National Security
4:15 pm
Sun December 4, 2011

Cutting Retiree Benefits A Sore Subject For Military

Originally published on Mon December 5, 2011 1:58 pm

Bean counters at the Pentagon are working long hours to figure out how to cut close to a trillion dollars from the Department of Defense budget over the next 10 years.

Those were the Pentagon's marching orders after the congressional supercommittee failed to come up with a plan to slash the country's deficit. Pentagon officials are looking at cutting weapons programs, troop levels and possibly even some base closures.

Part of the defense budget usually protected from budget cuts is personnel costs: mainly health care and retirement benefits. While Defense Secretary Leon Panetta has said everything's on the table, cutting benefits for troops is not an easy sell.

Bryan McGrath served in the U.S. Navy for 21 years, part of that time commanding the USS Bulkeley, a naval destroyer. Like many officers, he had enlisted in ROTC in college and figured he'd serve four years, get school paid for and be done.

"The problem was within those first four years, I came to absolutely love what I was doing," McGrath tells weekends on All Things Considered guest host Rachel Martin. "There was no reason to leave."

The Cost Of Benefits

It's easy to listen to someone like McGrath and think the military should be doing everything possible to recruit people like him, and then take care of them after they retire. But McGrath is the first to tell you that his military benefits — his $3,000 pension, and his health care — are costing his country too much money.

"My health care costs me the equivalent of approximately one triple latte a week, about $20 a month," he says. "My view — and this is my view only – is that my 21 years of service [is] rolled up into a great big love of country, and I think my country is in trouble."

Military retiree benefits cost the Pentagon $50 billion a year. That's more than next year's entire budget for the Department of Homeland Security. There are 1.9 million military retirees drawing pay and benefits, compared to 1.5 million in the active duty force. In 2010, then-Defense Secretary Robert Gates said those costs are "eating the Defense Department alive."

(To be clear, veterans are those who have served in the military; they receive benefits from the Department of Veterans Affairs. Military retirees are those who serve 20 years or more — it is their benefits that are often seen as unsustainable.)

"Military retirees who are working age ... for a family plan you pay $460 a year, [and] that covers you and all of your dependents," says Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments in Washington, D.C. "And if you're single, it's $230 a year."

When military retirees reach age 65 and are eligible to go on Medicare, they get something called TRICARE, a Medicare supplemental insurance plan, Harrison says. It covers everything Medicare doesn't cover. The cost: It's free. In addition to that, retirees also receive pensions. Depending on the rank of the retiree, the pension can be a couple thousand dollars a month or more.

To understand why these benefits are so expensive, you have to think about when military retirees start collecting them. Unlike private sector employees, who don't receive entitlements like Social Security and Medicare until they are 65 years old, military retirees generally begin collecting benefits in their 40s. The average age of officers when they retire is 47, Harrison says. The average age of enlisted soldiers when they retire is 43.

"They're paying retirement benefits to people who are 90 [or] even 100 years old right now, who served a couple of generations ago," he says.

A Sensitive Issue

The cost of military retiree benefits, and the possibility of cutting them, is something no one in Washington wants to talk much about. Arnold Punaro is an exception.

Punaro served as a major general in the Marine Corps and is part of an agency that advises the Pentagon on budget issues. He says the line he often uses to talk about the issue is that, "General Motors didn't start out as a health care company that occasionally builds an automobile."

"We can't let these trends continue so that the [Department of Defense] turns into a benefits company that occasionally kills a terrorist," Punaro tells NPR's Martin.

People at the Pentagon know that the issue is a huge problem, Punaro says, but the problem is finding someone willing to take up the fight. Though he is eligible for military health benefits, Punaro says he chooses not to use a system he criticizes and currently pays "a small fortune" for his health care. What concerns Punaro is that the cost of retiree benefits weakening the current and future military.

"I am very concerned that as current trends continue, this country will not have the strong military it needs 20 years from now, because all of the money is going to go to pay people that are no longer serving," he says.

Punaro says it's not a new problem.

Harrison of the CSBA says military benefits have been growing, unchecked, since the end of the draft in 1973. At the time, there was a sense troops needed to be compensated better, Harrison says. The problem is the way it was done.

"They didn't try to understand how they could get the best value for every dollar of compensation they added," he says. "They basically just spread the benefits all across the board."

Harrison's fear in the current budget environment is that the opposite will occur and that cuts will be made haphazardly.

"If you're smart about it, you can mitigate, even in some cases completely eliminate, any adverse effects on your force in terms of recruiting and retention," he says.

Potential Changes

The Obama administration has suggested retirees pay about $200 a year more for their health care, which the administration says could save $6.7 billion.

Some also suggest that, instead of a pension plan, soldiers should pay into a retirement plan, like a 401(k). But Panetta recently told a group of U.S. service members that he wouldn't support a change like that.

"You're asked to put your lives on the line. You're asked to go into battle. You're asked to be able to fight for America. You're asked to deploy time and time again. Nobody ought to compare what the military is doing to the civilian sector," Panetta said.

