The health and pension benefits of military retirees could be under heavy scrutiny in the near future. U.S. President Barack Obama’s proposal, known as the Plan for Economic Growth and Deficit Reduction, will cut Medicare and Medicaid, and could also cost veterans, active duty service members, and their families by reforming some veterans benefits.
The plan calls for an increase in pharmacy co-payments for service members’ families and military retirees, an annual enrollment fee for military retirees over 65-years-old in the TRICARE program, and changing the retirement system into a version of a 401(k) plan. The only part of the plan affecting current personnel is the increase in pharmacy co-payments. TRICARE and retirement changes will only affect those who join after the plan takes effect.
According to The New York Times, military pensions and health care for active and retired service members cost the government about $100 billion a year. The drive by Congress to reduce the debt this year could result in trimming core programs like research, training and construction, and weapons procurement.
The Defense Department will be required under legislation passed this year to find about $900 billion in savings over the coming decade, and this emphasis on cutting costs could make military retiree benefits vulnerable.
Currently, service members who retire after 20 years are eligible for pensions that pay half their salaries for the rest of their lives. Lifetime health insurance through TRICARE is also offered, at minimal cost. This prompts many working veterans to often choose military insurance over employer health plans, something advocates of revamping military benefit systems argue is fiscally unfair to civilian citizens.
Veterans’ groups and military leaders argue that the health and retirement systems help retain capable commissioned and non-commissioned officers. They feel that these people volunteered to put their lives at risk, and that they deserve higher-quality benefits. Pulling troops out of Iraq and Afghanistan could leave benefits open to attack because cutting benefits while the country was at war would have been political suicide.
Overall, the proposal would allow soldiers with less than 20 years of service to build up some savings through a 401(k) program, provided they served three to five years, thus spreading out funding and rewarding all volunteers. It would, however, prevent all retirees from receiving benefits until they are 60-years-old.
Given the political strength of veterans’ groups, it is unclear what success the proposed reforms will find. The Fleet Reserve Association has issued a statement opposing the recent White House proposal to reduce military health care and retirement benefits, but the pressure of an over-inflated federal budget could spell change for military retirement. Stay tuned to VA Benefit Blog for updates on this crucial issue.