Military Personnel: DOD Needs More Data to Address Financial and Health Care Issues Affecting Reservists
Published: 2003-09-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since the 1991 Persian Gulf War, National Guard and Reserve personnel have been deployed to a number of contingency operations. Since September 2001, about 300,000 reservists have been called to active duty, and the pace of reserve operations is expected to remain high for the foreseeable future. House Report 107-436 accompanying the Fiscal Year 2003 National Defense Authorization Act (P.L. 107-314) directed GAO to review compensation programs for reservists serving on active duty. GAO evaluated information on income change reported by reservists when activated; reserve families' readiness for call-ups and their awareness and use of family support programs, focusing on personal financial management; and a legislative proposal for the Department of Defense (DOD) to offer TRICARE, the military's health care program, to reservists and their families when members are not on active duty.
section_title: What GAO Found
paragraphs: DOD lacks sufficient information on the magnitude, the causes, and the effects of income change to determine the need for compensation programs targeting reservists who (1) fill critical wartime specialties, (2) experience high degrees of income loss when on extended periods of active duty, and (3) demonstrate that income loss is a significant factor in their retention decisions. Such data are critical for assessing the full nature and scope of income change problems and in developing cost-effective solutions. DOD self-reported survey data from past and current military operations indicate that activated reservists have experienced widely varying degrees of income change. While many reservists lost income, more than half of reservists had either no change or a gain in income. However, survey data are questionable primarily because it is unclear what survey respondents considered as income loss or gain in determining their financial status. DOD has placed greater emphasis on preparing reservists' families for potential call-ups, yet survey data show that one-third of spouses do not feel prepared, over half of reservists are not aware of family support programs, and more than 90 percent of spouses do not use these programs. Personal financial management, one of DOD's core family support programs, illustrates the continuing challenges DOD faces in providing outreach to reservists. The 2000 survey data showed that 61 percent of reservists did not know whether personal financial management services were available. The survey also showed that reservists have financial problems similar to their active duty counterparts. DOD is taking steps to improve personal financial management, but it has not assessed the financial well-being of reserve families, assessed the impact of reservists' financial problems on mission readiness, or determined how to tailor its programs to reservists. Available DOD data do not identify a need to offer TRICARE to reservists and their families when members are not on active duty. Estimates from DOD's 2000 survey showed that nearly 80 percent of reservists had health care coverage when they were not on active duty. This rate is similar to that of comparable groups within the overall U.S. population. DOD has expressed concern over the estimated costs of this proposal. Cost estimates range up to $5.1 billion a year. However, DOD has not fully assessed the ramifications of this proposed legislation, including the impact on recruiting and retention, the effects on active duty personnel, the extent reservists and their families might participate in such a program, or the impact on the TRICARE system. In addition, a high percentage of reservists' civilian employers who currently pay some or all of health care premiums for reservists during activations could discontinue providing such assistance. A number of recent improvements have been made to reservists and their families' health care when members are activated. However, DOD lacks data on problems reservists and their families have experienced with health care since the mobilizations following September 11, 2001; the causes of these problems; and their effects on readiness, recruiting, and retention.

section_title: Letter
paragraphs: Since the 1991 Persian Gulf War, National Guard and Reserve personnel  have been deployed to a number of contingency operations, including  those in Southwest Asia and the Balkans. About 300,000 reservists have  been called to active duty since September 2001 to support the war on  terrorism, conflicts in Afghanistan and Iraq, and other operations. Some  reservists have served for a year or more, and the pace of reserve  operations is expected to remain high for the foreseeable future. Citing the  increased reliance on the reserves, House Report 107-436 accompanying  the Fiscal Year 2003 National Defense Authorization Act directed us to  review compensation programs for reservists serving on active duty. Our  objectives were to evaluate (1) information on income change reported by  reservists when activated for a military operation to determine the need  for compensation programs; (2) reserve families’ readiness for call-ups and  their awareness and use of family support programs, specifically focusing  on personal financial management; and (3) a legislative proposal for the  Department of Defense (DOD) to offer TRICARE, the military’s health care  program, to reservists and their families when members are not on active  duty. This report is a follow-on to our March 2003 testimony, Military  Personnel: Preliminary Observations Related to Income, Benefits, and  Employer Support for Reservists During Mobilizations, GAO-03-549T  (Washington, D.C.: Mar. 19, 2003).
Military compensation is one of the tools DOD uses to attract, retain, and  motivate people. One of DOD’s guiding principles for military  compensation is that servicemembers, both reserve and active component  members, be treated fairly. Military compensation for reservists is  affected by the type of military duty they perform. In peacetime—when a  reservist is training or performing military duty not related to a  contingency operation—certain thresholds are imposed at particular  points in service before a reservist is eligible to receive the same  compensation as a member serving in the active component. For  contingency operations, these same thresholds generally do not apply.  Thus, reservists activated for contingency operations such as Iraqi  Freedom, Noble Eagle, and Enduring Freedom are generally eligible to  receive the same compensation as active component personnel.
Our review focused on the more than 870,000 reservists who generally drill  and train part-time with their military units (referred to as drilling unit  members in this report). To review compensation programs for reservists  on active duty, we analyzed legislation, policies, and other pertinent  documents; obtained and analyzed proposals to enhance reserve  compensation; and discussed these with officials from the Office of the  Assistant Secretary of Defense for Reserve Affairs, the Office of Military  Compensation, the Deputy Under Secretary of Defense for the Office of  Military Community and Family Policy, reserve component headquarters,  and the TRICARE Management Activity. To gain the perspective of  reservists and their spouses, we obtained and analyzed the results of a  2000 DOD survey of reservists, which covered reservists’ experiences  during military operations between 1991 and 2000, and a 2002 DOD survey  of spouses of activated reservists. (See app. I for more information on our  scope and methodology and app. II for a description of the 2000 and 2002  surveys.) We completed our work for this report from March to July 2003  in accordance with generally accepted government auditing standards.
subsections: section_title: Background
subsections: section_title: Components of the Reserve Forces
paragraphs: The reserve forces are divided into three major categories, one of which is  the Ready Reserve. The Ready Reserve, with approximately 1.2 million  reservists at the end of fiscal year 2002, is further subdivided into the  Selected Reserve, the Individual Ready Reserve, and the Inactive National  Guard. The Selected Reserve, with approximately 880,000 members in  fiscal year 2002, includes all personnel who are active members of reserve  units and who participate in regularly scheduled drills and training. In this  report, we refer to these personnel as “drilling unit members.” The  Selected Reserve also includes individual mobilization augmentees— individuals who regularly train with active component units. The  Individual Ready Reserve principally consists of individuals who have had  training and have previously served in the active forces or in the Selected  Reserve, and the Inactive National Guard contains individuals who are  temporarily unable to participate in regular training with the Guard unit.  Together, the Individual Ready Reserve and Inactive National Guard had  about 320,000 members in fiscal year 2002. There are seven reserve  components—the Army Reserve, the Army National Guard, the Air Force  Reserve, the Air National Guard, the Naval Reserve, the Marine Corps  Reserve, and the Coast Guard Reserve.
section_title: Reserve Participation in Military Operations
paragraphs: Since the end of the Cold War, there has been a shift in the way reserve  forces have been used. Previously, reservists were viewed primarily as an  expansion force that would supplement active forces during a major war.  Today, reservists not only supplement but also replace active forces in  military operations worldwide. In fact, DOD has stated that no significant  operation can be conducted without reserve involvement. Figure 1 shows  per capita involvement of reservists annually since 1986 and illustrates the  spikes in reserve participation in military operations in fiscal years 1991  (Desert Shield and Desert Storm) and 2002 (Noble Eagle and Enduring  Freedom), as well as a fairly steady level of involvement between 1996 and  2001. We derived per capita calculations by dividing the total days of  support for military missions by the end strength of the Selected Reserve.  However, force structure within the Selected Reserve qualifies only a  portion of those available to serve for a particular mission. Despite this,  the data highlight trends in the average number of support days served by  reservists.
There have been wide differences in the operational tempos of individual  reservists in certain units and occupations. Prior to the current  mobilization, personnel in the fields of aviation, special forces, security,  intelligence, psychological operations, and civil affairs had been in high  demand, experiencing operational tempos that were two to seven times  higher than those of the average reservist. Since September 2001,  operational tempos have increased significantly for reservists in DOD  reserve components due to the partial mobilization in effect to support  Operations Iraqi Freedom, Noble Eagle, and Enduring Freedom.
section_title: End Strength, Enlistment, and Attrition
paragraphs: For each year from fiscal year 1997 to 2002, the reserves on the whole  achieved at least 99 percent of their authorized end strength. In 4 of these  6 years, they met at least 100 percent of their enlistment goals. During this  time period, enlistment rates fluctuated from component to component.  For the fiscal year 1997-2002 period, only the Army National Guard  experienced a slight overall increase in attrition. The attrition data  suggest there has not been a consistent relationship between a  component’s average attrition rate for a given year and the attrition rate  for that component’s high demand capabilities (which include units and  occupations). In other words, attrition rates for high demand capabilities  were higher than average in some cases but lower than average in other  cases. Shortfalls have been identified in certain specialties, such as health  care professionals.
section_title: DOD’s Use of Survey Data
paragraphs: DOD uses surveys of reservists and their spouses to obtain information on  reservists’ income change when they are activated for a military operation  and to obtain their perspective on a number of issues relating to  activation, including family support and health care. The most recent  survey of reservists was completed in 2000, prior to the terrorist attacks  that occurred on September 11, 2001, and the ensuing mobilization. The  2000 survey included questions on various aspects of mobilization and  deployment for operations dating back to the 1991 Persian Gulf War. In  2002, the Office of the Assistant Secretary of Defense for Reserve Affairs  surveyed spouses of activated reservists. In 2003, DOD fielded a new  “status of forces” survey of activated reservists. However, the survey had  not been completed at the time we were conducting our work.
section_title: Roles and Responsibilities
paragraphs: The Under Secretary of Defense for Personnel and Readiness has  oversight for policies, plans, and programs for military personnel  management, military compensation, and personnel support programs.  The Assistant Secretary of Defense for Reserve Affairs is responsible for  the overall supervision of issues involving reserve forces. The Assistant  Secretary of Defense for Health Affairs has the responsibility to execute  DOD’s health care mission. The TRICARE Management Activity manages  and executes the Defense Health Program Appropriation and supports the  uniformed services in implementation of TRICARE. Regarding family  support programs, the secretaries of the military departments are  responsible for, among other things, ensuring that comprehensive family  support systems are developed at DOD installations and that family  support systems are monitored and evaluated to ensure that they are  accessible, effective, and responsive to the needs of DOD personnel and  their families.
