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i 

94–094 2015

[H.A.S.C. No. 114–7] 

FINAL RECOMMENDATIONS FROM THE 

MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON MILITARY PERSONNEL 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

FEBRUARY 11, 2015 
(II) 

SUBCOMMITTEE ON MILITARY PERSONNEL 

JOSEPH J. HECK, Nevada, Chairman 

WALTER B. JONES, North Carolina 

JOHN KLINE, Minnesota 

MIKE COFFMAN, Colorado 

THOMAS MACARTHUR, New Jersey, Vice 

Chair 

ELISE M. STEFANIK, New York 

PAUL COOK, California 

STEPHEN KNIGHT, California 

SUSAN A. DAVIS, California 

ROBERT A. BRADY, Pennsylvania 

NIKI TSONGAS, Massachusetts 

JACKIE SPEIER, California 

TIMOTHY J. WALZ, Minnesota 

BETO O’ROURKE, Texas 

DAVE GIACHETTI, Professional Staff Member 

CRAIG GREENE, Professional Staff Member 

COLIN BOSSE, Clerk 
(III) 

C O N T E N T S 

Page 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Davis, Hon. Susan A., a Representative from California, Ranking Member, 

Subcommittee on Military Personnel ................................................................. 2 

Heck, Hon. Joseph J., a Representative from Nevada, Chairman, Subcommittee on Military Personnel ........................................................................ 1 

WITNESSES 

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.), 

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

P. Carney .............................................................................................................. 3 

APPENDIX 

PREPARED STATEMENTS: 

Heck, Hon. Joseph J. ........................................................................................ 35 

Maldon, Hon. Alphonso, Jr., joint with Hon. Larry L. Pressler, Hon. 

Stephen E. Buyer, Hon. Dov S. Zakheim, Mr. Michael R. Higgins, 

Gen. Peter W. Chiarelli, Adm. Edmund P. Giambastiani, Jr., Hon. 

J. Robert Kerrey, and Hon. Christopher P. Carney ................................... 36 

DOCUMENTS SUBMITTED FOR THE RECORD: 

[There were no Documents submitted.] 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

Dr. Heck ............................................................................................................ 51 

Mr. Knight ........................................................................................................ 51 

Mr. Walz ............................................................................................................ 51 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

Mr. Jones ........................................................................................................... 59 

Mr. Kline ........................................................................................................... 55 

Mr. MacArthur .................................................................................................. 58 

(1) 

FINAL RECOMMENDATIONS FROM THE MILITARY COMPENSATION AND RETIREMENT MODERNIZATION COMMISSION 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ARMED SERVICES, 

SUBCOMMITTEE ON MILITARY PERSONNEL, 

Washington, DC, Wednesday, February 11, 2015. 

The subcommittee met, pursuant to call, at 12:58 p.m., in room 

2212, Rayburn House Office Building, Hon. Joseph J. Heck (chairman of the subcommittee) presiding. 

OPENING STATEMENT OF HON. JOSEPH J. HECK, A REPRESENTATIVE FROM NEVADA, CHAIRMAN, SUBCOMMITTEE ON 

MILITARY PERSONNEL 

Dr. HECK. Go ahead and call the Military Personnel Subcommittee of the House Armed Services Committee meeting to 

order. I want to welcome everyone to the first hearing of the Military Personnel Subcommittee on the 15 recommendations to modernize the military compensation and retirement system suggested 

by the Military Compensation and Retirement Modernization Commission. 

We appreciate the Commission’s diligent and comprehensive review of the military pay and benefits system, and believe their 

thoughtful recommendations deserve our attention and careful 

study. We want to ensure everyone that the Military Personnel 

Subcommittee will take every opportunity to thoroughly review and 

discuss them in the coming months. 

We are fully committed to improving the welfare and quality of 

life for both current members of our armed services and our veterans, while ensuring we keep our Nation safe and secure. Our 

purpose today following last week’s full committee hearing is to 

begin the subcommittee’s effort to understand the assumption, rationale, and details behind the Commission’s recommendations. 

A key consideration for our work is to continue viability of the 

All-Volunteer Force, which has been well sustained by our current 

compensation system since its inception. Most importantly, we 

must not break faith with our service members and undermine our 

efforts to recruit and retain the best and brightest in our Armed 

Forces. 

Before I introduce our panel, let me offer Congresswoman Davis 

an opportunity to make her opening remarks. 

[The prepared statement of Dr. Heck can be found in the Appendix on page 35.] 
2 

STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE 

FROM CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON 

MILITARY PERSONNEL 

Mrs. DAVIS. Thank you, Mr. Chairman. 

I also want to welcome back the commissioners. You have all 

been very, very busy and we appreciate the dedication of your time 

and effort. 

I believe this hearing at the subcommittee level provides our 

committee members the opportunity to have a better dialogue with 

all of you, with the commissioners, to better understand the assumptions and the details behind the recommendations. 

As we continue this dialogue over the next several months, we 

will have a hard look at 15 recommendations. And we are interested in being sure that any action that the Congress takes will 

preserve the All-Volunteer Force as an underlying principle. And 

we know you understand that as well. 

Some of the recommendations may take longer to fully understand before we can act. And we know it would have been very difficult actually to have sustained our All-Volunteer Force over the 

past 13 years of war without the current compensation system that 

we have today. 

But we are entering a new reality. Fiscal pressures with the new 

generation of citizens entering the military, and it is time to look 

at this and to look at it responsibly. 

The commissioners and their staffs have certainly, as I said, put 

in serious effort into this. And we, Mr. Chairman, as I know you 

believe, must do the same. Thank you. 

Dr. HECK. Thank you, Mrs. Davis. 

Before I introduce the panel let me just lay down some groundwork because we heard that votes will be somewhere between 1:50 

and 2:05. We know that you have a hard stop at 2:45 to get across 

campus. So I would ask to please keep opening statements short. 

To those of us at the panel, keep questions short and succinct, 

and give enough time for the commissioner to answer it. And we 

will try to muscle through as fast as we can. But we don’t want 

to shortchange anybody’s opportunity to give their opinions. 

In addition, today we are kind of now at I think recommendation 

141⁄2. So recommendation 15 of the Commission on a military dependent education category for disaggregating data we just added 

as an amendment to the Elementary and Secondary Education Act 

reauthorization, which is going on right now in the Education and 

Workforce Committee. So, recommendation 15 is already on its way 

to being adopted. 

We are again joined by an outstanding panel of commissioners. 

Again please try to keep your statements to 5 minutes or less. Your 

written comments will be made part of the record. 

I want to welcome the Honorable Alphonso Maldon, Chairman of 

the Commission; the Honorable Stephen Buyer; the Honorable 

Christopher Carney; Mr. Michael Higgins, who we all know well; 

General Peter Chiarelli; and Admiral Giambastiani. 

Chairman. 
3 

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.), ADM EDMUND P. GIAMBASTIANI, 

JR., USN (RET.), AND HON. CHRISTOPHER P. CARNEY 

Mr. MALDON. Thank you, Chairman Heck, Ranking Member 

Davis, distinguished members of the subcommittee. My fellow commissioners and I are honored to be here with you today. We thank 

you for the opportunity to testify. 

As a Commission we stand unanimous, Mr. Chairman, in our belief that our recommendations strengthen the foundation of the AllVolunteer Force. It secures our national security and honors those 

who serve and the families who support them now and into the future. 

Our recommendations maintain or increase the overall value of 

the compensation and benefits for service members and their families, and provide needed flexibility for service personnel managers 

to design and manage a balanced force. 

Our blended retirement plans expands benefits from 17 percent 

to 75 percent of service members, while maintaining the service’s 

current force profiles. It provides flexibility for service members 

and its services while protecting and improving the assets of service members who retire at 20 years of service. 

These findings are based on reasonable and conservative estimates, including TSP [Thrift Savings Plan] investment returns of 

7.3 percent, and retired pay costs of living adjustments of 2.3 percent. 

To maintain current force profiles, TSP contributions were not 

recommended beyond 20 years of service. However, the consideration of matching contribution that continues beyond 20 years of 

service may be an area 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 maintenance skill 

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 improving the costeffectiveness of DOD’s [Department of Defense] commissary and exchanges. 

Our recommendations also save more than $12 billion annually 

after full implementation without cutting the overall benefit of 

service members. Our recommendations align compensation to the 

preferences of service members, 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 the alternative benefit level. Its analytical tools then enabled for the first time direct comparison between the value of that service member’s place on varying compensation and benefits packages. 
4 

The survey validates the many comments we received from service members and their families at the 55 installations that we visited. Our recommendations incorporate substantial consideration of 

potential second- and third-order effect, which are reflected in our 

implementation timelines. 

Advancing these implementation timelines due to budget constraints may lead to an unanticipated cost, implementation challenges, or even failed modernization efforts. An example may be accelerating the multiyear backend operational efficiency of our commissary and exchange recommendations. 

In closing, my fellow commissioners and I again thank you for 

the opportunity to testify before you today. And we stand ready for 

your questions, Mr. Chairman. 

[The joint prepared statement of the commissioners can be found 

in the Appendix on page 36.] 

Dr. HECK. Thank you, Mr. Chairman. So no other opening statements? 

Mr. MALDON. That is it. 

Dr. HECK. Great. 

Mr. MALDON. Thank you. 

Dr. HECK. We will now begin with a 5-minute round of questions 

for the members of the panel. 

Again I want to thank all the commissioners for being here. And 

certainly I have got a lot of questions that probably go far—too far 

into the weeds at this level that we will probably address in later 

hearings or roundtable briefings with some of the Commission staff 

members. A couple of quick ones. 

You know when we talk about some of the rationales and assumptions used to come up with some of the recommendations, I 

was intrigued by one of the health care recommendations, specifically when it went to the dependent health care and enrolling them 

in some type of FEHBP [Federal Employee Health Benefit Plan]- 

like program and not under TRICARE. 

From the report, and I will quote—‘‘There are limited provider 

networks. Another important part of good access to care is having 

ample health care providers available to provide treatment. 

TRICARE networks of civilian health care providers, however, are 

limited because TRICARE reimburses providers for health care 

procedures at a rate equal to or lower than Medicare reimbursement rate. By reimbursing doctors at rates equal to or less than 

Medicare levels, which are less than market rates, TRICARE has 

been unable to attract enough quality doctors. In contrast, commercial insurance carriers in the civilian sector offer fair market value 

for physician services.’’ 

As a health care provider for over 30 years I question that assumption because most even private health insurers right now base 

all their reimbursements on Medicare rates. And so there is really 

not I think a big difference between what you are calling fair market rate and what most private health care insurers are providing 

as reimbursements to their network. 

So can you walk me through that, how you came up with that 

statement? 

Mr. MALDON. Yes, Mr. Chairman. I am going to ask Commissioner Buyer to speak directly to that question. 
5 

Mr. BUYER. What we did is we took the time to actually get into 

this question. 

So with regards to the contractors themselves, Congress basically 

said we are doing this to put pressure on DOD, say you know what, 

we need to rein in this program. We want it to be Medicare rates. 

What did the contractors do? They took it even further. We had 

to negotiate with providers for rates below Medicare. 

What impact did that have upon the system? It began to limit 

the network with regard to providers who participate under 

TRICARE. 

So if you can pick—we chose three different areas: Fayetteville, 

North Carolina; Phoenix, Arizona; and San Diego. We chose different specialties. We had to examine those carefully. 

So take the North Carolina one. With regard to OB/GYN [obstetrics/gynecology] we said okay, of the network, if you look at the 

Blue Cross Blue Shield plan—— 

Dr. HECK. I have just been informed that you need to be on a 

microphone somewhere so it gets recorded. 

Mr. BUYER. If you look at Fort Bragg, Fayetteville, North Carolina, for OB/GYN, and we said okay, what does a robust network 

look like? So what does Blue Cross Blue Shield provide? How many 

OB/GYNs signed into Blue Cross as an acceptable provider under 

their standards, right? One hundred fourteen at Fort Bragg. 

GEHA, the Government Employees Health Association a very— 

I would call it a similar plan to what TRICARE offers. How many 

signed into a GEHA plan? Forty-three providers. How many signed 

into TRICARE? Oh excuse me, I am sorry, 87. How many signed 

into the TRICARE program? Thirty-six, 36. 

Now you can go down all the different specialties here—— 

Dr. HECK. No, I agree with you that there are fewer providers 

in TRICARE than in the private plans. But how do you draw—— 

Mr. BUYER. No, not in the private plans. This is in TRICARE. 

Dr. HECK. No, no. That is what I am saying. In the TRICARE 

versus private plan. 

Mr. BUYER. Versus the private plans. You have got 114 OB/ 

GYNs—— 

Dr. HECK. But how do you make that connection that the reason 

for the lower number in TRICARE is due to reimbursement rates? 

That is my question. 

Mr. BUYER. Go talk to them. We have done our sensing sessions. 

We went around the country. We spoke to the family members. We 

spoke to the service members. And it is a reimbursement issue that 

these providers are not signing onto TRICARE. And it is a very— 

it is a severe issue. 

