The FY2008 National Defense Authorization Act: Selected Military Personnel Policy Issues
Released: 2008-02-06T00:00:00

Each year, the Senate and House Armed Services Committees report their respective versions of the National Defense Authorization Act (NDAA). They contain numerous provisions that affect military personnel, retirees and their family members. Provisions in one version are often not included in another, treated differently, or, in certain cases, they are identical. Following passage of each by the respective legislative body, a Conference Committee is typically convened to resolve the various differences between the House and Senate versions. If a Conference Committee reports its final version of the Authorization Act, the bill is returned to the House and Senate for their consideration. Upon final passage the act is sent to the President for approval.

In the course of a typical authorization cycle, congressional staffs receive many constituent requests for information on provisions contained in the annual NDAA. This report highlights those personnel-related issues that seem to generate the most intense constituent interest, and tracks their status in the FY2008 House and Senate versions of the NDAA. The House bill, H.R. 1585 , was introduced on March 20, 2007, reported by the Committee on Armed Services on May 11, 2007 ( H.Rept. 110-146 ), and passed by the House on May 17, 2007. The Senate bill, S. 1547 , was introduced on June 5, 2007 and reported by the Committee on Armed Services on that day ( S.Rept. 110-77 ), and reported by the Select Committee on Intelligence on June 29, 2007 ( S.Rept. 110-125 ). On October 1, 2007, the Senate passed its version after striking everything after the enacting clause of H.R. 1585 and inserting the text of S. 1547 as amended by the Senate. The entries under " H.R. 1585 House-passed Version" and " H.R. 1585 Senate-passed Version" in the following pages are based on language in the House- and Senate-passed bills, respectively, unless otherwise indicated. On December 6, 2007, the conference report ( H.Rept. 110-477 ) was filed. On December 12, 2007, the House agreed to the conference report (397-27) and two days later, the Senate agreed to the conference report (92-3). Objecting to language in the bill regarding a possible freeze on Iraqi assets held in U.S. banks, the President vetoed it on December 28, 2007. The bill was returned to the House and Senate, the language was removed, and the bill was renumbered: H.R. 4986 . The House passed the bill on January 16, 2008 (396-46), the Senate passed the bill on January 22, 2008 (91-3), and signed into law on January 28, 2008 ( P.L. 110-181 , 122 Stat. 3). The new version did not change any of the provisions discussed in this report.

Each presentation in this report offers the background on a given issue, compares House and Senate language on the issue, discusses the proposed and enacted language, identifies other relevant CRS products, and designates a CRS issue expert. Note: some issues were addressed in last year's National Defense Authorization Act and discussed in CRS Report RL33571, The FY2007 National Defense Authorization Act: Selected Military Personnel Policy Issues , concerning that legislation. Those issues that were previously considered in CRS Report RL33571 are designated with a " * " in the relevant section titles of this report.

Selected Family Matters

Background: The House and Senate Committees are concerned about the state of military families, particularly with regard to readiness and deployments.

Discussion: These provisions show the growing concerns in Congress regarding the effects of military service on military families, particularly for those undergoing deployment.

Reference(s): None.

CRS Point of Contact (POC): [author name scrubbed], x[phone number scrubbed].

Cold War Victory Medal

Background: Congress authorized the Cold War Recognition Certificate ten years ago as part of the FY1998 National Defense Authorization Act (Section 1084). Its was created to recognize the contributions and sacrifices of our armed forces and government civilians whose service contributed to victory in the Cold War. Members of the armed forces and federal government civilian employees who served the United States during the Cold War period, from September 2, 1945, to December 26, 1991, are eligible.

Discussion: A number of veterans' organizations have supported efforts to create this medal in recognition of the service members' role in the Cold War.

Reference(s): None.

CRS Point of Contact (POC): [author name scrubbed], x[phone number scrubbed].

Continuation of Authority To Assist Local Educational Agencies that Benefit Dependents of Members of the Armed Forces and Department of Defense Civilian Employees

Background: In 1950, Congress enacted P.L. 81-815 and P.L. 81-874. These laws (later made permanent) provide money from the Department of Defense to local school agencies for construction and educational activities in recognition of the impact of the dependents of Defense personnel who attend these schools. Local schools are supported, to a large extent, by the state tax base. In many cases, military personnel pay taxes to their home state which may not be the state where they are serving. Arguably, this assistance minimizes the impact these dependents have on schools near military facilities.

