Pay Raise Pace Slows
After six years of military pay raises that exceeded the rate of wage growth in the private sector, the Bush Administration has proposed a 2.2 percent increase in 2007 that matches wage gains for the US workforce.
January pay increases from 2001 through 2006 were set, by law, a half percentage point above wage growth in the private sector as measured by the government’s Employment Cost Index (ECI). (See “Action in Congress: Pay Raise in the Bag,” December 2005, p. 24.) For example, the 3.1 percent military pay raise of January 2006 exceeded a 2.6 percent climb in the ECI, measured from October 2003 through September 2004.
That lag in the ECI yardstick allows defense officials to factor in pay raise costs early in their budget planning cycles. The ECI-plus-a-half-percent was intended to be a temporary formula, to gradually narrow a perceived pay gap between the military and civilian peers.
With that law now expired, the Bush Administration, as expected, plans for a 2007 pay raise that matches yearly changes in the ECI. The index rose 2.2 percent from October 2004 through September 2005.
When the budget was released, DOD Comptroller Tina W. Jonas noted that military pay has gone up 29 percent since 2001, and specific, “targeted” pay increases “will be very important to the senior enlisted” troops DOD most wants to keep in uniform.
Those targeted for bonuses could include warrant officers and special operations forces with high-demand language skills, added Vice Adm. Evan M. Chanik, Joint Staff director of force structure, resources, and assessment.
Those Targeted Raises
Warrant officers and enlisted forces in pay grades E-5 through E-8 will get a special midyear pay raise on top of their 2.2 percent January pay hike, if Defense Department officials have their way.
Wage growth in the private sector for calculating the 2007 military pay raise was expected to come in at 2.7 percent. That was the Pentagon’s planning figure. When it came half a percentage point lower than anticipated, defense budget officials found themselves with a $263 million surplus for 2007 pay adjustments.
To use the windfall most effectively, officials drafted a plan to raise basic pay selectively in mid-2007. Beneficiaries will be those in warrant officer ranks and enlisted grades whose total pay still falls below the 70th percentile of private sector workers of similar age and educational backgrounds. The ninth Quadrennial Review of Military Compensation endorsed the 70th percentile standard for military pay in May 2002, but defense budgets haven’t accommodated full implementation across all pay grades.
At the end of February, this new effort to move close to that goal was under review by the White House’s Office of Management and Budget. Until the plan clears OMB, Pentagon pay officials declined to release further details.
Democrats Want More
In February, two weeks after the 2007 budget was presented to Congress, a group of Democratic Senators led by John Kerry (Mass.) wrote to the Senate Budget Committee urging that it plan for a bigger military raise, as 2.2 percent would be the smallest military raise since 1994. The letter does not propose a specific alternative raise.
The committee, said the Democrats, should reject “a paltry increase” that “neglects the value of [service members’] service and the very real challenges of recruiting and retaining an all-volunteer military in time of war.”
Senators who co-signed the letter were Edward M. Kennedy, Jeff Bingaman, Tim Johnson, Bill Nelson, Barack Obama, Christopher J. Dodd, Richard J. Durbin, Mark Dayton, and Frank R. Lautenberg.
Military, Civilian Pay Equalized
With the Administration no longer required by law to plan for a larger military pay raise, President Bush for the first time has proposed identical across-the-board increases for military and federal civilians.
Michael B. Styles, president of the Federal Managers Association, called it “a bittersweet victory after years of fighting for pay parity.” Civilian workers were “finally able to garner support from the President to recognize the contributions of all federal managers and employees, but now we’re faced with the lowest pay raise in almost two decades.”
A 2.2 percent raise, added Styles, “doesn’t strike me as adequate recognition.”
DOD Upholds Tricare Increases
Defense Secretary Donald H. Rumsfeld and Marine Corps Gen. Peter Pace, Chairman of the Joint Chiefs of Staff, testified before the armed services committees in early February to support a plan to raise Tricare fees and deductibles for under-65 retirees and their families.
Another part of the Defense Department plan to sustain the medical service would raise Tricare retail pharmacy co-payments.
Several Republican leaders said they understand the rationale for raising the long-frozen fees. Other Republicans joined some Democrats in saying they oppose increasing out-of-pocket expenses.
The plan would leave unchanged Tricare fees or deductibles for active duty families. But for under-65 retirees, the plan would:
- Raise Tricare Prime enrollment fees that have been set since 1995. New fees would vary by rank.
- Raise deductibles under Tricare Standard in two increments in 2007 and 2008.
- Set first-ever Tricare Standard enrollment fees, which would also vary by grade, up to $560 for family coverage for officers.
- Adjust fees and deductibles annually, starting in 2009. Tricare fees and deductibles for under-65 retirees would be raised annually by the percentage set for federal civilian employees under the Federal Employees Health Benefits Program.
- Raise the co-pay for the Tricare Retail Network. Co-payments under the Tricare pharmacy network would be raised for all beneficiaries who use the drug retail network.
Keeping Pace With Costs
Pace endorsed every change, telling lawmakers that “re-norming” Tricare fees and deductibles from 1995 to current dollars would go a long way toward preserving a “superb” medical benefit whose costs have spiraled out of control.
Rumsfeld said low fees have turned Tricare into a “magnet” for working-age military retirees who increasingly are encouraged by civilian second-career employers to use Tricare rather than company health plans.
Sen. Lindsey O. Graham (R-S.C.), chairman of the personnel subcommittee, praised Pace and Rumsfeld for recommending higher Tricare fees and said he stood ready to help.
Graham’s committee counterpart in the House, Rep. John McHugh (R-N.Y.), did not react as warmly. McHugh was worried that of $578 million in projected cost savings from the Tricare plan for 2007, $420 million “are imputed savings” that hinge on “changes in behavior.” In other words, McHugh said, the department is expecting a lot of people to stop using Tricare.
“I guess we could talk about the morality of that. Is that the way to contain costs, persuade people not to use health care?” McHugh asked Rumsfeld and Pace.
McHugh said it’s more important to consider whether critical military programs will be put at risk if the imputed savings from higher Tricare fees aren’t achieved and money for health care has to be shifted from other accounts.
The decision to vary the Tricare fees by rank was pushed by military leaders who worried about lower-ranking enlisted retirees being able to afford higher fees.
VA Fee Increases: Take Four
The Bush Administration’s $80.6 billion budget request for the Department of Veterans Affairs asks Congress, for the fourth year in a row, for authority to collect a health care enrollment fee of $250 a year from veterans who use VA health care and have above-poverty incomes and no service-related disabilities.
The same category of veterans also should face higher co-payments for medicines from the VA for non-service related conditions, the Administration says.
The House Veterans’ Affairs Committee won’t approve either change, says its chairman, Rep. Steve Buyer (R-Ind.).
But to Sen. Larry E. Craig (R-Idaho), chairman of the Senate Committee on Veterans’ Affairs, VA enrollment fees and higher drug co-payments aren’t so far-fetched.
Craig called the proposed fee increases “eminently reasonable.” Besides charging patients an enrollment fee if they have no service-related ailments, the Bush budget would raise the VA pharmacy co-payment from $8 to $15 for a 30-day supply of drugs from the VA for non-service related conditions.