You asked us to look at this program. And what my commissioners and I we agree this is—TRICARE is a broken program. You 

are going to receive a lot of pressure from those across the river 

and institutions and the contractors to convince you otherwise. 

That everything is okay with the TRICARE program. All we need 

to do is make little tweaks here and there and everything is just 

fine. Do not get sucked into the status quo. That is my best counsel 

to you. 

Dr. HECK. I appreciate that. Thank you. My time is expired. 

Mrs. Davis. 
6 

Mrs. DAVIS. Thank you, Mr. Chairman. And I want to follow up 

with this because I think the health care piece is really such a critical one. 

So you mentioned the fees that physicians would receive. What 

other systemic issues did you see in TRICARE that could not be 

fixed easily, or—— 

Mr. BUYER. Well, one of the systemic issues is one that you have 

to deal with every time. 

So what does the building do? Basically you have a structure of 

TRICARE that has a limited provider network. It is very cumbersome with regard to its scheduling. And that is the access getting into the system. Not only to primary care, but then also then 

to specialty care. 

You went through all the debacle with the VA [Department of 

Veterans Affairs], right. And what upset a lot of people, yes, that 

there were delays in getting those appointments. The greatest insult was the integrity issue, right, at the VA. 

We have that very same issue in DOD with regard to access to 

care and the delays of getting my primary care appointment and 

to specialty care appointments. 

Mrs. DAVIS. Yes, and—— 

Mr. BUYER. I would say that is—— 

General CHIARELLI. I would add contracting. I would add contracting to that. 

The whole contracting issue on these TRICARE contracts are 5 

years in duration. And then you add another 3 while you go 

through the protest period. So we end up 8 years behind. They are 

very hard to modify. 

So when new medical breakthroughs take place they are not just 

automatically integrated into TRICARE. You got to wait until the 

next contracting cycle to get them in. So you are receiving medical 

care that is 8 years in arrears. 

We sent people to the National Intrepid Center of Excellence for 

traumatic brain injury and post-traumatic stress. They got a care 

plan put together and then they go to their post camp station. 

Some of it has to be done on the TRICARE network, and TRICARE 

refuses to pay for it. 

Admiral GIAMBASTIANI. I would also say—— 

Mrs. DAVIS. One more? 

Admiral GIAMBASTIANI. I would also add that what is important 

about these contracts I have said to you and the full committee 

that I personally believe and I think our Commission believes that 

TRICARE is in a death spiral. 

Another way of describing how each cycle of contracts when we 

are looking for money, we restrict some of the procedures a little 

bit, eliminate a procedure. We reduce the number of zones. We try 

to make all of these marginal changes to try to capture every dollar. We go below Medicare rates, which is part of what Commissioner Buyer was just showing you. 

And the bottom line is that service continues to get less and less. 

It drives down that access and choice and the providers who are 

present. And this is why I call it a death spiral. It has continued 

since inception to move in this direction. 
7 

Mr. BUYER. Ma’am, one of the biggies is utilization, utilization 

management. So when you say where does a big chunk of savings 

come from? It is going to be in improved utilization of program 

management. And so our modeling estimates about $5.2 billion in 

savings because the TRICARE model does not have this right now. 

Mrs. DAVIS. As you move in talking about the military Federal 

employee benefit plan, would the MTFs [military treatment facilities] not be utilized? And is that not a problem as well? 

General CHIARELLI. It is absolutely critical that they be utilized. 

It absolutely—— 

Mrs. DAVIS. But what if they go outside the system? Wouldn’t 

they go outside the system? 

General CHIARELLI. That would be available in all our plans to 

be used by dependents. So dependents will have the opportunity either to go on the market to a private provider or to use the MTF. 

The MTF—this is going to strengthen the MTF. And I would just 

remind the committee, the number one requirement that we have 

a separate health care system is combat medical readiness, the 

ability to pick up doctors and move into a field of battle. 

Everything we do with this system has got to be built around ensuring, as I mentioned before, that the individual that is wounded 

on the first day of battle gets the same kind of care that the person 

on the first day of the 13th year of battle. And what we have to 

do is improve the kind of procedures and cases that are seen in the 

MTFs. And we think this will do that. 

Admiral GIAMBASTIANI. The intent is to incentivize in the plan, 

because the MTF will be one of the providers, is to incentivize the 

use of the MTF to draw the patients there. 

Mrs. DAVIS. In your discussions though did you talk about what 

if that is not the case? What if they do go outside the system? 

Wouldn’t that be more expensive? And they didn’t utilize the MTF. 

General CHIARELLI. No. They would be billed in the same manner. The MTFs will bill for—as part of the insurance market. As 

part of the insurance plan they will bill. 

So I think in some instances they will go outside. But that is one 

of the reasons why we think the Readiness Command is absolutely 

essential is that Readiness Command has to be there to oversee 

this whole process and ensure that we are making the right investments in personnel and in our MTFs to make them viable providers as part of that insurance plan. 

Mr. MALDON. Ranking Member Davis, currently under the current system of TRICARE people go outside—they go outside now 

to get that care when they can’t get it within the MTFs. 

Mr. CARNEY. And Congresswoman, this is kind of about readiness also. And not just readiness for the Active Force, but also the 

Reserve Force. 

As a reservist who did not have good access to a TRICARE 

plan—it wasn’t called TRICARE for us. It was called ‘‘try to find 

care.’’ And that affects readiness. If you are not medically ready, 

definitely ready, you are not going to be ready to fight the Nation’s 

wars. So this access is also about readiness. 

Mrs. DAVIS. Thank you. 

Dr. HECK. Thank you. 

Mr. MacArthur. 
8 

Mr. MACARTHUR. Thank you, Chairman. 

I had, if I remember right, had read that the total savings from 

your TRICARE recommendations were about $6 billion. And I just 

want to understand what of that is the result of structural changes 

and what of that is the result of increased cost sharing with our 

military personnel? 

Mr. MALDON. Yes. Congressman, for improved utilization and 

program management, just in that area alone there is $5.2 billion. 

There is an increase to the cost to beneficiaries. There is an increase there of $2.0 billion. There is a movement as we shift to accrual funding, that is a $4 billion savings. 

Now, that gave us of course a total of about $11.2 billion. But, 

what we have proposed is to turn around and invest in benefits to 

improve the quality of the program, which will be TRICARE 

Choice. And also to make sure that there are some other insurance 

reforms that would take place. 

So we have allowed for that. So there is about—there is roughly 

$2.7 billion that is spent for the insurance reform. There is another 

$4 billion that we are spending here for making sure that we can 

put money back into the system to make it better with regard to 

choice, access, and improve the overall value of that program by expanding the network. 

So totally yes, we are talking about somewhere between—about 

$6.7 billion. 

Mr. MACARTHUR. You lost me a little bit I am afraid. 

The first $4 billion—you mentioned $5.2 billion in utilization 

changes. So that is savings. Two billion in increased cost to personnel, I guess in the form of either rising premiums or co-pays or 

however that is fleshed out. 

And then you mentioned a $4 billion that got you up to that initial $11 billion. What was that $4 billion? 

Mr. MALDON. That is the accrual. That is the shift into accrual, 

accrual funding. When I talk about the cost to beneficiaries, that 

is that cost share increase there to the retirees that are non-Medicare eligible. 

Mr. MACARTHUR. Help me understand the accrual funding. I am 

not sure what you mean. 

Mr. MALDON. I am going to ask Commissioner Higgins to talk 

specifically to that in that area, please. 

Mr. HIGGINS. Thank you, Mr. Chairman. 

The accrual funding deals with trust funds. And we have a trust 

fund in retirement. And Department of Defense pays into that 

trust fund every year the cost of future retirements for people in 

the force. 

We would propose that for health care that the non-Medicare eligible retiree be included in a trust fund. So we would begin at that 

point to pay for the non-Medicare eligible retiree health care out 

into the future. 

And the DOD Actuary worked very, very closely with us on this. 

And the conclusion was that that normal cost percentage is what 

it is called, that contribution from discretionary dollars into the 

trust fund would be $4 billion savings that we would accrue to the 

Department of Defense in budget. 
9 

Mr. MACARTHUR. Savings against what other option? Savings 

against funding it in the future without accrual? 

Mr. HIGGINS. Savings against current funding levels that are 

being expended directly to health care. 

Mr. MACARTHUR. I may want to visit with you later on that. I 

think I am beginning to understand what you are talking about. 

I am not sure I understand exactly where the savings are coming 

from there, but I get the concept. 

Mr. HIGGINS. One of the future force that you are paying for at 

that moment is going to be a smaller force. And I think that is one 

ingredient that causes those normal cost percentage payments to 

be lower, to give you an idea of what you just mentioned. 

Mr. MACARTHUR. So if—and this is just a conclusion—if we rejected the—and I am not saying we should, but if we said there is 

enough change here, let’s not also make our military personnel 

bear some cost, and we didn’t shift $2 billion, we would still save 

$11 billion on this conversion to private health care networks as 

opposed to TRICARE. Is that a correct conclusion? 

Mr. HIGGINS. There would be an element of the savings that 

would not appear at that point. 

You would have savings that would be reaped by the Department 

of Defense because of increased premiums paid by the non-Medicare eligible retirees. Those savings, about 18 percent of the total 

savings would no longer be available. 

Mr. MACARTHUR. I thank you. I yield back. 

Dr. HECK. Mr. Walz. 

Mr. WALZ. Thank you, Mr. Chairman. 

Again, thank you, commissioners, for your hard work. And just 

like you, our major concern here is whatever we do must not negatively impact national security. We must maintain the integrity 

and the readiness of the All-Volunteer Force. And we must keep 

faith with those warriors who are there. 

I understand, and the argument to be made is, is that you will 

negatively impact national security if you don’t address these 

things. Because yesterday many of us were up with General 

Dempsey who made the case that it is impacting our ability to do 

that. 

And he made a pledge to us. He said the savings we get out of 

paying compensation will be put back into readiness. And he is 

making a very solid argument on that. 

I said the thing I keep—and again it is for us more than you, 

encourage you on this is what I heard him say is that as a senior 

enlisted guy I am going to go out and say okay, you are going to 

pay some co-pays on this. There are going to be some changes to 

health care. We are going to 1 percent instead of 1.5 percent on 

this. But you are going to get an extra rotation at NTC [National 

Training Center]. So it is all good. 

That is a very difficult sell to them. Maybe not to the senior folks 

about what is going to be there, but that is what we are up against. 

And actually, not facetiously, that readiness piece is absolutely critical. 

And as a troop I understand when readiness suffers the Nation’s 

security suffers as well as the wellbeing of your troops. They don’t 
10 

want to sit around. And they certainly don’t want to be asked to 

go to war without having everything they get. 

So I get it on this. I would say this issue and the TRICARE one, 

there are some difficult challenges here. And one is, again, to remove it from it, there is a 900-pound gorilla in here of a large number of these people who are suspicious of moving off a program that 

they know. Again, the devil you know is better than the one you 

don’t know, especially when they have been told that private market includes the ACA [Affordable Care Act], which they are told 

might not work or whatever it might be. 

So it is very difficult. I can tell you this. On my last appointment 

I had TRICARE Prime Remote that works beautifully. It is also 

very expensive. Am I correct, Mr. Buyer, in how that works? 

So we can’t provide that for everyone. But what we are up 

against is, is my wife until this day claims the military’s health 

care when you were deployed was the best insurance we ever had. 

It was all taken care of. TriWest handled it all and all was good 

to go. 

So I come back to you and ask. And last week the question I had 

was—I am not sure which of you said this, but it struck me, said 

that you need to take this package and not start ripping it apart 

because you will have second- and third-degree effects. 

It may be true, but that makes it virtually impossible to get it 

through here. And that is what I am struggling with. 

Because you are saying—because what I would say is I think the 

housing allowance on the GI Bill is a lightning rod that is going 

to come back to haunt us in that it makes us appear like we are 

breaking faith and then it makes this whole case harder. 

Because I understand. And I am—in full disclosure I am a life 

member of many of these VSOs [veteran service organizations]. My 

question to you is we can’t break it apart. How much inclusion 

from the MSOs [military service organizations] and VSOs happen 

in what you did? Or did you try and isolate yourself from the case 

of undue influence? 

Mr. MALDON. Congressman Walz, let me go back and first address one of the comments that you made if I might. We are not 

cutting benefits to the members of the force. That is not happening 

in our recommendations, number one. 

Number two, there aren’t any tradeoffs to this. The benefits— 

when we talked about the cost savings to the beneficiaries has 

nothing to do with our service members that are currently serving. 

This has to do with those retirees that are non-Medicare eligible 

retirees that age—that is between the time that they retire up to 

20 years or whatever that period of time is that they retire the 

service until the time that they get to the point that they can start 

receiving Social Security and so forth. 

So it is during those working years. That is that 1 percent increase per year starting from the 5 percent that it is today under 

the current system. And it goes on a slow ramp of 1 percent per 

year over the next 15 years until it gets to the 20 percent point. 

So that is that cost savings there. It is not for the—not bothering 

anything with the benefits of the service members that are currently serving. 
11 

Mr. WALZ. Chairman, is it concerning—and again, I appreciate 

that clarification. And I think I need to be very careful in choosing 

my words. 