Retired Navy Cmdr. Bryan McGrath says that's true, but protecting military benefits shouldn't undercut the military's ability to do what it was created to do: fight and win wars.

"I would submit that support for the troops starts with the notion that our position of world leadership costs something," McGrath says. "Right now, personnel costs [and] personnel entitlements — including those that come to me — are impacting our ability to put the best force on the field and I think that's something that we as a nation need to think very deeply about as we go forward."

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

RACHEL MARTIN, HOST:

From NPR News, it's WEEKENDS on ALL THINGS CONSIDERED. I'm Rachel Martin, in for Guy Raz.

Bean counters at the Pentagon are working long hours these days, trying to figure out how to cut close to a trillion dollars from the budget over the next 10 years. Those were the Pentagon's marching orders after the congressional supercommittee failed to come up with a plan to slash the country's deficit. So Pentagon officials are looking at cutting weapons programs, troop levels, maybe some base closures.

But the part of the defense budget usually protected from budget cuts is personnel costs: mainly health care and retirement benefits. And while Secretary of Defense Leon Panetta has said everything is on the table, cutting benefits for troops is not an easy sell.

And that's our cover story today: military benefits on the chopping block, which begins with 46-year-old Bryan McGrath. Hey, Bryan. Can you hear me? It's Rachel.

BRYAN MCGRATH: Hi, Rachel. Nice to hear from you.

MARTIN: Hey. Nice to talk with you.

McGrath served in the U.S. Navy for 21 years.

And can you give me the specific years that you served?

MCGRATH: Sure. I can give you the specific days: May 16, 1987 to March 31, 2008.

MARTIN: Specific.

(SOUNDBITE OF LAUGHTER)

MCGRATH: Oh, I can't remember my childhood. You know, I can't tell you what I'm doing next week. But I think if you told me a date in those 20 years, I could tell you exactly what I was doing.

MARTIN: What he was doing was commanding a naval warship, a destroyer.

MCGRATH: Destroyer USS Bulkeley.

MARTIN: He got there like a lot of officers do. He enlisted in ROTC in college, figured he'd serve four years, get school paid for, then split.

MCGRATH: The problem was - is that within that first four years, I came to absolutely love what I was doing, and there was no reason to leave.

MARTIN: And so years later as a commander, any time new sailors came to serve on his ship, McGrath sat them down, got to know them, and he tried to explain what it was exactly that made service in the Navy so rewarding.

MCGRATH: You know, these are kids from a variety of different socioeconomic backgrounds, most of whom had never stepped foot outside their state, let alone the country. And I paint this picture for them of the sun coming up stern of me as I face some random Greek island, and you see these beautiful white bleached structures in the hills, and you see a civilization that's thousands of years old that you've never seen before and people that you've never experienced before and a language you've never heard before, and this adventure that is hours away. It is every bit as exciting as Christmas morning when you're 5 years old.

(SOUNDBITE OF MUSIC)

MARTIN: It's easy to hear a guy like Bryan McGrath and think the military should be doing everything possible to recruit people like him and then take care of them after they retire. But McGrath is the first to tell you his military benefits, his $3,000 a month pension and especially his health care, are costing the country too much money.

MCGRATH: My health care costs me the equivalent of approximately one triple latte a week. I think it's about $20 a month. My view, and this is my view only, is that my 21 years service rolled up into just a great big love of country, and I think my country's in trouble.

MARTIN: Military retiree benefits cost the Pentagon $50 billion a year. That's more than next year's entire budget for the Department of Homeland Security. There are 1.9 million military retirees drawing pay and benefits compared to 1.5 million in the active duty force. Back in 2010, then Secretary of Defense Robert Gates said those costs...

ROBERT GATES: Are eating the Defense Department alive. In recent years, the department has attempted modest increases in premiums and co-pays to help bring costs under control but has been met with a furious response from the Congress and from veterans groups.

MARTIN: To be clear, veterans - that's anyone who's served in the military. They receive a different set of benefits. It's benefits for military retirees - that's men and women who serve 20 years or more - this is what's considered unsustainable, especially rising health care costs.

We asked Todd Harrison with the Center for Strategic and Budgetary Assessments in Washington to explain.

TODD HARRISON: For military retirees who are working age - that means they're less than 65 years of age - for a family plan, you pay $460 a year, so $38 a month. That covers you and all of your dependants. Once you hit 65 and you're eligible to go on Medicare, then you get something called TRICARE for life. What it is is a Medicare supplemental insurance policy, and it covers basically everything that Medicare doesn't cover and it's free.

MARTIN: And in addition to that, retirees also receive pensions, which, depending on the rank, can be a couple thousand dollars a month or more. And to understand why these benefits get so expensive to pay out, you have to think about when military retirees start collecting them.

Unlike private sector employees who don't get entitlements like Social Security or Medicare until they're 65 years old, military retirees can start collecting benefits when they're only in their 40s.

