Radical Overhaul of Military Pension System Doesn’t Go Far Enough

My latest for The National Interest, "America's Military Needs a New Retirement Plan," has posted.

military-pay-piggy-bank

My latest for The National Interest, “America’s Military Needs a New Retirement Plan,” has posted.  It’s over 2000 words and defies excerpting.  The set-up:

After half a decade of study, the Pentagon has proposed to Congress a radical overhaul of the military retirement system. The new plan addresses the unfairness of a system in which most who serve in uniform earn nothing toward their future retirement but makes serving a full career less attractive. More importantly, while the primary incentive for the new plan is to improve military readiness by reducing the cost of retirees, it’s doubtful the plan will actually save money given its reliance on retention bonuses and failure to address the massive issue of healthcare costs.

I conclude:

Over the very long term, then, the proposal should save money. Still, while pension reform is absolutely needed, the proposal does nothing to address the much more pressing issue of healthcare costs, which went from $17.8 billion in 2000 to $49.8 billion in 2010. The Congressional Budget Office (CBO) projects that, absent major changes, those costs will double again by 2030. CBO Senior Analyst Carla Tighe Murray estimates we could save “several billion dollars” over the next decade simply by increasing the out-of-pocket expenses paid by TRICARE users who are military retirees under 65 TRICARE to levels comparable in private sector.

The bottom line is that, while these reforms are a step in the right direction—and perhaps all that is politically possible given the current state of civil-military relations and dysfunction in Congress—they’re merely a drop in the proverbial bucket. Without more significant changes—most notably, addressing health care costs—we still face a future in which personnel costs, including those for those long since departed from active service, will overwhelm our ability to train and equip a modern fighting force.

In between, I discuss the history of the system, the details of the current plan, and the fact that personnel costs—including those for retirees—now eat up half our defense budget and are on a growth trajectory. This plan, then, is merely a drop in the bucket.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Mu says:

    We have to stop paying our soldiers with IOUs. The long-term health care benefit alone is probably worth more than the cash we pay an enlisted man during a first stint. But of course it keeps the cost “at the moment” down, making politicians look not quite as reckless as they truly are.

  2. arthropod says:

    No link?

  3. Tony W says:

    Bush’s wars – the gift that keeps on giving…..

  4. Scott says:

    This is a big topic so my comments will be all over the place. You did a good job looking at the immediate issue but there is a larger big picture topic to deal with also.

    First, the question addressed is how to create a pension system that drives the right actions in terms of motivation of personnel to 1) sign up and 2) to stay. I think the short term actions of a 401K type plans with matching is in the right direction. Longer term, you want to incentivize people to stay with the lure of a decent pension. I think if you lower the 50% to 40% at 20 years, you may have to do something about the up or out system we have now. As wars overseas decline (hopefully), promotion rates are going to decline drastically (this is already beginning to happen).

    Second, not addressed is the larger question of funding and affordability. We essentially spent $2T on wars by borrowing And that doesn’t include the long term medical costs of those returning. To avoid a steady decline as a nation, we need to fully fund (through taxes) our overseas activities. (I’m trying desperately to use neutral language here). Basically, long term I see us going to the way of the British Empire which had a graceful collapse after spending its total blood and treasure fighting two world wars.

    To pay for all those exploding medical costs, you recommend we match the private sector. The private sector is backing out of its obligations also WRT medical care. It is a race to the bottom. I’m not sure that is the solution.

  5. James Joyner says:

    @arthropod: Fixed it! Posted in a hurry while getting the girls out the door.

    @Tony W: Very little of this has to do with the wars, except that we increased long-term costs by raising base pay over the last decade.

    @Scott: They basically address the retention issues with one-time bonuses, which are much more cost-efficient than higher pension. Whether it works long term is a question.

    @Scott: I actually don’t address how to address it; I merely point out that it’s left unaddressed. The answer is actually the opposite, I think: get employers out of the business of providing healthcare and go to a single-payer model that we finance through the tax system and supplement with private insurance. We’re not there politically.