But you got a gray area retiree who is listening to this as a member of those. And I mischaracterized, if you will, because I have a 

predisposition to think that, maybe, in full disclosure. 

So what I am asking all of you to do is how do we get out there 

and talk to them about what their input could be. 

And I go back to this. I am concerned about this. You either take 

this package or you mess it up. That is troubling for me that I 

think it makes it much harder for us to do. 

Mr. MALDON. I am going to ask—let me ask Commissioner 

Chiarelli to respond first. 

General CHIARELLI. I made that comment. And I think it is just 

absolutely essential. And without getting into the specifics, before 

you start taking it apart you work with us so that we can in less 

than the 3 seconds I have to answer your question lay out for you 

how these recommendations support each other. 

Readiness Command is absolutely essential to what we are doing 

in medicine. And we feel that Readiness Command is absolutely essential because every single one of our recommendations in one 

way or another touches readiness. 

Mr. WALZ. So I need to see it as a whole, not three silos. 

General CHIARELLI. Or at least come to us and our staff and 

questions for the record that we can explain to you in greater detail 

how these recommendations work together. 

Mr. WALZ. Thanks. 

[The information referred to can be found in the Appendix on 

page 51.] 

Dr. HECK. Thanks, Sergeant Major [Walz]. Mr. Cook. 

Mr. COOK. Thank you, Mr. Chairman. 

I have been listening to this. And I got to be honest with you, 

I am a little bit confused. And Sergeant Major, you made some 

great points. 

Twenty, thirty years ago I think I used to understand this. And 

now I feel like I am in the middle of a calculus problem. 

You know I am retired, General. I used to—when I was younger 

the big thing for recruitment, and a lot of us have recruited here, 

was the fact that the government would take care of you if you 

served 20 years or even longer. 

And things have changed. Now my primary health care is Medicare. My secondary is TRICARE. And when I hear all these conversations it is like—and I try to listen to some of the veterans that 

I have there. 

They are—it is tough enough dealing with the veterans issues 

that come down and dealing with the VA. And we are making some 

of these issues very, very complex. 

At least I am not as smart as you guys. I am just a dumb Marine 

up here that is trying to get through. And my primary concern is 

to take care of the troops, the ones that have gone through this. 

God, can’t we make it any simpler or what have you? It just 

seems that we have thrown out the KISS [keep it simple, stupid] 

principle. 
12 

And for these veterans, for people that are on Active Duty 

TRICARE and the changes to it. Every time we change it—and I 

was there some of the meetings with TriWest and how we are 

going to do it. 

I appreciate that you are trying to do something. But we have 

got to have a standardized message and make it as simple as possible. I don’t understand the tables and so many doctors doing this 

and that. 

All I know is that many years ago I thought we were going to 

have medical care to take care of those people who stayed in long 

enough to retire. And that situation to me is constantly changing 

because of budgetary pressures. And I get it. 

But if we can simplify it because the people that are watching 

when I go and try to explain this to them, I can explain you know 

tanks and airplanes and everything else. What you deal it is as I 

said, this is another calculus problem, or a calculus course, which 

I didn’t do first well the first time when I was—as an undergraduate. 

So I don’t know if I have a question. I just am—I did—I was concerned about where those individuals that are on Medicare and 

TRICARE. It seems like no one even wants to even address 

TRICARE when they hear I have Medicare. And they don’t default 

to that because it is too complicated. Is that a correct statement or 

not in terms of the medical world out there right now that I deal 

with? 

Admiral GIAMBASTIANI. If I could—— 

Mr. MALDON. Yes. Go ahead, Commissioner Giambastiani. 

Admiral GIAMBASTIANI. Yes. Let me try to take this. First of all, 

if you look at this panel, I am guesstimating that we have something like 140 years of military experience up here. 

Mr. COOK. Somebody older than me then, right? 

Admiral GIAMBASTIANI. Yes. There are many of us who have 

some age. 

We are all geezers. And let me just say that we have spent a lot 

of time trying to make sure we are taking care of the troops because of the pain that we have gone through in seeing how these 

systems either work, don’t work, or continually get degraded, which 

is why we came to where we are. 

So let me just quickly encapsulate one. If you are retired and you 

are a Medicare-Social Security eligible person, I am, you are. Pete 

isn’t there yet or you are close? 

General CHIARELLI. One month. 

Admiral GIAMBASTIANI. One month. Okay. If you are in that case 

you will continue to serve with TRICARE for Life and Medicare. 

None of that changes from today for a retiree who gets to that. 

The area that the chairman already talked about, the working 

age retiree, you retire, you are not Medicare or Social Security eligible as yet. You are going to have a co-pay that goes up. And you 

are going to go into a series of health care plans that are a separate risk pool just for military. 

This is not the Federal program that we are just jumping into. 

This is separate for our folks to protect them. But the big thing is 

the military treatment facilities are in that program. 
13 

Then for Active Duty we still use the military treatment facilities 

and all of the military medical care for the Active Duty personnel. 

No differences. 

What is different now is that we have TRICARE Choice for dependents, folks who can’t get to a military treatment facility, for 

example, like a recruiter, people out in the hinterland, who are out 

doing the work for our military today. They are in that same type 

of program, if you will, that our retirees are in, except that we give 

them a basic allowance for health care to defer the costs of the premiums and the co-pays and the rest of it. 

That is as simple as I can make this system for you. It is a 

change. But we think it will significantly improve access, choice, 

and frankly the quality of the system. 

Dr. HECK. Thank you. 

Ms. Tsongas. 

Ms. TSONGAS. Thank you, Mr. Chairman. 

And thank you all for being here. I very much appreciated your 

presence before the full Armed Services Committee. 

I thought it was one of the better if not best hearings we have 

ever had. And I think your conversation today is very reflective of 

just the ways in which you have really worked very hard around 

some very complex issues. And the deep understanding you bring 

to it. 

Both the politics have changed, which are always so difficult, especially as we deal with our military who so ably and nobly served 

our country, and for whom we all feel a deep obligation to do the 

right thing. And I know your task was not a simple one. 

I would like, as I turn away from the changes to health care and 

focus on one of your recommendations that I think actually highlights a real plus. And that was your efforts and your recommendations about reforming the military pension system. 

So as you stated in your report, more than four out of five service 

members currently leave the military before reaching 20 years of 

service, and thus they leave the force without any retirement pay. 

I think this is particularly true and egregious of our Nation’s 

ground combat troops who have been repeatedly deployed over the 

past decade. And today fewer than 15 percent of U.S. soldiers and 

Marines will serve a full 20 years, meaning that most will separate 

from the military without any retirement savings. 

So I would like just to give you the opportunity to sort of highlight the changes you are recommending that can make a real difference so that those who do so ably serve but don’t commit or 

serve for 20 years, when they walk away they walk away with 

something that makes a real difference as they move into civilian 

life. 

And also if you could just talk about the tradeoffs you were 

thinking through. I mean I think this is a real plus that needs to 

be highlighted, especially for those who might think they are losing 

in other areas. And how the balance was struck. Were you thinking 

that way? 

And I don’t know who wants to take the lead. 

Mr. MALDON. Congresswoman, first thank you very much for the 

question. When we deliberated on our recommendations here, one 

of the things that we really wanted to do, and we were unanimous 
14 

in this, is that we wanted to make sure that we could actually expand that number of service members that were actually going to 

receive a retirement benefit when they leave the service. 

We were concerned about the number of people that come into 

the military and will make two to three deployments or just stay 

in for a good period of time and then wind up leaving the service 

and then not have anything at all. 

We believe that the recommendation we have made here to expand that percentage from 17 percent of the people that are currently leaving to 75 percent of the service members that would be 

leaving, we believe that is going to really help with retention and 

the recruiting, especially with recruiting. 

Because when these service members leave with something they 

get a new start in transitioning into civilian life again. But they 

also become goodwill ambassadors for the service because they are 

going to be able to talk about the great experiences that they had 

and how the services really took care of them. 

When we talk about really taking care of the service members, 

this is part of it. And I am going to ask Commissioner Higgins to 

fill in some here with regard to the rest of your question. 

Mr. HIGGINS. Thank you, Mr. Chairman. 

Regarding the issue of tradeoffs, what I would emphasize is that 

we believe our analysis. And we had what we think is very credible 

analysis by RAND Corporation. 

And the tradeoff was simply designing a system that delivered 

the force profiles because that is what the Chiefs, the Joint Chiefs, 

insisted that we do. That was our target objective. 

But modernization was what we found we really wanted to also 

achieve after we went out and talked to the force. They want 

choice. They want flexibility in their system. That is a new generation speaking to us. And we wanted to deliver on that requirement. 

But we wanted to hit those force profiles. And that is how—that 

was the tradeoff. That is what led us to the Thrift Savings Plan, 

which is a little richer benefit than you will find in the government 

civilian FERS [Federal Employees Retirement System] system; it 

is—if they get 1 percent mandatory. And then if they contribute 5 

percent, that is a total of 6 percent, which in the FERS system 

would be only limited to 5 percent over the long run. 

But there is that Thrift Savings Plan. And that is how we deliver 

a benefit to those individuals that were not going to receive anything under current 20-year cliff vesting. 

Ms. TSONGAS. So you are both creating a new opportunity that 

does require people sort of opting in. And I appreciate the financial 

literacy component that comes with it. 

Mr. HIGGINS. Right. 

Ms. TSONGAS. To give those some training to think this through. 

Mr. HIGGINS. Exactly. 

Ms. TSONGAS. While you are also trying to figure out how to meet 

the needs of the force. But is a plus. Thank you. 

Mr. HIGGINS. Yes. 

Dr. HECK. Thank you. 

Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. 
15 

It is my understanding that the new retirement system is all defined contribution. Am I correct in that? The proposal? 

Mr. MALDON. Yes, it is. Yes, it is, Congressman. 

Mr. COFFMAN. Was there a consideration for a bifurcated system 

that would be part defined benefit with a vesting period and then 

maybe going later on and then the other part of defined contribution? 

Mr. MALDON. Congressman, I am sorry. I heard the last part of 

your question a while ago. Maybe I didn’t hear the whole thing. We 

have a blended retirement plan. 

Mr. COFFMAN. Okay. 

Mr. MALDON. Okay. 

Mr. COFFMAN. Can you briefly explain that again? 

Mr. MALDON. Yes. The blended retirement plan is that we actually preserved 80 percent of the defined benefit plan. And so the 

defined contribution piece of that is the TSP. That is the Thrift 

Savings Plan piece of that where we—it is a government-sponsored 

program where the government will put in the 1 percent for every 

service member entering the service. 

And then at the third year, the first day of the third year, then 

there is an opportunity for a 3 percent matching by the government, if in fact the service member is putting in that 3 percent, 

there is a 3 percent matching that comes with it that could actually 

even go up to 5 percent, depending on whether or not the service 

members want to put in that amount of money. 

Mr. COFFMAN. Then when is the vesting for the defined benefit 

part? 

Mr. MALDON. It vests the first day of the third year. 

Mr. COFFMAN. Okay. And then when do they draw this? So right 

now under the current system you serve 20 years. And the day that 

you leave you start drawing. 

And it is a factor—so if somebody serves 20 years they get 50 

percent of their base pay the day after they leave the military. 

What is it again under your system, proposed system? 

Mr. MALDON. Commissioner Higgins. 

Mr. HIGGINS. Sir, the vesting at 2 years is actually the defined 

contribution, okay. The defined benefit remains a 20-year vesting 

requirement. They have to serve 20 years to get to the defined benefit, which is slightly reduced. 

We retain 80 percent of the cliff vesting. But we do reduce that 

multiplier to 2 percent, which yields a 40 percent of base pay at 

20 years of service. And it is immediately drawn. 

Mr. COFFMAN. Was there any discussion about a bifurcated system whereby one could serve less than 20 years, vest into the defined benefit component, and then maybe not draw until as a reservist. 

With Reserve retirement, I draw at age 60; maybe then not draw 

until later on that defined benefit portion? Was there a consideration for that? 

Mr. HIGGINS. It was certainly an area we discussed. Now, our 

recommendation—— 

Mr. COFFMAN. Sure. 

Mr. HIGGINS [continuing]. Does include a flexibility where the 

Secretary of Defense could come in and offer a solution like the one 
16 

you are talking about, and maybe see a change to the system for 

a select group of an individual MOS, military occupation, specialty 

or skill or segment of the population. 

So there is some flexibility in our system, which is important because that is derived by the services. I am not sure I answered 

your specific—— 

Mr. COFFMAN. No, you did. 

Now on the TSP part—— 

Mr. HIGGINS. Right. 

Mr. COFFMAN [continuing]. Defined contribution component—— 

Mr. HIGGINS. Right. 

Mr. COFFMAN. Is that a mandatory—so if I opt into this system—— 

Mr. HIGGINS. Yes. 

Mr. COFFMAN [continuing]. Which then is an 80–20 split to the 

old system—— 

Mr. HIGGINS. The defined benefit is. 

