good financial decision for them. 

So to try to reduce the impact of maybe a bent promise, we want 

to empower the servicemember with the ability to make good financial decisions to kind of reduce some of that. 

General CHIARELLI. I would only add also that the specific thing 

you said, sir, about somebody who has served 20 and is retired, is 

grandfathered in the current system. They will not be part of this 

system. 

Now, in the area of benefits that may fluctuate and change, that 

might affect them. Co-pays, but that is done over a period of a 15- 

year ramp, medical co-pays. 

But that 20-year person is grandfathered in the current system, 

and it would not change. 

Senator ROUNDS. Thank you, Mr. Chairman. I would just say I 

hope when we are all done with this, that the thought of bending 

the promises is one that we try to get away from. 

Mr. CARNEY. That was, certainly, our intent, Senator. Yes. 

Senator KERREY. I think you should see the recommendations 

too, Senator, as a continuation of what Congress has done for the 

last 13 years. 

Our goal is to improve the quality of paying benefits for our military. That was the primary objective of the commission. We have 

sent a group of holistic recommendations to you that we do think 

accomplish that objective. 

Mr. CARNEY. Senator, we really honest to God tried to keep the 

faith. 

Mr. MALDON. Senator, let me just say that I think, in summarizing what my colleagues have said here is that, everything that 

we did was totally done to protect the benefits, protect the interests 

of the servicemembers. I wouldn’t want anyone to get the impression that we are implying that we were actually cutting benefits of 

the servicemembers. It was quite the contrary. Even though we 

yield savings as a result of the approach that we took in reforming 

the structure of those programs, there was absolutely no interest 

on our part to reduce the benefits of the servicemembers, in fact, 

41 

it was to support those and improve those benefits. I’d just like to 

make that point. 

Chairman MCCAIN. Senator Kaine? 

Senator KAINE. Thank you, Mr. Chairman. 

Thanks to all of you for your service. This is an incredibly important topic, a very difficult one, and maybe even a thankless one. 

I have had a chance to begin to review the recommendations, and 

I see a lot of real positives. I think some of the focus on matters 

like financial literacy, the transition from veteran status to civilian 

life in terms of employment training and assistance, these are very 

far-reaching recommendations. Very much appreciate your work. 

I am going to make an editorial comment that has nothing to do 

with any of you. You all were asked to serve on this, and you said 

yes, and you’ve done a good job. 

I am not particularly a sensitive person. But when I walk in and 

it is a panel, and we are supposed to talk about military compensation, and there is not one woman sitting here, it’s just like, wow. 

I mean, really? 

One of the first things that happened when I got in the Senate 

was the order came down from then-Secretary Panetta to open up 

combat billets to women, to work on that. 

We have so many women serving in the armed services now, and 

on these issues, military compensation, the role of military families 

and their thought about these things are critical. 

I have a youngster in the Marine Corps, too. As he’s talking to 

his guys, they are often talking about what their own families are 

saying to them about things commissaries, exchanges, retirement, 

health care, salary. 

So we send a signal, and you didn’t form the committee, in terms 

of the membership. It was probably on us or the executive. But I 

just have to say that it seems so obvious that if we are really trying 

to have a military open to women—— 

Senator KERREY. Strike ‘‘probably.’’ It was you and the executive. 

Senator KAINE. Okay, yes. So then I’ll make it as a point obviously not critical to any of you who said yes, but it is to us. I am 

stunned about it. That is my editorial comment. 

Mr. BUYER. Senator? 

Senator KAINE. Yes? 

Mr. BUYER. I would invite you to actually meet the women who 

serve on the staff. They are sharp,, brilliant. 

Senator KAINE. I’m 100 percent certain about that, but it is no 

substitution for sitting at the—because we always have panels in 

this committee that look just like this where the folks backing up 

the panel members are the smart, talented, incredibly competent 

women. I just want to see some women at the table. That’s my editorial comment. 

Senator KERREY. Raise it in the caucus, Senator. 

Senator KAINE. Yes. 

Let me ask about collaboration opportunities. I don’t think this 

was gotten into in significant detail when I was gone, but what are 

the collaboration opportunities we can harvest between the DOD 

health system and the VA? Looking down the road, there have to 

be some economies of scale on the cost side, but there also have to 

42 

be improvements in quality of care at both ends of the spectrum, 

if we do additional collaboration. 

Did you get into that at all, or what thoughts would you have 

for us? 

Mr. MALDON. Senator Kaine, thank you for the question. We 

spent a lot of time talk about the DOD–VA collaboration. It was 

mentioned earlier by one of my colleagues as we talked about the 

formulary issues, the benefit of having a uniform formulary. We 

talked about shared services. We talked about a need to do better 

standardization, have standardized policies. We have actually had 

conversations with the Secretary of VA about that and we talked 

to people at DOD about that. 

I am going to ask Commissioner Buyer to talk a little bit about 

some of the additional specifics here as to how we respond to the 

challenge of that and what we did about it within our recommendations. 

Commissioner Buyer? 

Mr. BUYER. Thank you. Senator, earlier we talked about the real 

empowerment of the Joint Executive Committee. It really lies to 

the heart of ensuring that two departments of government work together seamlessly. So as that solder, sailor, airman, Marine transitions from their active status into the VA, they really shouldn’t feel 

it. As soon as they come over, they should feel that medical record 

is there and that the doctor who has just taken other my care, that 

there is true continuity of that care. 

That Joint Executive Committee that has authority, it doesn’t 

have the power to implement. So they can just create a lot of 

paper. So we are recommending that you actually give the Joint 

Executive Committee, not only do we create parity between the 

DOD and VA who lead the committee but also give it the power 

to actually implement, and implement what. 

So the recommendations on blending the formularies with regard 

to the antipsychotics, call it the mental health drugs, 

antidepressants, pain medications, let them set classifications of 

those drugs and how it should be blended. Extremely important, 

and General Chiarelli spoke to that earlier. 

The other would be on capital projects, whether it is building 

military hospitals or a VA hospital in close proximity, or outpatient 

or super-clinics, have some resource sharing. A lot of sharing initiatives that you find when you go around, there are a lot of local 

agreements. It is based on personality-driven. But there are a lot 

of things that work and are effective from those crucibles and that 

the Joint Executive Committee can actually then centralize those 

decisions rather than that being decentralized. 

With regard to the medical information, that is the I.T. issue. 

The Joint Executive Committee can really drive how the electronic 

health record is developed through its evolutionary process between 

the evolution of VistA and this new electronic health record that 

is about to come out of DOD, and how we then communicate with 

the civilian doctors who are providing the non-VA-based care to the 

VA. Then if you adopt what we are recommending, this choice of 

civilian plans, you have doctors out there that are providing that 

care. That electronic record needs to ensure that it is interoperable 

between your doctor back at home and that doctor from the MTF. 

43 

But guess what? When they transition then over into the VA, you 

want to make sure it is interoperable, too. 

Senator KAINE. That is very helpful. I would say, on the collaboration side, as I conclude, my sense is, with Secretary McDonald 

at the VA, he is a guy who understands collaboration. So there is 

a collaboration moment that is coinciding with the issuance of 

these recommendations, and we ought do what we can to take advantages of it. 

Mr. BUYER. When we met with the Secretary and the Deputy 

Secretary, they had already met with us previously and they also 

had initiated a policy paper. I haven’t had to chance to talk to General Chiarelli about it, but they are asking that doctors, that that 

they default to the prescription that DOD doctor had written. 

It is kind of nice to put it on paper. I would feel much more comfortable if it were something that the Joint Executive Committee 

looked at and gave it the implementation authority to ensure that 

if you had a prescription on Active Duty, a mental health drug, 

when you go to DOD, to ensure that you are going to get that drug 

is extremely important, because there are a lot of social ills that 

occur if he falls backwards. 

Senator KAINE. Right. Thank you. 

Senator KERREY. Can I just add something? At the beginning, 

Senator Kaine, the chairman invited us to speak our minds, which 

was dangerous in my case. 

I think this collaboration idea is not going to work. I don’t think 

you are going to get where you want to go unless you start considering actually putting these two systems together. Because of the 

readiness component, it has to be DOD who is going to be in charge 

of it. 

I think you have to go further. I would give this committee both 

authorizing and appropriating authority so they can’t basically 

rope-a-dope you. You have to have some pretty substantial change 

in order to get what you want. 

This is almost the 7-year anniversary of Dana Priest’s story 

about Walter Reed. I remember Danny Inouye calling me up because both of us had been transferred out of a military system into 

the VA system. What do we need to do? 

So I spent a fair amount of time thinking about this. We have 

a good recommendation in there, and you are going to improve collaboration. But unless and until you consider putting these two 

systems together and changing Senate rules so this committee both 

authorizes and appropriates, it seems to me, unless you at least 

consider those two things, it is going to be very difficult to get the 

kind of changes that you want. 

Chairman MCCAIN. Senator Tillis? 

We have always agreed with that, by the way. [Laughter.] 

Senator TILLIS. I want to go back to a question or follow up on 

a question that Senator Manchin asked about the perception and, 

Senator Kerrey, I think you responded to it, the perception that we 

are losing people because we are not competitive with the market, 

say at year 10. 

I think you made the comment that we are at or above market. 

Did you to say that? Could you expand on that? 

44 

Senator KERREY. Actually, I did say it, and I cannot expand on 

it. It came from the analysis we did on the commission, that we 

are at or above where we are in the private sector. 

It was congressional action that did it. I think we need to maintain that status. 

Senator TILLIS. So the perception that people are leaving at year 

10 based on pay or benefits may not be right? There may be other 

reasons they are leaving, lifestyle or other, but not pay and benefits? 

Senator KERREY. I would say that it is likely you can have individual cases, particularly technical individuals. Earlier Dov was 

talking about one of the problems we have is a lot of these new civilian companies forming up, and they will pay for a security clearance. They are apt to bid up what the military is doing. 

I think you will find exceptions to it. But I think in the aggregate, you will see that the military pay is at or exceeds what is 

available in the civilian world and the benefit package as well. 

I’m for that. General Chiarelli talked about it earlier. I came into 

this commission believing that it is likely we have a real problem 

with pay and benefits. I don’t believe we do. That is not the problem. 

That problem has a lot more to do with the retirement issues, 

and there, as I said earlier, I think it would be grossly unfair to 

address military retirement without taking on the big ones, which 

are Social Security and Medicare. 

Mr. MALDON. Senator Tillis, let me follow up, please, on that 

question by having Commissioner Higgins talk, because we did 

quite a bit of analysis and review around that. I want him to talk 

specifically to what our modeling told us. 

Mr. HIGGINS. Thank you, Mr. Chairman. 

Senator, I believe, in a general sense, retention today is probably 

as good as the military has ever seen it. Having said that, there 

are select skills that have always been historically very difficult to 

maintain. Some of the stories that you hear often are, let’s say, nuclear-skilled individuals in the Navy are always difficult to retain, 

because once they acquire those skills, there are very lucrative opportunities on the outside. 

In recent years, during the war years, what emerged was the 10- 

year departure of special operators. Those people obviously acquired significant skills during their tenure in the military that 

now have very high values placed on them in the private sector. 

The military responded to that with a significant bonus that I 

think turned the tide in that community. The Navy has always 

struggled with additional bonuses and several of their high-demand 

skills. But I think as a general rule, and this may rely mostly on 

the economy and the unemployment rate, but as we have moved 

through these last few years, retention has been quite good. 

Senator TILLIS. One final question for the chairman, or as directed by the chairman, the recommendations that you put forth, 

how have they been embraced by the stakeholder community? I 

have heard it said that we are providing for efficiency and value. 

It sounds like there winners and not a lot of losers. Are there areas 

out there that there are concern amongst some of the stakeholder 

groups? 

45 

Mr. MALDON. Mr. Chairman, I think at this point the feedback 

we have gotten from the VSOs, the stakeholders of that like, they 

are very receptive to what we have done at this point in time. It 

would be premature to say they are 100 percent on board with this, 

because they are still looking at the details of the report and our 

recommendations themselves, and they have to do their analysis as 

well. 

I think DOD is doing the same kind of thing, although I think 

the general feedback at this point from DOD and members of the 

joint staff is that they totally understand the merits of our report, 

what we are recommending, how those recommendations support 

fiscal sustainability of the compensation programs, and the fact 

that we have been able to achieve efficiencies by reforming the 

structures of those programs without taking away any benefits, in 

fact adding benefits in most cases for our servicemembers. 

Senator TILLIS. Thank you, Mr. Chair. 

Senator REED [presiding]. Senator Hirono? 

Senator HIRONO. Thank you, Mr. Chairman. 

I do want to commend Senator Kaine for his observation that it 

is always good to have women at the table as well as on the committee. 

I am looking at your retirement plan, and again, I thank all of 

you for your service, and I’m looking at the retirement plan that 

significantly increases the number of members who will receive 

benefits. I think that is very commendable. The plan does require 

contributions, basically mandatory 3 percent deductions from the 

servicemember’s pay as well as depending on investment return. 

Can you share with me what the current servicemembers think 

about a basically mandatory 3 percent contribution to TSP, and 

what concerns you have about volatility in the market that will 

probably arise, and what assumptions did you make regarding 

market volatility in coming up with your charts regarding retirement benefits? 

Mr. MALDON. Thank you, Senator, for the question. 

Senator, on each of those counts that you just mentioned, we actually looked at those. The response to the first part of your question, regarding what servicemembers think, I think we were informed that servicemembers felt very strongly that this is an increased benefit. This is kind of what they are wanting. This is what 

they are looking for. 

I think they told us through the survey responses that they really want choice. They want the flexibility of being involved in helping design the kind of compensation package they prefer, and then 

how they would receive pay. Those things are very important to 

them and they mentioned that to us. 

I am going to ask the Commissioner Zakheim to talk specifically 

to the other part of that question and those benefits. 

Mr. ZAKHEIM. Thank you, Mr. Chairman. 

Senator, first of all, in the United States generally, 97 percent 

of those who are put automatically into a plan stay in that plan. 

That already gives you one indicator. 

Another indicator is that right now 40 percent of the military are 

voluntarily contributing to TSP. So 4 out of 10 without any kind 

46 

of automaticity, without any kind of government matching, or anything like that, are putting their money into TSP. 

So if you take those two figures and put them together, you are 

going to get an answer that tells you that they will all see the benefit of this. 

Frankly, you can always opt-out if you want. 

Senator HIRONO. I understand. That part I think I am reassured 

by your responses. 

On the market? 

Mr. ZAKHEIM. On the market, the volatility, what we assumed is 

that the money would be invested in very, very conservative kinds 

of funds. Obviously, again, in TSP, you can choose from a variety 

of funds. But our assumptions were that there is one particular 

fund that would essentially follow people’s lifestyle, so when you 

are younger, you are probably willing to take more risk. As you get 

older, you get more conservative. 

Again, I think the record of TSP itself, and the fact that people, 

that the civilians stay in, that the military voluntarily go in, tells 

you that they trust the fund managers and, of course, are making 

their own choices. 

So I think we felt very comfortable with the recommendation, in 

terms of market volatility. 

Senator HIRONO. Thank you. That is reassuring. 

I am looking at one of your other charts, chart nine, where pregnancy and childbirth and newborn care are the top two procedures 

done in the MTFs. If we move into the private sector insurance 

market, what kind of effects do you think will occur as a result of 

that, in terms of cost and other impacts? These are huge numbers 

for these two procedures. 

Mr. MALDON. Senator, thank you for the question. 

Commissioner Buyer, would you respond first to the question? 

Mr. BUYER. I am going to do a tag team with General Chiarelli 

in my response to this. 

I think this chart when you look at it, it is surprising. It will be 

surprising to a lot of people when they look at this. There is an assumption that the medical providers at the MTF are providing procedures that really hone the skills that make those doctors and 

nurses combat-ready. Then when you look at a chart like this, you 

say, well, I suppose building the cohesion of the medical team, that 

is an added plus. But with regard to the skill sets that are needed, 

something is missing here. 

What I am going to do is tag team with General Chiarelli here 

because there are two pieces of this. As we move to a selection of 

plans, we want the MTF to be part of the network, because the procedures that the MTF needs are not these procedures that you see 

in the chart. 

So the creation of the jointness and the essential medical capabilities, I am going to pass it over to General Chiarelli, if I could. 

General CHIARELLI. I think it is absolutely critical that you understand the concept of essential military capabilities. That is built 

into what we are doing here. 

Those are those things, simply stated, that transfer to the battlefield. When you get the surgeons general in here and you show 

them this chart, they will argue that, hey, we get a lot of great 

47 

training out of taking care of all of those childbearing issues and 

childcare issues. 

All we are saying is that probably you do, but if we could rearrange your workload, we would give you more of the kinds of 

things that you see in combat. 

I think it is absolutely essential, as you talk to the different interest groups there, as a retired person, I’m looking at how you are 

going to provide care for me in my golden years. If you get stuck 

on that, you will miss the essential piece of what we have to do 

in the medical area, and that is care for our men and women when 

they are sent into harm’s way, and ensure that we have people who 

are trained to do that based on the kinds of wounds they are going 

to get. 

Senator HIRONO. Thank you, Mr. Chair. 

Senator REED. Thank you. 

Senator Lee? 

Senator LEE. Thank you, Mr. Chairman. 

Thanks to all of you who are appearing here today and who have 

served on this commission to make recommendations that are so 

important. 

This is, of course, something that is going to have a profound impact on the men and women who are currently serving or have previously served in our military. 

I hope that all Americans, particularly those who are currently 

serving or are veterans, can take the time to give these recommendations the thorough consideration they deserve. They can 

become part of a debate, a debate that we need to have to help figure out how we can provide better for the needs of those who serve 

us and have served us in the past, and simultaneously help us to 

maintain the strength, the viability of our military. 

I will ask this question to anyone who would like to answer it. 

Did the commission find the current lack of a retirement program 

similar to that recommended by the commission, that the absence 

of a plan like that right now is having an impact on recruiting and 

retention? In other words, currently, we don’t have a retirement 

system in place in the military that provides any benefits for those 

who serve for less than 20 years. Is that impacting recruiting? 

Mr. MALDON. Senator Lee, thank you for the question. 

When we looked, we took a very strategic approach to designing 

the right kind of structure for the compensation programs that are 

going to really support an All-Volunteer Force for the future. As we 

designed the structure for the program, in terms of how we might 

make a recommendation to modernize the current retirement system, we wanted to make sure we knew exactly what was of interest 

to the servicemembers that we would need to recruit and retain. 

The recommendations that we provided, we are absolutely convinced that they are the right set of recommendations here on having a blended retirement plan, because it does two things. It actually supports the retention needs by the Services, and it also supports the recruiting challenges that the Services would have. 

We believe that the recommendations that we made will absolutely take care of the recruiting and retention needs, and it is very 

important that they also support the current force profiles. The 

Services were very interested in making sure that we provided 

48 

them with the tools so they could make those adjustments to continue to meet the recruitment and retention needs for the Services 

as we move into the future. 

Senator LEE. So moving forward, if we were to adopt something 

like this, you think it would help recruiting and retention? 

Mr. MALDON. Absolutely. 

Senator LEE. Let’s talk about the commission’s finding. Let me 

quote this to make sure I get it right. The commission found, ‘‘The 

current compensation system is fundamentally sound and does not 

require sweeping overhaul.’’ 

But it also recommends that servicemembers who need nutritional assistance be transitioned into the Supplemental Nutrition 

Assistance Program (SNAP), the program formerly known as food 

stamps. So let me just ask the question, if servicemembers are in 

need of SNAP benefits, and if the report is contemplating that 

some or many of them will need SNAP benefits, that would, of 

course, be in addition to their regular compensation. Does that undermine your conclusion that their current compensation structure 

is adequate? 

Mr. MALDON. When we talk about the current compensation 

structure, we are basically talking about the pay table itself. We 

didn’t see a need to change the pay table, because the pay table 

has supported the All-Volunteer Force for the last 42 years, and 

specifically during the last 13 years of war. 

But we also recognize that because there are constant changes 

taking place here, a new generation, and also just the requirements 

of the servicemembers themselves, with regard to the size of families and that kind of thing, so there is an important purpose that 

the SNAP program served. 

We took a hard look at that, talked through that extensively. I 

will ask Commissioner Carney if he would respond initially. Then 

very quickly, Senator, I would like to ask Commissioner Higgins to 

follow up as well. 

Senator LEE. Okay. Mr. Chairman, if I could, I have one minor 

follow-up question I want to add to that, if he is going to answer 

that as well. 

I also am curious to know how many people might be, if you were 

to eliminate the Family Subsistence Supplemental Allowance 

(FSSA), how many servicemembers might be enrolled in SNAP and 

whether we have any kind of estimate as to what the increased 

cost would be. 

Mr. CARNEY. Senator, right now, the number of enrollees in 

SNAP from the Department of Agriculture is somewhere between 

2,000 and 22,000. That is their estimated range. That is the best 

information we received. 

On FSSA, I think there are 285 people altogether in the military 

in FSSA. Now, FSSA is restrictive. It is harder to get. There is also 

kind of a stigma attached with it as well. You have to go through 

your chain of command to get it, so does that impact your career 

somehow? So there are these kinds of things that make it probably 

less attractive and probably less useful, certainly, for the continental United States and the near territories. Now for overseas, it 

may still serve some useful purpose. 

49 

But the SNAP program, notwithstanding the fact that it needs 

to exist for some of our military, it is something that is easier to 

get. It provides better nutritional value for the families that require it. 

So either phasing out or reducing the FSSA program is not a bad 

idea because SNAP fills in the gap very nicely. 

Senator LEE. Okay. 

Thank you, Mr. Chairman. 

Senator REED. Senator McCaskill, please. 

Senator MCCASKILL. First, I want to note that your votes were 

unanimous; is that correct? 

Mr. MALDON. Yes. That’s correct, Senator. 

Senator MCCASKILL. That is quite an extraordinary thing for all 

of us who sit on this side of the table. We don’t see much very 

much that is unanimous, especially with the makeup of this particular commission. I am familiar and I have worked with many of 

you, and I know it is bipartisan, and I know you come from different perspectives. I know you probably came to the commission 

with different viewpoints at the beginning. The fact that you 

worked this hard and came up with this proposal adopted unanimously is something that I hope, before we get off to the races trying to politicize anything on this side of the table, that we pause 

a moment and realize that you might have gotten this right. This 

might exactly be what we need to be doing. 

So I want to compliment you in that regard. 

First of all, I think our country needs to save more, and our military always sets the example for our country, in terms of the values and ethics embraced by our military. So I think the way this 

plan embraces saving is terrific. 

I think most Americans don’t know that if you are in the military, that your TSP contributions are not matched currently, unlike 

all other Federal employees who get a match. I think that is, obviously, a double standard that is inappropriate. So the fact that we 

would move to a match for members of the military makes a great 

deal of sense. I think this part of it is terrific. 

Now, here is the tricky part. If we are going to reduce defined 

benefits to 40 percent, and someone can retire with 20 at 38, so 

they are 38 years old, they can’t access that TSP until they are 

591⁄2. Then eventually, not too long after that, they would be looking at Social Security in addition to that. 

So during that period of time, assuming someone is retiring at 

38 or 39 or 40 from the military with 20, was there any discussion 

on the commission about making a special rule or special circumstances where someone could access TSP before they were 

591⁄2? 

Mr. MALDON. Senator, I’m going to ask Commissioner Zakheim. 

These are the kind of questions that these former comptrollers 

really love to have. 

Senator MCCASKILL. I have missed him. We had great work, 

when I first arrived in the Senate. So I am happy to hear from you. 

Mr. ZAKHEIM. Thank you so much, Mr. Chairman and Senator. 

Right now, as you well know, you retire at 20, and then you start 

getting a monthly payment. So by definition, the 40 percent you 

are speaking about, you are going to get. 

50 

Now in addition to that, once you retire, you can get a lump sum 

payment, if you choose to do so. Or you may say no, I don’t want 

that, I want it later on. 

So you have in fact given the individual much more choice than 

he or she has today, because you can choose the lump-sum payment, and you will get that with a reduced payment until full Social Security kicks in. Or you can say no, I’m staying with my 40 

percent, my monthly payments. So you basically, now, are in much 

more control of your financial situation. 

One other point as well, and this was mentioned by my colleague 

Commissioner Carney and others. We put a huge premium on financial education. We actually spoke to some of the foreign militaries to see how they do it as well. 

Right now, you take an 18-year-old or a 19-year-old or 20-yearold and you fire hose them for a few hours about financial management, and it is in one ear and out the other. What we are proposing to do is have regular sessions at key points in their careers, 

key promotions, or something happens in your family life, you get 

married, you have children, whatever. So they can learn the nuances of financial management in a way that, when they hit the 

20 or if they leave sooner, they can make an informed choice about 

what they want to do with the money they are entitled to. 

So to answer your question, it seems to me, at least, that you are 

putting the person in uniform at a far greater advantage even with 

the 40 percent versus the 40 percent, because of the lump sum, because of the financial education, than they currently have today. 

Senator MCCASKILL. I know my time is almost up, and I thank 

you for that. 

I will have some questions for the record about whether or not 

we should allow them to continue to make contributions matched 

to TSP during the pendency of their retirement before they are eligible to pull out with their payment, whether or not that costs out 

in a way that would make sense to the commission. Some questions 

about why not just going to FEHBP, instead of creating another 

system. What are the advantages there? Are they substantive in 

policy or are they political? 

Finally, the one that I really would like to hear from you about, 

and I want to recognize General Chiarelli for the trailblazing he 

worked, especially in the suicide area. I am very familiar with how 

hard you worked on that, both while you were active and after your 

retirement. 

But I’m a little worried about the most expensive recommendation you made, which is another command, standing up a three 

star. We tried to work against quite so many flags. In fact, Gates, 

as you all know, did away in 2011 with the joint forces command, 

and I am trying to think how this new $300 million a year standup adds to the expertise we have now, because we are still going 

to have surgeons general in every branch. 

I have to be convinced that we need another group at the Pentagon. I have a great deal of affection for all of our generals and 

what goes with them, but three stars are expensive, especially everything that goes with them. What are we really going to gain by 

adding this new command at the Pentagon. 

51 

I am over my time by 1:48, so I don’t know whether the chairman wants that to be answered now or whether you want to take 

it for the record. But that is the only part of this that I start out 

a little skeptical about. 

Mr. MALDON. Senator McCaskill, thank you very much. Just very 

quickly, I know we are out of time here, but I would like to take 

the opportunity so that we can respond to that. 

Let me just say real quickly, the readiness command that was 

recommended, we really deliberated on that. We took a lot of time 

and spent it on that. Every recommendation that we made in this 

report was made with that in mind, the need for readiness. There 

was a readiness implication to every recommendation that we 

made. 

So when we proposed a readiness command, we did this in a context of understanding that it is much bigger than a medical readiness component that it has oversight for. They are much larger in 

terms of a number of things that fall underneath readiness. 

The medical readiness piece is only one component of that, and 

we were basically wanting to make sure that, if we are going to ensure success of the medical readiness, we must have proper oversight. That means having the right kind of people, the right person 

in charge with the right kind of ranking to be able to go to the 

budget meetings, and to those decisionmaking venues and hold the 

presence with the other Service Chiefs, and to be able to actually 

have influence with the surgeons general of the Services. 

I will ask Commissioner Chiarelli to speak to that more specifically, if you will. 

General CHIARELLI. Senator, I will only tell you that it is absolutely essential that in this whole process of changing the way we 

deliver medical care that we keep our MTFs a viable training 

ground for not only the doctors and physicians, but the entire medical team, to include our corpsmen and our medics, so that they are 

trained for the thing that civilian hospitals don’t do and that is go 

to war. 

There will be a tendency as we give the opportunity to get their 

health care on the outside, there could be a tendency in future 

budget periods to draw down on what is left in that MTF with our 

eyes covered not realizing that we may have to deploy the people 

in those MTFs far away to support those individuals who are in 

combat. 

To me, that is an absolute essential piece of this entire thing, to 

ensure that we do not allow that to atrophy should we enter into 

an extended period of time when those resources do not have to be 

deployed. 

Every single one of our recommendations, as I went through 

them, and I understood where I sat before, without getting into 

great detail, I will tell you every single one of our recommendations 

impacts readiness in some way. Someone from a joint readiness 

standpoint, remember, this is what is critical, we gain efficiencies 

in jointness. Somebody from a joint readiness perspective has to 

look at the entire readiness portfolio to include medical and ensure 

that we maintain that. 

I will end by saying I think the $300 million is a very conservative large number. We believe many of these resources exist curVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00057 Fmt 6633 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
52 

rently. When we took down Joint Forces Command, many of them 

were transferred to other locations, many of them in the Pentagon, 

and the resource, much of that, and we couldn’t totally put our 

hands on it, will be pulled out and you will see a much smaller bill 

than the $300 million that is cited in our report. 

Senator REED. Thank you. 

Senator Graham, please. 

Senator GRAHAM. Thank you, all, for a lot of hard work, and I 

think a very good product. To those who want to suggest alternatives, you are welcome. We will take any new good idea to make 

this better. To those who think it is wrong, we will accept criticism. 

But we will not accept demagoguery. We are not going to play that 

game. 

If you have a good idea, bring it. If you think they missed the 

mark, we will certainly listen to you. But we are not going to play 

the demagoguery game, because change is afoot, and it is necessary. 

Congress required you to do your job. Do you understand what 

we were asking you to do? Were we trying to get you to fix a broken system? There is an old adage, if it’s not broken, don’t fix it. 

Or were we trying to get you to make a system better? What was 

your mandate, in your own mind? 

Mr. MALDON. Senator Graham, thank you for that question. It is 

our understanding that our mandate was to modernize, make recommendations for modernizing. 

Senator GRAHAM. So it wasn’t your mandate from Congress to 

just go save money? 

Mr. MALDON. Absolutely not. That was not our understanding. 

Senator GRAHAM. So it was you understanding that Congress 

wanted you to look at a 70-year-old system and see if you could 

make it better and more efficient, right? 

Mr. MALDON. Correct, Senator. 

Senator GRAHAM. On the combat medicine point, do you agree 

that we have the best combat medicine any time in the history of 

the modern military? 

General CHIARELLI. After 13 years of war, we do. But I don’t believe we had it going into this. I think we got better and better. 

Senator GRAHAM. We have it now? 

General CHIARELLI. Yes, and we have to maintain it. 

Senator GRAHAM. That’s right. Don’t lose it. 

So if the core function of military health care is to make sure the 

force is ready to fight, then we have to make sure we hang on to 

that. That is what you are telling us, right? 

General CHIARELLI. Exactly. 

Senator GRAHAM. We learned from the Guard and Reserve when 

the war first started that a lot of people didn’t have dental coverage and 25 percent of Guard and Reserve were disqualified for 

deployment because of dental problems. Is that true? 

Mr. ZAKHEIM. That is true. 

Senator GRAHAM. Congressman Buyer? 

Mr. BUYER. Yes. 

Senator GRAHAM. That is true, because your brother is a dentist. 

We have overcome that, so we don’t want to go back to that system 

of having a health care system that doesn’t make you ready to 

53 

fight, having a health care system that can’t keep you in the fight 

and save your life if you get injured. 

I think Senator Kerrey probably knows more about that than 

anybody. 

So those are my guideposts. I don’t want to lose ground on the 

major functions. 

As to retirement, no one is suggesting that we are changing the 

retirement system to 40 percent versus 50 percent for those on Active Duty, are you? Everybody is grandfathered? 

Mr. MALDON. That is correct, Senator. 

Senator GRAHAM. I heard that conversation. If I just walked into 

this room not knowing the context, I would think that a 40 percent 

retirement change had been recommended by the committee for 

those on Active Duty. That is not true. 

This chart, who did your polling? 

Mr. MALDON. That polling was done by True Choice. It has to do 

with the survey that we conducted. 

Senator GRAHAM. I can’t imagine too many things that I do 

where 80 percent of the people prefer something new to something 

they have. So you feel good about those numbers? 

Mr. MALDON. Senator, we feel very good about that, unanimously. 

Senator GRAHAM. Okay. What about the retired community? Do 

you have data about how they feel about the proposed changes? 

Mr. MALDON. Well, the feedback that we have gotten is that—— 

Senator GRAHAM. Can you poll retired military members and find 

out? 

Mr. MALDON. We polled retired as well as Active Duty and Reserve components. 

Senator GRAHAM. So what were the numbers on the retired community? 

Mr. MALDON. Senator, let me take that question for the record. 

Senator GRAHAM. Fair enough. I want to see both ends of the 

spectrum here. 

[The information referred to follows:] 

First, it is important to note that retirement pay of retired servicemembers is 

grandfathered and therefore not affected by the Commission’s recommendations on 

retirement pay. 

In the fall of 2014, the Commission surveyed current and retired servicemembers 

about their preferences for changes to military compensation, including retirement. 

More than 100,000 retirees responded to the survey. The results, when weighted to 

represent the overall retired population, show that retirees were evenly split between a preference for a new ‘‘blended’’ retirement plan (49 percent) compared to 

the plan they have now (49 percent). Although the questions were developed and 

asked before the Commission arrived at its recommendations and therefore did not 

reflect the Commission’s exact final retirement recommendations, the questions did 

ask about a blended retirement plan that included reducing the retirement annuity 

multiplier from 2.5 to 2.0 and enhancing the Thrift Savings Plan with the Department of Defense matching up to 5 percent of servicemember contributions. These 

specific changes, along with others, were included in the Commission’s recommendations. It is worth noting that retirees under the age of 55 (53 percent) and those 

who retired from the Reserve component (55 percent) expressed a somewhat greater 

preference for the ‘‘blended’’ retirement option compared to what they have now. 

Senator GRAHAM. It seems to me that the jury is in, that the people on Active Duty like what you are proposing. If they had an option, they would take the new system. 

54 

I think what we need to understand as members of this committee is where is the retired force. What do they think about the 

proposed changes? Because the health care changes are not grandfathered, is that correct? 

Mr. MALDON. That is correct, just retirement. 

Senator GRAHAM. All right, so at the end of the day, your recommendations on health care are driven by the fact that we think 

we can provide better choice, more efficient for the patient, more 

efficient for DOD, and actually get more choice and better coverage. 

Is that correct? 

Mr. MALDON. That is correct. 

Senator GRAHAM. If we do nothing in terms of health care costs, 

it is exploding in terms of DOD’s overall budget, and somebody 

needs to deal with it. Is that correct? 

Mr. MALDON. In terms of fiscal sustainability, that is correct, 

Senator. 

Senator GRAHAM. Because you have a situation where you have 

to deal with retiree health care at the expense of readiness to fight 

the war of today and tomorrow, and that is a choice we don’t want 

to make. 

Mr. MALDON. That is correct. 

Senator GRAHAM. Thank you all for your hard work. 

Mr. MALDON. Thank you. 

Senator REED. Senator Cotton? 

Senator COTTON. Thank you all for your service, not just on this 

commission, but many of you have served our country in other 

ways. 

I have questions about some of the retirement proposals, and 

then if we have time at the end, about the commissary proposals. 

Could we get chart three up maybe, as a way of providing an illustrative point of discussions. 

Chairman Maldon, I will direct questions to you, if you want to 

farm them out that to subject matter experts, that is fine. 

This shows, on the left, the current defined benefit system. Get 

20 and get half-pay. On the right, you show your blended plan of 

a defined benefit along with a TSP contribution and government 

match, and then the continuation pay at 12 years. 

Was there any consideration about trying to move to a pure defined contribution system? 

Mr. MALDON. Senator, we have a defined benefit system now, 

and to move to a complete defined contribution system, we believe 

would not give us all of the retention benefits of the traditional 

military retirement. That is why we wanted to keep both systems 

blended, because we can take care of both our retention needs as 

well as the recruiting needs. 

Senator COTTON. Okay. Does anyone else want to elaborate? 

So I understand that trying to keep benefits roughly the same, 

or, in this example, better is one goal. Giving services and personnel flexibility is another goal. Retaining the force and maintaining the force is one goal. So the assessment of the commission is 

the 20-year defined benefit plan is important to maintain that last 

goal, retaining personnel for this full 20 years. 

Mr. MALDON. Yes, Senator, that is correct. 

55 

Senator COTTON. Any consideration of like a stairstep approach 

to the continuation pay, rather than saying the one at 12 years, another 4 years extension, maybe having two or even three periods 

within a 20-year time horizon where you are encouraging people to 

reenlist or officers to remain? 

Mr. MALDON. Senator, the current program as it is today, the 

compensation system, we have special pay, incentive pay. We have 

those bonuses that servicemembers are being paid. So we have 

those stepping stones that servicemembers have as a benefit 

through those programs already. 

This would be that retention piece that would take the servicemember now to a point of having 12 years plus a 4-year obligation 

that would get him to that 16th year, which means they are close 

enough to retirement that that is the retention will keep them 

there. 

Senator COTTON. So the thinking is that not many people leave 

after 12, and very, very few leave after 16? 

Mr. MALDON. That is correct. 

Senator COTTON. Under this proposal, let’s say a hypothetical E– 

7 who has had 7 or 8 years down range, three or four deployments. 

He would be leaving with his contributions to his defined contribution plans and the government match, is that right? 

Mr. MALDON. If he elected to—— 

Senator COTTON. If he didn’t reenlist at 7 or 8 years. 

Mr. MALDON. Yes. 

Senator COTTON. There is probably data to illustrate this. Do we 

have any problem retaining this kind of midcareer, senior NCO, 

company grade officer, field grade officer, in the 6 to 9 year range? 

General Chiarelli? 

General CHIARELLI. It depends on the military occupational specialty. It is one thing to retain an infantryman who is willing to 

hump a 60-pound ruck up the mountains of Afghanistan and keep 

him in as a platoon sergeant to 24 as opposed to someone who is 

trained with I.T. skills or is an airplane mechanic and can work 

in other areas. 

That is why it is absolutely essential the continuation pay be 

flexible and the Services have the ability, based on the military occupational specialty, to apply differing amounts depending on the 

military occupational specialty. 

I will tell you, rather than stair step, I believe that our RAND 

modeling showed this was the critical period. 

The critical period, my guys used to tell me, is 8 years and 27 

days. The model that was in place before was, if I could keep someone in under a defined contribution of 50 percent past that magical 

mark, I had a better than average opportunity to maintain them 

longer. 

But our modeling for this particular plan told us that that the 

10- to 12-year mark is absolutely critical. 

Senator COTTON. My time is almost expired, so my commissary 

question will wait for another day. 

Senator REED. Do you want to ask another question? 

Senator COTTON. Sure. I’d be happy to. 

So I have been stationed at bases, Fort Campbell stands out in 

my mind, that had a nice commissary. But it had an even better 

56 

Wal-Mart Supercenter right outside the gates. There are obviously 

bases in America, especially bases around the world, where we 

need an on-base commissary to provide the choices that our 

servicemembers have become accustomed to. Was there any consideration of assessing local sites around bases and forts, about 

whether or not a commissary is needed on that location? 

Mr. MALDON. Senator Cotton, we spent quite a bit of time talking 

to servicemembers, family members, installation commanders 

across the country on that. Polling told us the same thing. We had 

people that were in different places on how they perceived the 

value of the commissaries. 

Overwhelming, though, people believed it was very important to 

retention to have the commissaries there. There are people that 

would tell us that they have these other shops. We talked to some 

of the big shop warehouses, if you will. The stores, the Wal-Marts, 

the others, about the benefits they would offer if they were to offer 

a benefit. 

Quite honestly, at the end of the day, no one was willing to stand 

behind their comments that they made or had about providing savings to the servicemember. 

Our intention here was to make sure we could protect the benefit 

of the servicemembers, and servicemembers believe that this is a 

big savings to them and that they also believe it was a retention 

tool. 

That is the way we went about moving forward with our recommendation on the commissaries. 

Mr. ZAKHEIM. Could I just add to that, Mr. Chairman, Senator, 

several of the big chains talked about issuing a card, and you probably heard that too, that they will issue some cards to the military. 

When we ask their representatives point-blank, would you do it? 

Never got a straight answer. 

At the same time, we did hear—now, look, there are some people 

who will order their food online. We know that. But by and large, 

people want that. They want it because it is convenient, for a start. 

It is near them. It is military. They understand it. It is responsive 

to their needs. 

So we looked at that and made our recommendations based on 

the feedback. Again, different folks will have different requirements. But pretty much overwhelmingly, this is not something they 

wanted to go away 

General CHIARELLI. Proclivity to use the commissary is based on 

a whole bunch of things, and one of them is the size of family. We 

had the FSSA and SNAP issue before. There are arguments about 

how much it saves. But if you even cut the high number, the 31 

percent, in half, it is still a great savings to that E–7 with four kids 

and a wife who made a decision to stay home and take care of the 

kids, and to be an at-home mom. It is an unbelievable place for 

them to save the kind of money they need as part of the benefit 

we provided them. 

Senator COTTON. Thank you all again for your service and this 

important report. We look forward to working on it. 

Having dealt with junior enlisted men who are new to the Army, 

I can say the financial literacy proposals are very critical as well. 

57 

Having been a Member of Congress and now a Senator, I say 

maybe we should add that to our orientation as well. 

Senator REED. Thank you very much, Senator. 

On behalf of Chairman McCain, I would like to request unanimous consent to include written comments in the record from outside groups for up to 30 days after the conclusion of the hearing. 

Any objection? 

Hearing none, so ordered. 

[The information referred to follows:] 

See Appendixes D through O at the end of this hearing record. 

Senator REED. Also on behalf of the chairman, I would like to 

thank the witnesses for their excellent testimony, for their extraordinary contribution to this critically important issue. Thank you all 

very much. 

The hearing is adjourned. 

[Whereupon, at 11:56 a.m., the committee adjourned.] 

[Questions for the record with answers supplied follow:] 

QUESTIONS SUBMITTED BY SENATOR JOHN MCCAIN

HEALTHCARE

1. Senator MCCAIN. Commissioners, in your discussions with various constituencies—military and veterans’ service organizations, servicemembers and their families, and retirees and their families—what were their major concerns about the current military health system and how do your recommendations address those concerns? 

Mr. MALDON. TRICARE beneficiaries expressed three major areas of concern 

about the program: access, choice, and value. 

Access: 

• There are limited provider networks in TRICARE. For example, in Fayetteville, NC, 15 orthopedic doctors are in the TRICARE network compared 

to 43–163 orthopedic doctors in other networks. 

• Unavailability of appointments with the assigned primary care manager 

leads to lack of continuity of care. 

Value: 

• Cumbersome referral and authorization processes lead to wait times as 

long as 35 days for specialty care. 

• Referrals for civilian care, with inadequate information on which civilian 

providers actually accept TRICARE, lead to families giving up on TRICARE 

and paying out of pocket to receive needed health care. 

• The appeals process for medical necessity determination is frustrating 

and long. 

• The one-size-fits-all approach to care does not work. 

• Beneficiaries are unable to access care that serves their individual needs. 

The commission consistently received the following feedback from Reserve component (RC) members: 

• There is a lack of continuity of care transitioning to and from active duty 

for the RC. 

• There is a lack of continuity of care for families when the servicemember 

is activated and if the family’s existing health care providers do not accept 

TRICARE. 

• RC members must continue to pay the employee’s share of the insurance 

premium if they choose not to accept TRICARE coverage. In cases in which 

employers stop paying the employer’s share of the premium, RC members 

must fully fund the existing health insurance. 

• When RC members are not supporting a contingency operation during activation, TRICARE coverage ends abruptly upon demobilization, allowing 

no time for RC members and families to find civilian insurance, which in 

turn leads to a break in health coverage. 

58 

1Leemore, Dafny, Kate Ho, and Mauricio Varela, ‘‘Let Them have Choice: Gains from Shifting 

Away from Employer-Sponsored Health Insurance and Toward an Individual Exchange,’’ American Economic Journal: Economic Policy, 5, no. 1, (2013): 33, 56. 

Gaining access to medical care in the civilian sector through various commercial 

insurance plans would be a simpler, quicker endeavor under TRICARE Choice. 

TRICARE Choice would provide multiple health insurance options from which beneficiaries would select the plan that best meets their current needs. This opportunity 

for choice would preclude beneficiaries from having to purchase options that are not 

necessary for meeting their individual needs, while at the same time providing them 

the care that they do need in a timely manner, with the provider of their choice. 

2. Senator MCCAIN. Commissioners, you have recommended that military retirees’ 

healthcare costs increase over a 15-year period such that retirees ultimately would 

pay about 20 percent of the overall costs of their healthcare. How did you determine 

that was the right approach to get retirees to share more of the cost for their 

healthcare? 

Mr. MALDON. Currently, the retiree premium for TRICARE Prime is approximately 5 percent of the cost of the program. When TRICARE began in the early 

1990s, the retiree premium for TRICARE Prime was approximately 27 percent of 

the cost of the program. The premium was not indexed for inflation. The commission 

wanted to increase access to high valued commercial insurance products, while providing recognition of service. For this reason, the ramp stopped at 20 percent and 

did not continue to 27 percent. 

3. Senator MCCAIN. Commissioners, in your view, how much money are retirees 

willing to pay for better healthcare for themselves and their family members? 

Mr. MALDON. Importantly, the commission’s recommendation was designed to explore the answers to this question and these are discussed below, but the most important point to make is that the commission’s recommendation was designed to 

take into account a wide range of differences in retiree willingness to pay for better 

healthcare. TRICARE Choice would provide a wide range of plans that vary along 

many health care attributes (e.g., network size and access). These plans would have 

different costs. There would be some lower-cost plans that offer a similar benefit to 

TRICARE today (e.g., limited access and networks like the current TRICARE plan). 

There would be other plans with much more expansive covered services, networks, 

and access; these plans would cost more. Retirees would be able to choose among 

such plans. A retiree with a low willingness to pay for better health care could 

choose one of the lower-cost plans that more closely mirrors TRICARE today, and 

a retiree with a higher willingness to pay could choose a much richer plan for a 

higher cost. TRCIARE Choice would allow retirees to self-select the plan type they 

prefer and empower retiree families to take control of their own health care experience-a consumer-driven model focused on value and choice. 

As part of its analyses, however, the commission did explore this question in some 

detail and developed some preliminary answers. There were three primary methods 

used by the commission: 

• Examining academic literature that estimates this willingness to pay. 

• Surveying actual retirees to estimate their perceived value of choice and 

better healthcare experience. 

• Simulation modeling of the behavior of Federal civilians who are similar 

to military retirees in age, income, and location. 

The academic literature estimates how much workers who are not provided a 

choice of plans would be willing to forfeit of their employer-provided health care 

subsidies for the freedom to use the subsides to obtain their choice of plan from a 

menu of plans.1 This estimate, based on actual data from workers, was that the 

workers were willing to forfeit 16 percent of their subsidy. The estimates from the 

academic literature were consistent with the commission’s survey results and with 

the cost share changes for retirees in the commission’s recommendation. 

The commission directly measured the perceived valuation (very similar to willingness to pay) of health care benefit attributes for Active Duty family members in 

its survey. The survey did not directly measure perceived valuation of those attributes for retirees, but did measure preference intensity for them. Figure 19 on 

page 109 of the commission report provided these perceived valuations for Active 

Duty family members. The values are in annual dollar amounts. 

59 

The intensity of preferences for retirees was provided in Figure 14 on page 88. 

As discussed in the report, retirees’ 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. 

The third method looked at by the commission was the actual behavior of Federal 

civilians who were similar to retirees in age, income, and location. To support its 

cost analysis of the recommendation, the commission examined the insurance plan 

choices of Federal civilians and contracted with the Institute for Defense Analyses 

(IDA) to develop a simulation model of retiree (and Active Duty family member) 

health care plan choice. A detailed review of that model is provided in the IDA report on the commission’s website (http://www.mcrmc.gov/public/docs/report/IDA– 

Paper-P–5213—Final—020215.pdf). That model predicted that most retirees would 

take advantage of the choices provided to them and upgrade to a richer health care 

plan rather than the low-cost plans similar to TRICARE today. 

4. Senator MCCAIN. Commissioners, what are your estimates of the annual 

healthcare costs—premiums, co-pays, deductibles—for retirees and their families 

under the proposed TRICARE Choice? 


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Mr. MALDON. Health care costs for retirees and their families under TRICARE 

Choice can be divided into two components. The first component would be what they 

pay for coverage similar to what they have today under the existing TRICARE program. To create a relevant comparison, cost should be compared for similar coverage. In TRICARE Choice, retirees would have many options for health care plans 

and could choose to purchase enhanced coverage (broader networks, better access, 

and more covered services), rather than the existing TRICARE program. The second 

component would be any additional cost retirees choose to pay to purchase coverage 

that includes these enhancements. If retirees take advantage of the additional 

choices made available to them by TRICARE Choice, it can be argued that they will 

not experience a price increase, but rather a compensation increase because the retirees receive the better coverage at a subsidized rate. 

To evaluate these separate components of cost, the commission considered two 

plans from the Federal Employees Health Benefit Plan (FEHBP) as examples of 

what types of plans might be offered in TRICARE Choice. The first plan is the Government Employees Health Association (GEHA). Although not a perfect comparison, 

this plan is considered most similar to the existing TRICARE program. GEHA includes larger networks than the existing TRICARE program in the markets examined by the commission and more covered services. But it is a lower-cost, PPO-style 

plan and is the best comparison the commission could find for the existing 

TRICARE program. The second plan is Blue Cross Blue Shield (BCBS) Standard. 

This is one of the most robust and highest-cost plans in FEHBP and is used to illustrate the costs to retirees who exercise the opportunity to select better coverage 

made available to them by TRICARE Choice. 

The table below shows the costs to retirees for these options: existing TRICARE 

program, TRICARE Choice with a plan similar to GEHA, and TRICARE Choice 

with a plan similar to BCBS Standard. The first row of data illustrates the costs 

retirees pay now under the existing TRICARE program. Retirees enrolled in 

TRICARE prime paid a $548 (in 2014) premium. In addition, about 3 percent of retirees sponsor the purchase of TRICARE Young Adult (TYA) for about $2,000 and 

about 65 percent purchase the TRICARE Retiree Dental Program for about $1,500 

per year. This means that the average retiree is pays approximately $1,544 per year 

in premium costs for TRICARE. Adding in their copayments and deductible 

amounts for health care provides an average annual cost of about $2,030 per retiree 

household. 

These costs would be largely unchanged in the first year of TRICARE Choice, 

when the retirees’ premium cost share is 5 percent. These costs would increase, 

however, by the time TRICARE Choice was fully implemented with a 20 percent 

cost share (15 years after program initiation). In that year (using constant 2014 dollars), the comparable health care plan (GEHA) would have a premium for retirees 

of about $1,769 per year. No retirees would have to buy TYA and some retirees 

would rely on the partial dental coverage provided in GEHA instead of purchasing 

stand-alone full dental coverage, so the total premium amounts paid by the retiree 

in GEHA would be about $2,267 per year. Adding in copayments and deductibles 

provides an average annual cost of about $3,556 per retiree household. 

The comparison to GEHA is the best available comparison with the existing 

TRICARE program. There would be many retirees, however, who choose to purchase 

better coverage that costs more. A retiree who chooses to purchase better coverage, 

like BCBS Standard, would pay about $552 more per year ($3,556 to $4,108) for a 

plan with a value of about $2,763 more than GEHA (because the government would 

pay an 80 percent cost share at the end of the 15-year period, the government would 

be paying the remaining $2,211 for the added value of health benefits. Thus, these 

retirees are experiencing an increase in their compensation. 

61 

5. Senator MCCAIN. Commissioners, under your proposed TRICARE Choice plan, 

Military Treatment Facilities (MTF) would be network providers to commercial 

health plans. MTFs would bill commercial health plans for materials and services 

provided, and those health plans would then reimburse MTFs. Today, MTFs have 

limited capability to perform billing and collections functions. What additional infrastructure and personnel would MTFs need to perform those functions? How much 

would that cost the Department of Defense (DOD) and what is the return on investment? 

Mr. MALDON. In the civilian sector, medical providers do not typically handle 

medical billing or insurance. These functions are usually handled by administrative 

or support services. There are companies that provide billing services to major 

health systems in the United States today. The companies also provide training for 

coding, billing procedures, collections, and related processes. The Military Health 

System (MHS) could benefit from such a professional service. Alternatively, MHS 

could expand its current third-party billing activities to handle the medical billing. 

If this latter approach were taken, MHS would need to ensure that existing administrative personnel were trained to perform such duties and that efforts currently 

underway to modernize MHS information technology (IT) would support this task. 

In 2014, DOD awarded a contract to General Dynamics to build the Armed Forces 

Billing and Collection Utilization Solution (ABACUS) to generate medical claims, 

pharmacy claims, invoices, and governmental billing forms at 136 military medical 

treatment facilities globally. ABACUS will replace legacy IT systems and automate, 

consolidate, and centralize the Army, Navy, and Air Force’s separate health billing 

and collection IT systems. Adequate time would be required to set in place coding, 

billing, collections, and related systems, regardless of the system chosen, which is, 

in part, why the commission’s proposed legislation includes a 2-year implementation 

period before transitioning beneficiaries into the new system. 

6. Senator MCCAIN. Commissioners, how do your recommendations improve beneficiaries’ access to care, quality of care, and the experience of care? 

Mr. MALDON. Currently, TRICARE Prime is the only option available at no or limited out-of-pocket cost; however, under TRICARE Choice and including the Basic Allowance for Health Care (BAHC), most Active component families could choose from 

numerous plans with no or limited out-of-pocket costs. Under an insurance model, 

such as TRICARE Choice, 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. By allowing 

beneficiaries the opportunity to select from an array of health plans, they could 

choose coverage that best fits their individual needs. Providing TRICARE Choice 

and access to commercial insurance plans would give beneficiaries access to the 

medical industry’s most recent innovations and procedures, and eliminate the 

lengthy DOD contracting and appeals processes. RC members who are called to active duty would receive BAHC, which would create options for helping address concerns about cost and continuity of care that pertain to them and their families. One 

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cludes numerous providers, including the family members’ current provider. Another 

option would be to use BAHC to pay for a member’s current civilian plan. With commercial health insurance, beneficiaries who live away from major troop concentrations would have more extensive provider networks in civilian health plans. 

7. Senator MCCAIN. Commissioners, how do your recommendations incentivize 

beneficiaries to seek the most cost-effective means of getting healthcare? 

Mr. MALDON. TRICARE Choice would provide multiple health insurance plans 

from which beneficiaries could select the plan that best meets their current needs. 

This opportunity for choice would preclude beneficiaries from having to purchase options that are not necessary for meeting their individual needs. The recommendation also provides BAHC to be paid to servicemembers with dependents. The allowance creates a situation in which families spend their own money (subsidized by 

BAHC to be cost neutral) on health care, which provides a mechanism for more costeffective decisionmaking. For example, a family is less likely to seek care in an 

emergency room for a minor injury or illness knowing the expense would be greater 

than that associated with care provided by a primary care or urgent care provider. 

The TRICARE system today 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 out-of-pocket (OOP) expenses-copayments, deductibles, and 

coinsurance-experienced by TRICARE beneficiaries compared to their civilian counterparts. Although OOP costs are an important tool the health care sector uses to 

manage consumption of services, they usually are used in conjunction with nonmonetary tools to achieve greater results. Nonprice methods lower utilization by, 

among other things, reducing avoidable emergency room and urgent care visits, addressing health care needs before a hospital admission becomes necessary, shortening inpatient stays, and avoiding readmission. Nonprice techniques also can lead 

to better health care outcomes through disease management, wellness, and better 

coordination of 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. Under the proposed TRICARE– 

Choice model, health care plans would use a range of both price and nonprice techniques to affect beneficiary behavior and improve health care outcomes. 

8. Senator MCCAIN. Commissioners, what safeguards have you included in your 

recommendations to protect active-duty family members from experiencing higher 

than usual out-of-pocket costs for healthcare? 

Mr. MALDON. The commission modeled the actual amount of out-of-pocket health 

care costs expended for current Active component (AC) family members. BAHC 

would cover all health care expenses for the vast majority of AC families. Based on 

the commission’s cost estimates, 85 percent of AC family members would have 100 

percent of costs covered; 10 percent would have marginal cost increases; and 5 percent would be eligible for additional assistance via the proposed catastrophic and 

chronic health care program. For this program, the commission recommended setting aside $50 million annually in a special fund to assist families with catastrophic 

or chronic health care needs. Because of BAHC and the catastrophic and chronic 

assistance program, the commission expects net health care costs should be less 

under TRICARE Choice than under the current TRICARE program for most beneficiaries. 

COMMISSARIES

9. Senator MCCAIN. Commissioners, you recommend consolidating the Defense 

Commissary Agency and the three exchange systems into a single Defense Resale 

Activity (DeRA), and you recommend retaining the current branding of the three exchange systems with their separate directors. It appears DOD could save more 

money through additional efficiencies with a single exchange system. Why do you 

recommend retention of separate exchange systems? How much additional money 

could be saved with a single exchange system under a DeRA? 