section_title: Recent GAO Reports on Reserve Forces
paragraphs: We have previously reported on several issues surrounding the increased  use of reserve forces. In August 2003, we reported on the efficiency of  DOD’s process for mobilizing reservists following September 11, 2001. In  April 2003, we examined whether the Army was collecting and maintaining  information on the health of early-deploying reservists. In March 2003, we  testified before the Subcommittee on Total Force, House Committee on  Armed Services, on our preliminary observations related to the issues  covered in this report, as well as employer support. Also in March 2003,  we testified before the Subcommittee on Total Force concerning DOD’s  oversight of TRICARE’s network of civilian providers, and we issued a  report on this topic in July 2003. In September 2002, we issued a report in  response to a congressional mandate to study the health care benefits of  reserve component members and dependents and the effect mobilization  may have on these benefits. In June 2002, we noted that maintaining  employers’ continued support for their reservist employees will be critical  if DOD is to retain experienced reservists in these times of longer and  more frequent deployments.
section_title: DOD Lacks Data to Determine the Need for Income Protection Programs
paragraphs: DOD lacks sufficient information from the survey data to determine the  magnitude of income loss or gain experienced by reservists, the causes for  this change, and the effects of income loss on reserve retention. Such data  are critical for assessing the full nature and scope of income change  problems and in developing cost-effective solutions. DOD self-reported  survey data from past and current military operations indicate that  reservists have experienced widely varying degrees of income change  when they are activated. While many reservists have reported lost income  during activation, more than half of reservists have reported either no  change or a gain in income. Current pay policies and protections, as well  as emergency aid services, may help mitigate reservists’ financial hardship  during activation. Additional income protection initiatives for reservists  have been proposed. Three of these proposals are (1) an Army initiative to  provide special deployment pay to self-employed physicians who fill  critical medical wartime positions in the reserves, (2) legislative proposals  to authorize differential pay for federal employee reservists, and (3) an Air  Force initiative to establish an income insurance program for activated  reservists.
subsections: section_title: Information on Magnitude, Causes, and Effects of Income Loss Is Incomplete
paragraphs: The 2000 and 2002 DOD surveys provide incomplete information on the  magnitude of income change experienced by activated reservists, the  causes of income loss, and the effects of income loss on reservists’  attitudes toward military life and on retention. Such data are critical for  assessing the full nature and scope of income change problems and in  developing cost-effective solutions. Based on the 2000 survey data, DOD  estimated that the average total income change for all reservists (including  losses and gains) was almost $1,700 in losses. However, this figure should  be considered with caution because of the estimating methodology that  was used and because it is unclear what survey respondents considered as  income loss or gain in answering this question. For example, when  members reported income loss or gain, they may or may not have included  the value of indirect compensation, such as health care benefits, or  considered changes in their expenses, such as those for household and car  maintenance and for child care. In addition, it is unclear whether survey  respondents included paid civilian leave received concurrently with  military pay or whether they included differential pay if provided by their  employer. Further, reservists were mobilized or deployed for varying  lengths of time, which is likely to affect their overall income change.  According to DOD’s analysis of the survey data, certain groups reported  greater losses of income on average. For example, self-employed  reservists reported an average income loss of $6,500, physicians/registered  nurses reported an average income loss of $9,000, and self-employed  physicians/registered nurses reported an average income loss of $25,600.  DOD’s analysis presents little data on those groups who reported an  overall income gain. Two groups that were identified as reporting a gain  were clergy and those who worked for a family business without pay.
The existing survey data provide incomplete information on the causes of  income change. Income change can be attributed to various factors,  including a difference between civilian and military pay, a change in  spousal income, a change resulting from continuing losses from a business  or practice, a different job being performed, or some combination of these.  The 2002 spouse survey estimates showed that about 60 percent had an  increase in the military member’s earnings, 10 percent had an increase in  their own earnings due to working more hours or taking a second job,   31 percent had a reduction in the military member’s earnings, 19 percent  had a reduction in their own earnings because they were unable to work  as much, 6 percent had other increases in income, and 15 percent had  other reductions in income. In addition to these factors, military  households may also experience a change in expenses during the  activation period. The 2000 survey estimates showed that about 22 percent  of drilling unit members had an increase in child-care expenses, 26 percent  had an increase in household maintenance and car repair expenses, and   63 percent had an increase in telephone expenses. However, neither  survey provides complete information on the extent these individual  factors contribute to overall income change.
Although reservists have reported that income loss causes problems for  them, the effects of these problems are not clear. When asked to rank  income loss among other problems they have experienced during  mobilization or deployment, about 41 percent of drilling unit members  ranked it as one of their most serious problems. But the survey data are  inconclusive concerning the effects of income loss problems on  servicemembers’ attitudes toward military life or on retention. Our prior  work has shown that retention decisions are highly personal in nature and  that many factors may affect the decision of a servicemember to stay in  the military or leave. A 1998 RAND study conducted for DOD found that  income loss during the 1991 Persian Gulf War, while widespread among  reservists, did not have a measurable effect on the retention of enlisted  reservists. The study was cautiously optimistic that mobilizing the  reserves under similar circumstances in the future would not have adverse  effects on enlisted recruiting and retention. However, the effects of future  mobilizations can depend on the mission, the length of time reservists are  deployed, the frequency of deployment, the degree of support from  employers and family members, and other factors. Office of the Secretary  of Defense (OSD) officials told us it was too early to know how the current  mobilization would affect retention or what factors would be driving  reservists’ retention decisions.
section_title: Reservists Have Experienced Widely Varying Degrees of Income Loss or Gain
paragraphs: The 2000 DOD survey showed that an estimated 41 percent of reservists  who were drilling unit members in the Selected Reserve lost family income  when they were mobilized or deployed for a military operation, 30 percent  had no change in income, and 29 percent had an increase in income.   Table 1 shows the distribution of income change reported by drilling unit  members in the 2000 survey.
Our analysis of the 2000 DOD survey estimates showed that differences in  total family income change were attributable to different civilian  occupations. For example, a higher percentage of self-employed reservists  lost income (55 percent) compared with drilling unit members overall   (41 percent). About 10 percent of self-employed drilling unit members had  income loss of $25,000 or more, compared with about 3 percent for drilling  unit members overall. The percentage of federal employee reservists who  lost income did not differ statistically from the overall average for drilling  unit members. Of federal employee reservists, about 39 percent had an  income loss, and 62 percent had no change or a gain in income. Of  reservists in selected civilian career fields, a higher percentage of health  care professionals had income loss compared with reservists in other  career fields, and about 38 percent of health care professionals had an  income loss of $25,000 or more. Income change differences were also  evident based on reserve component and pay grade. For example, a higher  percentage of members in the Marine Corps Reserve and the Naval  Reserve had income loss compared with members of the Army National  Guard.
The 2002 DOD survey of spouses of activated reservists found that an  estimated 58 percent had an increase in monthly family income, 30 percent  had a loss in monthly income, and 12 percent experienced no change in  monthly income (see table 2).
section_title: Additional Income Protection Measures Have Been Proposed to Supplement Existing Pay Policies and Protections
paragraphs: Current pay policies and protections, as well as emergency aid services,  may help mitigate reservists’ financial hardship during activation. For  example, basic military compensation has increased in recent years. In  addition, the Soldiers’ and Sailors’ Civil Relief Act provides numerous  financial protections to reservists. (See app. III for more information on  existing pay policies and protections.) Additional income protection  measures for reservists have been proposed. Three proposals are (1) an  Army initiative to provide special deployment pay to self-employed  physicians who fill critical medical wartime positions in the reserves,   (2) legislative proposals to authorize differential pay for federal employee  reservists, and (3) an Air Force initiative to establish income insurance for  activated reservists.
subsections: section_title: Special Deployment Pay for Physicians in Critical Wartime Specialties
paragraphs: The Army, through DOD’s Unified Legislation and Budgeting process, has  proposed a special deployment pay to limit income loss and improve  retention of certain Army Reserve Medical Corps physicians. The pay  would be targeted at reservists called to active duty who are   (1) self-employed, (2) serve as officers in the Army Reserve Medical  Corps in critical wartime medical specialties, and (3) deploy involuntarily  beyond the established rotation. The special deployment pay would be  available during contingencies and funded through a supplemental  appropriation. Under this proposal, an eligible reservist would receive an  additional monthly pay that would vary by specialty, level of training, and  years of active duty service as a Medical Corps officer. The monthly pay  would be limited to no more than twice the special pay currently earned  by an eligible individual. The Army estimates the mean cost at $6,000 per  month per eligible professional. The Army estimates that had this pay  policy been in place in May 2003, Army Reserve physicians deployed  beyond the established rotation period (90 days) would have received a  total of $630,000 in special deployment pay for that month.
According to the Army, this special pay is needed because of difficulties  retaining and replacing fully trained physicians in the Army Reserve  Medical Corps to meet its wartime needs. These retention difficulties are  due, in part, to reservists’ concerns about financial loss during  deployment. According to the Army, it has been unsuccessful in recruiting  and retaining enough fully trained physicians to meet authorized personnel  levels in the Selected Reserve and has had to rely on transfers from the  Individual Ready Reserve to reconstitute its Selected Reserve strength.  The Army attributes retention challenges within the reserves to a decrease  in the number of active duty physicians transferring to the reserve  component, attrition due to an aging force and professionals meeting  retirement eligibility, and the inability of some medical professionals to  tolerate income loss resulting from frequent or lengthy activations.
Every 2 years, the Assistant Secretary of Defense for Health Affairs  publishes a list of critical officer skills needed to meet Ready Reserve  medical shortages and for which the services could offer retention and  recruiting incentives. During fiscal years 2002 and 2003, the Army Reserve  was projected to have critical shortages—that is, projected to fill less than  80 percent of authorized positions during the next 24 months—in   18 wartime health care specialties, such as general surgery, thoracic  surgery, and preventative medicine. For example, as of January 2003, the  Army Reserve had filled 78 percent of authorized general surgeon  positions, 62 percent of thoracic surgeon positions, and 41 percent of  preventative medicine positions.