Mr. COFFMAN. So now it is 80 percent of—— 

Mr. HIGGINS. It is 20 percent less, you could say. 

Mr. COFFMAN [continuing]. 20 percent—right. Then is that a 

mandatory—if, in other words, if somebody opts in, is that a mandatory participation in the TSP? Or can they simply—well, I see 

that—I don’t know why somebody would do it if it wasn’t I suppose. 

Mr. HIGGINS. The Thrift Savings Plan—— 

Mr. COFFMAN. It would be—— 

Mr. HIGGINS [continuing]. For new entrants—— 

Mr. COFFMAN. Yes. 

Mr. HIGGINS [continuing]. Would be an automatic enrollment at 

a 3 percent contribution. 

Mr. COFFMAN. And from the—okay. What is it, is it a 3 percent 

match as well? 

Mr. HIGGINS. No, not initially. The 3 percent—any matching government contributions don’t start until the first day of the third 

year. So immediately after they serve 3 years—— 

Mr. COFFMAN. So it is all based on the individual service member 

initially for the first 3 years. 

Mr. HIGGINS. Right. They are enrolled automatically. They can 

pull out and it is not an arduous process to pull out. But our analysis would indicate that a very high percentage, 97 percent, would 

not bother to remove themselves from the program. So we are really encouraging thoughtfulness about saving and finances. 

Mr. COFFMAN. Thank you, Mr. Chairman. And they would choose 

certain investment—— 

Mr. HIGGINS. The Thrift Savings Plan is the same Thrift Savings 

Plan available to you. All those choices are there. 

Mr. COFFMAN. Okay. 

Thank you, Mr. Chairman. I yield back. 

Dr. HECK. Thank you. 

Ms. Speier. 

Ms. SPEIER. Mr. Chairman, thank you. 

And again to each of you, I think you have heard it over and over 

again, but your contributions have been profound. And I would 

agree with my colleague Ms. Tsongas that it is probably the best 
17 

hearing that we have ever had. We just now have got to inject a 

little guts into all of us to do the right thing. 

Let me start off by addressing—as we heard earlier this morning 

about how we save money within Defense, the biggest way to save 

money, the most effective way is through military personnel. And 

they have suggested about $6 billion would be saved through 

health care and about $2 billion through retirement; I believe is 

what they said. 

And as I look at the health care component here, if in fact what 

we are saying is that it is going to go up 1 percent per year. Is 

that—am I understanding that correct, 1 percent per year? And 

right now it is about $535 a year. Is that right? 

Mr. BUYER. I don’t know the exact number, but that is pretty 

close. 

Mr. MALDON. Yes. 

Mr. BUYER. It was—— 

Ms. SPEIER. Pretty close. 

Mr. BUYER [continuing]. 1994 when it started. It was a 27 percent premium. It has eroded to 5 percent. 

Ms. SPEIER. So it is costing about—let’s just say round numbers, $500 a year. A 1 percent increase is $5.00. 

I mean I think we have to pitch this for what it is. You are going 

to have better health care. You are going to have a bigger network. 

And it is going to cost you one Starbucks latte a year. Are you in? 

Mr. BUYER. Bingo. Thank you. Conclude the hearing. 

Mr. MALDON. I totally agree with you. 

Ms. SPEIER. So we have got an education job to do. And I think 

we have got to man up to what we have to do. Because this is critical to the readiness of our troops, to the ability of our Department 

of Defense to be properly funded, and to the American taxpayers 

who don’t want to spend any more money on anything. 

So I just wanted to clear that particular point up. On the TSP, 

the Active Forces now would be able to sign up right away. Correct? 

Mr. HIGGINS. They can sign up today. And they do. The participation rate in the Thrift Savings Plan among Active Duty people 

is roughly 42 percent. What they would not and do not get 

today—— 

Ms. SPEIER. Is the match. 

Mr. HIGGINS [continuing]. Is the match. 

Ms. SPEIER. So would they immediately get the match if they are 

Active Duty today? Or would they have to wait the—— 

Mr. HIGGINS. The match would not start until they completed 

their 2 years of service. The first day of the third year is when the 

match—— 

Ms. SPEIER. But you said they are already serving. 

Mr. HIGGINS. They are already serving. They are automatically 

enrolled and a 3 percent deduction from their pay and a 1 percent 

mandatory government contribution. 

Admiral GIAMBASTIANI. If they opt in. 

Mr. HIGGINS. This is—I am sorry. Are you talking about currently serving people? 

Ms. SPEIER. Right. 

Mr. HIGGINS. If they opt in? 
18 

Ms. SPEIER. Right. 

Mr. HIGGINS. The answer would be yes, then. I was referring to 

new entry—— 

Ms. SPEIER. No, I understand you were. But I was trying to address the fact that if we have Active military now—— 

Mr. HIGGINS. Yes. 

Ms. SPEIER [continuing]. They are contributing. They would start 

getting the match. Correct? 

Mr. HIGGINS. That is correct. 

Ms. SPEIER. And they wouldn’t have to wait 2 years because they 

are already Active military. 

Mr. HIGGINS. Assuming they have been in 2 years, right. 

Ms. SPEIER. Right. 

General CHIARELLI. But they would have to opt in. 

Ms. SPEIER. But they would have to opt in. 

Mr. HIGGINS. Right. 

General CHIARELLI. They can stay under the current program if 

they so desire. 

Ms. SPEIER. Now, in terms of the contractual relationship that 

exists in the defined benefit plan, for those persons right now who 

are in military service working toward their 20 years, have not yet 

reached their 20 years, do we have a contract with them to allow 

them to stay in the old system? 

Mr. HIGGINS. Yes. 

Ms. SPEIER. So this is only going to be for persons who are 

new—— 

Mr. HIGGINS. New accessions. 

Ms. SPEIER [continuing]. Enlisted—— 

Mr. HIGGINS. Correct. 

Ms. SPEIER. Coming in after the law passes? 

Mr. HIGGINS. Correct. Or those that opt in that are currently 

serving. 

General CHIARELLI. And quite frankly we expect that number to 

be fairly high, particularly if you haven’t served for that long. 

Mr. HIGGINS. Right. 

Ms. SPEIER. Right. So for anyone who is presently serving in the 

military, their pension isn’t going to change. 

Mr. MALDON. Correct. 

Mr. HIGGINS. Unless they want it to. 

Ms. SPEIER. Unless they want it to. 

Mr. HIGGINS. Right. 

Mr. MALDON. Correct. 

Ms. SPEIER. But anyone today, regardless of whether you served 

1 year or 10 years or the 20, nothing is going to change. 

Mr. MALDON. Correct. 

Mr. HIGGINS. That is correct. 

Ms. SPEIER. All right. It is really important for us to get that. 

So for all the people we are talking to that are in service right now, 

nothing changes unless they want to participate in this new TSP 

that is going to have a much more healthy match by the Federal 

Government. 

Mr. MALDON. Right. 
19 

Mr. HIGGINS. And other elements of our proposal, which is continuation pay would be paid. The option to go over the lump sum 

on retirement. 

Ms. SPEIER. I am sorry. My time is expired. But thank you very 

much. 

Dr. HECK. Mr. O’Rourke. 

Mr. O’ROURKE. Thank you, Mr. Chair. 

I would like to continue this line of questioning, the comments 

made by Ms. Speier about the political guts necessary to pass and 

implement the work that you have brought before us. 

Talk a little bit about the survey and the surveying that you did. 

And I know that you published the questionnaire and the results 

online. I thank you for your transparency. 

Talk about how those survey results factored into your recommendations, and whether or not there has been any survey since 

the whole of this has been presented. And if so, what the feedback 

is on that. I think that might inform some of the work that we 

have to do in order to ultimately pass something like this. 

Mr. MALDON. Thank you, Congressman, for your question. We 

actually surveyed 1.3 million retirees. We actually surveyed over 

550,000 Active Duty/Reserve Component members. And the survey—and we not only surveyed them, I have got to tell you that 

in addition to the surveys that we conducted and the responses 

that we got back, we actually also collected all kinds of comments 

from service members that came back to us, both retirees as well 

as Active Component members, saying here is what we prefer as 

a value. 

This is what we value and in terms of our benefits here is what 

we—and part of what the reason we got to the recommendation 

that we got to on retirement is because they came back and said 

we want something different than a one-size-fits-all under the retirement plan that we currently have. 

We want to be able to participate in that decision. We want to 

be able to tell you how to design—how we like to see our retirement plan designed, and how we would like to receive the benefits 

of that plan, the compensation plan. 

So what we have put together here came from both the surveys, 

the results of the surveys as well as the different hearings, the 

town hall meetings, and the other comments that we received by 

way of our Web site as well as comments coming into the office. 

A combination thereof. 

Mr. O’ROURKE. Individual alternatives were surveyed. Was the 

final product surveyed? Or did you all solicit feedback from military service organizations, VSOs and—— 

Mr. MALDON. Absolutely. 

Mr. O’ROURKE. The answer is yes. Okay. 

But those—the results weren’t—it informed and was a factor in 

the decisions that you made, the recommendations that you made. 

But if something scored very well and was very popular but you 

thought did not make sense, you did not make that recommendation. Is that—— 

Mr. MALDON. That is correct. Yes. 

Mr. O’ROURKE. And if I could from Mr. Buyer would love to, following that and some of the questions that were just answered, you 
20 

were in our shoes. How do you move forward to produce the necessary political will in and out of this institution? 

I am again thinking about veteran’s service organizations, military retiree organizations, the people who come to my town halls 

every month. And you know it may just be 1 percent, but they look 

at that cumulative total over the next bunch of years and it adds 

up. And they have legitimate concerns about that. How would you 

present this in a situation like that? 

Mr. BUYER. I think in the exercise of your intellect be methodical 

would be my best counsel to you. Methodical to you in that you 

have given us an assignment. You put together this Commission. 

We have worked very, very hard with a very talented staff. We 

dove into the issues that you get to work with, but we went deep. 

You don’t get the luxury of that time to go deep as we have done, 

and to listen to so many across the force, and then to survey it, be 

responsive to so many different concerns at so many different levels. And to go into the third and fourth degrees of consequences. 

You only dream as a member to do that kind of thing, but you 

never have the time to do it. The luxury was you gave us that assignment. So we have applied our intellect to do that, and our 

scholarship is in our report. 

Now, you also must filter. You have to filter the difference between the constructive critic and the critic. You also have to recognize that there is a bureaucracy out there that I call the mud or 

the muck. And they are defended by gargoyles. And those gargoyles 

that defend the muck will try to suck you in and hold you in place. 

And being the agent of change is never fun. And that is what 

this committee gets to do. You get to be the agent of change because the force is ready and the time is now. 

So be constructive. Listen to the constructive critic. The noise 

will always be there. They have to respond to membership. They 

have a different constituency than what you have. 

Mr. O’ROURKE. Thank you. Thanks again for your work. 

Dr. HECK. Mr. Knight. 

Mr. KNIGHT. Thank you, Mr. Chairman. I would like to thank 

the committee for their work too. I have just a couple questions. 

And I think we are hitting down on it, that of the survey. 

The survey was presented to service members today. And they 

were asked if there was another situation would you like it better. 

And you probably gave them some parameters. And then you went 

back and gave them another survey after the parameters were set. 

Is that correct, of the new program? 

Because I am looking at this survey right here that says 80 percent of Active service members would prefer the current or proposed compensation system. And it says 80 percent would prefer 

the preferred proposed system. That is a tongue twister in itself. 

Was the survey before this presented the same way and said that 

if we gave you this option to have this type of a system, as opposed 

to your current system? So it was apples to apples. That is what 

I guess I am asking. 

Mr. MALDON. Yes. I think the answer to that question is yes. I 

mean what we really asked our service members to do in that 

155,000 responses that we got back from the survey, we basically 

were asking them to actually stack and rack the benefits in priority 
21 

terms for them in terms of what they preferred here with regard 

to that benefit. 

And so you give us your answer as to what is valuable to you 

as a benefit. Then we asked them to continue to compare one 

against the other. 

So they were—you know they were basically asked—we used the 

survey as an analytical tool to really kind of really get them to 

really not only tell us what they value, but then to give it to us 

in terms of priority one against the other, one benefit against the 

other. 

Mr. KNIGHT. So as I am going down my line of thinking here, I 

think it is fair if you offer somebody something and you say these 

are the parameters of what you are getting—your system is going 

to be, your retirement system or whatever it is, then I think it is 

fair. 

If you offer a choice to the people who are currently serving or 

currently employed as it were in the private world, you have the 

option. You can jump onto this new program or you can stay on the 

program. 

I think for us that have to sell this, that is a big selling point. 

We are giving you a choice. And you can stay under the current 

program. 

So my last question is about retirees. So, say there is a retiree, 

they retired in 2008 or 2010 or whatever it is. How does this affect 

them? Do they automatically change over? 

Because there can’t be a changeover. There was no buy-in. There 

was no—they just stay in the old system. Correct? 

Mr. MALDON. That is correct. 

Mr. KNIGHT. So I am trying to figure out how I don’t sell this. 

You have the option. If you don’t want it, don’t take it. If you do 

want it, it is probably a better system for you, especially for someone like me or enlisted out of high school and didn’t serve 20 years. 