HARRISON: The average age of an officer when they retire right now is 47 years old. The average age of an enlisted soldier when they retire is 43 years old. To put it in perspective, Vietnam veterans right now, we're just seeing their health care costs start to peak.

MARTIN: Which means the government is paying benefits for military retirees for a long time. Still, it's something no one in Washington is anxious to talk about.

ARNOLD PUNARO: Yes, it's a very controversial position.

MARTIN: Well, almost no one. Arnold Punaro is one of the most outspoken people you'll find on this issue.

PUNARO: And I say facetiously, it's allowed me to save some taxes because I can count as a business expense the food taster and the car starter I've had to hire to protect me against all the hate mail that I receive.

MARTIN: Punaro served as a major general in the Marine Corps. He's also part of an agency that advises the Pentagon on budget issues.

PUNARO: So I was at a cocktail party and I bumped into a four-star general and said General Motors didn't start out to be a health care company that occasionally builds an automobile, and we can't let these trends continue so that the Department of Defense turns into a benefits company that occasionally kills a terrorist.

And this general I was - we were talking about this subject says, you know, Arnold, I'm really concerned. So here's the problem we have is in private, in the Pentagon, they whisper about it, they know what a huge problem it is, and yet it's very hard to find anybody with the backbone to fight the good fight.

MARTIN: We should note you were in the military.

PUNARO: That's correct.

MARTIN: But this is a very controversial position for you to be taking because you're essentially arguing to cut your own benefits.

PUNARO: That's correct.

MARTIN: I mean, you get a cut on your health care premiums that you pay (unintelligible).

PUNARO: That's correct. I have the eligibility to use the military health care system but choose not to because I'm such a critic of the system. I think it would be hypocritical. So I pay a small fortune for my health care even though I could get it free from the U.S. military.

MARTIN: But I have to ask you - clearly when you're talking about this, it's emotional for you. I'm hearing frustration in your voice. Why is this such an important issue to you?

PUNARO: It's a very important issue for me and, you know, it is an emotional subject, because when I served in Vietnam, a young Marine gave his life to save my life. And I vowed that day that I would do everything I possibly could to ensure we had a strong national defense for as long as I had breath in my body.

And I am very concerned that as current trends continue, this country will not have the strong military it needs 20 years from now because all of the money is going to go to pay people that are no longer serving.

MARTIN: Punaro is saying something a lot of people in military circles won't say, but that doesn't mean it's a new problem. Todd Harrison says military benefits have been growing unchecked since 1973, the end of the draft.

HARRISON: There is a sense that we need to compensate the troops better. The problem is the way they went about doing it is they didn't try to understand how they could get the best value for every dollar of compensation they added. So they basically just spread the benefits all across the board. They increased just about every type of benefit you can imagine. And I fear that going into this - the current budget environment that the opposite will happen, that people will start just cutting haphazardly.

MARTIN: So it was give them more, give them more, and now it could be just - let's just cut it.

HARRISON: Take it away, take it away. And you don't want to do either one blindly. You want to go into it with your eyes open, knowing what the effects will be on your force. And if you're smart about it, you can mitigate or even in some cases completely eliminate any adverse effects on your force in terms of recruiting and retention.

MARTIN: Recruiting and retention. Some veterans lobbying groups say that cutting retiree benefits will make it harder to get talented people into the military and even harder to keep them there for the long haul. I asked Bryan McGrath - he's the retired Navy commander - what he thinks about that.

MCGRATH: I had an understanding even, you know, when I first began to think that I would someday retire, that there would be some costs associated with my retirement health care. And quite frankly, those costs are probably irresponsibly low.

MARTIN: So am I hearing that you would be willing to pay more for your health care or to take a little...

MCGRATH: Yeah. Absolutely.

MARTIN: ...or to take a little less in your pension - monthly pension benefit?

MCGRATH: If they wanted to offset it that way. I honestly don't care.

MARTIN: The Obama administration is willing to take him up on that. It suggested retirees pay about $200 a year more for their health care, which the administration says could save $6.7 billion. Some also suggest instead of a pension plan, following the private sector model and allowing soldiers to pay into a retirement plan like a 401(k).

But Secretary of Defense Leon Panetta recently told a group of U.S. service members that he wouldn't support a change like that.

SECRETARY LEON PANETTA: You're asked to put your lives on the line. You're asked to go into battle. You're asked to, you know, to be able to fight for America. You're asked to deploy time and time again. Nobody ought to compare what the military is doing to what's, you know, the civilian sector.

MARTIN: McGrath says that is true, but protecting military benefits shouldn't undercut the military's ability to do what it was created to do: fight and win wars.

MCGRATH: I would submit that support for the troops starts, you know, with the notion that our position of world leadership costs something, that the military necessary to support that position is not cheap and that we never, ever want to be in a fair fight. And that in order to bring those conditions about, we've got to buy the best planes, tanks, ships and vehicles that we can. And that's expensive.

Right now, personnel costs, personnel entitlements, including those that come to me, are impacting our ability to put the best force on the field. And I think that's something we as a nation need to think very deeply about as we go forward.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.