A 1996 survey conducted for the Chief, Army Reserve, found that  54 percent of Army Reserve physicians cited the financial impact of  mobilization as a primary reason that they did not intend to remain in the  reserves until retirement. The survey showed that catastrophic financial  loss associated with long-term deployments was the primary factor in their  decisions to leave the Army Reserve. Furthermore, over three-quarters of  all Army Reserve physicians surveyed in 1996 and 2001 required  mobilization periods of 90 days or less to avoid seriously affecting their  medical practices. Fifty-nine percent of respondents to the 2001 survey  preferred a maximum deployment length of 60 days or less. However,  these respondents indicated that a special deployment pay would allow  them to deploy for longer periods of time and would increase the  likelihood that they would remain in the Army Reserve. The amount of  special pay that respondents would need varied by medical specialty, with  the majority indicating a need for less than $10,000 a month to maintain  their practices while deployed.
To increase retention among medical professionals concerned about the  financial impact of lengthy mobilizations on their practices, the Army  implemented the Presidential Reserve Call-Up 90-Day Rotation Pilot  Program in 1999. The 3-year pilot program limited deployments of  physicians, dentists, and nurse anesthetists to 90 days in the area of  operations. A 2001 survey of Army Reserve medical personnel found that  intent to remain in the Army Reserve increased among self-employed  medical professionals who were aware of the 90-day rotation pilot  program. By 2001, the percentage of Army Reserve medical professionals  who indicated that they did not intend to remain until retirement had  dropped slightly. Those aware of the 90-day cap who indicated that they  would leave because of the financial impact of mobilization decreased by  23 percent from 1996 to 2001. Moreover, those indicating that they would  leave because of concerns about future mobilizations decreased by   20 percent over the same time period. Respondents to the 2001 survey  indicated that a special deployment pay would allow them to deploy for  longer periods of time. For example, of respondents whose original  optimal deployment length was 31 to 60 days, 76 percent indicated that  they could increase their deployment time up to 90 days with a special  deployment pay.
section_title: Differential Pay for Activated Federal Employees
paragraphs: Federal employee reservists called to active military duty do not receive  paid compensation from their civilian employing agency other than paid  military and annual leave. Under various legislative proposals introduced  during the current congressional cycle, federal agencies that employ  reservists called to active duty would be required to pay the difference, if  any, between the employee’s civilian pay and military pay from  appropriated funds. DOD’s 2000 survey estimates indicated that 9 percent  of drilling unit members were federal employees in 1999. Proponents of  differential pay for federal employee reservists state that providing this  pay (1) would recognize the demands and burdens placed on reservists  and their families, (2) would help federal employee reservists maintain  their standard of living, and (3) would set an example for other employers  of reservists. The Office of Personnel Management has opposed similar  legislation in the past on the basis of equity and cost issues. In addition, as  noted earlier, available data indicate that federal employee reservists are  not suffering income loss to a greater extent than other reservists, such as  certain health care professionals.
Federal law provides many rights and benefits for federal employees  called to active military duty. In December 2001, federal agencies were  granted discretionary authority to pay both the employee and government  shares of the Federal Employees Health Benefits Program premium for  any or all of an 18-month period when an employee is called to active duty  in support of a contingency operation. As of March 2003, about   64 percent of federal agencies reported paying the entire premium when  an employee is called to active duty. At agencies that have not used this  discretionary authority, employees may continue to pay their share of  premiums for the first 12 months and their share of premiums plus the  government’s share of premiums and a 2 percent administrative  processing fee for the next 6 months.
Other benefits for activated federal employee reservists include the  following:    continuation of life insurance for up to 12 months at no cost;    continued accrual of military leave, which may be carried over to the  following fiscal year or used while activated; and  retroactive retirement credits upon return to their civilian positions.
In an August 2002 memorandum, the Office of Personnel Management  cited “equity issues” in its opposition to differential pay for federal  employee reservists. While the Office of Personnel Management did not  elaborate, differential pay could create inequities in pay between federal  employee reservists and their active duty counterparts who are serving in  the same positions and pay grades. Two servicemembers performing the  same military job could receive different amounts of compensation simply  because one is a reservist with a full-time job in the federal civilian sector.  In addition, there may not be a correlation between a reservist’s civilian  and military pay grades. A federal employee’s civilian salary is based on  work performed at a certain pay grade and may require different skills and  knowledge than the employee’s military job. Providing differential pay  would, in effect, be paying the reservist for a job other than that being  performed.
The Office of Personnel Management also stated that the cost of providing  differential pay for activated federal employee reservists on an indefinite  basis would be significant and that data are lacking to make an accurate  cost projection. It noted that because federal agencies would fund the cost  of differential pay, agencies with greater numbers of activated reservists  would have higher costs, reducing the amount of funds available for other  program operations. The Congressional Budget Office developed a cost  estimate for one of the legislative proposals. It estimated that this  proposal would cost $201 million for the fiscal year 2003-08 period, which  includes retroactive payments for federal employees called to active duty  since September 11, 2001.
A factor that complicates calculation of the total cost of differential pay is  DOD’s lack of complete information about reservists’ employment. Until  recently, DOD did not require reservists to provide information to DOD  about their civilian employers. In response to our recommendation that  DOD collect complete data about reservists’ employment, DOD and the  services implemented the Civilian Employment Information Program in  March 2003. Under this program, Selected Reserve members are required  to provide their employment status, employer’s name, and civilian job title,  among other information. When fully established, the program will allow  DOD to consider employment-related factors during premobilization  planning and assist the department in accomplishing its employer  outreach efforts. The data could also help to identify the number of federal  employees who could be called to active duty and to develop a total cost  estimate if a pay differential were offered to them.
While civilian employers are not required under the Uniformed Services  Employment and Reemployment Rights Act to provide differential pay to  activated reservists, we have found that many employers do so. As part of  our earlier work on employer support for the Guard and Reserve, we  contacted 359 employers of reservists in high tempo units between  November 2001 and March 2002 about their pay practices for activated  employees. Of 183 employers who completed and returned the survey,  about 40 percent indicated that they provide either full pay, differential  pay, or a combination of both to activated reservists. For this report, we  also surveyed officials from 22 states about their compensation policies  for state employees called to federal active duty and found that most offer  some type of financial assistance to their activated employees. Nineteen of  the 22 states offer financial assistance, such as pay differentials, to  employees who are on military leave without pay and can document a loss  of income. (App. IV provides information on income assistance, military  leave, health benefits, and other benefits offered by the 22 states to their  employees who are called to active duty.) DOD’s 2002 spouse survey  estimates showed that the reserve member’s civilian employer continued  to pay the member’s salary in full or in part for 22 percent of spouses.
section_title: Income Insurance for Activated Reservists
paragraphs: From 1996 to 1997, DOD offered the Ready Reserve Mobilization Income  Insurance Program to reservists as a way to protect their civilian income  when called to active duty. The program was canceled after it failed  financially. Through DOD’s Unified Legislation and Budgeting process, the  Air Force has proposed that DOD establish a somewhat similar income  insurance program that addresses some of the problems associated with  the original program but not others.
The original DOD program was initiated after concerns were raised  following the 1991 Persian Gulf War that income loss would adversely  affect retention of reservists. According to a 1991 DOD survey of reservists  activated during the Gulf War, economic loss was widespread across all  pay grades and military occupations. In response to congressional  direction, DOD in 1996 established the Ready Reserve Mobilization  Income Insurance Program, an optional, self-funded income insurance  program for members of the Ready Reserve ordered involuntarily to active  duty for more than 30 days. Reservists who elected to enroll could obtain  monthly coverage ranging from $500 to $5,000 for up to 12 months within  an 18-month period. Far fewer reservists than DOD expected enrolled in  the program. Many of those who enrolled were activated for duty in  Bosnia and, thus, entitled to almost immediate benefits from the program.  The program was terminated in 1997 after going bankrupt.
We reported in 1997 that private sector insurers were not interested in  underwriting a reserve income mobilization insurance program due to  concerns about actuarial soundness and unpredictability of the frequency,  duration, and size of future call-ups. Certain coverage features violated  many of the principles private sector insurers usually require to protect  themselves from adverse selection. These features include voluntary  coverage and full self-funding by those insured, the absence of rates that  differentiated between participants based on their likelihood of  mobilization, the ability to choose coverage that could result in full  replacement of their lost income rather than those insured bearing some  loss, and the ability to obtain immediate coverage shortly before an  insured event occurs. DOD officials told us that private sector insurers  remain unsupportive of a new reserve income insurance mobilization  program and that the amount of federal financial commitment required for  the program is prohibitive. Thus, DOD has no plans to implement a new  mobilization insurance program.
However, the Air Force has proposed that DOD establish a self-funded  income insurance program for reserve component members ordered  involuntarily to active duty for more than 30 days, or in support of forces  activated during a war declared by Congress or a period of national  emergency. The Air Force proposal attempts to address adverse selection,  low participation rates, and funding concerns that contributed to the  failure of the Ready Reserve Mobilization Income Insurance Program. For  instance, to address adverse selection and low participation rates, all  drilling unit members and individual mobilization augmentees would be  automatically enrolled in the program for $1,000 of monthly coverage with  the option to opt out. Individual Ready Reserve members would have the  option to enroll. To further mitigate adverse selection and funding  concerns, payments would not be made during the first 6 months of  enrollment in the program, regardless of mobilization or recall status. This  delay would allow funds to accrue for future payouts. Furthermore, DOD  would be able to suspend the annual enrollment open season during  national emergencies and periods of war that are declared by Congress.  Mandatory waiting periods for coverage to become effective would help  counter adverse selection that resulted when reservists with knowledge of  their imminent mobilization enrolled in the Ready Reserve Mobilization  Income Insurance Program. However, instituting waiting periods and  requiring mandatory participation still would not overcome financial  liability associated with large mobilizations. Even infrequent mobilizations  could produce a large number of claims. As a result, funding for the  program could be exhausted quickly. In 1998, the Congressional Research  Service estimated that if every Selected Reservist were enrolled for  coverage of $1,000 per month and paid premiums of $10 per month, the  fund would accumulate $9 million in income each month and $702 million  over 5 years, assuming that premiums were invested at a 10 percent  compound interest rate. A mobilization of 250,000 reservists would create  a monthly liability of $250 million, making the fund insolvent by the fourth  month of mobilization.