It would probably be a better program for me. Or for somebody who 

served 35 years it probably still is a better program for you. 

So I don’t know. How am I not going to be able to sell this? 

Mr. MALDON. You know, Congressman, if I were in your position, 

I would be asking that same question. I don’t know how I would, 

knowing what I know, from what we have done over the last 18 

months to 2 years. I would have a very difficult time trying to figure out how not to get this done, to justify why we couldn’t sell it. 

Mr. KNIGHT. Mr. Chair, we all have gargoyles in our district. And 

they all protect the muck. So, that is what makes it hard. 

Admiral GIAMBASTIANI. If I could add, I think the noise and misinformation, the gargoyles, whatever you would like to call it, that 

is what will muck this system up. 

Frankly, everything we know based on surveys and response we 

get when you ask people about these systems, they would prefer to 

go with this newer system. There is no doubt. I think it is going 

to be noise and misinformation, frankly that will cause it not to be 

accepted. 

Mr. KNIGHT. Thank you. 

Thank you, Mr. Chair. I yield back. 

Dr. HECK. Great. So since the bell hasn’t rung, we will continue 

with some additional questions if members have some. 
22 

Mr. Jones had to leave. He has three questions that he would 

like answered. I am going to submit those to you for the record and 

then if you can get him responses I would appreciate it. 

A couple of kind of just quick bullet questions that I have to 

make sure I understand some things. 

So, service members auto-enroll, but may opt out. But then he 

is reenrolled the following January. Does that happen in perpetuity? So if he opts out the second January the next January he 

has reenrolled again? 

Mr. MALDON. Yes. 

Mr. HIGGINS. Yes. 

Dr. HECK. And the thought behind reenrolling a person who has 

made clear he doesn’t want to participate let’s say for two, three, 

or four Januaries in a row? 

Mr. HIGGINS. Well, we hope that after the third financial awareness session that we also call for that new wisdom will appear in 

that individual’s mind and they will understand the importance of 

participation and change their course. I mean, we believe that the 

financial planning education is very critical here. 

Mr. CARNEY. Mr. Chairman, if I might—— 

Dr. HECK. Sure. 

Mr. CARNEY. I am the father of a lance corporal who is now making a few bucks. And his question to me was dad, what do you 

know about Ford F–250s? I said I know you can’t afford them. 

But these kids are out there making these kinds of decisions all 

the time. And you know how paternalistic do we want to be is kind 

of the question. And it is not really a paternalism question. 

It is a readiness question. Because a lot of these kids get in financial difficulty and they lose clearances if they have them. Or 

they deploy and they know they have financial trouble at home and 

that is on their mind when they are forward. And that is the kind 

of stuff we are trying to get away from here. 

Dr. HECK. Right. Thank you. 

General CHIARELLI. They are going to look at that. They are 

going to be talking to their buddy. And their buddy is decided to 

stay in. And it is going to show on his or her LES, Leave and Earnings Statement, an amount of money that has accumulated. 

And before too long they are going to be talking about you really 

get 6 percent match? You know, and this is an opportunity. And 

we just want to give them the opportunity to re-evaluate their decision not to play as often as we possibly can. 

Mr. CARNEY. So one of the things we recommend is altering the 

LES to reflect what they are getting and what the projected is. Sort 

of like when you get your Social Security thing every year, if you 

stayed until 70, that kind of thing. So it gives them some more financial awareness. And also we want to include the families in the 

financial literacy as well. 

Dr. HECK. Great. 

I just want to be clear also on the match. So there is 1 percent 

automatic from the day the person signs the paper, and the autoenrollment at a 3 percent deduction, which they can increase, decrease or opt out of. But the government match does not begin 

until the first day of the third year of service. 

Mr. HIGGINS. Correct. 
23 

Dr. HECK. Okay. Because that is what I read on page 37. 

And then on page 38 there is a bullet that says service members 

should be vested in their TSP after two complete years of service. 

The standard 1 percent contribution and matching contributions 

provided by the uniformed services. But up until that date there 

has not been any matching contributions. 

Mr. HIGGINS. That is correct. 

Dr. HECK. Okay. Just wondering because there was kind of—it 

made me wonder. 

Okay. I will leave it there and yield to Mrs. Davis. 

Mrs. DAVIS. Thank you, Mr. Chairman. 

Can you help me understand a little bit more about the continuation pay? Because the plan has—the continuation pay bonus has 

a 12-year mark. Correct? And service members can be encouraged 

to stay until 20, but it only requires 4 additional years. 

But you are assuming, I think, that the continuation pay would 

be invested into the service member’s respective retirement plan. 

Is that true? And what if that assumption doesn’t bear out? 

Mr. MALDON. Commissioner Higgins. 

Mrs. DAVIS. And I guess the bottom line too, Mr. Higgins, is so 

what is the comparison on the monthly current system and proposed system at that point in time, so after the 12-year mark? 

Mr. HIGGINS. Certainly we would hope that after receiving continuation pay they would invest that amount of money. In some 

cases it is not an insignificant amount of money. I mean it does 

vary by service. And—— 

Mrs. DAVIS. And we are roughly talking about? 

Mr. HIGGINS. Amounts? Officer could go to $120,000. Enlisted member could be in the neighborhood of $20,000 if I am not mistaken. Depending on assumptions of what grade that it is offered. 

And that will vary by service because there are different multipliers used in terms of the number of months of pay would be included. And that varies by service because the analysts looked at 

that fine tuning. 

We would hope they are invested, yes. And to some degree they 

are going to be able to put it in the Thrift Savings Plan because 

many of these individuals are going to have room left in the contribution rate that the government allows in the Thrift Savings 

Plans so they can take some part of that continuation pay and put 

it in Thrift Savings. 

Maybe not this year, but maybe next year as well and the year 

after that. So I mean that is our hope. 

Mrs. DAVIS. Is the whole program impacted if they do not do 

that? I mean does it rest on that assumption? 

Mr. HIGGINS. It does not. I think in the long run, you know, 

there—if, let’s say for argument’s sake, there is no investment of 

continuation pay, then obviously it will lay stream assets available 

to that information is, that service member is reduced. 

We still believe that our benefits, again widely variable based on 

assumptions, we still believe that our program will produce better 

lay stream assets, or certainly as good as they have today. 

General CHIARELLI. I think it is fair to say, though, that we did 

not assume they would invest it in TSP when calculating our 

charts. Our charts are based on the fact that they would get an 
24 

amount of money based on the service’s needs both in rank and 

military occupation specialty. It would vary. 

And that money, at least in the charts that we have showed you, 

for what this is worth at 20 years, are under the assumption they 

do not invest it. If they invest it in the TSP, it would only go up, 

I believe, how we calculate it. 

Mr. BUYER. Mrs. Davis? For me as we were putting this together, 

early on when we talked about doing a match on a TSP we heard 

from the Chiefs. And the Navy and the Air Force were very anxious. 

They were very nervous because they didn’t want to create an 

off-ramp whereby the amount of money invested in the particular 

MOS’s, whether it is a nuclear to pilots to technicians. You know 

if you do this they will—we have invested so much they will just 

off-ramp and go into the private sector. 

And so this feature, this is an attractive retention feature that 

also we talk about what are some of the principles of your thinking 

and the methodology. It is flexibility and choice. 

And this is a tremendous value. And it really—when somebody 

hits that 12-year mark they got some really fascinating decisions 

they get to make that they don’t get to make today. 

Admiral GIAMBASTIANI. I think if I could add also on this continuation pay. What is important is that we are trying to give the 

services and the Department of Defense—what we have recommended to Congress is to give them an opportunity, as you have 

heard from Mr. Higgins, to adjust the multiple. 

But as a minimum it has got to be 21⁄2 months of basic pay. It 

can go up or down depending on that grade military occupational 

specialty and the rest. 

Number two, they could move it from 12 years to 13 years is 

what we are also suggesting. But our modeling shows that at the 

12-year point right now that is the best thing. 

Number three, just to make sure we are all clear, they can take 

this as a lump sum immediately and do whatever they want with 

it. Which is—and the modeling shows that this will help. That is 

why we call it continuation pay. 

Mr. BUYER. Powerful retention incentive. 

Admiral GIAMBASTIANI. Yes. It is very powerful. And it keeps the 

force profile where the services want to have it today. 

Mr. CARNEY. But it is also critical that they have the robust financial education so they make the decisions with it. And that is 

a big chunk of one of our recommendations, certainly. And it is a 

big part of all of this. It ties together. 

Mr. MALDON. Ranking Member Davis, I would also just like to 

add that without that investment of the continuation pay their net 

earnings, lifetime savings with our modeling is still to their advantage, net-net. There is a net positive in their lifetime earnings in 

the recommendation without that continuation pay. 

Mrs. DAVIS. Thank you. 

Dr. HECK. Mr. Knight, further questions? 

Mr. KNIGHT. Thanks, Mr. Chair. Just a quick question. 

What would the 20 percent say? What were their reasons for not 

liking the proposed program? Did they give any? 
25 

Mr. MALDON. Commissioner Higgins, you want to take a shot at 

that first? 

Mr. BUYER. We do the same things you guys do. 

Mr. HIGGINS. We are known as a paternalistic military force. We 

have very great interest in protecting the interest of our young 

service members. And I think it would be fair to say that we saw 

some of those feelings come forward in the survey. 

And these are generally from people, more experienced people. 

People who had been in the force a lot longer. People that may not 

share some of the desire for choice of flexibility that is part of the 

mantra of a new generation that we want to recruit and retain. 

There was some of that clearly. 

But it would be also fair to say, I think, that what people saw 

in the survey was very close to our final recommendation because 

we had pretty good ideas about the solutions that we felt were viable and had importance. 

And the survey reflected that. And that is why you saw us speaking with such confidence that we could offer them the option to see, 

be visible and to make judgments on. 

Admiral GIAMBASTIANI. I think part of the answer that Commissioner Higgins has given to you is from our verbal engagement 

with individuals, base visits, town halls, those types of things. As 

opposed to specifically in the survey. 

In other words, you didn’t prefer—you prefer the current retirement system why? I don’t believe we asked that specific question 

on why do you prefer this over that. We just asked if you were— 

afforded these systems what would you opt for? 

Mr. KNIGHT. Yes. I would just expect—you know in a prior life 

I was a financial adviser. And the more you talk to people and the 

more kind of information you gave them, not advice, the clearer 

they were. And the better choices they made. 

And I just wonder if it got further down the survey and you said 

well what about this and you gave them a little bit more information. 

You know when you are 19 and you are getting in the military 

you don’t think that you are ever going to be 60. Or if you are joining as a career, you just want to serve and you just want to be in 

the military and be part of the mission. 

So I don’t know that that is the thinking process from everyone. 

And so I think the more it goes down I think more if this is adopted it will start to become part of the culture. And nobody will know 

any different. 

Admiral GIAMBASTIANI. I think that is why this financial training 

that we are absolutely adamant on is such an important component 

of this. 

You have heard us say it many times. You understand this from 

your experience. But when you are dealing with these young people 

you just have to keep working on it. And you got to do it in a smart 

and coherent fashion for them. 

Mr. MALDON. Congressman, I want to provide you with a little 

more—we will do this for the record, if I might provide you with 

a little bit more information around your question on that 20 percent. 
26 

I would just add though, very quickly, a lot of it really depends 

on where you are at that point in time in your military career. And 

people that have been a long—been in it for a while, they are closer 

to the retirement point that took the survey, they are more likely 

to want to answer that question to say they like the current system 

better because that is the one that they are in and that is the one 

they are familiar with. 

But we will provide you with more information for the record. 

[The information referred to can be found in the Appendix on 

page 51.] 

Mr. KNIGHT. I think part of it is familiarity, I do. Look, if 80 percent of the people like what I am doing, I am a happy guy, so. 

I yield back. 

Dr. HECK. Thanks. 

Mr. Walz. 

Mr. WALZ. In my district that is 51 percent or—that is the way 

it works. 

Again I want to just clarify the point. I think the thoughtfulness 

you put into that, I am going to echo that again. I don’t think it 

can be said enough. Because this is a tough lift. And the folks sitting right there know that and I understand. You know it as well 

as anybody. 

I am appreciative of how you did it. I think this discussion on 

paternalistic is certainly true. It goes there. 

The one thing I would say is you took averages and things like 

that. I caution us all to think about, this is all great unless you 

are retiring in January of 2009. It would have been some significant things that impacted you because of economic conditions in 

this country with the Thrift Savings Plan and the way it worked. 

Now I know many people are saying, well that is the nature of 

things. Markets go up and down and whatever. I would make the 

argument that our commitment to these folks is different than just 

market winners and losers. These are folks that put their lives on 

the line. And so that defined benefit plan is certainly there. 

I would ask for all my colleagues to keep in mind because we are 

going to get asked many questions. The question I would ask is 

Congress has both a defined benefit plan and the Thrift Savings 

Plan. You are asking us to choose between one or the other. Just 

a thought. 

Those are things we are going to have to—and this getting there 

and how do we do all this is going to matter. Well, we will have 

the debate on this. It will matter on how our force looks at this. 