Discussion: The law will augment impact aid laws in cases where there is a substantial military presence (and, in certain cases, civilian presence) and/or when military personnel policy or base structure changes bring about 'significant' changes in the average daily student attendance. This assists many states in adjusting to changed education needs pursuant to changes in military basing strategies, etc.

Reference(s): None.

CRS Point of Contact (POC): [author name scrubbed], x[phone number scrubbed].

Disregarding Periods of Confinement of Members in Determining Benefits for Dependents Who Are Victims of Abuse by the Member

Background: In the past, military members, including those eligible to retire, who were convicted of abuse or domestic violence could receive a sentence that included loss of military benefits. As a result, family members, especially those who suffered abuse, lost access to military benefits, including retired pay and health care, at a time when they were most in need of these benefits. On October 23, 1993, Congress enacted P.L. 102-484 , which "authorizes various benefits for the spouses and former spouses of retirement-eligible members who lose eligibility for retired pay as a result of misconduct involving abuse of dependents. Generally, the spouses and former spouses are provided the same rights and benefits that they would have had if there had been no abuse and the member had retired under normal circumstances."

Discussion: By example, a member of the armed services who is arrested and confined for abuse prior to reaching eligibility for retirement, may remain confined long enough to qualify for retirement except that such time in confinement is not creditable toward retirement. If it had been enacted, the House language would have allowed those confined to have the time in confinement prior to the actions of a convening authority terminating retirement eligibility, to count toward that retirement eligibility.

CRS Point of Contact (POC): [author name scrubbed], x[phone number scrubbed].

Continuation/Modification of Authority for Members of the Armed Forces to Designate a Recipient for a Portion of the Death Gratuity

Background: The Death Gratuity is one of a number of benefits available to the survivors of military personnel. Its purpose is to provide an immediate cash payment to survivors until other benefits, if any, become available. Under law, the beneficiary(ies) are designated in order of eligibility with the surviving spouse first, followed by the children. If so designated by a service member, others can receive this benefit including parents or siblings. Recently, it was reported that a service member, a single parent, died while on active duty and that her financially struggling parents who had custody of the surviving child were unable to access this benefit. P.L. 110-28 (May 25, 2007) contained language that allows a covered service member to designate up to 50 percent of the death gratuity (in 10% increments) to a person other than the recipient under law. This authority ends September 30, 2007.

Discussion: The law allowed service members to designate a beneficiary but also created a specific list of other such beneficiaries if the member did not designate a beneficiary in writing.

Reference(s): CRS Report RL32769, Military Death Benefits: Status and Proposals , by [author name scrubbed] and [author name scrubbed].

CRS Point of Contact (POC): [author name scrubbed], x[phone number scrubbed].

Recoupment of Annuity Amounts Previously Paid, but Subject to Offset for Dependency and Indemnity Compensation

Background: The Survivor Benefit Plan (SBP) provides an annuity for the survivors of those who die while serving in the Armed Forces and those who have retired from the Armed Forces. For those receiving retired pay, a portion of that pay is withheld for those participating in the SBP. For the surviving spouses of those who die of injuries or illness suffered in the line of duty, the Department of Veterans Affairs provides a monetary benefit known as Dependency and Indemnity Compensation or DIC. If a surviving spouse or former spouse is eligible to receive both benefits, the SBP benefit is offset on a dollar-for-dollar basis. If the DIC is paid to an SBP-eligible surviving spouse or former spouse, a percentage (or possibly all) of the deceased retiree's original contributions to the SBP will be returned to the surviving spouse or former spouse. If the SBP is offset by DIC, that proportion of deductions from the deceased retiree's retired pay which financed the offset portion of the SBP will be refunded. SBP payments can be restored, if the beneficiary becomes ineligible for DIC and remains eligible for SBP, provided that the refunded SBP payments are returned.

Discussion: Military widow(er)s are often confused or uninformed when one benefit offsets the other resulting in a return of payments made and any subsequent recoupments that may result. Often, these widow(er)s feel that money has been unfairly taken away from them. It was expected that the House provision would remove any uncertainty as to what happens during the recoupment process when an over payment is made. This language was not included in the law.