The Air Force proposal does not completely address some of the problems  experienced with the prior program, including adverse selection, low  participation rates, proof of loss of income, and funding concerns. As  currently structured, the Air Force’s proposed income insurance program  would not have graduated premiums that differentiate between  participants based on their likelihood of mobilization. However,  participants would be able to purchase additional coverage or opt out of  the program depending on their perceived risk of activation. Similar to the  Ready Reserve Mobilization Income Insurance Program, the Air Force’s  proposed program is designed to be financed entirely by premiums paid by  individual members. DOD would need to assume responsibility for any  unfunded liability that may result from a larger than expected  mobilization. As a result, the Secretary of Defense would need to submit a  supplemental appropriation request.
In addition, the Air Force’s proposed income insurance program does not  require proof of loss of income. As designed, the program would pay  benefits based on the amount of coverage chosen by the reservists  regardless of actual losses incurred. Premium rates would be set for a  specified amount of insurance coverage. There is no provision to prevent  reservists from subscribing to amounts of coverage significantly greater  than their actual loss of income. To minimize the program’s financial  liability, reservists could be required to document income loss when  submitting claims. However, verifying losses from self-owned businesses,  lost commissions or bonuses, or additional expenses could be difficult and  delay timely payment of benefits.
Even if these design criteria were addressed, designing a financially sound  program may not be possible. There is no reliable way to estimate the  duration, number, and timing of future mobilizations and the number and  specialties of reservists that would be called up. DOD’s increased reliance  on the reserve components in a changing and unpredictable world  situation makes projections of future call-ups exceedingly difficult. To be  financially sound, an insurance program, at a minimum, should have a  large eligible population of whom a large proportion are insured and the  proportion of those insured who file claims should be reasonably stable  over time. In addition, to be affordable, the majority of those insured will  not, in any period, incur the losses that they insure against.
Furthermore, it is unclear whether reservists want or need an income  insurance program. Although the 2000 DOD survey indicated that an  estimated 41 percent of drilling unit members had losses in family income  when mobilized or deployed, it is unknown whether reservists would be  willing to participate in a new income insurance program. For example,  high premiums and a mandatory waiting period before becoming eligible  for payouts could discourage participation. A survey conducted before the  Ready Reserve Mobilization Income Insurance Program was implemented  showed that about 70 percent of enlisted members and 55 percent of  officers indicated interest in participating in such a program. The DOD  Office of the Actuary estimated that about 40 percent of reservists would  participate. However, only about 3 percent of Selected Reserve members  actually enrolled. The enrollment pattern indicated that reservists in  certain military specialties had a greater need or demand for income  protection. Of the approximate 5,500 military specialties in the reserve  components, about 1,930 (35 percent) had some reservists enrolled in the  program, including 420 military specialties that had enrollment levels of   10 percent or more. Although these 420 military specialties accounted for  less than 8 percent of the total military specialties within the reserve  components, they made up over 25 percent of the total reservists enrolled  in the program. Of the 420 specialties with enrollment levels of 10 percent  or more, 250 were in aviation, legal, and medical fields.
section_title: DOD Faces Challenges in Family Readiness and Support
paragraphs: Although DOD has placed greater emphasis on family readiness, many  reserve families indicate they do not feel prepared for call-ups. In addition,  although reservists and their families are eligible for military family  support services, many reservists appear not to be aware of these services,  and most spouses of activated reservists have not used these services.  DOD officials have acknowledged they face challenges in providing family  support outreach to reservists and have taken steps to improve outreach.  Personal financial management, one of DOD’s core family support  programs, illustrates the continuing challenges DOD faces in providing  outreach to reservists. DOD has not assessed the financial well-being of  reserve families, nor has it assessed the impact of reservists’ financial  problems on mission readiness. DOD has noted a need to improve  reservists’ and their spouses’ awareness of and access to personal  financial management programs, but it has not tailored its programs to  reservists by developing plans that specify how these needs will be met.
subsections: section_title: Surveys Indicate a Lack of Readiness among Many Reserve Families and Low Awareness and Use of Support Programs
paragraphs: DOD has recognized the importance of family readiness and family  support for its servicemembers, including reservists. Under a 1994 DOD  policy, the military services must “ensure National Guard and Reserve  members and their families are prepared and adequately served by their  services’ family care systems and organizations for the contingencies and  stresses incident to military service.” According to DOD, families of  reservists who use family support services and who are provided  information from the military cope better during activations. Furthermore,  military members who are preoccupied with family issues during  deployments may not perform well on the job, which in turn, may  negatively affect the mission. According to DOD’s 2000 survey estimates,  reservists who had been activated stated that among the most serious  problems they experienced were burdens placed on their spouse and  problems created for their children. More than half of all reservists are  married, and about half have dependents. As of September 2001, there  were about 960,000 family members of Selected Reserve members,  including spouses, children, and adult dependents.
Despite this recognition of the importance of family readiness and family  support, many reserve families feel they are not prepared when the  member is notified for active duty. According to DOD officials, Operations  Noble Eagle and Enduring Freedom highlighted that not all reserve  families were prepared. Since many families never thought their military  member would be mobilized, they had not become involved in their family  readiness networks. Results from the 2000 DOD survey also showed a  substantial number of reservists did not anticipate call-up— about   35 percent of drilling unit members thought it was unlikely or very unlikely  that they would be mobilized or deployed in the next 5 years.  Furthermore, about one-fourth of drilling unit members said their  dependent care arrangements were not realistically workable for  deployments lasting longer than 30 days.
DOD’s 2002 spouse survey showed that an estimated 33 percent of spouses  felt they were unprepared or very unprepared when they first learned of  the member’s order to active duty, while 37 percent felt they were very  well prepared or well prepared and 30 percent felt they were neither  prepared nor unprepared. The survey data indicated that less than half of  spouses were involved in family readiness groups, attended readiness  briefings, received preactivation materials, or had a military point of  contact to help them deal with emergency issues that might arise. Our  analysis showed that some of these factors appeared to be related to  whether spouses felt prepared or unprepared when the member was  notified for active duty, although involvement in family readiness groups  and receiving preactivation materials upon the member’s notification to  active duty did not appear to be significant factors. (See app. V.)  Compared with unprepared spouses, a higher percentage of prepared  spouses had a longer period of notice before the member was activated.  As might be expected, a higher percentage of prepared spouses than  unprepared spouses were coping well or very well during the activation.  An estimated 84 percent of prepared spouses were coping well or very  well, 3 percent were coping poorly or very poorly, and 13 percent were  coping neither poorly nor well. Of unprepared spouses, 41 percent were  coping well or very well, 31 percent were coping poorly or very poorly,  and 28 percent were coping neither poorly nor well.
Although activated reservists and their family members are eligible for the  same family support services as their active duty counterparts, the DOD  2000 survey estimates showed that more than half of all reservists either  believed that family support services were not available to them or did not  know whether these services were available (see table 3).
DOD has found that the degree to which reservists are aware of family  support programs and benefits varies according to component, unit  programs, command emphasis, reserve status, and willingness of the  individual member to receive or seek out information. Among the key  challenges in providing family support are the long distances that many  reservists live from their home unit and military installations, the  difficulty in persuading reservists to share information with their families,  the unwillingness of some reservists and their families to take the  responsibility to access available information, conflicting priorities during  drill weekends that limit the time spent on family support, and a heavy  reliance on volunteers to act as liaisons between families and units.
Spouses of activated reservists have not made extensive use of military  family support programs. DOD’s 2002 spouse survey indicated that most  spouses did not use family programs during activation. When asked to rate  the helpfulness of various military support services, an estimated   94 percent of spouses said they had not used family programs. In response  to another survey question concerning the difficulty they experienced  accessing military services, 87 percent said they had not used family  programs. It is unclear from the survey data why spouses did not use  family programs. About 1 percent of spouses rated family programs as  their most important military support service.
DOD has recognized the need for improved outreach. For example, the  department has published benefit guides for reservists and family  members and has enhanced information posted on its Web sites. DOD  published a “Guide to Reserve Family Member Benefits” that informs  family members about military benefits and entitlements and a family  readiness “tool kit” to enhance communication about predeployment and  mobilization information among commanders, servicemembers, family  members, and family program managers. Each reserve component has  established family program representatives to provide information and  referral services, with volunteers at the unit level providing additional  assistance. The U.S. Marine Corps began offering an employee assistance  program in December 2002 to improve access to family support services  for Marine Corps servicemembers and their families who reside far from  installations. Through this program, servicemembers and their families can  obtain information and referrals on a number of family issues, including  parenting, preparing for and returning from deployment, basic tax  planning, legal issues, and stress. The National Guard has established  family assistance centers across the United States to act as an entry point  for service and assistance that a family member may need during the  current mobilization. As of May 2003, over 400 family assistance centers  had been established.
section_title: DOD Has Identified Outreach Challenges for Personal Financial Management Programs
paragraphs: Personal financial management, one of DOD’s core family support  programs, illustrates the continuing challenges DOD faces in providing  outreach to reservists. These challenges include improving access to and  awareness of personal financial management programs for reservists and  their family members. Under DOD policy, military personnel bear primary  responsibility for the welfare of their families, but the commitment  demanded by military service requires that they be provided a  comprehensive family support system, to include financial planning  assistance. Servicemembers receive financial management training during  their basic training and, in some cases, during advanced training. In  addition, personal financial management is one of the core services  offered at the military services’ family support centers. Personal financial  management consists of programs conducted by counselors who provide  personal and family financial training, counseling, and assistance.
DOD studies have identified problems with personal financial management  in the active duty force, particularly among junior enlisted members. A  2002 study found that (1) 20 percent of the junior enlisted force in the  active component has financial problems; (2) these personnel have  substantially more financial problems than does the comparable civilian  population; and (3) financial problems are not related to family income,  which suggests that financial problems are shaped by spending patterns  and management skills rather than by the level of income. According to  this study, “unit leaders consistently complained that much of their time  was spent dealing directly with financially overextended members. These  problems had a corrosive effect on the unit because they affected work  performance through added stress on members as well as through  absences to deal with creditors or get credit counseling.” A 2000 Navy  study found that 57 percent of Navy leaders cited financial concerns as the  main servicemember issue with which they dealt most often. Further, in  response to a House Committee on Armed Services requirement in the  Fiscal Year 2002 National Defense Authorization Act, the Navy identified  $250 million in productivity and salary losses due to poor personal  financial management.
In 2002, as part of its human capital strategic plan, DOD identified a need  to improve the financial literacy and responsibility of servicemembers,  including reservists. The plan states that mission readiness and quality of  life are dependent upon servicemembers’ using their financial resources  responsibly and that the military services must make a commitment to  educate servicemembers and their families and encourage them to use  good financial sense. Financial literacy training and counseling is one of  the pillars that support financial well-being. However, DOD has not  developed plans to address these needs.