Because my biggest concern on this is, again, how do we ensure—and you have thought about this deeply. First and foremost, 

how do we make sure that All-Volunteer Force is still there? How 

do we retain them? 

And I want to be on the record. I think you brought up many 

intriguing things that are well thought out in going through. But 

I think if we ever divorce legislation and thoughtfulness from the 

politics and the will of those served we make a mistake. Because 

great ideas have died because of not ability to do that. So, just as 

a thought. 

Mr. BUYER. Sergeant Major, in our examination where we felt 

that systems were running well we left it alone. 
27 

So you asked us is it possible to modernize the system. If so, 

where? Is it possible to be effective and find efficiencies? If so, 

where? 

At the same time to be very responsive to a demographic for 

which you are recruiting from. And where are they today compared 

to when you took your oath as a young man? 

They are in a different place today. And the way their peers and 

their contemporaries as they mature through life and how they are 

being rewarded differently than in the military. I mean it is different. 

So how do we prepare for that force to recruit and for you to be 

able to retain into the future? And that is part of our package too. 

Mr. WALZ. Well, it is a thoughtfulness. And I have to tell you I 

am grateful for my colleagues here who are taking this in the right 

spirit and thinking this thing through. 

This is important work. It is going to matter. No less than the 

Chairman of the Joint Chiefs that it is absolutely critical to this 

nation’s national security to get this right on all fronts. And I think 

you see we are taking that seriously. 

Again, I can’t thank you enough, and really look forward. We just 

kicked off is where it is. It is a long game. We got to figure it out. 

We got to get to the end. Thank you. 

Dr. HECK. Ms. Speier. 

Ms. SPEIER. To follow up on my colleague, Mr. Walz’s comments, 

under your plan, if I understand it correctly, you are still going to 

have for new enlisted today—I mean after the law would be passed, 

they would still have a defined benefit plan. It would just be 80 

percent instead of 100 percent. Correct? 

Mr. MALDON. That is correct. 

Ms. SPEIER [continuing]. 20 percent—— 

Mr. MALDON. Yes. 

Ms. SPEIER [continuing]. At 20 years. 

But you also have the benefit of a TSP that has got a Federal 

match that you didn’t have before. And we should—I don’t know 

if you have used this. 

But this is a, I think, very artfully done chart that if hasn’t been 

up should be up because it shows how in all likelihood the benefit 

could be actually greater than the current plan. 

I have just two quick questions. And maybe I am somewhat impacted by having just seen the American Sniper. For those men 

and women who go into battle and do the unthinkable on our behalf, for short periods of time and then leave the military there 

really is nothing for them. 

And I think when the American public thinks about our military 

and making sure that we give them what they deserve, they want 

to make sure the folks on the front lines were getting some form 

of support. 

And the truth is, if you only serve 3, 4, 6 years, if you only do 

three, four, five tours of duty, by God, I mean to think that we 

have put them in that kind of position and then leave the military, 

there is really nothing for you. 

Admiral GIAMBASTIANI. Well, I wouldn’t—— 

Ms. SPEIER. Besides the VA. 

Admiral GIAMBASTIANI. Yes. 
28 

Ms. SPEIER. But I mean in terms of compensation. And I don’t 

know if you have thought about that at all. That wasn’t part of 

your charge, but—— 

Admiral GIAMBASTIANI. No, it is part of our charge. 

Mr. BUYER. We are in a place that is no different than where 

Congress was after World War II. And they stepped forward with 

the GI Bill. 

Where we are today is not only do we do the GI Bill that is already there, but we also are doing more with regard to the war 

after next. And that is what this modernization of our package is. 

So what your comments are, you are in the exact same position I 

believe as Congress was in 1948 and 1952. 

Mr. MALDON. Congresswoman, I would like to add, I am looking 

at this chart here though. And I think I would be remiss if I didn’t 

mention we are redoing this chart because we are taking a look at 

the lifetime earnings. 

And we are going to—and I think the result is going to be the 

same. But we will be redoing that chart. And we will make sure 

that you get the update to that as we do it. 

Ms. SPEIER. Okay. 

Mr. MALDON. Because we just re-look at assumptions and those 

kind of things that I think would be very important to make sure 

that that date is included. 

Ms. SPEIER. So with my last 2 minutes, are there any areas that 

we haven’t covered today that we should hone in on in terms of 

your entire proposal? 

We tend to look at certain areas and we beat them to death. But 

we may not be looking at other areas that are also critical or important. So if there is anything else that we haven’t really spent 

any time on and you would like to address, I would be happy to 

hear it. 

Mr. MALDON. I will turn to my fellow commissioners and see if 

you have any comments to make. Go ahead. Commissioner 

Chiarelli wants to. 

General CHIARELLI. I would really like to state the importance of 

the Readiness Command, not only from a medical standpoint but 

also from the standpoint of every single one of our recommendations touches readiness in some way. 

The only way that I would disagree with Commissioner Buyer is 

it is a lot like World War II. But in my own service there were 8.5 

million men and women who fought that battle for just over 4 

years. 

We have done it with less than 1 percent of the population and 

every one of them has been a volunteer. So you know if we want 

to maintain this force and do these kinds of things, we need to ensure that we are watching the readiness issues. 

Admiral GIAMBASTIANI. I would like to echo that and just suggest 

one thing. In individual discussions with a number of members 

there are concerns about this creating another four-star command. 

I would like to remind you of something just for a moment because everybody is worried about grade creep. And yes, you have 

two retired four-stars sitting here. 

But what is important to remember about this is this was the 

toughest recommendation we came to as a Commission. We de-
29 

bated this ad infinitum, frankly, for about a year on how to best 

help solve the combat medical readiness issue and to keep oversight. 

It is not just a four-star command, but it is also on the Joint 

Staff the creation of a doctor who is not submerged underneath 

some other division head, who is in fact reporting directly to the 

Chairman of the Joint Chiefs on medical. So it is a combination. 

I just want to remind you of one thing to think about. Today the 

United States Government has about 2.1 million civil servants. We 

have 8,000 SES’s. That ratio comes out to be about 38 Senior Executive Service civilians for every 10,000 Federal employees. 

In the United States military we have about 1.36 million Active 

Duty. We have 994 flag and general officers. That ratio is a tad 

under 7. So you have got 38 Senior Executive Service for every 

10,000 Federal employees. And we have just under 7 for every 

10,000. 

My comment to you is if you are really worried about grade 

creep, I am not suggesting going after the civilian corps. I am just 

telling you, give me a break here. I think we are making a mistake. 

Dr. HECK. Mrs. Davis. 

Mrs. DAVIS. I might just add because we had actually a meeting 

yesterday around some of the stand-ups of multiple commands at 

times that perhaps were not appropriate. 

So I think that is partly where some of those questions are coming from as well. And just being able to really explain why it is and 

justify, which I think members are going to be looking for. 

General CHIARELLI. It is $50 billion. It is a big hunk of money. 

And when you look at the VA portion, although you know that is 

a separate bucket, you are talking over $100 million in health care. 

So it really does need someone to ensure that it is being done as 

efficiently and effectively as possible. 

I would also add that the formulary issue is—you asked me another issue and I am going to keep pounding on it every time I 

come up here. This formulary issue is absolutely essential. 

And I will tell you that piece of paper that came out on the 20th 

from the Veterans Administration has not fixed that issue. It has 

not fixed it. And we really, really need to rationalize those two 

formularies. 

Dr. HECK. Now let me—I am going to follow up on that same 

line. So obviously so now we have DHA [Defense Health Agency], 

which has kind of assumed the role also of TMA [TRICARE Management Activity]. How do you see—what happens to the Defense 

Health Agency if we stand up a Joint Readiness Command and we 

do away with TRICARE? 

Admiral GIAMBASTIANI. We are not doing away with TRICARE in 

its entirety. Remember, you are going to still have TRICARE for 

Life. And so you are going to need a much smaller administrative 

staff. 

So that frankly very large TRICARE and Defense Health Agency, 

that is part of where the savings come from because there are significant reductions there. That is what happens to them. 

We can give you more detail for the record on this. 

[The information referred to can be found in the Appendix on 

page 51.] 
30 

Dr. HECK. Probably explains why Secretary Woodson is on my 

calendar next week. 

Mr. BUYER. I want to go really—I want to go—yes. He is going 

to have less of a kingdom and he will be defending the muck. 

Let me go real personal to you. So when you are in theater as 

a combat surgeon the picture that someone took, that radiograph, 

that picture that was taken. 

Do you realize that when that patient was then on the air ambulance to Landstuhl, when he got off the bus, when he was carried 

off the bus at Landstuhl his medical record is on his chest, along 

with his x-ray. 

And you say, Steve, why is that? In the era of the electronic 

health record? It is because there is no trust. You see that x-ray 

that was taken, the kind that supports hospital in Iraq for you is 

a different system than—that is located at the MTFs. 

Because the Defense Health Agency, they are funded differently. 

They buy things differently. The acquisition is different. So when 

it comes to the combatant side of health care, it is owned by the 

services. 

So this recommendation that General Chiarelli and Admiral 

Giambastiani have created this Readiness Command in the J10, it 

is to ensure that it becomes seamless and integrated. We have to 

stop this. 

We also need acquisition reform. But that was outside our purview. 

I will yield back, but you see what I mean? Come on, doc, we got 

to do better. 

Dr. HECK. Well, votes are going to be at 2:30. I will ask if anybody has got any last alibis. Okay. 

You know we have touched on a lot of important issues. But we 

haven’t yet delved into a lot of issues. Like until we start talking 

about SBP [Survivor Benefit Plan] and DIC [Dependency and Indemnity Compensation] offset, talk about a third rail. Or if we 

start talking about some of the other issues that you have addressed. 

I want to assure all the subcommittee members that we will continue to address every one of these issues in detail before we come 

to the point of trying to make a recommendation on the recommendations. 

Again, I want to thank all the commissioners for your thoughtful 

work, for coming before us again. I appreciate the insights you 

have provided. Look forward to working with you as we slog 

through and defend the muck from the gargoyles. 

Mr. MALDON. Thank you, Mr. Chairman. 

Dr. HECK. There being no further business, the hearing is adjourned. 

[Whereupon, at 2:28 p.m., the subcommittee was adjourned.] 
A P P E N D I X 

FEBRUARY 11, 2015 

PREPARED STATEMENTS SUBMITTED FOR THE RECORD 

FEBRUARY 11, 2015 

(35) 
36 
37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 

WITNESS RESPONSES TO QUESTIONS ASKED DURING 

THE HEARING 

FEBRUARY 11, 2015 

(51) 

RESPONSE TO QUESTIONS SUBMITTED BY MR. WALZ 

Mr. MALDON. The Commission’s mandate was to conduct a review of all compensation systems and recommend a holistic set of compensation reforms. As such, 

the Commission’s recommendations are designed to work together, and with other 

existing compensation programs, to maintain recruiting, retention, and the quality 

of life of Service members and their families. 

The Commission’s retirement and GI Bill recommendations, for example, are 

aligned to provide strong midcareer retention incentives. The GI Bill recommendation would allow Post 9–11 GI Bill benefits to be transferred to dependents after 

10 years of service (YOS), with a commitment of 2 additional YOS. Then at 12 YOS, 

the Commission’s retirement recommendation includes continuation pay that would 

include a commitment of 4 additional YOS. Thereafter, the defined benefit annuity 

would provide incentive for people to remain in service until 20 YOS, much as it 

does today. 

Another example of how the recommendations are integrated is evident in the 

Commission’s health care recommendations. The recommendation for a Joint Readiness Command would provide DOD with strong tools with which to attract new 

workload into Military Treatment Facilities, thereby strengthening the readiness of 

the medical force. The Commission’s TRICARE Choice recommendation, in which 

Reserve Component members, retirees, and family members would choose from a 

menu of commercial health insurance plans, supports the Commission’s readiness 

recommendations by ensuring that Military Treatment Facilities have the proper 

business practices (e.g., billing system, access priority lists, etc.) to support the new 

readiness workload. 

The Commission’s financial literacy recommendation provides critical support to 

ensure the success of the other recommendations as well. The retirement recommendation provides incentives for Service members to save and invest early in 

life, and the financial literacy recommendation would provide knowledge to support 

investing prudently. Similarly, financial literacy training would ensure that Service 

members make informed decisions in choosing the right health care options for their 

families within TRICARE Choice. [See page 11.] 

RESPONSE TO QUESTIONS SUBMITTED BY MR. KNIGHT 

Mr. MALDON. The Commission’s survey did not ask why Service members prefer 

certain benefits to others. There is, however, some evidence that those who prefer 

the current benefits package are more senior in rank. For example, senior officers 

(O4–O6) and senior enlisted (E5–E7) prefer the current retirement plan by a margin 

of approximately 60:40. In contrast, junior enlisted (E1–E4) expressed preference for 

the recommended blended retirement plan by a ratio of 60:40. [See page 26.] 