Mr. MALDON. The commission’s proposal for implementing a consolidated resale 

organization includes a recommendation to initially retain the current branding and 

a director for each of the currently branded exchange systems. This recommendation 

is meant to ease the transition and should not be interpreted as the recommended 

end state. The intent is to eventually transition to a single organization with a single leadership team, a single headquarters, a single information technology infraVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
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structure, a single human resources system, a single logistics network, a single support staff, and so forth. Many of the savings estimated in the commission’s final report are based on these consolidation efforts. 

Although a Defense Resale Activity liaison position is recommended for each of 

the Services, those positions do not have to be directors. A consolidation of branding 

may eventually be pursued, but given that this is not expected to be a significant 

driver of savings it was not identified as a key component of implementation. The 

commission suggested that branding and organizational structure can be modified 

over time by the Board of Directors (BOD). 

10. Senator MCCAIN. Commissioners, how would your recommendation impact the 

total amount of funds that the exchange system annually provides for the Services’ 

Morale, Welfare, and Recreation programs? 

Mr. MALDON. The commission’s proposal to consolidate commissaries and exchanges is expected to have no impact on the contributions to Morale, Welfare, and 

Recreation (MWR) programs. The commission’s Final Report offers multiple ways 

that the consolidated organization would increase profits through reduced operating 

costs and increased sales. The Board of Directors (BOD) would determine and direct 

the best use of those profits, making tradeoffs among the needs of the MWR programs, the benefits of reinvesting in the resale system, and the goal of slowly reducing the burden on taxpayers. It is expected that the BOD would ensure that the 

MWR programs receive the same priority and resources that they do today. 

11. Senator MCCAIN. Commissioners, how would your recommendation affect the 

current savings percentages that patrons receive when shopping in defense commissaries? 

Mr. MALDON. The commission’s recommendation is focused on preserving and improving the benefits delivered to servicemembers and their families through commissaries and exchanges. At the core of this recommendation is a statutory guarantee that food would continue to be sold at cost (plus a 5 percent surcharge) in 

commissaries. The commission strongly recommended that personal health items 

continue to be sold at cost and be protected through policy. DOD would have the 

authority to protect other categories of items through policy as well. The consolidated organization would have the option of raising prices on other nonfood items 

but would have to find a balance between generating profits and maintaining customer loyalty and satisfaction. The prices for these other nonfood items would likely 

be similar to the discounted, but slightly higher prices found in the exchanges. 

12. Senator MCCAIN. Commissioners, in your deliberations, did you consider commercialization of the commissary and exchange systems? In your view, how much 

money could be saved by out-sourcing the commissary and exchange systems to the 

private sector? 

Mr. MALDON. The commission considered commercialization of the commissaries 

and met with multiple groups investigating this alternative but did not find this approach to be a promising way of saving money. Initial analysis indicates that commercial grocers cannot afford to sell such a wide selection of groceries at prices similar to those currently offered in commissaries. The commission did not investigate 

the option of commercializing commissaries and raising prices because doing so 

would reduce the benefit to servicemembers. The option of subsidizing commercial 

grocers was rejected for multiple reasons. Advocates of commercialization also expressed concern over the many restrictions currently placed on commissaries to minimize competition with the exchanges. 

The commission considered but did not investigate commercialization of exchanges. Initial analysis indicated that the opportunity for savings is greater 

through the consolidation of commissaries and exchanges. 

CHILD CARE

13. Senator MCCAIN. What are the average wait-list times for child care on military bases? 

Mr. MALDON. Currently, wait times for military child care programs are not 

tracked in a reliable way and are not routinely reported. This is why the commission recommended establishing mandatory, standardized monitoring and reporting 

of child care wait times. In response to a commission data request, the Army indicated that it is experiencing 6 to 9 month wait times for infants and 3- to 5-month 

wait times for toddlers. The Navy estimated a 3- to 5-month average wait for infants, but cautioned that the methods used to calculate and report this data were 

64 

inconsistent and may affect its accuracy. The Air Force does not consistently calculate or track wait times across its child care programs, but was able to provide 

information for one of its largest overseas bases, indicating wait times up to 7 

months for infants. Wait times were not received from the Marine Corps. 

14. Senator MCCAIN. What causes the child care shortage on military bases? Is 

it due to a lack of skilled personnel available to work in child development centers 

or a lack of physical space available in those centers? Are there any other limiting 

factors that we should consider? 

Mr. MALDON. The root causes of military child care shortages can vary significantly from one location to another. Although Child Development Center (CDC) 

staffing shortages was the most frequently cited cause, some locations are more substantially affected by shortages in available and properly configured facilities, shortages in available and qualified community-based and home-based providers, or 

shortages in funding to pay community- and home-based providers. 

Based on the limited data available, shortages are consistently more acute for infant and toddler care. As documented in the commission’s Final Report, this particular cause for shortage can be the result of financial considerations. The cost of 

providing services for these younger children is higher and the fees collected from 

these typically younger parents tend to be lower based on their lower household income. Because military child care fees do not vary with the age of the child as they 

typically do in private sector child care, the fees paid for older children often subsidize the care for younger children. As a result, the mix of ages that are provided 

care in military programs may be intentionally favorable for older children, even 

when the demand is highest for infant and toddler care. 

Even though DOD salaries for child care staff are generally competitive, in some 

areas, finding interested and qualified candidates can still be difficult. In recent 

years, staffing shortages have often been related to the lengthy process associated 

with conducting background investigations and making hiring decisions based on 

the results of those investigations. Forthcoming updates to the policy on background 

checks for individuals in DOD child care services programs should shorten this process. 

In areas where facilities are needed, military construction (MILCON) funding may 

be required to build new facilities, expand existing facilities, or reconfigure leased 

facilities. These funds are limited and require a lengthy approval process. The commission’s recommendation to reestablish the authority to use operating funds for 

minor construction projects at child development facilities should improve responsiveness when facilities are needed. 

QUESTIONS SUBMITTED BY SENATOR KELLY AYOTTE

COMPENSATION AND RETIREMENT

15. Senator AYOTTE. Commissioners, consistent with section 674 of the National 

Defense Authorization Act for Fiscal Year 2013, Congress clearly established principles that should govern the commission’s recommendations. One of those principles that Congress explicitly identified was the idea of grandfathering those currently serving or already retired. Do the commission’s recommendations with respect to retirement pay completely comply with this governing principle set forth by 

Congress that for those currently serving or retired the ‘‘retired pay may not be less 

than they would have received under the current military compensation and retirement system?’’ 

Mr. MALDON. Yes, retired pay would be completely grandfathered for servicemembers currently serving or retired. Also, consistent with the congressional principles set forth in the National Defense Authorization Act for Fiscal Year 2013, 

servicemembers and retirees would have the choice to opt in to the recommended 

blended retirement system. For those who choose not to opt in, their retired pay remains unchanged, and therefore would not be less than they would have received 

under the current compensation and retirement system. 

16. Senator AYOTTE. Commissioners, is it correct that the commission proposes increasing the cost share for medical costs 1 percent each year for 15 years so that 

the cost share grows from 5 percent to 20 percent? 

Mr. MALDON. Yes, the commission did propose a gradual increase in cost shares 

for retirees not yet eligible for Medicare. Currently, the premium for TRICARE 

Prime for non-Medicare-eligible retirees is approximately 5 percent of the cost of the 

program. When the TRICARE program went into effect in 1996, the cost share for 

65 

retirees younger than 65 was 27 percent of total health care costs. The premium 

was not indexed for inflation. The commission wanted to increase access to highvalued commercial insurance products, while providing recognition of service. For 

this reason, the ramp stopped at 20 percent and did not continue to 27 percent. 

17. Senator AYOTTE. Commissioners, under the commission’s proposal, would that 

significant cost share growth impact those currently retired, as well as those currently serving when they retire? 

Mr. MALDON. The change in cost-share percentage would take place in successive 

years after the recommendation is implemented. Anyone who was retired at that 

time or who retired before the 20 percent threshold is reached would experience a 

1 percent increase in cost share per year. Even at the end of the designated 15-year 

implementation period, the cost share would be a smaller percentage than the 27 

percent cost share that retirees paid when TRICARE was first created and substantially less than retired government civilians pay. 

RECRUITMENT AND RETENTION

18. Senator AYOTTE. Commissioners, did your model consider the impact retirement and health care proposals in an individual or in an aggregate manner—in 

terms of their impact on recruitment and retention? 

Mr. MALDON. Recruitment and retention were considered both individually and in 

aggregate. For example, the retention modeling conducted by RAND showed the recommended blended retirement system would maintain the Services’ current force 

profiles. The commission’s survey showed that servicemembers strongly prefer better choice and access in health care plans. The recommended TRICARE Choice 

health care plan would therefore be expected to improve recruitment and retention. 

These individual effects were then aggregated to ensure the holistic package of 

reforms would maintain recruiting, retention, and the All-Volunteer Force. For example, the Post-9/11 GI Bill and retirement recommendations work collectively to 

provide midcareer retention incentives that would help meet retention goals as follows: 

• Providing Post-9/11 GI Bill transferability at 10 years of service (YOS), 

with 2 additional YOS, would enable the Services to increase retention to 

the critical 12-year point in a military career. 

• Awarding continuation pay at 12 YOS, with an additional commitment of 

4 YOS, would bring servicemembers to the 16-year point, at which the draw 

of the defined benefit (DB) encourages retention. 

• Maintaining the majority of the DB retirement plan, would encourage 

servicemembers to stay 20 years or more. 

• Maintaining flexibility in special and incentive pays, including continuation pay, would provide additional opportunities for retention incentives in 

cases where those listed above are not sufficient to retain key personnel. 

SERVICE BEYOND 20 YEARS

19. Senator AYOTTE. Commissioners, under your proposal, does the Thrift Savings 

Plan (TSP) government match end at 20 YOS? 

Mr. MALDON. The commission recommended matching contributions end at 20 

YOS because retention modeling shows the Services’ current force profiles would be 

sustained after 20 YOS without TSP matching. The commission testified to Congress, however, that matching after 20 YOS is an issue Congress should explore to 

ensure the recommended retirement plan maintains lifetime earnings of 

servicemembers. 

20. Senator AYOTTE. Commissioners, under the commission’s proposal, is it correct 

to say that the defined benefit for retirement at 20 years would decline from 50 percent of base pay to 40 percent of base pay? 

Mr. MALDON. Although the recommended blended retirement system would maintain the majority of the current defined benefit, retired pay would decline from 50 

percent to 40 percent of basic pay for servicemembers who retire with 20 YOS. 

These servicemembers would also have government-sponsored TSP assets and 

would receive a new continuation pay at 12 YOS. Using conservative estimates, this 

combination of blended retirement system benefits is projected to generate greater 

lifetime earnings for servicemembers who retire with 20 YOS. 

66 

21. Senator AYOTTE. Commissioners, if a servicemember served for 30 years, 

would the reduction of the defined benefit decline from 75 percent to 60 percent? 

Mr. MALDON. Although the defined benefit for a servicemember who retires with 

30 YOS would decline from 75 percent to 60 percent of basic pay, servicemembers 

would also receive government-sponsored TSP assets and a new continuation pay 

at 12 YOS. 

22. Senator AYOTTE. Commissioners, when we look at these two proposals together—ending the TSP match at 20 years and reducing the defined benefit so significantly for those who serve 30 years—wouldn’t that create a reinforcing disincentive discouraging service beyond 20 years? 

Mr. MALDON. Retention modeling shows that the Services’ current force profiles 

would be maintained after 20 YOS without TSP matching after 20 YOS. It is for 

this reason the commission did not recommend matching after 20 YOS. 

Matching after 20 YOS would increase retention after 20 YOS, but would also approximately maintain lifetime earnings for servicemembers who retire with 30 YOS 

relative to their lifetime earnings under the current retirement system. For this reason, the commission testified to Congress that matching after 20 YOS is an issue 

Congress should explore to ensure the recommended retirement plan maintains lifetime earnings of servicemembers. 

QUESTIONS SUBMITTED BY SENATOR DAN SULLIVAN

GENERAL

23. Senator SULLIVAN. Commissioners, there is a quantitative difference between 

the service of our military members and other Federal employees; benefits and 

healthcare should reflect this disparity. Assuming Congress implements new 

changes like the recommendations the commission is suggesting, does the issue of 

grandfathering play a role? 

Mr. MALDON. Under the commission’s recommendation, retired pay is grandfathered for currently serving servicemembers and retirees. Benefits from the Montgomery GI Bill and REAP are also grandfathered. Several of the commission’s recommendations improve or maintain current benefits (e.g., Commissary savings, financial literacy training, and child care availability) or provide new options without 

changes to the current benefit (e.g., Survivor Benefit Plan). For these recommendations, grandfathering would not be necessary. Although it is not feasible to grandfather the current TRICARE program under the commission’s recommendation, 

TRICARE Choice is designed to be separate from the Federal Employee Health Benefit Plan precisely because of the qualitative differences between servicemembers 

and other Federal employees. 

24. Senator SULLIVAN. Commissioners, if so, how do you plan to implement these 

changes to programs and services currently and previously used by servicemembers 

while applying new standards? 

Mr. MALDON. Retired pay is grandfathered for currently serving and retired 

servicemembers by the commission’s recommendation. For grandfathered 

servicemembers, their retied pay would continue to be calculated by the Defense Finance and Accounting Service (DFAS) consistent with the current retirement system. For servicemembers who are under the proposed retirement system, DFAS 

would simply calculate retired pay using a different retired pay multiplier. In both 

cases, DFAS would use existing processes to disburse retired pay to servicemembers. 

The commission’s recommendations also grandfather benefits under the Montgomery GI Bill and the Reserve Education Assistance Program (REAP) for servicemembers currently enrolled in those programs. The commission’s recommendations 

stop new enrollments in those programs in favor of the Post-9/11 GI Bill. 

EDUCATION

25. Senator SULLIVAN. Commissioners, one of the best things the military does for 

its servicemembers and veterans is provide educational assistance and training in 

the form of the G.I. Bill. I have seen firsthand how the benefits of this program have 

changed the lives of the marines in my command, as well as their dependents. What 

impacts—if any—would alterations to the existing program have on those that are 

currently benefiting as well as those troops that hope to utilize it in the future? 

Mr. MALDON. The commission shares the belief that education benefits are very 

valuable to our servicemembers, with the potential to substantially change their 

67 

lives. Based on this appreciation for the value of the education benefits, multiple 

recommendations were made. Sunsetting the Montgomery GI Bill (MGIB) and the 

REAP shifts servicemembers to the Post-9/11 GI Bill, which is generally more generous and supportive of their academic goals. Those currently using MGIB and 

REAP benefits would be grandfathered and the rules concerning reimbursement of 

MGIB fees would not change. 

For the Post-9/11 GI Bill, the recommendations to require 10 YOS before being 

eligible for transfer and the recommendation to sunset the living stipend for dependents using transferred benefits are both intended to increase the use of the Post9/11 GI Bill for the education of servicemembers, which was the original and primary intent of this benefit. A secondary effect of these changes is that they slow 

the rapidly growing cost of transferred benefits, which threatens the fiscal sustainability of the benefit for all. 

The recommendations related to data collection and reporting are all designed to 

inform those who set education policy, manage these programs, and evaluate their 

effectiveness. The expected effect for servicemembers and their families is a gradual 

improvement of these benefits. 

QUESTIONS SUBMITTED BY SENATOR MIKE LEE

IMPLEMENTATION COSTS

26. Senator LEE. Commissioners, the commission report states that the recommendations, if implemented, would reduce Federal outlays by $11 billion over the 

next 5 fiscal years and by $12.6 billion annually by fiscal year 2053. Can you talk 

about the assumptions that were made in developing these estimates, and what factors, such as increased life expectancy, higher than assumed costs of healthcare, or 

smaller than assumed economic growth could impact those savings estimates? 

Mr. MALDON. The commission estimates its modernization recommendations, if 

enacted, would substantially reduce DOD budgetary costs and Federal spending 

over time. All Commission estimates of savings and cost-avoidance are expressed in 

fiscal year 2016 constant dollars, and therefore account for expected inflation. These 

estimates have been calculated using an appropriate set of assumptions, specific to 

each recommendation. For a complete list of assumption related to each individual 

recommendation, please refer to Appendix D, ‘‘Cost Data,’’ (p. 255) of the commission’s Final Report. 

All budget estimates, including those made by the commission, can be affected by 

changes in economic conditions. Many factors, including shifts in economic performance and political decisions may affect the realization of earlier estimates. The commission’s approach to developing estimates, however, has been fact based, rooted in 

commonly accepted financial theory and modeling, and informed by relevant historical data and trends. This approach serves to maximize the utility of commission 

estimates as a key element in the careful consideration of the commission’s recommendations. 

27. Senator LEE. Commissioners, is it the commission’s assessment that all of 

these recommendations could be implemented immediately with minimal negative 

impact on the Armed Forces, or do you believe some of the reforms could be either 

phased in or introduced through pilot programs in order to assess impact and utility 

for servicemembers? 

Mr. MALDON. The commission’s recommendations include multiyear implementation timelines to ensure the necessary preparations are completed before implementation of the new programs. Importantly, these implementation steps include financial literacy training for servicemembers prior to implementation. 

28. Senator LEE. Commissioners, in your cost analysis, does the commission take 

into consideration the overhead costs of implementing these recommendations, such 

as the cost of introducing and managing Thrift Savings Plans across the force or 

creating and managing new a healthcare insurance system for all military families 

and retirees? How much time would it take to implement such recommendations? 

Mr. MALDON. The commission’s cost estimates include estimates of implementation costs for each of the recommendations. Cost estimates also include administrative costs such as managing the new health insurance system, which would actually 

be a savings relative to the cost of administering the current TRICARE program. 

The commission’s recommendations include multiyear implementation timelines 

to ensure the necessary preparations are completed before implementation of the 

68 

new programs. It is important to note, these implementation steps include financial 

literacy training for servicemembers prior to implementation. 

29. Senator LEE. Commissioners, in Recommendation 6, the commission recommends that non-Medicare eligible retirees have access to the same military 

health benefit program as military families at a cost that gradually increase over 

time. If this recommendation were enacted, would these retirees be paying more for 

health benefits than they are under the current system? 

Mr. MALDON. In the first year of TRICARE Choice implementation, when the premium cost share is set at 5 percent, the range of premiums available to working 

age retirees would be similar to the cost of TRICARE Prime today and total costs 

of health care to retirees would be similar to what they are today. Fifteen years 

after implementation, when the premium cost share for working age retirees grows 

to 20 percent after a 1 percent per year increase, the premiums would be higher 

than TRICARE Prime is today and the total costs of health care to retirees would 

be higher. The commission’s best estimate of the average cost to a retiree user of 

TRICARE today is about $2,000. This includes the premium for TRICARE Prime, 

the average costs of extra programs like TRICARE Young Adult and TRICARE Retiree Dental Program, and their out-of-pocket costs for co-pays and deductibles. 

Under TRICARE Choice when the premium cost share has risen to 20 percent, the 

total average cost is estimated at $3,600. 

30. Senator LEE. Commissioners, the modeling used in Recommendation 1 indicated that the new retirement system proposed would maintain the Services’ current force profiles. Can you explain in more depth how the modeling for this particular recommendation worked, and if ‘‘current force profiles’’ refers to both a quantitative and qualitative assessment of the current force? 

Mr. MALDON. RAND’s Dynamic Retention Model (DRM) can analyze structural 

changes in military compensation. In the commission’s case the DRM was used to 

analyze proposed changes to the retirement system. Recent applications of the DRM 

include analyses for the 9th, 10th, and 11th Quadrennial Reviews of Military Compensation (QRMCs), as well as analysis in support of the recent DOD review of military compensation reform. The model’s capability has steadily increased. For example, new, faster estimation and simulation programs have been written; costing has 

been refined; and the model can now show retention and cost effects in both the 

steady state and the year-by-year transition to the steady state. 

The model is based on a mathematical model of individual decision-making over 

the life cycle in a world with uncertainty and in which servicemembers have heterogeneous preferences (tastes) for active and for Reserve service. The parameters of 

this model are empirically estimated with data on military careers drawn from administrative data files. The model begins with service in the active Component (AC), 

and individuals make a stay/leave decision in each year. Those who leave the AC 

take a civilian job and, at the same time, choose whether to participate in the Reserve component (RC). The decision of whether to participate in the RC is made in 

each year, and the individual can move in to or out of the RC from year to year. 

More specifically, a reservist can choose to remain in the RC or to leave it to be 

a civilian, and a civilian can choose to enter the RC or remain a civilian. 

The quantitative and qualitative effects of a reform are both important. The commission focused on the quantitative aspects of maintaining the baseline force profile, 

judged in terms of the overall force strength and experience mix (the number of personnel by year of service). In the course of analyses, the model confirmed the retirement recommendation can maintain the baseline force profile. 

With respect to maintaining the quality of the force, the commission thought 

about the accession of personnel who are judged to be high quality based on information available at the time of accession, and the retention of personnel who are 

revealed to be high quality through their performance in the military. Under the 

retirement recommendation there would be little if any change in accession requirements for enlisted and officers. Further, an important aspect of a compensation system is the incentives it provides for individuals to exert effort and to reveal their 

ability, and for harder working, more able individuals to remain in the force. The 

retirement recommendation, along with the continuation of the current promotion 

system (including criteria for promotion as well as time-in-grade constraints), maintains these incentives. Because both the accession requirements and the incentives 

for effort and ability are essentially the same under the recommendation as at baseline, the commission foresees a continuation of the baseline recruiting and 

resourcing policy, which is adaptive to the economic environment and the personnel 

needs of DOD, to be sufficient to sustain the quality of personnel entering the military, and the quality of the retained force to be sustained. 

69 

31. Senator LEE. Commissioners, Recommendation 13 advocates for eliminating 

the Family Subsistence Supplemental Allowance (FSSA) domestically and replacing 

that assistance with the Department of Agriculture’s Supplemental Nutrition Assistant Program (SNAP). The report states that only 285 servicemembers in fiscal year 

2013 used FSSA assistance, in large part because SNAP creates fewer social stigmas for recipient families. Did the commission estimate how many servicemembers, 

in addition to those already on FSSA, would start using SNAP if FSSA was eliminated domestically? What cost increase would be incurred by the Department of Agriculture? 

Mr. MALDON. The commission found no reason to predict that the number of 

servicemembers who would start using SNAP if FSSA were eliminated domestically 

would be substantially larger than those who are already receiving FSSA benefits. 

No evidence was found to suggest that other servicemembers, who are not currently 

receiving FSSA benefits, would apply for SNAP as a result of this change. Note that 

only 75 percent of the 285 servicemembers receiving FSSA benefits in 2013 were 

stationed in the United States. Based on this percentage, we project Department of 

Agriculture would incur a cost increase of approximately $1 million as a result of 

this recommendation. 

QUESTIONS SUBMITTED BY SENATOR JEANNE SHAHEEN

PREPARATION OF THE RECOMMENDATIONS

32. Senator SHAHEEN. Commissioners, how confident is the commission that a majority of our men and women who are serving and have served support the commission’s recommended reforms? 

Mr. MALDON. The commission recommendations were very much informed by discussions with many servicemembers, family members, and retirees. The commission 

and staff visited 55 military installations, conducted 8 public hearings, 8 town hall 

meetings, and many sensing sessions. Through these discussions, the commission 

heard from the Force very clear preferences for additional choice, access, and flexibility in compensation programs. 

These preferences were reinforced by the commission’s survey, in which more 

than 150,000 servicemembers and retirees indicated their preferences for various 

features and levels of compensation programs. The sources showed that servicemembers, particularly those lower in rank, prefer TSP matching and autoenrollment, as well as greater access and choice in health benefit. Servicemembers 

also expressed preference for a wider network of civilian health care providers, coupled with maintaining access to health care in MTFs. 

The commission’s recommendations deliver additional choice, access, and value to 

servicemembers. The retirement recommendation extends benefits from 17 percent 

to 75 percent of the force, while protecting lifetime earnings of servicemembers who 

retire with 20 YOS. The health benefit recommendation, TRICARE Choice, provides 

much more choice of, and access to, health care at lower costs to the majority of 

Active Duty servicemembers’ families. TRICARE Choice also would provide a substantially better health benefit to Reserve component members, which would, in 

turn, improve medical readiness. Several of the other recommendations improve or 

sustain benefits for servicemembers, such as enhanced financial literacy training, 

greater support for exceptional family members, and maintained grocery discounts 

at DOD commissaries. 

COST SAVINGS

33. Senator SHAHEEN. Commissioners, the commission’s report details substantial 

anticipated cost savings after full implementation. How long does the commission 

assess it would take to realize full savings for the more significant recommendations 

and how substantial does the commission expect the upfront transition costs to be? 

Mr. MALDON. Savings estimates for the more significant recommendations are 

provided below. Upfront transition costs are included in each table as ‘‘implementation costs.’’ 

Retirement: 

The commission estimates that its retirement recommendation would reduce DOD 

budgetary costs by $6.1 billion during fiscal year 2016–fiscal year 2020 and result 

in annual steady-state savings of $1.9 billion by fiscal year 2046. Federal outlays 

would increase by $7.2 billion during fiscal year 2016–fiscal year 2020, but decrease 

by $4.7 billion annually starting in fiscal year 2053. In this estimate, DOD budgVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00075 Fmt 6633 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
70 

2The 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. 3Office 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. 

etary 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 servicemembers’ 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 servicemembers for defined benefit (DB) annuities and increases in 

TSP contributions and CP. Outlays are higher in the near years because Government contributions to servicemembers’ TSP accounts begin immediately upon implementation of the blended retirement system, yet reductions in DB payments are realized over time as servicemembers retire under the blended retirement system. 

Health Benefit: 

The commission estimates that its health benefit recommendation would reduce 

DOD budgetary costs by $26.5 billion during fiscal year 2016–fiscal year 2020 and 

result in annual steady-state savings of $6.7 billion by fiscal year 2033. Federal outlays would decrease by $3.9 billion during fiscal year 2016–fiscal year 2020 and $3.2 

billion annually starting in fiscal year 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-Medicareeligible retiree health benefit costs. In developing this estimate, the commission 

worked closely with the Office of Personnel Management (OPM); procured the services of the IDA to conduct health benefit pricing analyses; and relied upon data from 

OPM related to beneficiary demographics, choices, and health care plans in the 

FEHBP.2

Commissaries and Exchanges: 

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 fiscal year 2016–fiscal year 2020 and result in annual steady-state savings of $515 million by fiscal year 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.3 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 efVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00076 Fmt 6633 Sfmt 6621 Z:\DOCS\94844.TXT JUNE

203ful17.eps 203ful18.eps
71 

ficiencies. Realized costs and savings therefore depend upon the set of efficiencies 

selected for implementation. 

Education Benefits: 

The commission estimates that its recommendation related to servicemember education would reduce DOD budgetary costs by $87 million during fiscal year 2016– 

fiscal year 2020 and result in annual steady-state savings of $17 million upon implementation. Federal outlays would decrease by $15.6 billion during fiscal year 2016– 

fiscal year 2020 and $4.8 billion annually starting in fiscal year 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, REAP, and the Post-9/11 GI Bill. 

34. Senator SHAHEEN. Commissioners, in the case of the proposed reform to servicemember education benefits, how much of the savings come from the phase-out of 

the housing stipend for dependents and how much come from raising the service requirement to 10 years? 

Mr. MALDON. Changing the eligibility requirement for transferring Post-9/11 GI 

Bill benefits from 6 YOS, with a 4-year additional commitment, to 10 YOS, with a 

2-year additional commitment, results in a steady state savings of $1.6 billion annually. Phase out of the housing stipend for dependents accounts for $3.2 billion of the 

savings. 

HEALTHCARE RECOMMENDATIONS

35. Senator SHAHEEN. Commissioners, does the commission anticipate any additional burden for servicemembers obtaining healthcare through the existing system 

but having their dependents rely on a distinct system? 

Mr. MALDON. The commission does not anticipate any additional burden in obtaining healthcare under the recommended plan. Currently, servicemembers receive 

care through their units or MTFs, and their families receive care through the MTF 

or the network of civilian providers in their TRICARE region. Under the commission’s plan, there would be no change in how servicemembers receive their care, and 

their families would still receive care either at the MTF or through civilian providers within their selected health plan’s network. The major difference would be 

in how the health care benefit is provided. 

36. Senator SHAHEEN. Commissioners, I understand active-duty families could 

continue to access MTFs as a venue of care. How would this work? 

Mr. MALDON. Under the commission’s recommendation, insurance plans operating 

within the geographic area around an MTF would include the MTF in their provider 

networks. Beneficiaries could choose to receive care at the MTF in the same way 

they might choose to receive care from other providers. To provide beneficiaries incentive to seek care at MTFs, copayments at MTFs would be lower than those for 

civilian providers. 


203ful19.eps 203ful20.eps
72 

37. Senator SHAHEEN. Commissioners, the commission recommends the DOD implement a robust medication therapy management (MTM) program. Pharmacist-provided MTM has been shown to improve patient health while at the same time reducing costs, so increasing access to these services makes sense. How should DOD 

implement a robust MTM program, and what role will retail community pharmacies 

play? 

Mr. MALDON. The commission recommended DOD’s TRICARE pharmacy benefit 

should remain in place but proposed some important adjustments. DOD would manage the pharmacy program and continue to use the DOD formulary and Federal 

Supply Schedule pricing. In keeping with the commission’s objectives to increase 

choice, access, and flexibility in health care, beneficiaries using TRICARE Choice, 

as well as Medicare-eligible retirees using TRICARE for Life, 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. The commission recommended such contracts require a pharmacy benefits 

manager to integrate pharmaceutical treatment with health care and to implement 

robust MTM, including the integration of MTM activities at retail pharmacies. 

QUESTIONS SUBMITTED BY SENATOR MAZIE K. HIRONO

CHOICE OF HEALTHCARE PLANS

38. Senator HIRONO. Commissioners, when considering a transition to a new 

choice of commercial health plans, did the commission take into account the complexity and potential disruption dependents may face each time a Permeant Change 

of Station (PCS) occurs? 

Mr. MALDON. The commission did consider these concerns. With any permanent 

change of station move, military families face changes, and health care is no exception. When they move, families need to select new health care providers whether 

they receive care through the current TRICARE plan or through TRICARE Choice. 

In terms of their health insurance, families would have the option to select national, 

rather than regional, insurance plans, which would preclude the need to change insurance companies in a new locality. That said, because health care pricing is regional in nature, families might find that going with a less expensive regional plan 

better suites their needs. The commission’s financial literacy recommendation would 

provide families support for understanding how to choose a plan that best suits 

their needs. 

39. Senator HIRONO. Commissioners, what plan will be in place to ensure that individuals who can ill afford a disruption in care will not be materially harmed by 

having to wait to enroll in a new health plan until after they PCS? 

Mr. MALDON. Coverage would be seamless from location to location. Beneficiaries 

would not be removed from their old policy before they were added to their new one. 

If they needed care before they arrived at their new duty station and their new policy took effect, they could use out-of-network benefits on their old policy if needed. 

Beneficiaries on national plans would not have to change plans unless they wanted 

to do so, and would be able to use physicians from their plan’s national network. 

COST OF PRIVATE MEDICAL CARE FOR PREGNANCY, CHILDBIRTH, AND INFANT CARE

40. Senator HIRONO. Commissioners, I appreciate your response to my question 

regarding moving the most common procedures performed at MTFs, childbirth and 

newborn care, to the private sector. What I am still concerned by is: what financial 

cost can be anticipated for both the dependent and the military when these services 

are moved to commercial health plans for treatment outside of MTFs? 

Mr. MALDON. Costs for maternity and childbirth care would depend on the insurance plan beneficiaries choose. As a point of comparison, the 2015 Government Employee Health Association plan (both the High and Standard options) covers maternity and delivery costs at 100 percent with no deductible when care is provided in 

network. For the 2015 Federal Blue Cross/Blue Shield (BC/BS) policies, maternity 

and delivery costs are also covered at 100 percent when care is by preferred providers. There is no deductible for the BC/BS Standard plan; however, on the BC/ 

BS Basic plan beneficiaries are responsible for $175 of inpatient services per admission. Because the commercial insurance carriers would assume risk associated with 

maternity costs, there would be no associated costs for the military. 

73 

FINANCIAL LITERACY

41. Senator HIRONO. Commissioners, did the commission evaluate the feasibility 

for implementing the robust frequency of financial literacy training you’ve recommended within the current training schedule of military units? 

Mr. MALDON. The commission’s recommendation to increase the frequency and 

strengthen the content of financial literacy training was made after a thorough review of financial training policies, schedules, and content for Active and Reserve 

component members of all Services. Servicemembers and their families, as well as 

organizations devoted to increasing financial literacy, such as the Consumer Financial Protection Bureau, also provided input to the commission. Training, provided 

at more appropriate career and life milestones, would be beneficial to 

servicemembers, their families, and the Services. Military leaders have expressed 

concern regarding the amount of stress experienced by servicemembers in financial 

difficulty and the amount of time spent counseling those experiencing difficulties. 

Increased financial literacy training would provide proactive, vice reactive, effort 

and contribute to improved readiness. 

42. Senator HIRONO. Commissioners, for many military families financial decisions are often made by members and their partners and, in some instances, solely 

by the partner if the member is deployed. Did the commission consider financial literacy programs for military families as a whole or only individual servicemember 

training? 

Mr. MALDON. The commission believes encouraging financial literacy within the 

military family unit best supports financial readiness for the Uniformed Services. 

According to the Blue Star Families’ 2013 Military Family Lifestyle Survey, 82 percent of servicemembers indicated their spouse should be included in financial readiness courses. The commission believes in the importance of financial literacy training for military families, and servicemembers would like to have their spouses included in financial training; however, it is difficult for the Services to mandate 

training for family members As such, the commission believes that financial literacy 

should be open to family members, but participation should not be mandatory. 

[Appendixes A through O follow:] 

74 

APPENDIX A—FINAL REPORT OF THE MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION 


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362 


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363 


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364 


94844.291
365 


94844.292
366 

APPENDIX B—LEGISLATIVE PROPOSALS OF THE MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION 


203FU293.EPS
367 


94844.294
368 


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369 


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371 


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509 


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510 


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511 


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94844.445
519 


94844.446
520 


94844.447
521 


94844.448
522 


94844.449
523 


94844.450
524 


94844.451
525 

APPENDIX C—ADDENDUM TO THE REPORT OF THE 

MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION 


203FU452.EPS
526 


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527 


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528 


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531 


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541 


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545 


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548 


94844.475
549 


94844.476
550 


94844.477
551 


94844.478
552 


94844.479
553 


94844.480
554 


94844.481
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94844.482
556 


94844.483
557 


94844.484
558 


94844.485
559 


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94844.487
561 


94844.488
562 


94844.489
563 


94844.490
564 


94844.491
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94844.492
566 


94844.493
567 


94844.494
568 


94844.495
569 


94844.496
570 


94844.497
571 


94844.498
572 


94844.499
573 


94844.500
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578 


94844.505
579 


94844.506
580 


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581 


94844.508
582 


94844.509
583 


94844.510
584 


94844.511
585 


94844.512
586 


94844.513
587 


94844.514
588 


94844.515
589 


94844.516
590 

APPENDIX D—STATEMENT OF THE FLEET RESERVE 

ASSOCIATION 


203FU517.EPS
591 


94844.518
592 


94844.519
593 


94844.520
594 


94844.521
595 


94844.522
596 


94844.523
597 


94844.524
598 


94844.525
599 


94844.526
600 

APPENDIX E—STATEMENT OF THE AIR FORCE 

ASSOCIATION 


203FU527.EPS
601 


94844.528
602 


94844.529
603 


94844.530
604 

APPENDIX F—STATEMENT OF THE COMMISSIONED 

OFFICERS ASSOCIATION 


203FU531.EPS
605 


94844.532
606 


94844.533
607 


94844.534
608 


94844.535
609 


94844.536
610 


94844.537
611 


94844.538
612 


94844.539
613 


94844.540
614 


94844.541
615 


94844.542
616 

APPENDIX G—STATEMENT OF THE CONCERNED 

VETERANS FOR AMERICA 


203FU543.EPS
617 


94844.544
618 


94844.545
619 


94844.546
620 


94844.547
621 


94844.548
622 

APPENDIX H—STATEMENT OF THE ENLISTED 

ASSOCIATION OF THE NATIONAL GUARD 


203FU549.EPS
623 


94844.550
624 


94844.551
625 


94844.552
626 


94844.553
627 


94844.554
628 


94844.555
629 


94844.556
630 


94844.557
631 


94844.558
632 


94844.559
633 


94844.560
634 

APPENDIX I—STATEMENT OF THE NATIONAL 

ASSOCIATION FOR UNIFORMED SERVICES 


203FU561.EPS
635 


94844.562
636 


94844.563
637 


94844.564
638 


94844.565
639 

APPENDIX J—STATEMENT OF THE NATIONAL DEFENSE 

INDUSTRIAL ASSOCIATION 


203FU566.EPS
640 


94844.567
641 


94844.568
642 


94844.569
643 


94844.570
644 


94844.571
645 


94844.572
646 

APPENDIX K—STATEMENT BY THE RESERVE OFFICERS 

ASSOCIATION 


203FU573.EPS
647 


94844.574
648 


94844.575
649 


94844.576
650 


94844.577
651 


94844.578
652 


94844.579
653 


94844.580
654 


94844.581
655 

APPENDIX L—JOINT LETTER 


203FU582.EPS
656 


94844.583
657 


94844.584
658 


94844.585
659 


94844.586
660 


94844.587
661 


94844.588
662 


94844.589
663 


94844.590
664 


94844.591
665 


94844.592
666 


94844.593
667 


94844.594
668 

APPENDIX M—STATEMENT OF THE VETERANS OF 

FOREIGN WARS OF THE UNITED STATES 


203FU595.EPS
669 


94844.596
670 


94844.597
671 


94844.598
672 


94844.599
673 


94844.600
674 


94844.601
675 


94844.602
676 


94844.603
677 


94844.604
678 


94844.605
679 


94844.606
680 

APPENDIX N—STATEMENT OF THE WARRANT OFFICERS 

ASSOCIATION 


203FU607.EPS
681 


94844.608
682 


94844.609
683 

APPENDIX O—LETTER FROM THE CONJOINED 

MILITARY/VETERANS SERVICE ORGANIZATION 


203fu610.eps
684 


94844.611
685 


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687 


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688 


94844.615
689 


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690 


94844.617
691 


94844.618
692 


94844.619
693 


94844.620
694 


94844.621
(695) 

THE RETIREMENT AND COMPENSATION PROPOSALS OF THE MILITARY COMPENSATION 

AND RETIREMENT MODERNIZATION COMMISSION 

WEDNESDAY, FEBRUARY 11, 2015 

U.S. SENATE, SUBCOMMITTEE ON PERSONNEL, COMMITTEE ON ARMED SERVICES, Washington, DC. 

The subcommittee met, pursuant to notice, at 3:03 p.m. in room 

SD–G50, Dirksen Senate Office Building, Senator Lindsey Graham 

(chairman of the subcommittee) presiding. 

Committee members present: Senators Graham, Tillis, Gillibrand, and King. 

OPENING STATEMENT OF SENATOR LINDSEY GRAHAM, 

CHAIRMAN 

Senator GRAHAM. Thank you, all. The subcommittee will come to 

order. 

We have our ranking member, and what I thought I would do is 

just basically let you introduce yourselves, so I don’t destroy your 

names, starting with the chairman. 

Mr. MALDON. Alphonso Maldon, chairman. 

Mr. HIGGINS. Sir, Mike Higgins. 

General CHIARELLI. Pete Chiarelli. 

Admiral GIAMBASTIANI. Ed Giambastiani. 

Mr. ZAKHEIM. Dov Zakheim. 

Senator PRESSLER. Larry Pressler. 

Mr. BUYER. Steve Buyer. 

Senator GRAHAM. Where is he? There you are. He is a House 

Member, and he’s sitting in the audience. [Laughter.] 

So the testimony you gave before the full committee was compelling. I think you have been to the House. Is that correct? 

Mr. MALDON. That is correct, Mr. Chairman. 

Senator GRAHAM. Did you all survive? 

Mr. MALDON. We are intact. 

Senator GRAHAM. I heard it went well. 

Mr. MALDON. Thank you. 

Senator GRAHAM. So, rather than doing an opening statement, I 

will turn it over now to our ranking member. I would like to ask 

some questions, and I appreciate your work product. It is an extraordinary amount of time, talented people coming up with I think 

696 

pretty innovative solutions that could probably always be made 

better. 

So without further ado, our ranking member, Senator Gillibrand. 

STATEMENT OF SENATOR KIRSTEN E. GILLIBRAND 

Senator GILLIBRAND. Thank you, Senator Graham. I really appreciate this committee and your chairmanship. 

I want to note that this committee works very well together, in 

the past we have, and I know we will continue to work well together in a bipartisan fashion. 

I want to thank all the witnesses for your hard work. I appreciate the testimony you gave to the full committee. 

Many members of the subcommittee have expressed reservations 

about the Department of Defense’s (DOD) proposals to control the 

growth of personnel costs, which we received while waiting for the 

findings of this commission and which were requested by the administration again this year. We have been concerned that the efforts were piecemeal rather than holistic, and that their short-term 

and long-term effects on servicemembers and their families were 

unclear. We were most concerned about the consequences of those 

recommendations on what we consider the most vulnerable military population, our most junior servicemembers. 

I am very grateful that you have looked at these issues in a holistic manner and really look to have some long-term changes that 

can make a difference. I am very grateful for the new ideas that 

have been put forward, and I am very eager to talk further about 

the assumptions that underpin your recommendations. 

Thank you, Senator Graham, for hosting the hearing. 

Senator GRAHAM. That was excellent. 

Mr. Chairman, why don’t you lead us off? 

STATEMENT OF HON. DOV S. ZAKHEIM, COMMISSIONER, MILITARY COMPENSATION AND RETIREMENT MODERNIZATION 

COMMISSION; ACCOMPANIED BY COMMISSIONERS HON. 

LARRY L. PRESSLER, HON. DOV S. ZAKHEIM, MICHAEL R. 

HIGGINS, GEN PETER W. CHIARELLI, USA (RET.), AND ADM 

EDMUND P. GIAMBASTIANI, JR., USN (RET.) 

Mr. MALDON. Mr. Chairman, thank you very much, and Ranking 

Member Gillibrand, distinguished members of the subcommittee. 

My fellow commissioners and I are honored to be back here in 

front of you today. As a commission, we stand unanimous in our 

beliefs that our recommendations strengthen the foundation of the 

All-Volunteer Force. It ensures our national security and honors 

those who serve and the families who support them, not only today 

but into the future. 

Our recommendations maintain or increase the overall value of 

compensation and benefits for servicemembers and their families, 

and provide needed flexibility for service personnel managers to design and manage a balanced force. 

Our blended retirement plan expands benefits from 17 percent to 

75 percent of servicemembers while maintaining the Services’ current profile. It provides flexibility for servicemembers and the Services while protecting or improving the assets of servicemembers 

who retire at 20 years of service. 

697 

These findings are based on reasonable and conservative estimates, including Thrift Savings Plan (TSP) investment returns of 

7.3 percent and retired pay cost-of-living adjustments of 2.3 percent. To maintain current force profiles, TSP contributions were 

not recommended beyond 20 years of service by this commission. 

However, the consideration of matching contributions that continues beyond the 20 years of service may be an interest that the 

committee wishes to explore. 

Our recommendations promote essential high-level focus on readiness through a new joint readiness command that can serve as a 

strong advocate for readiness funding and skilled maintenance 

standards. They expand choice, access, quality, and value of health 

care by offering family members, Reserve component members, and 

retirees a broad choice of insurance plans that are more flexible 

and efficient than the current TRICARE system. 

They maintain savings on groceries and other essential goods, 

while providing the cost-effectiveness of DOD commissaries and exchanges. Our recommendations also save more than $12 billion annually after full implementation without cutting overall servicemember benefits. 

Our recommendations align compensations and the preferences 

of servicemembers, which were partially measured through the 

more than 155,000 survey responses we received. Our survey methodology, which was new to the military community, captured preferences for alternative benefit levels. Its analytical tools then enabled for the first time direct comparison between the values that 

servicemembers place on varying compensation and benefits packages. 

The survey validates the many comments we received from 

servicemembers and their families at the 55 installations that we 

visited. 

Our recommendation, Mr. Chairman, incorporates a substantial 

consideration of potential second- and third-order effects, which are 

reflected in our implementation timelines. Advancing these implementation timelines due to budget constraints may lead to unanticipated cost implementation challenges, or even failed modernization efforts. An example may be accelerating the multi-year backend operational efficiencies of our commissaries and exchange recommendations. 

In closing, my fellow commissioners and I again thank you for 

the opportunity to testify before you today, and we are pleased to 

respond to your questions. Thank you. 

[The prepared joint statement of Mr. Maldon, Senator Pressler, 

Mr. Buyer, Mr. Zakheim, Mr. Higgins, General Chiarelli, Admiral 

Giambastiani, Mr. Kerrey, and Mr. Carney follows:] 

PREPARED STATEMENT BY THE MILITARY COMPENSATION AND RETIREMENT

MODERNIZATION COMMISSION

Statement of: 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, Jr., USN (Ret.); Hon. J. Robert Kerrey; and Hon. Christopher P. Carney 

Chairman Graham, Ranking Member Gillibrand, distinguished members of the 

subcommittee: My fellow commissioners and I are honored to be here, and we thank 

you for the opportunity to testify today. We also wish to thank you for your support 

of the Commission throughout the last 18 months and for your unwavering commitVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00703 Fmt 6601 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
698 

ment to and leadership in the protection of servicemembers’ compensation and benefits. 

As a Commission, we stand unanimous in our belief that the recommendations 

offered in this report strengthen the foundation of the All-Volunteer Force, ensure 

our national security, and truly honor those who serve—and the families who support them—now and in the future. Our recommendations represent a holistic package of reforms that do not simply adjust levels of benefits, but modernize the structure of compensation programs for servicemembers. These recommendations sustain 

the All-Volunteer Force by maintaining or increasing the overall value of compensation and benefits for servicemembers and their families, and they provide needed 

options for Service personnel managers to design and manage a balanced force. 

We would first like to address the concern that an all-male Commission does not 

have sufficient diversity to make recommendations on military compensation. As 

stated previously, the members of the Commission were appointed and had no input 

on the composition of the Commission. Nonetheless, the Commissioners immediately 

recognized the need to supplement our experience through selection of our senior 

staff. Our General Counsel and two of our three portfolio leads are women. One is 

a retired two-star admiral, one is a retired Lieutenant Colonel, and another is the 

spouse of a retired Army E–8, with exceptional family members. Beyond our senior 

staff, many of our diverse Commission staff members are current or former representatives of most key military and family demographics and are current or 

former beneficiaries of many of the very programs we explored. This internal diversity of insight and personal experience was deeply appreciated and, indeed, essential 

to our consideration of all relevant issues. 

RETIREMENT

The Commissioners recognize that an appropriate and truly beneficial retirement 

system is fundamental to keeping faith with our Nation’s heroes. Currently, only 17 

percent of enlisted members and 49 percent of officers earn a military retirement. 

The Commission’s blended retirement plan recommendation expands benefits to 75 

percent of servicemembers, and protects recruiting and retention to maintain the 

Services’ current force profiles. It also provides more flexibility for servicemembers, 

as well as for the Services that must field a balanced force. The Commission’s recommendation also protects, and even improves, the assets of servicemembers who 

retire at 20 years of service (YOS), based on reasonable and conservative estimates. 

For example, the Commission’s model assumes that servicemembers contribute 

only 3 percent of their basic pay to Thrift Savings Plan (TSP), even though 75 percent of participants in the Federal Employees Retirement System contribute 5 percent or more of their pay to maximize government matching contributions. It assumes investment returns of 7.3 percent, consistent with TSP returns since 1989 

and lower than the average rate of return estimated by State pension funds. It assumes 2.3 percent annual retired pay cost-of-living adjustments, consistent with Department of Defense (DOD) actuarial assumptions. It further relies on discount rate 

assumptions calculated by our contractor support based on servicemember behaviors. To maintain current force profiles, TSP contributions were not recommended 

beyond 20 YOS; however, the consideration of matching contributions that continue 

beyond 20 YOS may be an area the committee wishes to explore. 

Key features of the blended retirement plan include the following: 

• Grandfather retired pay for current servicemembers and retirees, while allowing servicemembers to opt in to the new blended retirement plan. 

• Maintain the majority of the current defined benefit. 

• Vesting at 20 YOS for standard retirement. 

• Defined benefit multiplier of 2.0 (vs. the current 2.5 percent) to maintain 

80 percent of the current defined benefit. 

• Institute a defined contribution plan for all servicemembers through the 

Thrift Savings Plan. 

• Automatic enrollment of servicemembers to contribute 3 percent of basic 

pay. 

• Automatic Government contributions of 1 percent of servicemembers’ 

basic pay. 

• Government matching of servicemember contributions of up to 5 percent 

of basic pay from beginning of 3 YOS to 20 YOS. 

• Vesting at beginning of 3 YOS (2 years and 1 day). 

• Continuation pay at 12 YOS to provide mid-career retention incentives. 

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• ‘‘Basic continuation pay’’ of 2.5 times monthly basic pay for activeduty servicemembers (0.5 of active-duty pay for Reserve component 

(RC) members). 

• Additional continuation pay from Services as needed to maintain desired force profiles. 

• Provide servicemembers more choice in how to structure defined benefit payments. 

• Choice to receive all or part of pre-Social Security age defined benefit annuities as lump-sum payments. 

• Full annuities resume at full Social Security receipt age to ensure steady 

income later in life. 

• Provide Services additional career field flexibility. 

• Authority to propose adjustments to YOS to vest for defined benefit annuity for individual career fields. 

• One-year waiting period after YOS adjustment is proposed to Congress. • Enables differing force profiles to resolve long-term manpower challenges. 

JOINT READINESS

The primary goal of the Commission’s recommendations is to maintain the AllVolunteer Force. A critical element of this goal is a focus on sustaining or improving 

joint readiness. There are challenges to maintaining joint readiness capabilities during peacetime. For example, currently high levels of medical readiness could be enhanced if Military Treatment Facilities (MTFs) had access to a different mix of 

cases, yet DOD has limited means to affect MTF workload or access to trauma-care 

cases. The recommended Joint Readiness Command would provide essential highlevel focus on readiness for the next conflict and provide a strong advocate to ensure 

appropriate readiness funding. Key elements of the Commission’s recommendation 

include the following: 

• Establish a Joint Readiness Command (JRC). 

• Functional unified command led by a four-star General/Flag Officer. 

• Includes a subordinate joint medical function. 

• Required structure and personnel may be realigned from current Joint 

Staff functions. 

• Participates in annual planning, programming, budgeting, and execution 

process. 

• Establish a Joint Staff Medical Readiness Directorate. 

• Led by a three-star military medical officer. 

• Current Joint Force Surgeon billet transitions to assume the increased 

authorities. 

• Establish statutory requirement for DOD to maintain Essential Medical Capabilities (EMCs). 

• Limited number of critical medical capabilities that must be retained 

within the military. 

• Secretary of Defense approves, establishes policies related to, and reports 

to Congress annually on EMCs. 

• JRC identifies EMCs; establishes joint readiness requirements consistent 

with EMCs; monitors and reports on Services’ adherence to EMC policies 

and standards; and monitors allocation of medical personnel to ensure 

maintenance of EMCs. 

• Protect and improve transparency of medical programs funding. 

• Active component (AC) family, retiree, and RC health care should be 

funded from the Services’ Military Personnel accounts. 

• Medicare-Eligible Retiree Health Care Fund should be expanded to cover 

health-care and pharmacy for non-Medicare-eligible retirees. 

• New trust fund for health care expenditures appropriated in the current 

year. 

• MTFs funded through a revolving fund using reimbursements for care delivered. 

• MTF operations that exceed reimbursement for care delivered to be funded from Services’ operations and maintenance accounts as cost of readiness. 

HEALTH BENEFITS

The health benefit is essential for nearly all military constituencies. The current 

TRICARE program is beset by several structural problems that hinder its ability to 

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provide the best health benefit to AC families, RC members, or retirees. It has weak 

health care networks because it reimburses providers at Medicare rates or lower. 

It limits access to care with a frustrating referral process. It has challenges adopting 

medical advancements or modern health care management practices in a timely 

manner. The Commission’s recommendations expand choice, access, quality, and 

value of the health care benefit. Key features include the following: 

• Continue to provide active-duty servicemember health care through their 

units or MTFs to ensure Services can maintain control of medical readiness of 

the Force. 

• Retain current eligibility for care at MTFs, pharmacy benefit, dental benefit, 

and TRICARE For Life for all beneficiaries. 

• Establish a new DOD health program to offer a selection of commercial insurance plans. 

• Beneficiaries include active-duty families, RC members and families, nonMedicare-eligible retirees and families, survivors and certain former 

spouses. 

• AC families receive a new Basic Allowance for Health Care (BAHC) to 

fund insurance premiums and expected out-of-pocket costs. 

• BAHC based on the costs of median plans available in the family’s 

location, plus average out-of-pocket costs. 

• Part of BAHC used to directly transfer the premium for the plan the 

family has selected to the respective insurance carrier. 

• Remainder of BAHC available to AC families to pay for copayments, 

deductibles, and coinsurance. 

• Establish a program to assist AC families that struggle with highcost chronic condition(s) until they reach catastrophic cap of their selected insurance plan. 

• RC members can purchase a plan from the DOD program, at varying cost 

shares. 

• Reduce cost share for Selected Reserves to 25 percent to encourage 

RC health and dental readiness and streamline mobilization of RC personnel. 

• When mobilized, RC members receive BAHC for dependents; select 

a DOD plan or apply BAHC to current (civilian) plan. 

• Non-Medicare-eligible retirees’ cost contributions remain lower than the 

average Federal civilian employee cost shares, but increase 1 percent annually over 15 years. 

• Leveraging its experience, Office of Personnel Management administers 

the program with DOD input and funding. 

• Institute a program of financial education and health benefits counseling. 

SURVEY

In an effort to gather input from key stakeholder groups, the Commission surveyed current and former servicemembers’ preferences for possible changes to military compensation. This survey was designed to be statistically representative of 

key Active, Reserve, and retired subgroups. Some important aspects of this survey 

include the following: 

• More than 155,000 current and former servicemembers completed the survey. 

• Results are statistically representative the overall populations and key substrata (95 percent confidence interval). 

• Unlike other military surveys that measure satisfaction with current benefits 

and other aspects of service, the Commission’s survey explored servicemember 

preferences for alternatives to their compensation. 

• Survey participants manipulated sliders (scaled 0 to 100) on a set of web-enabled interactive screens to express their preferences for alternative levels of a 

benefit’s feature (e.g., preferences for alternative TSP contributions matched by 

DOD). 

• Preference scores were standardized into measures of relative importance 

across all benefit features (24 items in the Active Force survey) to enable comparisons and rank ordering of benefit features. 

• The system’s analytical tools also calculated a measure of perceived value 

which identified how much of a basic pay raise would be required to match the 

perceived worth servicemembers assigned to alterative levels of a benefit feature (such as alternative TSP percent’s matched by DOD). 

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• The survey analysis tools also calculated aggregate preference measures for 

alternative configurations of compensation (including retirement, health care, 

and quality of life benefit changes), providing insight into how compensation 

changes could alter servicemember preferences for an overall pay and benefits 

package. 

• Analysis of the survey results revealed considerable support across key servicemember groups for the Commission’s modernization recommendations. 

• The survey results underscore the Commission’s position that efforts to modernize military compensation must be undertaken in an integrated, holistic 

manner. 

• The Commission considered the insights gained from this survey valuable, yet 

it was just one of several sources of data and analysis available to support its 

deliberations. 

• In addition to the material on the survey included in the Commission’s Final 

Report, a separate report on the survey, along with extensive data files on the 

results, are available on the Commission’s web site (MCRMC.gov). 

We offer one additional note as you review and contemplate these and the full 

complement of our recommendations. Our recommendations look beyond the immediate and incorporate a substantial consideration of potential second- and thirdorder effects. The implementation timelines in our report are a direct result of these 

considerations. We ask, therefore, that the members of the Subcommittee work to 

ensure the most effective possible implementation of any enacted recommendations. 

For example, our recommendation related to DOD commissaries and exchanges 

has a multiyear implementation timeline. The Commissioners are concerned that 

DOD budget constraints may create pressure to accelerate the backend operational 

efficiencies recommended in our report. An inappropriate acceleration, however, may 

lead to unanticipated costs, implementation challenges, or even failed consolidation 

of the military resale system. We ask that you give such concerns your full consideration as you move forward in your review and implementation of any recommendations. 

In closing, my fellow Commissioners and I again thank you for the opportunity 

to testify here today. It has been our honor and privilege to serve American 

servicemembers and their families as we have assessed the current compensation 

and retirement programs, deliberated the best paths to modernization, and offered 

our recommendations. We are confident that our recommendations will indeed serve 

our servicemembers in a positive, profound, and lasting way. We are pleased to answer any questions you have. 