  6. Mr. Prosser says:

    @James Joyner: ” I think: get employers out of the business of providing healthcare and go to a single-payer model that we finance through the tax system and supplement with private insurance.” I had no idea you were in favor of this but I believe it is the ultimate answer along with pension systems which provide better than the 401k pipedream.

  7. Rob Prather says:

    @Mr. Prosser: I only found out four or five years ago that James supports single payer. It seems that growing up with the military made him comfortable with the notion.

  8. James Joyner says:

    @Rob Prather: It made me both comfortable with and suspicious of it at the same time!

    Even in my College Republican days, I believed that everyone ought to have access to basic healthcare. But I was under the mistaken notion that most countries who had “socialized medicine” followed the model of the US military and the British National Health Service, both of which offer universal but substandard care. It turns out that that’s not really true; most developed countries operate under something more akin to Medicare For All but with rather tighter fee regulation.

  9. Richard Mayhew says:

    @James Joyner: Okay, there is one party in this country that is generally on-board or at least not systemically opposed to expanding health care access and affordability to all people in this country; they paid a heavy political price to do so in 2009/2010. The other party is your party. Do something about that— either change your party internally or finishing shitting before you get off the pot.

  10. Rob Prather says:

    @James Joyner:

    But I was under the mistaken notion that most countries who had “socialized medicine” followed the model of the US military and the British National Health Service, both of which offer universal but substandard care.

    Indeed, and both are actual socialized systems. I agree with your first comment on the matter: basic guaranteed healthcare with an option for supplemental insurance.

    I had a bit of exposure with the military system via Keesler Air Force Base growing up since my stepfather was DAV from Vietnam. I could buy medicine there or, if necessary, be hospitalized there. My experience with it was minimal, but not bad when I used it.

  11. Tony W says:

    @James Joyner:

    Very little of this has to do with the wars, except that we increased long-term costs by raising base pay over the last decade.

    …and employed many more people in the military – including active/inactive reservists – offering re-enlistments with a very low bar for a long time, thereby increasing the number of folks who qualify for pensions.

    It’s not entirely on topic but we also injured many more of our brothers and sisters by sending them off to fight for the Freedom to Purchase Oil Relatively Cheaply (TM), effectively putting them on government assistance for the rest of their lives, even if it’s not “military pension” per-se.

    Conservatives seem to forget about fiscal responsibility when the adrenaline kicks in.

  12. superdestroyer says:

    @James Joyner:

    Medicare for all would require a massive reorganization of healthcare in the U.S. With the lowering of reimbursements, there would be no need for the Ivy League universities to have medical schools and no need for pharmacist and physical therapist to have doctorates. What no one understands is that in a country with medicare for all with very light price control that no one wants their kid to group up and be a doctor.

    And how long does anyone believe that GS-15 pay would stay at its current level if bureaucrats were making more than cardiologist.

  13. Slugger says:

    @superdestroyer: The published ratios of physicians to population in the socialized medicine countries of the first world are about the same as the US. Even Latin America, especially Cuba, does not have low numbers of doctors.

  14. DrDaveT says:

    @Tony W:

    …and employed many more people in the military

    Actually, no, we didn’t. Overall end strength did not increase noticeably during the Afghanistan and Iraq wars.

    This is a bad thing. In the past, when the wars ended we could cut spending immediately by downsizing to the pre-war end strength. This time, that option doesn’t exist — and so we have to cut spending in R&D (stupid) or procurement (difficult) or operations and maintenance (nearly impossible).

  15. Mikey says:

    @superdestroyer:

    What no one understands is that in a country with medicare for all with very light price control that no one wants their kid to group up and be a doctor.

    My wife is from Germany, a country that has what’s very accurately described as “Medicare for all with tight price controls.” I told her you said no one in such a country would want their kid to grow up and be a doctor, and she literally burst out laughing right before she said that was ridiculous and any German parent would be absolutely thrilled to have a child become a medical doctor.

  16. Nikki says:

    @Mikey: Any parent who wants happiness for their child would be thrilled to have him/her become a medical doctor.

    Only a partisan hack would believe otherwise.