RESPONSE TO QUESTIONS SUBMITTED BY DR. HECK 

Mr. MALDON. TRICARE would not be discontinued in its entirety. For example, 

active-duty Service members would continue to receive care through the Military 

Health System, TRICARE for Life would continue to serve Medicare-eligible retirees, and the pharmacy benefit would remain in place. If the Joint Readiness Command were created and TRICARE Choice implemented, the role and responsibilities 

of the Defense Health Agency (DHA) would change. DHA responsibilities would include the following: 

• Administer the remaining elements of the TRICARE program and contract with 

third-party administrators to coordinate care and claims processing associated 

with active-duty Service members, TRICARE for Life, and the pharmacy program. 

• Provide recommendations and data to the Office of Personnel Management 

(OPM) to assist in the coordination of a health insurance program that meets 

the unique needs of DOD beneficiaries and military medical readiness. 
52 

• Provide information, education, and benefits counseling to TRICARE Choice 

users. 

• Manage the emergency fund to assist with catastrophic and chronic conditions 

experienced by active-duty families. 

• Administer the 10 current and any future MHS-wide shared services (the current shared services include Information Technology, Contracting, Facility Planning, Medical Logistics, Pharmacy, Public Health, TRICARE Health Benefit, 

Budgeting & Resource Management, Education & Training, and Research & Development). 

Some of the functions DHA performs today would be redistributed. Under 

TRICARE Choice, OPM would be responsible for actions such as negotiating and 

awarding contracts with health insurance carriers, dispersing payments to insurance carriers, and auditing insurance carriers’ operations. The insurance carriers 

participating in TRICARE Choice would be responsible for actions such as coordination of benefits to plan enrollees; payment and adjudication of claims; and publication and distribution of health insurance plan brochures, identification cards, and 

other related documents to plan enrollees. The Joint Readiness Command would 

need to revisit DHA’s current role as a Combat Support Agency, as well as that of 

the Readiness Division under DHA’s Healthcare Operations Directorate. [See page 

29.] 
QUESTIONS SUBMITTED BY MEMBERS POST HEARING 

FEBRUARY 11, 2015 

(55) 

QUESTIONS SUBMITTED BY MR. KLINE 

Mr. KLINE. The Commission recommends placing the services in charge of budgeting for service members’ needs for Basic Allowance for Health Care and retirement (continuation pay). What is your assessment of the ability of each service to 

take on this task? How would this added requirement on the services take them 

away from other duties? Did you speak to the services on this issue during your review? 

Mr. MALDON. The Commission recommended the Basic Allowance for Health Care 

(BAHC) be calculated based on a formula established in law. This statutory formula 

would be based on the median health plan Active Component families select in a 

geographic location in the prior year plus the average amount of out-of-pocket costs 

(copayments, coinsurance, and deductibles) in that location in the prior year. The 

Defense Finance and Accounting Services would be responsible for dispersing 

BAHC, not the individual military Services. The military Services would include in 

their annual Military Personnel budget an amount necessary to cover the costs of 

beneficiary health care, including the BAHC. The Office of the Secretary of Defense 

would provide to the Services most of the information necessary to determine the 

Services’ budget requirements for beneficiary care. During the development of the 

recommendations the Commission staff met regularly with representatives of the 

Surgeons Generals’ staffs to discuss possible financial requirements of the recommendation. The Commission does not expect that budgeting for the health benefit 

provided to beneficiaries would be beyond the Services’ capability or would impede 

their other duties. 

The Commission recommended basic continuation pay be determined by each 

member’s current pay at 12 years of service. Any special continuation pay used to 

retain Service members in key specialty areas would be handled similarly to current 

retention bonuses. Commission and staff held discussions with personnel experts in 

all of the Services as well as the respective Assistant Secretaries for Manpower and 

Reserve Affairs for the Army, Navy, and Air Force, and the Assistant Deputy Commandant for Manpower and Reserve Affairs for the Marine Corps, before it made 

its recommendations. Under the current system, the Services have the analytical 

and staff capability to determine bonuses and special pays required to attain desired 

officer and enlisted retention levels by skill. These bonuses and special pays are constantly being adjusted to adapt to changing requirements and retention conditions. 

The Commission recommendations would require some further adjustments to these 

bonuses and special pays, but not beyond the capabilities that currently exist. 

Mr. KLINE. How do your recommendations ensure family members and retirees 

are not hesitant to seek medical care for the fear they might spend their entire 

Basic Allowance for Health Care before the end of each month? 

Mr. MALDON. The Commission’s recommendation balances two factors: the need 

to provide high-quality health benefits, particularly for active-duty family members 

(ADFMs), and the desire to incentivize more appropriate and efficient health care 

utilization. The Commission’s recommendation also included several features to help 

protect ADFMs from higher costs and subsequent risk, including BAHC, a fund for 

those with catastrophic and chronic health care needs, and financial literacy training regarding health care. BAHC would provide incentive for appropriate utilization 

of health care, while ensuring ADFM’s health care expenses remain generally cost 

neutral. BAHC would be calculated based on a formula established in law. This 

statutory formula would be based on the median health plan active-duty families 

select in a geographic location in the prior year plus the average amount of out-ofpocket costs (copayments, coinsurance, and deductibles) for ADFMs in that location 

in the prior year. Basic Allowance for Health Care (BAHC) would be provided only 

to active-duty Service member with dependents; BAHC is not provided to retirees 

or their dependents. 

The Defense Finance and Accounting Services (DFAS) would transfer the premium portion of BAHC to the Office of Personnel Management for purchasing the 

insurance plans that Service members select. This procedure would ensure that 

ADFMs purchase a health insurance plan despite possible competing priorities within their household budgets. DFAS would deposit directly into the Service members’ 
56 

pay only the portion of BAHC dedicated to cover out-of-pocket expenses (e.g. copayments). 

The Commission has also recommended an assistance program to provide emergency funding to ADFM who struggle with catastrophic or chronic health care 

needs. This catastrophic and chronic health care assistance fund would mitigate the 

risk of high-cost health care events for ADFMs. Active-duty families would apply for 

funding from this DOD program to cover out-of-pocket expenses that substantially 

exceed the portion of their BAHC allotted for out-of-pocket expenses but are less 

than their health plan’s catastrophic cap. After ADFMs reach their plan’s catastrophic cap, they are no longer required to pay out-of-pocket costs. The Commission 

recommends that an annual total of $50 million should be budgeted for this catastrophic and chronic condition assistance fund. 

Additionally, the Commission has recommended providing Service members extensive financial literacy training related to health care. By helping Service members 

understand their families’ coverage options and how to manage their families’ 

health care expenses, they should be well prepared to be proactive in the use of 

health care resources, know when it is appropriate to seek care, and feel confident 

they would have the resources needed to fund their families’ care. For example, 

within the range of health plans offered, Service members would have the opportunity to choose the plan that best fits their individual family’s situation. A member 

with several young children might choose a plan that has a higher premium, but 

features low deductibles, copayments, and coinsurance, anticipating that the family 

may have frequent preventative services would better manage the care ADFMs receive, lower utilization when appropriate, and limit unnecessary out-of-pocket costs 

by preemptively addressing health care needs and reducing avoidable emergency 

room and urgent care visits. 

Mr. KLINE. Your proposal requires retirees to eventually pay out-of-pocket for 20% 

of all health care costs. Why do you recommend that retirees pay 20% of health care 

costs? 

Mr. MALDON. Currently retirees pay cost shares for their health care. Their cost 

contributions would gradually increase over many years but, as recognition of their 

military service, remain significantly lower than the average Federal civilian premium employee cost share (28%) and lower than the total cost share when 

TRICARE was established (27%). 

Mr. KLINE. How do we ensure the Basic Allowance for Health Care benefit covers 

health care costs for the Select Reserve and National Guard under the current 

TRICARE Reserve Select system, so service members come to drill medically ready, 

and we avoid the problems of the past where the military bore the cost of getting 

them medically ready? 

Mr. MALDON. Reserve Component (RC) members would receive Basic Allowance 

for Health Care (BAHC) for their families only when they are called to active-duty 

for a period of more than 30 days. RC members would be permitted to use BAHC 

to either buy a TRICARE Choice plan or apply it to their civilian health plan, maximizing continuity of care. 

Members of the Selected Reserve are currently eligible for TRICARE Reserve Select at a 28 percent premium cost share. TRICARE Choice reduces their premium 

cost share to 25 percent. Under TRICARE Choice, all RC members would have access to health plans with partial dental coverage, which would aid those RC members who do not choose to purchase dental coverage under the TRICARE Dental 

Program. Additionally under TRICARE Choice, RC members would have access to 

vision coverage not available currently under TRICARE. Healthy dental and vision 

status are both concerns for medical readiness of the Total Force. 

Mr. KLINE. How would the TRICARE changes affect the most critically injured 

and wounded who medically retire under the current TRICARE Prime structure, 

which offers a benefit that covers most of their care? Would a service member’s 

Basic Allowance for Health Care shift costs to them or would they still continue to 

receive a benefit to cover all of their care? 

Mr. MALDON. Basic Allowance for Health Care (BAHC) would not pay for health 

care of active-duty Service members themselves, but rather for their family members. Retirees would not receive BAHC. Service members who medically retire and 

are placed on either the temporary disabled retirement list or the permanent disability retirement list receive care as a retiree from the Veterans’ Administration 

health care system and would continue to do so after implementation of the Commission’s health care recommendation. In addition to receiving health care from the 

VA, medically retired Service members who are not Medicare eligible would have 

the option to purchase a TRICARE Choice policy. Upon becoming eligible for Medicare, they would have access to TRICARE for Life. 
57 

Mr. KLINE. What is the rationale behind the $50M catastrophic event emergency 

fund? What are the qualifying criteria? How does your recommendation address the 

fund becoming insolvent? 

Mr. MALDON. The rationale behind the catastrophic and chronic health care assistance fund is to provide protection against the risk of very high out-of-pocket 

costs for active-duty family members (ADFMs) that are less than the catastrophic 

cap of the selected TRICARE Choice plan. 

To be eligible for assistance under this program, an active-duty Service member 

must have a dependent with a catastrophic or chronic health care need and must 

incur medical expenses in connection with the condition that exceed the portion of 

BAHC allotted for out-of-pocket expenses. The Secretary of Defense would establish 

policy on how families would apply for this assistance, how the Department would 

determine the amount of assistance to be provided to each family, and the method 

by which the Department would distribute such assistance. The Commission recommended an annual total of $50 million be budgeted for the 

fund by estimating the cost of covering all ADFM households that have costs near 

the catastrophic caps of the plans in TRICARE Choice. DOD would have the ability 

to budget additional funds if $50M is found to be insufficient for covering out-ofpocket costs for catastrophic and chronic conditions, as it does today for TRICARE 

costs. 

Mr. KLINE. Because service members after 10 years of service are well positioned 

to leave military service and take their TSP account to a civilian 401(k) plan, how 

do you anticipate that changes in the current retirement system would affect retention goals for senior staff noncommissioned officers and field grade officers? 

Mr. MALDON. The Commission’s recommendations are expected to maintain retention across the force profile, including for senior staff and noncommissioned officers 

and field grade officers. These findings are based in part on RANDS Corporation’s 

Dynamic Retention Model analysis, which indicates reducing the pension multiplier 

from 2.5 percent to 2.0 percent, while adding TSP, with matching funds, and continuation pay, would not create an incentive to leave (see page 29 of the Commission’s Final Report). The recommendations also 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 years of service, would enable the Services to increase retention to 

the critical 12-year point in a military career. • Awarding continuation pay at 12 years of service (YOS), with an additional 

commitment of 4 YOS, would bring Service members 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 Service 

members to stay 20 years or more. • 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. 

Mr. KLINE. What is the rationale behind the amount of continuation pay? Is continuation pay enough of an incentive to meet retention needs for a high quality 

force? How does continuation pay interact with other special pay and bonuses to 

keep high demand specialties in the service? 

Mr. MALDON. Continuation pay shown in Table 2 on page 30 of the Commission’s 

Final Report was calculated by RAND’s Dynamic Retention Model as the amount 

necessary to optimally maintain the current force profiles by service and component. 

Because this amount of continuation pay maintains the force profiles, it is expected 

to be sufficient to meet retention needs for a high-quality force. The recommendation also provides flexibility, so the Services can adapt to changing conditions and 

requirements. The addition of continuation pay would not affect other special pay 

and bonuses other than to add another retention tool for Services to use. 

Mr. KLINE. When formulating your recommendations, did you take into account 

how perceived inequality among service members in their benefits would affect the 

morale of the All-Volunteer Force? How can you assure future service members that 

their retirement benefit will be worth as much to them as it is to service members 

today? 

Mr. MALDON. The current retirement system creates inequality by precluding a 

majority of Service members from receiving any Government-sponsored retirement 

funds. Under the proposed blended retirement system, a greater number of Service 

members would receive Government-sponsored retirement assets. The Commission 

found that the value of the retirement system to Service members would likely be 

increased, rather than reduced, with the proposed blended retirement plan. These 

changes are anticipated to have a positive effect on morale. Based on RAND’s Dynamic Retention Model projections, the proposed retirement plan would allow the 
58 

Services to maintain nearly identical steady-state force profiles, providing another 

indication that morale and perceived value of the retirement system will remain 

strong. 