Senator GRAHAM. Thank you all very much. I will start off and 

try to be very brief. 

When it comes to retirement reforms, is it fair to say that if you 

are in the Service today and anywhere in the near future, you are 

going to be grandfathered? If you like the system you have today, 

you can keep it? 

Mr. MALDON. That is correct, Mr. Chairman. 

Senator GRAHAM. So no one is being required to give up the current system? 

Mr. MALDON. They are not required to give up the current system. They can in fact opt into the new system, if in fact those recommendations are adopted, Mr. Chairman. 

Senator GRAHAM. They have to opt in. If they do nothing, they 

stay in the current system. Is that correct? 

Mr. MALDON. That is correct. 

Senator GRAHAM. When it comes to percent of Active Duty 

servicemembers who prefer the current or proposed compensation 

system, if that chart is remotely right, 80 percent prefer the new 

proposed system when they are told how to compare the two? 

Mr. MALDON. That is correct, Mr. Chairman. 

Senator GRAHAM. How sure of that result are you? 

Mr. MALDON. Mr. Chairman, we are about as sure as we can be, 

based on the data, just looking at the data, analyzing the data. 

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We actually used the survey results to validate the comments 

that we heard from our hearings that we had, town hall meetings, 

those sensing sessions. All of those conversations and discussions 

that we had with the servicemembers and their families and the 

Reserve component members and retirees, they were validated by 

the survey results. 

Senator GRAHAM. Every retiree, they are going to keep what they 

have, right? 

Mr. MALDON. Let me make sure I understand your question 

again, Mr. Chairman? 

Senator GRAHAM. People who are currently retired, who have already done their time, they are not affected by this? 

Mr. MALDON. They are not affected by this. 

Senator GRAHAM. So if anybody calls you up on the phone and 

says you need to get in this fight because they are going to take 

your retirement away from you or change it, that is not accurate? 

Mr. MALDON. The only thing that is going to change is the health 

care piece of it. 

Senator GRAHAM. That is why I am talking about retirement. 

Mr. MALDON. Yes. 

Senator GRAHAM. We will get to that later. 

Mr. MALDON. Okay. 

Senator GRAHAM. Talking about retirement, I want to make sure 

that everybody understands what we are doing. 

Mr. MALDON. That is correct. 

Senator GRAHAM. If you have earned your retirement, if you have 

your retirement, you can keep your retirement. 

Mr. MALDON. That is correct, Mr. Chairman. It is grandfathered. 

Senator GRAHAM. If you are on Active Duty today, nobody is 

making you change. But if you want to change, you can. 

Mr. MALDON. That is correct. 

Senator GRAHAM. Now, if those numbers hold, I will have to ask 

myself why would I stop a choice that 80 percent seem to want? 

If those numbers hold, I will have a conversation with myself, and 

I think I know how that will end. 

That is an incredible work product, to have 80 percent willing to 

accept the new idea. That is just fantastic, if those numbers are accurate. 

Health care, the current health care system, TRICARE, do you 

agree that it is sort of, in terms of choice and provider participation, dying on the vine? 

Mr. MALDON. Mr. Chairman, I would say that the current system, the current TRICARE system, in my opinion, has certainly 

lost its usefulness. It is not as effective as it was at the time that 

it was established and served a purpose, in fact, in some good ways 

for a number of years. But the time has come that I believe it has, 

certainly, outlived its usefulness. 

Senator GRAHAM. Well, do you agree with me that the reason 

there are fewer providers in the TRICARE network is that we are 

paying below Medicare reimbursement rates? 

Mr. MALDON. I absolutely believe that, Mr. Chairman. 

Senator GRAHAM. I have never run a hospital, and I am not a 

doctor. But I would be reluctant to take on a patient population 

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that is paying less than Medicare. So if that is true—is that true? 

TRICARE actually pays less than Medicare to the provider? 

Mr. MALDON. TRICARE pays at the reimbursement rate or less 

than that rate. 

Senator GRAHAM. Okay, the best is Medicare and, many times, 

it’s less. 

Mr. MALDON. That is correct. 

Senator GRAHAM. Well, if that is true, then our military members 

and their families and our retirees are going to have less choice because that is an unsustainable system. Your goal was to replace 

that system with something that would give you more choices in 

health care. Is that correct? 

Mr. MALDON. Yes, Mr. Chairman. It was to get more choices. It 

was to expand the network. Tt was to actually give better access 

to health care. 

Senator GRAHAM. Let’s keep it really simple, too. Under the new 

plan, doctors and hospitals will get paid more. They will have a 

higher reimbursement rate, potentially. 

Mr. MALDON. I believe that is correct. That was the intention, 

yes. 

Senator GRAHAM. Okay. The rate of reimbursement for the Federal employee health care system, is that generally higher than 

TRICARE for the providers? 

Mr. MALDON. That is correct, Mr. Chairman. 

Senator GRAHAM. So I can see why more doctors and hospitals 

would want to participate in TRICARE Choice, because they have 

a chance of getting higher reimbursement. Under TRICARE 

Choice, the member and their families will have more choices than 

they do today under TRICARE. Is that correct? 

Mr. MALDON. That is correct, Mr. Chairman. 

Senator GRAHAM. The belief is that they will have more options 

and higher quality. Is that correct? 

Mr. MALDON. That is correct. 

Senator GRAHAM. That eventually the 5 percent cost share that 

is currently being appropriated or taken from the population is insufficient to maintain the system over time. Five percent of the 

money to pay for TRICARE comes from the patient population. Is 

that correct? 

Mr. MALDON. Yes, Mr. Chairman. 

Senator GRAHAM. I don’t know of any system in the world that 

5 percent is the number, so we are going to have to adjust that 

number. 

The goal for me is, if we are going to adjust that number, that 

you get more for your money, that if we are going to ask you to 

pay more, you get more. I am not going to ask you to pay more and 

get less. Is that the general idea of health care? 

Mr. MALDON. That is absolutely the general idea. 

Mr. Chairman, let me add that as we had conversations with the 

military service organizations and the veterans service organizations, certainly from the military service organizations, that was 

one of their main concerns, that if they had to pay more, that they 

would be able to get more in return. I believe we have done that. 

704 

Senator GRAHAM. I promise them that you are not going to pay 

more and get less, and to the Guard and Reserve. You are going 

to get a better deal. 

Senator Gillibrand? 

Senator GILLIBRAND. Thank you, Mr. Chairman, for those great 

questions. 

So to focus again on retirement, I just wanted to get some detail 

for Guard and Reserve. Guard and Reserve are crucial tools for retention for troops, especially as we drawdown. But your recommendations about government contributions to TSP and bonuses 

favor the Active component. Did you assess the role of the Reserve 

component in retention when looking at these recommendations? 

Mr. MALDON. We did, indeed, assess that, Ranking Member Gillibrand. 

I would like to have Commissioner Higgins respond to that first, 

please. 

Mr. HIGGINS. Thank you, Mr. Chairman, Senator. 

Yes, ma’am. Without a doubt, our analysis included the impacts 

and implications for the Guard and Reserve of the retirement system that we proposed. We believe it will operate very similarly 

there as it does in the Active Force. 

Senator GILLIBRAND. So this chart here, does that show that, according to your study, the demographic prefers the hybrid retirement system that you have recommended? Is that what your chart 

shows? 

Mr. HIGGINS. The survey questions we asked were highly influenced by some of our early thinking about what reforms may be 

possible. The answer is yes, a lot of what was in the survey is what 

you see today as our final proposal. 

Senator GILLIBRAND. When you did survey the servicemembers, 

what were the things that they said they valued in a retirement 

plan? 

Mr. HIGGINS. Choice, flexibility, and we believe that we have delivered on that with a plan that is multifaceted and delivers the 

force profile, which is what the Joint Chiefs demanded. 

Senator GILLIBRAND. Your recommendation is that retirees leaving after 20 years of service have the option to choose a lump sum 

in place of all pension payments up through age 67, or to split the 

difference by getting half the benefit upfront and the other half 

spread out in monthly checks. All the options you recommend 

would resume monthly payments to retirees at age 67. How do you 

recommend that the DOD calculate the lump sum? 

Mr. HIGGINS. We would suggest that they should consider an actuarial type of assessment and consider the interests of people, 

what would draw them to this benefit. 

Senator GILLIBRAND. Okay. A different topic, I am particularly 

concerned about the well-being of families, so one of the questions 

that I wanted to ask was about those military families who are 

food insecure, who don’t have enough food. I have been concerned 

by the small amount of servicemembers that use the Family Subsistence Supplemental Allowance (FSSA). You have recommended 

eliminating it in favor of the Supplemental Nutrition Assistance 

Program (SNAP). What factors informed your recommendation to 

do away with the FSSA rather than reform it? Do you think the 

705 

SNAP can adequately meet the needs of the servicemembers who 

live with chronic food insecurity? 

Mr. MALDON. Senator, we gave a lot of consideration to that. We 

obviously want to make sure that we don’t have anyone who is 

with the need and that need is not being met, especially with regard to nutrition or any other kind of support that the military 

should be providing for the servicemembers. 

I am going to ask Commissioner Dov Zakheim to respond to the 

question. 

Mr. ZAKHEIM. Thank you, Mr. Chairman. 

One of the things is that SNAP tends to be more anonymous for 

people, so that you don’t have to go through the chain of command 

and let the whole world that you have a problem. 

Senator GILLIBRAND. Right. 

Mr. ZAKHEIM. That is one of the bigger issues. There are not all 

that many people on the FSSA program. 

Senator GILLIBRAND. Right. 

Mr. ZAKHEIM. The benefits are actually a bit better. 

Senator GILLIBRAND. That was the purpose of it, to give more 

support. 

Mr. ZAKHEIM. Exactly. 

Senator GILLIBRAND. But it doesn’t really work. 

Mr. ZAKHEIM. So you are doing a bit better. You are keeping your 

pride and dignity. It seems, to us, that it is kind of a no-brainer 

on this one. 

Senator GILLIBRAND. Does the Basic Housing Allowance or other 

military benefits prevent servicemembers from qualifying for SNAP 

or will they still qualify? Did you do any analysis of who would 

qualify? 

Mr. MALDON. Thank you for that question, Senator. 

Commissioner Higgins? 

Mr. HIGGINS. Senator, clearly, the Basic Allowance for Housing 

would have an impact on SNAP eligibility in some States. But I 

think the States have very different formulas, which was one of the 

complications that we encountered. 

The major concern that we had was nobody really knows how 

many people actually participate in SNAP and receive the benefit. 

In addition, it appears that for most people, SNAP is actually a 

better benefit. So our original concern was to deliver to the families 

that have need the best benefit available. FSSA was not providing 

that. SNAP does. 

But following right behind that is the awareness that we need 

to understand exactly which servicemembers are on SNAP. This is 

where we come in with our reporting requirements, to fully get 

that information. 

Senator GILLIBRAND. To identify which ones are actually food insecure. 

How would this affect families serving overseas, because they are 

not eligible for SNAP. 

Mr. HIGGINS. We would retain the FSSA overseas, because there 

is a valid, urgent need there for the program. 

Mr. ZAKHEIM. There is no alternative. 

Mr. HIGGINS. Correct. 

Senator GILLIBRAND. Right. 

706 

Mr. HIGGINS. SNAP doesn’t reach overseas. 

Senator GILLIBRAND. Do you plan on any particular outreach to 

try to assess which families are food insecure, so that you can be 

more supportive? 

Mr. HIGGINS. I think one of our recommendations is to ensure 

that the States are properly accounting for servicemembers and 

their families as they approve people for SNAP. The commission 

obviously may not be the ones making these decisions, but once 

DOD has the information, then you can reassess what changes to 

the pay system may be required, once you fully understand who is 

in need. 

Senator GILLIBRAND. I have a lot of other questions that I can 

submit for the record. But specifically, I want to talk a little bit 

about commissaries and exchanges, as well as child care on military installations and education benefits. So I will submit those for 

a written response. 

Thank you, Mr. Chairman. 

Senator GRAHAM. Thank you. Very good questions. 

Senator Tillis? 

Senator TILLIS. Thank you, Mr. Chairman. 

Gentlemen, thank you for your work. I want to go back and 

maybe cover some of the points that Chairman Graham made. 

First, I am assuming that the anticipated adoption rate of the 

new plan has a lot to do with, well, let’s say somebody like the 

chairman, who is a little bit more advanced in his pension accruement, so he may end up deciding to stay on the plan, when he asks 

that question of himself. 

But with the pyramid being among some of the younger, less 

tenured people, it looks like it is more or less following the same 

trends that you have seen with these type of pension transitions 

in the private sector. Is that right? Does it fit pretty much with 

that adoption rate? 

Mr. MALDON. I think that is fair, yes. 

Senator TILLIS. The question that I have in that is, I know there 

are some people who may have some concerns with tying some of 

the retirement to stock, but it is also using contemporary models 

another 401(k) programs to optimize the return. Is that correct? 

Mr. MALDON. That is correct. 

Senator TILLIS. Then, in the process of doing this, one question 

I have is with respect to the adoption rate. Over what period of 

time do you think you would see the mix where the proposed plan, 

people would opt in? I am assuming there is an opt-in when they 

come into the Service, there is some period of time, but the ones 

already here can make that decision. Over what period of time do 

you see the plan being implemented? 

Mr. MALDON. Commissioner Higgins? 

Mr. HIGGINS. Thank you, Mr. Chairman, Senator. 

Sir, we have to be clear about the two groups of people we are 

talking about here. One is all the new accessions. They will be in 

our proposal, if our language is adopted. 

Senator TILLIS. From that point forward. 

Mr. HIGGINS. As we recommend. As soon as they enter Active 

Duty, new accessions. 

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Those who are currently serving will have the ability to opt in. 

We feel the strength and power of our proposal would draw many 

of the currently serving people in, up to a certain point, up to, say, 

10, 12 years of service, where their investment in the current system is perhaps more remote in their perspective than what we are 

offering. I think you will see very high rates, indeed. 

Mr. MALDON. Senator, we do have a data point. We know that 

40 percent of folks in the military now are investing in TSP with 

no government match. 

Senator TILLIS. So they are already in, fundamentally, the same 

sort of plan without any leverage. 

Mr. MALDON. Without any leverage. So that is a pretty good indication of what my colleagues just said. 

Mr. HIGGINS. If I could, sorry, the opting in is limited. There is 

a window. 

Senator TILLIS. What is that window? 

Mr. HIGGINS. I believe it is 6 months, if memory serves. 

Senator TILLIS. One of the questions I have, because I think it 

is a good idea to add the additional cost for financial literacy, and 

there may very well be that some may not opt in, not because it 

is not a good idea but because they don’t understand that it is a 

good idea. So that is why I was asking about of the enrollment window. 

To what extent are we really presenting to those who have the 

choice, and are probably within a window where it will most likely 

make sense for them to go this route, that they have the right education and materials to make that decision? 

Mr. MALDON. Step one is a briefing for every servicemember concerning our recommendations, assuming they would be adopted, 

throughout the force, to ensure that the force knows what is available to them. 

Mr. ZAKHEIM. It is going to be continuing. That is another point 

that is very, very important. I mean, it is not fire-hosing a 19-yearold for 6 hours or something, and then he or she has no idea after 

the 6 hours are over. 

We studied this in great depth. We even talked to other militaries about it. 

Clearly, if you have a regularized approach, people go through 

different stages in their lives. They get married. They have children. They get promotions. At each major stage, the idea is that 

you come back and say, well, now you are at this stage, here are 

some of the concerns you ought to bear in mind, here is how you 

might want to look at the benefits available to you. 

So it is a completely different approach to financial literacy than 

the military has today. 

Senator TILLIS. A different line of questioning, but how does this 

work out for the government in terms of saving us money or managing our long-term obligations? 

Mr. MALDON. Thank you, Senator, for the question. 

There is savings, but not savings. By that, I mean there is a $75 

million cost per year to actually support or sustain this kind of 

training that we are recommending, because we are talking about 

a very robust kind of training. 

708 

Senator TILLIS. Oh, I am sorry. I completely agree with the value 

of the financial literacy. I am back to the program as a whole. How 

do the economics of this look versus the current state? 

Mr. MALDON. I’m sorry, Senator. I thought you were still on the 

other question. I apologize for that. 

Commissioner Zakheim? 

Mr. ZAKHEIM. Sure. You are going to have, initially, some outlays, because you have to get the TSP program going. But our 

numbers show that in budget terms, budget authority terms, you 

are already saving up to $1 billion in 2016, if you went immediately. 

Senator TILLIS. So that is after you fund the transition bubble? 

Mr. ZAKHEIM. The transition bubble is an outlay number. This is 

a net budget authority number. By the time you get out to where 

this really kicks in, so this is quite a few years down the pike, say 

2053, you are talking about savings and outlays of nearly $15 billion a year. 

Senator TILLIS. Great. I had another question. It is on a different 

topic, and it is with the unemployment. I read a little bit on it, but 

I would like to get your take recommending eliminating unemployment compensation for those on the post-9/11 G.I. Bill. What was 

the thought process behind that? 

Mr. MALDON. Senator, we wanted to make sure that when we 

looked at each one of these programs, we wanted to take a very 

hard look at what the intent of those benefits were and to make 

sure that they were being delivered in a cost-effective way. As we 

did that, in talking to people across the country that we talked to, 

we would find out that there were servicemembers who were getting unemployment benefits. They were using tuition assistance 

benefits. They used the the 9/11 Montgomery G.I. Bill. There were 

a number of duplicative benefits that servicemembers were receiving. 

We did not think that we could not just look at that and look 

past it, because it was just not an efficient way to do that. We 

wanted to make sure that we could sustain the educational benefits 

for a very long time. The way to do that was really to look at those 

things that we could do away with. The unemployment piece of 

that, which is something where if a servicemember was receiving 

tuition assistance and using that tuition assistance to go to school, 

there was no reason to actually be getting unemployment and having the BAH paid for as well. 

Senator TILLIS. Thank you all for the work. As speaker in North 

Carolina, we were trying to get this done for our State employees, 

and I think we will ultimately do it there. This is great work, and 

I look forward to hearing more about it. Thank you. 

Thank you, Mr. Chair. 

Senator GRAHAM. Senator King? 

Senator KING. Thank you, Mr. Chair. 

The premise, as I understand it, was that this was not a budgetcutting exercise. It was a realignment of compensation exercise and 

the sort of underlying assumption was that people aren’t going to 

be hurt by this. However, I note that there is a budgetary impact 

of something like $4.8 billion in year one and $30 billion over 10 

years. 

709 

That money isn’t coming out of the air. Isn’t that coming from 

military personnel in one way, shape, or form? 

Mr. MALDON. Thank you, Senator, for the questions. 

Those are savings, but those are savings that we arrived at by 

achieving efficiency in some the various programs that were decades-old and just weren’t serving a purpose. The funding for those 

programs were there. The benefits to servicemembers, from what 

the servicemembers have told us, is that they just were not meeting their requirements. 

I am going to ask Commissioner Higgins to speak specifically to 

the cost savings there. 

Mr. HIGGINS. Sir, with regard to retirement, where there were 

significant savings, as you suggest, we believe, and our analysis 

would confirm, that servicemembers who stayed in 20 years, over 

the course of their lifetime, their assets will be as good or better 

under our proposal. 

That could vary based on the assumptions that you apply to that 

formula, but what I would like to maybe clarify for you, where I 

think you are going, is do we save this money on the backs of 

servicemembers who are loyal, faithful, and serve through their 20 

years? 

Senator KING. Well, you are showing $30 billion in savings. Like 

I said, it is not coming out of the air. It is coming from somewhere. 

Mr. HIGGINS. With regard to retirement, it is a more effective use 

of dollars. We are moving dollars from future benefits to current 

dollars. Those dollars are far more effective in producing retention 

than dollars that are paid later in a differed plan. We are delivering a Thrift Savings Plan, the continuation pay, new choices, new 

flexibility, a lump sum, for example, on retirement. 

Those are all things that people want that we delivered under a 

modernization, not a cost-cutting objective, but a modernization objective. We deliver on those, and those are highly effective in producing retention. That is what our analysis that we believe in suggests is true. 

Senator KING. Well, you mentioned retention, and it seems to me 

that is what this is all about. A fundamental difference in the military system than in the private sector is that in the military system, you have to grow your talent. You don’t hire middle managers 

in midcareer. So retention is the whole deal. 

I am concerned, for example, how the new system would affect 

somebody who has done their 20 years, because you get some of the 

most important service between 20 and 28 or 30 years. My understanding is that the incentive to stay those additional years really 

diminishes under the plan that you are proposing. Can you react 

to that thought? 

Admiral GIAMBASTIANI. Senator, if I could, I think, first of all, it 

is important for you to know that of the nine commissioners who 

have unanimously put this report together that I am guessing we 

have 130, 140 years of military service amongst all nine of us. I 

don’t know the exact number, but it is pretty close. 

So we looked at this, how we sustain the All-Volunteer Force. 

Having, for example, speaking for myself, I came in during Vietnam, during the draft era. I had a lot of fine people serving with 

me. But the midgrade chief petty officers, sergeant majors, all of 

710 

those senior enlisted frankly didn’t exist in big numbers and didn’t 

stick around very long. So that is part of the retention profile that 

we looked at, in addition to officers. 

Senator KING. They got nothing. 

Admiral GIAMBASTIANI. Correct. 

Senator KING. The current system is it is 20 years or nothing. 

Isn’t that correct? 

Admiral GIAMBASTIANI. Well, no. It is for 20 years for retirement 

pay. They get the G.I. Bill. There are other V.A. benefits. But the 

retirement plan. 

So we looked at this, and as you can see from our surveys, we 

went out and talked with folks. We wanted to make sure that we 

maintained the best profile. 

The chairman in his opening statement said that the Joint 

Chiefs asked us to look very carefully at the profiles that the Services needed over a career path. So we tried to put together a whole 

series of packages. 

We looked at 350 programs, frankly, and we came up with only 

15 recommendations. The reason is that those are the most important to provide the value, the benefits, the access, choice, retention, 

all the rest of it. We think we have put a pretty complete package 

together. 

I would say one thing. Will some of the retirees pay more? The 

answer is yes. We have a program in health care where the nonMedicare, Social Security-eligible retirees will pay 1 percent more 

per year, if you will, from the 5 percent they are currently paying 

over a 15 year period, up to a total of 20 percent. 

So, yes. There are a couple of these were somebody’s going to pay 

a little more like that. But the vast majority of these are, for example, because we reduced the TRICARE staff significantly, we have 

reduced the Defense Health Agency staff in the Pentagon by transferring many of these to this Federal-type health program, if you 

will, including the Military Treatment facilities. 

That is where we come up with a lot of these, if you will, efficiencies and savings, so that we can finance these better programs. 

Mr. ZAKHEIM. Senator, as you probably know, I used to be Comptroller of the Pentagon, so I worried a lot about budgets. There are 

really two ways to approach what you are raising. One is to say 

that I have to find some money. How do I do it? So I will slice off 

here, I will slice off there. 

The other is to get entirely off the cost curve. That is what we 

have done. It is not just retirement that saves you money. As Admiral Giambastiani just said, the health care approach that we are 

taking saves you money. Yet, it benefits the consumer. 

When you think about it, in the private sector, that happens all 

the time. Computers get cheaper. They get better at the same time 

they get cheaper. 

What we are essentially doing is getting off the classic cost curve, 

a cost curve that, by the way, has been around in some cases for 

70 years, give or take, and saying, if you have an entirely new approach, you not only save some money, which was not, as the chairman said, our priority, but you are really bringing your military 

into 21st century choice. 

711 

It is a very different military from when I came into this business in the mid-1970s, when most of the military people were 

young, single, no families. A lot of these issues never arose. It is 

different, and, essentially, this is a 21st century program. 

Senator KING. Well, I am not taking a position on your proposal 

yet. I just want to underline that this retention issue, it seems to 

me, is really crucial. We cannot make a mistake because it may be 

10 years before it manifests itself. That is why I think we really 

to be careful with fully modeling it, thinking about it, having a representative group that fully understands the survey and what the 

options are. 

So I just throw that out, Mr. Chairman. 

Mr. ZAKHEIM. Senator, you are absolutely right. One of the 

things, if you look at, and this actually points to the comprehensiveness of what we are doing, why it all hangs together. So you 

have, for instance, under our approach, the G.I. Bill, 10 years you 

vest. You commit to 2. That brings you to 12. At 12 years, you get 

continuation pay. You commit to 4 more. It brings you to 16. At 

that point, you are in for 20. 

So if you look at the package, it is actually a phenomenal retention tool, and that is what the analysis that we had showed, to a 

great degree. 

Mr. MALDON. Senator King, let me also add, please, that DOD 

sent a white paper to the commission last March. They concluded 

that a blended retirement plan like the one we have proposed 

would sustain the recruiting and retention, just to kind of make 

that point here, that that was their conclusion with their white 

paper, which we took into consideration as we moved forward with 

our deliberation. 

Admiral GIAMBASTIANI. I think it is important to understand 

that you are creating a problem today as you ask individuals to 

leave the Service who have gone on two, three, four deployments 

and they leave with absolutely nothing. 

My biggest concern is that they are going to talk to other people 

about how they answered their country’s call, were planning to 

stay in for 20, and then asked to leave. I think our recommendation would go a long way in correcting what I believe is wrong 

there. 

Senator PRESSLER. Senator King, your very original question, I 

just want to add one footnote, where does this money come from? 

In part, there is a reduction from 2.5 percent a year that one gets 

in their retirement formula. Our plan would reduce that to 2 percent. That is probably where some heavy lifting is going to come. 

Probably that will be objected to, to some extent. 

But your very original question was where does the money come 

from. Some of it comes from that in the retirees’ formula, the formula will reduce. Now it is 2.5 percent a year. It will be reduced 

to 2 percent a year, I believe. Correct me if I am wrong. 

Senator GRAHAM. Thank you. Very good question, but as I understand the blended plan, you get a 40 percent guarantee defined 

benefit, but you get a matching Thrift Savings Plan for your entire 

20 years. I think you are going to get more money at the end of 

the day. 

712 

Mr. ZAKHEIM. Senator, we have a chart I think that we could put 

up for you. 

Senator GRAHAM. Well, the chart I am looking at is 80 percent 

of the people want to transfer into the other system. I think I know 

why. 

But we are going to vote in about 5 minutes, and I will just start 

it off. 

I think he asked a really good question about retention. The G.I. 

benefit, the Webb bill, for lack of a better word. Senator Webb did 

a great job. Senator McCain and I had a real concern. 

I want to be generous after 4 years, but I want to keep people 

around. So one thing we did that I think was really smart, is if you 

stay in 12 years, after 12 years, you can actually transfer your G.I. 

benefits to your kids. I’m working on grandkids. 

So think about this. If you retire, now the G.I. benefit that you 

didn’t use in the military, basically pay for your education, there 

will be a pretty healthy benefit left, if you manage your career 

right. You can actually pay for your kids’ college. I thought that 

was a real incentive to stay past 12 years, that if you make it to 

20, you can take the G.I. benefit and actually use it for the benefit 

of your children. 

But the goal is to be generous, sustainable, and keep people 

around who we want to keep around. I hate the fact that after 12 

years of fighting in Iraq and Afghanistan, you get a pink slip and 

you get zero. Under sequestration, that is going to be more likely 

than not. 

Remember what we are doing to the force here. We are going to 

reduce personnel down to the lowest level since 1940 in the Army. 

That means a lot of people are going to be asked to leave before 

they get to 20, and get nothing for it. That is why we have to be 

smart about sequestration and about what you are trying to do. 

So any second rounds? 

Senator TILLIS. I look forward to actually meeting with some of 

your representatives to talk more about the plan design. I think 

Senator King makes a great point. If there are documented savings 

and there are things we can realize, versus on paper savings, then 

there is something to be said for turning those savings back into 

even more benefits for the veterans, really use those for strategic 

investments that address retention, those sorts of things. 

A question I had is since this has come out, I see what the 

graphic says here in terms of the adoption rates, but what are you 

hearing from people? When I have gone through these types of conversions before, everybody hates it until you go through the financial literacy and really show what it means to the large number of 

people who will probably opt into it. Are you getting resistance 

now? Is it generally positive? Where are you in terms of the stakeholder community and feedback? 

Mr. MALDON. Senator Tillis, I think at this point in time I do 

still believe that it is kind of early in the process to really give a 

definitive answer to that question. But I think for the most part, 

the support the recommendations, the report, is getting, it seems 

people are rather supportive of it. 

I think it is fair to say that a lot of the key stakeholders who 

would be impacted in some way by this or associated in some way 

713 

with the decisions are thinking that they still need to know more 

about the details. So we are in the process of going through that. 

So I am sure we don’t have the final decisions from them in terms 

of where they might be at this point in time. Most are supportive 

at this time. 

Admiral GIAMBASTIANI. If I could add, Senator, in talking with 

members of the Joint Chiefs, these are the Service Chiefs, they 

would tell you that at the beginning of this process when this commission stood up, there was a tremendous amount of doubt with 

the Active-Duty Force out there that you were messing with my retirement system. Senator Graham made that point many times at 

the beginning here. 

Once the message has gotten out by the senior officers and senior 

enlisted across the force, the heat level went down dramatically. So 

that is very important for those stakeholders. 

Mr. ZAKHEIM. I would just add, Senator, and this is purely anecdotal, I am getting a lot of emails from people, some whom I know 

and some whom I don’t. I mean, it is literally running 99–1 in 

favor. 

Senator TILLIS. Well, I would think that you benefit from this 

working relatively well in a lot of large, complex organizations out 

there. I do think, though, that what Senator Graham opened up his 

comments with is very important. If you like your current plan you 

will have the option to keep it, and we mean it this time. So I think 

that that is critically important. 

When you wind into that the financial literacy, this is something 

that is critically important, something I have seen benefit from policy down in North Carolina, then you are going to help these folks 

make some very positive decisions. I think they will become positive supporters of this plan. 

So thank you for your work. I look forward to learning more 

about it. 

Senator GRAHAM. Thank you, all. Anything else? I think they 

have just called the vote. Does anybody have any more questions? 

If not, we will let you go. Well done. 

One final thought, if you are 18 years in, I am probably sticking 

with what I got. But if I am just getting started, I like the blended 

plan. 

We have to fix sequestration, because Senator King has raised a 

great point. How do you retain people? Well, under sequestration, 

you can’t. You are going to have to let a lot of people go. We need 

some kind of system to at least be fair to these people. If you are 

going to let them go, you ought to pay them for their honorable 

service rather than just say thank you. 

So I appreciate the hard work. 

Mr. MALDON. Thank you, Mr. Chairman. 

Senator GRAHAM. Why don’t we go vote? We will stand in adjournment, go vote, and come back to the second panel. How does 

that sound? 

Senator GILLIBRAND. That is perfect. 

Senator GRAHAM. Okay. 

[Recess.] 

Senator GRAHAM. Thank you all. 

Can we get the second panel upfront and ready to go? 

714 

I apologize. We had to go vote. 

So panel two, could you introduce yourself, starting with the Air 

Force Sergeants Association. 

Mr. FRANK. I am Rob Frank, retired Chief Master Sergeant of 

the U.S. Air Force, and I am the CEO for the Air Force Sergeants 

Association. 

Ms. PARKE HOLLEMAN. Good afternoon. I am Deidre Parke 

Holleman. I am the head of the Washington office of The Retired 

Enlisted Association. 

Mr. JONES. My name is Rick Jones. I am the legislative director 

for the National Association for Uniformed Services. 

Mr. NICHOLSON. I am Alexander Nicholson, legislative director 

for Iraq and Afghanistan Veterans of America. 

Senator GRAHAM. Thank you all for coming. I don’t have an opening statement. Would you all like to go with ladies first? How 

would you like to do this? Do you want to give a quick opening 

statement, or do you just want to take questions? 

Ms. PARKE HOLLEMAN. Well, I wrote it. I will give it a shot. 

Senator GRAHAM. Well, you wrote it, and I will listen to you, if 

you read it. 

STATEMENT OF DEIRDRE PARKE HOLLEMAN, EXECUTIVE 

DIRECTOR, THE RETIRED ENLISTED ASSOCIATION 

Ms. PARKE HOLLEMAN. Thank you kindly. Chairman Graham 

and members of the subcommittee, thank you for the opportunity 

to testify on behalf of the men and women of The Retired Enlisted 

Association concerning the retirement recommendations made by 

the Military Compensation and Retirement Modernization Commission. 

May I ask that our full written statement be made part of the 

record? 

Senator GRAHAM. Yes, ma’am. Your entire written statement, including the first panel, will be made part of the record. Thank you. 

Ms. PARKE HOLLEMAN. Thank you. 

The Retired Enlisted Association is the largest veterans organization in the Nation that was created specifically for enlisted personnel from all the branches of the armed services. We were founded in 1963 and congressionally chartered in 1992. 

The commission has outlined a series of recommendations that 

would result in the blended retirement system that contains elements of a defined contribution retirement plan while retaining a 

good bit of the military’s current 20-year, cliff-vesting defined benefit plan. 

We are very grateful that you wish to hear our views, though a 

bit breathless as well. We are told the Pentagon, with all their resources, is working like mad to develop response to present to the 

President in 60 days. We have only had 13 days to prepare comments to present to you. 

Because of that timetable, we must say that even with the fine 

cooperation of the commission’s members and staff, we are far from 

having the numbers, details, and analysis that are needed to accurately and thoroughly assess the recommendations. 

With that large caveat, we acknowledge that the report of the 

commission is a serious analysis that contains interesting proVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00720 Fmt 6601 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
715 

posals. It is clear that they made an honest attempt to change and, 

in their view, improve the system as it is now. 

But first, we should note that the present cliff 20-year retirement 

system has worked very well for over 40 years for our all-volunteer 

military. It has worked during good and bad economic times, and 

amazingly well during the last 13 years of war. Therefore, we believe that Congress should adopt the medical model of first do no 

harm when considering overhauling the present system. 

On the other hand, we agree improvement should be made whenever possible to a system designed not only to attract personnel to 

our Armed Forces who will defend our Nation but also to care for 

him who shall have borne the battle and for his widow and his orphan, as President Lincoln said. We recognize, of course, that this 

is now the motto of the Department of Veterans Affairs, but it is 

equally true when it comes to those currently serving, not just for 

those who have left the Services. 

It is a splendid idea to provide a portable retirement investment 

account for those who serve in our uniformed services but leave, for 

whatever reason, before serving 20 years. It is also a first-rate idea 

to provide effective financial education to all those who serve. But 

neither benefit should be paid for by reducing the retirement of 

those who served 20 years or more. 

Does this proposal do that? We are worried that it may. We have 

many concerns. 

First, clearly, there is a 20 percent cut in the defined benefit plan 

value from 50 percent to 40 percent. How is that made up? There 

is the Thrift Savings Plan where, except for an initial 1 percent, 

retirees must contribute their own money to receive any of the government’s matching contributions. 

It should be noted, as was noted earlier, that currently 40 percent of the presently serving force is contributing to nonmatching 

TSP to augment their present defined plan. Thus, this advantage 

to future members would be lost. 

Another issue of concern is that the 12-year bonus payment, 

which is listed as part of the retirement calculation but certainly 

looks like present taxable income and not tax-deferred income, it 

seems to us that in order for that to be part of the retirement calculation, a change in the law would have to be made. 

In addition, the commission says that they are leaving the method of calculating the lump sum payment proposal to the Secretary 

of Defense, as was discussed a bit in the first panel. We question 

whether that is appropriate since a new Secretary could change the 

method with the stroke of a pen. 

Further, is the discount rate used in calculating present value of 

future money correct? According to the senior pension fellow of the 

American Academy of Actuaries, who is quoted the Military Times 

regarding the commission’s use of a 12.7 percent discount rate, it 

is not. I quote, ‘‘Twelve percent, my gosh. That is an outrageous 

rate to use for something like that.’’ 

The article went on to say private sector companies would normally use 4 percent to 5 percent, but he said that he would use an 

even lower rate, perhaps 2 percent to 3 percent, because the U.S. 

Government is considered the safest lender in the world. 

716 

We believe that the reason for this dramatic disparity is because 

the commission is not using actual value of an E–7’s present retirement, which DOD pegged at $1.1 million last year, but rather the 

servicemember’s perceived value of the benefit. It appears to us the 

thought behind this is that if the servicemember’s perception is favorable, even if it is incorrect, retention will not be harmed. 

That assumption may be correct, but is it appropriate? The value 

of a retirement plan should first be analyzed objectively, not subjectively. Doesn’t Congress have a duty to protect the objective interests of the men and women who in the future will continue to serve 

the Nation in danger, inconvenience, and loneliness for 20 or more 

years? 

The commission has proposed that servicemembers be given effective financial education, and we agree. Shouldn’t this sophisticated financial analysis be used when considering the creation of 

a new retirement system. We believe that it should even when 

changes are being considered in part for the admirable goal of improving the situation of those who have served 3, 5, or more years 

in our same uniformed services. 

These are just a few of the worries and questions that we have 

concerning the commission’s retirement proposals. I will, of course, 

try my best to answer any questions you may have for me. 

Again, thank you for the opportunity to speak before you and 

thank you for all that you do for our servicemembers. 

[The prepared statement of Ms. Parke Holleman follows:] 

PREPARED STATEMENT BY THE RETIRED ENLISTED ASSOCIATION

Chairman Graham, Ranking Member Gillibrand, and members of the subcommittee, thank you for this opportunity to submit testimony on behalf of the men 

and women of The Retired Enlisted Association concerning the retirement recommendations made by the Military Compensation and Retirement Modernization 

Commission (MCRMC). The Retired Enlisted Association is the largest veterans organization in the Nation that was created specifically for enlisted personnel from 

all branches of the armed services. We were founded in 1963 and congressionally 

chartered in 1992. 

The MCRMC has outlined a series of recommendations that would result in a 

blended retirement system that contains elements of defined contribution retirement 

plan while retaining a good bit of the military’s current 20-year, cliff-vesting defined 

benefit retirement plan. 

We are very grateful that you wish to hear our views though a bit breathless as 

well. We are told that the Pentagon, with all of the resources at its command, is 

working feverishly to develop a response to present to the President in 60 days. We 

have only had 13 days to to prepare comments to present to you. 

Because of that timetable we must say that even with the fine cooperation of the 

Commission’s members and staff we are far from having the numbers, details, and 

analysis that are needed to accurately and thoroughly be able to assess the recommendations. With that large caveat we acknowledge that the report of the 

MCRMC is a serious analysis that contains interesting proposals. It is clear that 

the Commission made an honest attempt to change and, in their view, improve the 

system as it is now. 

But first we should note that the present cliff 20 year retirement system has 

worked very well for over 40 years in our All-Volunteer military. It has worked during good and bad economic times, and amazingly well during the last 13 years of 

war which, after all, is what it its purpose is. Therefore, we believe Congress should 

adopt the medical motto of ‘‘first do no harm’’ when considering overhauling the 

present system. 

On the other hand we agree improvements should be made whenever possible to 

the system that is designed not only to attract the personnel in our Armed Forces 

who are required to defend our Nation, but also ‘‘To care for him who shall have 

borne the battle and for his widow, and his orphan,’’ as President Lincoln said. We 

recognize, of course, that this is the motto of the Department of Veterans Affairs. 

717 

But it is equally true when it comes to those currently serving, not just for those 

who have left the Services. 

It would be a splendid idea to provide a portable retirement investment account 

for those who serve in our uniformed services but leave (for whatever reason) before 

serving 20 years. It is also a first rate idea to provide effective financial education 

to all those who serve. But neither benefit should be paid for by reducing the retirement of those who serve 20 years or more in the Services. 

Does this proposal do that? We are worried that it may. Clearly there is a 20 percent cut in the Defined Benefit Plan value from 50 percent to 40 percent. How is 

that made up? There is the Thrift Savings Plan (TSP) where the retirees must contribute their own money to receive any of the government’s matching contributions. 

(It should be noted that currently 40 percent of the presently serving force is contributing to non matching TSPs to augment their present defined plan. Thus this 

advantage would be lost.) 

Another issue of concern is the 12 year bonus payment, which is listed as part 

of the retirement calculation but certainly looks like it is present taxable income 

and not tax deferred. It seems to us that in order for that to be part of the retirement calculation a change in the law would have to go through the Ways and Means 

Committee. In addition, the Commission says they are leaving the method of calculating the lump sum payment proposal to the Secretary of Defense. We question 

whether that is appropriate since a new secretary could change the method with a 

stroke of the pen. 

Further, is the discount rate used in calculating present value of future money 

correct? According to the senior pension fellow for the American Academy of Actuaries, Mr. Donald Fuerst, who is quoted in the Military Times, regarding the Commission’s use of a 12.7 discount rate and I quote: ‘‘Twelve percent! My gosh, that 

is an outrageous rate to use for something like that.’’ The article went on to say 

private sector companies would normally use a 4 percent or 5 percent but Mr. 

Fuerst said that he would use an even lower rate (perhaps 2 percent or 3 percent) 

because the U.S. Government is considered the safest lender in the world. 

We have heard that the reason for this dramatic disparity is because the Commission is not using actual value of an E–7’s retirement (which the Department of Defense (DOD) pegged as $1.1 million last year) but rather the servicemember’s ‘‘perceived value’’ of the benefit. It appears to us the thought behind this is that if the 

servicemembers’ perception is favorable, even if it is incorrect, retention will not be 

harmed. That assumption may be correct—but is it appropriate? Doesn’t Congress 

have a moral duty not to mislead men and women who have served this Nation in 

danger, inconvenience and loneliness for 20 or more years? The Commission has 

proposed that servicemembers be given effective financial education, and we agree. 

Shouldn’t this education occur before they are asked to make these crucial and complicated decisions? We believe that honor requires members understand what these 

changes would mean to them even when these changes are being proposed, in part, 

to protect the interests of others who have served 6 or 8 or 10 years in the same 

uniformed services. 

We recognize there is real concern about the lack of fairness in the current retirement system when it comes to military members who leave after 10, 12, or other 

multiple years of service but have no savings or investments to show for that service. This seems especially unfair to those who may have served multiple combat 

tours in Iraq and/or Afghanistan. 

We agree that the current retirement system needs to be changed in order to give 

servicemembers an investment portfolio they can take with them when they leave 

the Service, even if they do not stay for a 20 year career. However, we strongly oppose any reduction in the retirement benefits career military personnel currently receive as a way a paying for a new benefit for those who leave prior to 20 years. 

The retirement recommendation of the MCRMC gives us concern because it appears to provide a greater incentive to leave at critical retention points, especially 

during periods of great stress for personnel such as they have experienced since 

2003. It also appears to give less incentive to those who stay for a 20 year career 

to remain in the Service after the 20 year point. That’s because the government contribution to the TSP ends at 20 years, which means the only addition to the TSP 

that would occur after 20 years would be contributed by the servicemember. It 

seems to us that any senior noncommissioned officer or any officer who is an O– 

5 or O–6 would be smart to leave at that point. If that happens, the Services would 

lose the cadre that are their very backbone and the resulting loss of expertise and 

leadership would severely harm them. 

We also question the wisdom of putting additional financial pressures and worries 

on senior personnel deployed to a combat zone should the market drop, as happened 

in 2008. The stress of serving and providing leadership in a combat zone, as well 

718 

as keeping in touch with family members and dealing with family issues should not 

be increased by adding on additional pressures regarding retirement financial matters. 

The Commission’s recommendations for changes in the Guard-Reserve pay and retirement generally follow those recommended for active duty personnel. However, 

there are some exceptions and we believe, as has happened so often in the past, 

Guard-Reserve members could end up that is not equal, in terms of treatment, to 

the active duty in spite of their exemplary performance during the past 12 years 

of war. 

Specifically, the recommendation for continuation pay at the 12th year of service 

is for an amount that is equal to 0.5 times the serve member’s monthly basic pay, 

as if the member were on active duty. However, the active duty continuation pay 

is recommended to be 2.5 times monthly basic pay. We believe this is unfair and 

discriminatory and the Guard-Reserve amount should be 2.5 times monthly basic 

pay, the same as the active duty. 

In addition, the commission’s recommendation calls for the Guard-Reserve member to earn basic pay in a ‘‘given period’’ to make TSP contributions and to receive 

government contributions into their TSP accounts. This ‘‘given period’’ needs to be 

clearly defined and needs to take into account varying drill periods among Reserve 

component members, depending on their type of drill status. 

There also needs to be clarification regarding whether Reserve component members would get the lump sum payment when they enter the Retired Reserve, just 

as active duty members would. 

As we have stated before, many aspects of the Commission’s proposal deserve 

much more study before it would be appropriate to come to any sort of definite conclusion as to its merit. But it is readily apparent to TREA that the Commission’s 

proposals seek an equivalency between military occupations and those in the private 

sector. On this we simply do not think that the proposals hit their mark. 

It is laudable that the Commission has made such a serious attempt at making 

sure every servicemember leaves with ‘‘something’’ at the end of their time in service. But this proposal will simply not accomplish the mission of creating a smooth 

transition between the military and civilian sectors. We agree that a system like 

this will make the transition into the private sector easier for those who fail to complete 20 years of service, but it will not erase the vast gulf that already exists between the military and the private sector. 

When a servicemember with a Military Occupational Specialty (MOS) of 19–K, 

which is an M1A1D/A2 tank crew member, transitions out of the Service they are 

told that ‘‘there is no civilian equivalent’’ in the private sector. The mission of DOD 

is ostensibly to provide for the national defense. But many servicemembers are 

trained in warfighting skills and it is not surprising that for those individuals the 

private sector has difficulty in translating military skills and placing value on military experience. 

The Commission’s proposals are a welcome attempt to rectify this inequity. The 

fact is, however, that this incongruity between military service and the private sector will never be erased. Servicemembers who get out after one or two enlistments, 

usually at the 4 to 8 year point of time in Service, will still be junior to their age 

cohort when they eventually take private sector jobs. This ‘‘seniority delta’’ will remain for their entire career, as will reduced salaries and wages when compared to 

their age cohort. As all human beings are limited to a finite number of working 

years, there is simply no way to overcome this fact of military service. 

Another inconvenient fact about military service is that the longer one serves in 

the military, the greater the impairment their career suffers when they inevitably 

transition out. The vast majority of military retirees are not four star admirals or 

generals with $500,000 defense contractor consulting jobs lined up; they are E–7s 

with many fewer options. They are unable to build up equity in a home because 

they are moving every 2 to 3 years, and their educational accomplishments are often 

lacking as well. 

Frankly, this proposal disincentivizes these individuals from serving any longer 

than exactly 20 years in the military. Every month longer that they serve is another 

month that they are missing out on an employer match to their TSP, or to a 401(k). 

As rational actors (as the vast majority of individuals who serve 20 years in the U.S. 

military are) most people are going to move to a situation that is the greatest benefit to them. For servicemembers to serve any longer than 20 years sizeable bonuses 

or other inducements are going to be needed to get them to stay in the military 

when they realize they may be missing out on a matching employer contribution to 

their TSP or 401(k). 

If a servicemember decides to stay in the military for more than 20 years, they 

are taking on an even greater risk that the TSP portion of their retirement may 

719 

not be there when they retire. One need not go back to 1929, only to 2008 for an 

example of what can happen. It has taken nearly 5 years for the average 401(k) to 

return to the level that it was at in 2008—not to mention all of the growth potential 

that has been lost. It seems unfair to ask servicemembers, even after they pass the 

20 year point, to bear the risk of their TSPs declining in value even as they volunteer to die in defense of this great country. 

In the final analysis, this proposal from the Commission attempts to bridge the 

gap between military and civilian employment, but does not accomplish what it sets 

out to do. Wage and salary gaps that result in lessened career earnings will still 

persist. Further, in attempting to save money by ending the DOD’s matching contribution to the TSP at 20 years it actually disincentivizes the vast majority of 

servicemembers from spending any more than 20 years and 1 day serving their 

country. As DOD knows, many of these servicemembers have skills and knowledge 

that the military cannot afford to lose, en masse, at exactly 20 years. 

One aspect of the Commission’s proposal that we think Congress should strongly 

consider supporting is the one that makes ability to transfer the Post-9/11 GI Bill 

to dependent family members vest once the servicemember reaches 10 years in 

Service. 

The Post-9/11 GI Bill is one of the great legislative accomplishments of the 21st 

century because it shows how America honors those who have committed to defend 

her. By covering the full cost of in-State public school tuition to attend any accredited school in the country as well as providing money for books, housing, and a 

monthly stipend returning servicemembers are permitted to concentrate their full 

attention on their studies while they successfully reintegrate back into American Society. 

Recognizing the vast value that the Post-9/11 GI Bill has to servicemembers in 

this way will strengthen the morale of America’s fighting force far into the future. 

That being said, we have grave concerns about the part of the proposal that would 

take away the housing stipend from dependents that have had the benefit transferred to them. Making college less affordable, even if it only refers to housing costs, 

for the dependents of servicemembers who have served our country honorably for 

over 10 years seems an odd way to honor their sacrifice. 

We look forward to participating in more debate about how to strengthen the current system to overcome these obvious hurdles and we are happy to answer any 

questions on these issues. 

Senator GILLIBRAND [presiding]. Mr. Frank? 

STATEMENT OF ROBERT L. FRANK, CHIEF EXECUTIVE 

OFFICER, AIR FORCE SERGEANTS ASSOCIATION 

Mr. FRANK. Ranking Member Gillibrand, members of the subcommittee, it sure is an honor to be here to speak on this particular commission’s report. We have some early analysis, of course, 

with similar concerns that she has outlined, but I am going to get 

right to the point. Why is it that we are talking about reforming 

the system? To be frank, and the elephant in the room, is this 

about saving money? Is it about the bottom line? $12 billion is 

nothing to sneeze at when it comes to savings of our government 

taxpayer dollars. 

But the commission has reported to us that no, that wasn’t the 

objective of this. Is this change for the sake of change? We have 

a perceived antiquated system. It is decades old and people say it 

should be modernized to match the private sector. I will point to 

the fact that other than when our retirement system has been tinkered with, and Congress, certainly, has done a good job of fixing 

that in the past, that this is ushered in the All-Volunteer Force. 

It has got us through good economic times and bad. It certainly has 

put us through 20 years of high operations tempo and war. 

But when we talked to the commission, they said our objective 

was to create a better system. So the real question is, how is this 

a better system for the Services? Does it combat a perceived recruiting and retention issue? I am ready to tell you that is a phanVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00725 Fmt 6601 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
720 

tom menace. We haven’t missed recruiting goals in years. As a 

matter fact, over the last couple of years, we have had to tell people that they need to leave. Notably so, we do give them severance 

pay and other things as they leave the service. But again, our recruiting and retention issues are not a problem in today’s military. 

We are led to believe that 83 percent get out with nothing. That 

is nothing except for that $80,000 education, significant home loan 

guarantees, hundreds of thousands of dollars in training and experience they will take to get a great job, numerous veteran benefits, 

a 401(k) style system that they can invest in today for their future 

retirement, and, of course, the title of veteran. In recent times, less 

than 1 percent carry that title. 

Retention is the biggest concern I think that we have. We can 

look at the past, and back in 1986, of course, we changed the retirement system. Ten years later, Congress had us take some time 

to fix that system. What is it going to look like 10 years from now 

if this is enacted? 

The cumulative effects of everything else that is on the table, not 

to consider necessarily what is in this report but everything else, 

and then we create a system where it is easy to off-ramp at early 

points in their career, could have significant impact on retention, 

especially when the economy rebounds. 

This system has been compared to the private sector, and let me 

be very clear about this. This way of life has no comparison. To add 

to that, in the private sector, if you are running a company, you 

have someone with 10 years’ experience who gets out, what do you 

do? You go hire somebody with equivalent experience to take their 

place, and you move on with the mission of your company. 

We cannot do that in the U.S. military. We must grow our experience. It is different, and we have to take that into consideration. 

Senators, we need people to go 20-plus years. In the Air Force, 

most significantly, our enlisted corps, we have a higher rate of folks 

who go to 20-plus years for a reason. We need them to do that. 

We as an association urge the committee to proceed with caution. 

Education about this new system has to be upfront. Financial education in my background, I can tell you, it is not enough for what 

they need, especially when they have to start making decisions 

about their own retirement. 

The chart said 80 percent were in favor of this. I know the charts 

are gone now, but it said 80 percent were in favor of this. Now that 

everything is in context, and we have run our surveys, I can tell 

you that there is a stark difference in what people currently serving in uniform today say about the choice between this system, 

what they have today, and what the future proposal is. 

We, certainly, don’t want the budget to be balanced on the backs 

of our servicemembers. We welcome change. Change is good, but 

change for the better. 

To take away from those who have gone the long term, the ones 

we need to go long term, to take away from that to give to those 

who are one and done will have a significant effect on the All-Volunteer Force. Thank you. 

[The prepared statement of Mr. Frank follows:] 

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PREPARED STATEMENT BY CMSGT ROBERT L. FRANK, (RET.) 

Chairman Graham, Ranking Member Gillibrand, and members of this committee, 

thank you for this opportunity to present the views of the Air Force Sergeants Association (AFSA) on the military retirement recommendations of the Military Compensation and Retirement Modernization Commission. 

AFSA is a 110,000 member strong, federally chartered, worldwide veterans and 

military service association representing the quality-of-life interests of current and 

past enlisted airmen as well as their families. We are in a unique position to have 

a good understanding of the views of enlisted servicemembers as half of our membership is currently serving in uniform and half are retirees or veterans. We have 

chapters at every Air Force base around the world, as well as a variety of retiree 

chapters. As such, we have the pulse of our members and regularly receive feedback 

on a variety of important issues. 

We want to thank the committee for its historic, nonpartisan focus on protecting 

this Nation and those extraordinary military citizens who subject themselves to unlimited liability to make freedom possible. We know your work here today is not an 

academic exercise. The recommendations of the commission and how this Congress 

acts on them will have a great impact on the morale of those serving, their decisions 

whether or not to pursue the military as a career, and the attitudes and well-being 

of those who love and support them. More importantly, these recommendations will 

have a significant impact on those who have not yet decided to serve, as well as 

the effect on retention well into the future. 

Today, I want to briefly comment on the commission recommendations relative to 

changing the structure of the military retirement program itself. The tasking to the 

commissioners was extraordinary, and we certainly applaud their dedicated efforts. 

Their challenges were unique, and they delivered several recommendations for you 

to consider as this nation’s military moves forward. We understand budget protection and reduction was not the stated motivation of the commission; rather, it was 

primarily the long-term efficacy of the All-Volunteer Force and the quality of the 

lives of those who serve. 

Some say the current pay, benefits, and retirement systems are too generous. We 

would ask, ‘‘What is the basis for comparison to make that statement?’’ We would 

assert that you cannot fairly compare the lives of military members with those of 

other citizens, and there is no ‘‘job’’ like this for a true comparison. Military members face unique day-to-day risks, demands, and challenges, and a condition of their 

employment is a pledge to give up their very lives if ordered to do so. As such, it 

would seem to us that the measurement of success of the current compensation, 

benefits, and retirement systems has to be based on the success of recruiting and 

retention. 

Compensation in this report has been compared to private sector programs, yet 

unlike the private sector, the military services cannot hire experience into most of 

their positions, and must rely on ‘‘growing’’ experience. Because we must retain 

servicemembers at various degrees to keep experience levels right, a retirement and 

compensation system has to entice a significant portion of servicemembers to make 

the military a full career to 20 years and beyond. We urge the committee to proceed 

with caution, find the unanswered questions, and note the challenges we have seen 

already in the All-Volunteer Force. Errors with adjustment to the retirement system 

has occurred in the past and it has required Congress to take corrective action. 

The current retirement system has also been characterized as an ‘‘old system’’ 

which hasn’t been drastically altered in nearly 70 years. Yet it is a system that ushered us into an All-Volunteer Force, served us in good and bad economic times, 

through significant personnel downsizing over the past few decades, and certainly 

has maintained a ready force through 13 years of war with more than 20 years of 

heavy deployment cycles. We believe there are times that call for bold decisions; but 

we also believe a primary motivator should be to not harm a system that seems to 

be working. 

Specifically, my comments today will center on Recommendation #1 to ‘‘help more 

servicemembers 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.’’ I will also include Recommendation #3, to ‘‘promote 

the financial literacy of servicemembers by implementing a more robust financial 

and health benefit training program,’’ in my comments as a related measure. 

While we are intrigued with the intent of these recommendations, we have serious 

concerns about some details of the proposals. Our members have told us the current 

retirement system has served us well since the initiation of the All-Volunteer Force 

in 1973. Our nation does not currently have an overall military recruiting and reVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00727 Fmt 6601 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
722 

tention problem. In fact, such problems have usually not cropped up unless there 

is tinkering with their pay and benefit programs. Therefore, we will be interested 

in further examining the justification to change an untested system that may or 

may not have the same consistently positive results. The commission cited many 

private sector programs in comparison, but as previously stated, there are stark differences between the private sector and military service. Changes made today could 

take 10 or more years to reveal their success or failure. There is no better example 

of this than the passage The Military Reform Act of 1986 (better known as ‘‘Redux’’) 

which triggered severe retention issues in the mid to late 1990s requiring congressional intervention to stop them in 1999. 