Reference(s): CRS Report RL31664, The Military Survivor Benefit Plan: A Description of Its Provisions , by [author name scrubbed].

CRS Point of Contact (POC): [author name scrubbed], x[phone number scrubbed].

*Survivor Benefit Plan Annuity Offset for Dependency and Indemnity Compensation

Background: As explained on the previous page, a surviving spouse or former spouse who is eligible to receive both a Survivor Benefit Plan (SBP) annuity and benefits under Dependency and Indemnity Compensation (DIC), will have the SBP benefit reduced or offset on a dollar-for-dollar basis by DIC.

Discussion: Under the law, SBP-eligible surviving spouses or former spouses who are also eligible to receive DIC, receive an additional payment of up to $50 per month and slightly more in subsequent years.

Reference(s): CRS Report RL31664, The Military Survivor Benefit Plan: A Description of Its Provisions , by [author name scrubbed].

CRS Point of Contact (POC): [author name scrubbed], x[phone number scrubbed].

Annuities for Guardians and Caretakers of Dependent Children Under Survivor Benefit Plan

Background: Under the Survivor Benefit Plan (SBP) military service members and participating retirees can, upon their death, provide an annuity to certain survivors, including spouses, former spouses, and/or dependent children. In certain cases, a member may wish to designate a dependent child as the beneficiary, however the child may be too young to be financially responsible. This is also true if the eligible dependent child is mentally incapacitated.

Discussion: Under the Senate language, a guardian or caretaker of dependents could be designated as a beneficiary. This could be helpful in those instances where the dependent child(ren) is/are very young or mentally incapacitated. This language was not included in the law.

Reference(s): CRS Report RL31664, The Military Survivor Benefit Plan: A Description of Its Provisions , by [author name scrubbed].

CRS Point of Contact (POC): [author name scrubbed], x[phone number scrubbed].

*Effective Date of "Paid-Up" Coverage under the Military Survivor Benefit Plan (SBP)

Background: The military Survivor Benefit Plan (SBP) provides annuities to the survivors of military personnel and retirees. The SBP is funded, in part, via deductions in the retired pay of participants. In 1999, Congress reduced the cost of the SBP to certain retirees by enacting the so-called "paid-up" provision. Under this language, reduction in retired pay made to cover the retiree's share cease when two conditions are met: (1) the retiree reaches age 70; and (2) the retiree has participated in the SBP for 360 months. As enacted, these provisions become effective October 1, 2008 ( P.L. 105-261 , 112 Stat. 2045, October 17, 1998). Language was included in the Senate version of the National Defense Authorization Act for both Fiscal Year 2006 and 2007 to move the effective date of this provision to October 1, 2005, and October 1, 2006, respectively. This language was dropped by the Conference Committees (U.S. Congress, Conference Committee, National Defense Authorization Act for Fiscal Year 2006, H.Rept. 109-360 , 109 th Cong., 1 st Sess. H.R. 1815 , December 18, 2005 and U.S. Congress, Conference Committee, John Warner National Defense Authorization Act for Fiscal Year 2007, H.Rept. 109-702 , 109 th Cong., 2 nd Sess. H.R. 5122 , September 29, 2006).

Discussion: The SBP was created on September 21, 1972. It is possible for military retirees who entered the service prior to 1978 to both reach the age of 70 and participate in the SBP for 360 months but be prevented from benefitting under the "paid-up" provision because of the October 1, 2008, effective date.

Reference(s): CRS Report RL31664, The Military Survivor Benefit Plan: A Description of Its Provisions , by [author name scrubbed].

CRS Point of Contact (POC): [author name scrubbed], [phone number scrubbed].

Army/Marine Corps End Strength

Background: Even though engaged in combat operations in Afghanistan since 2001 and in Iraq since 2003, the Bush Administration and the Department of Defense (DOD) have, until recently, resisted congressional calls to permanently increase the end strength of the Army and Marine Corps (although they did accede to temporary increases). Even the Quadrennial Defense Review (QDR) released on February 6, 2006, recommended an Army end strength of 482,400 and a Marine Corps end strength of 175,000. On January 19, 2007, DOD announced that it would seek approval to increase permanent active Army end strength by 65,000 to 547,400 and permanent active Marine Corps end strength by 27,000 to 202,000, both by FY2012. In response to the request for increased end strength, the respective committees reported the following:

Discussion: Increasing the end strength will require increased annual recruiting and retention goals. It is reasonable to project an annual recruiting goal of 85,000-87,000 for the active Army and 36,000-38,000 for the active Marine Corps. Based on recent experience, these goals may be difficult to achieve.