DOD is reviewing a draft uniform personal financial management policy.  Currently, DOD and service regulations address aspects of personal  financial management. The draft policy seeks to establish a uniform  approach to educating and training all servicemembers, including  reservists. Regarding the reserves specifically, the draft policy would  require the military departments to provide a financial planning package  and instructional information to reservists as part of their mobilization  training. In addition, the draft policy outlines metrics to track financial  well-being, such as the number of delinquent government credit cards, the  number of individuals who have had their wages garnished, the self- reported financial condition of military personnel and their families, and  the number of administrative Uniform Code of Military Justice actions  taken against military personnel for financial indebtedness and  irresponsibility.
In addition to drafting a personal financial management policy, DOD has  taken steps to improve personal financial management programs. In May  2003, DOD formally launched a “financial readiness campaign” to address  servicemembers’ poor financial habits and to increase financial  management awareness, savings, and protection against predatory  practices. It has also entered into a number of partnerships with nonprofit  organizations and government agencies that have agreed to support  counselors who offer financial assistance programs to servicemembers.  The services have also made improvements. For example, the Navy has  increased the number of mandatory hours of personal financial  management training and uses mobile financial management teams to  train financial specialists, including in geographically remote regions  where there are no financial educators to provide training. The services  also provide financial planning information on their Web sites.
As shown in table 3, the 2000 DOD survey showed that an estimated   61 percent of drilling unit members did not know whether financial  counseling and management education services were available, and   16 percent did not think these services were available. DOD’s 2002 spouse  survey showed that about 76 percent of spouses did not use the military’s  financial information and counseling services, although it is unclear why  they did not. Although DOD has identified challenges in the service  personal financial management programs, it has not developed plans to  provide outreach to reservists and their spouses. A DOD official from the  Office of the Deputy Under Secretary of Defense for Military Community  and Family Policy said that little attention has been placed on extending  personal financial management programs to the reserve population. In a  2002 report to Congress, DOD stated, “The services should improve  access to personal financial management information by Reserve forces.”  The DOD report also stated that most personal financial management  training “does not adequately provide support to spouses.” The Army  noted that “increasing spouse participation is not easy and requires  significant marketing and leadership support.” The Air Force and the  Marine Corps specifically identified the lack of spousal outreach as a gap  in their programs. The services also recognize a need to improve  marketing of financial management programs to reservists and their  spouses. Two services—the Army and the Air Force—cited lack of  resources, including dedicated personal financial management personnel,  as a challenge to increasing access to and awareness of personal financial  management programs.
In addition, while DOD has assessed the financial well-being of the active  duty force, it has not conducted such assessments of reservists. Our  review of DOD survey data showed that reservists reported having many  of the same financial problems as their active duty counterparts. For  instance, about 20 percent of reservists and 19 percent of active duty  personnel characterized their family’s financial condition as “in over your  head” or “tough to make ends meet but keeping your head above water.”  However, a higher percentage of reservists reported having such financial  difficulties as bouncing checks, receiving a letter of indebtedness, and  falling behind in paying rent or mortgage, than did their active duty  counterparts. For example, 12 percent of reservists fell behind in paying  rent or mortgage compared with 3 percent of active duty members. In  addition, while DOD has found a link between financial problems and  readiness in the active component, it has not assessed the impact of  reservists’ financial problems on mission readiness.
section_title: DOD Has Not Fully Assessed the Need for Expansion of TRICARE to Nonactivated Reservists
paragraphs: Reservists’ family members are eligible for TRICARE when reservists have  been activated for 31 days or more, and a number of recent improvements  have been made to reserve family health benefits. These improvements  include earlier access to certain benefits, expanded options, higher  reimbursement rates for nonnetwork physicians, and efforts to improve  outreach. Reserve families may choose to use TRICARE when reservists  are activated or remain under civilian health insurance coverage. Our prior  work showed that despite having access to TRICARE, most reservists with  civilian health insurance had opted to retain their civilian health care  coverage for their families during periods of activation. To further expand  reservists and their family members’ access to health care, Congress is  considering legislation to offer military health care coverage to reservists  and their families when members are not on active duty. However, DOD  has not fully assessed the need for or ramifications of this proposal. For  example, DOD does not know the impact this proposal would have on  recruiting and retention, the effects on active duty personnel, the extent  reservists and their families might participate in such a program, or the  impact on the TRICARE system. Cost estimates range up to $5.1 billion a  year.
subsections: section_title: Improvements to Reserve Family Health Benefits
paragraphs: When activated for a contingency operation, reservists and their family  members are eligible for health care benefits under TRICARE, DOD’s  managed health care program. TRICARE offers beneficiaries three health  care options: Prime, Standard, and Extra. TRICARE Prime is similar to a  private HMO plan and does not require enrollment fees or copayments.  TRICARE Standard, a fee-for-service program, and TRICARE Extra, a  preferred provider option, require copayments and annual deductibles.  None of these three options require reservists to pay a premium. Benefits  under TRICARE are provided at more than 500 military treatment facilities  worldwide, through a network of TRICARE-authorized civilian providers,  or through nonnetwork physicians who will accept TRICARE  reimbursement rates.
Reservists who are activated for 30 days or less are entitled to receive  medical care for injuries and illnesses incurred while on duty. In addition,  Congress requires the Army to monitor the health status of those  designated as early-deploying reservists by providing annual medical and  dental screenings, selected dental treatment, and—for those over age 40— physical examinations every 2 years. Those under age 40 are required to  undergo a physical examination once every 5 years. For its early-deploying  reservists, the Army conducts and pays for physical and dental  examinations and selected dental treatment at military treatment facilities  or pays civilian physicians and dentists to provide these services.  Reservists who are placed on active duty orders for 31 days or more are  automatically enrolled in TRICARE Prime and receive most care at a  military treatment facility. Family members of reservists who are activated  for 31 days or more may obtain coverage under TRICARE Prime, Standard,  or Extra. Family members who participate in Prime obtain care either at a  military treatment facility or through a network provider. Under Standard  or Extra, beneficiaries may use either a network provider or a nonnetwork  physician who will accept TRICARE rates. Upon release from active duty  that extended for at least 30 days, reservists and their family members are  entitled to continue their TRICARE benefits for 60 days or 120 days,  depending on the reservists’ cumulative active duty service time.  Reservists and their dependents may also elect to purchase extended  health care coverage for 3 months at a time for a maximum of up to either  18 months or 3 years under the Continued Health Care Benefit Program.
Legislation passed in December 2002 (P.L. 107-314, sec. 702) made family  members of reservists activated for more than 30 days eligible for  TRICARE Prime if they reside more than 50 miles, or an hour’s driving  time, from a military treatment facility. In March 2003, DOD altered  TRICARE policy such that all family members of reservists activated for   31 days or more are eligible for TRICARE Prime. In conjunction with this  change, DOD announced a change in the eligibility of reserve families for  TRICARE Prime Remote for Active Duty Family Members. DOD stated  that a legislative provision of the program that required a family member  to “reside with” the servicemember would be interpreted as meaning that  eligible family members resided with the servicemember before the  servicemember left for their home station, mobilization site, or  deployment location, and the family members continue to reside there.
Under DOD authorities in the National Defense Authorization Acts for  2000 and 2001, DOD instituted several demonstration programs to provide  financial assistance to reservists and family members. For example, DOD  instituted the TRICARE Reserve Component Family Member  Demonstration Project for family members of reservists mobilized for  Operations Noble Eagle and Enduring Freedom to reduce TRICARE costs  and assist dependents of reservists in maintaining relationships with their  current health care providers. The demonstration project eliminates the  TRICARE deductible and the requirement that dependents obtain  statements saying that inpatient care is not available at a military  treatment facility before they can obtain nonemergency treatment from a  civilian hospital. In addition, DOD may pay a nonnetwork physician up to  15 percent more than the current TRICARE rate.
About 40 percent of the problems reservists have reported relate to  understanding TRICARE’s benefits and obtaining assistance when  questions or problems arose. Because these problems could be reduced  through improved education about TRICARE’s benefits and better  assistance while navigating the TRICARE system, we recommended in  September 2002 that DOD ensure that reservists, as part of their ongoing  readiness training, receive information and training on health care  coverage available to them and their dependents when mobilized and  provide TRICARE assistance during mobilizations targeted to the needs of  reservists and their dependents. DOD has added information for  reservists to its TRICARE Web site and, in response to our  recommendation, has begun to implement a TRICARE reserve  communications plan aimed at outreach and education of reservists and  their families.
The TRICARE Web site is a robust source of information on DOD’s health  care benefits. The Web site contains information on all TRICARE  programs, TRICARE eligibility requirements, briefing and brochure  information, location of military treatment facilities, toll free assistance  numbers, network provider locations and other general network  information, beneficiary assistance counselor information, and enrollment  information. There is also a section devoted specifically to reservists, with  information and answers to questions that reservists are likely to have.  Results from DOD’s 2000 survey showed that about 9 of every 10 reservists  had access to the Internet.
DOD has begun to implement a TRICARE communications plan to educate  reservists and their family members on available health care and dental  benefits. The plan identifies a number of tactics for improving how health  care information is delivered to reservists and their families. Under the  plan, materials are to be delivered through direct mailing campaigns, fact  sheets, brochures, working groups, and briefings. The plan also identifies  methods of measurement that will assist in identifying the degree  information is being requested and received. In March 2003, OSD  distributed educational materials for beneficiary counseling assistance  coordinators, reserve component staff, and others. In May 2003, the  TRICARE Management Activity established a working group to improve  reserve component communications.
section_title: Reservists’ Families Have Health Care Choices and Challenges
paragraphs: Most reservists who are not on active duty have civilian health insurance  through either their own or their spouse’s employer. Estimates from  DOD’s 2000 survey showed that nearly 80 percent of reservists had health  care coverage when they were not on active duty and about 20 percent did  not. According to DOD’s 2002 survey, an estimated 90 percent of spouses  of activated reservists had private health insurance prior to activation, and  4 percent had no insurance. The other 6 percent had TRICARE coverage or  some combination of TRICARE and private health insurance. While DOD  requires activated reservists to use TRICARE for their own health care,  using TRICARE is an option for their dependents. During mobilization,  some reservists may choose to save the cost of premiums by dropping  civilian insurance for their dependents and relying on TRICARE, which  has no associated premium. However, doing so means that dependents  must learn the benefits and requirements of a new health plan. It also  means they may be unable to use the same civilian providers if these  providers do not participate in TRICARE networks or accept TRICARE  patients. Reservists’ decisions regarding health care coverage for their  dependents are affected by a variety of factors—whether they or their  spouses have civilian health coverage, the amount of support civilian  employers are willing to provide with health care premiums, and where  they and their dependents live.