First, we will be interested in viewing the details of the specific surveys that resulted in these recommendations. As you know, enlisted servicemembers represent 

about 83 percent of the overall force. As such, decisions made in regard to the military retirement program will primarily impact enlisted members and their families. 

Based on the views of our members, our understanding has been that the vast majority of them are content with the current system that provides them with a solid 

retirement benefit based on the extraordinary career they serve over the long 

term—without their need to constantly monitor and participate in the details of the 

growth and development of the retirement benefits they will eventually receive. So 

our first major interest would be to examine the specific survey results received 

from the large majority of servicemembers who are current and past noncommissioned members. 

A second concern that we believe is an important one is that the recommendations 

may well encourage early departure from the military—rather than promoting a 

full, 20-year service career. We believe most involved in these recommendations recognize the need for a strong career force to ensure continuity, training, mentorship, 

and leadership. As you know, our military members have certainly been stressed 

during the past decade—with repeated deployments, persistent separations from 

families, increased group and individual taskings due to cuts in our military forces, 

and the unique challenges of their military operations and tactics of the particular 

enemies they are facing. It would seem the recommended changes provide 

servicemembers with greater incentives to leave at critical career points. We would 

ask this committee to take a close look at the choices offered in relation to the 

stresses on military members and their families, and if the changes might set in 

motion future retention problems. 

Next, in looking at the numbers, it is apparent those who would choose to serve 

beyond 20 years under the recommended system would derive less of a financial 

benefit than they do under the current system. We believe it is important to always 

keep in mind the possibility that the decisions this committee makes in regard to 

military retirement changes could backfire. The recommended changes could entice 

members who currently would choose to serve full careers to instead opt to leave 

military service in order to start different career paths in civilian industry that do 

not have the career stresses and unique challenges of military life. Again, we would 

be moving to an untested system to replace one that is already working, potentially 

leaving a hollow force without critical experience and leadership at certain levels. 

Accordingly, we challenge this committee to make its decisions to call for change— 

only if you are very confident that no unnecessary risks to the maintenance of the 

All-Volunteer Force will be set in motion. 

Additionally, the recommended system would only provide government matching 

of the thrift saving aspect of the blended program up to the 20-year point. It would 

seem to us that this, in itself, would encourage those members who reach 20 years 

of service to find another career outside of military service to continue to gain 

matched contributions and make the most of a defined compensation system. Again, 

we would suggest that this aspect of the recommended program—of encouraging departure at critical career points—should be closely scrutinized. 

Concerning the thrift savings portion of the blended retirement system, we would 

make a few observations. 

First, a greater management burden and risk would be shifted from the employer 

(the Department of Defense) to the employees (servicemembers)—who are already 

very occupied in carrying out their military duties, often overseas, in spartan conditions, and at great risk. Furthermore, many of our servicemembers lack the knowledge to fully understand how to manage the investment funds they will be expected 

to use under this proposal. 

Second, the recommended blended retirement system should first include a program to promote and provide for financial literacy training, such as has been recommend in this report. Having worked during my active duty years as an Air Force 

First Sergeant and in later years with the Office of Servicemember Affairs of the 

Consumer Financial Protection Bureau, I can personally attest to the specific finanVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00728 Fmt 6601 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
723 

cial capabilities and challenges of servicemembers—and several of the ‘‘traps’’ they 

can fall into. While any such training would be commendable, one would have to 

take a close look at the logistics, funding, and practical applications of this training. 

Some very important questions would include these: 

• Would the financial education training program be enthusiastically funded by DOD, or would it be a prime, first-in-line target for future spending 

cuts—as are some other military personnel programs? 

• Would it be carried out as a part-time, additional duty (as many programs in the military tend to be), or would it be taught by a dedicated team 

of professional financial counselors? 

• Will financial counseling be provided early on, before Basic Military 

Training to ensure these servicemembers fully understand the system they 

are about to enter? 

• How large would this financial training force be? Would it be adequate 

to provide counseling when needed at all military locations? 

• Would this program include family financial training/planning as well— 

considering that participation of a spouse is important when making career 

decisions? 

• Who will review the curriculum of such training outside of those facing 

budgetary pressures? 

• Will the recommended, blended system be placing those who are simply 

financially illiterate and/or unlikely to grasp the full breadth of the training 

at a career disadvantage? Remember we are dealing with military members 

of various capabilities, aptitudes, and educational backgrounds. 

• Would such a training effort leverage already-existing, very successful 

agencies and programs such as those provided by the Consumer Financial 

Protection Bureau? 

Mr. Chairman, AFSA has worked for many years with members of the overall 

Armed Services Committees and its subcommittees—this subcommittee in particular, since we primarily focus on quality-of-life programs. Together, we have 

worked on and achieved many things that have greatly benefited the force and 

which have made the All-Volunteer Force effort successful. 

We have watched you adjust military pay in the past, gauged the results, and 

made further adjustments when warranted to get it ‘‘just right.’’ Similarly, during 

the past 40 years of the All-Volunteer Force, we have seen a few minor adjustments 

to the military retirement system. 

However, in the coming months this committee will exercise its collective wisdom 

to decide if a major departure from the currently working system is justified and 

appropriate. We do not envy you in that regard, and we fully recognize the burden 

of leadership you have chosen to carry out on behalf of this Nation. 

As this committee moves forward in looking at the range of recommendations 

made by the Commission, on behalf of this association and the 110,000 enlisted 

members we represent, we pledge our cooperation, participation, and support of 

your effort to make the right decisions for the great men and women who serve to 

protect and defend the interests of the American people. 

Senator GILLIBRAND. Mr. Jones? 

STATEMENT OF RICHARD A. JONES, LEGISLATIVE DIRECTOR, 

NATIONAL ASSOCIATION FOR UNIFORMED SERVICES 

Mr. JONES. Mr. Chairman, Madam Ranking Member, Senator 

King, the National Association for Uniformed Services appreciates 

the opportunity to testify and appreciates the Military Compensation and Retirement Modernization Commission (MCRMC) commissioners’ decision to hold harmless the current retirement system for 

those currently retired and for those currently serving. We also applaud MCRMC’s recommendation for no change in TRICARE for 

Life. 

The MCRMC report, however, has some questions in it. What we 

question is the pay-for of the TSP innovation. The MCRMC report 

makes a simple but questionable change in the retirement system. 

It takes the current system as it stands with 20-year program and 

voluntary TSP and adds government participation with a 1 percent 

724 

automatic TSP contribution and matching contributions up to 5 

percent. 

There is one more aspect. It drops the retirement multiplier 20 

percent, cutting it two times for the years of service from 2.5. The 

result, the retirement check would be 20 percent less under the 

proposed plan, 20 percent less. 

Of course, one of the key questions about the commission’s report 

is why is it necessary to shave the 20-year program in order to enhance the system for those who leave early? 

In recent past testimony, we have heard principal Defense Department officials tell us the current military retirement system is 

neither unaffordable nor spiraling out of control, remaining a relatively constant percentage of pay over time. 

Since issuance of the report a little less than 2 weeks ago, the 

National Association for Uniformed Services has already heard a 

barrage of critical comments. One said, ‘‘I depended on that retirement check when I transitioned to civilian life.’’ Another member 

said, ‘‘You are better off being a policeman, a fireman.’’ And, ‘‘The 

blended plan requires servicemembers to actually pay into the account. Basically, that’s a pay cut of 3 percent.’’ 

Another questionable element of the package recommends stopping the government’s automatic and matching TSP contributions 

at the 20-year mark. The retirement package is a critical incentive 

to stay in service beyond 20 years. 

There are many valid reasons. It generally takes 15 to 20 years 

to train and prepare the next generation of infantry battalion commanders, of submarine captains. We need to create these experienced leaders. 

The National Association for Uniformed Services agrees that 

young men and women who serve three, four, or five deployments 

would be better off if offered something after honorable service 

other than a pink slip and the door. We also see, however, that the 

current 20-year cliff retirement program has proven its mettle. 

It works, through nearly 70 years. It is not spiraling out of control. It remains a powerful pull for career service and keeping experience at hand. 

It may be prudent to upgrade the TSP account. However, it 

should not come as a result of cutbacks in the military career incentive package. 

Thank you for the opportunity to testify. I appreciate it. 

[The prepared statement of Mr. Jones follows:] 

PREPARED STATEMENT BY THE NATIONAL ASSOCIATION FOR UNIFORMED SERVICES

Chairman Graham, Ranking Member Gillibrand, and members of the subcommittee: 

The National Association for Uniformed Services (NAUS) honors and applauds the 

Military Compensation and Retirement Modernization Commission (MCRMC) Commissioner’s decision to hold fast the moral contract for those who have retired and 

for those currently serving on a career path. The retirement system is not disturbed 

for those currently retired or those currently serving. Also we applaud MCRMC recommendation for no change in TRICARE for Life. It, too, is held in honor. 

Of course, the NAUS welcomes improvement. We ask, however, that any proposed 

change to the present retirement system do no harm. The fact that our All-Volunteer Force (AVF) is without peer, the best in the world, has been proven over the 

past more than 40 years and clearly demonstrated at most other times. The current 

retirement system has helped sustain the AVF, and we should be guarded not to 

jeopardize this achievement. 

725 

The NAUS sees nothing wrong with servicemembers being provided a government 

match to their Thrift Savings Plan (TSP) choice. It might be a good idea to provide 

a matching TSP to strengthen the compensation system for those servicemembers 

who leave the force prior to a full career. 

At present, more than 40 percent of the Force already participates in the TSP program without government participation. Adding a government contribution could 

make it more attractive. However, we question the ‘‘pay for’’ of this innovation. 

The MCRMC report makes a simple but questionable change in the retirement 

program. In essence, it takes the current system as it stands—a 20-year program 

with an available TSP—and adds government participation. The government would 

make a 1 percent automatic TSP contribution and match contributions up to 5 percent. There one more aspect, the report calls for a 20 percent reduction in the retirement multiplier—dropping it to 2.0 from 2.5. 

The result is that a servicemember with a 20-year career would receive a retirement check amounting to 40 percent of his final basic pay, 20 percent less than 

under the current plan. 

Of course, one of the key questions about the Commission’s report is why reduce 

the 20-year calculation. Is it necessary to shave the 20-year program in order to enhance the system for those who leave early? 

In recent past testimony, Dr. Jo Ann Rooney, principal deputy under-secretary of 

Defense for Personnel and Readiness, said the current military retirement system 

is ‘‘neither unaffordable, nor spiraling out of control, as some would contend’’ noting 

that retirement costs as a percentage of pay are projected to be relatively constant 

over time. 

There are many valid reasons to keep the current retirement system. It generally 

takes 15 to 20 years to generate the next generation of infantry battalion commanders and submarine captains. As a result, the department must ensure that the 

military retirement policy promotes greater retention and longer careers necessary 

to create these experienced leaders. A civilianized system with the introduction of 

investment risk many not be the right approach for the military. 

Since issuance of the report less than 2 weeks, the NAUS has already heard from 

a number of members and supporters about this proposal. 

Let me run down a few of their comments: 

- The difference is this . . . with the 20-year deal, you knew what to expect. 

Very black and white. With this ‘‘new deal,’’ there are many ‘‘what ifs’’ that 

can change depending who is running the country . . . people like stability 

on issues like this.’ 

- I don’t know what I would have done during my transition to civilian life 

without my immediate retirement pay after 20 years. 

- They’re basing that 401(k) off past performance. What happens if you retire on a down market, or if the market goes total bust? 

- Under the new proposed retirement you’re better off being a policeman 

or firefighter. 

- That chart of theirs presumes that the E–7 under the current system is 

not saving or investing or deferring anything . . . total hogwash. 

- Nothing is stopping the servicemember from contributing to the TSP 

right now . . . other than the fact that it would make the difference in the 

charts not as great. 

- Let’s not forget another assumption . . . that the future holds no more 

economic crashes to wipe out the 401 accounts again. 

- The blended plan requires servicemembers to actually pay into the account. Basically this cuts pay by 3 percent. 

Another questionable element of the package recommends stopping the government’s automatic and matching TSP contributions at the 20 year mark. MCRMC 

officials call this a force shaping item while simultaneously recognizing the heightened costs of sustaining the contribution beyond 20 years. 

In 2006–2007, Congress recognized the importance of retirement benefit as an incentive to stay in service. It thoughtfully changed retirement rules to allow the multiplier to run beyond 30 years for senior enlisted and senior officers. The change was 

an incentive to encourage these senior people to stick around. 

In that period, 4,000 people with greater than 30 years of service stayed—3,000 

were senior enlisted and 1,000 were senior officers. As retired Navy Admiral and 

Commissioner Edmund Giambastiani said, ‘‘Having a Command Sergeant Major 

who’s been in for 36 years who will stay for another four really makes a huge difference—tremendous amount of experience.’’ 

726 

The congressional decision to retain experience during wartime made a difference. 

Congress rightly concluded retention was more affordable, in lives and money, than 

retraining. 

There remain many questions and considerations—the analysis of this report has 

only just begun. The NAUS agrees, however, that we would be better off if the 

young men and women who served three, four and five deployments were offered 

something after honorable service other than a pink-slip and the door. 

Government participation in the currently available TSP account could be helpful 

in advancing the present 40 percent servicemember participation rate. These 

servicemembers voluntarily contribute without any kind of automatic government 

contribution. 

The NAUS recognizes, however, that all investing for retirement is subject to risk, 

including the possible loss of the money you invest. To ensure an adequate retirement, conservative financial advisors believe savings rates need to be between 12 

percent and 15 percent of income (including an employer match). That would require a set aside of upwards of 7 percent of present disposable pay. 

Investment is often times compared to a yo-yo. The market goes up and down. 

Historically, however, the market has acted more like a man walking up hill with 

a yo-yo. It still goes up and down but over time it runs generally uphill, and may 

it always be so. But the future is uncertain and one must remember that past performance is no guarantee of future results. 

We still remember the severity of 2008 and the years it took to regain the loss 

after the crisis of that period. We are concerned that altering the certainty of a regular retirement check at 50 percent of base pay may be a disincentive for mid-level 

officers and top enlisted to continue their careers. 

The NAUS applauds Congress for taking action over the 13 years of war to maintain the powerful pull of the 20-year retirement system, to raise pay, enhance 

health benefits and enact the Post-9/11 GI Bill. If you had not taken these actions, 

it is questionable as to whether we would have the military strength we have today. 

In recent testimony before Congress, Commissioner and former Senator Bob Kerry 

said, ‘‘I came into this commission believing that it’s likely we have a real problem 

with pay and benefits.’’ 

But, Commissioner Kerry concluded, ‘‘It would be unfair to identify military retirement as the big problem because it isn’t. The big problem is Social Security and 

Medicare, so it seems to me, to address military retirement without going after Social Security and Medicare is basically saying we’re going to balance the budget on 

the backs of our military retirees. I think that it would be a wrong thing to do and 

send a terrible signal.’’ 

Many pundits and other so-called experts around the beltway continually write 

critically about military pay and benefits. As John Finkel writes in The Good Soldier, if some of these folks could get out from behind their desks ‘‘into the lead 

Humvee and go out on Route Predator or Berm Road, they could experience, as our 

troops do, the full ‘pucker’ factor. They could experience it the next day, too, and 

the day after that and then maybe, they could go back on the job and tell the reality 

of service—at least we’d hear the truth.’’ 

Defending our national security is a tough job. It is arduous service and demands 

enormous sacrifice that many Americans are unwilling to commit. Clearly, we need 

to assure quality recruitment and retention, and we need to retain experienced career personnel. NAUS has concerns that this proposal, which mirrors private sector 

models, carries the incentives to assure an appropriate retention outcome. 

Over the years the current 20-year cliff retirement program has proven its mettle. 

It works. Though the military retirement system is nearly 70 years old, it is not 

spiraling out of control. While it may be prudent to upgrade the TSP account, it 

must not come as a result of cutbacks in the military career incentive package. The 

strength of our national security depends mainly on three pillars; a vibrant economy, a strong defense and a faith in the Nation and support for those who serve. 

The question regarding the Military Compensation and Retirement Compensation 

report is whether faith has been broken. Once the servicemember’s appreciation of 

the compensation or care they are given is broken, no matter what ‘‘bells and whistles,’’ it’s going to be difficult to recruit people to serve or to retain their skills. 

ON THE OTHER HAND, SEQUESTRATION IS A PROBLEM

Sequestration, however, is a problem. We were told sequestration would never 

happen. But here we are in year three facing the blunt and irresponsible approach 

to taming our annual deficits and reining in the enormous debt we and future generations face. 

727 

Under sequestration, defense, which accounts for less than 15 percent of the budget, is forced to take 50 percent of sequester cuts. It is disproportional by any measure of understanding and incredibly detrimental to our national security. 

The results of these cuts have already been devastating to our national security. 

The Air Force is approaching the smallest it has been since 1946; the Navy is approaching a historic low level of ships; the Army is on its way to the lowest troop 

level since before World War II; and the Marine Corps will be down two divisions. 

Sequestration is a blunt instrument. It was wrong when the President proposed 

it; it was wrong when Congress accepted it; it was wrong when enacted, wrong 

when signed; and wrong when implemented. 

The NAUS implores you to end defense sequestration. 

Senator GILLIBRAND. Thank you, Mr. Jones. 

Mr. Nicholson? 

STATEMENT OF ALEXANDER NICHOLSON, LEGISLATIVE 

DIRECTOR, IRAQ AND AFGHANISTAN VETERANS OF AMERICA 

Mr. NICHOLSON. Thank you, Ranking Member Gillibrand. Even 

though he stepped out, I have to say, as a native South Carolinian 

and representing an organization headquartered in New York, it is 

a particular honor to testify for this particular combination of 

chairman and ranking member. 

On behalf of Iraq and Afghanistan Veterans of America (IAVA) 

and our nearly 300,000 members and supporters, we appreciate the 

opportunity to share with you our views on the final report of the 

Military Compensation and Retirement Modernization Commission. 

To give you the bottom line upfront on the commission’s recommendations from our perspective, we see them as somewhat of 

a mixed bag. Some of the recommendations align well with the recommendations that we and other military and veterans organizations have been advocating for years while others appear to be bold 

new steps in a positive direction that merits serious consideration. 

However, a few of the other recommendations raise questions and 

concerns for IAVA and our members. 

But first, let me talk about some of our areas of agreement. We 

are in strong alignment with the commission on the need for increased DOD–VA cooperation up to and including sharing systems 

and information. The process of transitioning from Active Duty to 

veteran status is still disjointed. Operation Iraqi Freedom/Operation Enduring Freedom veterans often report gaps in care and assistance when leaving DOD and entering the VA system. 

Another area in which we strongly agree with the commission is 

on the urgent need for increased financial literacy and benefits 

stewardship education for servicemembers and military families, 

especially if you are going to change the dynamic and require 

troops to take more personal responsibility for their part of their 

own benefits package outcomes. We see the need for this not only 

in countless examples of predatory lending targeting servicemembers but also predatory for-profit educational institutions 

going after servicemembers’ and veterans’ valuable post-9/11 G.I. 

Bill benefits. 

Second, IAVA is interested in taking a deeper dive into the commission’s recommendations regarding alternate retirement plan 

packages. In our 2014 annual survey of our members, 36 percent 

of respondents felt that the military retirement system should be 

reformed. Of those respondents, when allowed to select multiple options, 67 percent favored a 401(k) style benefit for noncareerists, 33 

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percent favored increasing the overall value of the current retirement benefits, and 59 percent favored a partial early retirement 

benefit for 10 or 15 years of service. 

To many of IAVA members, who are by definition combat veterans, it seems fundamentally unfair that one can serve for 10 or 

12 years with three, four, or five more deployments and leave with 

absolutely no retirement benefit at all, yet a careerist who never 

deployed could be entitled to a full retirement package. Therefore, 

IAVA is open to reforms that would amend the current system to 

allow noncareer troops the opportunity to receive some retirement 

benefits. 

Lastly, IAVA has some serious concerns and questions with some 

of the commission’s recommendations regarding reductions in post9/11 G.I. Bill benefits. We will continue to analyze these numerous 

comprehensive recommendations the commission has articulated 

before developing final views. However, fundamental reductions in 

post-9/11 G.I. Bill benefits, even for dependents, raise red flags for 

IAVA and our members. 

We appreciate the opportunity to offer our views on the commission’s recommendations and look forward to working with each of 

you and your staff and the committee to improve the lives of 

servicemembers, veterans, and their families. Thank you. 

Senator GILLIBRAND. Thank you. 

I will reserve my questions for the end. We will go to Senator 

King. 

Senator KING. Thank you all for your testimony. It is very helpful, and also for your service. 

Ms. Holleman, I had to smile when one of the first things you 

said was the proposals are interesting. In Maine, when somebody 

says something is ‘‘interesting,’’ that means forget it. I sort of get 

the drift. ‘‘Oh, that is interesting.’’ 

As you can tell from my prior line of questioning, I am very concerned about the issue of retention and particularly retention beyond 20 years, or retention of those people who have solid service 

credentials between, say, 12 and 20 years. Talk to me about the 

cliff vesting of the current system and how you think this would 

either improve retention or diminish it. 

Mr. Frank? 

Mr. FRANK. Senator, I came in in 1987. I came in under the 

REDUX retirement plan. Ten years later, I am working a flight 

line. I am having a hard time finding a specialist to help me fix 

my airplane so we can get it in the air, and it is because we had 

a system in place that people said, you know what, I am not making this a career. We don’t have the experience that we need at 

these particular levels. 

So, of course, it was changed. We had the option to go back to 

the High-3 system as we moved forward. TRICARE, of course, was 

coming online at that time, again, health care changes. 

Fast forward to where we are at now. As the economy gets better 

and there are less perceived value of a retirement system based on 

this new system, especially if they are not educated on how to 

properly invest or the way to go about doing this, you are going to 

have people—this is almost like REDUX on steroids. It is an easier 

off-ramp. 

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You know what? I have some money now that I have socked 

away. It is even easier for me to depart the Air Force or the services and go out and work for this company that has offered me a 

great job. We would salute them smartly and say thanks for your 

service. But we could very well put ourselves in a position to have 

problems with those key components. 

They talk about, hey, if you go to 12 years, it will get you to 16, 

and 16 will get you to 20. But under this new system, I don’t know. 

Senator KING. But all of you said in one way, shape, or form the 

current system is working, why change it? My understanding is it 

is working great for people to stay for 20 years, and it is not working at all for people who stay 12 or 13 or 8. They could have three 

or four deployments and end up with zip in terms of retirement 

benefits. 

How is that fair or appropriate? Don’t we have to do something 

about that? Isn’t this proposal one of the only real options for dealing with that problem? 

You talked about this, from the point of view of your groups. 

Mr. NICHOLSON. Sure, I think that we would absolutely agree 

that something has to be done to give some sort of benefit to those 

who are noncareerists. I think, however, we would agree with our 

VSO and MSO colleagues that we don’t want to also do that at the 

expense of those who are careerists. 

It is not necessarily a zero-sum game, or we don’t have to look 

at it that way. We don’t want to necessarily support reducing their 

benefits. 

Senator KING. But I think this is important. The way I read the 

math, you are not reducing their benefits. They are getting 40 percent instead of 50 percent, but the other 10 percent, if there is any 

kind of decent compounding with the contribution and the match. 

By the way, somebody characterized it as a 3 percent pay cut. 

Well, you can look at it that way, but it is voluntary, and then government is going to match it on the other side. That is 3 percent. 

I mean, it works out both ways. 

But you are going to end up with the same or more money, aren’t 

you? I mean, it is not accurate to say that you’re cutting people’s 

retirement benefits. If you stay 20 years and get the 40 percent 

and the 401(k), what it looks like, don’t you end up in the same 

place or better? 

Mr. JONES. At what age does one retire? Is it 40, 42? At what 

age does one receive the TSP? So for that period of time, between 

your age of retirement and the acceptance of the TSP 401(k) program, you have benefits that are reduced 20 percent through that 

period. That is practically where a lot of the money comes from 

that it is being saved in this program. Do you follow? 

I retire at age 42, and I get 40 percent instead of 50 percent 

under the current program in my retirement check. I wait until I 

am 65 or 60 to receive TSP. That is where you begin to make an 

equivalence. 

Senator KING. So that is the difference that you see as the disadvantage of this program to somebody who stays longer than 20 

years. 

Mr. JONES. Well, the other thing that you mentioned earlier, that 

a lot of the senior officials who are in the military stay beyond 20, 

730 

20 to 28. Between 20 and 28, there is no TSP match. There is no 

contribution of 1 percent for those folks. 

So when you speak about retention, Congress decided in 2007 

that they needed that experience. So what they did was to allow 

retirement benefits to continue beyond 30 years. I think two members of the panel stayed with the military for that period of time 

beyond 30 years. 

That experience counted. It saved not only money that might 

have been required for training, but it saved lives through that experience. So that was a very important thing that Congress did in 

2007. 

Senator KING. What is your reaction to the problem of the 12- 

year veteran who has served three or four deployments and ends 

up with no retirement benefits whatsoever? 

Mr. JONES. Well, I thought I made it clear in my statement and 

I will do it again, the deal is that we like that part. We think there 

should be some TSP agreement, if they can make a contribution. 

Forty percent of folks voluntarily get into that program. 

Evidently, there are 17 percent of people who go on for retirement. If every retired person, 17 percent of the force, was part of 

that voluntary 40 percent, that still would leave 23 percent of the 

folks in service who are not making a career in TSP. 

So that is an acceptable program. If you can enhance it, it will 

be like magic. People would love to come in. 

Senator KING. So you would do the TSP but not the cut from 50 

to 40. 

Mr. JONES. Absolutely. I am not at a negotiation table here, but 

there could be some program like that, and it would enhance that 

benefit for particularly those in this drawdown. I mean, we are 

pulling people out of the combat zones and giving them the pink 

slips. 

Senator KING. That is going to be a real problem in the next several years. 

I hope you all can help us get rid of the sequester, please. Can 

we all agree that that is something we need to work on together? 

Mr. JONES. The final page of testimony is that that is the real 

problem, the sequester. That is what we would love to see, the end 

of that sequester for defense. 

As was mentioned earlier by the chairman, there is a substantial 

reduction in Navy ships, in the force for the Air Force, right down 

the line. This is a very dangerous time, and there are problems all 

around the world, hotspots from Iraq to the Japanese sea. 

Senator KING. Well, I hope, as part of your communications mission, you will not only be reacting to this issue, but also communicate to your Representatives and your Members the importance 

of dealing with sequester, because that is a huge problem. It is 

going to cost American lives. 

Thank you. 

Ms. PARKE HOLLEMAN. May I say, quickly, we are. We are all 

talking about sequester. But when you are analyzing the proposed 

package, I would ask that you analyze it at 1 percent, just the 1 

percent, all the way up to the 5 percent matching. I would ask that 

you do both, because, as Senator Gillibrand said, there are many, 

particularly enlisted young ranks, who cannot afford or at least, 

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certainly, don’t feel they can afford a 3 percent cut in their pay. 

There are people with real financial problems in our young enlisted 

ranks. The 3 percent or the 5 percent matching could be could really feel like a bridge too far for them. 

So when you are looking at that, I would be grateful if you 

looked at various, not just the 5 plus 1, but the 3 and the 1 by 

itself. 

Senator KING. Thank you. 

Ms. PARKE HOLLEMAN. Thank you. 

Senator KING. Mr. Chairman? 

Senator GRAHAM [presiding]. Senator Tillis? 

Senator TILLIS. Thank you all for being here. I thank you for 

your service and your continued service. 

A couple questions. I mean, first, would you all agree that giving 

more servicemembers more retirement benefits is a good thing? 

Mr. JONES. It is good thing. 

Senator TILLIS. That we do have a problem with those men and 

women who are serving who are not going the full 20 years, that 

we owe it to them to provide them with something more than they 

are getting today? 

Mr. JONES. We could improve that. 

Senator TILLIS. The next question I had, is this report is fairly 

fresh. And I see Mr. Frank, I know you have a copy of the report 

before you, I believe. It looks like it is tabbed in the first 15 or 20 

pages. My guess is, like us, you haven’t been able to thoroughly exhaust going through it, modeling it, and reviewing all the recommendations. 

Mr. FRANK. That is correct. 

Senator TILLIS. So you have to spend some time doing that, coming up with use cases and really understanding how this affects 

your members and the stakeholders who are referred to. I am going 

through that same process. 

Ms. Holleman, you made a comment that reminded me of a discussion I literally just had yesterday with one of my legislative 

staff who was talking about the TSP and the matching. This person, college educated, I think he actually even did some finance 

studies in school, was questioning the wisdom of taking advantage 

of the math. I had to sit down with him like I did with my daughter and my son, when they first had to do that. 

I would say that it may look to a younger person that that is insurmountable. But I think if we really educate them through financial literacy, they will realize it will be a great long-term benefit 

to them. 

That is one of the reasons I am excited one of the recommendations is increased investment in financial literacy, so that they can 

make informed decisions. And in some cases perhaps the 1 percent 

or 3 percent or 3 percent or 5 percent isn’t achievable. But I hope 

for many it will be, because it benefits them long term. 

I guess my question goes back to the feedback that you are getting. Is the feedback that you are getting from your members now 

more based on a fear of the unknown or documented examples of 

where this would be less preferable than the status quo? 

Mr. FRANK. I would tell you, Senator, from our association that 

the feedback that we have is significantly different than what they 

732 

put on a chart. So 80 percent of anybody in favor of anything is 

suspect sometimes. So I don’t know that I ever found that in the 

Air Force, that anybody was ever in favor 80 percent. 

So again, this is early returns, but it is statistically significant 

that now that they see the whole picture, and I know how the question kind of led out with the survey was. Would you like this, 

would you like this, and then they put it together with people who 

are good with those kind of things. But the reality is, now that people see it in context, it is, ‘‘Oh, wait a minute, I am not sure.’’ 

I think, to Chairman Graham’s point earlier, they have been in 

the Service a while. ‘‘I am not sure that this necessarily what I like 

to do.’’ 

But they are also looking at other suggestions in there, in the 

particular report. But to that one, at least this is a known safe factor for me. 

Senator TILLIS. Mr. Frank, I think you touched on an important 

point. And as I said earlier about Chairman Graham, he is in a 

much more advanced state, shall we say, in terms of his career progression, so it probably isn’t going to make sense for him, which 

has proven to be the case in a number of other cases. We are talking about people being an opt-in into the other plan. Silence is consent with the current plan. 

So just understanding we have that has a level set. This is not 

changing the deal for those who came in with this option. 

We need to go through a process here of education. But I would 

really encourage you, as you are going through and forming an 

opinion about this, this is reminiscent of a few of the cycles that 

I have done before I entered public service and private sector work. 

I agree with your opening comment. There is no job like the job 

of serving in the U.S. Armed Forces. But I do believe that this program is something that could potentially provide some balance. But 

what we need to do is provide the resources so that the people who 

ultimately give you feedback, they cannot possibly know the use 

cases that apply to that, in the same way that they may not completely understand the compounding opportunity that they could 

have if they hopped into the plan. 

So I think that we have to do a lot of work so that we can get 

feedback and identify any outliers where maybe there are some 

things that would have. to be changed, if we were to move forward 

with this plan. 

So I hope we can get your commitment and make sure that we 

provide assistance. I know that my staff will be pouring through 

this plan, and that we’ll give you the information so you can model 

it, because I do believe the adoption rate is probably not too far off 

from what was ultimately seen in large programs done in, say, a 

300,000-person organization that I have had some exposure with. 

So just keep your mind open. I think you should always be vigilant and do exactly what you are doing here and advocate, but keep 

your mind open and figure out what we can do to provide you with 

information to do that modeling. 

I do have some things that are probably—you made positive comments on I think the recommendation on financial literacy. You 

would generally agree that is a good thing, not only in terms of 

733 

making a decision about this retirement plan but for long-term financial planning. 

Ms. PARKE HOLLEMAN. Absolutely. 

Mr. FRANK. Senator, and to add to that, I think you have to get 

to them early, before basic training. 

Senator TILLIS. Absolutely. In fact, we are doing that in high 

school down in North Carolina now as a part of financial literacy 

curriculum requirements. I agree with you. 

Do you all agree that on other areas, outside of the retirement 

plan, that SNAP provides more robust benefits than FSSA? 

Ms. PARKE HOLLEMAN. I do, yes, Your Honor. [Laughter.] 

Senator TILLIS. You can call me Thom. 

Ms. PARKE HOLLEMAN. Thank you kindly. 

Mr. FRANK. Senator, in my experience as a first sergeant, the 

FSSA was actually to get away from the stigma of food stamps. It 

just was a pain in the rump, I will say, to work through that. So 

SNAP probably would be a better option. 

Ms. PARKE HOLLEMAN. There are only a few hundred people in 

that program, because of the problems. Since the commission recommended that it continue overseas, then we are very much for 

that recommendation. 

Senator TILLIS. Thank you. Any other comments? 

Mr. JONES. It is a rational proposal. 

Senator TILLIS. Okay. 

Do you all also believe that the G.I. Bill is a good incentive for 

retention? 

Mr. FRANK. Certainly. 

Mr. JONES. It is for recruitment, the G.I. Bill is a tremendous recruitment incentive. Retention was modified and well done by the 

current chairman and also the current chairman of the full committee. We supported that when it was presented. 

Mr. FRANK. Its transferability is a retention tool. I am concerned 

about the proposed change a little bit, but definitely a tool. 

Senator TILLIS. And, Senator Graham, did I hear you were working on grandchildren? 

Senator GRAHAM. Not mine, but others’. 

If I did the Strom thing, it’s possible, but I better get started. 

[Laughter.] 

Senator TILLIS. If I could just ask a couple more questions, I 

know my time has expired. These are things that I didn’t get to the 

other panel, and that was if you had all dug in long enough to form 

any opinions about the recommendations on the national student 

identifier, benefits or concerns? 

Mr. NICHOLSON. That has been on the lower end of our priority 

list. 

Senator TILLIS. How about space available travel? 

Mr. NICHOLSON. That seems like a good one. 

Mr. JONES. Excellent idea. 

Senator TILLIS. And do you think it is going to have any effect 

on availability for retirees? I didn’t get a chance to ask that of the 

panel members. 

Mr. FRANK. Well, Senator, as a matter of fact, I had a conversation with a couple folks the other day on this very topic, and that 

is exactly what they brought up, for retirees, it may take some 

734 

space there. I think we have to look at this a lot further. Off-thecuff, it looks like a great thing. If space is available, allow them 

to do that. But it might have an impact. 

Senator TILLIS. I was going to submit that as a follow-up question to the first panel. But I want to let you all know that this is 

something that is very important to me. I come from North Carolina. We have a couple people in uniform down there, and this is 

a very, very important matter to me. I welcome you to come to my 

office and discuss your concerns with my staff and with me. Thank 

you. 

Mr. NICHOLSON. Senator Tillis, could add one more thing to your 

earlier question? On the issue of member feedback, the numbers I 

cited earlier, the 36 percent of respondents who were in favor of reforming the retirement system, we do one of the largest annual 

service surveys of Iraq and Afghanistan veterans in the country. At 

the time we did our 2014 survey, we of course didn’t know what 

the proposals were going to be. We tried to formulate questions to 

get at this issue in advance, having, of course, talked to the commissioners about where they were going with this. 

We intend to survey more specifically in our 2015 survey, which 

we will deploy in a couple weeks, on the specific recommendations. 

But I would just think that one of the biggest things we have 

been seeing, because in addition to our quantitative surveys, I 

mean, a lot of our feedback is qualitative. It is through social 

media. The biggest thing I have been seeing is what you mentioned 

earlier, the fear of the unknown. A lot of people are under the mistaken impression, still, no matter how many times we say, you all 

say, and the commissioners say that this not going to be impact 

those who are currently in or currently retired, the biggest fear 

that we see seems to be that it is. They don’t believe it or they’re 

not hearing that, for some reason. 

So if the methodology of the commission in arriving at their 80 

percent figure is to have explained what the system would be and 

then gauge a reaction, I don’t find it beyond the scope the reality 

that the 80 percent number could be accurate. But the biggest 

issue I think not only in gathering accurate data, but in terms of 

P.R. for the commission itself moving forward, and any changes 

that might be pursued and proposed, is clarifying and amplifying 

that data point that this isn’t going to impact those who are currently in the system. 

Senator TILLIS. Mr. Nicholson, that is a great point. And just to 

reinforce it, when I say, if you like your plan, you can keep it, when 

I hear the commission say, at repeated requests from me and Senator Graham that that is the case, that will be an area that we’ll 

be working on to confirm, because I think it is critically important. 

You don’t break a promise that you made to the people who entered with that expectation. I think that is critically important. 

The other thing that I will send as a follow-up to the commission 

is so that you can provide the kind of tools—I don’t know what the 

implementation strategy would be here, and the stakeholder engagement strategy would be. But it almost, certainly, needs to use 

the kind of tools that are used in the private sector to say, if you 

are a soldier at this point in time and you model out the financial 

choices that will be a part of financial literacy, I would presume to 

735 

give them that informed decision about what this exactly means to 

them, that this decision makes, so that we can really begin to identify the people to become a part of that potentially 80 percent or 

60 percent, whatever that number is, and the ones who may have 

legitimate concern in the plan design that we need to address. We 

will be pursuing that as a part of our due diligence. 

Thank you, all. 

Mr. JONES. Senator, one thing on the plan, that you can keep it. 

There is a provision in the recommendations that allows the Secretary to change the 20-year period for career either to more years 

or to fewer years. So if you can keep your plan, the Secretary may 

change it. 

Senator GRAHAM. Thank you. Well, we will fix that, if that is 

true. 

So the bottom line is you have to look at it this way. The chairman of this committee is a military retiree. I am not going to go 

to John McCain and say we are going to take your retirement 

away. I’ll let someone else do that. We’re not. That wouldn’t be fair. 

So just chill out. Nobody’s going to mess with something you’ve already earned. 

If I don’t get court-martialed, I’m retiring in August after 33 

years. I’m not going to screw with my own retirement. If nothing 

else, you can believe that. 

I’m not going to put people in the position who have served, 

ready to retire, that they are going to lose anything. It is not fair. 

If you are on Active Duty today and this is your first day of Active 

Duty, you can keep the current system until we pass a bill, if we 

ever do, because to do otherwise is not fair. 

It is not fair to kick somebody out at 12 at no fault of their own, 

because we are reducing the force and Congress is stupid to do sequestration. That is your guys, the Iraq and Afghan vets. We want 

to do right by them, and that means a new benefit that doesn’t 

exist today. We want a sustainable, generous benefit. 

Here is my belief, that if you are going to enlist in the military 

the day after we reform the system, you are going to know on day 

one that the defined benefit plan is 40 percent. If that is not a good 

deal for you, don’t join. Go somewhere else. If you are halfway decent at managing your money, you’ll make up the 10 percent. 

But, Ms. Holleman, we are going to make sure that the 1 percent 

is modeled out because a lot of people live paycheck to paycheck. 

So I want to take the most conservative estimate of 1 percent and 

see how much of the 10 percent that makes up. 

From 20 to 30, I am not worried about that group because at 20, 

you are basically working for half pay anyway. You just obviously 

like your job, because you could quit and get half your salary and 

go do something else. So the reason people stay past 20 is they just 

like what they do, and they want to get promoted and maybe increase their retirement. So I am not really worried about that so 

much, Mr. Jones. 

But what I am worried about is, does the math add up? It sounds 

like a good deal, but let’s test it. And if you need more time to run 

the numbers, you are going to get it, because this is a transformational change. And we want to do it thoughtfully. 

736 

If I were a young person coming into the military, let’s say I had 

been in 4 years, I would take the blended plan in a heartbeat. You 

are just going to have more. But if I am 16, 17 years in, I’m sticking with what I have. It makes no sense. 

So I bet you that 19 percent reflects people who are close to 20, 

and that 80 percent, whether it is accurate or not, probably reflects 

people under 10. 

When you look at the G.I. Bill, it rewards people to stay past 12 

by transferring their benefits to their kids. That is a big deal. That 

is one less expense in retirement, paying for your kids’ college. 

Under the current plan that they are proposing, you get a bonus 

to stay in, an incentive to stay in, so that helps retention. I think 

those two things make sense. 

The idea that you are paying for this on the back of the people 

past 20, I don’t really buy that. But I want to know more about 

it, because you can’t create a new benefit helping the 12-year guy, 

the 8-year guy, without something giving. And I don’t want to punish somebody because you are helping somebody else. 

But I think this modernization effort of a blended plan will serve 

the country well. A 40 percent defined-benefit is a pretty good deal. 

There are not many deals like that in society today. 

But what we are asking people to do is an incredible thing, and 

that is to get shot or get killed. So I am going to make sure that 

you get a good deal. If it is below 20 percent cost share, it will be 

because I think you have earned a discount when it comes to 

health care. 

So please be mindful that this committee wants to embrace modernization, but it won’t be punitive. But if it does save money to 

make the system more sustainable, that is a good thing, because 

we are $17 trillion, $18 trillion in debt and we ought to be looking 

for savings where we can. 

So I will shut up now and take any final comments. 

Mr. FRANK. Chairman Graham, it was a great opportunity to 

come talk, and we do appreciate the opportunity the extended time 

to look at this. 

To your point, there are only a few marks in here. It is a little 

beat up, but it is going to get worse. And we would love to spend 

some time, obviously, discussing it with all of you in the future and 

help find the way forward. 

Senator GRAHAM. We will try to be reasonable and make sure 

you have a reasonable amount of time. I will be very sensitive to 

that. 

Mr. FRANK. Thank you. 

Senator GRAHAM. Thank you all so much for participating and 

representing your interests very well. Thank you. 

The hearing is adjourned. 

[Whereupon, at 4:53 p.m., the subcommittee adjourned.] 

[Questions for the record with answers supplied follow:] 

QUESTIONS SUBMITTED BY SENATOR KIRSTEN E. GILLIBRAND

RETIREMENT

1. Senator GILLIBRAND. Commissioners, the Department of Defense’s (DOD) own 

studies, and those of outside think tanks, seem clear that your average 17–21 year 

old does not spend a lot of time thinking about the retirement system or what kind 

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of healthcare the military will give them when they retire 40 years in the future. 

This seems reasonable since most servicemembers—above 70 percent—only serve 

one enlistment. 

Instead, it seems more likely that young recruits care about cash compensation, 

housing, and education benefits. The commission undertook an extensive study of 

these values and preferences. According to the commission’s study, does this demographic prefer the hybrid retirement system you recommend here? 

Mr. MALDON. Yes, the Commission’s survey showed that lower pay grade groups, 

both enlisted and officer (E1–E4 and O1–O3) generally preferred the blended retirement model. For example, E1–E4 active-duty servicemembers prefer the blended 

plan by a margin of 60:40. 

2. Senator GILLIBRAND. Commissioners, the commission’s recommendation is that 

retirees leaving after 20 years of service have the option to choose a lump-sum in 

place of all pension payments up through age 67, or to split the difference by getting 

half of the benefit upfront and the other half spread out in monthly checks. All the 

options the commission recommends would resume monthly payments to retirees at 

age 67. How does the commission recommend that DOD calculate that lump sum? 

Mr. MALDON. The Commission does not recommend a specific methodology for calculating the lump sum. In general, it is expected that the lump sum would be calculated as the present value of all or a portion of retired pay between retirement 

and age 67. The present value would be calculated with a selected discount rate, 

and assuming a level of expected retired pay cost-of-living adjustments (COLAs). 

However, the Commission recommends that the Secretary of Defense establish policy to calculate lump sums, including discount rates and COLA assumptions. 

FINANCIAL LITERACY PROGRAMS

3. Senator GILLIBRAND. Commissioners, currently every branch has different policies on how they provide financial literacy. Would the new proposed program be 

standardized across the branches or left up to each branch to set their own policies? 

Mr. MALDON. The recommendation establishes minimum training timelines that 

would be standardized across the Services. This minimum standard would ensure 

a level of commonality for financial literacy training that servicemembers receive. 

The Services would retain the flexibility to offer additional training to their respective servicemembers. 

Minimum training events would be provided during initial training or upon arrival at the first duty station; during leadership and pre- and post-deployment training; at transition points (e.g., Active component to Reserve component, separation, 

and retirement); at major life events (e.g., marriage, divorce, birth of first child, disabling sickness or condition); and upon request of the individual. 

4. Senator GILLIBRAND. Commissioners, the commission report recommends DOD 

hire outside firms to provide financial literacy training. Currently every branch has 

a different set of policies on how they provide financial literacy. Does the commission agree that all the branches should have the same financial training provided 

for their military member? 

Mr. MALDON. The recommendation establishes minimum training timelines that 

would be standardized across the Services. This minimum standard would ensure 

a level of commonality for financial literacy training that servicemembers receive. 

The Services would retain the flexibility to offer additional training to their respective servicemembers. 

Minimum training events would be provided during initial training or upon arrival at the first duty station; during leadership and pre- and post-deployment training; at transition points (e.g., Active component to Reserve component, separation, 

and retirement); at major life events (e.g., marriage, divorce, birth of first child, disabling sickness or condition); and upon request of the individual. 

5. Senator GILLIBRAND. Commissioners, how are the commission’s recommendations different from current financial literacy training in the military? 

Mr. MALDON. The Commission’s recommendation substantially increases the frequency and content of financial literacy training for servicemembers, as well as provides common minimum training standards for all Services. Based on the 2013 Blue 

Star Families Annual Lifestyle Survey, only 12 percent of servicemember respondents indicated they were receiving financial education from servicemember training. 

The Commission’s recommended changes to financial literacy training would ensure 

servicemembers universally received financial literacy training at certain key times 

738 

over the course of their military career. Another change would be hiring professional 

trainers to provide financial literacy training, ensuring that servicemembers are receiving training from certified financial advisors. 

DEPARTMENT OF DEFENSE COMMISSARIES AND EXCHANGES

6. Senator GILLIBRAND. Commissioners, in fiscal year 2013, the Defense Commissary Agency reported the average discount for commissary patrons to be 30.5 

percent and the exchanges reported savings between 20 and 24 percent. Respondents to the commission’s survey indicated that a commissary discount of 10 percent 

or less offers little to no value. What impact will the commissions’ recommendation 

have on the level of discounts at commissaries and exchanges? 

Mr. MALDON. The Commission’s recommendation is focused on preserving and improving the benefits delivered to servicemembers and their families through commissaries and exchanges. At the core of this recommendation is a statutory guarantee that food would continue to be sold at cost (plus a 5 percent surcharge) in 

commissaries. Although just as it is now, no restrictions would be placed on exchange pricing, to remain competitive in the face of increased private-sector competition, the exchanges would need to continue to offer substantial discounts. The 

nine strategies suggested in the Commission’s final report offer the consolidated resale system additional opportunities to reduce costs and increase revenue. These 

strategies include the following: consolidate and optimize logistics networks, consolidate staffing creating shared services business units, convert some or all of the commissary workforce from APF to NAF employees, expand commissary sales through 

the introduction of convenience items with variable pricing, aggregate procurement 

of supplies and services, reduce second destination transportation costs, aggregate 

and align capital expenditures, expand the Military STAR card to commissaries, and 

consolidate retail space. Pursuing some or all of these opportunities can increase 

profits. The additional profits can be used to increase the discount on nonfood items, 

improve the commissary and exchange facilities, increase Morale, Welfare, and 

Recreation (MWR) dividends, or reduce the appropriated fund burden. To satisfy the 

Board of Directors, the Executive Director of the consolidated resale system would 

need to find the right balance among these competing demands, satisfying the needs 

of the Military Services and the needs of shoppers. Shoppers would not be satisfied 

unless they were provided the right goods and services, in a safe and pleasant environment, at an acceptable discount. 

7. Senator GILLIBRAND. Commissioners, how does the commission envision maintaining the profits that go to Morale, Welfare and Recreation activities in this new 

system? 

Mr. MALDON. The Commission’s recommendation preserves the partial dependency of MWR programs on resale profits. The Commission’s Final Report offers multiple ways that the consolidated organization can increase profits through reduced 

operating costs or increased sales. Through the Board of Directors, the Military 

Services would determine and direct the best use of those profits, making tradeoffs 

among the needs of the MWR programs, the benefits of reinvesting in the resale 

system, and the goal of slowly reducing the burden on taxpayers. 

8. Senator GILLIBRAND. Commissioners, has the commission considered allowing 

veterans, regardless of retirement or duty status to use the Exchanges online? How 

would this affect the profitability of the Exchanges? 

Mr. MALDON. The Commission considered multiple options for expanding the list 

of authorized patrons, both in exchange facilities and online. The decision to increase the patron base must consider multiple factors, such as estimated profits, 

concerns over fairness, the likely response from private-sector retailers and their 

representatives, and the control and management of access. Although it is reasonable to expect some increase in profits, the Commission did not find defensible analysis to quantitatively estimate that increase. Accordingly, no effort was made to assess the objections that may be raised by States, commercial retailers, and other 

groups regarding substantial expansion in the eligible population of tax-free shoppers. 

IMPROVE ACCESS TO CHILDCARE ON MILITARY INSTALLATIONS

9. Senator GILLIBRAND. Commissioners, did the commission look at how the proposed reduction in the force structure would impact the current childcare wait 

times? 

739 

Mr. MALDON. Child care services, demand for those services, and associated wait 

times can vary substantially from location to location. The data needed to establish 

a baseline and perform a credible analysis of the effect of force structure reductions 

at each location was not available. 

To address changes in force structure and other variables affecting demand, the 

Commission instead focused its child care recommendations on standardizing the 

tools needed to measure demand and minimize the obstacles to satisfying that demand. Upon implementation of these recommendations, the Military Services would 

be better able to understand and respond to changes in demand, including effects 

associated with local force reductions. 

10. Senator GILLIBRAND. Commissioners, bases have 24 hour operations; why did 

the commission not make recommendations on how to help military families with 

childcare during nights and weekends? 

Mr. MALDON. The Commission received only a few inputs citing concerns with the 

availability of military child care outside of normal business hours. Many parents 

cited the extended hours offered in Child Development Centers (CDCs) as one of the 

advantages over private-sector alternatives, noting the CDC’s willingness to open 

early to support activities like physical training or stay open late to support extended working schedules. 

SAFEGUARD EDUCATION BENEFITS FOR SERVICEMEMBERS

11. Senator GILLIBRAND. Commissioners, many current servicemembers have 

made decisions about whether to extend their service based on the current G.I. Bill 

benefits and what they could do for themselves and their families. I am concerned 

that making changes without a grandfathering process would pull the rug out from 

under these servicemembers plans. Did the commission look at how many 

servicemembers would be impacted by the 2017 sunset in your recommendations? 

Mr. MALDON. Yes, this is why the Commission recommended sunsetting the living 

stipend for dependents on July 1, 2017. Doing so would allow time for families to 

identify alternative methods of paying for room and board if needed. 

Using available historical data, the Commission estimated that approximately 

400,000 dependents would need to identify alternative methods of paying for room 

and board. It is important to note that more than 33 percent of children to whom 

Post-9/11 GI Bill benefits have been transferred are younger than 10 years old, and 

thousands of these children are infants. 

12. Senator GILLIBRAND. Commissioners, did the commission consider alternatives 

that would allow for greater grandfathering of the current benefits? 

Mr. MALDON. Under the Commission’s recommendation, retired pay is grandfathered for currently serving servicemembers and retirees. Benefits from the Montgomery GI Bill and REAP are also grandfathered. Several of the Commission’s recommendations improve or maintain current benefits (e.g., Commissary savings, financial literacy training, and child care availability) or provide new options without 

changes to the current benefit (e.g., Survivor Benefit Plan). For these recommendations, grandfathering would not be necessary. It is not feasible to grandfather the 

current TRICARE program under the Commission’s health care recommendation. 

TRANSITION TO CIVILIAN LIFE

13. Senator GILLIBRAND. Commissioners, one of the commission’s recommendations is focused on strengthening the new Transition GPS program that requires 

several reports to Congress. What is the commissions’ assessment of the current effectiveness of the current Transition GPS program? 

Mr. MALDON. Although overall veterans’ unemployment has remained lower than 

that over nonveterans during the last 2 decades, since 2005, veterans age 18 to 24 

have consistently had a higher unemployment rate compared to nonveterans. One 

large company told the Commission that veterans, even those who complete the 

Transition GPS program, do not necessarily have the networking skills they need 

to get jobs. Despite the fact that a recent survey showed 44 percent of veterans attend school part- or full-time, the education track of Transition GPS is optional. Assessing the outcomes of the program is difficult because the matrixes needed to do 

so are incomplete. Veterans may also benefit from more face-to-face interactions 

with employees at One-Stop Career Centers. Currently, these employees are not required to attend Transition GPS workshops and their participation in veteran-focused job fairs is not monitored or reported. 

740 

MILITARY DEPENDENTS EDUCATION

14. Senator GILLIBRAND. Commissioners, the commission has recommended adding military dependent student identifiers to the Elementary and Secondary Education Act (ESEA). What benefit does the commission see from tracking military dependents? 

Mr. MALDON. Currently, there is no systematic way to identify issues military students might experience because of the military lifestyle. Tracking information reported about these students through the ESEA data submitted by schools would 

provide DOD with the means to compare military children against their peers and 

to identify areas where additional support might be needed to better serve military 

children in their schooling. 

15. Senator GILLIBRAND. Commissioners, does the commission think that more resources will be required to help teachers and administrators be better prepared to 

meet the needs of military children? 

Mr. MALDON. Currently, military children are not identified as such in public 

school data reported to the Federal Government. Large-scale data specifically pertaining to military children’s achievement in school does not exist; therefore, the 

Commission did not consider if more resources are required to help teachers and administrators be better prepared to meet the needs of military children. The first step 

is to identify any concerns about military children’s schooling by tracking their 

achievement, and the Commission’s recommendation regarding the military student 

identifier creates a tool for generating data needed to do so. 

(741) 

THE HEALTHCARE RECOMMENDATIONS OF 

THE MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION 

WEDNESDAY, FEBRUARY 25, 2015 

U.S. SENATE, 

SUBCOMMITTEE ON PERSONNEL, 

COMMITTEE ON ARMED SERVICES, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:36 p.m. in room 

SH–216, Hart Senate Office Building, Senator Lindsey Graham 

(chairman) presiding. 

Committee members present: Senators Graham, McCain, Cotton, 

Tillis, and Gillibrand. 

OPENING STATEMENT OF SENATOR LINDSEY GRAHAM, 

CHAIRMAN 

Senator GRAHAM. Hearing come to order. I apologize for being 

late. 

We have a vote at 2:45 p.m., so let’s just get started, see how far 

we can go, and just keep the trains running, here, so we get the 

testimony we need from this distinguished group. 

The Military Compensation and Retirement Modernization Commission (MCRMC) has been introduced to the committee about four 

times. Are y’all still the same people you were before? 

Mr. MALDON. We are, Mr. Chairman. 

Senator GRAHAM. Okay. If you could just start with the Admiral, 

here, for the record, announce who you are, then we’ll get started. 

I’ll defer any opening statements to the Senator from New York. 

STATEMENT OF SENATOR KIRSTEN E. GILLIBRAND 

Senator GILLIBRAND. Mine’s really short, but I am just going to 

say thank you to Senator Graham for his leadership on this committee. I want to join him in welcoming all of you to be our witnesses. 

We’ve already held a full committee hearing and a Personnel 

Subcommittee hearing on the MCRMC’s findings and recommendations. Obviously your work is incredibly important to this committee. Today’s hearing will address the MCRMC’s recommendations to improve health benefits for our servicemembers and families. I’m especially interested in hearing from our witnesses about 

how these recommendations address the issues of healthcare access, healthcare choice, and healthcare quality for the junior enVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00747 Fmt 6601 Sfmt 6601 Z:\DOCS\94844.TXT JUNE
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listed families and for military families with special needs dependents. 

Recent reports indicate that many Military Service organizations 

have reservations about these specific recommendations. We will 

hear from some of these Service organizations today during the second panel. I take their concerns seriously and will ensure that 

their concerns are addressed before we consider any major overhaul of the military healthcare system. 

Again, thank you for your excellent effort in this regard. We’re 

very grateful for your hard work. 

Senator GRAHAM. That was well done, and quick. 

Senator GILLIBRAND. Short and sweet. 

Senator GRAHAM. Admiral. 

Admiral GIAMBASTIANI. Good morning, sir. Ed Giambastiani, retired Navy. 

Mr. BUYER. Congressman Steve Buyer, class of 1980. 

Senator GRAHAM. Go Dogs. 

Mr. MALDON. Al Maldon, chairman. 

Mr. HIGGINS. I’m Mike Higgins. 

General CHIARELLI. Pete Chiarelli. 

Senator GRAHAM. Thank you all for your great service. We’ll receive your testimony. 