Reference(s): CRS Report RL31334, Operations Noble Eagle, Enduring Freedom, and Iraqi Freedom: Questions and Answers About U.S. Military Personnel, Compensation, and Force Structure , by [author name scrubbed].

CRS Point of Contact (POC): Charles Henning at x[phone number scrubbed].

Hardship Duty Pay

Background: Hardship Duty Pay (HDP) is compensation for the exceptional demands of certain duty, including unusually demanding mission assignments or service in areas with extreme climates or austere facilities. The maximum authorized amount for HDP was recently increased by Congress from $300 to $750 per month ( P.L. 109-163 , Section 627).

Discussion: While the maximum authorized rate for HDP is increased to $1500 per month by this provision, the actual rate paid will be determined by the Secretary of Defense. DOD has currently set HDP at $100 per month for both Iraq and Afghanistan.

Reference(s): CRS Report RL31334, Operations Noble Eagle, Enduring Freedom, and Iraqi Freedom: Questions and Answers About U.S. Military Personnel, Compensation, and Force Structure , by [author name scrubbed].

CRS Point of Contact (POC): Charles Henning at x[phone number scrubbed].

*Modifying Reserve Retirement Authorities

Background: Active duty military personnel are eligible for full retirement benefits after 20 years of active duty, regardless of their age. Reservists are also eligible to retire after 20 years of qualifying service but do not receive retired pay or access to retiree health benefits until age 60. In light of the heavy use of the Reserve Component in recent years, a number of legislative proposals has been introduced to lower the age at which reservists receive retired pay and military retiree health care benefits.

Discussion: The law is narrower in scope than some other legislative proposals in the 110 th Congress, such as those that would lower the age for receipt of retired pay and retiree health care benefits to 55 for all reservists. The law reduced the age at which certain reservists—those who, after the date of enactment of this bill, serve on active duty for the specified period under the specified activation authorities—can draw retired pay. However, the retirement age cannot be reduced below age 50. Additionally, it did not reduce the age at which they can receive retiree medical benefits; that would remain at age 60.

Reference(s): CRS Report RL30802, Reserve Component Personnel Issues: Questions and Answers , by [author name scrubbed].

CRS Point of Contact (POC): [author name scrubbed] at x[phone number scrubbed] or Charles Henning at x[phone number scrubbed].

POW/MIA Operations

Background: The Department of Defense (DOD) POW/MIA organization consists of the DOD Prisoner of War/Missing Personnel Office (DPMO) and two field activities-the Joint POW/MIA Accounting Command (JPAC) and its subordinate Central Identification Laboratory-Hawaii (CIL-HI) and the Air Force's Life Sciences Equipment Laboratory. Over the past several years, Congress has been concerned about the level of DOD resources being allocated to POW/MIA operations, both personnel and funding. The FY2007 John Warner National Defense Authorization Act ( P.L. 109-364 ) required DOD to submit a five-year overview of the funding required and requested. The FY2008 President's Budget would support 91 percent, or $8.0 million less than, the total funding required as determined by the overview for FY2008.

Discussion: If supported by appropriations, these increases would fund FY2008 POW/MIA operations at 100% of the requirement as determined by the overview mandated by P.L. 109-364 . This is report language and is not contained in the law itself.

Reference(s): CRS Report RL33452, POWs and MIAs: Status and Accounting Issues , by [author name scrubbed].

CRS Point of Contact (POC): Charles Henning at x[phone number scrubbed].

*Military Pay Raise

Background: Ongoing military operations in Iraq and Afghanistan, combined with end strength increases and recruiting challenges, continue to highlight the military pay issue. Title 37 U.S.C. 1009 provides a permanent formula for annual military pay raises that indexes the raise to the annual increase in the Economic Cost Index (ECI). The FY2008 President's Budget request for a 3.0 percent military pay raise was consistent with this formula. Congress, in FY2004, FY2005 and FY2006 approved the raise as the ECI increase plus 0.5 percent.

