With Congress seemingly satisfied to let the defense budget take another $52 billion hit in the fiscal year that begins Oct. 1 – versus Republicans accepting higher taxes on the wealthy and Democrats agreeing to curb federal entitlements – Defense Secretary Chuck Hagel gave a preview Wednesday of how round two of budget sequestration could rattle current forces and deepen damage to U.S. readiness.
For example, options being weighed to squeeze pay and benefits, and thus protect readiness and modernization accounts from even deeper cuts than planned, include:
-- Changing how Basic Allowance for Housing is set so that service members living off base while stateside pay more out-of-pocket for housing.
-- Modifying TRICARE for retirees so those in second careers are encouraged to use employer-provided health insurance when available.
-- Reducing military overseas cost-of-living allowances.
-- Capping future military and defense civilian yearly pay raises.
-- Ending the taxpayer subsidy for military commissaries.
Hagel, with Adm. James Winnefeld, vice chairman of the Joint Chiefs, presented these and other cost-cutting options at a Pentagon press conference, to show the impact on readiness if Congress doesn't reach a debt reduction compromise but allows the next step in a $500 billion, decade-long defense cut to occur under the sequester formula.
The cost-cutting ideas come from a "Strategic Choices in Management Review" that Hagel ordered last March to prepare the department for sequestration. Deputy Defense Secretary Ashton Carter led the review with the joint chiefs, service secretaries and combatant commanders participating.
"Any discussion of compensation should acknowledge," Hagel said, that "no one in uniform is overpaid for what they do for this country."
But pay and benefits have climbed 40 percent above inflation since 2001, Hagel said, "to sustain a force under considerable stress, especially the Army and Marines, during the height of the Iraq and Afghan campaigns."
One war is over, however, the other is ending "and the department cannot afford to sustain this growth" in compensation, Hagel said.
He noted that Congress has rejected recent attempts to curb compensation, including "modest" TRICARE fee increases for working age retirees. "But given our current fiscal situation, DoD has no choice but to consider compensation changes of greater magnitude," he said.
Hagel acknowledged that Congress would have to agree to support any rollback in compensation. But lawmakers will see that other budget cutting alternatives, if sequestration continues, would require even more dangerous cuts to training, force structure and weapon programs.
Army Gen. Martin Dempsey, chairman of the Joint Chiefs, is to develop a specific package of compensation changes for inclusion in the fiscal 2015 budget, to save almost $50 billion over the next decade, the target for compensation accounts set in the strategic review.
The goal still will be to keep pay and benefits robust enough so the services can continue to recruit and retain a quality force, Hagel said.
HEALTH RECORDS COMPROMISE
In April 2009, President Obama called for a Virtual Lifetime Electronic Record (VLER) system for all Americans, and said the first step to achieve it would be integration of electronic health records for the departments of Defense and Veterans Affairs into a single joint and seamless system.
That joint VA-Defense health record system isn't going to happen, senior administration officials conceded at a combined hearing in July of the House armed services and veterans affairs committees.
"It is a tough path and we decided to get off it," said Frank Kendall, under secretary of defense for acquisition, technology and logistics. "The cost for that would have been exorbitant. The last estimate I saw was $28 billion life-cycle costs."
The revised goal is to modernize still separate VA and DoD electronic record systems so they can share medical data and patient information to improve care delivery and claims processing.
Members of Congress ripped this compromise when it was first unveiled last February by then-Defense Secretary Leon Panetta and VA Secretary Eric Shinseki. At a press conference, the secretaries had used the sort of cryptic language policymakers favor when announcing that a goal their boss had set won't be achieved, but something almost as good will be.
By April, lawmakers had raised enough fuss that even the new defense chief, Hagel, expressed his own public displeasure at the compromise. He put Kendall in charge of a fresh review of plans to integrate health records. A month later, review results were announced in statement that sounded very familiar to followers of the e-record controversy.
Kendall, in effect, endorsed the earlier compromise that Hagel and Congress had disparaged. VA will pursue its own plan to modernize Vista, its popular electronic medical record system, while Defense officials will "pursue a full and open competition for a core set of capabilities for healthcare management software modernization."
Meanwhile, in the "near term," both departments will work to achieve "enhanced interoperability," the statement said.
At the combined hearing of House committees, Republicans and Democrats took turns pressing Kendall, other Defense officials and VA's own team of medical records and information technology experts, on the separate courses they set and how they differ from Obama's original vision and what both departments had touted until late last year.
Rep. Michael H. Michaud of Maine, ranking Democrat on the veterans affairs committee, said Defense officials were abandoning the goal of an "integrated" record system with VA, in favor of keeping two separate systems and trying to make them "interoperable" using commercial software.
Kendall said it was the best business decision DoD could make.
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