STATEMENT OF HON. ALPHONSO MALDON, JR., CHAIRMAN, 

MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION; ACCOMPANIED BY COMMISSIONERS 

HON. STEPHEN E. BUYER, MICHAEL R. HIGGINS, GEN PETER 

W. CHIARELLI, USA (RET.), AND ADM EDMUND P. 

GIAMBASTIANI, JR., USN (RET.) 

Mr. MALDON. Thank you, Mr. Chairman, Ranking Member Gillibrand, distinguished members of the subcommittee. My fellow commissioners and I are honored to be here with you. We thank you 

for the opportunity to testify before you again today. 

As a Commission, we stand unanimous in our belief that the recommendations offered in our report strengthens the foundation of 

the All-Volunteer Force, it ensures our national security, and it 

truly honored those who serve and the families who support them. 

Our recommendations sustain the All-Volunteer Force by maintaining or increasing the overall value of the compensation of benefits 

for servicemembers and their families, and provide needed options 

for service personnel managers to design and manage a balanced 

force. Our recommendations, further, save the government more 

than $12 billion annually after full implementation. 

Today, we specifically address our recommendations to improve 

the military health benefit. Modernization of the health benefit was 

one of the most sacred trusts given to this Commission. There is 

no benefit more fundamental, nor one more personal, than that 

which maintains the very health and well-being of our Nation’s heroes and their families. 

As commissioners, we share the unequivocal belief that a highquality health benefit is essential for all military constituencies, 

and we find that the current TRICARE program falls short of this 

aspiration. TRICARE, as it exists today, is beset by several structural problems that deny our Active Duty families, Reserve-compoVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00748 Fmt 6601 Sfmt 6601 Z:\DOCS\94844.TXT JUNE
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nent members, and retirees the high-quality health benefit they deserve. 

Low reimbursement rates result in weak healthcare networks, a 

frustrating referral process that limits access to care unnecessarily. 

A key medical advancement and modern healthcare management 

practices are often slow to be adopted. The current TRICARE program limits choice, access, and quality. Conversely, our recommended—our recommendation on TRICARE Choice program expand all three while increasing the overall value of the health benefit to the servicemember. 

Choice and access are important components of a high-quality 

health benefit, and we believe they can be delivered without undermining the existing Military Treatment Facility (MTF) structure 

and the training platform it provides. Current TRICARE beneficiaries already elect MTF-based care through TRICARE Prime, 

even when other options are available to them. The Commission’s 

survey showed that servicemembers strongly prefer a health benefit that both increases choice of civilian providers and ensure continued access to MTF care. 

Moreover, our proposed TRICARE Choice offer the same incentives to choose MTF care as DOD’s less robust TRICARE reform 

proposal, and would be expected to result in the same retention of 

workload at the MTFs. Our recommendations further offer tools to 

improve medical readiness by attracting new cases into the MTFs, 

especially those related to combat casualty care. 

Currently, there are serious challenges to maintaining joint combat medical capabilities with the typical mix of cases during peacetime. As a result, military medical personnel often rely on just-intime proficiency training at civilian hospitals, and the Services substitute wartime medical personnel requirements with nonoperational family and retiree care specialists during peacetime. 

Our healthcare recommendations improve the viability of MTFs as 

a readiness training platform by providing our families and retirees 

with greater access, choice, and value to their healthcare experience. 

Finally, Mr. Chairman, our recommendation on DOD/Department of Veterans Affairs (VA) collaboration improves the 

healthcare experience for transitioning servicemembers. Just one 

example of insufficient collaboration, drug formularies continue to 

differ between DOD and VA, to the detriment of our transitioning 

servicemembers. Differing formularies often results in uncertainty, 

tension, and a lack of continuity of care for wounded warriors that 

should not exist, especially for those managing pain and mental 

health concerns. Our recommendations ensure proper continuity of 

care, regardless of the organizational considerations. 

In closing, my fellow commissioners and I again thank you for 

the opportunity to testify here today. It has been our honor and 

privilege to serve our servicemembers and their families in our role 

as commissioners, and a particular honor to seek ways to improve 

and modernize the health benefit. We are confident that our recommendations will serve our servicemembers in a positive, profound, and lasting way. 

We are pleased to answer your question at this time. 

Thank you. 

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[The prepared statement of Mr. Maldon follows:] 

PREPARED STATEMENT BY THE MILITARY COMPENSATION AND RETIREMENT

MODERNIZATION COMMISSION

Chairman Graham, Ranking Member Gillibrand, distinguished members of the 

subcommittee: My fellow commissioners and I are honored to be here, and we thank 

you for the opportunity to testify today. 

As a Commission, we stand unanimous in our belief that the recommendations 

offered in our report strengthen the foundation of the All-Volunteer Force, ensure 

our national security, and truly honor those who serve—and the families who support them—now and into the future. Our recommendations represent a holistic 

package of reforms that do not simply adjust levels of benefits, but modernize the 

structure of compensation programs for servicemembers. These recommendations 

sustain the All-Volunteer Force by maintaining or increasing the overall value of 

compensation and benefits for servicemembers and their families, and they provide 

needed options for Service personnel managers to design and manage a balanced 

force. Our recommendations also create an effective and efficient compensation and 

benefit system that saves the Government, after full implementation, more than $12 

billion annually, while sustaining the overall value of compensation and benefits of 

those who serve, those who have served, and the families that support them. 

JOINT READINESS

Some have suggested that increasing access to and choice among health care providers would impair readiness by limiting training opportunities in Military Treatment Facilities (MTF). Yet beneficiaries currently have complete freedom to use 

TRICARE Standard or Extra to seek care outside of MTFs, but they often choose 

TRICARE Prime and receive MTF care. The Commission’s survey also showed that 

servicemembers strongly prefer a health benefit that, while increasing choice of civilian providers, allows continued access to MTF care. The Department of Defense’s 

(DOD) TRICARE reform proposal recommends elimination of TRICARE Prime with 

lower MTF co-payments to incentivize continued MTF usage. TRICARE Choice proposes the same incentives and should therefore result in the same retention of readiness workload at MTFs. 

Furthermore, our recommendations contain additional tools that enable DOD to 

improve medical readiness by attracting new cases into MTFs, especially those related to combat casualty care. There are serious challenges to maintaining joint 

combat medical capabilities with the typical mix of cases seen in the military health 

care system during peacetime. As a result, military medical personnel have had to 

rely on just-in-time proficiency training at civilian hospitals. The Services also regularly substitute wartime medical personnel requirements with medical specialties 

that provide non-operational family and retiree care during peacetime. DOD has 

recommended closing or repurposing many MTFs that do not have sufficient workload to adequately support readiness training. Conversely, our health care recommendations improve the viability of MTFs as readiness training platforms, while 

providing our families and retirees greater access, choice, and value to their health 

care experience. Key elements of the Commission’s recommendation include the following: 

• Establish a Joint Readiness Command (JRC). 

• Functional unified command led by a four-star general/flag officer. 

• Includes a subordinate joint medical function. 

• Required structure and personnel may be realigned from current Joint 

Staff functions. 

• Participates in annual planning, programming, budgeting, and execution 

process. 

• Establish a Joint Staff Medical Readiness Directorate. 

• Led by a three-star military medical officer. 

• Current Joint Force Surgeon billet transitions to assume the increased 

authorities. 

• Establish statutory requirement for DOD to maintain Essential Medical Capabilities (EMC). 

• Limited number of critical medical capabilities that must be retained 

within the military. 

• Secretary of Defense approves, establishes policies related to, and reports 

to Congress annually on EMCs. 

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• JRC identifies EMCs; establishes joint readiness requirements consistent 

with EMCs; monitors and reports on Services’ adherence to EMC policies 

and standards; and monitors allocation of medical personnel to ensure 

maintenance of EMCs. 

• Protect and improve transparency of medical programs funding. 

• Active component (AC) family, retiree, and RC health care should be 

funded from the Services’ Military Personnel accounts. 

• Medicare-Eligible Retiree Health Care Fund (MERHCF) should be expanded to cover health care and pharmacy for non-Medicare-eligible retirees. 

• New trust fund for health care expenditures appropriated in the current 

year. 

• MTFs funded through a revolving fund using reimbursements for care delivered. 

• MTF operations that exceed reimbursement for care delivered to be funded from Services’ operations and maintenance accounts as cost of readiness. 

HEALTH BENEFITS

A high-quality health benefit is essential for all military constituencies. Yet, the 

current TRICARE program is beset by several structural problems that hinder its 

ability to provide the best health benefit to active duty families, Reserve component 

members, or retirees. It has weak health care networks because it reimburses providers at Medicare rates or lower. It limits access to care with a frustrating referral 

process. It has challenges adopting medical advancements or modern health care 

management practices in a timely manner. The Commission’s recommended 

TRICARE Choice program expands choice, access, quality, and value of the health 

benefit. Key elements of the Commission’s recommendation include the following: 

• Continue to provide active-duty servicemember health care through their 

units or MTFs to ensure Services can maintain control of medical readiness of 

the Force. 

• Retain current eligibility for care at MTFs, pharmacy benefit, dental benefit, 

and TRICARE For Life for all beneficiaries. 

• Establish a new DOD health program to offer a selection of commercial insurance plans. 

• Beneficiaries include active-duty families, RC members and families, nonMedicare-eligible retirees and families, survivors, and certain former 

spouses. 

• AC families receive a new Basic Allowance for Health Care (BAHC) to 

fund insurance premiums and expected out-of-pocket costs. 

• BAHC based on the costs of median plans available in the family’s 

location, plus average out-of-pocket costs. 

• Part of BAHC used to directly transfer the premium for the plan the 

family has selected to the respective insurance carrier. 

• Remainder of BAHC available to AC families to pay for copayments, 

deductibles, and coinsurance. 

• Establish a program to assist AC families that struggle with highcost chronic condition(s) until they reach catastrophic cap of their selected insurance plan. 

• RC members can purchase a plan from the DOD program, at varying cost 

shares. 

• Reduce cost share for Selected Reserves to 25 percent to encourage 

RC health and dental readiness and streamline mobilization of RC personnel. 

• When mobilized, RC members receive BAHC for dependents; select 

a DOD plan or apply BAHC to current (civilian) plan. 

• Non-Medicare-eligible retirees’ cost contributions remain lower than the 

average Federal civilian employee cost shares, but increase 1 percent annually over 15 years. 

• Leveraging its experience, Office of Personnel Management administers 

the program with DOD input and funding. 

• Institute a program of financial education and health benefits counseling. 

DOD–VA COLLABORATION

Our recommendation on DOD–VA collaboration improve the health care experience for transitioning servicemembers. For example, drug formularies continue to 

746 

differ between DOD and VA to the detriment of transitioning servicemembers. Differing formularies create tension maintaining servicemembers on medications with 

which they are familiar and transitioning servicemembers to new medication on new 

formularies. This tension should not exist, especially for pain medication and antipsychotics. We believe creating a single formulary for these medications is the best 

and only means of ensuring continuity of care regardless of organizational considerations. Key elements of the Commission’s DOD–VA collaboration recommendation 

include: 

• Grant additional authorities and responsibilities to the Joint Executive Committee to standardize and enforce collaboration between the DOD and VA to: 

• Establish within 6 months a strategic uniform formulary to include all 

drugs identified as critical for transition from DOD to VA status. 

• Oversee electronic health record compliance with national health information technology standards ensuring health care data can be quickly and 

easily shared between the departments. 

• Approve or disapprove in advance any new DOD or VA medical capital 

asset acquisition or modernization of capital assets, of either DOD or VA 

medical components. 

• Define common services and planned expenditures for them, and certify 

consistent with strategic plan. 

• Establish a standard reimbursement methodology for DOD and VA provision of services to each other. 

In closing, my fellow Commissioners and I again thank you for the opportunity 

to testify here today. It has been our honor and privilege to serve servicemembers 

and their families as we have assessed the current compensation and retirement 

programs, deliberated the best paths to modernization, and offered our recommendations. We are confident that our recommendations will indeed serve our 

servicemembers in a positive, profound, and lasting way. We are pleased to answer 

any questions you have. 

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Senator GRAHAM. Well, thank you all very much for your hard 

work. We’ll just get right at it. 

One of the recommendations is that the amount of money to pay 

TRICARE bills, past increase on the patient side, is 5 percent. Is 

that correct? 

Mr. MALDON. It’s—that’s 5 percent—there—it is at 5 percent. 

Senator GRAHAM. Okay. So, the bottom line is, of all the—of the 

dollar we’ll pay for TRICARE, 5 percent comes from those utilizing 

the service. Is that correct? 

Mr. MALDON. That is correct, Mr. Chairman. 


225PER8.eps
754 

Senator GRAHAM. The norms in the private sector, somewhere in 

the 20s—28? Is that right? 

Mr. MALDON. About 28 percent. 

Senator GRAHAM. TRICARE originally was at 28 percent—— 

Mr. MALDON. 27, I believe. 

Senator GRAHAM. 27 percent. 

Mr. MALDON. Yes, Mr. Chairman. 

Senator GRAHAM. Your recommendation is to get it to 20 percent 

over 15 years. 

Mr. MALDON. That is correct, Mr. Chairman. 

Senator GRAHAM. You believe we have to do that to make 

TRICARE sustainable, no matter what we do. 

Mr. MALDON. It is our belief that that is absolutely correct. 

Senator GILLIBRAND. Congressman Buyer, do you see a way to 

maintain the 5 percent and keep the program viable? 

Mr. BUYER. No. 

Senator GRAHAM. Okay. 

All right. Now, you have retirees under 65 who are TRICARE recipients. Will they get a—an allowance in this new system? How 

much will their premiums go up beyond the 5 percent? Will their 

copayments go up? Will their deductibles go up? 

Mr. MALDON. Mr. Chairman, they do not. Retirees—non-Medicare-eligible retirees do not get a basic allowance for healthcare as 

the active Duty—— 

Senator GRAHAM. How much—— 

Mr. MALDON.—family would do. 

Senator GRAHAM.—more can the retired force expect to pay if we 

go to this new system, per person? 

Mr. MALDON. Today, Mr. Chairman, they’re paying about— 

roughly $500. Under the new system, the worst-case scenario 

would be up to about $1,760—$1,760—$69. 

Senator GRAHAM. So—— 

Senator GILLIBRAND. That’s per year? Is that per year? 

Senator GRAHAM. Per year? 

Mr. MALDON. Per year. 

Senator GRAHAM. Wow. 17- what? 

Mr. MALDON. That’s $1,769. That’s the worst-case scenario. 

Senator GRAHAM. Gotcha. 

Mr. MALDON. That’s out to the—— 

Senator GRAHAM. I gotcha. 

Mr. MALDON.—the 15 years. 

Senator GRAHAM. I gotcha. Oh, so that’s after the premium—— 

Mr. MALDON. That’s after the—that’s premium that will take you 

out to that—— 

Senator GRAHAM. No, I got you. So, aside from premiums, will 

their copayments or deductibles go up? Do we know? 

Mr. MALDON. There would be some other costs in there. There’s 

copay costs and deductibles, and some of those costs may be there. 

Senator GRAHAM. I’ll tell you what I want you to do. I want you 

to give me kind of a summary of what the median would look like. 

I want the retired force to know, ‘‘Here’s what it would cost you 

to make this change.’’ 

[The information referred to follows:] 

755 

Health care costs for retirees and their families under TRICARE Choice can be 

divided into two components. The first component would what they pay for coverage 

similar to what they have today under the existing TRICARE program. To create 

an apples-to-apples comparison, cost should be compared for similar coverage. In 

TRICARE Choice, retirees would have many options for health care plans and could 

choose to purchase enhanced coverage (broader networks, better access, and more 

covered services), rather than the existing TRICARE program. The second component would be any additional cost retirees choose to pay to purchase coverage that 

includes these enhancements. Should retirees take advantage of the additional 

choices made available to them by TRICARE Choice and is not a cost increase to 

the retiree. Instead, it is, in fact, a compensation increase because the retirees receive the better coverage at a subsidized rate. 

To evaluate these separate components of cost, the Commission considered two 

plans from the Federal Employees Health Benefit Plan (FEHBP) as examples of 

what types of plans might be offered in TRICARE Choice. The first plan is the Government Employees Health Association (GEHA). This plan is considered the most 

similar to the existing TRICARE program, although is not a perfect comparison. 

GEHA includes larger networks than the existing TRICARE program in the markets examined by the Commission and more covered services. But it is a lower-cost, 

PPO-style plan and is the best comparison the Commission could find for the existing TRICARE program. The second plan is Blue Cross Blue Shield (BCBS) Standard. This is one of the most robust and highest-cost plans in FEHBP and is used 

to illustrate the costs to retirees who exercise the opportunity to select better coverage made available to them by TRICARE Choice. 

The table below shows the costs to retirees for these options: existing TRICARE 

program, TRICARE Choice with a plan similar to GEHA, and TRICARE Choice 

with a plan similar to BCBS Standard. The first row of data illustrates the costs 

retirees pay now under the existing TRICARE program. Retirees enrolled in 

TRICARE prime paid a $548 (in 2014) premium. In addition, about 3 percent of retirees purchase TRICARE Young Adult (TYA) for about $2,000 and about 65 percent 

purchase the TRICARE Retiree Dental Program for about $1,500 per year. This 

means that the average retiree is paying about $1,544 per year in premium costs 

for TRICARE. Adding in their copayments and deductible amounts for health care 

provides an average annual cost of about $2,030 per retiree household. 

These costs would be largely unchanged in the first year of TRICARE Choice, 

when the retirees’ premium cost share is 5 percent. These costs would increase, 

however, by the time TRICARE Choice was fully implemented with a 20 percent 

cost share (15 years after program initiation). In that year (using constant 2014 dollars), the comparable health care plan (GEHA) would have a premium for retirees 

of about $1,769 per year. No retirees would have to buy TYA and some retirees 

would rely on the partial dental coverage provided in GEHA instead of purchasing 

stand-alone full dental coverage, so the total premium amounts paid by the retiree 

in GEHA would be about $2,267 per year. Adding in copayments and deductibles 

provides an average annual cost of about $3,556 per retiree household. 

The comparison to GEHA is the best available comparison with the existing 

TRICARE program. There would be many retirees, however, who choose to purchase 

better coverage that costs more. A retiree who chooses to purchase better coverage, 

like BCBS Standard, would pay about $552 more per year ($3,556 to $4,108) for a 

plan with a value of about $2,763 more than GEHA (because the government would 

pay an 80 percent cost share at the end of the 15-year period, the government would 

be paying the remaining $2,211 for the added value of health benefits. Thus, these 

retirees are experiencing an increase in their compensation. 

756 

Senator GRAHAM. Now, the hope is that, if you make this change, 

the benefits go up and make it worth the additional investment. 

That’s the goal of this, right, is to give you more choices, better 

healthcare? 

Mr. MALDON. Yes. 

Senator GRAHAM. Okay. 

Mr. MALDON. Yes, Mr. Chairman. 

Senator GRAHAM. All right. Now, Active Duty family members, 

they’ll get a basic allowance, so they’ll have no out-of-pocket cost. 

Is that correct? 

Mr. MALDON. That is correct. 

Senator GRAHAM. For the median program. 

Mr. MALDON. That is correct, Mr. Chairman. 

Senator GRAHAM. For the median cost. 

Mr. MALDON. Yes. 

Senator GRAHAM. Will their deductibles or copayments appreciably go up under TRICARE Choice? 

Mr. MALDON. Let me ask—— 

Senator GRAHAM. Do they have any copayments or deductibles? 

Mr. MALDON. Let me ask Commissioner Higgins if he would respond to that question, please. 

Mr. HIGGINS. Senator, today there are copayments that—— 

Senator GRAHAM. Right. 

Mr. HIGGINS.—Active Duty people pay. If they remain inside the 

MTF, obviously those are minimal. But, the key here is that there 

are two pieces to the basic allowance for healthcare. One is the premium. They—— 

Senator GRAHAM. Right. 

Mr. HIGGINS.—pay the 28 percent. 

Senator GRAHAM. Right. 

Mr. HIGGINS. The other piece is the copayments that they are expected, in that median plan, to pay. So, we would project that 85 

percent of people would not see a copayment or out-of-pocket expense beyond what they’re doing today. 

Senator GRAHAM. Okay, that’s my question. I want you to validate that. Eighty-five percent of the people in the current 


225per9.eps
757 

TRICARE system would not expect to see an increase in copayments. 

Mr. HIGGINS. That’s correct. They would be fully—— 

Senator GRAHAM. Everybody’s going to expect to see an increase 

in premiums if we adjust from the 5 percent. 

Mr. HIGGINS. That’s, of course, the 5 percent only applies to 

the—— 

Senator GRAHAM. Retirees. 

Mr. HIGGINS.—working-age retiree—— 

Senator GRAHAM. Yes. 

Mr. HIGGINS.—not the Active Duty—— 

Senator GRAHAM. That’s—not Active Duty family members. 

Mr. HIGGINS. Right. 

Senator GRAHAM. Okay. So, 85 percent of the people seem to be 

immune from any copayment increase if they—— 

Mr. HIGGINS. That—— 

Senator GRAHAM.—go to TRICARE Choice. 

Mr. HIGGINS. That would be our analysis—— 

Senator GRAHAM. Active Duty—— 

Mr. HIGGINS.—yes, sir. 

Senator GRAHAM. Okay. Guard and Reserve, is that still the 

same? 

Mr. HIGGINS. The Guard and Reserve package is a little bit different. The TRICARE Reserve Select would have a cost share of 25 

percent, and that would be, as it is today, fully burdened to the individual. 

Senator GRAHAM. How much more would they have to pay, in 

terms of dollars? 

Mr. HIGGINS. It would be my view, I believe, that there wouldn’t 

be much of an increased cost. We’re going to take that percentage—— 

Senator GRAHAM. Right. 

Mr. HIGGINS.—and make it a lower percentage burden to the individual, from 28 down to 25. 

Senator GRAHAM. Okay. I guess what I’m saying is, just give me 

some estimate of out-of-pocket cost, here. You’ve given me a good 

estimate from 500 to 1,769 over the next 15 years. 

Mr. HIGGINS. Sir, if—— 

Senator GRAHAM.—in terms of premiums, in the worst-case scenario. On the copayment side, I’d like some kind of analysis, too. 

[The information referred to follows:] 

Health care costs for retirees and their families under TRICARE Choice can be 

divided into two components. The first component would what they pay for coverage 

similar to what they have today under the existing TRICARE program. To create 

an apples-to-apples comparison, cost should be compared for similar coverage. In 

TRICARE Choice, retirees would have many options for health care plans and could 

choose to purchase enhanced coverage (broader networks, better access, and more 

covered services), rather than the existing TRICARE program. The second component would be any additional cost retirees choose to pay to purchase coverage that 

includes these enhancements. Should retirees take advantage of the additional 

choices made available to them by TRICARE Choice and is not a cost increase to 

the retiree. Instead, it is, in fact, a compensation increase because the retirees receive the better coverage at a subsidized rate. 

To evaluate these separate components of cost, the Commission considered two 

plans from the Federal Employees Health Benefit Plan (FEHBP) as examples of 

what types of plans might be offered in TRICARE Choice. The first plan is the Government Employees Health Association (GEHA). This plan is considered the most 

758 

similar to the existing TRICARE program, although is not a perfect comparison. 

GEHA includes larger networks than the existing TRICARE program in the markets examined by the Commission and more covered services. But it is a lower-cost, 

PPO-style plan and is the best comparison the Commission could find for the existing TRICARE program. The second plan is Blue Cross Blue Shield (BCBS) Standard. This is one of the most robust and highest-cost plans in FEHBP and is used 

to illustrate the costs to retirees who exercise the opportunity to select better coverage made available to them by TRICARE Choice. 

The table below shows the costs to retirees for these options: existing TRICARE 

program, TRICARE Choice with a plan similar to GEHA, and TRICARE Choice 

with a plan similar to BCBS Standard. The first row of data illustrates the costs 

retirees pay now under the existing TRICARE program. Retirees enrolled in 

TRICARE prime paid a $548 (in 2014) premium. In addition, about 3 percent of retirees purchase TRICARE Young Adult (TYA) for about $2,000 and about 65 percent 

purchase the TRICARE Retiree Dental Program for about $1,500 per year. This 

means that the average retiree is paying about $1,544 per year in premium costs 

for TRICARE. Adding in their copayments and deductible amounts for health care 

provides an average annual cost of about $2,030 per retiree household. 

These costs would be largely unchanged in the first year of TRICARE Choice, 

when the retirees’ premium cost share is 5 percent. These costs would increase, 

however, by the time TRICARE Choice was fully implemented with a 20 percent 

cost share (15 years after program initiation). In that year (using constant 2014 dollars), the comparable health care plan (GEHA) would have a premium for retirees 

of about $1,769 per year. No retirees would have to buy TYA and some retirees 

would rely on the partial dental coverage provided in GEHA instead of purchasing 

stand-alone full dental coverage, so the total premium amounts paid by the retiree 

in GEHA would be about $2,267 per year. Adding in copayments and deductibles 

provides an average annual cost of about $3,556 per retiree household. 

The comparison to GEHA is the best available comparison with the existing 

TRICARE program. There would be many retirees, however, who choose to purchase 

better coverage that costs more. A retiree who chooses to purchase better coverage, 

like BCBS Standard, would pay about $552 more per year ($3,556 to $4,108) for a 

plan with a value of about $2,763 more than GEHA (because the government would 

pay an 80 percent cost share at the end of the 15-year period, the government would 

be paying the remaining $2,211 for the added value of health benefits. Thus, these 

retirees are experiencing an increase in their compensation. 

Mr. HIGGINS. The—— 

Senator GRAHAM. That’s all I’m asking. 

Mr. HIGGINS. If I could, Mr. Chairman, when we look at retirees 

today, the working-age retiree, we have determined that their outof-pocket costs are approximately—a little over $2,000, on average. 

Senator GRAHAM. Okay. 


225per10.eps
759 

Mr. HIGGINS. Many pay much less if they stay within the MTF. 

But, many are paying dental premiums, many are paying for adultchild coverage that is quite expensive. So, on average, the retiree— 

working-age retiree—is about $2,000, and final end state, 15 years 

from now, we would project that that retiree, who’s going to get the 

adult child in their healthcare plan under TRICARE Choice, is 

going to be out-of-pocket somewhere around $3,500. So, we’re looking at a increase of less than two times. 

Senator GRAHAM. Okay, thank you. 

Senator Gillibrand. 

Senator GILLIBRAND. Thank you. 

One of my concerns is the needs of families with special needs. 

Your report says that there should be a DOD program available to 

assist families with a high-cost chronic condition or a catastrophic 

event or illness with medical expenses until they reach their health 

plans’ catastrophic caps or are no longer required to pay out-ofpocket costs. Active Duty families should apply for the—to this program for additional funding to cover copayments that substantially 

exceed their basic allowance for healthcare. How do you envision 

this operating? 

Mr. MALDON. Thank you, Senator, for the question. I’m going to 

ask Commissioner Buyer to respond to that question, please. 

Mr. BUYER. In our report, I’ll refer you to pages 265 through 267. 

What we seek to do is to mitigate the financial risks of the chronic 

and catastrophic illnesses to the Active-Duty family households. So, 

when you take about the average median plan, and you’re about— 

around the $995s, say just under $1,000. We—back—when we 

did—prior to Medicare Part D, we used to talk about the ‘‘donut 

hole,’’ with drug costs. There’s kind of a hole here, also, meaning 

you’re covered to $1,000, but, when you get to $2,000, that’s the 

cap, and then you’re triggered into a fund. We’ve come up with a 

calculation that we believe that funding the program with about 

$50 million annually will allow for the complete coverage of expenses for that family in excess of $2,000. 

Senator GILLIBRAND. Okay. Who will be in charge of deciding 

who receives the additional funding and how to define ‘‘chronic’’ 

and ‘‘catastrophic’’ conditions? 

Mr. BUYER. You have the plans. So, the—each of the plans— 

when you have a family member that—with a particular condition 

for which they’re being treated, if, in fact, it’s chronic, and you have 

catastrophic coverage. I mean, my gosh, it could—it could be—catastrophic could be any form of—type of an illness or an accident. 

When those costs exceed $2,000, it triggers into the fund. 

Senator GILLIBRAND. Okay. 

Admiral GIAMBASTIANI. If I could, the Secretary of Defense or Department of Defense (DOD) would determine that. 

Senator GILLIBRAND. Okay. 

How—would families with special-needs dependents be automatically enrolled, or do they need to figure this out? 

Mr. MALDON. Yes. Commissioner Higgins, I’m going to ask you 

to respond to that question. 

Mr. HIGGINS. We don’t envision an enrollment, per se, although 

I think a family with a special-needs individual in the family would 

be well-recognized in the system, and there would be an acknowlVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00765 Fmt 6601 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
760 

edgment that, after the first year or 2, that there would be—it 

would be consistent to consider them a special category, and there 

wouldn’t be an—a very arduous kind of administrative process. 

Senator GILLIBRAND. Okay. How did you assess the $50 million 

fund? How did you assess that that would be the right amount of 

money? 

Mr. HIGGINS. We calculated what the out-of-pocket costs would 

be today, where that—the basic allowance for healthcare would 

take—the allowance for out-of-pocket costs would take them. 

Where that line crossed, we considered what the costs would be for 

all the population beyond the crossing lines. That was calculated 

to be $50 million. You could add money to that, obviously, and 

push that line back. That would be perhaps a decision Congress 

might want to consider. But, we believe that we have the right 

analysis, on $50 million after the crossing lines, where you have 

out-of-pocket costs match each other. 

Mr. MALDON. Senator, that’s based on 5 percent, too, I thought, 

just to be sure. It was 5 percent of the people we thought that 

would fall within that category. 

Senator GILLIBRAND. Now, it’s not clear, would this program also 

apply to family of military retirees, or is this just for Active Duty? 

Mr. MALDON. It’s Active Duty, Senator. 

Senator GILLIBRAND. Okay. So, did you assess possible costs for 

medically retired wounded warriors having access to these kinds of 

funds to pay for medical expenses for any special-needs dependents 

they have? 

Mr. MALDON. No, we did not. I mean, no, it will not. 

Senator GILLIBRAND. Okay. 

So, what would they—so, someone who is a veteran, who is— 

wounded warrior who has a child with autism, what do they do? 

They just don’t get coverage through this system, or there’s no 

extra money if they do have catastrophic-care requirements? 

Mr. MALDON. Commissioner Higgins, would you respond to the 

question? 

Mr. HIGGINS. Senator, I’m assuming you’re talking about somebody that qualified for a disability retirement. 

Senator GILLIBRAND. Yeah. 

Mr. HIGGINS. They would be covered in the same way as a working-age retiree would be covered. 

Senator GILLIBRAND. But, you said retirees aren’t covered—their 

families aren’t covered. 

Mr. HIGGINS. I’m sorry. The—— 

Senator GILLIBRAND. So, I’m asking about dependents of retirees 

or medically wounded—wounded warriors. So, let’s say you’re Active Duty, you have an autistic child, you’re trying to get the medical necessities for your child—— 

Mr. HIGGINS. I see. 

Senator GILLIBRAND.—to develop. You get wounded in Afghanistan. You are—must retire, for—due to that injury. What does that 

dependent do? Are—is there any coverage for them? Have you assessed cost? What happens? 

Mr. HIGGINS. I believe I would like to correct that, then. They 

would not be covered, because this would be an Active Duty benefit. I—if I do understand you correctly now. So, a wounded—— 

761 

Mr. MALDON. Yes, let us take that, Senator Gillibrand—— 

Senator GILLIBRAND. Just—— 

Mr. MALDON.—for the record. 

Senator GILLIBRAND. Just analyze that fact pattern for me. 

Mr. MALDON. Okay. 

Senator GILLIBRAND. Because it’s real. It’s the kind of thing that 

happens. 

Mr. BUYER. But, I think it’s also—it’s also worthy—you’ve 

brought up a scenario that we didn’t think about. 

Senator GILLIBRAND. Yeah. 

Mr. BUYER. I want to thank you for that. But, it’s also worthy 

for you to improve our work product. So, if you have the consideration that, ‘‘You know what? I think this fund, for these special 

needs’’—because this is really narrow population that you’ve defined, here—— 

Senator GILLIBRAND. Yes. 

Mr. BUYER.—because the VA’s not going to cover that dependent, 

and whether they access into this fund is probably a worthwhile 

recommendation, and it’s right in your jurisdiction to do. 

Senator GILLIBRAND. Okay. 

Admiral GIAMBASTIANI. When I was on Active Duty, I thought 

the Exceptional Family Member Program was working and that we 

were sending people where they could get the medical care they 

needed. When we went around to posts, camps, and stations and 

talked to servicemen all across the country, we found out it is not 

working, according to spouses, that many of them are sent to 

places where they cannot get critical care. 

Senator GILLIBRAND. Right. 

Admiral GIAMBASTIANI. I honestly believe that this program 

would increase the access to that care for the Active component—— 

Senator GILLIBRAND. Now, are you—— 

Admiral GIAMBASTIANI.—soldier. 

Senator GILLIBRAND. Did you do any analysis about whether a 

stigma would be created for people who access this fund? Or was 

that not an issue raised? Meaning, you may not want your commander to know that your wife has a chronic condition that—whatever. It may be personal. It may be something that—so, is it 

known—is it known by your commander unit that you’re accessing 

this fund, or does it stay—— 

Admiral GIAMBASTIANI. Well—— 

Senator GILLIBRAND.—confidential under healthcare? 

Admiral GIAMBASTIANI. I remember the day I could no longer go 

and pick up my wife’s medical records at the MTF, when HIPAA 

went into play—in play. So, I believe that that would—— 

Senator GILLIBRAND. It would stay confidential. 

Admiral GIAMBASTIANI.—that would be confidential under 

HIPAA, which the military follows very, very strictly. 

Senator GILLIBRAND. Okay. Because we—I worked a lot on special—— 

I’m over time. 

Senator GRAHAM. No, take your time. 

Senator GILLIBRAND. I worked a lot on getting funding for special-needs treatment specifically under TRICARE. So, that work 

gets vitiated to a significant degree if other options are now availVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00767 Fmt 6601 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
762 

able. I just don’t want to lose the access that we were trying to develop for special-needs kids if a servicemember gets injured, which 

happens all the time. So, we just want to make sure this population has services. 

Admiral GIAMBASTIANI. I—if I could just add, we—as General 

Chiarelli said, we spent a lot of time looking at exceptional family 

members on the Active Duty side. We did not spend as much time 

on the—— 

Senator GILLIBRAND. On retirees. 

Admiral GIAMBASTIANI.—veteran side. 

Senator GILLIBRAND. Okay. 

Mr. BUYER. But, the medically retired, I think it’s awesome. I 

mean, you went right to something very narrow and specific. If you 

try to define that population—— 

Senator GILLIBRAND. It’s going to be—— 

Mr. BUYER.—it might be 12. 

Senator GILLIBRAND. Yeah, it’s going to be—— 

Mr. BUYER. I mean, it’s going to be—— 

Senator GILLIBRAND.—specific. 

Mr. BUYER.—really small. 

Senator GILLIBRAND. Yeah. 

Mr. BUYER. So, adding that to access this fund, I think, is probably—is well worthy of your consideration. 

Senator GILLIBRAND. Thank you. 

Senator GRAHAM. With that, we’re going to just recess. We’re 

going to go vote. We have back-to-back votes, and so, we’ll stand 

in recess. When Senator Tillis gets back, tell him, please, to just 

go ahead and chair the hearing, and we’ll be right back. 

Thank you. 

Senator GILLIBRAND. Thank you. 

[Recess.] 

Senator TILLIS [presiding]. Thank you all. If we can come back 

to order. 

I think the chairman and the ranking member will be back momentarily, but, since I’m probably the only other one that was 

going to ask questions of this panel, we’ll go ahead and proceed. 

I’d like to start with kind of normalizing the first numbers, 

Chairman Maldon, that you and Senator Graham discussed, and 

that was the $500 to $1,700 number. I’m just trying to normalize 

that, because I think we need to make sure it’s communicated 

properly, because—are you saying that the $500, in today’s dollars 

with the new program design at year 15, is at $1,700? 

Mr. MALDON. Yes, Senator Tillis, it’s at the—today it’s $500— 

roughly $500. What we are saying is that, 15 years from today, 

that cost would have—would be $1,769—— 

Senator TILLIS. Could you go—— 

Mr. MALDON.—approximately. 

Senator TILLIS. Could you go on to discuss if—let’s just say we 

keep current state, and the number under the current state is 

$500—what the projection would be 15 years from now if you did 

nothing. Has there been math on that? 

Mr. MALDON. We did some math on it. I honestly don’t remember 

exactly what those numbers might be at this point in time. I’ll ask 

my colleagues, here, if anybody might remember. If not, I’ll—— 

763 

Senator TILLIS. Okay. If it’s—— 

Mr. MALDON.—take it for the—— 

Senator TILLIS.—not readily available, if we could ask you to—— 

Mr. MALDON. I’ll take it for the record. Let me take it for the 

record. 

Senator TILLIS. Because I think that that’s—it’s very important 

for people to understand that this is not added purely because of 

the change in program design, that some of these are rising costs 

of insurance, healthcare, and a number of other factors over a 15- 

year period. 

Mr. MALDON. Yeah. We will do that. It is constant dollars that 

we’re talking about. But—— 

Senator TILLIS. All right. 

Mr. MALDON.—we’ll definitely take that for the record, and I can 

get back to you on this. 

[The information referred to follows:] 

The estimates on the change in retiree health care costs that have been provided 

by the Commission have been in constant or real dollars, i.e., they are in a base 

year so that simple comparisons of the costs at different points in time can be made 

on a comparable basis. In constant dollars, the TRICARE Prime premium for retirees declined from the program’s inception in 1995 until 2012. In fiscal year 2013, 

the TRICARE Prime premium became indexed to retirement pay increases and thus 

is now fixed in constant dollar terms. 

The 2016 President’s budget request eliminates the TRICARE Prime program for 

non-Medicare-eligible retirees and introduces a new premium at the Prime level for 

the remaining (modified) version of TRICARE Standard/Extra that was previously 

provided for free. 

Senator TILLIS. Okay. 

Mr. MALDON. Okay? 

Senator TILLIS. Something else that was in the—I think, the 

opening paragraph of your opening statement, was the $12 billion 

that would, I think, be saved. The—typically, the leap one would 

make, who may be a stakeholder in this, is that $12 billion comes 

at the expense of something less than they’re going to receive. I’m 

assuming, similar to the pension strategy, it may come from efficiencies and other things. Can you talk about the key sources of 

the—the sources of that $12 billion in savings? 

Mr. MALDON. Yes, Mr. Chairman. I’m going to ask Commissioner 

Higgins to start off talking about it, and then we’ll have others talk 

about it, as well. 

Mr. HIGGINS. Senator, the $12 billion that you refer to has three 

parts. One would be the savings from just moving to an accrual 

system for the working-age retiree. That has budgetary savings of 

$4 billion. So, just looking at the healthcare components of all this, 

of what we propose, we would suggest that the cost shares are 

going to produce roughly $2 billion in savings. Better utilization, 

better management of the program is going to develop about $5.2 

billion of savings there. So, we are increasing cost shares for the 

working-age retiree. As a result, they are part of the savings, obviously. 

Senator TILLIS. So, some of that is as a result of the cost share, 

but not all of it. You’re saying somewhere on the order of $5 billion 

of the $12 billion? 

Mr. HIGGINS. Is the purely utilization management that the private sector is going to bring to the program. For example, we’re 

764 

going to put $4.5 billion of those total savings back into the system, 

in terms of your choice, in terms of the improved network, in terms 

of that healthcare management, that quality management that’s 

going to produce quality healthcare for people. We believe that 

we’re pushing back into that system about $4.5 billion. So, the net 

savings, just looking at the healthcare aspect alone, is about $2.7 

billion. 

Senator TILLIS. Do you have any sense where some of the increased cost comes with a benefit of increased value? Where—to 

the extent there’s going to be more—or is there something, as 

you’re talking to the stakeholders—I know that the choice becomes 

a factor which seems to rate pretty highly among many that would 

be a part of the plan. But, can you give me some sense of how 

much of that—the additional costs or the cost share is somehow 

compensated for by much higher value for the money? 

Mr. HIGGINS. Mr. Chairman, you want to—— 

Mr. MALDON. Yes. One of the things that takes place, Mr. Chairman, is that there’s an expense in—— 

Senator TILLIS. He’s back. It was a fleeting moment. [Laughter.] 

Mr. MALDON. Okay, I apologize. Okay. 

Senator, is the—there’s an expansion of the network that takes 

place there. Then, in terms of just the program management, in 

itself, just bringing about efficiencies and streamlining the processes of the way the work is done, of some of that. Also, just in increasing the value of the services that they were to get with regard 

to the doctors, themselves—I mean, the medical professionals, 

and—because now you’re talking about the people that would not 

be reimbursed at the reimbursement rate or lower rate, so you 

have increased quality that would hopefully come with that, as 

well. 

General CHIARELLI. I would argue that—also, that I don’t think 

that there’s a single one of the groups that’ll follow us that would 

argue they don’t want to see the best possible medical care for 

servicemembers when deployed into harm’s way. Central to our 

recommendations is that, ensuring that our doctors are trained in 

a way that, as I’ve said before, on the first day of battle, they can 

provide the same kind of care they have after 13 years of battle. 

That’s a critical piece. As these—as the Services get smaller, the 

number of dependents gets smaller, we need to find ways that attract additional people into the MTFs, but also the right kind of 

caseload into the MTFs, so that we have that critical, critical combat medical readiness. 

Senator TILLIS. Then, the last thing—sorry, Mr. Chairman, if I 

may—just, again, going back to initial reactions by stakeholder 

groups, either those who would be in the plan or the providers. 

What sense do you have of their reaction? We’re going to hear, I 

think, shortly, but what sense do you have, in terms of the challenge that we would have to convince those who are—would be 

beneficiaries of other changes, that it’s the appropriate path? 

Mr. MALDON. I’m going to ask Commissioner Buyer to respond 

to your question. 

Mr. BUYER. So, if I may, Mr. Chairman, right now in TRICARE, 

we have very limited networks. Okay? The networks are limited because of the reimbursement rates. So, in order for me—you’re a 

765 

doctor, I’m one of the TRICARE contractors. I want you in my network, but I want to make money, too. So, I get you in my network, 

but I’m going to pay you below—below Medicare rates. 

Now, you look at your practice, and you say, ‘‘Okay, of my practice, I can only take so much Medicare, so much Medicaid,’’ right? 

You make these decisions. You say, also, ‘‘I may be a veteran. I’m 

going to do this because of the flag, my patriotism,’’ but you can 

only do that for so long, right? 

So, here’s what I’d like you to see. You say, ‘‘Well, how does the 

family really feel about this?’’ Well, access is pretty important, 

right, to a health network. In TRICARE, our networks are very 

limited. So, take for example—we’ll go to Fayetteville, Fort Bragg. 

So, for orthopaedic surgery—you blew out your knee, right, or your 

son or daughter has, in an athletic event, and you need to see an 

orthopaedic surgeon. In the TRICARE network around Fort Bragg, 

you get access to only 15 orthopaedic surgeons. If you are in the 

BlueCross/BlueShield plan, under TRICARE Choice—you chose the 

BlueCross/BlueShield—you get access to 163 orthopaedic surgeons. 

How come only 15 out of the 136 are in the network? Because of 

the low reimbursement rates, right? So, those rates are going to 

begin to limit the choice. 

So, when you say, ‘‘How does it impact the family?’’ You want the 

access to the very best of healthcare, and, in order for someone to 

qualify as a provider under a BlueCross/BlueShield plan, they don’t 

select just anybody, they have to meet their own qualifications to 

be a provider within their plan. They want the best. They don’t— 

and what does TRICARE do? Does TRICARE have any specialty 

requirements in order to be in their plan? No. It’s just you’ll accept 

below-Medicare rates. 

This is incredibly important when you begin to see the differences from family practice, OB–GYN—you can go down a lot of 

different specialties and you’ll be able to see how these limited networks limit the access and choice and access to good quality 

healthcare. 

Senator TILLIS. Thank you. That chart reminds me that I need 

to enroll in vision care, now that I’m here in the Senate. [Laughter.] 

But, thank you, Mr. Chairman. 

Mr. BUYER. The reason I have the GEHA plan, there, the Government Employees Health Plan, is—that’s about the median. 

Senator GRAHAM [presiding]. Right. 

Mr. BUYER. We couldn’t find an actual plan in the marketplace 

to say what would be the median. So, Mr. Chairman, you talked 

about the median—— 

Senator GRAHAM. Right. 

Mr. BUYER.—early on. That’s about it. 

Senator GRAHAM. That’s 87? What number is that? 

Mr. BUYER. Yes, that would be 87 or in the GEHA plan, which 

is about the median. 

Senator GRAHAM. Okay. 

Mr. BUYER. But, if you wanted the BlueCross, oh, my gosh, the 

numbers—oh, I’m sorry, it’s 43 for orthopaedic surgeons. 

Senator GRAHAM. Gotcha. 

Mr. BUYER. So, TRICARE would be 15—— 

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Senator GILLIBRAND. Reimbursement rates or that’s—— 

Mr. BUYER.—GEHA median plan is 43; with BlueCross/ 

BlueShield, 163. 

Senator GRAHAM. Gotcha. 

Mr. BUYER. So, look at the avenue of choice and access and quality of healthcare. Pretty extraordinary. 

Senator GRAHAM. Your—— 

General CHIARELLI. I would also point out, besides being it—the 

cost, and paying below Medicare rates, there’s another bureaucratic 

requirement, and that’s to get certified by TRICARE to be in the 

network. Many people—many doctors back away from joining the 

network when they realize that there’s the additional bureaucratic 

requirement to get certified and made part of the network, even 

though they’re certified in their State to provide that care. 

Admiral GIAMBASTIANI. Finally, if I could say, when you look at 

this chart, this is just a static chart that exists today. As we go on 

in the history of TRICARE, these numbers keep getting wider and 

wider and wider, which is why we think TRICARE, long term, is 

in a death spiral. 

Senator GRAHAM. Well, that was very impressive for a House 

member. So——[Laughter.] 

Senator Cotton. 

Mr. BUYER. You have a feigned memory, Mr. Chairman. [Laughter.] 

Senator GRAHAM. Senator Cotton. Nope, you’re next. 

Senator COTTON. So, your comment about vision makes me think 

of a—an element of the essay ‘‘What Does ISIS Really Want from 

the Atlantic,’’ last week, where the reporter had gotten—had talked 

about the roots of ISIS, and he went to interview a jihadi in London, said that no one really understood how great Sharia was, because all they saw was the beheadings and the cutting off of hands. 

They didn’t understand all the social-justice elements of it: free 

public education, free housing, free healthcare. The reporter asked 

the jihadi, ‘‘But, doesn’t Great Britain already have free 

healthcare?’’ The jihadi said, ‘‘No, a lot of stuff like vision isn’t covered.’’ [Laughter.] 

So, maybe that’s the legitimate grievances that they have. 

Mr. Chairman, I’ll start with you. So, I mean, as I’ve gone 

through some of the recommendations—and I’ve heard, last week, 

from a lot of folks at home—one point that you commonly hear is, 

‘‘Well, we’re going to have to pay for more.’’ I mean, it is a—is it 

a fair characterization to say maybe you’re paying a little bit more, 

but you’re also getting a lot more? Furthermore, you would be getting less for what you’re already paying for if we proceed with the 

current sequestration policies? 

Mr. MALDON. I think that is absolutely correct, Senator Cotton. 

Senator COTTON. Okay. I mean, other—feedback from other folks 

on the panel? 

But, how—when you—we were talking to the beneficiaries here, 

and they, in the end, just see that they have a higher bottom line. 

Like, what are the key benefits that you think we can tell them, 

like, ‘‘No, this is what you’re getting if you pay a little bit more on 

a periodic basis’’? 

767 

General CHIARELLI. Well, I would argue the mere fact that you 

take it out of the government contracting business and—DOD contracting—and you don’t wait 5—you have a 5-year contract that’s 

very, very difficult when a new medical procedure comes out, of 

some kind, to go ahead and modify that contract. That 5-year contract turns into an 8-year contract after the protest takes place. So, 

in the eighth year, all those things that were brought to medicine 

in that 7-year period aren’t available to the TRICARE recipient. 

That’s why we’ve literally got people that we’re putting together 

treatment plans for traumatic brain injury and post-traumatic 

stress at the NICO at Walter Reed. They go under the TRICARE 

system, and TRICARE, their insurance, refuses to pay for 50 percent of the things that are on the plan that we said that this particular servicemember needed, to get better. That, to me, validates 

Admiral Giambastiani’s statement that this system is broken. 

Senator COTTON. Other feedback? 

Admiral? 

Admiral GIAMBASTIANI. I would just tell you that you just look 

at the way the numbers keep going. Unfortunately, what’s happened over the years is, because we haven’t changed the copays, 

because we haven’t changed any of the fees, because they’ve remained virtually static, you have to get money out of it somewhere 

out of the system. So, we keep changing the size of the sectors or 

the areas of responsibility. We try to collapse contracts that—the 

DOD is working as hard as they can to make it as efficient, but, 

ultimately, what happens to this is, you reduce the amount of 

available care to beneficiaries, you reduce the quality, because the 

groups that are available to do this have shrunk considerably. So, 

therefore, the system keeps eating itself from within, is what I 

would tell you. That’s why I think it’s in a death spiral. 

Mr. BUYER. I would just like to add this. In the 1990s, after the 

first Base Realignment and Closure (BRAC), and it was exposed 

that the military retiree really wasn’t enjoying the freedom and liberties that they had fought for, because they felt that they had to 

live in close proximity to a military base to access healthcare. Then 

the BRAC exposed them, that, wait a minute, that the government 

was about to throw them onto Medicare. Congress responded with 

TRICARE for Life. When we did that, we essentially said to the 

military retiree, ‘‘You’re free. You can live anywhere you want in 

the country that you fought to defend.’’ It really changed the interdynamic of the military retiree, because now they can go live with 

their children and know their grandchildren. Better yet, when they 

go do that—and I’m a military retiree of which I’m a military retiree—I look at this and say, ‘‘I can actually access better choice, 

a greater number of highly qualified doctors.’’ There is—it’s not 

written about in the press. 

This debacle that occurred in the VA, on waiting times—the reason America got so upset about it was because of the integrity 

question. It really was. We still—we—if you go in and you look at 

the inside of the MTFs today, talk to those soldiers and the families, talk to the wives. The waiting times for primary care and specialty care—shameless. 

So, accessing this under TRICARE Choice, not only for the families, but also for the military retirees, that gray-area retiree, we get 

768 

them better access to care, increase their choice, and increase their 

quality. 

So, that’s what they get for a little more money. 

Senator COTTON. I mean—go ahead, Mr. Chairman. 

Mr. MALDON. Senator, I’d just also add to this—and, I think, in 

terms of just summarizing it, here, into three different areas. For 

the Active Duty family members, they get those—for their money, 

there’s no additional costs, here, but they get a lot more, in terms 

of choice, access, and so forth, as my colleagues have already said. 

Then, for the Reserve components, they get a lot more, because, 

one, the cost has been reduced from 28 percent of their premium 

to 25 percent, so they—that’s a—there’s a cost savings there to 

them. It’s a lower cost there. In addition to that, there are—there’s 

no break in coverage when the Reserve component member is mobilizing, deploying, and back and forth, and so forth. They don’t 

have that break in coverage that they would have under the current system. They’re going to have consistent coverage during that 

period of time, which would be a much better value under the 

new—under our proposed—— 

Mr. BUYER. Could I—— 

Mr. MALDON.—recommendations. 

Mr. BUYER. Could I add one more? The big winners, that isn’t 

really talked about in this, are those that live in the rural areas. 

They’re the ones who are the really big winners under this type of 

a health system. Because when—if you’re subject to the TRICARE 

today, and you’re in a limited network, it’s so limited, whereby 

sometimes you go against your migratory pattern. We don’t talk 

about that very often. But, someone from a small town thinks that 

they need to go to a bigger town for better healthcare. Of if I’m in 

a bigger town, I need to go to the bigger city for better healthcare. 

In the TRICARE network, sometimes when they sign up a particular doctor, they may say, someone in a town of 10,000, you have 

to go over to the town of 3,000 people to go get your healthcare. 

It just drives them crazy. It really does. 

This type of plan, we can access a greater—I’m sorry, I didn’t 

mean to point in front of your face—but you great—you access a 

greater number of healthcare providers in rural areas, Senator Cotton, and that is a huge benefit in this plan. 

Senator COTTON. I’ll yield back. 

Senator GRAHAM. Excellent question. 

Anything else, Senator Gillibrand? 

Senator GILLIBRAND. No. 

Senator GRAHAM. Thank you all. We will—— 

Absolutely. 

Senator COTTON. Since there’s no more questions—— 

Is it your best estimate that beneficiaries in the system, even if 

they pay—in certain cases, pay a little bit more than they do now— 

still, on average, will be paying less than similarly situated beneficiaries who did not serve in our military? 

Mr. MALDON. Yes. In fact, they’d be paying less than what someone that was a part of a healthcare plan similar to FEHBP. They’d 

be paying less than those civilian employees that would be enrolled 

in that plan. 

769 

Senator COTTON. That’s at—everyone’s in agreement on that 

point? So—— 

Admiral GIAMBASTIANI. Yes. 

Senator COTTON. Admiral? Yes. 

So, one might say that to—in response to the point that we 

promised our veterans that they would receive a certain level of 

healthcare, and that would be a better or lower priced care than 

civilians who didn’t serve receive, yes, this proposal is going to 

keep that promise. 

Mr. BUYER. Absolutely. 

Senator COTTON. Yes. 

Mr. BUYER. Because today someone who worked at a depot as a 

Federal civilian employee is getting access to better healthcare 

than the servicemember in uniform or his—in particular—not necessarily him, it’s his family, in the TRICARE network. Because the 

TRICARE network is so limited so that Federal civilian employee 

is getting access to better healthcare for his children than the servicemember for theirs. That’s not right. 

Senator COTTON. When you take into account the entire package 

of healthcare benefit, price, access, quality, so forth. 

Mr. BUYER. Yes. 

Senator COTTON. That the promise we made to our 

servicemembers is that they would receive that package, relative to 

civilians, not necessarily that that package would never change in 

any way for the rest of time. 

Mr. BUYER. For the rest of time? Well, I don’t—— 

Senator COTTON. For the—— 

Mr. BUYER.—I don’t know what that means. But, for—for the 

rest of time. 

Senator COTTON. For—— 

Mr. BUYER. I do know, for the military retiree, for example, 

they’re very artful, okay, in their words that they will select, because they’re, ‘‘Oh, I’ve been promised healthcare for life.’’ I mean, 

you—— 

Senator COTTON. That’s because soldiers are very artful—— 

Mr. BUYER. Well, you’ll—— 

Senator COTTON.—and always have been. 

Mr. BUYER.—you’ll hear artful things. But, they have—— 

Mr. MALDON. No, but—— 

Mr. BUYER.—they have had a tremendous benefit. They really 

have. 

General CHIARELLI. But—— 

Mr. BUYER. But it’s—— 

General CHIARELLI. But, it—— 

Mr. BUYER. Go ahead. 

General CHIARELLI. No, I’m just saying, if you look at the details 

of our legislation, one of the things we did was, we saw that 

TRICARE used to be good, not so good today, because of actions 

taken by DOD. Okay? Because they need to save money. We turned 

to Commissioner Zakheim and said, ‘‘Bulletproof this. Set this legislation in a way that, if we can get this through and get this benefit in the hands of these folks, that nobody will be able to do that.’’ 

He did. I won’t give you the specifics of that, but he did in our legislation. 

770 

Mr. BUYER. So, my conclusion is, for that military retiree, when 

they’ve been at 5 percent—they were at 27 percent, right, and 

they’re at 5 percent today, and we walk them up to 20 over 15 

years. They are getting so much more value in a health—in a quality health system that their complaint does—is not legitimate. 

Senator COTTON. Yeah, I mean, I think it’s important that we all 

be prepared—Republican, Democrat alike, and the commissioners— 

to answer these questions, because we will get those questions, and 

I think we’re all in agreement that we all want the same thing for 

the retirees. We just have to be able to explain to them exactly how 

the new system will work and how much better the package could 

be for them, despite the discrete changes they see in their lives. 

Mr. MALDON. Senator, I think that it is fair to say, though, that 

the retirees—in all of the travel that we did across the country in 

townhall meetings, into sessions, and public hearings, and so 

forth—retirees basically—they told us that they didn’t mind seeing 

an increase, frankly, in that cost sharing, as long as they got value 

for it. They wanted to make sure there was improved value for it. 

I think that’s what we have provided in those recommendations 

that we’ve—— 

Senator COTTON. Yes. 

Mr. MALDON.—made. 

Senator COTTON. Thank you. 

Senator GRAHAM. Thank you all very much. 

So, let’s hear some—from retirees. Y’all are next. 

Thank you very much. 

Next panel, please. [Pause.] 