Despite the availability of DOD health care benefits with no associated  premium, our prior work has shown that many reserve family members  elect to maintain their civilian health care insurance during mobilizations.  According to estimates from DOD’s 2000 survey, about 90 percent of  reservists with civilian health care coverage maintained it during their  mobilization. Reservists we interviewed often told us that they maintained  this coverage to better ensure continuity of health benefits and care for  their dependents. The Uniformed Services Employment and  Reemployment Rights Act does not require employers to continue paying  their share of health care premiums when mobilizations extend beyond   30 days. However, employers continued to pay at least their portion of  health insurance premiums beyond this 30-day period for about 80 percent  of the reservists we contacted who maintained their employer-sponsored  coverage. DOD’s 2002 survey of spouses of activated reservists indicated  that only a small percentage of reserve families had to pick up the entire  premium in order to retain the member’s civilian health care coverage  during activation. Specifically, the survey estimated that    35 percent of families paid the employee share of the premium,    29 percent paid no additional costs because the member’s employer paid  the full health care premium,    18 percent paid no additional costs because the family was covered under  the spouse’s health care plan, and    8 percent paid the full health care premium.
Our surveys of reservists’ civilian employers also show that a high  percentage of employers provide assistance with continued health care  benefits for their activated reservists. Of the 183 employers of reservists in  high tempo units who completed and returned our survey on employer  support, 121 employers provided information on their health benefit  policies. Of these 121 employers, 105 (88 percent) reported that they paid  the full heath care premium or the employer share of the health care  premium during the activation period. Of the 22 states we surveyed about  pay and benefit policies for their activated reserve employees, 13  (59 percent) reported that they paid the full health care premium or the  employer share of the health care premium. Most of these states provided  these benefits during the entire activation period.
In our prior work, we found that many reservists who did drop their  civilian insurance and whose dependents did use TRICARE reported  difficulties moving into and out of the system, finding a TRICARE  provider, establishing eligibility, understanding TRICARE benefits, and  knowing where to go for assistance when questions and problems arose.  While reserve and active component beneficiaries report similar  difficulties using the TRICARE system, these difficulties are magnified for  reservists and their dependents. For example, 75 percent of reservists live  more than 50 miles from military treatment facilities, compared with   5 percent of active component families. As a result, access to care at  military treatment facilities becomes more challenging for dependents of  reservists than their active component counterparts.
Reservists may also transition into and out of TRICARE several times  throughout a career. These transitions create additional challenges in  ensuring continuity of care, reestablishing eligibility in TRICARE, and  familiarizing or refamiliarizing themselves with the TRICARE system.  Reservists are also not part of the day-to-day military culture and,  according to DOD officials, generally have less incentive to become  familiar with TRICARE because it becomes important to them and their  families only if they are mobilized. Furthermore, when reservists are first  mobilized, they must accomplish many tasks in a compressed period. For  example, they must prepare for an extended absence from home, make  arrangements to be away from their civilian employment, obtain military  examinations, and ensure their families are properly registered in the  Defense Enrollment Eligibility Reporting System (DOD’s database system  maintaining benefit eligibility status). It is not surprising that many  reservists, when placed under condensed time frames and high stress  conditions, experience difficulties when transitioning to TRICARE.
section_title: DOD Has Not Assessed the Need for or Ramifications of Expanding TRICARE to Reservists Not on Active Duty and Paying Health Insurance Premiums of Activated Reservists
paragraphs: To further expand reservists and their family members’ access to health  care, Congress is considering legislation to offer TRICARE to reservists  when they are not on active duty. The legislation would entitle members  of the Selected Reserve and certain members of the Individual Ready  Reserve and their dependents to the same TRICARE benefits as a  member of the uniformed services on active duty or a dependent of such a  member. An enlisted reservist enrolled in the TRICARE program would  pay an annual premium of $330 for self only coverage and $560 for self and  family coverage, while a reserve officer would pay an annual premium of  $380 for self only coverage and $610 for self and family coverage. (Military  personnel on active duty and family members of personnel on active duty  do not pay a premium for TRICARE coverage.) The legislation also would  require DOD to pay premium costs incurred by reservists who choose to  continue their civilian health care insurance coverage when activated.  DOD would cover the civilian insurance costs up to the total cost of the  reservist’s premium and would be required to pay an amount equal to  TRICARE’s average cost of providing TRICARE for self and family  coverage. Proponents have stated that the legislation (1) would recognize  an expansion of reserve roles and missions in recent years and an  increased demand placed on reservists and their families, (2) would assist  DOD in recruiting and retaining reservists, and (3) would help reservists  who opt to join TRICARE maintain continuity of their health care  coverage.
We have a number of concerns with the proposal to extend TRICARE  coverage to reservists not on active duty and their family members and to  require DOD to pay premium costs incurred by reservists who choose to  continue their civilian health care insurance coverage when activated.  First, while there has been an expansion of reserve participation in  military operations, with a dramatic increase in mobilizations to support  operations in Iraq, many reservists have deployed only once or not at all.  According to the results of DOD’s 2000 survey, only 25 percent of  reservists reported in 2000 that they had been mobilized or deployed. Of  those mobilized or deployed at least once, nearly 70 percent had  participated in only one operation. Since September 2001, DOD has called  300,000 reservists to active duty, representing one-fourth of the 1.2 million  reservists eligible for call-up. Second, DOD officials we spoke with about  the proposed legislation noted that DOD currently has not identified an  overall recruiting and retention problem in the reserves and that it was too  early to project the potential for future recruiting and retention problems  that might result from the ongoing mobilization. They also could not tell us  what effect the proposed legislation would have on the military’s ability to  recruit and retain reservists. Third, as noted previously, most reservists  activated prior to 2001 achieved continuity of care for their families by  retaining civilian health insurance during activation. However, DOD  officials said that little is known about reservists’ behavior patterns of  health care usage during mobilizations since September 2001 and that it is  difficult to project their behavior if the current proposal were approved.  According to a DOD official, it is unknown whether younger members of  the reserve force would purchase TRICARE health care coverage even at  reduced rates. In addition, a high percentage of reservists’ civilian  employers who currently pay some or all of health care premiums for  reservists during activations could discontinue providing such assistance  if DOD makes this coverage available to reservists year-round.
Other concerns with the proposed legislation have also been raised. DOD  officials said that creating greater uniformity of benefits between active  and reserve forces could have unanticipated effects on the active  component if active component members are enticed into leaving the  active component and joining the reserves. The OSD Health Affairs Policy  Director also noted that DOD could have difficulties tracking reservists’  premium costs in order to pay these costs during activation as required by  the legislative proposal. Another concern is the stress that could be placed  upon the TRICARE system. Currently, TRICARE provides care for   8.7 million beneficiaries—eligible active duty personnel, retirees, and  dependents. It is not clear to what extent reservists and their eligible  dependents would use TRICARE and the impact this could have on the  system. Beneficiary groups have described problems with access to care  from TRICARE civilian providers. In March 2003, we testified on DOD’s  oversight of the TRICARE civilian provider network, noting the problems  with assessing the network’s adequacy due to insufficient information.
In addition, controlling rising health care costs is a major concern of  DOD’s. According to a 2003 Congressional Budget Office analysis of   long-term defense spending, spending for military medical care, which  already makes up more than 10 percent of DOD’s operation and support  costs, is the fastest growing category of operation and support spending.  In this projection of the administration’s plans, annual medical spending  rises by 67 percent over the 2007-2020 period, from $33 billion to   $55 billion. Many of the same forces that cause national health  expenditures to rise—an increase in the volume of health care services  available and expanded use of new, high-cost drugs and procedures— translate into higher military medical costs. In addition, retirees and their  dependents now make up a larger share of beneficiaries, increasing the  average age and costs of the people who receive health coverage through  DOD. Two reasons military medical costs are expected to rise dramatically  over the next 5 years are (1) new benefits for military retirees over age 65  (called TRICARE for Life), which had an actuarial liability estimated at  $592 billion as of September 30, 2001, and (2) a switch to an accrual  accounting system—with DOD’s budget being charged each year for the  expected costs of future benefits. DOD’s fiscal year 2003 budget for the  defense health program was $14.8 billion.
The Congressional Budget Office estimated that implementing the  legislation— extending TRICARE coverage to reservists not on active duty  and their family members and requiring DOD to pay premium costs  incurred by reservists who choose to continue their civilian health care  insurance coverage when activated—would cost a total of $466 million in  2004 and $7.3 billion over 2004-2008.
The Congressional Budget Office estimated that extending TRICARE  coverage to reservists who are not on active duty would cost $393 million  in 2004 and $7.1 billion over 2004-2008. On the basis of DOD data, the  Congressional Budget Office estimated that the provision would apply to  760,000 reservists after excluding 120,000 who work for the federal  government. It also estimated that about 70 percent of qualified reservists  would opt to enroll in the TRICARE program.
The Congressional Budget Office estimated that requiring DOD to pay  premium costs for continued civilian health care coverage during  activation would cost $73 million in 2004 and $155 million over 2004-2008.  According to this estimate, the amount DOD would pay reservists would  cover about 60 percent of the average civilian premium.