For example, an E7 is projected to have Government-sponsored lifetime earnings that are $440,452 greater under the blended retirement system than under the current retirement system. This assumes the Service member contributes 3 percent of 

his or her basic pay to TSP, Government TSP contributions are 4 percent of basic 

pay (1% plus matching), and that TSP investments grow at 7.3 percent annually. 

Moreover, these are conservative estimates, since the 75 percent of participants in 

the Federal Employees Retirement System (FERS) contribute 5 percent of their base 

pay to maximize matching contributions and both historical and projected investment returns of state pension systems exceed 7.3 percent. If Service members contribute more to TSP or investment returns are higher, their lifetime earnings will 

increase by more than this baseline projection. 

Mr. KLINE. Reservists may have trouble finding health care options in rural areas. 

How does your proposal ensure protection for rural areas or areas with lesser 

choices of plans? Is there a fallback option for these members if choices aren’t available or affordable? 

Mr. MALDON. Network inadequacy in rural areas exists today under the current 

TRICARE program. When Reserve Component (RC) members activate, their family 

members are eligible for health care coverage under TRICARE. If the family transitions to TRICARE, it risks the loss of continuity of care if the family’s existing 

healthcare providers do not accept TRICARE. The limitations of the TRICARE networks are detailed in the Commission’s Final Report. It can be particularly difficult 

to find providers in TRICARE networks in rural areas and areas where there is a 

minimal Military Health Service presence. 

It is anticipated that in TRICARE Choice RC members would have the opportunity to choose from an array of local and national commercial health insurance 

plans. Rather than relying on TRICARE’s provider networks, which are limited in 

areas away from troop concentrations, RC members would have access to commercial insurance carriers’ networks, which are specifically designed for the local area 

in which RC members live. Activated RC members would receive a Basic Allowance 

for Health Care (BAHC), which they could use to pay for a TRICARE Choice plan 

for their families or could use to pay for their civilian insurance, thus alleviating 

the need to change plans and providers when an RC member is activated. 

QUESTIONS SUBMITTED BY MR. MacARTHUR 

Mr. MACARTHUR. In relationship to the TRICARE Program, your Final Report 

stated that ‘‘according to beneficiaries, timely and convenient access to care is a critical element of high quality properly functioning health care benefit, yet many 

TRICARE users expressed frustration with this element.’’ Concurrently, TRICARE 

beneficiary access to prescription drugs through local pharmacies has been steadily 

decreasing over the last few years, and starting in October of this year TRICARE 

beneficiaries will only be able to get certain medications through the mail or from 

a military treatment facility. Moreover, many beneficiaries prefer to use their local 

pharmacy and need the face-to-face encounter with a pharmacist, or may not live 

close to a military treatment facility. With all of this in mind, do you believe the 

Department should instead be looking at ways to maintain beneficiary access to 

their local pharmacy, so that beneficiaries can access the health care system that 

best meets their needs? 

Mr. MALDON. The Commission recommended DOD’s pharmacy benefit 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 Medicareeligible retirees using TRICARE for Life, would obtain medications from retail, mailorder, and MTF settings. DOD would retain the authority to contract with a thirdparty administrator to perform functions such as managing the retail pharmacy network, distributing mail-order medications, and processing claims. The Commission 

recommends that such contracts require a pharmacy benefits manager to integrate 

pharmaceutical treatment with health care and to implement robust medication 

therapy management (MTM), including the integration of MTM activities at retail 

pharmacies. 

Mr. MACARTHUR. In relation to the TRICARE Program, your Final Report recommends that the Department should implement a robust medication therapy management (MTM) program. Pharmacist-provided MTM has been shown to improve 
59 

patient health, while at the same time reducing costs, so increasing access to these 

services makes sentence. Retail community pharmacies have been at the forefront 

of providing MTM services. With this in mind, don’t you agree that the Department 

should work to implement a robust MTM program that utilizes retail pharmacies? 

Mr. MALDON. The Commission recommended all eligible beneficiaries, including 

Medicare-eligible retirees using TRICARE for Life, obtain medications from retail, 

mail-order, and MTF settings. DOD should 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. These 

contracts would require the pharmacy benefits manager to integrate pharmaceutical 

treatment with health care and to implement robust medication therapy management (MTM), including the integration and MTM activities at retail pharmacies. 

QUESTIONS SUBMITTED BY MR. JONES 

Mr. JONES. In the retirement example that is used to illustrate the current versus 

the proposed retirement system, it is of a E–7 who retired at age 38. And if he/she 

lived until 85 his retirement under the current system is approximately 202K. My 

staff looked this up using a DOD retirement calculator and came up with a very 

different number. Our number was about $2.1M and that was if the service member 

lived until age 78. Can you please explain the large discrepancy? Also, can you explain the personal discount rate? 

Mr. MALDON. The retirement example in the report is based on the present value 

of the retired pay, which accounts for the time value of money (i.e., that a dollar 

received in the future is worth less than a dollar received today). The DOD calculator estimates the cumulative retirement pay flow (of the current Defined Benefit 

Plan) from year of retirement out to 40 years from retirement and includes a cost 

of living adjustment (COLA). It does not calculate the personal discount rate. 

The time value of money recognizes that money in hand today is more valuable 

than money in the future because money can be invested and earn positive returns. 

Personal discount rates expand this general concept to include people’s risk tolerances and patience for spending. People who are risk averse or impatient for spending have higher personal discount rates, implying they strongly prefer money today 

relative to money in the future. The present value example in the Commission’s 

final report reduces the value of future defined benefit payments by the personal 

discount rates calculated from RAND’s dynamic retention model 

Conducting the same analysis of lifetime retirement earnings without discounting 

shows using conservative estimates, the proposed retirement system generates higher lifetime earnings than the current retirement system: 

E–7 with 20 YOS O–5 with 20 YOS 

Government-Sponsored Lifetime Earnings 

Current Defined Benefit $2,056,239 $3,391,483 

Blended Plan 

Proposed Defined Benefit $1,644,992 $2,713,186 

Continuation Pay (Statutory Basic) $7,321 $14,008 

Continuation Pay (Discretionary Force Management) $2,548 $64,435 

TSP Withdrawals (Age 60–85) $276,329 $478,808 

TSP Balance (Age 85) $565,502 $663,414 

Total Blended Plan $2,496,691 $3,933,851 

Government-Sponsored Lifetime Earnings Gain (Loss) $440,452 $542,368 

Mr. JONES. Can you explain what the TRICARE Prime premium will be for working age retirees once fully implemented as compared to today’s TRICARE Prime enrollment fee? 

Mr. MALDON. There would not be a single TRICARE Choice premium cost for nonMedicare-eligible retirees under the Commission’s recommendation. Retirees would 

be able to choose diverse plans with different prices, for example less expensive 

plans with more limited networks and more expensive plans with larger networks 

and more services. The Commission expects even the less expensive plans would 

have better networks and access than the current TRICARE program provides. In 

addition, the plans would offer a range of options that meet different needs for dif-
60 

ferent stages and situations in life—allowing beneficiaries to select the plan best 

suited to their specific needs. 

In the first year of TRICARE Choice, when the premium cost share is set at 5 

percent, the range of premiums available to working age retirees would be similar 

to the premium for TRICARE Prime today, and total costs of health care to retirees, 

including premiums, copayments, and coinsurance, would be similar to what they 

are today. Fifteen years after implementation, when the premium cost share for 

working age retirees reaches its maximum of 20 percent, the premiums would be 

higher than TRICARE Prime is today, and the total costs of health care to retirees 

would be higher. As recognition of the retiree’s military service, however, all of the 

plans in TRICARE Choice would be offered at a lower premium cost share than the 

average Federal civilian employee and lower than the cost share when TRICARE 

was established. 

The Commission’s best estimate of the average cost to a non-Medicare-eligible re- tiree under TRICARE today is about $2,000. This amount includes the premium for 

TRICARE Prime, the average cost of extra programs like TRICARE Young Adult 

and TRICARE Retiree Dental Program, and out-of-pocket costs for copayments and 

deductibles. Under TRICARE Choice, when the premium cost share has risen to 20 

percent, the total average costs would be $3,600 per year. 

Mr. JONES. Has the Commission done a side-by-side comparison of a variety of 

plans available on the FEHBP and that of the existing TRICARE programs and estimated premiums and copays for working-age retirees? 

Mr. MALDON. The Commission recommendation does not place beneficiaries in the 

Federal Employees Health Benefits Program (FEHBP). The Commission explored 

this option and did not recommend it because it was not the best way to meet the 

needs of military beneficiaries and provide them the most cost-effective health benefit. Military beneficiaries would need to have access to military hospitals, and 

FEHBP plans do not provide this. The costs of plans would be different, because 

military beneficiaries are substantially younger than federal civilians and the plans 

would not cover the Service member, so the plans would have to provide coverage 

for fewer adults than FEHBP family plans. Also, the Commission recommended 

DOD work with the Office of Personnel Management and be more involved in designing and managing the new program than other Federal departments and agencies are in FEHBP. 

The Commission analyzed projected plan premiums in TRICARE Choice and how 

they would compare to FEHBP plan premiums today. The differences in demographics (e.g. age) of military beneficiaries compared to federal civilians would likely 

result in an approximately 15 percent reduction in premiums for TRICARE Choice 

from what is seen in FEHBP today. Retaining the TRICARE pharmacy benefit in 

its current form would likely drive another approximately 15 percent reduction in 

premiums. Overall, it is realistic to expect plan premiums in TRICARE Choice to 

be on average 25–30 percent lower than FEHBP premiums. 

Mr. JONES. In relationship to the TRICARE Program, your Final Report stated 

that ‘‘according to beneficiaries, timely and convenient access to care is a critical element of high quality properly functioning health care benefit, yet many TRICARE 

users expressed frustration with this element.’’ Concurrently, TRICARE beneficiary 

access to prescription drugs through local pharmacies has been steadily decreasing 

over the last few years, and starting in October of this year TRICARE beneficiaries 

will only be able to get certain medications through the mail or from a military 

treatment facility. Moreover, many beneficiaries prefer to use their local pharmacy 

and need the face-to-face encounter with a pharmacist, or may not live close to a 

military treatment facility. With all of this in mind, do you believe the Department 

should instead be looking at ways to maintain beneficiary access to their local pharmacy, so that beneficiaries can access the health care system that best meets their 

needs? 

Mr. MALDON. The Commission recommended DOD’s pharmacy benefit 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 Medicareeligible retirees using TRICARE for Life, would obtain medications from retail, mailorder, and MTF settings. DOD would retain the authority to contract with a thirdparty administrator to perform functions such as managing the retail pharmacy network, distributing mail-order medications, and processing claims. The Commission 

recommends that such contracts require a pharmacy benefits manager to integrate 

pharmaceutical treatment with health care and to implement robust medication 

therapy management (MTM), including the integration of MTM activities at retail 

pharmacies. 
61 

Mr. JONES. In relation to the TRICARE Program, your Final Report recommends 

that the Department should 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 sentence. Retail community pharmacies have been at the forefront of providing MTM services. With this in mind, don’t you agree that the Department 

should work to implement a robust MTM program that utilizes retail pharmacies? 

Mr. MALDON. The Commission recommended all eligible beneficiaries, including 

Medicare-eligible retirees using TRICARE for Life, obtain medications from retail, 

mail-order, and MTF settings. DOD should 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. These 

contracts would require the pharmacy benefits manager to integrate pharmaceutical 

treatment with health care and to implement robust medication therapy management (MTM), including the integration and MTM activities at retail pharmacies. 

Mr. JONES. Your retirement proposal would provide a 401(k)-like, TSP benefit 

similar to Federal employees. Doesn’t a 401(k) benefit act to an create incentive to 

leave, rather than stay in service? 

Mr. MALDON. The Commission’s recommendations are expected to maintain retention across the force profile, including for senior staff and noncommissioned officers 

and field grade officers. These findings are based in part on RANDS Corporation’s 

Dynamic Retention Model analysis, which indicates reducing the pension multiplier 

from 2.5 percent to 2.0 percent, while adding TSP, with matching funds, and continuation pay, would not create an incentive to leave (see page 29 of the Commission’s Final Report). The recommendations also 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 years of service, would enable the Services to increase retention to 

the critical 12-year point in a military career. 

• Awarding continuation pay at 12 years of service (YOS), with an additional 

commitment of 4 YOS, would bring Service members 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 Service 

members to stay 20 years or more. 

• 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. 

Mr. JONES. Can you explain the personal discount rate for the retirement pension? 

Mr. MALDON. The time value of money recognizes that money in hand today is 

more valuable than money in the future because money can be invested and earn 

positive returns. In other words, a dollar received in the future is worth less than 

a dollar received today. Personal discount rates expand this general concept to include people’s risk tolerances and patience for spending. People who are risk averse 

or impatient for spending have higher personal discount rates, implying they strongly prefer money today relative to money in the future. The present value example 

in the Commission’s final report reduces the value of future defined benefit payments by the personal discount rates calculated from RAND’s dynamic retention 

model. 

Æ