Thank you all very much. Could you introduce yourselves, starting from the—my left to the right? 

Ms. RAEZER. Hi, Mr. Chairman. I’m Joyce Raezer, with the National Military Family Association. 

Admiral RYAN. Norbert Ryan, with the Military Officers Association of America. 

Mr. SNEE. Retired Master Chief Tom Snee, Fleet Reserve Association, sir. 

General HARGETT. Gus Hargett, National Guard Association 

(NGAUS). 

Senator GRAHAM. Thank you all. 

I will defer my opening statement and allow Senator Gillibrand 

to say anything she would like. 

Senator GILLIBRAND. Thank you for your service. Thank you for 

being here. We look forward to your testimony. 

Senator GRAHAM. Speaking of military retirees—Senator McCain, 

would you like to say anything? 

Chairman MCCAIN. I’m retired. [Laughter.] 

Senator GRAHAM. Okay. With that insight, we’ll let the panel 

move forward. 

So, just—— 

STATEMENT OF JOYCE W. RAEZER, EXECUTIVE DIRECTOR, 

NATIONAL MILITARY FAMILY ASSOCIATION 

Ms. RAEZER. Okay, thank you very much, Mr. Chairman and 

Ranking Member Gillibrand, Senator McCain. We appreciate the 

opportunity to speak on behalf of National Military Family AssociaVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00776 Fmt 6601 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
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tion and the families we serve about the healthcare proposals of 

the Military Compensation and Retirement Modernization Commission. 

We thank the commissioners for their thoughtful approach, outreach, and dedication to obtaining input from troops and their families. 

Military families deserve nothing less than the best possible 

health coverage and care. They also expect the readiness of their 

servicemember to perform the mission as well as the readiness of 

their medical providers to meet the challenges of the battlefield in 

its aftermath to be a priority. 

We agree with—our association agrees with the commissioners 

who have testified that the current TRICARE benefit and system 

to deliver that benefit is unsustainable. Budget pressures continue 

to diminish the benefit, delay access, and threaten military medical 

readiness in what has been DOD’s most frequently proposed reform: raise the fees charged to beneficiaries. When we asked for 

their input last year for the Defense Department’s military health 

system review, families cited bureaucratic hassles to obtain referrals, lack of continuity of care, inability to obtain timely care, and 

a lack of coverage for certain services. 

We do know that many families remain satisfied with TRICARE, 

the care they receive and the low cost of that care. But, what could 

happen to that care when financial pressures take a greater toll on 

the military hospitals or the TRICARE benefit over time? Our association is open to other healthcare options for military families because DOD has been well aware of many TRICARE problems—in 

some cases, for years—but has failed to take corrective action. We 

support, in principle, the concept of moving military families to 

high quality commercial health plans as a way to improve access 

to providers and offer more coverage options that match families’ 

needs, but we need more information. 

Military families are concerned, as you are, Mr. Chairman, about 

what would happen to out-of-pocket costs. Even when assured that 

the proposed basic allowance for healthcare would be set to ensure 

most Active Duty families have no additional cost, families are unconvinced. They cite recent changes to the basic allowance of 

health—housing formula as evidence the healthcare allowance 

could become a target for cost-cutting. They worry how a formula 

based on averages will support larger-than-average families or 

those with a family member with a chronic or a catastrophic health 

condition, as you mentioned, Senator Gillibrand. They also—the 

families of the wounded also cited the same kind of questions that 

you are asking, so appreciate you asking those. Many families tell 

us the cost proposed for retirees and their families are too high, despite the gradual ramp-up. 

In our written statement, which we’ve submitted for the record, 

we’ve outlined many logistical challenges involved in implementing 

TRICARE Choice and the need for families to have the tools they 

need to make informed decisions. We do believe the Commission’s 

proposal does contain important protections for families, protections they don’t have now, but which must be in—written into any 

statute implementing the changes. 

772 

Implementation plan must also address unique circumstances of 

military life. For example, FEHBP plans only cover Applied Behavioral Analysis (ABA) therapy for autistic children if a State requires that coverage. A unique circumstance of military families 

would be, we would need to see that coverage in any plan offered 

to military families. Change also demands an analysis of the potential impact on military hospitals to avoid unintended consequences 

for beneficiaries and military medical readiness. 

I would like to touch briefly on one additional recommendation 

from the Commission, because of its relation to healthcare, which 

is recommendation 7, to align the services offered under the Extended Care Health Option, ECHO, to those of State Medicaid 

waiver programs. The ECHO benefit is currently underutilized because of bureaucratic requirements involved in obtaining some 

services, such as respite care, and a mismatch between the benefit 

and what families experience that they need. This match—mismatch forces families to apply for State Medicaid waiver programs 

and get stuck on waiting lists whenever they move to a new State. 

Adopting the Commission’s recommendation would provide for better continuity and coverage of services. 

In an era of budget constraints, when military families see any 

proposed change in their benefits as just another attempt to cut 

costs, it’s important to rebuild their trust and show them their 

service is valued. We hope the Commission’s proposals prompt a 

thorough discussion of how to deliver the best health benefit possible for military families. 

Questions you ask about—and others ask about the Commission’s proposals should also be asked about the current system. 

How does the structure promote medical readiness? How does it ensure timely access and quality care at the best possible price for 

both beneficiaries and the government? Now is the time to have 

that conversation. So, thank you for beginning it. 

[The prepared statement of Ms. Raezer follows:] 

PREPARED STATEMENT BY THE NATIONAL MILITARY FAMILY ASSOCIATION

EXECUTIVE SUMMARY

The National Military Family Association (NMFA) appreciates the creation by 

Congress of the Military Compensation and Retirement Modernization Commission 

(MCRMC or the Commission) and we thank the commissioners and their staff for 

their work over the past 18 months. 

Recommendation 5: Ensure servicemembers 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. 

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

duty family members, Reserve component members, and retirees. 

READINESS FIRST

The MCRMC recognizes the Military Health System’s (MHS) dual mission by 

making two separate recommendations aimed at modernizing the MHS. The proposed Joint Readiness Command (JRC) is charged with ensuring servicemembers receive the best possible combat casualty care while the TRICARE Choice concept proposes a new way to deliver the health benefit. We agree with the MCRMC assessment that the two proposals are interdependent. While the JRC and TRICARE 

Choice recommendations must be in sync, the MHS must start with maintaining 

and improving readiness as the primary objective of any modernization proposal. 

Military families expect the readiness of their servicemembers to perform the misVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00778 Fmt 6601 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
773 

sion, as well as the readiness of their medical providers to meet the medical challenges of the battlefield and its aftermath, to be a priority. 

NATIONAL MILITARY FAMILY ASSOCIATION POSITION ON TRICARE CHOICE

The Commission’s health care proposal merits further study and serious consideration. Offering military families a selection of high quality commercial health plans 

could provide them with better access to high quality care, a more comprehensive 

set of benefits, and the ability to tailor coverage options based on individual family 

needs. Our Association believes military families could benefit from increased choice 

in health care options. 

While our Association supports, in principle, the concept of moving military families to high quality commercial health plans, more information and analysis are 

needed before we can fully endorse the Commission’s health care proposal. The 

MCRMC report raises several questions and areas of concern. Some segments of the 

military family community will incur significantly higher out-of-pocket costs versus 

the current system. Implementation details are sparse for important aspects of the 

plan. Most importantly, we believe a change of this magnitude demands a more 

thorough analysis of the potential impact on MTFs to avoid unintended consequences for beneficiaries and military medical readiness. 

We agree with Commissioners who have testified before Congress that 

TRICARE—both the benefit and the system to deliver the benefit—is unsustainable 

as currently structured. Specifically, TRICARE’s beneficiary satisfaction and fiscal 

sustainability have both declined. Given fiscal constraints, future improvements to 

address beneficiary dissatisfaction are unlikely. In fact, further dilution of the 

TRICARE benefit seems inevitable. Therefore, we are receptive to alternative ways 

of delivering the military health care benefit to families. 

Our Association believes growing TRICARE beneficiary dissatisfaction and increased cost pressures warrant a reexamination of how DOD delivers the health 

benefit to military families. 

MCRMC RECOMMENDATIONS WE SUPPORT

• Recommendation 7: Improve Support for Servicemembers Dependents 

with Special Needs 

• Recommendation 10: Improve Access to Child Care on Military Installations 

• Recommendation 13: Ensure Servicemembers Receive Financial Assistance to Cover Nutritional Needs by Providing Them Cost-Effective Supplemental Benefits 

• Recommendation 14: Expand Space-Available travel to more families of 

Servicemembers 

• Recommendation 15: Measure how the Challenges of Military Life Affect 

Children’s School Work by Implementing a National Military Dependent 

Student Identifier 

We support the proposal to improve support for dependents with special needs, 

reducing their reliance on State programs that very few are able to access. We 

thank the Commission for recognizing the importance of child care for the readiness 

of servicemembers and their families. Making access to Federal nutrition programs 

easier will help servicemembers and their families meet their nutritional needs. We 

have supported the need for a Military Student Identifier for several years as a 

means of tracking graduation rates and other milestones for military children as 

they move from one school district to another. 

RECOMMENDATIONS WE CANNOT SUPPORT

• Recommendation 2: Provide more options for servicemembers to protect 

their pay for survivors 

• Recommendation 11: Safeguard education benefits for servicemembers by 

reducing redundancy and ensuring the fiscal sustainability of education 

programs. 

We cannot support the Commission’s recommendation on the Survivor Benefit 

Plan (SBP), as it does nothing to eliminate the SBP–DIC offset for today’s survivors 

and imposes additional costs on some of the most vulnerable military families. We 

believe Congress should preserve the full Post 9–11 GI Bill for military families 

whose servicemembers have already transferred the benefit. 

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RECOMMENDATIONS REQUIRING FURTHER STUDY

• Recommendation 1: Help more servicemembers 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. 

• Recommendation 3: Promote servicemembers’ financial literacy by implementing a more robust financial and health benefit training program. 

• 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 proposals for the new retirement system and the health care proposal call for 

servicemembers and their families to make responsible choices that will require a 

robust financial training program. We wonder how DOD and the Services will accomplish this financial training for both the servicemember and his/her spouse. We 

also have concerns about the proposal to merge commissary and exchange operations and worry about the effect this change would have on the military resale system. We will seek more information on how these proposals could be implemented 

and encourage Congress to do the same. 

Chairman Graham, Ranking Member Gillibrand, and distinguished members of 

the subcommittee, the National Military Family Association (NMFA) thanks you for 

the opportunity to present testimony concerning recommendations of the Military 

Compensation and Retirement Modernization Commission’s (MCRMC or the Commission) report. Our primary consideration as we read the report was the impact 

on the quality of life of military families—the Nation’s families. We are concerned 

about the long-term viability and availability of the benefits, programs, and resources that help servicemembers and their families maintain readiness. We appreciate the Personnel Subcommittee’s recognition of the service and sacrifice of these 

families. Your response through legislation to the ever-changing need for support 

has resulted in programs and policies that have helped sustain our families through 

more than a decade of war. 

Our Association appreciates the creation of the Commission by Congress and we 

thank the commissioners and their staff for their work over the past 18 months. 

Their task, to conduct a holistic evaluation of the entirety of the military compensation system, has been a daunting one. Indeed, in our statement before the Personnel 

Subcommittee of the Senate Armed Services Committee last year, we requested that 

Congress delay making any substantial legislative changes to personnel policies 

until the Commission had finished their study. Now it is our turn to comment on 

the recommendations the Commission has made in their report. 

We thank the Commissioners and their staff for seeking insights from our Association and others during all stages of the Commission’s process. We surveyed military families for their input and concerns. We prepared a statement and were invited to testify as part of a panel before the Commission in November 2013 to share 

what we had heard from military families. We encouraged military families to attend the town hall sessions with the commissioners in their localities. We met with 

commission staff members on numerous occasions to answer questions and to share 

information. Since the release of the Commission report, we continued to elicit the 

thoughts of military families on the recommendations. 

The main focus of our statement today will be on the Commission’s health care 

recommendations. Additionally, we appreciate the opportunity to share our thoughts 

on other pertinent recommendations that we feel impact military families. We hope 

our analysis will be useful to you as you weigh the merits of the recommendations 

and think about implementation. 

MCRMC HEALTH CARE RECOMMENDATIONS

Recommendation 5: Ensure servicemembers 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. 

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

duty family members, Reserve Component members, and retirees. 

BACKGROUND: THE DUAL MISSIONS OF THE MILITARY HEALTH SYSTEM

The Military Health System (MHS) is unique in that it has dual readiness and 

benefit provision missions. The MHS readiness mission must achieve both a medically ready fighting force that is healthy and capable of deploying as needed and 

a ready medical provider force capable of delivering health and combat-casualty care 

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for servicemembers in operational environments. The MHS benefit provision mission 

is responsible for providing the earned health care benefit to family members, retirees, and survivors. The two missions intersect when military medical personnel provide care to family members and retirees in the Military Treatment Facilities 

(MTFs) honing their medical skills in the process. 

The MCRMC recognizes the MHS dual mission by making two separate recommendations aimed at modernizing the MHS. The proposed Joint Readiness Command (JRC) is charged with ensuring servicemembers receive the best possible combat casualty care while the TRICARE Choice concept proposes a new way to deliver 

the health benefit. In both recommendations, the MCRMC acknowledges that the 

two proposals are interdependent, but cites few—if any—concerns on how one might 

negatively impact the other. 

With our Association’s mission and expertise in advocating for military families, 

we have clear perspectives on how the MCRMC’s proposals might impact beneficiaries. However, we also have concerns about how these recommendations could 

affect the MTFs’ future viability and the ability of the MHS to achieve its military 

medical readiness goals. We realize that while the JRC and TRICARE Choice recommendations must be in sync, the MHS must start with improving readiness as 

the primary objective of any modernization proposal. 

NATIONAL MILITARY FAMILY ASSOCIATION POSITION ON TRICARE CHOICE

The Commission’s health care benefit proposal merits further study and serious 

consideration. Our Association believes military families could benefit from increased choice in health care options. Offering military families a selection of high 

quality commercial health plans could provide them with better access to high quality care, a more comprehensive set of benefits, and the ability to tailor coverage options based on individual family needs. 

While our Association supports, in principle, the concept of moving military families to high quality commercial health plans, more information and analysis are 

needed before we can fully endorse the Commission’s health care proposal. The 

MCRMC report raises several questions and areas of concern. Some segments of the 

military family community will incur significantly higher out-of-pocket costs versus 

the current system. Implementation details are sparse for important aspects of the 

plan. Most importantly, we believe a change of this magnitude demands a more 

thorough analysis of the potential impact on MTFs to avoid unintended consequences for beneficiaries and military medical readiness. 

WHY IS OUR ASSOCIATION OPEN TO CHANGING OR DISMANTLING TRICARE?

We agree with Commissioners who have testified before Congress that the 

TRICARE status quo is unsustainable. TRICARE—both the benefit and the system 

in place to deliver that benefit—faces pressure on multiple fronts and beneficiaries 

will continue to feel that pressure as they access care and in the cost of that care. 

Specifically, TRICARE’s beneficiary satisfaction and fiscal sustainability have both 

declined. Congress has directed DOD to find efficiencies in the MHS. While it has 

adopted some better business practices, DOD’s most-frequently-proposed ‘‘efficiency’’ 

seems to be raising beneficiary cost shares. Given fiscal constraints, future improvements to address beneficiary dissatisfaction are unlikely. In fact, further dilution of 

the current TRICARE benefit seems inevitable. Therefore, we are receptive to alternate ways of delivering the military health care benefit to families. 

BENEFICIARY DISSATISFACTION

The Commission’s findings regarding TRICARE beneficiary dissatisfaction are on 

point. Many military families encounter difficulties in using the TRICARE benefit. 

Among the most common complaints are: 

• Access Challenges: 

- TRICARE’s cumbersome referral and authorization process is not only a 

hassle, but often leads to treatment delays. These are particularly problematic for a highly mobile population that must endure the referral and authorization process after each PCS simply to continue already established 

specialty care. Military family members with chronic conditions cite examples that the cumulative effect of repeated treatment interruptions has had 

a negative impact on their long-term health outcomes. 

- Limited provider networks pose challenges to families seeking care. Network provider shortages are more pronounced in certain areas of the country and with certain specialties, particularly behavioral health care. 

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1More-Specific Guidance Needed for TRICARE’s Managed Care Support Contractor Transitions GAO–14–505: Published: Jun 18, 2014. Publicly Released: June 18, 2014. 

- Inadequate access standards and insufficient measures within many 

MTFs mask beneficiaries’ (including active duty servicemembers’) reported 

difficulties in obtaining appointments. This disconnect was highlighted in 

the Military Health System Review ordered by Secretary of Defense Chuck 

Hagel in 2014. 

• Coverage Issues: 

- TRICARE is slow to cover emerging technologies and treatment protocols. 

Families frequently complain that TRICARE does not cover services commonly reimbursed by commercial plans such as molecular diagnostic tests 

and intensive outpatient programs for mental health issues. 

- TRICARE’s pediatric coverage is also problematic. TRICARE is authorized to approve purchased care only when it is ‘‘medically or psychologically 

necessary and appropriate care based on reliable evidence.’’ The Defense 

Health Agency’s (DHA) hierarchy of reliable evidence includes only ‘‘published research based on well-controlled clinical studies, formal technology 

assessments, and/or published national medical organization policies/positions/reports.’’ There is no doubt that evidence of effectiveness is a cornerstone of medical necessity, yet such tightly prescribed data for children is 

not always readily available. Pediatric providers are adamant advocates of 

robust research for children’s health needs, but the reality is strict adherence to this adult-based standard of reliable evidence results in military 

children being denied care and treatment that is widely accepted and practiced elsewhere in the health care system. 

• Lack of Choice: 

- TRICARE’s uniform benefit means that military families cannot choose 

from various coverage options to best meet their needs. This is frustrating 

for families who could benefit from nontraditional care such as chiropractic. 

- Current Reserve component options pose problems for families during mobilization/demobilization. Switching to TRICARE when the servicemember 

is activated can result in disruptions in care, while maintaining the 

servicemember’s employer-sponsored health insurance can lead to significant out-of-pocket costs. We have long advocated giving National Guard and 

Reserve members more flexibility to maintain their employer-sponsored coverage for their families during activation. 

• Customer Service: 

- TRICARE is slow to adopt customer service innovations from the private 

sector such as the Nurse Advice Line. We advocated for a nurse advice line 

for several years and many commercial health plans offered nurse advice 

lines long before DHA rolled out their version in 2014. 

- TRICARE’s contracting process leads to customer service problems during 

transitions between regional contractors. In April 2013, military families 

experienced issues with referral authorization and customer service during 

the West Region transition to a new managed care support contractor. 

These issues were compounded by what the Government Accountability Office determined was a lack of oversight by DOD.1 It took months before 

beneficiary support was running smoothly under the new contractor. 

- TRICARE beneficiary communications are inadequate particularly when 

dealing with coverage changes. There are numerous instances of TRICARE 

implementing coverage changes without notifying beneficiaries and/or providers, resulting in beneficiary confusion and, in some instances, significant 

out-of-pocket expenses. For instance in January 2013, TRICARE ceased reimbursement for lab-developed tests including prenatal and preconception 

cystic fibrosis screenings. They failed to notify beneficiaries and providers 

that they were no longer covering this prenatal screening test that has been 

the standard of care for over 10 years. As a result, these tests were not reimbursed and some beneficiaries faced $800 in out-of-pocket charges. 

One main reason we support the MCRMC’s concept of shifting military families 

to commercial health plans is that DOD has been well aware of these TRICARE 

problems, in some instances for years, but has failed to take corrective action. 

TRICARE’s pediatric coverage is a prime example of DOD’s failure to address 

known issues. Based on urging from pediatric health care stakeholders, the National 

Defense Authorization Act (NDAA) for Fiscal Year 2013 mandated a DOD review 

of military kids’ health care and related support. That report, Study on Health Care 

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and Related Support for Children of Members of the Armed Forces, identified significant gaps and areas for clarification related to TRICARE’s pediatric reimbursement policies. The TRICARE for Kids Stakeholder Coalition, a group of pediatric 

provider organizations, military and veterans’ service organizations (including our 

Association), disability groups, and military families, has urged DOD to share their 

plans for implementing solutions and help us identify areas where legislative fixes 

are necessary. Since the study’s release in July 2014, we have met with DHA once 

to share our reactions to the report, but have not heard any details on next steps. 

DHA’s seeming inability to move forward in a timely manner and engage in transparent communication lowers stakeholder and beneficiary confidence that improvements are possible. 

Any discussion of beneficiary dissatisfaction must differentiate between TRICARE 

as a whole and the direct care system. While we believe most MCRMC findings on 

TRICARE beneficiary satisfaction are accurate, the report contains some examples 

(e.g., never seeing the same primary care provider or the inability to choose your 

providers) that military families tell us are issues most often in the direct care system, not necessarily TRICARE as a whole. It is important to note that the 

MCRMC’s TRICARE Choice proposal does not address beneficiary complaints regarding the direct care system other than by allowing dissatisfied beneficiaries to 

seek care somewhere else in the hope competition will incentivize the MTFs to improve. 

Additionally, it is important to acknowledge there is a segment of the beneficiary 

population that is satisfied with the current TRICARE system. Some have been fortunate enough never to experience the problems outlined above. Others accept these 

issues as part and parcel of getting ‘‘free’’ health care. As advocates for military families we focus on solving beneficiary problems and improving the Military Health 

System but, in the course of our work, we also hear from families who are content 

with the status quo and won’t relate to the dissatisfaction areas outlined in the 

MCRMC’s report. Our concern for these families centers on what could happen to 

their care if financial pressures take a greater toll on the MTFs or the TRICARE 

benefit over time. If the status quo is unsustainable, what will happen to their satisfaction with the system and the quality of their care? 

FISCAL SUSTAINABILITY

Year after year, DOD contends that the TRICARE program is fiscally 

unsustainable as currently structured. Officials highlight the limits Congress has 

placed on beneficiary cost shares while expanding benefits (e.g., TRICARE for Life). 

They cite statistics showing the health care budget is growing as a percentage of 

overall DOD spending. They contend that growing health care costs will limit DOD’s 

ability to fund readiness and modernization. DOD’s statistics can be debated, but 

there is no doubt about the relentless pressure to erode the TRICARE benefit by 

increasing fees and reducing available resources to the system. 

The Defense Health Agency (DHA) points to purchased care as the largest driver 

of military health care spending. As currently configured, TRICARE has limited options for reducing purchased care spending in ways that won’t negatively impact 

beneficiaries. TRICARE contracts are configured such that providers and beneficiaries have minimal incentives to manage utilization. In fact, certain TRICARE 

and MTF policies drive beneficiaries to more expensive venues for care. For instance, when acute care appointments are unavailable at the MTF (either because 

the MTF is closed or completely booked), TRICARE requires a referral and authorization to seek Urgent Care from a network provider. Some MTFs go a step further 

and simply refuse to give any referrals to network Urgent Care. Beneficiaries who 

find themselves in this situation often have no choice but to seek more expensive 

care at the Emergency Room. 

Despite DOD initiatives to become more efficient, cost cutting pressures will continue. Our Association fears attempts to reduce purchased care spending will result 

in erosion of network provider access and questionable coverage policies. Provider 

reimbursement rates will continue to decline, resulting in fewer providers participating in the TRICARE network. Alternatively, providers might further limit the 

number of TRICARE patients they will see due to low reimbursement rates. The 

result will be diminished access to care for military families. While maintaining the 

current TRICARE program gives the appearance of delivering a promised benefit, 

we fear that ongoing cost cutting measures will reduce TRICARE’s value in ways 

that might not be readily apparent to beneficiaries until it’s too late and they have 

no other options. 

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Our Association believes that growing TRICARE beneficiary dissatisfaction and 

increased cost cutting pressures warrant a reexamination of how DOD delivers the 

health benefit to military families. 

EVALUATING TRICARE CHOICE: ADVANTAGES FOR MILITARY FAMILIES

Our Association believes the Commission’s health care proposal has the potential 

to provide military families with a more robust and valuable health care benefit 

than they have today. Offering families a selection of high quality commercial 

health plans could provide them with better access to high quality care, a more comprehensive set of benefits, and the ability to tailor coverage options based on individual family needs. We also appreciate the Commission’s efforts to maintain minimal out-of-pocket costs for active duty families. We also thank the Commission for 

its recommendation to keep the TRICARE for Life benefit for our Medicare-eligible 

beneficiaries as it is today. TRICARE for Life is working the way Congress intended. 

Our Association supports the concept of transitioning active duty military families, as well as working-age retirees and their families and survivors, to a high quality DOD health benefit program since it would offer the following advantages: 

• Enhanced Access to Care: 

- TRICARE Choice promises to offer beneficiaries more robust provider networks with greater access to primary care and specialists. Since commercial 

health plans reimburse providers at market rates versus the discounted 

Medicare rates TRICARE offers, they are able to attract more providers to 

their networks. 

- TRICARE Choice should streamline access to specialty care. Many commercial plans allow beneficiaries to direct their own health care. Even families who elect an HMO type plan should find less cumbersome referral and 

authorization processes than they currently face with TRICARE. 

- A selection of national commercial health plans should streamline the 

transition of care during most PCS moves. Under TRICARE Choice, families will not have to modify their enrollment when moving from one area 

of the United States to another, assuming they have selected a TRICARE 

Choice plan with national coverage. 

- Barriers to Urgent Care will be eliminated with TRICARE Choice. Families will be able to elect plans that do not require a referral and authorization for Urgent Care. 

- Beneficiaries retain access to MTFs for medical care with TRICARE 

Choice. Many military families are familiar and comfortable with MTFs. 

Others value MTF providers’ cultural competency and sensitivity to military family challenges. It is important that TRICARE Choice offers beneficiaries continued access to MTF care. 

• Better Coverage Policies: Commercial health plans should reduce problems 

with TRICARE coverage, such as questionable pediatric reimbursement policies 

and lack of coverage for emerging technologies and treatment protocols. Coverage decisions would no longer be subject to rigid TRICARE regulations regarding medical necessity, the hierarchy of reliable evidence, and, in some 

cases, the additional step of requiring Congressional approval for a new benefit. 

While beneficiaries certainly want safe and effective treatment, commercial 

plans would offer more comprehensive coverage for services and procedures 

widely accepted by the medical community that don’t meet TRICARE’s rigid 

standards. Whether or not a procedure is medically necessary would no longer 

be a DOD decision. 

• Greater Choice: 

- TRICARE Choice would allow military families to tailor coverage to best 

meet their needs versus the current TRICARE benefit that provides uniform coverage and meets some families’ needs better than others. 

- TRICARE Choice plans would offer coverage options that are currently 

unavailable such as vision, chiropractic, and acupuncture. 

- More robust provider networks should give beneficiaries greater choice in 

selecting their providers. 

- We appreciate that the MCRMC recognized the patient care management 

tools used by U.S. Family Health Plan (USFHP). USFHP knows our community and has high satisfaction among beneficiaries. We agree with the 

MCRMC suggestion that some USFHP plans could continue as TRICARE 

Choice options for military families since we believe most USFHP families 

would like to retain their coverage. 

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- National Guard and Reserve members will have more attractive options 

under TRICARE Choice. 

• We have long advocated for more flexibility in allowing Guard and 

Reserve members to retain their employer sponsored health plan for 

their families while activated. The Basic Allowance for Health Care 

(BAHC) gives them the option of applying BAHC to their employer plan 

premiums. This will enable Reserve component families to maintain 

continuity of medical care during servicemember activation. 

• For families that prefer using TRICARE during activation, a menu 

of commercial plans will better serve Guard and Reserve members in 

areas not near a military installation where current TRICARE networks may be particularly weak. 

• Minimal Active Duty family out-of-pocket costs (in principle). Although we are 

not convinced the current MCRMC proposal completely insulates active duty 

families from excessive medical expenses, we appreciate that the Commission 

acknowledges the principle of minimal out-of-pocket costs for active duty families and proposes the creation of the Basic Allowance for Health Care to give 

families a way to cover their health care costs. 

Underpinning our assessment of TRICARE Choice advantages is the assumption 

that the menu of commercial plans would be comparable to or better than those offered via the Federal Employee Health Benefit Program (FEHBP.) We believe this 

is a valid assumption since the MCRMC uses FEHBP as a point of reference in their 

report and suggests that the Office of Personnel Management (OPM) manage the 

DOD program due to their proven track record with FEHBP. 

Our Association believes the Commission’s TRICARE Choice health care proposal 

has the potential to provide military families with a more robust and valuable 

health care benefit than they have today. However, while we are open to the idea 

of transitioning military families to commercial health plans, the MCRMC report 

raises questions and concerns that must be addressed before we can fully support 

the Commission’s health care proposal. 

EVALUATING TRICARE CHOICE: AREAS OF CONCERN AND CLARIFICATION

First, we believe a change of this magnitude demands a more thorough analysis 

of the potential impact on MTF caseload to avoid unintended consequences for beneficiaries and military medical readiness. Second, some segments of the military family community will incur significantly higher out-of-pocket costs versus the current 

system. Third, implementation details are sparse for important aspects of the plan. 

1. TRICARE Choice’s Impact on MTFs/Military Medical Readiness is Unclear 

Even though the MTFs will remain an integral component of military family 

health care delivery under the MCRMC’s proposal, the report contains very few details on the potential impact TRICARE Choice might have on the direct care system. 

We have the following concerns: 

• The MCRMC report contains no analysis of TRICARE Choice’s impact on 

MTF caseload. TRICARE Choice makes two radical changes to beneficiary 

health care. It introduces a co-pay for MTF treatment and it provides unfettered 

access to civilian providers. Yet, there is no analysis of the potential impact 

these changes might have on MTF beneficiary caseload. 

- From a beneficiary standpoint, will DOD still insist on the option of employing ‘‘sticks’’ to drive beneficiaries back into the MTFs if the lower copay ‘‘carrot’’ is insufficient motivation? DOD has frequently employed the 

‘‘stick’’ approach to pull the patients it needs into the direct care system, 

most recently in the ‘‘MTF recapture’’ efforts that limited TRICARE Prime 

beneficiaries’ ability to enroll with a civilian network Primary Care Manager even if they had already established a relationship with that doctor. 

It’s been our experience that many military medical providers believe they 

must maintain the ability to force military families into the MTFs in order 

to maintain needed skills and patient loads. 

- From a readiness standpoint, what happens if a significant percent of 

family members and retirees elect to leave the MTF and receive care in the 

civilian market and the MTFs no longer have means to force them in when 

they need the bodies for training and maintaining provider proficiencies? 

Will the MTFs remain viable? The MCRMC recommendation seems to assume MTFs will respond to patients’ new opportunities for choice by improving quality and other enhancements to draw beneficiaries in. What 

happens if their efforts aren’t enough? 

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• The Joint Readiness Command (JRC) is charged with attracting a different 

mix of medical cases into MTFs to better support combat-care training and medical readiness. We are pleased the Commission emphasized that care for active 

duty servicemembers is a key part of readiness and so proposed no changes in 

how they would get their care. We hope the readiness focus they propose will 

improve the care and readiness of servicemembers for their missions. We understand and appreciate the goal of bringing new Essential Medical Capability 

(EMC) cases into the MTFs as part of that readiness focus. However, we are 

skeptical the tools the MCRMC suggests for the JRC will be sufficient in attracting the necessary caseload, particularly if currently enrolled beneficiaries 

leave the MTFs in great numbers. 

- The ability to adjust MTF reimbursement rates is cited as one tool to attract EMC cases, but decisions on where to seek medical care, particularly 

in trauma and complex cases, typically do not involve price. Since price 

shopping isn’t currently a significant factor in consumer behavior for medical care decisions, we question how much impact alternative prices would 

have in attracting EMC cases to MTFs. 

- Another tool the MCRMC outlines for the JRC is establishing commercial 

reimbursement rates and associated billing systems, improving authorities, 

and allowing greater access to veterans and civilians with relevant complex 

cases and trauma. However, the MTFs would be competing for these cases 

with established medical systems that employ marketing departments and 

campaigns as well as established relationships in the local community. Simply opening the MTFs to the broader community may not be enough to attract the desired EMC cases. 

- The MCRMC report states that financial incentives, specifically lower copays at MTFs versus those for civilian providers, would encourage beneficiaries to seek care at the MTFs. However, beneficiaries currently pay 

nothing out-of-pocket for MTF care and it is unclear what impact a co-pay 

will have on beneficiary decisions regarding where to seek care. 

• From a JRC implementation standpoint, it is unclear who would be responsible for working out the details at the individual MTF level. Who sets the 

standards for what services and medical specialties will be available at the 

MTF? Is that an MTF commander decision? A Service decision? A Joint Medical 

Command might have had more authority over MTF implementation. It seems 

there is high potential for inconsistencies and lack of coordination on readiness 

needs. 

• The MCRMC report is unclear on the magnitude of the desired shift from 

beneficiary care to EMC cases. If the goal is a major shift away from beneficiary 

care (such as labor/delivery/newborn care), is there sufficient civilian medical 

capacity to absorb increased demand for care from military families, particularly in remote locations with significant troop concentrations, such as 

Twentynine Palms, CA; Fort Polk, LA; and Fort Riley, KS? 

• TRICARE Choice does nothing to address access and quality issues within the 

MTFs. Although the MCRMC report highlights areas where beneficiaries are 

unsatisfied with the direct care system, their proposal does nothing to address 

those complaints other than to say beneficiaries can now vote with their feet 

and go elsewhere for care. In fact, the renewed emphasis on combat casualty 

care skill building, while critically important for military medical readiness, 

might actually exacerbate problems with care for family members and other 

beneficiaries. What will the process be for determining the level at which MTFs 

will participate as network providers in the TRICARE Choice civilian plans and 

for managing that participation as MTF staffing and focus on the EMCs 

evolves? 

TRICARE Choice introduces radical changes to the beneficiary health benefit with 

no estimate of the impact on MTF caseload. While the Joint Readiness Command 

proposal calls for a strategic shift to EMC cases in the MTFs, details on this transition are sparse. We believe a change of this magnitude demands a thorough analysis, including a forecast of beneficiary demand for MTF services under TRICARE 

Choice and an estimate of the likely increase in EMC cases within the direct care 

system. 

2. Potential for Significant Out-of-pocket Costs 

Active Duty Families 

The MCRMC report acknowledges that TRICARE Choice will result in increased 

out-of-pocket costs and these higher costs would effectively reduce overall active 

duty compensation if they were not offset with the creation of the Basic Allowance 

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for Health Care (BAHC). Although we appreciate the MCRMC’s attempt to address 

this issue, we are not convinced the current proposal sufficiently insulates active 

duty families from excessive out-of-pocket health care expenses for the following reasons: 

• TRICARE Choice’s Catastrophic Cap is Unspecified: A key advantage of the 

current TRICARE plan is a low catastrophic cap. By limiting annual out-ofpocket expenses to $1,000 per family, the current TRICARE benefit limits the 

financial risk currently serving families face from health care costs. The catastrophic cap amount for TRICARE Choice plans is not specified, so we have no 

way of assessing the financial risk families would face under the MCRMC’s proposal. We must have details on this element of TRICARE Choice to complete 

our evaluation. 

• Details are Sparse on the Chronic/Catastrophic Program: The MCRMC proposes that active duty families facing chronic or catastrophic conditions and resulting copayments that substantially exceed their BAHC could receive assistance from a new catastrophic fund. But, the report provides very few details on 

this program. How would eligibility be determined? What process would families follow to apply for the fund? Would there be an appeals process? What portion of costs exceeding BAHC would be reimbursed? There is no mention of adjusting the program based on lessons learned. Implementation must include a 

mechanism for adjusting policies and processes to ensure the program achieves 

the desired outcomes. We fear that applying for this fund would become another 

hurdle for families facing already challenging circumstances. More importantly, 

given one of the main benefits of TRICARE Choice is removing DOD from the 

coverage determination process, we are opposed to giving DOD authority over 

coverage decisions for families with chronic or catastrophic conditions. 

• The BAHC Formula Raises Concerns: 

- BAHC is calculated to cover the premium cost share of the health plan 

selected in the prior year by the median active duty family. This methodology introduces risk that the BAHC will be eroded over time if families 

scrimp on their choice of plans. We contend there should be a high standard 

for the type of plan that is appropriate for military families given the impact of family member health on servicemember readiness. The quality of 

health plans for military families should also be commensurate with the extraordinary sacrifices made by servicemembers and their families. The level 

of the BAHC should be set based on the costs of plans available for their 

location in the current year and not on what families chose in the prior 

year. 

- Under the TRICARE Choice plan, large families become vulnerable to 

higher out-of-pocket expenses. The portion of BAHC intended to cover outof-pocket costs is calculated as the average copayment amount by all active 

duty family member beneficiaries in the prior year. Although details are 

limited, the MCRMC has confirmed to us BAHC would not vary based on 

family size. While there would be no difference in family premiums based 

on family size, a large family will almost certainly incur higher copayment 

expenses than the ‘‘average’’ family and those additional expenses will not 

be covered by BAHC. The current TRICARE benefit provides a zero out-ofpocket cost option for health coverage for all active duty families regardless 

of family size. TRICARE Choice should be modified to minimize out-of-pocket costs for larger than average families. 

To move beyond the principle of minimal out-of-pocket costs and gain more visibility on the financial impact of TRICARE Choice on actual military families, we 

would like to see more data on out-of-pocket expenses for a variety of family circumstances (family size plus high/med/low health care utilization) crossed against 

a variety of plan types to get a better understanding on potential out-of-pocket expenses. 

Although the MCRMC states its goal is to minimize out-of-pocket expenses for active duty families to avoid a reduction in overall active duty compensation, several 

elements of the TRICARE Choice proposal could lead to significant out-of-pocket 

costs for some families. The BAHC calculation must ensure a baseline of excellent 

medical coverage with minimal out-of-pocket expenses for all active duty families. 

The MCRMC must also be more transparent about the risk of out-of-pocket costs 

by providing specifics on TRICARE Choice plans’ catastrophic cap(s) and the chronic/catastrophic program. 

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Non-Medicare Eligible Retirees 

The MCRMC report acknowledges that beneficiaries will incur higher out-of-pocket expenses with TRICARE Choice versus the current benefit. For active duty families, as outlined above, the MCRMC seeks to mitigate these higher costs with BAHC 

so as to avoid reducing overall active duty compensation. Retirees would not receive 

BAHC and would thus be fully responsible for premiums and cost shares. The Commission’s proposal focuses on the advantages of choice and states that military retirees should pay a lower premium than civilian employees as a recognition of their 

service. However, it does not address the perceived reduced value of the military retirement package resulting from TRICARE Choice. While our Association has not 

opposed moderate TRICARE fee hikes in the past, we believe out-of-pocket expenses 

for retirees under TRICARE Choice could become too high and diminish the value 

of the earned retirement benefit unless safeguards are written into law. 

• Premiums and Out-of-pocket Expenses Will Be Significantly Higher than 

TRICARE as it stands today: Although the MCRMC report does not provide 

specifics on premium costs, an ultimate 20 percent premium cost share (after 

a 15-year ramp-up), higher out-of-pocket expenses, and copays associated with 

the civilian could be as much as thousands of dollars more per year than retirees currently pay for TRICARE Prime. We agree with the Commission, however, that the availability of additional benefits and automatic coverage of adult 

children up to age 26 at no additional premium may partly close the gap between what retirees currently pay under TRICARE and what they would pay 

under TRICARE Choice when fully implemented. 

• TRICARE Choice’s Catastrophic Cap is Unspecified: A key advantage of the 

current TRICARE plan for retirees is a low catastrophic cap. By limiting annual 

out-of-pocket expenses to $3,000 per family, the current TRICARE benefit limits 

the financial risk military retiree families face from health care costs. The catastrophic cap amount for TRICARE Choice plans is not specified, so we have no 

way of assessing the financial risk retiree families would face under the 

MCRMC’s proposal. We must have details on this element of TRICARE Choice 

to complete our evaluation, but it’s important to acknowledge that DOD has 

proposed increases to the retiree catastrophic cap under the current system. 

As we have stated, we believe pressures on the current system will result in increased beneficiary costs and so understand an accurate forward-looking ‘‘apples to 

apples’’ comparison between TRICARE as it might be in 10 years vs. TRICARE 

Choice does not exist. We do appreciate the Commission recognized the need for a 

15-year transition to the 20 percent cost share ceiling for working-age retirees and 

that they recognized the government’s responsibility to absorb a higher level of the 

premium costs for military retirees than for civilians in recognition of their military 

service. However, current retirees and currently serving career military members 

developed an understanding of the value of their retirement health care benefit 

based on over 2 decades of TRICARE history. Just as higher out-of-pocket costs associated with TRICARE Choice would reduce overall active duty compensation if not 

offset by BAHC, even higher premium and out-of-pocket costs for non-Medicare eligible retirees reduces the value of the earned retirement benefit package. While we 

accept the inevitability working age retirees will pay more for their health care in 

the future, we believe TRICARE Choice, as proposed by the Commission, may go 

too far in undercutting the earned retirement benefit. 

Wounded Warriors/Medically Retired Servicemembers 

The MCRMC’s TRICARE Choice proposal makes no mention of wounded warriors 

or medically retired servicemembers. This omission must be addressed before we 

can fully assess TRICARE Choice. We do have two main concerns regarding 

TRICARE Choice for wounded warriors as it is currently presented: 

• Out-of-pocket Expenses: Currently, non-Medicare eligible medically retired 

servicemembers receive the same TRICARE benefit as all other non-Medicare 

eligible retirees. We believe any changes to the TRICARE benefit must maintain minimal out-of-pocket costs for medically retired servicemembers. The 

MCRMC’s TRICARE Choice proposal, with its high out-of-pocket expenses for 

non-Medicare eligible retirees, is not an acceptable benefit for wounded warriors 

and their families. We also need more information on how TRICARE Choice 

plans will work for the families of retired wounded warriors and other military 

retirees who may receive some or all of their care from the VA or be eligible 

for Medicare Part B because of their injuries. 

• Severely Injured Wounded Warriors: We are disappointed that the MCRMC 

proposal does not address out-of-pocket expenses the severely wounded currently face to maintain their medical coverage. Specifically, if an individual is 

783 

so severely injured that he/she qualifies for Social Security Disability Insurance 

for 2 years, he automatically qualifies for Medicare Part B. Qualified individuals MUST take Part B in order to maintain TRICARE status. If an individual 

fails to enroll in Part B, he LOSES both TRICARE and Medicare coverage and 

must wait an extensive period of time and pay significant penalties to re-enroll. 

For many severely injured individuals, this means they lose all access to their 

previous healthcare providers and/or options for other healthcare needs. The 

current cost for Part B coverage is approximately $110/month. This amount increases regularly. 

Our Association requests more information from the Commission on how 

TRICARE Choice will be configured for medically retired servicemembers and their 

families. We also ask the Commission to consider the problems the severely wounded face in accessing their health care benefit as part of their modernization proposal. 

The MCRMC must be more transparent and detailed about the potential out-ofpocket costs faced by all beneficiary categories. 

• The BAHC calculation must be modified to ensure it covers out-of-pocket expenses for an excellent baseline plan for all active duty families regardless of 

family size. 

• TRICARE Choice’s out-of-pocket expenses for non-Medicare eligible retirees 

must not reduce the value of the earned retirement benefit package. 

• Finally, consideration must be given to how TRICARE Choice will work for 

medically retired servicemembers to ensure minimal out-of-pocket costs for 

wounded warriors and their families. 

3. Concerns Regarding TRICARE Choice Implementation Details 

Many TRICARE Choice implementation details are lacking in the Commission’s 

proposal. We have identified several issues, which must be addressed to ensure successful implementation of a complex program: 

• Ensuring Coverage Meets Unique Military Family Needs: We appreciate that 

the MCRMC proposal says DOD should provide OPM with recommendations on 

the unique needs of the eligible Uniform Services beneficiary population. However, we would like assurances on some specifics: 

- For military families who move frequently, a variety of high quality national plans is critical. Selecting a national plan will be the only way for 

mobile families to avoid a deductible and catastrophic cap reset with each 

move. National plans will also maintain coverage consistency and lessen 

disruption and hassle during geographic moves. 

- It is important coverage DOD has already deemed necessary and appropriate for military beneficiaries, via inclusion in the current TRICARE benefit, is part of TRICARE Choice commercial plans. For instance, TRICARE 

covers Applied Behavior Analysis (ABA) for beneficiaries regardless of location, whereas FEHB plans only cover ABA in States that mandate ABA 

coverage. ABA coverage that varies from State to State is not suitable for 

a mobile military population. Similarly, TRICARE offers beneficiaries access to behavioral health care without referral or prior authorization. We 

would expect similar accommodations for behavioral health care access in 

TRICARE Choice Plans. 

- It is essential commercial plans and BAHC policies take into account the 

unique situations military families face. Many families geo-bach—that is, 

the servicemember lives in a different location from his/her family members 

due to the spouse’s career, kids’ education or other considerations. Other 

families relocate during lengthy servicemember deployments. Policies must 

be in place to ensure these unique situations do not put military families 

at risk for higher costs or coverage lapses. 

• Beneficiary Education and Communication: TRICARE Choice would require 

an unprecedented level of beneficiary communication and education. 

- Under TRICARE Choice, servicemembers continue to receive care through 

the military, but the spouse and family members are covered under the new 

health plans. Therefore, the servicemember AND spouse must be educated 

on how to select the best plan for their family. This includes the basics of 

commercial health insurance (e.g., definitions of premium, deductible, cost 

share, co-pay), tools to help select the best plan for the family, and scenario 

planning to help families understand the trade-offs and potential out-ofpocket expenses associated with various options. 

- This education process must be ongoing, as many families will face new 

health plan choices every 2–3 years with PCS moves. They will not only 

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need refreshers on the basics of selecting the right health plan, but they 

will need information on how coverage varies based on location, to include 

what care will be available through the MTFs as network providers in the 

civilian plans. MTFs must be involved in the education process. 

• Financial Planning Guidance: BAHC paid directly to servicemembers will be 

difficult to manage for some. It is critical that financial education prompts 

servicemembers to create a plan for BAHC that helps them apply the allowance 

to out-of-pocket medical expenses versus other discretionary spending. The success of the Basic Allowance for Housing has been cited as evidence 

servicemembers can successfully direct an allowance to its intended purpose. 

However, unlike housing expenses that are stable and regularly recurring, medical bills are highly variable in amount and timing, requiring more sophisticated 

budgeting skills. 

Given the role spouses play in health care decisions and family finances, it is critical that education and communication programs and resources are designed to accommodate spouses as well as servicemembers. Child care and evening/weekend options are critical factors to achieve spouse participation in any in-person classes. If 

the servicemember is responsible for selecting a plan and that servicemember is deployed, how will the spouse—who in all likelihood will be the person managing the 

family’s use of the health plan—be involved in the decision on which plan to choose? 

While all Americans face a learning curve when making health insurance decisions, it is imperative servicemembers and their families are prepared to successfully navigate TRICARE Choice’s commercial health plan options. Military families 

lead complicated, stressful lives. We cannot set them up for additional challenges 

related to health care and finances. Additionally, the impact of poor choices, including limited access to health care or financial problems associated with unpaid medical bills, has the potential to reverberate beyond the individual family and negatively impact military readiness. Providing effective education on health care choices 

for servicemembers and their spouses while they on active duty will ultimately benefit them as they make the transition to civilian life after their service. 

CONCLUDING THOUGHTS ON THE MCRMC’S TRICARE CHOICE PROPOSAL

Recent media coverage and Congressional hearings, together with the legislative 

language included in the report, imply the MCRMC report should be viewed as a 

turnkey plan, ready for implementation. Given the number of unanswered questions 

regarding the health care proposal, we view the TRICARE Choice proposal as a first 

step in a needed process toward change. While we believe the MCRMC health care 

concept has merit and we support the idea of moving military families to high quality commercial health plans, the MCRMC proposal requires much more analysis and 

concept optimization before it could be implemented. The statute authorizing 

TRICARE Choice must also set clear baseline standards that ensure families have 

access to high quality plans that meet their unique needs at the best possible cost. 

Furthermore, change of this magnitude will take some time to implement. In the 

meantime, we encourage Congress and DOD to seek solutions to the many problems 

described by the MCRMC report as they relate to military family health care. These 

issues deserve to be addressed without waiting for wholesale change. Ensuring the 

current system is still held accountable, while developing ideas for the future is a 

very important way Congress and the DOD can build and repair trust with the families who depend on their military health care benefit. 

MCRMC RECOMMENDATIONS WE SUPPORT

We appreciate the opportunity to comment on other recommendations from the 

Commission report that affect the quality of life of military families. 

Recommendation 7: Improve Support for Servicemembers Dependents with Special Needs 

EXPAND BENEFITS AVAILABLE THROUGH ECHO

The Commission’s proposal to improve support for military families with special 

needs family members by increasing benefits available through the Extended Care 

Health Option (ECHO) program is a critical step in easing challenges faced by these 

families. Our Association supports this proposal without reservation. 

Additionally, we ask: (1) Congress consider extending ECHO eligibility to families 

for 1 year after retirement or separation to ensure they have access to much-needed 

care and services for their special needs family member, and (2) DOD review procedures for accessing care through ECHO to remove unnecessary requirements and 

ease the process for vulnerable military families. 

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2The Department of Defense Report to Congress on Participation in the Extended Care 

Health Option (ECHO), May 30, 2013, available at http://tricare.mil/tma/congressionalinformation/downloads/ExpansionEvaluationEffectivenessTRICAREProgramECHO.pdf 

Caring for children with complex medical needs can be incredibly expensive. Such 

children often require nutritional support, incontinence supplies, and other costly 

items vital to their care but non-medical in nature and therefore not covered by 

some insurance plans, including TRICARE. Most families in this situation ultimately turn to State Medicaid programs, which provide this kind of assistance 

through waiver programs to individuals whose families do not qualify based on income. Because the demand for these services far outstrips the supply, lengthy waiting lists to receive assistance are common in most States. For that reason, these 

services are often out of reach for a military family who must relocate every 2 to 

3 years. A military family who places their special needs child on a Medicaid waiver 

waiting list must start again at the bottom of the waiting list whenever they move 

to a new State. 

The ECHO program was designed in part to address this imbalance, by allowing 

military families with a special needs child or spouse to access non-medical services 

not covered under TRICARE. According to TRICARE’s website, benefits covered 

under ECHO include ‘‘training, rehabilitation, special education, assistive technology devices, institutional care in private nonprofit, public and State institutions/ 

facilities and, if appropriate, transportation to and from such institutions/facilities, 

home health care and respite care for the primary caregiver of the ECHO-registered 

beneficiary.’’ However, in practice military families have found it difficult to obtain 

services through the program. 

This reality was reflected in TRICARE’s May 30, 2013 report, ‘‘The Department 

of Defense Report to Congress on Participation in the Extended Care Health Option 

(ECHO),’’ detailing military families’ usage of the ECHO benefit. In 2012, DOD reported 99 percent of funds expended through the ECHO program were spent on Applied Behavioral Analysis (ABA) therapy and ECHO Home Health Care (EHHC). 2

Although these services are important and popular with special needs families, it 

is impossible to see this statistic and not wonder why families are not accessing the 

long list of other services ostensibly available to them under ECHO. 

In our Association’s view, there are two reasons why special needs military families are not utilizing the ECHO program. First, as the Commission also noted, 

ECHO simply does not cover many of the products and services needed by special 

needs families. For example, many families need larger than normal diapers for 

their disabled children. ECHO deems diapers a convenience item and will not pay 

for them, although State Medicaid programs regularly pay for incontinence supplies. 

Aligning ECHO benefits more closely with State Medicaid programs, as the Commission recommends, would provide much needed support to special needs military 

families. 

ECHO services are also under-utilized due to the procedural hurdles TRICARE 

has put in the path of those seeking benefits. An example is the policy regarding 

respite care. For families with special needs children, the time away afforded by respite care is vital. Access to quality respite care allows families to run errands, spend 

time with other children, and simply recharge. Respite care is ostensibly available 

through the ECHO program, but TRICARE policies limit its utility. Specifically, 

TRICARE requires families use another service through ECHO in any month that 

respite care is also provided. We are grateful the Commission recommended eliminating this requirement, which creates an artificial barrier preventing families from 

accessing needed care. 

We have heard reports that special needs families may soon find their access to 

respite care limited as the military Services eliminate or reduce respite care they 

provide through the Exceptional Family Member Program (EFMP). Each Service operates its own EFMP program designed to assist special needs families with assignment coordination, referral and family support. As part of their family support, the 

Services’ EFMP programs provide respite care for military families with eligible special needs family members. We have been told that the Army intends to eliminate 

this program and the other Services may soon follow suit. Given this cutback, it is 

even more important to ensure families can access much-needed respite care using 

their ECHO benefit. 

NEED FOR TRANSITIONAL CARE

We also note the ECHO program is only available to currently serving military 

families. Families who transition out of the military, whether through retirement 

or separation, immediately lose eligibility for ECHO benefits. This abrupt cutoff 

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3 2013 Demographics Profile of the Military Community. Rep. Office of the Deputy Assistant 

Secretary of Defense (Military Community and Family Policy), http://www.militaryonesource.mil/ 

12038/MOS/Reports/2013-Demographics-Report.pdf 

places an undue burden on families who are already coping with the stress of caring 

for a special needs family member. While families may eventually be able to access 

services through State Medicaid programs, they often face long waiting lists, which 

leads either to gaps in treatment or financial hardship for a family trying to pay 

for needed care. As more servicemembers and families transition out of the military, 

this problem will become more widespread. To ease the hardship for families in this 

situation, we recommend ECHO eligibility be extended for 1 year following separation or retirement to provide more time for families to obtain services in their communities or through employer-sponsored insurance. 

IMPEDIMENTS TO ACCESSING ECHO

Our Association has identified other TRICARE policies that inhibit families’ use 

of ECHO. TRICARE mandates families first use public assistance where available 

before accessing services through ECHO and requires families to submit a Public 

Facility Use Certificate explaining why public assistance is unavailable or insufficient when requesting ECHO benefits. Families seeking a respite care provider 

must find one who meets the strict requirements for such providers set by ECHO. 

These conditions can be confusing for families already coping with the stress of caring for a disabled family member. We suggest Congress review this and other requirements associated with accessing benefits through ECHO as you evaluate the 

MCRMC proposal, with the goal of streamlining the process for special needs military families. 

Recommendation 10: Improve Access to Child Care on Military Installations 

MILITARY FAMILIES NEED AFFORDABLE, ACCESSIBLE CHILD CARE WHERE THEY LIVE

We are gratified the Commission recognized the importance of high quality, affordable child care to military families. Their recommendation to exempt child care 

providers from furloughs and hiring freezes is a common sense solution to an issue 

that has been a source of anxiety for families during recent budget crises. We also 

appreciate the Commission’s concern about the lengthy waiting lists families often 

confront when seeking care at installation Child Development Centers (CDCs) and 

agree that funds should be available to expand or modify facilities to increase the 

number of child care spaces. However, we also note a large number of military families—more than 70 percent—do not reside on an installation. For these families, onbase CDCs may not be the best solution. 

According to the 2013 Demographics Profile of the Military Community, more 

than 40 percent of servicemembers have children. Of the nearly two million military-connected children, the largest cohort—almost 38 percent—is under age five.3

Like all working parents, servicemembers with young children need access to affordable child care in order to do their jobs. However, the military lifestyle comes with 

unique challenges and complications for families. Servicemembers rarely live near 

extended family that might be able to assist with child care. Their jobs frequently 

demand long hours, including duty overnight. They are often stationed in communities where child care is expensive or unavailable. 

For all of these reasons, many military families rely on child care provided 

through their installation (either CDCs or in Family Child Care (FCC) homes). Yet, 

the demand for child care exceeds the supply. Statistics cited by the Commission 

are supported by the experiences military families share with us: in many locations, 

the waiting list for care is so long that the CDC is essentially not an option for 

many families. The problem is exacerbated by the frequent moves associated with 

military life. Following each Permanent Change of Station (PCS) move, a military 

family must restart the process of looking for care in their new community and frequently find themselves again at the bottom of the waiting list. 

There are three factors contributing to the long waiting lists at installation CDCs: 

lack of physical space, staffing shortages, and wait list management. We support the 

Commission’s recommendation that Congress reestablish the authority to use operating funds to construct or renovate CDCs. Streamlining the process to build new 

facilities and/or renovate existing ones could provide the physical space to ensure 

that more military families can access installation child care. Although, we wonder 

where funding to operate these new facilities will be found. 

We also welcome the Commission’s simple, common-sense recommendation to exempt child care providers from hiring freezes and furloughs. High rates of employee 

turnover are not uncommon at child care centers, both at DOD facilities and in the 

787 

civilian world. However, high turnover combined with a hiring freeze can make it 

impossible for CDC directors to staff their facilities appropriately. We also heard 

from many families in 2013 concerned about how they would find child care if CDC 

employees were furloughed due to sequestration. No military family should have to 

worry about losing needed child care because of a budget crisis. 

