Military compensation could take big hit

Military folks will see compensation packages pinched in 2015 under a deal struck last week by House and Senate negotiators finalizing pay and benefit changes in the fiscal 2015 defense authorization bill.

But the compensation pinch in 2015 could become a more hurtful punch starting in 2016, the armed services committees warn, if the new Congress fails to roll back defense spending cuts of $50 billion a year still mandated by the Budget Control Act and its “sequestration” cutting tool.

As expected, the Jan. 1 military pay raise will be capped for a second straight year at 1 percent versus 1.8 percent to keep pace with private sector wage growth.

But House negotiators have persuaded senators to soften provisions for dampening stateside housing allowances and for raising beneficiary co-pays on drug prescriptions that are not filled on base.

More dramatic, multiyear hikes in drug co-pays embraced in May by the Senate committee have been replaced by a standalone $3 increase for non-active duty beneficiaries filling prescriptions at retail outlets or through the TRICARE mail order program.

The co-pay increases take effect as soon as the bill is signed but TRICARE likely won’t be ready to implement before Feb. 1.

At retail outlets military family members and retirees would pay $8 instead of $5 for generic drugs and $20 versus $17 for brand name drugs on the military formulary.

Non-active duty beneficiaries using home delivery would pay $16 instead of $13 for a three-month supply of brand name drugs on the formulary, and $46 rather than $43 for non-formulary brand names.

Since March TRICARE has required older beneficiaries, for at least one year, to get non-generic maintenance drugs filled by mail or on base.

The new defense bill would make this pilot program permanent, not just for the elderly but for all non-active duty beneficiaries needing medicine for chronic conditions.

Also, brand name drugs not on the formulary would be available only by mail order.

These changes are to take effect Oct. 1.

The House-Senate deal also softens a plan to cap Basic Allowance for Housing (BAH) increases over three years until service members residing off base pay 5 percent of average rental costs out of pocket.

The compromise would pare BAH rate hikes in 2015 only and by only 1 percent. And BAH rate protection will shield current recipients from the change until they move to their next stateside assignment.

In a “joint explanatory statement” on the compromises reached, the House-Senate conferees warn that heftier compensation savings sought by the Joint Chiefs will be revisited after the Military Compensation and Retirement Modernization Commissions delivers its recommendations in February, particularly if planned defense budget cuts are not eased.

“If sequestration-level budgets remain in effect for fiscal 2016 and beyond, DOD will need to make painful cuts and achieve substantial savings across its entire budget (to) avoid an unacceptable reduction in readiness,” the statement says.

“The Chiefs have urged us to take all action necessary, including compensation adjustments, to avoid such readiness impacts.”

Tom Philpott can be contacted at Military Update, P.O. Box 231111, Centreville, Va. 20120-1111, or by e-mail at:

[email protected]