Pay raise, Tricare fees, couples' BAH might take months to set

Military folks likely won’t learn until December what their January pay raise will be, or whether pharmacy co-pays through mail order and retail outlets will rise sharply, or whether working-age retirees will see Tricare fees jump next year.

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Also, servicemembers with children and married to other members likely won’t know for a few more months whether their combined Basic Allowance for Housing (BAH) will drop significantly as soon as they’re reassigned.

And 69,000 surviving spouses affected by the so-called SBP-DIC offset won’t know until December if the partial relief they enjoy from a monthly Special Survivor Indemnity Allowance will expire after May 2018 or become a permanent payment at $310 a month, plus annual adjustments to keep pace with inflation.

The fate of these key elements of compensation is uncertain because the Senate and the House treat them differently in separate versions of the fiscal 2018 National Defense Authorization Act (HR 2810) bill. The Senate passed its bill Monday. A House-Senate conference committee will set to work immediately to shape a final defense bill but conferees can’t finish until lawmakers reach a budget deal to set topline funding levels for defense and all other federal departments.

That deal could shear billions of dollars from the final defense bill. Even deeper cuts could occur if no deal is reached and Congress allows automatic cost-cutting across government under the 2011 Budget Control Act (BCA) with its mindless sequestration tool. In most recent years, lawmakers have worked around the sequestration threat with late-hour agreements. This year, defense bills assume topline increases sharply higher than BCA allows. The Senate-passed bill would exceed the BCA cap by $91 billion, making deep late-hour cuts much more likely.

As the Oct. 1 start of a new fiscal year drew near, Congress and the White House agreed for a ninth straight year to have government operate under a continuing resolution, or CR. This one lasts until Dec. 8, freezing spending at fiscal 2017 levels and delaying new program starts for 10 weeks into fiscal 2018.

Advocacy groups for military members, families and retirees had hoped Senate champions might offer amendments during floor debate to sideline the more worrisome personnel-related provisions in the Senate bill, such as plans to trim housing allowances for dual-service couples or to raise Tricare fees on non-disabled retirees under age 65. But bill managers packaged only blocks of inconsequential amendments behind closed doors and approved them by unanimous consent. Not a single senator rose, for example, to criticize the plan to cap the next military pay raise at 2.1 percent or to fight higher co-pays planned for Tricare drug prescriptions filled by mail order or at retail outlets.

One powerful lobbying force, Military Officers Association of America (MOAA), is particularly concerned that the Senate supports the administration’s call to raise Tricare fees and deductibles on under-age-65 retirees. It would do so by removing a “grandfather” clause enacted last year to require Tricare to apply a higher set of fees only to future force retirees — those who first enter service on or after Jan. 1, 2018, and then serve long enough to retire.

Defense officials complained this went absurdly too far to shield current members and retirees from higher out-of-pocket medical costs. For almost the next 50 years, “until all the grandfathered beneficiaries reach Medicare eligibility,” officials told Congress, Tricare would have to administer two separate benefit packages. Also, the savings from raising fees on working-age retirees, which the services need to address other readiness needs, would be stunted, officials said.

The Senate defense authorization bill passed Monday would remove the grandfather protection so higher Tricare fees would begin to affect the under-65 population of retirees and dependents immediately. MOAA wants House-Senate conferees to resist this change in negotiating a final bill.

“We do not think raising Tricare fees through repeal of last year’s grandfathering, which is now law, is in any way fair to beneficiaries,” said retired Navy Capt. Kathy Beasley, MOAA’s government relations director for health affairs. “The House saw fit to maintain the existing grandfathered fee structure and to maintain focus on implementation of [other] current Tricare reform efforts.”

Beasley said a “further insult to beneficiaries” is the Senate-passed plan to adjust the higher Tricare fees using “an arbitrary medical inflation index.”

The Congressional Budget Office estimated that extending the higher fees to current under-65 retirees and spouses would save almost $4 billion over just the next five years. Providing only a 2.1 percent military pay raise in January, rather than the 2.4 percent hike in the House bill to match recent wage growth in the private sector, would save another $1.4 billion over the same period, CBO said.

The Senate also voted for a plan to raise pharmacy fees in ways to encourage greater use of generic drugs, on-base pharmacies and mail order. For example, co-pays for a 30-day supply of a brand drug at retail, or a 90-day supply by mail order, would be set at $28 in 2018 and climb to $45 by 2026. Co-pays for generic drugs at retail would be set at $10 in 2018 and increase to $14 by 2026.

The Senate would go farther than Tricare proposed to encourage use of base pharmacies where drugs would stay free of charge. It would add a $10 co-pay for mail order generics in 2018 and let it rise to $14 by 2026. Generics by mail currently are free. The Senate said the generic co-pay on mail order would partially offset current shipping and administrative costs and would be consistent with cost shares charged for generics at Tricare retail outlets. Exempt from co-pays would be survivors of members who die on active duty and disabled retirees.

Projected savings from the pharmacy changes are $2.1 billion through 2022. Some of those savings, the Senate committee explained, would be used to make permanent the Special Survivor Indemnity Allowance.

Congress first approved SSIA in 2008 to ease the impact of a dollar-for-dollar offset in Survivor Benefit Plan (SBP) payments that occurs when surviving spouses also qualify for Dependency and Indemnity Compensation (DIC) from the Department of Veterans Affairs. DIC is payable when a member dies on active duty or from a medical condition in retirement that VA has rated 100-percent disabling.

The SBP-DIC offset is very unpopular but also costly to eliminate. Congress decided only to soften it affect by creating SSIA. It began at $50 a month and climbed to $310, but under current law it would sunset after May 2018.

The House Armed Services Committee promised not to let SSIA expire but left it to senators to device a solution. The Senate voted to make it permanent but also to adjust the payment annually, starting in 2019, to keep pace with inflation.

SSIA still could be at risk, and the fight by military associations to derail moves to dampen compensation blunted, if sequestration or a last-hour budget deal slices billions of dollars off final defense authorization and appropriation bills.