We agree with the Commission that CDCs should improve the procedures they 

use to manage their waiting lists. Currently lists are unreliable, making it difficult 

for families to know whether it is worth waiting for a space to open at the CDC 

or if they should seek care elsewhere. At the same time, if the Services do not have 

reliable information about the length of their waiting lists it is impossible to ascertain if they are meeting their own standards or allocating resources appropriately. 

As stated above, less than 30 percent of military families live on installations, 

which can make installation child care an inconvenient choice. Many families prefer 

to seek care near their homes or close to a spouse’s job. However, families seeking 

child care in civilian communities often find the costs are extremely high, much 

more so than on-base care. For those families, the fee assistance program offered 

by the Services is invaluable, allowing them to afford quality child care in their communities. We urge the Services to continue funding this program and to expand eligibility so families are assured of finding quality child care regardless of their location. 

Recommendation 13: Ensure Servicemembers Receive Financial Assistance to 

Cover Nutritional Needs by Providing Them Cost-Effective Supplemental Benefits 

MEETING MILITARY FAMILIES’ NUTRITIONAL NEEDS

We are pleased the Commission chose to address the issue of financial assistance 

for low-income military families. We have long recognized that, while the majority 

of military families are able to make ends meet, some families struggle financially. 

This is especially true of junior enlisted servicemembers with larger families. The 

Family Subsistence Supplemental Allowance (FSSA) was designed to assist those 

families by increasing their household income until it reaches 130 percent of the 

Federal poverty level. However, we agree with the Commission that military families needing nutrition support are better off seeking this aid through the Department of Agriculture (USDA) Supplemental Nutrition Assistance Program (SNAP), 

both because it is often easier to qualify for SNAP and because that program provides a higher benefit. For this reason, we agree with the Commission that the 

FSSA program should sunset in the United States, although the program must be 

maintained overseas. We also agree that more information about the number of 

military families relying on SNAP is needed. In addition, we also ask Congress to 

evaluate available nutritional support programs to determine if they are adequately 

meeting the needs of low-income military families, whatever their location. 

The Commission reports just 285 servicemembers received FSSA benefits during 

fiscal year 2013. At the same time, the number of families receiving benefits 

through SNAP was much higher, according to figures cited by the Commission 

based on estimates by the U.S. Department of Agriculture. We agree the low number of families seeking aid through FSSA may be due in part to the application process, which requires the approval of the servicemember’s commanding officer. The 

anonymity of applying for food stamps and not having your command know about 

your financial straits may appeal more to the servicemember. 

While SNAP is indeed a significant help to many military families, we note the 

program’s inclusion of Basic Allowance for Housing (BAH) paradoxically means families living in high cost locations do not qualify for assistance while families of similar size and servicemember rank do in places with lower housing costs. Because 

BAH only covers the cost of rent and utilities, it does not help families with the 

higher cost of food, gasoline, and other necessities in areas such as Hawaii, southern 

California, and Washington, DC. We ask Congress to evaluate the SNAP program 

to see if this disparity can be addressed in a way to better meet the needs of lowincome military families. We agree DOD needs better visibility over data that can 

provide information on families on the financial edge who would benefit from food 

support programs. They must analyze the data to determine what other assistance 

might be needed to support these families. 

Recommendation 14: Expand Space-Available travel to more families of 

Servicemembers 

SUPPORTING MILITARY FAMILIES DURING DEPLOYMENTS

We appreciate that the Commission listened to military families in the town halls 

by responding to their requests for greater access to Space-Available travel during 

788 

4 Chandra, Anita. Views from the Homefront: The Experience of Youth and Spouses from Military Families. Rep. RAND Corporation, http://www.rand.org/pubs/technical—reports/TR913.html 

separations. We believe that the ability to change this policy already exists, but 

raising the issue in the Commission report may bring it higher visibility. 

Recommendation 15: Measure how the Challenges of Military Life Affect Children’s School Work by Implementing a National Military Dependent Student Identifier 

TRACKING MILITARY CHILDREN’S EDUCATION PROGRESS

For years, our Association has advocated for creating a national student identifier 

for military-connected children in public schools. While we have been pleased to see 

several States begin tracking military students in their classrooms, we agree with 

the Commission that in order to obtain reliable, consistent data this initiative 

should be implemented at the Federal level. A military student identifier will allow 

researchers and policy makers to better understand the impact of military life on 

academic achievement and enable them to direct resources more effectively to support military children. 

Our own research has shown that experiencing the repeated, prolonged deployment of a parent can lead military children to show symptoms of stress and anxiety 

at higher rates than their civilian counterparts.4 Military children are also more 

mobile than other students, moving an average of six to nine times between kindergarten and their senior year. There is no data on military students’ attendance, 

graduation rates, performance on standardized tests or other commonly measured 

indicators of academic achievement. Creating a report-only subgroup of children who 

have parents or guardians serving on active duty in the seven Uniformed Services, 

as the Commission suggests, would fill this gap and allow policy makers to more 

effectively direct programs and services to support military students. 

RECOMMENDATIONS WE CANNOT SUPPORT

While we support many of the Commission’s recommendations, several of their 

proposals concern us. We cannot support the Commission’s recommendation on the 

Survivor Benefit Plan, as it does nothing to eliminate the SBP–DIC offset for today’s 

survivors and imposes additional costs on some of the most vulnerable military families. We believe Congress should preserve the full Post 9–11 GI Bill for military 

families whose servicemembers have already transferred the benefit. 

Recommendation 2: Provide more options for servicemembers to protect their pay 

for survivors 

WE NEED THE DIC OFFSET ELIMINATED FOR TODAY’S SURVIVING SPOUSES

We appreciate the Commission listening to the concerns of retirees and surviving 

spouses about the inequity of the Department of Veterans Affairs Dependency and 

Indemnity Compensation (DIC) offset to the Survivor Benefit Plan (SBP) annuity. 

However, we cannot support the recommendation put forth by the Commission giving retired servicemembers the option of funding the elimination of the offset by 

paying a higher premium. 

Our Association has long believed the benefit change that will provide the most 

significant long-term advantage to the financial security of all surviving families 

would be to end the Dependency and Indemnity Compensation (DIC) offset to the 

Survivor Benefit Plan (SBP). Although we know there is a significant price tag associated with this change, ending this offset would correct an inequity that has existed 

for many years. Each payment serves a different purpose. The DIC is a special indemnity (compensation or insurance) payment paid by the VA to the survivor when 

the servicemember’s service causes his or her death. The SBP annuity, paid by 

DOD, reflects the longevity of the service of the military member. It is ordinarily 

calculated at 55 percent of retired pay. Military retirees who elect SBP pay a portion of their retired pay to ensure their family has a guaranteed income should the 

retiree die. If that retiree dies due to a service-connected disability, their survivor 

becomes eligible for DIC. 

We have concerns about the Commission’s proposed changes to the SBP premium 

structure. It would leave the 60,000 surviving widows/widowers who currently absorb the offset in the same situation they are now—continuing to have their SBP 

annuity offset by their DIC payment. We need Congress to address the elimination 

of the offset to those who pay the premium and don’t receive their complete benefit 

now! Only 8 percent (4,580) of SBP/DIC recipients are active duty death surviving 

789 

5Department of Defense Office of the actuary . . . 09–30–14 

spouses. Over 57,500 are the surviving spouses of retirees who have paid SBP premiums subsidized by DOD.5

As stated, the SBP annuity and the DIC annuity are paid for two separate purposes. The retiring servicemember chooses to ensure the financial security of his/ 

her surviving spouse by enrolling in the Survivor Benefit Plan. There is a chance 

the retiree may die of a service-connected disability. We maintain the payment of 

the DIC is the responsibility of the VA regardless of what other insurance or annuity the survivor may be eligible for. No other survivors of Federal employees (former 

military members) are subject to the offset when they receive both a survivor annuity and the DIC. Surviving children receiving SBP are not subject to the offset. 

Since the retiree already pays a premium for SBP, why should he/she also subsidize 

the payment of the VA DIC annuity? 

The Commission notes in its report the increased election of SBP by retired 

servicemembers, comparing an election rate of 52 percent in 1993 to an election rate 

of 79 percent in 2013. This increase is due in great part to the elimination of the 

Social Security offset authorized by the NDAA for Fiscal Year 2005 (Public Law 

108–375) and phased in over a 3-year period ending in 2008. Increasing the SBP 

premium to 11.25 percent would discourage retirees from signing up for the higher 

coverage unless they were severely disabled and had no other options. Those with 

severe disabilities who have been medically retired may be least financially able to 

pay higher premiums even though their survivors would have the greatest stake in 

having the offset eliminated. 

We are especially concerned the Commission did not address how the survivors 

of those who die on active duty would be affected if this recommendation would be 

enacted. Would they continue to experience the DIC offset to SBP? For many of the 

survivors of junior servicemembers, the DIC completely offsets the SBP annuity. We 

have questions where the funding would come from to fully fund both the DIC and 

SBP benefits for these survivors? How would the proposed changes to the retirement 

system figure into this? 

We are encouraged at the suggestions the Commission has made on providing an 

analysis of the costs and benefits of the options to the retiring servicemember and 

their spouse. Again, it is important to have all the information to make an informed 

decision on retirement and survivor plans. But, we cannot support asking the retiree to fund both the unsubsidized portion of the SBP and the VA provided DIC 

payment on the chance he/she may die of a service-connected disability. 

Recommendation 11: Safeguard education benefits for Servicemembers by reducing redundancy and ensuring the fiscal sustainability of education programs. 

HONOR THE CONTRACT WITH THOSE WHO HAVE ALREADY TRANSFERRED THE BENEFIT

As anyone who has pursued higher education can attest, tuition is only a fraction 

of the cost of attending college. Living expenses, books and fees add significantly 

to students’ costs. Recognizing this reality, Congress included a living stipend in the 

Post 9–11 GI Bill. This valuable benefit has allowed many servicemembers to complete their educations and launch careers. Other servicemembers judge the best 

choice for them and their families is to transfer the benefit to a dependent spouse 

of child. Servicemembers incur an additional service obligation with the understanding the entire benefit—to include the living stipend—will transfer to their designated recipient. 

In the Commission’s view, it is time to evaluate the effectiveness of transferability 

of the Post 9–11 GI Bill on retention and better align the benefit to meet retention 

goals. However, they fail to acknowledge many servicemembers have already transferred the benefit—and met their additional service obligation—but their dependents have not yet had the opportunity to use their earned GI Bill benefits. 

Servicemembers with young children accepted an additional service obligation with 

the understanding their families would have full use of the Post 9–11 GI Bill benefit. They made financial arrangements and savings plans based on those provisions. They made difficult choices and possibly passed on other opportunities to ensure their earned benefit became one their dependents could use. These 

servicemembers honored their part of the contract. Now we ask Congress to do the 

same and preserve the full Post 9–11 GI Bill for those military families who have 

already transferred the benefit. 

It is worth noting servicemembers who transfer their Post 9–11 GI Bill benefits 

and fail to meet the required service obligation are required to repay the benefit. 

The VA recognizes in transferring the benefit the servicemember has entered into 

a contract and must meet the terms of the agreement. Should servicemembers exVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00795 Fmt 6601 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
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pect any less? We acknowledge the Post 9–11 GI Bill is an exceptionally valuable 

benefit. In a time of fiscal constraint, Congress may have to make difficult decisions 

regarding its future viability. However, the contracts of those who have already 

earned the benefit must be honored. 

RECOMMENDATIONS REQUIRING FURTHER STUDY

We believe several MCRMC recommendations have promising elements, but will 

require more study and further questions in order for the Commission to answer 

our concerns. The proposals for the new retirement system and changes in health 

care call for servicemembers and their families to make responsible choices that will 

require a robust financial training program. We wonder how DOD and the Services 

will accomplish this financial training for both the servicemember and his/her 

spouse. We also have concerns about the proposal to merge commissary and Exchange operations and about the effect this change would have on the military resale system. We will seek more information on how these proposals could be implemented and encourage Congress to do the same. 

Recommendation 1: Help more servicemembers 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. 

TAKING RESPONSIBILITY FOR YOUR OWN RETIREMENT

As advocates for the entire military family community, our Association is keenly 

aware of the inequities inherent in the current retirement system. The majority of 

the families we serve remain in the military for fewer than 20 years and thus leave 

with little or no retirement savings. Recognizing this disparity, we support the Commission’s recommendation to create an employer match to servicemember Thrift 

Savings Plan (TSP) accounts, which would create a valuable, transportable retirement benefit for servicemembers regardless of how long they spend in the military. 

At the same time, we strongly believe in the value of the defined benefit plan, both 

as a retention tool and as a vital element in retirees’ financial well-being. We commend the Commission for creating a hybrid system that would maintain the majority of the defined benefit plan along with a defined contribution. 

While we would like to support the recommendation fully, we do have concerns. 

The proposal shifts both risk and responsibility for retirement savings from the government to the individual servicemember. In addition, the recommendation would 

lead to a significant income reduction for future working-age retirees compared to 

the current plan. We ask Congress to consider the following issues prior to making 

any decision about retirement changes. 

THE ‘‘BLENDED’’ RETIREMENT SYSTEM: QUESTIONS AND CONCERNS

• Increased responsibility for retirement while purchasing power is eroded: 

The value of the TSP is tied directly to the level of individual contributions. 

If servicemembers choose not to participate, or make smaller contributions, 

the value of the benefit is diminished. Currently 40 percent of 

servicemembers choose to participate in TSP even though DOD provides no 

match. While under the proposal enrollment in the plan would be automatic, servicemembers would have the choice not to participate. To their 

credit, the Commission paired this recommendation with a call for improvements in servicemember financial literacy programs, arguing once servicemembers understand the value of saving for retirement, especially with an 

employer match, there would be great incentive to participate. However, the 

reality is military families have experienced a series of cuts to their purchasing power in recent years, with higher out-of-pocket costs for housing 

and health care and pay raises that do not keep pace with inflation. TSP 

contributions will take another bite out of their disposable income. How 

many families will simply feel they cannot afford to save for retirement? 

• Higher risk for servicemembers and families: We are also concerned 

about the risk associated with a defined contribution plan, which we feel 

the Commission did not adequately address. Like all market-based funds, 

TSP accounts carry the risk of investment losses. In addition, a high rate 

of inflation would effectively diminish the value of TSP savings. Under this 

plan, the TSP would represent a significant share of retirement savings for 

a person who spends 20 or more years in the military, so the proposal imposes greater risk on those who stay for a full career. If there is a downturn 

in the market, retirees face losing a large share of their retirement savings. 

791 

6Source: NMFA Transition Survey, May 2014 

While some of that risk could be offset by a robust financial literacy program, risk is an intrinsic element of any defined contribution system. 

• Reduced income for working age retirees: Our most pressing concern is 

the financial well-being of future working age retirees, who would face a 

significantly reduced income under this plan relative to the current one. According to the Commission, future retirees’ pensions would be 20 percent 

less than provided under the current system. While the loss would be offset 

by the increased value of the TSP, servicemembers would not be able to 

begin drawing from that until they reached age 591⁄2. How much of a burden will this reduced income place on future working-age retirees? We also 

wonder what will happen to the Survivor Benefit Plan under this scenario. 

Will prospective retirees and their spouses feel they cannot afford to participate in SBP if their retirement income is reduced? Will Survivor Benefit 

Plan premiums and benefits be adjusted given the smaller retirement 

amounts and the availability of the Thrift Savings Plan as an asset for the 

survivor? 

As more servicemembers leave the military due to downsizing, our Association 

has increasingly focused on the issues families face as they transition to civilian life. 

In 2014, we surveyed military spouses who recently transitioned or were preparing 

to do so soon. What we have heard is that separating or retiring from the military 

is a difficult transition for many military families, often accompanied by significant 

financial hardship. 

• ‘‘Fortunately, we have been cautious about our spending and were financially prepared to live on retired pay if necessary which proved to be true.’’ 

• ‘‘Save every penny you can. Get out of debt before you separate. Brace 

yourself—it is harder than you can imagine. We are out of debt and have 

some savings, but my husband has been job hunting for 7 months.’’ 

• ‘‘I feel after 15 years in a career, he is starting from scratch and at the 

bottom of the barrel in the civilian workforce. I’m scared we’ll be trying to 

support a family on minimum wage because nobody knows how to use an 

0369 (military specialty designation) in the real world’’ 6

The prevailing view of the working-age retiree who moves seamlessly into civilian 

employment is frequently far from reality. Rather, it is not uncommon for workingage retirees to face a lengthy period of unemployment or underemployment, especially if their military skills do not translate directly into a civilian career. We are 

concerned that a reduced retirement annuity will add to the financial stress families 

commonly face during this transition. 

The Commission’s approach to this problem, offering servicemembers the option 

of a lump sum payout in exchange for a reduced retirement annuity, is not an acceptable solution for the long-term well-being of the family. While the Commission 

does not detail the amount of the proposed payout or the how much would be cut 

from the annuity, similar proposals in the past have been detrimental to servicemembers, providing much less total retirement compensation. This is especially true 

if the amount of the lump sum offered does not increase with inflation. Military retirees should not have to face a long-term financial disadvantage in order to address 

a short-term financial shortfall. 

A 2014 RAND report, Toward Meaningful Military Compensation Reform, offered 

a proposal that would partially offset the reduced benefits for working-age retirees 

in the MCRMC plan. In its report, RAND suggests implementing a transition pay 

for servicemembers leaving after 20 or more years of service. Including a transition 

payment for retiring servicemembers would address two of our concerns by helping 

families through the financial challenges associated with transition and by offsetting 

some of the income lost by working-age retirees under a reduced defined benefit 

plan. In our view, this proposal merits further study for all transitioning servicemembers receiving an honorable discharge. 

We also note that the Commission does not address medical retirees in its proposal on retirement. How would these most vulnerable military families cope with 

a reduced annuity? 

We recognize the majority of servicemembers currently leave the service with no 

employer-provided retirement benefit and we commend the Commission for attempting to remedy this inequity while preserving most of the defined benefit plan. While 

we would prefer the annuity remain at its current level, we acknowledge that may 

not be feasible while also providing an employer match to the TSP. While we support the proposal in principle, we are concerned about the shift of risk and responsibility to servicemembers and their families and about the impact on the financial 

792 

7http://www.usfinancialcapability.org/downloads/NFCS—2012—Report—Military—Findings.pdf, page 28. 

well-being of working-age and medical retirees. We believe there are steps Congress 

and DOD could take to mitigate these drawbacks—such as including a transition 

pay for servicemembers—that would allow us to more wholeheartedly support the 

proposal. 

Recommendation 3: Promote servicemembers’ financial literacy by implementing 

a more robust financial and health benefit training program. 

MORE TRAINING IS NECESSARY TO MAKE GOOD FINANCIAL CHOICES

We support the proposal to implement a more robust financial and health benefit 

training program. However, we question how some of the recommendations will 

truly improve financial literacy and must emphasize the importance of extending 

these training programs to the entire military family, particularly the spouse. 

The MCRMC concluded that existing financial literacy training programs do not 

adequately educate servicemembers. Yet, it maintains investing money in growing 

existing programs, with only slight changes, would better educate servicemembers. 

We think it is important to note in many areas, servicemembers are already miles 

ahead of their civilian counterparts in financial knowledge and management practices. 

According to a survey done by FINRA Investor Education Foundation in 2012, 80 

percent of servicemembers believe they are good at dealing with day-to-day financial 

matters.7 When compared to their civilian counterparts in age and demographic, 

servicemembers were more likely to have an auto loan, carry a credit card balance, 

have a student loan, and a mortgage, but they were also less likely to use non-bank 

borrowing and have unpaid medical bills. Servicemembers spent less than their income and had less difficulty covering their expenses than their civilian counterparts. 

They are more likely to save or have a retirement account. However, they were 

more likely to be underwater in their mortgage or have declared bankruptcy. These 

statistics bear more reflection and require adaptations in financial literacy programs 

that are specific to their military lifestyle challenges, like understanding the risk 

of investments in real estate when unable to homestead in one place. 

It is absolutely critical changes in financial literacy focus on educating the entire 

military family. Spouses are often left in charge of the big financial decisions as 

they are more consistently present on the home front. Financial wellness and health 

care are often not executed by the servicemember. Mismanagement can result in far 

more devastating repercussions than a loss of security clearance: we have seen surprising use of food banks by military families; financial issues are a leading culprit 

in divorce and military suicide events; and unsurprisingly, morale is dropping after 

14 years of war. The Commission’s proposal must be considered in the light of how 

it can be applied to the entire family unit to best serve its purpose. 

In considering improvements to financial literacy and health benefit training programs, opportunities to reach family members must embrace the lack of mandate 

the command and service have over family members. Dependent spouses or family 

members cannot be forced or tasked into education. Programs must be interesting, 

relevant, accessible, and innovative to reach our youngest families and entice them 

to participate. Provisions should be made to ensure attending or accessing good financial literacy counseling and education resources does not cost families money 

and can be performed at times convenient to them. We think the online budget 

planner is a good example of the great potential in this recommendation. 

The MCRMC recommends several financial education ideas that are already in effect. For example, each Service provides financial management training to the servicemember at various stages in their career. They also provide financial counseling 

for servicemembers and their families through a designated staff member at every 

installation. However, in some locations, this person may be shared among various 

installations or not be committed to financial literacy as a full-time responsibility. 

The MCRMC’s proposal for more resources dedicated to financial education could expand availability of training personnel and programs. 

The MCRMC’s proposal recommends: 

1. Increasing the frequency of and strengthening financial literacy content 

2. Enhancing financial literacy content 

3. Hiring firms to provide financial literacy training 

4. Messaging from leadership 

5. Mandatory annual Defense Manpower Data Center (DMDC) surveys 

6. Strengthening partnerships with Federal and nonprofit organizations 

7. Provide an online budget planner for servicemembers 

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8Defense Manpower and Date Center, 2013 QuickCompass of Financial Issues, Question 73, 

pg. 138 

8. Restructure the LES to reflect compensation changes proposed by the MCRMC 

The Department of Defense (DOD) already provides financial counseling through 

Military OneSource confidential counseling number. Military OneSource counseling 

is also the most accessible tool currently available for spouses. DOD engages in a 

massive campaign called Military Saves to promote savings in cooperation with the 

Consumer Federation of America that includes memorandum and video messages 

from the Joint Chiefs and Enlisted Leaders encouraging servicemembers to pledge 

to save. The DOD meets quarterly with Federal and nonprofit organizations at the 

Defense Financial Readiness Roundtable to discuss programs and plans for reaching 

military families with financial literacy tools provided outside of DOD. 

In 2003, DOD formally launched a financial readiness campaign to deal with financial habits that put members’ readiness at risk, including financial management 

awareness, savings and protection against predatory practices. Since then, items 1, 

2, 4, and 6 on the MCRMC list have been implemented. DMDC has surveyed 

servicemembers about financial issues as recently as December 2013. With only 

items 3, 7, and 8 as new recommendations by the Commission, we feel this proposal 

leaves too many specifics to chance, especially with so many other moving parts in 

the health care and retirement proposals. 

We would be remiss if we omitted the other financial challenges faced by military 

families. Between 2000 and 2012, Congress approved pay raises that exceeded the 

statutory requirement and set the standard that the Basic Allowance for Housing 

(BAH) would completely cover average housing expenses at each rank. For the past 

3 years, however, DOD has proposed pay raises lower than the Employment Cost 

Index standard required in statute. DOD has also proposed a reduction in the BAH. 

The cumulative effect of these changes will severely impact the purchasing power 

of servicemembers and their families. Financial literacy to promote financial readiness will be more important to help military families’ dollars stretch further. 

The MCRMC is proposing a massive overhaul of the health care system that 

would give servicemembers the choices they have been craving, but could also result 

in out-of-pocket expenses for large families or those with extensive health care 

needs. They are also proposing a retirement system that would ask our younger and 

least equipped servicemembers to carry a bigger burden in saving without giving 

them the extra tools to do so. According to a 2013 DMDC survey, approximately 10 

percent of responding servicemembers found it difficult or very difficult to cover expenses and pay all bills.8 These 10 percent demonstrate that there is still a target 

number of servicemembers who will not just benefit, but desperately need a different kind of financial management education. 

We support the MCRMC’s recommendation to promote better financial literacy for 

servicemembers’ through a more robust financial and health training program and 

feel that it is absolutely critical for the success of their other recommendations. We 

must emphasize that implementation must include family members. We would also 

like to see more information or study on how these proposals benefit the majority 

of servicemembers who are already financially savvy, but challenged by other financial challenges of military service. 

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 SAVINGS ARE THE REASON WE SHOP AT THE COMMISSARY

We thank the Commission for affirming the commissary savings military families 

have told us they value must be protected and also affirming that DOD dollars 

should help to support the savings level. We also understand efficiencies can help 

make more solid a benefit the DOD continues to find expendable. However, we believe the implementation of the Commission’s recommendation may remove many 

protections that sustain the existence of the commissary and exchanges. We don’t 

believe there is enough data or context on the practical aspects of consolidation to 

support this proposal as written and feel it requires further study. 

• Currently, commissaries sell items at cost with a 5 percent surcharge 

that funds infrastructure investments. Operational costs are paid with appropriations. The exchanges sell items for profit, cover most of their operational costs with those profits, and provide the remainder to support Morale, Welfare, and Recreation (MWR) programs. The MCRMC proposes a 

new system that combines the exchange and the commissary systems into 

a new Defense Resale Agency (DeRA) and forces the surcharge and profit 

794 

margins to fully fund the operational costs of both systems. The exchanges 

have already been yielding smaller and smaller profit margins. How many 

efficiencies will be needed in a combined system to cover costs AND provide 

the MWR support at desired levels? 

• The recommendation states ‘‘MWR programs should continue to be funded from DeRA profits.’’ What if there is a shortfall? 

• DOD currently operates three exchange systems (NEXCOM, MCX, 

AAFES). Previous attempts to consolidate the exchanges into a single entity 

have failed due to logistical challenges and Service objections. How and why 

will it work this time? 

• More than 60 percent of the employees working at the commissary and 

exchanges are military affiliated. Nearly 30 percent are military spouses. 

We do not know how these changes would affect their status. Civilian employees at the commissary would likely be converted to Non-Appropriated 

Fund (NAF) status, possibly reducing their pay and forcing a change in 

their benefits as they switch to a new system. What logistical challenges 

in merging employees from two distinct pay and benefit structures must be 

resolved and at what cost? How will the financial security of long-time commissary employees be protected? 

• Consolidation may also remove the appropriated funds that cover second 

destination transportation costs for shipping commissary goods overseas. 

The new DeRA would be responsible for generating revenue to cover operating costs and second destination transportation at a cost of more than 

$340 million. Again, what if they can’t? What’s the protection for families 

who depend on overseas commissaries? 

It remains unclear to us what will happen if the new blended system cannot cover 

operating costs. What are the second- and third-order effects on families around the 

world for providing healthy and familiar foods and goods? How will potential reductions in MWR revenues affect the morale of our military families at home or 

servicemembers away from home? 

As in our health care discussion, we must acknowledge that commissaries are 

under tremendous financial pressures and the appropriation that supports their operations—and by extension the savings military families need—is a constant target 

for budget-cutters. We are open to discussions on how to strengthen the resale entities in a way that protects customer savings and MWR revenues. We have concerns 

that restructuring the commissary and exchanges into a single entity could diminish 

each of these benefits. But, we hope this recommendation and the additional commissary study Congress mandated in the NDAA for Fiscal Year 2015 will provide 

a starting point for action on ways to strengthen the benefits and protect the military families who depend on them. 

THE WAY AHEAD

The National Military Family Association commends the Commission for its 

thoughtful consideration of many issues important to military family quality of life, 

as well as its comprehensive approach to military compensation. We are intrigued 

by the innovative recommendations regarding health care and retirement. We hope 

our questions will help inform a much-needed discussion, not just about the proposals, but also about current benefits and ultimately what will be best for 

servicemembers and their families and the readiness of the force. We need more information on the impact of consolidating aspects of the military resale system on 

the savings military families experience at the commissary before embracing this 

recommendation. We especially thank the Commission for its recommendations regarding special needs military families, child care, nutritional support and military 

children in public schools. Their recommendations, if enacted, would address concerns that we often hear from military families and greatly enhance many families’ 

well-being. While we cannot support the Commission’s recommendations regarding 

the Survivor Benefit Plan or the Post 9–11 GI Bill, we do appreciate the efforts to 

preserve benefits important to servicemembers and their families. 

We ask Members of Congress to consider these recommendations thoughtfully as 

they respond to the budgetary challenges our Nation faces. We encourage Congress 

and DOD to seek solutions to the many issues raised by the MCRMC report and 

would welcome the opportunity to share additional input from the military families 

we serve. We must not delay the conversation on how to provide the best for our 

servicemembers and the families who stand behind them! This report gives us a 

starting point. 

Our Nation will continue to call on servicemembers to address emerging threats 

and sustain peace around the world. Any change to the system of military comVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00800 Fmt 6601 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
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pensation will have far reaching consequences and must recognize the unique challenges of military life. The government should ensure military families have the 

tools to remain ready and to support the readiness of their servicemembers. Compensation and benefits for servicemembers should reflect the singular service of 

military members and honor that service with a commensurate system of financial 

and medical support into retirement for them, their families and for their survivors. 

STATEMENT OF VADM NORBERT R. RYAN, JR., USN (RET.), 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, MILITARY OFFICERS ASSOCIATION OF AMERICA 

Admiral RYAN. Chairman Graham, Senator Gillibrand, Senator 

Tillis, and Senator McCain, thank you for this opportunity on behalf of our 390,000 members. 

This afternoon, I’d like to make just five brief points: 

First, the Military Officers Association of America (MOAA) sincerely appreciates the work that the Commission did. These are 

very professional, dedicated Americans that have done quality 

work. The proposed change to the healthcare system is welcome. 

It’s a welcome shot across the bow and should serve as a forcing 

function, I believe, for Congress to work with DOD and Secretary 

Carter to push through with the essential and much needed reforms necessary to optimize the system. I believe the one thing we 

all agree on is that the status quo is not acceptable. 

Second, it’s obvious that the Commission, Congress, MOAA, and 

my colleagues here at the table all seek the same objective: a 

healthcare delivery system that is far more integrated, efficient, effective, and sustainable than the current system. 

Third, where MOAA respectfully differs with the Commission is, 

we believe the problems that TRICARE has can be addressed in a 

systematic manner without resorting to its elimination. MOAA has 

consistently stated that the largest barrier to a truly efficient and 

highly reliable healthcare organization is the current three-service 

system. In the 1980s, Congress demanded, over the strong objection 

of Pentagon leadership, that the Services fight wars jointly. It is 

now time for Congress to insist that the Services do the same thing 

immediately in the medical-care area. Study after study has concluded that a unified medical command that has a single budget 

authority over the three military systems will yield significant cost 

savings and efficiencies that will make the military system one we 

can be proud of. 

Fourth, MOAA’s recent electronic survey of 7,500 beneficiaries, 

1,500 of which were enlisted, 400 spouses, indicates that, even with 

its problems—even with its problems, 8 out of 10 prefer TRICARE 

to a health plan similar to what Federal civilians use. If Congress 

contemplates moving to a healthcare plan similar to the Commission’s recommendation, it needs to take the time necessary to ensure all stakeholders understand the second- and third-order effects. 

Finally, MOAA believes that, out of the Commission’s 15 recommendations, the two that propose dramatic changes to both military retirement compensation and military care programs could 

have a serious impact on career retention required in the All-Volunteer Force. Both recommendations produce a negative effect on 

the pocketbook of patriotic Americans for whom the government 

needs to serve for—needs to draw to a 20-year career. 

796 

So, it isn’t necessarily as much the money, but I would like to 

put up a chart on this, because, Senator Graham, as you pointed 

out, people would sign up for this retirement benefit when they 

came in because, as Senator McCain has said, it would be prospective. But, what we’re concerned about is the combination if we implemented a retirement system that was prospective and we also 

integrated that with the healthcare system that the Commission 

reports, the question is, would there still be a sufficient draw for 

those young men and women who are coming in, in the future, that 

they would feel it’s worth going from 10 years to 20 years? We 

think there’s considerable risk with this. All you have to do is multiply that 20 by 20 and you would see, it’s about 128,000 less in 

benefit. So, the question is, would that be sufficient to get people 

to stay in for a career, let alone more than one tour? 

If Congress—and because that’s basically a 27-percent cut, as 

you see—if Congress and the administration decide to adopt these 

two very financially impactful recommendations from the Commission, MOAA believes the risk to the quality of the All-Volunteer 

Force would be significant because of—the incentive to stay for a 

career would be in doubt. 

Again, thank you for this opportunity, and thank you all for your 

continued leadership. 

[The prepared statement of Admiral Ryan follows:] 

PREPARED STATEMENT BY THE MILITARY OFFICERS ASSOCIATION OF AMERICA

Chairman Graham and Ranking Member Gillibrand, members of the committee, 

on behalf of the 390,000 members of the Military Officers Association of America 

(MOAA), we welcome this opportunity to submit testimony for the record, regarding 

our views concerning the Military Compensation and Retirement Modernization 

Commission’s (MCRMC) report and recommendations regarding military health benefits. 

MOAA sincerely appreciates the hard work and detailed analysis that went into 

the Military Compensation and Retirement Modernization Commission’s report. The 

commissioners and professional staff should be commended for their extensive effort. 

Their product provides the country with an instrument that we can use as a catalyst 

to begin important thoughtful discussions, analyses, and debates on vital issues that 

directly affect our service men and women, retirees, their families, and their ability 

to insure our national security. We look forward to working closely with the Congress and in particular this committee, your staff, the Pentagon, and the administration on these critical concerns and recommendations regarding military compensation, benefits and the retirement system. 

The Commission and MOAA both seek the same objective. However, we urge caution concerning any major changes to the military’s health care system (MHS) that 

could potentially have a negative impact on the military medical readiness of our 

medical personnel, as well as on the entire All-Volunteer Force and their families. 

Several of the health care proposed recommendations represent nothing short of a 

seismic change, and have not been modeled and studied within the complex and dynamic realities of the military health care system. 

Some defense leaders and others have stated, and continue to state, that the military’s health care costs absorb a disproportionate 10 percent, non-war share of the 

Department of Defense (DOD) budget, and that this spending trajectory must 

change. These assertions should be viewed in proper context in that healthcare costs 

comprise 23 percent of the Nation’s budget; 22 percent of the average State budget; 

16 percent of household discretionary spending; and are 16 percent of the U.S. gross 

domestic product—so a 10 percent share of DOD’s budget is not too bad a deal. Additionally, not usually highlighted are the improvements to the benefit and the extended benefit coverages for Reserve and Guard components which Congress rightfully mandated during the past decade. The facts also show that DOD healthcare 

costs have been relatively flat over the past 3 years because of changes Congress 

already has put in place. 

797 

The current and future national security situation will require that we maintain 

a balance of investment in equipment, training, operational capabilities, as well as 

personnel requirements which have been the cornerstone of the success of our AllVolunteer Force. There are finite resources for these competing demands and we 

strongly agree that the military’s health care system needs to evolve beyond what 

it is today, into a modern high performing integrated system, delivering quality, accessible care, safely and effectively to its beneficiaries—while simultaneously meeting international health crises and national disasters, while at the same time 

honing its readiness capabilities. No other health care entity in the country is 

charged with these dual, yet mutually inter-dependent, mandates. 

Our Nation’s health care industry is undergoing rapid change, and it is within 

this context that the military health care system finds itself at a major inflection 

point. It must sustain the advances and skills learned from the past 14 years of 

combat experience and it cannot compromise on its readiness platforms. Thus, any 

reforms must support the goal of sustaining an operationally ready force with a 

ready medical force. How to most effectively accomplish this without negatively impacting retention and readiness is the crux of the issue. 

MILITARY HEALTH CARE AND THE IMPORTANCE OF THE TRICARE PROGRAM

The MCRMC recommends the TRICARE program be eliminated and replaced 

with a Federal Employee Health Benefits Program (FEHBP)-like substitute health 

plan. It is worthwhile to understand the importance of the current program that it 

is purported to replace. 

There have been, and continue to be, many studies on the organization, coordination, and the increasing costs of the military health system, as well as its effectiveness addressing particular health challenges. Despite the stress that has been 

placed on the military’s health system and the TRICARE program, because of war— 

its performance has withstood the test of time and in some ways, is stronger and 

more resilient now than it has ever been. 

The TRICARE program was established in 1995 having evolved from the Civilian 

Health and Medical Program of the Uniformed Services (CHAMPUS). Today, it provides care to over 9 million servicemembers and families, retirees, and survivors, 

through a range of benefits from TRICARE Young Adult to TRICARE for Life. 

TRICARE, by its very nature, was designed to support military medical readiness 

as well as to ensure the delivery of a defined benefit. It accomplishes this by sustaining the operational capability for military treatment facilities through an augmented network of health care services provided by three managed care support 

contractors, who ensure the continuous delivery of the benefit. 

The heart of military medical readiness is found in the direct care system, of 

which military treatment facilities provide the core platform for training. The provision of care in these facilities is vital to the ongoing training of physicians, nurses, 

corpsmen, medics, and other ancillary and administrative personnel. Managed care 

support contracts allow for nationwide flexibility in support of a ready deployable 

force. This model has proven successful but expensive, as evidenced by large budget 

increases for civilian purchased care. 

Managing and maintaining a health care budget in excess of $50 billion a year 

is complicated and intricate. It is precisely because of the challenges presented in 

managing such a large program that the system has become somewhat, over time, 

both self-defeating and sub-optimal. For instance, reducing the Prime Service Areas 

(PSA) around the MTFs saves money in the budget, but reduces the number of 

beneficiaries utilizing the MTF which creates even more excess capacity. The overall 

result of this sub-optimization of the direct care system has directly resulted in both 

the increased use of purchased care in civilian networks, and a shrinking patient 

base. 

Despite its current challenges and short-comings, MOAA believes TRICARE is not 

currently in a ‘‘death spiral’’ as some have said, and it is not broken—but there are 

areas that definitely need urgent focused attention and reform. The recent 2014 

MHS Review identified key shortcomings and areas for improvement in the domains 

of access, quality, and patient safety—with some steps already underway. This past 

summer, MOAA’s own survey on MHS access, quality and safety corroborated much 

of the same, especially regarding access to care issues. In short, we will not accept 

the status quo and we must all must continue to hold the Department accountable 

for aggressively correcting these areas. 

TRICARE has come to a unique moment in its history, and is presented with an 

opportunity for a thoughtful redesign of the program. This should be done with the 

goals of ensuring that the TRICARE benefit remains robust and medical readiness 

is strengthened while keeping beneficiary care and access in the forefront. 

798 

THE MCRMC PROPOSALS

The MCRMC has advanced four over-arching proposals that represent significant 

changes to the MHS. We are generally in support of two of them but have significant concerns regarding the other two. 

We applaud the Commission for addressing issues experienced by military families with special needs. We generally agree with the recommendations and the intent to improve support for these beneficiaries by aligning services offered under the 

Extended Care Health Option (ECHO program) to those of State Medicare waiver 

programs. We believe that Guard and Reserve families are particularly vulnerable 

during transitional periods and should have an extension of support. It is imperative 

that the benefit must include members of all seven of the uniformed services. 

We also support dramatically improving collaboration between the DOD and VA 

and there exist some excellent examples, such as the joint DOD/VA health care facility in North Chicago. For years MOAA has advocated for legislative authority to 

grant the existing Joint Executive Committee additional authority and responsibility to enforce collaboration. Many of the issues impeding progress range from a 

common electronic medical record to joint facility and acquisition planning can be 

accomplished in a transparent manner. Similarly, the issue of a transitional formulary for servicemembers leaving the DOD and enrolling into the VA system 

should be immediately corrected. 

We have significant concerns regarding the Commission’s proposals to create a 

new Joint Readiness Command (J–10), tasked with overseeing new standards for essential medical capabilities and establishing military treatment facilities as preferred network providers within civilian communities. MOAA for years has supported the concept of a unified medical command that has a single budget authority 

over the three military systems. The time is right for this to come to fruition now, 

starting with the large multi-service market areas. A single budget authority to include human resources and infrastructure oversight and control, will yield huge cost 

savings and efficiencies that we can only now dream about. Throughout the years, 

numerous studies have recommended the consolidation of medical budget oversight 

and execution and this can be done while maintaining the readiness responsibilities 

of the Surgeons General under title 10. However, the MCRMC proposal does not include this MOAA-supported recommendation. 

Associated with that recommendation, is the proposal to increase beneficiary 

health care choice by dismantling the current TRICARE three-option program and 

moving active-duty family members, retirees under age 65 and Reserve component 

members into a commercial premium-based insurance model, similar to the Federal 

Employee Health Benefit Program (FEHBP). 

PROPOSAL TO ELIMINATE THE TRICARE PROGRAM AND REPLACE IT WITH A FEDERAL

EMPLOYEES HEALTH BENEFITS PROGRAM-LIKE SYSTEM

Offering military families and retirees under age 65 choices in a FEHBP—like 

program is one of the centerpieces of the MCRMC’s health care proposals. It is in 

response to reported access, referral, contracting, and bureaucratic problems that 

beneficiaries experience under TRICARE Prime. Observations made by the commission regarding many of these issues are right on the mark. 

TRICARE Prime is by design an HMO model of care, costing beneficiaries less 

and inherently providing less choice. TRICARE Standard provides a wider range of 

choice and is more popular. The commission’s main concerns involve issues with the 

TRICARE Prime; a fair question to ask is whether it takes such a radical change 

to address those problems. 

The new FEHBP-like program, called TRICARE Choice, would offer beneficiaries 

an array of plan options to choose from based upon their location. MTFs would be 

offered as one of the providers in the plan. It is envisioned that DOD would have 

the authority to adjust MTF billing for civilian reimbursements and co-payments for 

insurers as needed to meet the MTF’s readiness requirements. 

Concerns 

This proposal is a dramatic change in the entire philosophy of delivering military 

health care coverage and if it is seriously entertained, should be subject to much 

more scrutiny to ensure it meets beneficiary needs without changing the fundamental benefit value or leading to unintended consequences. 

TRICARE is designed to support military readiness—to include military family 

readiness. FEHBP serves a very different purpose and does not factor in readiness. 

For example, how would DOD’s new investment in an electronic medical record be 

used in a FEHBP-like benefit design? 

799 

Instead of fixing existing issues and investment in fixing these, the Commission’s 

answer is to eliminate the entire program and have beneficiaries, particularly retirees not on Medicare, pay substantially more under the premise of receiving more 

’’bang for their buck.’’ 

The unintended consequences to military medical readiness could be great. Using 

MTFs as network providers, competing for business in the civilian market was not 

thoroughly examined in the Commission’s report—this represents an unacceptable 

level of risk. Especially since the MTFs exist for readiness or a unique mission. The 

use of TRICARE as a back-up to absorb care during periods of readiness has largely 

been a success—for example, during large scale deployments of medical staff on the 

hospital ships in both war-time and humanitarian scenarios. 

The Commission also presumes the Defense Department, in working with FEHBP 

insurers, would be afforded the right to set provider payments and beneficiary copayments for MTFs versus other providers, and adjust those as necessary to direct 

patient flow to MTFs. MOAA remains dubious that a broad range of insurers would 

be comfortable with extending such authority to one provider, however preferred. 

Military families would have to receive extensive education when selecting health 

plans. Overwhelming choice may be just that – overwhelming and confusing, especially in the face of the existing stressors military families face. Educating beneficiaries on their TRICARE benefits has been a challenge since the program’s inception. Under the MCRMC concept, we are skeptical that DOD could effectively educate beneficiaries on an even greater array of plans. 

Under FEHBP, an open season for plan changes occurs once a year. If a military 

family member experienced a new diagnosis or health status change, he or she may 

want to change plan coverages. This would be especially problematic with mental 

health issues. There are already shortages of mental health providers in many 

States with our largest military bases, regardless of network. 

Premiums, copays, unique plan features, and the determination of medical necessity would vary by location and plan design. This would be a dramatic and unwelcome departure from what has been a program with a uniform benefit. Military 

families today can only plan as far as their next set of orders. They have come to 

rely on the uniform nature of the health benefit administered by TRICARE, no matter where they are stationed in the world. 

For example, Applied Behavior Analysis (ABA) is a therapy increasingly sought 

by military families for autistic dependents on the autism spectrum. Within the 

FEHBP, the therapy is not a covered benefit and it is offered by only 20 plans in 

a handful of States. 

Another area not fully addressed by the Commission is pharmacy coverage. The 

Commission proposes that the TRICARE pharmacy program remain unchanged. But 

virtually all of the FEHBP plans include different levels of pharmacy coverage, and 

practical experience is that the TRICARE pharmacy program is virtually unusable 

if other coverage exists. MOAA believes this would entrap military families between 

significantly higher costs for civilian coverage or extraordinary bureaucratic problems if they seek to use TRICARE pharmacy programs. 

The needs of a military family today can be dramatically changed by the demands 

of service. Unlike the TRICARE managed care support contractors, it is not clear 

that commercial plans under an FEHBP-like scenario would be sensitive to or responsive to a military family’s unique needs. ‘‘Ready to Serve’’ the title of MOAA 

and United Healthcare Foundation’s recent survey on civilian providers, conducted 

by RAND and released in December 2014, shows that civilian mental health providers are not equipped with the necessary knowledge or cultural sensitivity required in the care of military and veterans populations. 

Putting this major military health benefit under the administration of the Office 

of Personnel Management (OPM) appears to be a significant step toward treating 

military beneficiaries like Federal civilians for health care purposes. Military beneficiaries incur unique and extraordinary sacrifices unlike the service conditions of 

any civilian, and their health benefits have been intended to be significantly better 

than civilian programs. 

MOAA’s recent survey of over 7,000 respondents revealed that 4 out of 5 prefer 

TRICARE over an FEHBP-like system for retirees and families, and 9 out of 10 do 

not feel confident that OPM would be able to understand and accommodate the 

unique needs of military families. The respondents include active duty, active duty 

family members, retirees, military spouses, and survivors of all the uniformed services. 

An additional concern of MOAA centers on the potential premium working-age retirees will pay. It is not clear how the commission determined premium cost shares 

for beneficiaries. A 20-percent premium cost share for retirees is substantially too 

high, regardless of any phase-in period. A cost structure this high devalues the inVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00805 Fmt 6601 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
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kind premiums servicemembers contributed through decades of arduous service and 

sacrifice acknowledged in previous cost-share settings. 

The fundamental issue is that recognition of decades of service and sacrifice in 

uniform should be formally recognized in any cost determination. A 20 percent cost 

share is not far off from the 28 percent cost share for Federal civilians using 

FEHBP. Comparison with civilian or corporate cash fees is inappropriate. Military 

retirement and medical benefits are the primary offset for enduring decades of arduous service conditions. Career retirees pre-pay huge ‘‘upfront’’ health care premiums 

through 20 to 30 years or more of service and sacrifice. 

PROPOSAL TO ESTABLISH A JOINT READINESS COMMAND

MOAA has long been on record in support of a joint or unified medical command 

to ensure interservice consistency of policy, consolidated budget authority, appropriate determinations for medical staffing, training, procurement efficiencies, and 

more. 

Unfortunately, the creation of another layer of bureaucracy does not address the 

root of the MHS’s problems. The largest barrier to a truly efficient and highly reliable healthcare organization is the current three service system organization. This 

arrangement is directly responsible for extensive costs through the duplication of 

technology services, medical equipment, lack of common procedures and processes, 

especially in the much touted multi-service market areas. Literally millions are 

wasted each year due to the inefficiencies of this type of structure. 

An example is the military’s integrated referral and management center which 

serves the multiple clinics and hospitals in the National Capital Area. It is charged 

with making specialty referrals and appointments for the geographical market area. 

However, they only end up making approximately 20 percent of the total appointments, due to the fact that there is no unified policy and process in appointing beneficiaries into all of the military clinics and hospitals. The hospitals and clinics still 

report to three different service commands under three or more different sets of orders and varying budgets. This wastes millions in missed referrals going into the 

private sector. 

There have been measures made at integration. The creation of the Defense 

Health Agency is a step in the right direction and has proven it can get things 

done—but its budgetary successes 

have mainly been borne on the backs of the beneficiaries by higher pharmacy fees, 

mandatory mail order and rising premiums and co-payments. The MCRMC health 

care proposals represent a ‘‘shot across the bow’’ and should serve as a catalyst for 

the DOD to quickly push through with these long needed structural reforms under 

the direction of Congress. 

Concerns 

This new command structure does not provide a unified budget authority, but 

rather, participation in the budget process with the service and others. One of the 

key’s to an efficient joint organization is budget accountability and direct oversight. 

The proposed rate setting authority charged to coerce beneficiaries into using 

MTFs and to induce private insurers to use the facility is risky and managerially 

cumbersome. Even if potential insurers would allow one provider system to exert 

such powers. It is unclear if this could increase the potential to put MTF needs in 

more direct opposition to dependent/retiree/survivor beneficiary desires. 

Historically, MTFs have wanted older beneficiaries for trauma, surgical procedures and other needs, but has not had the capacity to enroll beneficiaries for routine and specialty care. 

Placing a new bureaucratic structure over the existing one seems redundant, especially if it fails to address the principle problems of diffuse budget and oversight 

authority for DOD-wide medical programs. The functions overseeing readiness already exist in the Service Surgeons General and Joint Staff Surgeon. Service consolidation can and should take place without introducing another costly layer. 

TRICARE HAS ITS FAULTS BUT CAN BE IMPROVED WITH CONGRESSIONAL LEADERSHIP

Problems in TRICARE like rising costs, barriers to access, and lack of customer 

service in certain areas, can be addressed in a systematic manner without resorting 

to its elimination. The elimination of TRICARE would be akin to ‘‘throwing out the 

baby with the bath water’’ and does not get to the root of the problems. The recent 

MHS Review produced a baseline starting point. 

The time is ripe to institute change. The development of a new set of TRICARE 

contracts, set to start in 2017, is about to commence bidding. The Request for ProVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00806 Fmt 6601 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
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posal (RFP) seeks industry bidders and additional input has gone out. Now would 

be an opportune time to institute innovative ideas from industry. 

The Department of Health and Human Services’ Centers for Medicare and Medicaid (CMS) have instituted reforms calling for more payments to providers that 

place the value of health care over volume. There needs to be more focus on value 

based reforms which reward innovation 

and quality outcomes. DOD and TRICARE should maintain alignment with 

Health and Human Services and set goals to institute these same types of payment 

reforms into the new contracts. For example, a program to bench-mark that is already under TRICARE, the U.S. Family Health Plan, uses capitated financing to effectively manage its defined beneficiary population. 

A great deal of the cost increases have come from the current fee-for-service payment structure that TRICARE uses to pay its providers as this facilitates increased 

use of services. DOD must recognize that it is simply not possible to maintain a traditional fee-for-service discount purchasing strategy to keep costs down and improve 

access for beneficiaries. 

The discounted fee-for-service strategies from the past have also not been effective 

in creating provider networks that meet the needs of TRICARE beneficiaries in an 

economical and customer satisfying way. The Commission acknowledged this feedback from beneficiaries in their report. 

A value-based model will require new ways of thinking and risk-sharing. Under 

new contracts, managed support contractors and MTFs should be incentivized to 

align and integrate, with risk shared by each for the success of the whole. 

These payment innovations can and should be tried in a pilot program, using one 

or more of the enhanced multi-service markets as a testing ground. Experimenting 

with innovative public/private partnerships, including the VA, should be done to increase training case-mix and critical skills maintenance. This can be done now, 

without change to the whole system. 

One area where the Commission proposal to use an FEHBP-like program could 

be productive is for Guard and Reserve members and their families. We have long 

sought to bridge the health care continuity gap between and during periods of activation. As Guard and Reserve family members are not usually subject to frequent 

relocations and typically prefer to keep their employer coverage, the FEHBP-like 

concept would be more fitting for this population, including providing these families 

an option for an allowance to cover their civilian employer coverage during periods 

of deployment. 

By effective rationalization of the current military health care infrastructure, 

great savings can be gained with resulting better quality of care for beneficiaries. 

It simply does not make sense to keep open facilities with minimal inpatient occupancy. 

For the continuous development of the future MHS and TRICARE, DOD would 

benefit from frequent dialog with leaders in the health care industry. A regularly 

scheduled forum could be modeled after the existing Defense Health Board (DHB), 

focused on industry best-practices from all sectors. A forum like this could also leverage ideas from the Commission and beneficiary engagement. 

Lastly, targeted investment should be made in technologies and people to support 

established joint processes and procedures that will generate real return on investment. 

SUMMARY

The MCRMC has made 15 recommendations—2 of which propose dramatic 

changes to both military retirement and health care programs that could, in 

MOAA’s opinion, seriously impact on career retention required in the All-Volunteer 

Force. Both recommendations produce a negative effect on the pocket book of those 

whom the government needs to serve for a career of 20 years or greater. For example, the combined effects of the MCRMC’s health care and retirement change, if 

fully implemented today, on a retired E–7’s annual retirement value is over $6,400 

or a loss of 27 percent until they can draw from their Thrift Savings Plan at age 

591⁄2. 

802 

Therefore, a complete overhaul of a health plan and the system serving 9.6 million military retiree and family beneficiaries deserves thoughtful and careful consideration, with Congress ensuring that legislation and implementation reflects intent. 

Congress should take all needed time to make deliberate decisions about this proposed wholesale change, ensuring that both Congress and stakeholders understand 

the second- and third-order effects. 

Some of the findings in the MCRMC report align with concerns raised by MOAA, 

and deserve to be addressed now, pending deeper consideration of the broader 

issues. The number one action Congress should take immediately is to demand that 

DOD without delay, reform under a truly unified military health care system—and 

not just the servicemember’s share of it. Without unified budget and oversight delivery of current multi-service, multi-contractor programs, TRICARE as we know it 

will remain parochially administered and sub-optimized. 

Servicemembers, whether in garrison, down range, or anywhere in the world, 

should not have to worry if they have selected the appropriate health care coverage 

for their families. Radical change of core retention programs always carries significant risk of unintended negative retention effects. That risk is exponentially magnified when the changes include significantly higher costs for already-stressed beneficiaries. 

The key is to ensure that program changes entail real improvements, both for 

readiness and the beneficiaries, and avoid the kinds of changes that merely create 

a new set of problems for both. 

STATEMENT OF THOMAS J. SNEE, NATIONAL EXECUTIVE 

DIRECTOR, FLEET RESERVE ASSOCIATION 

Mr. SNEE. Senator Graham, Ranking Member Gillibrand, Senator Tillis, Senator McCain—Senator McCain, it’s good to see you. 

A few years ago, we worked on the reemployment rates of our veterans a few years ago, and I’m glad that we’re still producing that 

and keep going. So, again, I thank you—and other members of the 

subcommittee, my name is Tom Snee, and I’m the National Executive Director for the Fleet Reserve Association (FRA) of 60,000-plus 

enlisted serving in the U.S. Navy, Marine Corps, and Coast Guard. 


225per1.eps
803 

I want to thank you today for the opportunity to express the views 

of our Association on the Commission’s recommendations related to 

healthcare, a valued concern throughout. We also want to thank 

the Commission for reaching out to the FRA to seek our input on 

these complex and challenging issues during their deliberations. 

Before commenting on the Commission’s healthcare recommendations, FRA still notes with concern the impact of sequestration that 

is felt outside, not only towards national security, but to pay and 

allowances. Please remove DOD from sequestration. 

It should be also noted, on aside, that, in the total force manning 

of over 75 percent enlisted mannings, that there were no representation of enlisted on the Commission staff. 

Recommendation number 6 of the Military Compensation and 

Retirement Modernization Commission is the most wide-ranging 

recommendation that calls on the Congress to replace the current 

healthcare arrangement with a new system that provides beneficiaries with choices offered by commercial insurance companies. 

The Commission found that TRICARE is no longer fiscally sustainable. FRA believes that such vast and dramatic change to the 

healthcare benefits should require additional reviews. It is recognized that the beneficiaries would be offered a variety of cost 

choices in their geographic areas of medical service providers, ranging from the array of copays and premiums. The critical factor is 

the making of these choices as having a well-informed service and 

family members in the decisionmaking process of these plans. This 

is the cause-and-effect attribute to recommendation number 3, the 

need for a well-structured and reenergized financial literacy program providing an understanding of health insurance and accompanying care. 

Again, recommendation number 6 calls for the realignment of 

costs for beneficiaries, which has a major concern with our members under the age of 65. The Association believes that, over time, 

this could devalue the current 20-plus-year career of military service that retirees can expect as reduction in healthcare premiums. 

The question we need to ask is, Are we advocating a culture of 

early departure over a viable career with a potential negative impact on manning requirements either through recruiting or retention models? FRA advocates that other options to make TRICARE 

a more cost-effective measure would be implemented before raising 

costs—higher costs to TRICARE beneficiaries. 