Discussion: A military pay raise larger than the permanent formula is not uncommon. Mid-year, targeted pay raises (targeted at specific grades) have also been authorized over the past several years. This year's legislation includes no mention of targeted pay raises.

Reference(s): CRS Report RL33446, Military Pay and Benefits: Key Questions and Answers , by [author name scrubbed].

CRS Point of Contact (POC): Charles Henning at x[phone number scrubbed].

*Concurrent Receipt

Background: Since the enactment of Concurrent Receipt legislation in FY2003, the Combat-Related Special Compensation (CRSC) benefit has been available to all military retirees with 20 or more years of active duty who meet other eligibility criteria. Excluded from eligibility have been reservists and those who were medically retired under Chapter 61 of Title 10 prior to completing 20 years of service. Those who are rated by the VA as 100% Unemployable were originally scheduled to become eligible for Concurrent Receipt in 2014. The FY2006 NDAA modified this eligibility date to be October 1, 2009.

Discussion: The law opened CRSC eligibility to some previously excluded.

Reference(s): CRS Report RL33449, Military Retirement, Concurrent Receipt, and Related Major Legislative Issues , by [author name scrubbed].

CRS Point of Contact (POC): Charles Henning at x[phone number scrubbed].

Moving Reserve "GI Bill" Educational Benefits from Title 10 to Title 38

Background: The original "GI Bill" educational benefit was enacted in 1944 as part of a legislative act designed to help the millions of World War II servicemembers readjust to civilian life upon demobilization. This was a "post-service" benefit for veterans. In subsequent versions of the "GI Bill," the educational benefit became not just a veterans' readjustment program, but a military recruiting incentive as well. In 1984, when Congress established the version of the GI Bill which came to be known as the "Montgomery GI Bill" (MGIB), the basic benefit for active duty personnel (MGIB-AD) remained codified in Title 38 (Veterans' Benefits). A new benefit was also established for members of the Selected Reserve (MGIB-SR), but this was placed in Title 10 (Armed Forces) as its purpose to "encourage membership in units of the Selected Reserve" was directly related to recruiting and retention, not veterans' readjustment. Over time, the benefit for those eligible for MGIB-AD increased more rapidly than for those eligible for MGIB-SR, as the programs were administered and overseen by different executive branch agencies and congressional committees. In 2004, Congress enacted a new educational benefit called the Reserve Educational Assistance Program (REAP) for reservists who had served at least 90 days on active duty in support of a contingency operation. This program was placed in Title 10, although the benefit level was statutorily linked to the MGIB-AD basic benefit in Title 38.

Discussion: Transferring the Montgomery GI Bill – Selected Reserve statutory authority from Title 10 to Title 38 has been advocated by a number of military advocacy groups as a way of ensuring the Reserve GI Bill payment rates maintain proportional parity with the Active Duty GI Bill.

Reference(s): CRS Report RL34549, A Brief History of Veterans ' Education Benefits and Their Value , by [author name scrubbed] and [author name scrubbed].

CRS Point of Contact (POC): [author name scrubbed] at x[phone number scrubbed].

*Role of National Guard Bureau and National Guard Bureau Chief

Background: There have been long-standing tensions between the senior leadership of the military services and their respective reserve components regarding policy and resource allocation decisions. This conflict has resurfaced in the past few years with respect to several decisions which impacted the Army and Air National Guard. Additionally, the devastation caused by Hurricane Katrina generated great interest in revamping the way in which the federal and state governments prepare for and respond to disasters or other catastrophic events. Modifying the role which the National Guard might play in future events has been an area of particular interest, given its unique status as both a state and federal force. The FY2007 John Warner National Defense Authorization Act ( P.L. 109-364 , Section 529) directed the Commission on the National Guard and Reserve (CNGR) to review a number of proposed changes to the role of the National Guard Bureau (NGB) and the National Guard Bureau Chief and to report its recommendations on these proposals to the House and Senate Armed Services Committees. The CNGR submitted its "Second Report to Congress" on March 1, 2007.

Note: The Senate-passed version contains relevant provisions in both Title V and Title XVIII of the bill. The provisions in Title V were included in the bill reported by the Senate Armed Services Committee, while the provisions in Title XVIII were the result of an amendment on the Senate floor.

