What To Do About Rising DoD Personnel Costs

As pressure builds from all quarters to cut the defense budget, many look to the rising cost of all facets of personnel costs for active duty and retirees. Here's a snippet from a 10 May story in Defense News that outlines the problem:

"Health-care costs are eating the Defense Department alive," U.S. Defense Secretary Robert Gates said during a May 8 speech at the Eisenhower Library in Abilene, Kans. By Pentagon estimates, the U.S. military will spend $244 billion on personnel costs in 2010, more than one-third of the $636 billion appropriated for the year. Defense analysts think the actual number could top $300 billion. In his speech, Gates said health-care costs alone had risen from $19 billion a decade ago to $50 billion today. He noted that attempts to reduce the federal bill, including "modest increases in premiums and co-pays" for Tricare, the decade-old military health-care system, had been defeated by a "furious response from Congress and veterans groups."

These figures are a real problem, and they represent the compounded impact of the growing entitlement burden on the Department.

Here are a few ideas for slowing the rise in these costs:

1.  Tri-care premiums for retirees.  Raise them--significantly, but do so in proportion to the paygrade at retirement.  Will this raise the "furious response" from Congress and veterans groups?  Maybe.  But were the average American wage earner to know that a retired single O-5 with Tricare Prime coverage pays less than $20 a month in premiums (and a family of 4 premium is about twice that) , I have a feeling this "furious" response would be a good bit tempered.

2.  Lump sum retirement option.  Military retirees should be offered a lump-sum benefit at any retirement that occurs at less than 30 years of service.  Here's how this would work.  A Navy Commander retires at 20 years of service.  There is a predictable cost of his retirement to the government for the next ten years.  A percentage of that total--up to 66% for instance, should be offered as a lump sum upon retirement, with NO FURTHER retirement pay until the 30 year point is reached, at which the normal retirement pay schedule would commence. The Lump Sum option would NOT BE OPTIONAL for anyone joining the Service after the implementation date--this would be the norm.

I'm sure there are other ideas worth considering, and I hope readers will tee some of them up.


Bryan McGrath