It has been noted that higher costs will be ensure a better access 

in care response. We ask, Will this be a measured contractual guarantee of the future? FRA shares the concern about the timely access and waiting time for care. The Naval Medical Research Center 

has reported TRICARE benefit beneficiaries in some locations are 

experiencing half of the referrals for purchased care network that 

waited longer than the 28-day standard. Even in locations with the 

highest access to care, only 16 percent of referrals maintain the 28- 

day standard. FRA recommends a measurable pilot program in specific geographic locations currently not served by TRICARE Prime 

that might be a demonstration if the plan is effective in meeting 

the needs of the beneficiaries. 

FRA supports the recommendation number 8, and strongly encourages, again, a quicker collaborative joint action between DOD 

804 

and the Department of Veteran Affairs on the joint electronic 

health record system to provide a seamless transition for our members once they leave DOD into the VA system. 

Limited time does not permit me to go into more detail, but our 

written testimony does provide further details. 

Mr. Chairman and the committee, I thank you very much for our 

opportunity to express our views. Thank you. 

[The prepared statement of Mr. Snee follows:] 

PREPARED STATEMENT BY THE FLEET RESERVE ASSOCIATION

THE FRA

The Fleet Reserve Association (FRA) celebrated 90 years of service last November 

11, and is the oldest and largest enlisted organization serving Active Duty, Reserves, retired and veterans of the Navy, Marine Corps, and Coast Guard. FRA is 

congressionally chartered, recognized by the Department of Veterans Affairs (VA) as 

an accrediting Veteran Service Organization (VSO) for claim representation, and is 

entrusted to serve all veterans who seek its help. In 2007, FRA was selected for full 

membership on the National Veterans’ Day Committee. 

FRA was established in 1924 and its name was derived from the Navy’s and Marine Corps program for personnel transferring to the Fleet Reserve or Fleet Marine 

Corps Reserve after 20 or more years of active duty, but less than 30 years for retirement purposes. During the required period of service in the Fleet Reserve, assigned personnel earn retainer pay and are subject to recall by the Navy. 

FRA’s mission is to act as the premier ‘‘watch dog’’ group in maintaining and improving the quality of life for Sea Service personnel and their families. FRA is a 

leading advocate on Capitol Hill for enlisted active duty, Reserve, retired and veterans of the Sea Services. The Association also sponsors a National Americanism 

Essay Program and other recognition and relief programs. In addition, the FRA 

Education Foundation oversees the Association’s scholarship program that presents 

awards totaling nearly $123,000 to deserving students each year. 

The Association is also a founding member of The Military Coalition (TMC), a 32- 

member consortium of military and veteran’s organizations. FRA hosts most TMC 

meetings and members of its staff serve in a number of TMC leadership roles. 

For 9 decades, dedication to its members has resulted in legislation enhancing 

quality of life programs for Sea Services personnel, other members of the uniformed 

services plus their families and survivors, while protecting their rights and privileges. CHAMPUS, (now TRICARE Standard) was an initiative of FRA, as was the 

Uniformed Services Survivor Benefit Plan. More recently, FRA led the way in reforming the REDUX Retirement Plan, obtaining targeted pay increases for mid-level 

enlisted personnel, and sea pay for junior enlisted sailors. FRA also played a leading 

role in advocating recently enacted predatory lending protections and absentee voting reform for servicemembers and their dependents. 

FRA’s motto is: ‘‘Loyalty, Protection, and Service.’’ 

CERTIFICATION OF NON-RECEIPT OF FEDERAL FUNDS

Pursuant to the requirements of House Rule XI, the Fleet Reserve Association has 

not received any Federal grant or contract during the current fiscal year or either 

of the 2 previous fiscal years. 

INTRODUCTION

Mr. Chairman, FRA salutes you, the ranking member and all members of the subcommittee, and your staff for the strong and unwavering support of programs essential to Active Duty, Reserve component, and retired members of the uniformed services, their families, and survivors. The subcommittee’s work has greatly enhanced 

support for our wounded warriors and significantly improved military pay, and 

other benefits and enhanced other personnel, retirement and survivor programs. 

This support is critical in maintaining readiness and is invaluable to our uniformed 

services engaged throughout the world fighting to stop terrorism generated by Islamic extremism, sustaining other operational requirements and fulfilling commitments to those who have served in the past. The Association wants to thank the 

Subcommittee for the opportunity to express its views on the Commission’s recommendations related to health care. 

805 

BACKGROUND

The National Defense Authorization Act for Fiscal Year 2013 (H.R. 4310-P.L. 112– 

239) establishes the Military Compensation and Retirement Modernization Commission (MCRMC), but limits its recommendations from being a BRAC-like endorsement, as originally proposed, in its review of the current compensation and military 

retirement system. FRA believes it’s important that this distinguished Subcommittee and its House counterpart maintain oversight over commission recommendations. While FRA supports many of the Commission’s recommendations, it 

was noted that no enlisted personnel were appointed to serve on the Commission. 

More than 75 percent of the current active force is enlisted and therefore should 

have representation on this Commission. 

The commission was instructed not to alter the current retirement system for 

those already serving, retired or in the process of retiring. Along with a review of 

military compensation, the president asked that the commission look at the ‘‘interrelationship of the military’s current promotion system.’’ 

The driving-force for creating the MCRMC has been the myth that ‘‘personnel 

costs are eating us alive’’ and that personnel costs are ‘‘unsustainable.’’ 

Of historical note, in 1986 Congress passed, over the objection of then Secretary 

of Defense Casper Wienberger, major retirement changes, known as ‘‘Redux,’’ that 

significantly reduced retirement compensation for those joining the military after 

1986. FRA led efforts to repeal the act in 1999 after the military experienced retention and recruitment problems. The Association continues to monitor the take rate 

for personnel choosing to remain on the High-3 program, or the Redux program at 

15 years of service. 

The Commission believes that it can make drastic changes to pay, retirement, and 

other benefits and assumes it will have no impact on retention, recruitment, and 

readiness. Past experiences with substantial benefit changes indicate otherwise. 

Rhetoric about ‘‘unsustainable’’ personnel costs since 2000 is misleading. Improvements since 2000 to personnel programs were needed to offset pay and benefit cutbacks of the late 1980s and the 1990s that undermined retention and recruitment. 

FRA wants to thank the members of the Commission and their staff for allowing 

FRA to have input while the report was being written. The Commission met with 

97 other advocacy and visited 55 military installations, received more than 150,000 

survey responses from active duty and retirees. In addition, the Commission held 

eight Town Hall meetings to further understand the complexity of the military compensation and retirement systems. 

DEFENSE OUT OF SEQUESTRATION

Before commenting on MCRMC health care recommendations, FRA wants to note 

with growing concern the impact of sequestration. Budget cuts mandated by the 

Budget Control Act of 2011 pose a threat to national security and will substantially 

impact member pay and benefits. These automatic cuts, known as Sequestration, require that 50 percent come from Defense, even though Defense only makes up 17 

percent of the Federal budget. These cuts were intended to be so punitive that Congress and the administration would be forced to work together to find reasonable 

alternatives. Unfortunately, this has not occurred and Congress along with the 

White House have been unable to come to a long term agreement on the budget 

without sequestration cuts. Unless current law is changed, the DOD will have to 

cut an additional $38 billion in fiscal year 2016 and some $269 billion over the following 5 fiscal years. 

The DOD budget was already scheduled to be cut by $487 billion over a 10-year 

period before the enactment of sequestration, which will cut an additional $500 billion in the defense spending if fully implemented. The Bipartisan Budget Act of 

2013 mitigated the spending cuts for fiscal year 2014 and 2015. However, the original sequestration cuts for fiscal year 2016 thru 2021 remain in effect—continuing 

to place national security at risk. 

Secretary of Defense Chuck Hagel has warned that future sequestration budget 

cuts will create a ‘‘hollow force.’’ The Services have already canceled deployment of 

ships, slashed flying hours, renegotiated critical procurement contracts, temporarily 

furloughed civilian employees, and are in the process of reducing force structure, 

giving America the smallest military force since before World War II. If sequestration is not ended, additional force reductions will likely go deeper and training and 

modernization levels will be further impacted. 

806 

MCRMC FINAL REPORT

The report makes 15 major recommendations intended to improve the cost-effectiveness of quality benefits for those who currently serve, have served and will serve 

in the future. Five of the 15 recommendations (#3, 5, 6, 7, and 8) pertain to health 

care and will be the main focus of this testimony. 

FRA strongly supports recommendation 3 that promotes financial literacy and believes it should include educational information on health care in conjunction with 

recommendation 6, which will provide beneficiaries with choices offered by commercial insurance companies. Any enhanced program should also include the spouses. 

The Association was in the forefront of supporting the enactment of the Military 

Lenders Act (MLA) in 2006 and supported the creation of the Office of Military Liaison within the Consumer Financial Protection Bureau (CFPB) when the Bureau’s 

enabling legislation was enacted in 2010. FRA continues its work to ensure Active 

Duty personnel are protected from predatory lenders, and urges this subcommittee 

to ensure that the MLA is effectively administered. The Association applauds recent 

efforts by the Consumer Finance Protection Bureau (CFPB) to regulate predatory 

lenders through enforcement of the MLA. FRA supports a more robust Personal Financial Management (PFM) training that should include education on health insurance. Furthermore such an invigorated plan should include training for the spouse. 

FRA supports recommendation 5, but is unsure if this can be effectively implemented. The intent of this recommendation is to ensure medical combat readiness. 

FRA supports the establishment of a Joint Medical Command to reduce duplication 

of services for each Service branch and ensure inter-service consistency of policy and 

budget oversight. 

Recommendation 6 impacts current Active Duty, the Reserve component, and retirees under age 65, which calls on Congress to replace the current health care arrangement with a new system that provides beneficiaries with choices offered by 

commercial insurance companies. The Commission found that TRICARE is no 

longer fiscally sustainable. At this time FRA does not support or oppose this recommendation; but believes that such vast and dramatic change to the health care 

benefit requires additional review. 

Beneficiaries would be switched to a plan similar to the Federal Employee Health 

Benefit Program (FEHBP), except that military treatment facilities would be included in the network. Like the FEHBP beneficiaries could choose from a selection 

of commercial insurance plans. The plan would be administered by the Office of Personnel Management (OPM) rather than the Department of Defense (DOD). Beneficiaries would be required to pay 20 percent of all health care costs. Beneficiary 

family members would not be covered under the plan and would be provided a Basic 

Allowance for Health Care (BAHC) to cover the cost of premiums and deductibles 

for an average health care plan. Reserve component (RC) members who are mobilized would also receive a BAHC in lieu of TRICARE coverage. 

Although there are similarities between the BAHC and the base allowance for 

housing, the big difference between the two is that housing costs are predictable but 

health care costs are not. 

Shifting costs to retirees under age 65 is a serious concern for FRA. The Association believes that this shift devalues 20 or more years of arduous military service 

that earned the retiree an offset in healthcare premiums during retirement. FRA 

advocates that other options to make TRICARE more cost-efficient should be implemented first as alternatives to shifting costs to TRICARE beneficiaries. 

FRA is also concerned about the timely access to care. The MCRMC report notes 

that TRICARE Prime beneficiaries in some locations that half the referrals for purchased care network waited longer than the 28-day standard for purchased care network. Even in locations with the highest access to care, 16 percent of referrals still 

do not get appointments within the 28-day standard. Perhaps a pilot program in a 

limited geographic location not currently served by TRICARE Prime could demonstrate the efficiency of the plan. 

The Association supports recommendation 7 that seeks to improve support for 

servicemembers with special dependents. These improvements to the Extended Care 

Health Option include expanded respite care hours, and consumer directed care. 

FRA wants to make sure that U.S. Coast Guard personnel are also covered by this 

program. FRA represents the Sea Services and wants to ensure that the Coast 

Guard benefits have parity with DOD benefits. 

FRA welcomes recommendation 8 that attempts to improve collaboration between 

DOD and the Department of Veterans Affairs (VA). FRA supports a joint electronic 

health record that will help ensure a seamless transition from DOD to VA for 

wounded warriors, and establishment and operation of the Wounded Warriors Resource Center as a single point of contact for servicemembers, their family members, 

807 

and primary care givers. The Association is concerned about shifting of departmental oversight from the Senior Oversight Committee comprised of the DOD and 

VA secretaries per provisions of the National Defense Authorization Act for Fiscal 

Year 2009, to the more lower echelon Joint Executive Council. This change is perceived by many as diminishing the importance of improving significant challenges 

faced by servicemembers—particularly wounded warriors and their families—in 

transitioning from DOD to the VA. The recommendation to provide additional authority to the Joint Executive Committee is a step in the right direction. 

Under a broader improved collaboration it should be noted that Medicare is not 

authorized to reimburse VA hospitals for care provided to Medicare eligible veterans. This results in veterans being forced to decide between receiving medical care 

through the VA, or using Medicare at a non-VA facility and foregoing the personalized care of a VA hospital. The majority of veterans pay into Medicare for most of 

their lives, yet the law prohibits them from benefitting from this via care at VA facilities later in life. 

CONCLUSION

FRA is grateful for the opportunity to provide comments on these recommendations to this distinguished subcommittee. 

STATEMENT OF MAJOR GENERAL GUS L. HARGETT, JR., ARNG 

(RET.), PRESIDENT, NATIONAL GUARD ASSOCIATION OF THE 

UNITED STATES 

General HARGETT. Mr. Chairman, Senator Gillibrand, Senator 

Tillis, Senator McCain, thank you for the opportunity to testify 

today on the healthcare recommendation made by the MCRMC in 

their final report. 

National guardsmen nationwide applaud the MCRMC for providing some innovative ideas and a real starting point to deliver a 

reform of the military retirement and healthcare systems. Maintaining medical readiness, including dental readiness, allows the 

National Guard to remain a truly operational force for the Army 

and Air Force. 

The MCRMC recommends that changes and alternatives to 

TRICARE are in order, citing problems with access to care, number 

and location of providers, cumbersome referral and authorization 

process, limited provider networks, and member preferences for 

greater choice. All these problems exist today in the National 

Guard, and I can assure you, because I have been there and done 

that. 

The MCRMC recommends giving servicemembers the option of 

selecting from the more than 250 Federal healthcare plans available under the Federal Employee Health Benefit Program. This 

program would be called TRICARE Choice. I believe that expanded 

choices for health insurance will be well-received by all National 

Guardsmen. 

One of our top priorities has always been to see that every member of the National Guard and their families are able to afford 

healthcare. But, NGAUS remains concerned with the actual cost of 

these plans. Although the research work of the Commission is 

broad and important, that we see the actual numbers and the cost 

of each program and it be given to each servicemember under these 

250 plans. NGAUS would recommend the subcommittee bring in 

actuaries to do cost-benefit analysis of each of the programs. These 

questions need to be answered before members and retirees of the 

Guard would feel secure in supporting the change in TRICARE as 

it now stands. 

808 

Another issue of access to healthcare benefits involves the men 

and women of the Guard who are military technicians. Our technician force is made up of people who run our armories, our wings, 

on a daily basis. They do not have the same privileges under the 

current law, nor were changes in access and affordability addressed 

by the Commission. These men and women who serve under Title 

32 or Title 5 should also be able to take advantage of a new modernized healthcare program. I ask that the subcommittee examine 

the healthcare benefits now available to our technicians. 

One access issue involves the Guard and Reserve retirees under 

age 60, gray area of retirees, who would continue to have access 

to healthcare benefits, but at full premium. This does not compare 

fairly to the Commission’s recommendation that would allow Active 

Duty retirees to maintain continuity of coverage at only 20-percent 

premium cost-share. In all fairness, providing a premium cost subsidy to gray-area retirees to assist them in maintaining continuity 

of health needs to be included in the report and any legislation 

passed to incorporate the Commission’s health access recommendation. 

Any recommendation of the Commission, although not directly 

healthcare related, does not—although not directly healthcare related, is to the mental health and welfare of the families of the 

members of the Guard. This recommendation concerns military 

children. The Commission noted that children experience unique 

stress associated with parental deployments and that these 

stresses can adversely affect academic performance, and recommends that children of Active Duty servicemembers be identified in nationwide reporting of student performance. Although not 

mentioned, children of the National Guard and Reserves should be 

identified, and their issues addressed, and NGAUS asks the subcommittee to include them. 

We support the changes to protect the viability of the total force. 

That cannot be done under the current system and under the constraints of sequester. 

Mr. Chairman, as always, we thank you for the opportunity to 

testify before the Commission and stand ready to present—to assist, as required. 

[The prepared statement of General Hargett follows:] 

PREPARED STATEMENT BY MAJOR GENERAL GUS HARGETT, (RET.) 

Senator Graham, Senator Gillibrand and other distinguished members of the subcommittee: On behalf of the entire membership of the National Guard Association 

of the United States, I thank you for the opportunity to testify today on the health 

care recommendations made by the Military Compensation and Retirement Modernization Commission in their final report. 

First, I would like to go on the record and thank the Commission for its hard 

work. National Guardsmen nationwide applaud the Commission for providing some 

innovative ideas and a starting point to deliberate reform of the military’s retirement and health-care systems. We believe its final report is a great way to reduce 

personnel costs while preserving the viability of the All-Volunteer Force. 

Maintaining medical readiness, including dental readiness, allows the National 

Guard to be truly an operational reserve of the Army and Air Force. NGAUS supports any change in health care benefits that allow the National Guard to be ready 

to serve this nation at home and abroad. 

The Commission recommends that changes and alternatives to TRICARE are in 

order citing problems with access to care, number, and location of providers, cumbersome referral and authorization process, limited provider networks and members 

preference for a greater choice. The Commission found that National Guard memVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00814 Fmt 6601 Sfmt 6621 Z:\DOCS\94844.TXT JUNE
809 

bers are faced with difficult choices during mobilization and demobilization and that 

these transitions can be costly for Guard families and disruptive to health care coverage, especially for servicemembers who are mobilized in support of a mission that 

is not a contingency operation. All these problems do exist for the National Guard. 

Because guardsman are not living on bases, but in their communities across the 

country, access to care on the current TRICARE Reserve Select program, can be extremely difficult. 

Another issue with the current health insurance program looms large for the 

Guard. When a member of the Guard is mobilized, his/or her health insurance 

changes. When it changes to the limited provider network of TRICARE, a member 

and his/her family usually have to change doctors. Changing back and forth on insurance is very disruptive to health care coverage, usually during the time most 

stressful to a member and their family. Issues of timely enrollment and issues when 

returning to civilian health insurance challenge all activated Guardsmen and 

women. As I understand it, the Commission recommends giving servicemembers the option of selecting from the more than 250 health insurance plans available under the 

Federal Employees Health Benefits Program (FEHBP). This program would be 

called TRICARE Choice. Of the 250, at least 11 plans cover every area in the country. The Department of Defense would sponsor and approve the levels of care of 

these commercial health insurance plans and servicemembers and their families 

would not be subject to the same rates as other Federal employees within FEHPB. 

The thought is that more physicians are available in FEHBP networks and that it 

is more likely Guard families’ civilian job health insurance physicians are one in the 

same. I believe that expanded choices for health insurance will be well-received by 

the National Guard for these reasons. 

DOD would also fund part of the Guard member’s existing health insurance plan 

instead of requiring transition to a DOD-sponsored commercial programs. For example, Guard members who are mobilized would receive a new Basic Allowance for 

Health Care to apply toward a DOD plan or to cover the employees share of their 

existing health care plans. I believe many members of the Guard will take advantage of this option. 

These recommendations should increase access and choice for the entire Reserve 

component, but NGAUS remains concerned with the actual costs of these FEHPB 

plans. Right now, not every member of the Guard can afford health care, and along 

with maintaining military readiness, one of our top priorities is to see every member 

of the Guard and their families are able to afford health insurance. Although the 

research work of the Commission is broad, it’s important we see the actual monthly 

costs of the each program to a servicemember for the 250 plans that would be available under FEHBP. NGAUS would recommend the subcommittee bring in actuaries 

to do a cost-benefit analysis of each of the programs. Choice and the size of the provider networks should bring costs down, but these questions need to be answered 

before members and retirees of the Guard would feel secure in supporting the elimination of TRICARE as it now stands. 

Another issue of access to health care benefits involves the men and women of 

the Guard who are military technicians. Our technician force is made up of the people who run our armories and wings 

on a daily basis. They do not have the same privileges under current law nor were 

changes to their access and affordability addressed by the Commission. Although I 

understand the Commission could not address every situation, these men and 

women who serve under Title 32 or Title 5, should also be able to take advantage 

of a new modernized health care program and I ask that the subcommittee examine 

the lack of health care benefits now available to our technician force, and work with 

the other Committee of jurisdiction to address these vital concerns. 

Another recommendation of the Commission, although not directly health care related, does relate to the mental health and welfare of the families of members of 

the Guard. This recommendation concerns military children. The Commission noted 

that children experience unique stresses associated with parental deployments, and 

that these stresses can adversely affect academic performance and recommends that 

children of Active-Duty servicemembers be identified in nationwide reporting of student performance. Although not mentioned, children of the National Guard and Reserve should also be identified and their issues addressed. 

Again, I thank the members of this Subcommittee for the opportunity to provide 

input into what I hope will be the start of modernization of our compensation and 

retirement systems in the military. NGAUS supports any changes that promote the 

viability of the force. It’s time now for all of us associated with the military to work 

with Congress to finish the job. NGAUS stands ready to provide the subcommittee 

with any help it needs. 

810 

Senator GRAHAM. Thank you all. 

Senator McCain, would you like to go first? 

Senator MCCAIN. No, thank you, Mr. Chairman. 

Senator GRAHAM. Okay. Let’s sort of get right into it, here. 

Do you all agree that the 5-percent number has to change? Does 

anybody expect, if you kept the current system and you didn’t 

change it at all, that we’d have to adjust premiums upward over 

time? 

Admiral RYAN. Mr. Chairman, we work with you all to increase 

the premiums and then have them at a cost-of-living rate, so 

they’re already planned to continue to go up. What we don’t have 

a lot of visibility on is, frankly, where the 5 percent came from. 

Senator GRAHAM. Okay. Well, the bottom line is, I think we need 

to get over that hurdle that something has to give, here, on that 

side. The question is—you’re going to have to pay more or the system’s going to collapse over time, and I want to make sure that 

you’re getting more value for your money. 

As to the provider network, it seems to me that they’re been hitting—they’ve been hit hard, in terms of trying to keep TRICARE 

afloat. The only explanation I can give for the fact that there’s so 

many less people participating in TRICARE versus these other programs is the reimbursement rate. Does that make sense? 

Admiral RYAN. Mr. Chairman, one thing I would say is that we, 

at MOAA, certainly agree that we can’t continue with the fee for 

service. We have to do, I think, what the Department of Health 

and Human Services (HHS) is doing. I think we have to do what 

the U.S. Family Health Plan is doing, with capitated financing or 

paying for the value of healthcare rather than the number or volume of procedures that you take. That has—this policy that Admiral Giambastiani talked about, that has us into this spiral that 

we’re into. I think if DOD would come under a single unified command and go to what HHS and others are going to, with a different 

way of financing healthcare, paying for the quality, you would get 

these networks to start opening back up again. 

Senator GRAHAM. Anybody want to take a shot at that? 

General HARGETT. Mr. Chairman, when I was the adjutant general of Tennessee and we had the rural communities, as they were 

discussed earlier, that were underserved, I actually had to write 

letters to healthcare professionals in communities where we were 

not served at all, and just ask them to sign up for TRICARE. What 

I constantly heard from everyone is that, ‘‘We’re—we just can’t 

take the reduced benefit and see the number of people that are required under the current system.’’ 

Ms. RAEZER. Yeah, Mr. Chairman, I would agree. I think what— 

one of our concerns about TRICARE is, TRICARE is not fast 

enough to look at changes in how healthcare is financed, 

incentivized, where some commercial plans have had to do that. 

There have been things happening, as—— 

Senator GRAHAM. That’s what General Chiarelli was saying. 

Ms. RAEZER. Yes, exactly. Some of it comes down to a choice. Do 

you want DOD to take this task on, or do you want to look for solutions among the private sector in—that’s—— 

Senator GRAHAM. Okay. That’s the ultimate issue. Let’s take a 

poll. Starting with you. What do you think is the best thing for the 

811 

Congress to do? Try to take the current system and do what the 

Admiral is talking about, or look at the private sector? 

Ms. RAEZER. I think Congress needs more time to do both. What 

we would recommend is maybe put a hold on the next TRICARE 

contract procurement until you can ask questions of DOD. How— 

what’s the best way to address some of these issues? 

Senator GRAHAM. Here’s my bias. If I were trying to run a 

healthcare company, the last people I’d pick would be the—— 

Ms. RAEZER. Well—— 

Senator GRAHAM.—DOD. 

Ms. RAEZER.—I—— 

Senator GRAHAM. They’re good at blowing things up. 

Ms. RAEZER. So I think you need—there have been questions 

raised about—that the details in the Commission’s report. So, we 

need more details as—— 

Senator GRAHAM. All right. Admiral—— 

Ms. RAEZER. But—— 

Senator GRAHAM.—what’s your bias? 

Admiral RYAN. I obviously have biases, but I was surprised by 

our polling, that, with the challenges that the plan has currently, 

that eight out of ten, across the spectrum, prefer to TRICARE. So, 

I would say Plan A ought to be: You ought to do what you did in 

the 1980s and tell DOD they don’t have a choice, they have to go 

to a unified health plan—— 

Senator GRAHAM. I gotcha. 

Admiral RYAN.—with one person. Then you could fall back on 

Plan B if it doesn’t work. But, I think—— 

Senator GRAHAM. Yeah. 

Admiral RYAN.—you could get the financing the way you want it, 

you could make it a uniform benefit, which is what Senator Gillibrand is concerned about, and we are. Some of the things, like the 

applied therapy for autistic children, they’re not covered in 

FEHBP, and only about 20 of the programs in all the States—— 

Senator GRAHAM. Yeah. 

Admiral RYAN.—even cover it. So, a uniform plan is a pretty good 

benefit. 

Senator GRAHAM. Yeah. Okay. 

Mr. Snee? 

Mr. SNEE. Mr. Chairman, the Fleet Reserve, as I mentioned in 

my statement, of a pilot program, could probably be of the best to 

reevaluate over a period of time. Of course, I wouldn’t come right 

out and say, but—— 

Senator GRAHAM. I gotcha. 

Mr. SNEE.—maybe I’m just saying—but, one of—the other thing 

is, maybe combine the medical commands. 

Senator GRAHAM. Yeah. 

Mr. SNEE. Another thing is the—incentivize to encourage retirees 

to use the MTF, so there’s a little bit more of that level from the— 

especially of—— 

Senator GRAHAM. That’s not going to work very good under sequestration. 

Mr. SNEE. Well, I understand, sir. 

Senator GRAHAM. Yeah. 

General? 

812 

Mr. SNEE. It’s just an idea. The—— 

Senator GRAHAM. Yeah, I know. I know. 

Mr. SNEE.—other thing is, we can send additional information in 

writing, sir. 

Senator GRAHAM. I gotcha. 

General? 

General HARGETT. Mr. Chairman, I think if we continue to do 

the same thing with the same systems, we will get the same result. 

I think we have to look at change. I think it’s up to this subcommittee and the Congress to figure out how to do that change. 

We’re open to help with the change. 

Senator GRAHAM. Senator Gillibrand. 

Senator GILLIBRAND. Thank you, all of you, for the—your testimony. It’s very helpful. 

The Commission’s report describes significant beneficiary dissatisfaction with the current TRICARE health benefit. So, I—it’s 

interesting, Admiral, that you said eight out of ten preferred 

TRICARE, which was pretty alarming—shocking to me, actually. 

So, Ms. Raezer, the National Military Family Association is an 

important voice for our military families. How would you describe 

the military family assessment of TRICARE? Did you guys do polling similar to what the Admiral did? 

Ms. RAEZER. We have not surveyed the way MOAA did, but we 

did—have gone out to families, did a lot of gathering of input as 

we were working through the military health system review and to 

provide input to DOD for that. We could get a lot of feedback from 

families. 

There is a—families are used to TRICARE. They will say, ‘‘I’ll accept the hassle of TRICARE because of the cost.’’ They’re dealing 

with a lot of things, and accepting of a lot of things that they 

shouldn’t have to accept. 

Senator GILLIBRAND. So, just to follow up on that, one of the concerns we were having is that—obviously, military families move 

frequently, and they have limited options under TRICARE. But, at 

the same time, TRICARE covers a wide range of medical needs, regardless of where they move. Do you think that this new model of 

care will provide the same level or greater access to quality of care 

that exists now? Have you assessed that? 

Ms. RAEZER. I think there are options, but a lot of how families 

will actually access is—is going to be dependent on what kind of 

information they get. It’s a lot easier to give information on 

TRICARE and how it does or doesn’t work in certain places. When 

you have more choices, families are going to need more education, 

‘‘When do I pick a national plan’’—— 

Senator GILLIBRAND. Right. 

Ms. RAEZER.—‘‘versus a local plan?’’ for example. 

Senator GILLIBRAND. Are you concerned about how military families will be able to transfer medical records maintained by a private 

provider when the family is required to move to a new location? Is 

that something you’ve assessed? 

Ms. RAEZER. That’s already a problem. If I go to a civilian—if my 

TRICARE prime doc at a military hospital sends me to a civilian 

specialist, if I don’t carry that record back to that civilian’s—to that 

primary doctor, the—or vice versa, if I’m going from a military speVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00818 Fmt 6601 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
813 

cialist back to a civilian primary care manager, I’m the one carrying the record. So—— 

Senator GILLIBRAND. So, we might have to require portable 

records, which is obviously a huge problem from going to—— 

Ms. RAEZER. Yeah. 

Senator GILLIBRAND.—Active Duty to veteran service, anyway. 

Admiral, in your polling, did you poll both Active Duty military 

families and retirees? 

Admiral RYAN. Yes, Senator, we did. 

Senator GILLIBRAND. Was there a difference in their assessments? 

Admiral RYAN. There was a slight difference. We had—about 10 

percent of the folks were Active Duty, because we’re—we have 

90,000 Active Duty and we have 300,000 that are in some stage of 

second careers or third careers. 

It was interesting, of the 400 spouses that responded, they were 

at 85 percent, they preferred TRICARE to an FEHB program. 

Overall, it was 80 percent. For the Active Duty, there was a slight 

split. Below 35, it was about 73 percent. Above 35, it was about 78 

percent that preferred TRICARE to the FEHB. So, it was fairly 

consistent—— 

Senator GILLIBRAND. Interesting. 

Admiral RYAN.—across all. 

Senator GILLIBRAND. Mr. Snee and General Hargett, did you 

have any feedback from your members? 

General HARGETT. Yes, ma’am. The most people that we heard 

from—and bear in mind, our people are in rural communities, they 

don’t have access to the Fort Braggs and the Fort Campbells—most 

of them were favorable to change—— 

Senator GILLIBRAND. Okay. 

General HARGETT.—because of the lack of access and—— 

Senator GILLIBRAND. Because of the challenge with access, 

yeah—— 

General HARGETT. Yes, ma’am. 

Senator GILLIBRAND.—very much so. 

General HARGETT. Yes, ma’am. 

Senator GILLIBRAND. I see that in New York State all the time. 

General HARGETT. Yes, ma’am. 

Senator GILLIBRAND. Mr. Snee? 

Mr. SNEE. Yes, ma’am. We surveyed 80 percent of ours—membership, as well. As you said, it is well with—in the Tennessee area 

of considering the Active Duty folks is where they’re going to be, 

especially with our recruiters and our reservists in this type of 

thing. But, with—they want to keep TRICARE. 

Senator GILLIBRAND. One of the things that I hear a lot from our 

veterans is that the mental health services that are needed really 

aren’t there, that, in fact, for a female who is suffering from posttraumatic stress disorder, she may avoid the VA, because they 

don’t have specialists who understand her concerns or what she’s 

going through, or various stigma associated with going through existing structures. Do—have you done any assessment if this would 

perhaps help, the access to mental health services, being able to go 

general providers, where there are specialists and expertise, and 

have a wider choice might benefit some of our retirees and veteran 

814 

population? But—I don’t know, so I’d like to know if you’ve had any 

analysis on that. 

Admiral RYAN. Senator Gillibrand, that’s a great question. I was 

surprised. We chartered a study on mental health—civilian mental 

health workers and—were they culturally sensitive to the military, 

where they could be effective? RAND did the study for us, and we 

can make that available to you, but we were very surprised that 

the majority—I want to say close to 90 percent—did not have the 

cultural sensitivity to be effective in their counseling—— 

Senator GILLIBRAND. In the military—— 

Admiral RYAN.—of military families and children, as well as the 

veterans. That study, we did in 2014. We briefed up there on the 

Hill, but we haven’t gotten it out as much as we want to. 

Some States are more effective at helping with that. Joining 

forces has helped with doctors. But, overall, the RAND study was 

pretty dramatic in the fact that they didn’t have the cultural sensitivity and awareness that they needed to be effective. 

Ms. RAEZER. But, Senator, there’s also an issue with just the— 

the network issue. We hear from too many Active Duty families 

who are trying to get behavioral healthcare for a child, and they’ve 

gone through the list in the—that—in the network, and continue 

to hear, ‘‘No, we’re not taking any new patients. We’re not taking 

TRICARE patients. No, we’re long—no longer in the network.’’ So, 

there are access issues right now. We think the sensitivity, there 

are ways to—that should be done to make that better for all providers. But, for a lot of our families, it starts with access. They 

can’t get the care. 

Senator GRAHAM. One quick question and I’ll turn it over to Senator Tillis, here. 

When people say they prefer TRICARE to a more commercial 

system, how do they know, if they’ve never been in it? 

Senator GILLIBRAND. Yeah, that’s the unknown, you’re right. 

Senator GRAHAM. Yeah. 

So, Senator Tillis, go ahead. 

Senator TILLIS. Actually, just—I was channeling my first question through the chairman. 

But, because the question that I had—and it went back to maybe 

some of the surveys or polling, just—I’d be very interested in taking a look at the methodology and how the questions were asked, 

because the—it’s one thing to say—first off, I was astonished by 

the numbers, in the 70s. I thought, generally speaking, people don’t 

like their health plan, for just general reasons. So getting anywhere beyond the 60s would be surprising to me, in terms of the 

user experience. But if you look at—if you couch some of the questions—and I think—and is it—am I pronouncing it right? Ms. 

‘‘Razor’’? 

Ms. RAEZER. Yes. 

Senator TILLIS. If you couch the question by saying—if I’m in 

Fayetteville, and I go from having 15 providers who are willing to 

participate in the TRICARE plan, and 138—and I will guarantee 

you, knowing North Carolina relatively well, I know about the 

quality of the providers at the other end of the spectrum—would 

they potentially answer that question differently? 

815 

This is more with an eye towards the value for the money. You 

look at behavioral health, the number of people that may opt out 

of being in a provider network now simply because the reimbursement rates do not make it viable in the face of a number of other 

people seeking the care that may be able to be with that insurer 

that has a higher reimbursement rate. 

So, how do we get—I mean, do you all feel like that, in spite of 

all that I just said there, that, generally speaking, your members 

are satisfied with TRICARE as it exists today? 

Ms. RAEZER. I know there are military families who are very satisfied with TRICARE because they’re basically healthy and they’re 

willing, in many cases, to wait for a little bit of access in a military 

hospital because they’re not paying anything out of pocket. But, 

anecdotally—and I think a good question for DOD is—how many 

families are switching from Prime to Standard? Why do you 

think—because Standard, they pay more, but they have more 

choice. 

Senator TILLIS. Right. 

Ms. RAEZER. I know a lot of our families who get frustrated in 

doing some of the bureaucratic goat ropes will say, ‘‘I’m going to 

manage my own care. I’m going to go to Standard.’’ I think 

there’s—families are looking at the cost. They’re afraid of change. 

There’s been so much change. There’s a lot of anxiety, and so, 

‘‘Well, we know what to expect with TRICARE right now, so we’re 

not sure we want to take that leap into something different.’’ 

Senator TILLIS. I always love my insurance when I’m not using 

it. 

But, what about the rest of the people on the panel, on the same 

question, about your members? 

Admiral RYAN. It’s a great question, and this was more than just 

our members. We had over 1,500 noncommissioned officers answer, 

400 spouses. Some of them didn’t say whether they were noncommissioned officer spouses or officer spouses. But, we got a crosssection. We were really trying to find out just how people felt. Because the way the Commission asked the question, I think, was 

fair, but it’s—who was—who doesn’t want more access? Who 

doesn’t want it to be more timely? We know there are problems 

with that, as Ms. Raezer has said. So, we were surprised by the 

response, that, despite the challenges—and that’s why we’re leaning toward Plan A, demand that they go to a optimized system of 

one unified person in charge, where you can hold them accountable 

for getting a uniform plan, with better type of financing, where 

there’s risk between the contractor and the military, and it— 

whether it’s capitation or value, and go that way, rather than 

throw the baby out with the bath water. 

Senator TILLIS. I was glad to hear your points on capitation 

strategies earlier. I agree with it. 

Mr. Snee? 

Mr. SNEE. Yes, sir. From the culture of change, if you will, from 

the dependents as to where do we go, we move from one place to 

another under permanent change-of-station orders. What’s going to 

happen where we get to our next duty station? Is it going to be 

available? I made mention of recruiters. Of course, not to take 

away from my colleague here, the Major General, and the reservVerDate Nov 24 2008 14:01 Jun 26, 2015 Jkt 000000 PO 00000 Frm 00821 Fmt 6601 Sfmt 6602 Z:\DOCS\94844.TXT JUNE
816 

ists, as to, okay, so where do we go from here, and where can we 

have the change? Are we going to have something that we know 

we can use? If you have that pressure put on the family, especially 

the spouses, as, ‘‘Okay, where do we go?’’ Nothing the—from North 

Carolina, even here in Virginia, but let’s go out to Wyoming, let’s 

go out to some of those other areas. As long as you have that MTF 

umbrella in those referral services outside, that’s okay. But, once 

you get out of that, you’re talking about a culture of change of 

‘‘What if?’’ 

Thank you. 

Senator TILLIS. General Hargett? 

General HARGETT. Yes, sir, Senator. 

I’m probably one of those guys that retired from Active Duty and 

I didn’t know what I didn’t know. I used TRICARE, and I used the 

Fort Campbell and Fort Hood and all those places forever. So, I 

was actually pretty happy with it. But, once you go out and retire, 

you find that it’s far different when you start looking at access. 

As a matter of fact, I’ll follow onto what she said—when I retired, and I started figuring out my access, I actually went to 

MOAA and bought a supplement, where I could switch over to 

Standard and paid, what, I don’t know, Norb, $130 every quarter 

to be able to have access to a larger network. So I think sometimes 

that we kind of get caught into what is it we’re used to, what we’re 

comfortable with. When you asked the question about change, people fear change. 

Senator TILLIS. Mr. Chairman, if I may, just one thing. 

I would like to underscore what Senator Gillibrand said about 

medical information, chart data. We did a lot of work in North 

Carolina trying to make sure comprehensive information follows 

the patient. That’s one of the dangers. If you have an expanded 

provider network, and you don’t have that transportability of information, you may have a more qualified provider, but they’re acting 

on less information. I think that’s a very important part. 

The other thing related to support for spouses. I think one of the 

panelists mentioned just one of the treatments on autism. If we’re 

talking about—this is something that we actually took action on as 

I was Speaker in North Carolina—when you’re talking about the 

impact that that has on the family, particularly of deployed personnel, it’s not only transformational for the child that may be in 

the program, but for that parent who’s taking care of the family 

while their loved one’s deployed. I think that’s an area that we 

need to look at, as well. 

Ms. RAEZER. I would agree, Senator. I think that’s where the 

Commission’s recommendation to make sure that the plans are addressing the unique needs of military families, that’s so important, 

and looking at things that TRICARE has—DOD has already 

deemed as essential, with your help, like the ABA therapy, they 

need to be included in these plans as requirements. We need to 

look at things like mobility and how to help families as they move. 

So—but, that, we believe, is doable, with a conversation. We all 

have our lists of what happens. Right now, things are falling 

through the cracks, in some cases. So, this is an opportunity to talk 

about how to make things better. 

Senator GRAHAM. Go ahead, Senator Gillibrand. 

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Senator GILLIBRAND. Yeah. 

Following along this concern, I think one thing we can work on, 

to whatever end we have, a—minimum requirements. I mean, part 

of the debate on healthcare reform was the fact that it would be 

great if you could go to any State at any time and have hundreds 

of plans at your fingertips, that you could buy whatever you wanted. But, the reason why that was a debatable issue is because some 

States had minimum standards. So, New York State, for example, 

said, ‘‘You have to cover mammograms. You cannot not cover mammograms, because we know that if you don’t have any money, 

you’re not going to spend that 20 bucks, you’re saying to say, ‘I’m 

going to risk it another year. I can wait another year. I don’t have 

that 20 bucks right now.’ ’’ Because that was the copay for a mammogram in that fact pattern. 

So, maybe one thing we should work on is, What are the minimum standards for the marketplace that we would have? Because 

obviously you’re going to have a lot of new customers. If we do 

something like this, you have an enormous number of new potential customers, so we say, to be eligible to get these customers, you 

have to have minimal standards. Maybe that creates a marketplace. I don’t know. But, to the extent you can think through that, 

or if you have thoughts on that, please advise us. But, I’m going 

to ask the panel to perhaps brief that issue—the Commission. 

Senator GRAHAM. That’s actually a—here’s the big dilemma. One, 

we have to do something with the current system, because it’s just 

unsustainable. Admiral Ryan, we’ve been wrestling this alligator 4 

or 5 years. I just have lost, sort of, faith that we can take the current construct, the single-payer system that you’re envisioning, and 

make it as efficient as a competitive model. But, having said that, 

the minimum standards is probably a good idea to look at. You just 

don’t want to have too much so that it loses the whole advantage 

of being able to get more people to participate. 

So—and here’s the honest answer. It seems to me that the person who’s going to pay the most is the retiree, no matter what you 

do. The family members are pretty well held harmless with the 

new system, maybe a little more out of pocket. The National Guard 

guys may pay some more, but they’re definitely going to get a bigger choice. It’s the retiree that we need to really watch, here, and 

be fair to. 

So, you have reservists who live in rural areas that feel like they 

would benefit from choice. You have families that are accompanying Active Duty members that we want to take care of for recruitment purposes. So, I think probably the more choice, the better, for them. Then you have the retiree population, who has done 

their service to the country, and you want to be fair to them. You 

have a unsustainable system as it exists today. 

So, what I want to do is—this pilot project? I don’t really know 

what the right answer is, other than: Change is coming. I just really appreciate the input that you’ve given us. 

Admiral, I promise you, whatever we do, we will listen to what 

you have to say. Probably going to come out differently, at least I 

will, on the idea of a single-payer system, but I want to make sure 

that any cost increased borne by the retiree community is something I can look them in the eye and say, ‘‘That’s justified, and 

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you’re getting more for your money.’’ If I can’t do that, I won’t do 

it. Because I am going to ask people to pay a little bit more. There’s 

just no way around that. If I can’t say, ‘‘You’re getting something 

better for your money,’’ I’m not going to do it. It’s not about just 

saving money, it’s about improving quality of healthcare. 

Thank you all. To be continued. 

[Whereupon, at 4:28 p.m., the subcommittee adjourned.] 

[Questions for the record with answers supplied follow:] 

QUESTIONS SUBMITTED BY SENATOR KIRSTEN E. GILLIBRAND

HEALTHCARE

1. Senator GILLIBRAND. Commissioners, the commission has recommended the Department of Defense (DOD) implement a system similar to the healthcare benefits 

available to civilian employees. Often the services available in those plans may differ greatly from location to location. Military families move every 2 to 3 years on 

average. How does the commission account for the availability of care in different 

locations under the different plans? 

Mr. MALDON. For Active component (AC) members, their ability to obtain care, 

regardless of duty station, would improve under TRICARE Choice. First, 

TRICARE’s low reimbursement rates cause less participation among providers. This 

situation can be aggravated in higher-cost markets where TRICARE reimbursement 

rates are particularly uncompetitive, deterring provider participation. Health care 

markets, including their supply of doctors and the rates for procedures, vary substantially by geographic location. Commercial health insurance carriers specialize in 

organizing networks and delivering health care suited to local markets. A selection 

of commercial insurance plans under TRICARE Choice is more likely than 

TRICARE to reflect the conditions of the local health care market, including a network that best incorporates available doctors. AC family members getting care at 

Military Treatment Facilities (MTFs) can experience a loss of continuity of care 

mainly because of unavailability of appointments with the same primary care provider. Under TRICARE Choice, the insurance plan would be required to build a robust network of civilian providers allowing the beneficiaries to choose a provider 

who has availability and can provide continuous care. 

Continuity of care for Reserve component (RC) members would improve as well 

under the TRICARE Choice system. RC members and their families face a lack of 

continuity of care when RC members transition to and from active duty and are 

moved on and off of TRICARE. This situation is particularly difficult when the servicemember is activated and if the family’s existing health care providers do not accept TRICARE. When the RC member is not supporting a contingency operation 

during activation, TRICARE coverage ends abruptly upon demobilization, resulting 

in a break in coverage until coverage can resume under the civilian health insurance plan. Under TRICARE Choice, when the RC member is mobilized, the RC families would have the choice to retain their existing (civilian) health insurance or 

move to a TRICARE Choice plan. In either scenario continuity of care is improved. 

It is more likely the RC families’ current physicians would participate in TRICARE 

Choice plans with traditional commercial insurance networks than the current 

TRICARE network. 

Within TRICARE Choice, national plans would be offered; therefore, military families that choose national plans would not have to change plans, which would facilitate having the same level of health care when moving within the United States. 

Additionally, the Commission’s proposed legislation would mandate that health benefit plans under TRICARE Choice include the health care benefits provided under 

TRICARE and Federal Employee Health Benefit Program (FEHBP) currently, as 

well as the essential health benefits established under the Patient Protection and 

Affordable Care Act. The national plans and inclusion of standard benefits will ensure like coverage in all locations. 

2. Senator GILLIBRAND. Commissioners, do you recommend a required standard 

of care that will be available under all plans? 

Mr. MALDON. Under the Commission’s recommendation, a selection of plans would 

be offered 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. Specifically, the Commission’s 

proposed legislation includes that all health benefits plans under TRICARE Choice 

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meet a baseline of quality measured in criteria such as an ample number of health 

care providers, ease of access to services, and inclusion of the latest medical treatments and technologies The Commission’s proposed legislation would mandate that 

health benefit plans under TRICARE Choice include the health care benefits provided under TRICARE and FEHBP currently, as well as the essential health benefits established under the Patient Protection and Affordable Care Act. The recommendation further states that the Office of Personnel Management (OPM) would 

administer the health care program. OPM would be able to leverage its experience 

in managing the FEHBP, and other large-scale health benefits programs, to achieve 

the best health care benefits with the greatest amount of flexibility possible. OPM 

has established criteria for deeming health plans acceptable for FEHBP, and would 

have similar standards for evaluating plans for inclusion in TRICARE Choice. Additionally, DOD would be required to submit recommendations and data to OPM to 

ensure the program meets the unique needs of the DOD beneficiary population. 

3. Senator GILLIBRAND. Commissioners, will it be more or less difficult for these 

family members to receive continuous healthcare as they move from duty station to 

duty station with inconsistent civilian healthcare services available at different locations? 

Mr. MALDON. For Active component (AC) members, their ability to obtain care, 

regardless of duty station, would improve under TRICARE Choice. First, 

TRICARE’s low reimbursement rates cause less participation among providers. This 

situation can be aggravated in higher-cost markets where TRICARE reimbursement 

rates are particularly uncompetitive, deterring provider participation. Health care 

markets, including their supply of doctors and the rates for procedures, vary substantially by geographic location. Commercial health insurance carriers specialize in 

organizing networks and delivering health care suited to local markets. A selection 

of commercial insurance plans under TRICARE Choice is more likely than 

TRICARE to reflect the conditions of the local health care market, including a network that best incorporates available doctors. AC family members getting care at 

MTFs can experience a loss of continuity of care mainly because of unavailability 

of appointments with the same primary care provider. Under TRICARE Choice, the 

insurance plan would be required to build a robust network of civilian providers allowing the beneficiaries to choose a provider who has availability and can provide 

continuous care. 

Continuity of care for Reserve component (RC) members would improve as well 

under the TRICARE Choice system. RC members and their families face a lack of 

continuity of care when RC members transition to and from active duty and are 

moved on and off of TRICARE. This situation is particularly difficult when the servicemember is activated and if the family’s existing health care providers do not accept TRICARE. When the RC member is not supporting a contingency operation 

during activation, TRICARE coverage ends abruptly upon demobilization, resulting 

in a break in coverage until coverage can resume under the civilian health insurance plan. Under TRICARE Choice, when the RC member is mobilized, the RC families would have the choice to retain their existing (civilian) health insurance or 

move to a TRICARE Choice plan. In either scenario continuity of care is improved. 

It is more likely the RC families’ current physicians would participate in TRICARE 

Choice plans with traditional commercial insurance networks than the current 

TRICARE network. 

Within TRICARE Choice, national plans would be offered; therefore, military families that choose national plans would not have to change plans, which would facilitate having the same level of health care when moving within the United States. 

Additionally, the Commission’s proposed legislation would mandate that health benefit plans under TRICARE Choice include the health care benefits provided under 

TRICARE and FEHBP currently, as well as the essential health benefits established 

under the Patient Protection and Affordable Care Act. The national plans and inclusion of standard benefits will ensure like coverage in all locations. 

4. Senator GILLIBRAND. Commissioners, how can the military provide continuity 

of care for military family members who choose to receive their healthcare using a 

commercial insurance plan? Will their medical records now be maintained by their 

commercial healthcare provider and not by the military? 

Mr. MALDON. Under TRICARE Standard and Extra, military family members 

elect to receive all of their health care from civilian health care providers, and their 

medical records are maintained by the health care provider of their choice. Under 

TRICARE Choice, continuity of care would come, in part, from providing beneficiaries with the opportunity to select from among civilian providers who are tied 

to the communities they serve, and therefore, are less likely to move and leave the 

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network. Beneficiaries’ medical records would be maintained by the providers, and 

because of electronic medical records and electronic health care records requirements under the Patient Protection and Affordable Care Act, records could be 

shared among providers in different geographic areas (as appropriate, subject to the 

Health Insurance Portability and Accountability Act requirements). As it is today, 

obtaining documentation from private healthcare providers and providing documentation for military health records update, if needed, is ultimately the military 

family members’ responsibility. 

5. Senator GILLIBRAND. Commissioners, if family members elect not to receive 

their healthcare in military facilities, and their health records are maintained by 

their private healthcare providers, how will the military conduct medical screenings 

necessary to ensure that appropriate medical services are available at new duty stations, particularly overseas locations, as is currently done pursuant to the Exceptional Family Member Program? 

Mr. MALDON. Under TRICARE Standard and Extra military family members can 

elect to receive all of their health care from civilian health care providers, and their 

chosen health care provider maintains their medical records. Obtaining documentation from private healthcare providers and providing documentation for military 

health records updates is ultimately the military family members’ responsibility. 

Any screening necessary, but not previously conducted, can be accomplished either 

at a Military Treatment Facility or by a private health care provider. 

6. Senator GILLIBRAND. Commissioners, the commission recommends a Basic Allowance for Health Care (BAHC) to help Active-Duty military families pay the cost 

of TRICARE Choice. As we know, medical expenses are typically not spread out 

evenly throughout the year, and in many instances are not predictable. This is particularly significant for junior enlisted military personnel at the lower end of the 

pay scale. How will the BAHC be disbursed to military families to meet unexpected 

medical costs? 

Mr. MALDON. The portion of the BAHC used to pay the insurance plan premium 

for Active component families would appear as an allotment on the servicemember’s 

Leave and Earnings Statement. This portion of BAHC would be paid directly into 

the OPM trust fund for payment to the insurance plan selected. If the servicemember indicates a non-TRICARE Choice plan in the Defense Enrollment Eligibility Reporting System, the Defense Finance and Accounting Services would make payment 

directly to that insurance carrier. The portion of the BAHC to be used for active 

duty families’ out-of-pocket costs (copayments, coinsurance, and deductibles) would 

be paid to active-duty servicemembers as a cash payment in their direct deposit. 

To help servicemembers plan for unexpected medical costs, health care issues 

would be addressed in financial literacy training sessions provided for in the Commission’s recommendations. In cases when a family member experiences extraordinary medical expenses due to catastrophic or chronic health care needs, a fund 

would be available to address the gap between BAHC and the catastrophic cap for 

the beneficiaries’ insurance plan. 

MILITARY TREATMENT FACILITIES

7. Senator GILLIBRAND. Commissioners, the commission recommends further 

downsizing the capacity of MTF; how do you foresee dealing with MTFs in more remote areas and would those be at risk under the commission’s proposal? 

Mr. MALDON. The Commission supports strengthening MTFs. The Commission 

did not recommend downsizing the capacity of or closing MTFs, rather it recommended reorienting them to focus on training military medical personnel for the 

readiness mission. The Commission has in fact recommended changes that would 

increase the viability of MTFs. For example, the Commission proposed eliminating 

MTF catchment areas to allow beneficiaries who currently live outside catchment 

areas to seek health care at MTFs, incentivizing beneficiaries to use MTFs through 

lower copayments than civilian providers, encouraging insurance carriers to send 

workload to MTFs by offering lower reimbursement rates for medical procedures, 

and providing MTFs the authority to treat veterans and civilians with cases that 

are needed for Essential Medical Capability skill maintenance. 

8. Senator GILLIBRAND. Commissioners, the commission recommends opening 

MTFs to people who do not get their care through DOD as needed to meet trauma, 

surgical and other professional requirements for the health providers. What impact 

821 

do you foresee this recommendation having on servicemembers and their families 

as they seek care at the MTFs? 

Mr. MALDON. The Commission recommended opening MTFs to veterans and civilians with the case mix needed to meet Essential Medical Capabilities (EMC) and 

not for all care. This change was recommended to strengthen the MTFs as training 

platforms, while preserving the access of beneficiary groups to the MTFs. The Code 

of Federal Regulations (CFR) currently specifies the priority level assigned to categories of DOD beneficiaries with space-available access to MTFs. Veterans and civilians would be added to the groups within the CFR at a level below the existing 

priority groups. Veterans and civilians seeking medical treatment of the same type 

as DOD beneficiaries would not displace DOD beneficiaries in the existing priority 

groups. In the cases that involve EMC-related medical procedures, EMCs would be 

included as a factor in the prioritization. Servicemembers or their family members 

with EMC-related cases would have priority over veterans who will, in turn, have 

priority over civilians. 

TRICARE AND MEDICAID AND ECHO

9. Senator GILLIBRAND. Commissioners, the commission correctly noted that military families who are eligible for Medicaid services have to reapply for Medicaid 

benefits every time they move to a new State, and many encounter waiting lists 

that are longer than their assignments. To address this, the commission recommended that the ECHO benefit be expanded to provide benefits similar to the 

Medicaid benefit. Will the expanded ECHO benefit vary by State so that it matches 

the individual State’s Medicaid benefit, or would it be a standard benefit for all military families? 

Mr. MALDON. The Commission recommends a consistent set of expanded Extended 

Care Health Option (ECHO) services regardless of duty station. Because Medicaid 

waiver services are determined at a State level and can vary from State to State, 

this means that the services offered through ECHO will not exactly match the services offered in every State. The proposed implementation plan includes an analysis 

of Medicaid waiver services across all States to identify the common services to be 

added to ECHO. 

10. Senator GILLIBRAND. Commissioners, would ECHO continue to provide this 

benefit once the military family satisfies the waiting list requirements? Will the 

military families be able to choose Medicaid or ECHO or could they receive benefits 

from both? 

Mr. MALDON. Under the Commission’s recommendation for the ECHO program, 

military families may continue to receive ECHO benefits even after they satisfy 

waiting list requirements for State Medicaid waiver services, just as they can today. 

In addition, because the Secretary of Defense has determined that services through 

Medicaid are not considered available and adequate for the purpose of ECHO, military families may receive benefits from both programs simultaneously. 

DEPARTMENT OF VETERANS AFFAIRS COLLABORATION

11. Senator GILLIBRAND. Commissioners, if the Reserves are transitioned to 

TRICARE Choice, then how will DOD/VA interface with private providers to make 

sure military records are up to date and accurate? 

Mr. MALDON. Military records are the servicemembers’ and their Personnel Commands’ combined responsibility. Currently, servicemembers go through their command’s personnel office to update their records and periodically review them for accuracy. 

Obtaining documentation from private health care providers and providing documentation for military health records update, similarly, is ultimately the 

servicemembers’ responsibility. DOD and VA interface with civilian providers today 

for updating medical information in military health records, and there would be no 

difference under TRICARE Choice. 

The Commission recommended that the DOD and the VA electronic health 

records meet the national standards for electronic health records. The Commission 

also recommended that DOD require the private providers in TRICARE Choice network to adhere to the national standards. Assuming such compliance, exchanging 

electronic health information would be seamless. 

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