Discussion: A number of the provisions in the law track closely with recommendations contained in the CNGR's Second Report to Congress, including the following:

4 Star Rank for NGB Chief. The law (Section 1811(b)) increased the rank of the Chief of the National Guard Bureau from lieutenant general to general, as advocated by CNGR Recommendation 13. NGB Charter. The law (Section 1813(b)) transferred authority for prescribing the NGB charter to the Secretary of Defense, consistent with CNGR Recommendation 12. NGB a joint activity of DOD. The law (Section 1812(a)) established the NGB as a joint activity of the Department of Defense, consistent with CNGR Recommendation 9. NGB Chief Advisory Role. Section 1811(c) of the law corresponded closely with the first part of CNGR Recommendation 10. New Function of the NGB. Section 1813(a) of the law was consistent with CNGR Recommendation 11.

In other areas, the law differs somewhat from the CNGR recommendations:

Determining Requirements and Budgeting for Domestic Response Capabilities. Section 1815 of the law was similar in certain respects to the recommendations provided by the CNGR, but differed in other areas. A description of these similarities and differences is beyond the scope of this report. See CNGR recommendations 1, 3, 4, and 5. Planning for Disasters and Terrorism. The requirement for a plan to respond to natural disasters or terrorist attacks contained in Section 1814 of the law was different than what was recommended by the CNGR. CNGR Recommendation 19 proposed that "U.S. Northern Command should develop plans for consequence management and support to civil authorities that account for state-level activities and incorporate the use of National Guard and Reserve forces as first military responders."

The following topic was not specifically addressed by the CNGR:

Selection of NGB Chief. The provision (Section 1811(a)) modifying the process for recommending an officer as Chief of the National Guard Bureau concerned a topic which was not specifically addressed in the CNGR report. The law brought the recommendation process for NGB Chief into greater harmony with the process used for recommending officers for other O-9 and O-10 positions. Specifically, it added requirements related to joint duty experience and capability to serve effectively in the position. This provision was generally consistent with language on page 94 the CNGR Report which states "...reserve component officers should be held to the same standards as applied to active component officers under Goldwater-Nichols, although the methods of attaining those standards may be different. If all officers must meet the same qualifications for promotion to any grade, the legitimacy of the selection of reserve component officers to senior grades and of their nominations to positions of importance and responsibility will be unassailable."

Reference(s): CRS Report RL33571, The FY2007 National Defense Authorization Act: Selected Military Personnel Policy Issues , pp. 34-36. Commission on the National Guard and Reserves, Second Report to Congress , March 1, 2007, available at http://www.cngr.gov .

CRS Point of Contact (POC): [author name scrubbed] at x[phone number scrubbed].

*Tricare Fee Increases

Background: In early 2006, DOD proposed increases in Tricare Prime enrollment fees for retired personnel under age 65, but Section 704 of the FY2007 John Warner National Defense Authorization Act ( P.L. 109-364 ) prohibited increases in premiums, deductibles, copayments, and other charges between April 1, 2006, and September 30, 2007. In submitting its proposed FY2008 budget, DOD again proposed fee increases that would provide an estimated $1.9 billion in potential savings for the year.

Discussion: The FY2007 Authorization Act requested two separate reports on defense health care budget issues, one by the Government Accountability Office (GAO) and another by a DOD Task Force on the Future of Military Health Care. Both reports favored increases in the portion of costs borne by beneficiaries, but GAO found that although DOD is unlikely to realize estimated savings ($9 billion over a five-year period), it would achieve "significant savings." Although there remains considerable opposition to fee hikes among beneficiaries, the two Armed Services committees have expressed an intention to seek an eventual "comprehensive and prudent" approach to changes to health care budget issues. The conference report stated: "The conferees urge [DOD] to continue to identify opportunities to improve the quality and effectiveness of the military health care system through improved performance and health care outcomes. The conferees believe that any increase in TRICARE program cost sharing should be made only after implementation of improvements in the health care program, after consideration of the comprehensive reports mandated by Congress. . . and following consultation with military beneficiary advocates."

Reference(s): Government Accountability Office, Military Health Care: TRICARE Cost-Sharing Proposals Would Help Offset Increasing Health Care Spending but Projected Savings are Likely Overestimated , GAO-07-647, May 2007; Department of Defense, Task Force on the Future of Military Health Care, Interim Report, May 2007.

CRS Point of Contact (POC): Dick Best, x[phone number scrubbed].

