Earlier in the year, as part of the article that details the 2011 Department of Defense Authorization Bill, which was signed into law Jan. 7, 2011, we asked a select group of people how they would rewrite the current defense budget, with an eye toward the cuts everyone expects are just over the horizon. While we didn’t immediately run these sidebars with the online reprint of the budget piece, we are sharing them now because of their interest in light of current events and future budgets.
There are many items in the acquisition part of the defense budget that you could probably get rid of, or do more efficiently, or do better, but that’s not where I would start. Where I would start is in personnel costs, and a key part of that is military health care costs, which have been rising at a rate of about 5 to 7 percent a year, far faster than inflation and faster than just about any other area of the defense budget. That’s an unsustainable trend, and if you don’t arrest that growth, eventually your health care and your overall personnel costs will crowd out everything else in the defense budget. We won’t be able to afford the force structure we have today if we don’t make some changes to our personnel costs.
Now, I should point out that the military health care system is separate and distinct from veterans’ health care, which is provided by the Department of Veterans Affairs. People often get those mixed up. So what I would do right off the bat is look at the annual premiums military retirees pay for health care. Those were set back in 1995. So for a military retiree and all of his or her dependents, $460 a year is what they pay, or $38 a month. That figure has not been linked to inflation. It has not gone up one penny since 1995, whereas right now, the average American family pays about $3,500 a year for a family plan for health insurance … If we raise the premiums, those who want to keep it can keep it and pay a greater share of the cost. Rand did a survey, and about 70 percent of military retirees actually have access to health care through their employer or their spouse’s employer. By raising the premiums, you would be incentivizing people to use their employer plans rather than the military health care system.
The other thing is the growth in military pay, which lagged behind equivalent civilian pay in the ’80s. In the ’90s, it roughly stayed even. But in the past decade it caught up because Congress enacted raises each year that were about a half a percent higher than raises in the private sector. To a certain extent that was justified, and it brought military pay back in line with where it had been in the past. But we can’t keep adding that extra half a percent above the private-sector pay increase, because when we do, it adds about a half a billion dollars a year to the budget in terms of payroll costs – not just for that year, but for every year in the future as well.
Of course, these kinds of modifications are, politically, an uphill battle. I think the default solution to our budget problems will be to cut acquisition and cut force structure. If we don’t make the hard decisions to deal with these other areas, like personnel costs, we will cut weapon systems to the bone, we will cut force structure to the bone, and we will have a smaller, less capable force in the future.
This interview first appeared in The Year in Defense, 2010 Review, Winter 2011 Edition.