DOD estimated that the cost of extending TRICARE coverage to reservists  who are not on active duty would be $5.1 billion per year. DOD’s estimate  does not include the costs to pay the premiums of activated reservists’  civilian health care. DOD’s estimate is significantly higher than the  Congressional Budget Office estimate due to certain assumptions  concerning the number of potential beneficiaries, the proportion of  potential beneficiaries that would opt to enroll in TRICARE, and the per  capita costs of providing care. DOD officials told us that they used  historical cost profile data to develop their cost estimates. However, we  did not independently verify either the DOD or the Congressional Budget  Office cost estimate. Noting the high cost of this proposed legislation, the  Secretary of Defense has expressed opposition to this legislation, stating  he will recommend that the President veto the National Defense  Authorization Act for Fiscal Year 2004 if a provision to expand TRICARE  is included.
section_title: Conclusions
paragraphs: DOD survey estimates showed income change varied considerably among  activated reservists, with a sizeable proportion of reservists experiencing  income loss, but more than half experiencing no change or a gain in  income. However, these data are questionable because it is unclear what  survey respondents considered as income loss or gain in determining their  financial status. For example, the number of reservists reporting income  loss could be lower if respondents did not include the sum of their military  pay— basic pay, special pays, allowances, and indirect compensation,  such as health care benefits. Currently, DOD cannot determine the need  for compensation programs to provide income protection to reservists  because it lacks sufficient information on the scope and nature of income  change experienced by activated reservists. More specifically, DOD lacks  sufficient data on the magnitude of income change, the causes of income  change, and the effects of income change on reservists’ retention  decisions. Survey results showed that a higher percentage of reservists in  certain groups, such as self-employed reservists and health care  professionals, experienced greater income loss compared with reservists  overall and that, for some, income loss or the potential for income loss is a  significant factor in their decisions on whether to stay in the reserves. A  number of approaches to providing income protection have been  proposed, including an income insurance program, differential pay for  activated federal employee reservists, and special pay for certain reserve  physicians. Of these three, only the last is targeted at reservists who (1) fill  critical wartime specialties, (2) experience high degrees of income loss  when on active duty, and (3) demonstrate that income loss is a significant  factor in their retention decisions. This is the kind of business case  approach that we think is necessary to determine the need for income  protection compensation programs.
In the area of family support, DOD and the military services have taken  steps to improve personal financial management programs. They have also  identified challenges such as increasing reservists’ and spouses’ awareness  of and access to personal financial management programs. However, they  have not developed specific plans to address these identified needs.  Further, while DOD has assessed the financial well-being of active duty  members and linked financial well-being with mission readiness, it has not  conducted similar assessments of the reserve force. Our review of DOD  survey data showed that reservists reported having many of the same  financial problems as their active duty counterparts. For instance, a higher  percentage of reservists reported having such financial difficulties as  bouncing checks and receiving a letter of indebtedness than have their  active duty counterparts. Conducting these assessments would provide a  better understanding of financial difficulties reservists encounter and the  impact these difficulties have on mission readiness.
Recent improvements have been made to reservists and their families’  access to TRICARE when the member is activated. In past military  operations, most activated reservists retained civilian health care  insurance coverage for their families during the activation period. To  further expand access to health care benefits, legislation has been  proposed that would provide TRICARE benefits to reservists and their  family members when they are not on active duty. Furthermore, the  legislation would require DOD to pay premium costs incurred by reservists  who choose to continue civilian health care insurance coverage when  activated. While proponents have cited a number of reasons for this  legislation, concerns have also been raised. We believe these concerns  may outweigh the perceived benefits and costs of the legislation.  Currently, DOD lacks sufficient information to determine the need for the  expanded health care benefits offered in the legislation and the  implications of the proposal for reservists, active duty members, and the  military health care system. DOD officials further stated that currently no  problem has been demonstrated in overall reserve recruiting and  retention. DOD has not yet identified problems reservists and their  families have experienced with access to health care during mobilizations  since September 11, 2001, such as problems in maintaining continuity of  health care; the causes of these problems; and their effects on readiness,  recruiting, and retention.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense direct the Under Secretary  of Defense for Personnel and Readiness to determine the need for  compensation programs aimed at addressing reservists’ income loss  during periods of active duty by obtaining more complete information on  the magnitude of income change, the causes of income change, and the  effects of income change on reserve retention. At a minimum, these efforts  should be designed to identify reservists who (1) fill critical wartime  specialties, (2) experience high degrees of income loss when on active  duty, and (3) demonstrate that income loss is a significant factor in their  retention decisions. We further recommend that, on the basis of this  information, the Secretary of Defense develop targeted compensation  programs, as appropriate, to retain these reservists in the armed forces.
We recommend that the Secretary of Defense direct the Secretaries of the  Army, the Air Force, and the Navy and the Commandant of the Marine  Corps to develop specific plans for improving reservists’ and their spouses’  awareness of and access to personal financial management programs. In  developing these plans, the military services, in conjunction with the  Under Secretary of Defense for Personnel and Readiness, should assess  the financial well-being of reservists and determine whether reservists’  financial problems affect mission readiness.
We recommend that the Secretary of Defense direct the Under Secretary  of Defense for Personnel and Readiness to assess problems reservists have  experienced since the mobilizations following the events of September 11,  2001, in maintaining continuity of health care; the causes of these  problems; and their effects on readiness, recruiting, and retention. As part  of this assessment, DOD should evaluate the ramifications of extending  TRICARE coverage to reservists not on active duty and their family  members as well as paying premium costs incurred by reservists who  choose to continue their civilian health care insurance coverage when  activated. DOD should also evaluate the potential impact of extending  such coverage on the retention of active duty personnel and on the  TRICARE system.
section_title: Matters for Congressional Consideration
paragraphs: In order to provide DOD an opportunity to determine the need for and  ramifications of expanding TRICARE, Congress may wish to delay a  decision on the legislative proposal to offer TRICARE to reservists and  their families when members are not on active duty. Furthermore,  Congress may wish to direct the Secretary of Defense to assess and report  on reserve health care benefits as we have recommended in this report.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, DOD concurred with our  recommendations. Regarding our recommendation that DOD develop  targeted compensation programs to retain reservists in the armed forces,  DOD stated that the department must exercise concern about paying its  part-time force more than its full-time force when undertaking similar  duties. As discussed in our report, we agree that equity between active  component and reserve component personnel is one factor that must be  considered in compensation programs that address income loss.  Nevertheless, we believe that DOD could target such compensation  programs appropriately by gathering more complete information on  reservists’ income loss and applying the three criteria included in our  recommendation.
On the basis of DOD’s concurrence with our recommendation concerning  reserve health care benefits, we have added matters for congressional  consideration concerning the legislative proposal to extend TRICARE  benefits to nonactivated reservists and their families. We believe the  proposed expansion of TRICARE deserves scrutiny due to its high costs,  the current lack of information on the need for this expansion of  TRICARE, and its potential ramifications. An assessment of this proposed  expansion of TRICARE is likely to be a complex and time-consuming  undertaking.
DOD’s comments are reprinted in appendix VI.
We are sending copies of this report to the Secretary of Defense, the Under  Secretary of Defense for Personnel and Readiness; the Secretaries of the  Army, the Air Force, and the Navy; and the Commandant of the Marine  Corps. We will also make copies available to appropriate congressional  committees and to other interested parties on request. In addition, the  report will be available at no charge at the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions concerning this report, please call  me at (202) 512-5559. Major contributors to this report are listed in  appendix VII.
section_title: Appendix I: Scope and Methodology
paragraphs: To evaluate information on income change reported by reservists when  activated for a military operation, we obtained and analyzed the results of  the Department of Defense’s (DOD) 2000 Reserve Component Survey and  2002 Survey of Spouses of Activated National Guard and Reserve  Component Members. We stratified the results of these surveys by pay  grade group, reserve component, and for certain other groups such as type  of employers. Further, we discussed the extent of income change with  officials from the following offices or commands:    Office of the Assistant Secretary of Defense for Reserve Affairs.    Office of the Deputy Under Secretary of Defense for Military Personnel  Policy, Office of Military Compensation.
National Guard Bureau.    National Committee for Employer Support of the Guard and Reserve.    Service Reserve Forces Policy Committees.    Office of the Assistant Secretary of the Army for Manpower and Reserve  Affairs.
U.S. Army Reserve Command, Fort McPherson, Georgia.    Office of the Chief of Army Reserve.    U.S. Army National Guard.    U.S. Air Force Reserve.    U.S. Air National Guard.    U.S. Naval Reserve.    U.S. Marine Corps Reserve, Quantico, Virginia.
We reviewed relevant reports from the DOD Office of the Inspector  General and the U.S. Army Audit Agency and our prior GAO reports and  testimony. We discussed with an official from the Congressional Budget  Office the estimated cost of a pay differential for federal employees who  are called to active duty. We did not verify the methodology used to  calculate this estimate. We analyzed current compensation and benefits  policies for activated federal employees from the Office of Personnel  Management. Further, we surveyed officials from 22 states between May  and July 2003 and obtained their compensation and benefits policies to  gain the perspective of state governments’ financial assistance and  benefits for state employee reservists called to federal active duty. To  determine the 22 states, we chose the 11 states with the highest total  population of reservists in the state, the 5 states with the smallest total  reservist population, and 6 states in the middle. We obtained a standard set  of information regarding each state’s policy. We also updated information  on employer compensation policies from our June 2002 report on  employer support of the National Guard and the Reserve. We had  surveyed 359 employers of reservists in high tempo units between  November 2001 and March 2002. Due to concerns about mail  contaminated with anthrax, not all completed surveys were obtained  before issuance of the employer support report. We updated the data with  an additional 72 surveys for a total of 183 completed surveys. Employers  were not randomly selected; therefore, the results are not projectable to  all employers. We also reviewed data from the Defense Manpower Data  Center regarding Army Reserve Medical Corps authorized and actual fill  rates for critical medical specialties and gains and losses from the Army  Selected Reserve and the Army Individual Ready Reserve from 1991 to  2002 to review an Army proposal for special deployment pay. We reviewed  DOD surveys on Army Reserve physicians’ experiences during  mobilizations, on a rotation program to address earlier concerns about the  length of deployments, and on associated catastrophic income loss. We  also contacted military aid associations, including the Army Emergency  Relief, the Navy-Marine Corps Relief Society, and the Air Force Aid  Society, to obtain and review information on emergency loans and  financial assistance provided to activated reservists on active duty.
To evaluate reserve families’ readiness and awareness and use of family  support programs, we reviewed DOD family policy regulations. We also  reviewed DOD Web sites and other materials designed to inform  servicemembers and their families about benefits. To obtain further insight  into reservists’ awareness and access to family support programs, we  reviewed service personal financial management regulations and policies  to determine the extent to which these programs are extended to  reservists and their family members. To evaluate the financial well-being  of reservists, we reviewed RAND and other DOD studies. We also  compared the results of the 2000 DOD survey with the 1999 DOD Survey of  Active Duty Personnel. Specifically, we met with and obtained information  from DOD officials from the Office of the Assistant Secretary of Defense  for Reserve Affairs, the Office of the Deputy Under Secretary of Defense  for Military Community and Family Policy, the military services, and  reserve components. We also met with representatives from the National  Military Family Association and the JumpStart Coalition for Financial  Literacy to discuss challenges reservists face when called to active duty.