*Retiree Tricare Coverage and Employer Group Health Plans

Background: Section 707 of the FY2007 John Warner National Defense Authorization Act ( P.L. 109-364 ) prohibited employers from offering incentives to military retirees not to enroll in employee-sponsored health care plans. Tricare beneficiaries are thus treated in the same way as Medicare beneficiaries in that they are eligible for government health care plans but they may not receive any direct inducement to forego employer-sponsored health care plans. The goal of the legislation was to discourage employer efforts to shift costs of health care coverage to DOD while not decreasing the earned benefits of retired servicemembers. On the other hand, some employers offer a variety of different health care options (sometimes known as a cafeteria plan) that permits employees eligible for Tricare to choose plans that will complement their Tricare coverage and there has been some confusion in regard to this issue. In addition, some employers, including state governments, remain opposed to the provision that may increase their health care costs and there has been discussion of repealing the FY2008 provision.

Discussion: There remains some confusion among beneficiaries in regard to this provision and opposition among some employers. The law did not, however, address this issue. A rule that will provide DOD regulations on employer-sponsored health care is expected to be published soon in the Federal Register.

Reference(s): None.

CRS Point of Contact (POC): Dick Best, x[phone number scrubbed].

*Tricare Pharmacy Fees

Background: Currently dependents of active-duty servicemembers and retired servicemembers and their dependents (up to age 65) must make co-payments of $3 for generic pharmaceuticals, $9 for formulary drugs and $22 for non-formulary drugs obtained through the Tricare retail pharmacy program. The Administration has proposed increasing co-payments for generic pharmaceuticals and formulary drugs to $5 and $15, respectively, along with $22 continuing to be required for non-formulary drugs. CBO has estimated that banning the proposed increases would increase DOD's discretionary costs by $187 million in FY2008.

Discussion: There is considerable resistance among beneficiaries and their organizations to raising co-payment rates. GAO has concluded that increases in beneficiaries' co-payments are unlikely to permit DOD to achieve the extent of savings it has anticipated but "it is still likely to achieve significant savings." The Interim Report of the DOD Task Force on the Future of Military Health Care concluded that "The portion of costs borne by beneficiaries should be increased to a level below that of the current FEHBP [Federal Employees Health Benefits Plan] or that of generous private-sector plans and should be set at or below the level in effect in 1996." Further, the Task Force recommended that "Increases in cost-sharing should be phased in over three to five years to avoid precipitous changes."

Reference(s): Government Accountability Office, Military Health Care: TRICARE Cost-Sharing Proposals Would Help Offset Increasing Health Care Spending but Projected Savings are Likely Overestimated , GAO-07-647, May 2007; Department of Defense, Task Force on the Future of Military Health Care, Interim Report, May 2007.

CRS Point of Contact (POC): Dick Best, x[phone number scrubbed].

*Treatment of Tricare Retail Pharmacy Network Under Federal Procurement of Pharmaceuticals

Background: Pharmaceuticals obtained by DOD are procured under federal pricing rules, but there has been a dispute regarding pharmaceuticals dispensed by the Tricare retail network: DOD has maintained that federal pricing rules apply; the pharmaceutical industry disagrees. Although there had been a provision relating to the issue in the Senate version of the defense authorization bill for FY2007, no language was included in the John Warner National Defense Authorization Act ( P.L. 109-364 ). The conference report ( H.Rept. 109-702 ) accompanying the final bill stated that "prescriptions dispensed by the Department of Defense Retail Pharmacy Program qualify for discounted drug prices under [38 USC] Section 8126." A court case concerning the issue was returned to a lower court on a procedural issue and has not been pursued.

Discussion: Both provisions aim at encouraging pharmacies in the Tricare retail network to obtain pharmaceuticals at the same price that is available to Federal agencies, including DOD and the VA. The House version provides flexibility to DOD; the Senate Committee on Armed Services provision makes federal pricing mandatory after October 1, 2007. There has been considerable resistance to the proposal from pharmaceutical companies and retail drug stores and some observers say that making federal pricing mandatory for the Tricare Retail Pharmacy Program could be seen as a precedent for setting retail prices for pharmaceuticals obtained through Medicare.

Reference(s): None

CRS Point of Contact (POC): Dick Best, x[phone number scrubbed].