To evaluate a legislative proposal for DOD to offer TRICARE to reservists  and their families when members are not on active duty, we reviewed  relevant GAO reports. We discussed health care benefits and eligibility  criteria for reservists and their family members and recent improvements  to military health care with DOD health care officials. We obtained cost  estimates of the legislative proposal from the Congressional Budget Office  and DOD, but we did not verify the methodology used to calculate the  estimates. During our survey of officials from 22 states, we obtained their  respective health care benefits policies to gain the perspective of state  governments’ health benefits for state employee reservists called to  federal active duty. We met with and obtained information from DOD  officials within the Office of the Assistant Secretary of Defense for  Reserve Affairs, Office of the Assistant Secretary of Defense for Health  Affairs, and the TRICARE Management Activity.
We completed our work for this report from March to July 2003 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: DOD Surveys of Reservists and Spouses
paragraphs: This appendix describes DOD’s 2000 survey of reserve personnel and 2002  survey of spouses of activated reserve personnel. We did not participate in  the design or collection of the results.
subsections: section_title: 2000 Survey of Reserve Component Personnel
paragraphs: The 2000 Survey of Reserve Component Personnel is a survey of Selected  Reserve members of the reserve components sponsored by the Office of  the Assistant Secretary of Defense for Reserve Affairs. The study  population consisted of 728,347 members below flag or general officer  rank and having at least 6 months of reserve duty service as of   August 2000. The sample consisted of 74,487 members, and eligible  respondents returned 35,223 questionnaires for a response rate of   47 percent. DOD officials believe that the response rate for the survey is as  good as other similar surveys that they have conducted. However, there is  a potential for bias in the estimates to the extent that respondents and  nonrespondents had different opinions on the questions asked. Data were  weighted by the Defense Manpower Data Center to allow the study to  provide estimates for the study population or subpopulations. This was a  mail-out survey, with the data collection period running from August 16,  2000, through December 29, 2000.
Because this is a probability sample based on random selections, the  sample is only one of a large number of samples that might have been  drawn. Since each sample could have provided different estimates,  confidence in the precision of the particular sample’s results is expressed  as a 95 percent confidence interval (e.g., plus or minus 4 percentage  points). This is the interval that would contain the actual population value  for 95 percent of the samples that could have been drawn. As a result, we  are 95 percent confident that each of the confidence intervals in this  report will include the true values in the study population. All percentage  estimates from the survey review have sampling errors of plus or minus   5 percentage points or less, unless otherwise noted. We used the weighting  factors and the sampling error methodology provided by the Defense  Manpower Data Center to develop 2000 estimates and sampling error  estimates. In some cases, we used the estimates developed by the Defense  Manpower Data Center.
section_title: 2002 Survey of Spouses of Activated National Guard and Reserve Component Members
paragraphs: The 2002 survey of spouses was sponsored by the Office of the Assistant  Secretary of Defense for Reserve Affairs to assess the needs and concerns  of National Guard and Reserve families prior to and during activation, to  assess the status of family support initiatives, and to gather data from  spouses of members who have been activated since September 11, 2001.  The study population for this survey consisted of 29,673 spouses of  reservists activated for Operations Noble Eagle, Enduring Freedom,  Bosnia, Southwest Asia, or Southern Watch. The survey was a stratified  random sample consisting of 7,658 spouses. Eligible respondents returned  3,874 completed surveys for a response rate of 51 percent. DOD officials  believe that the response rate for the survey is as good as other similar  surveys that they have conducted. However, there is a potential for bias in  the estimates to the extent that respondents and nonrespondents had  different opinions on the questions asked.
As with the 2000 survey, the 2002 spouse survey is also a probability  sample based on random selections, so the sample is only one of a large  number of samples that might have been drawn. For this survey, we  express confidence in the precision of our estimates as a 95 percent  confidence interval. All percentage estimates from the 2002 survey have  sampling errors of plus or minus 5 percentage points or less, unless  otherwise noted. To produce estimates of the study population, the sample  data were weighted to reflect the sample design and to adjust for  nonresponse. Because weighting factors were not provided to us for use  with the data, we computed weighting factors as the ratio of the  population to respondents for each stratum.
section_title: Appendix III: Policies and Protections That May Help Mitigate Reservists’ Financial Hardship During Activation
paragraphs: This appendix discusses existing pay policies and protections, as well as  emergency aid services, that may help mitigate reservists’ financial  hardship during activation.
While basic military compensation, in constant dollars, remained fairly  steady during most of the 1990s, it has increased in recent years. As a  result, reservists activated today are earning more in the military than they  did just a few years ago. (See fig. 2.) For example, an enlisted member in  pay grade E-4 who is married with no other dependents would earn $3,156  per month in basic military compensation in fiscal year 2003, compared  with $2,656 per month in fiscal year 1999, or a 19 percent increase. These  figures are calculated in constant 2003 dollars to account for the effects of  inflation.
In addition to increases in basic military compensation, Congress in   April 2003 increased family separation allowance from $100 to $250 per  month and imminent danger pay from $150 to $225 per month. These  increases expire September 30, 2003. The Senate and House are also  considering a new special pay of up to $1,000 per month that would  compensate servicemembers for frequent or lengthy deployments.
In addition to these increases in pay, other pay policies and protections  may help to mitigate reservists’ financial hardship during deployment. For  example:    The Soldiers’ and Sailors’ Civil Relief Act caps debt interest rates at   6 percent annually for debts incurred prior to activation and provides  many other financial protections if members can show that their ability to  pay is materially affected by being activated. Legislation currently before  Congress would amend the act to expand certain protections for activated  servicemembers.  Income that servicemembers earn while mobilized in combat zones is tax- free. The President designates combat zones. Military pay received while  in these combat zones is excluded from gross income and not subject to  federal income tax. Legislation currently before Congress would expand  combat zone tax exemptions to any designated contingency operation.
For Iraqi Freedom, Noble Eagle, and Enduring Freedom, DOD has  authorized reservists to receive both a housing allowance and per diem for  their entire period of activation, up to 2 years.
Military Reservist Economic Injury Disaster Loans up to $1.5 million are  available through the Small Business Administration to help small  businesses meet necessary operating expenses and debt payments until a  key employee—including the owner—is able to return from active duty to  the business and normal operations resume.
Servicemembers who are experiencing financial hardship can also obtain  emergency assistance in the form of interest-free loans or grants from  private aid organizations to pay for basic living expenses such as food or  rent during activation. The Army Emergency Relief, the Air Force Aid  Society, and the Navy-Marine Corps Relief Society are nonprofit charitable  organizations that provide financial, educational, and other assistance to  servicemembers and their families who are in need. These organizations  provide assistance to active component members, reservists, and retirees.
In 2002, the Navy-Marine Corps Relief Society distributed approximately  $41 million to almost 51,000 individuals, including $1.5 million provided  due to inadequate income to meet basic living expenses such as rent or  mortgage, food, and utilities. The Navy-Marine Corps Relief Society did not  track separately the assistance it provided to reservists.
The Air Force Aid Society distributed over $24 million in 2002 to more  than 34,000 individuals. Of this amount, $600,000 was provided to  reservists. The Aid Society reported significant increases in reservists’  receiving emergency assistance and phone card use. About 140 reservists  received emergency assistance for basic living expenses because they  experienced loss of civilian pay or military pay problems.
Army Emergency Relief distributed $41 million in 2002 to more than   56,000 people. At least $850,000 went to about 900 reservists for  emergency travel assistance, vehicle repairs, rent or mortgage assistance,  and as an income supplement while waiting for delayed military pay when  called to active duty.
section_title: Appendix IV: Selected States’ Policies on Compensation for Activated Employees
paragraphs: This appendix displays the results of our survey of 22 states to obtain their  policies regarding pay and benefits offered to state employees who are  called to federal active duty. It describes the military leave policies and  financial assistance programs such as state pay differentials for activated  state employees who experience income loss as a result of federal  activation. It also describes each state’s policy on the continuation of  dependent health care coverage and other reported benefits. To determine  the 22 states, we chose the 11 states with the highest total population of  reservists in the state, the 5 states with the smallest total reservist  population, and 6 states in the middle. We conducted our survey of the   22 states between April and July 2003.
In summary, we found that 19 of the 22 states surveyed offer pay  differentials to employees who are on military leave without pay and can  document a loss of income. Of these 19 states, 16 are mandated under  state law or executive order to provide financial assistance, while   3 states—Colorado, Georgia, and Texas—allow the individual state  agencies to offer pay differentials at the agencies’ discretion. The other  three states do not offer pay differentials to activated employees on  unpaid leave. The manner in which states calculate the amount of the pay  differential varies. For example, 7 states calculate the amount of the pay  differential as the difference between an employee’s civilian salary and  basic military pay, not including military special pays and allowances. In  contrast, 10 states include military special pays, allowances, or both in the  calculation, which can lower the differential amount that the state pays to  its activated employees. Georgia allows state agencies to formulate their  own differential calculation, while Pennsylvania offers a flat rate monthly  stipend to all activated employees. States offering financial assistance do  so for a period of time ranging from 90 days in Colorado to the duration of  the activation in states like Florida and Alabama. We did not find a  correlation between the size of a state’s reservist population and the type  or extent of financial assistance the state offers. The results of our survey  are presented in table 4.
section_title: Appendix V: Preactivation Activities of Spouses of Activated Reservists
paragraphs: This appendix provides an analysis of data from the 2002 DOD survey of  spouses of activated reservists concerning preactivation activities of  spouses. Based on spouses’ self-reported feelings of being prepared or  unprepared upon receiving a notice of activation for the military member,  we compared their responses to questions concerning preactivation  activities—volunteering or participating in unit family readiness programs  or groups, attending preactivation briefings, receiving preactivation  materials. We also compared their responses to questions concerning  other factors that could affect preparedness, such as being assigned a  military point of contact and the amount of advance notice received prior  to activation. Finally, we compared their responses to a question  concerning how well they have coped with the activation. The results of  our analysis are presented in table 5.
section_title: Appendix VI: Comments from the Department of Defense
section_title: Appendix VII: Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: Kelly Baumgartner, Brenda S. Farrell, Thomas W. Gosling, Krislin M.  Nalwalk, Jennifer R. Popovic, Mark F. Ramage, Loch-Hung Leo Sze, and  Nicole Volchko made significant contributions to this report.