Behind the Hill’s swift reforms of military compensation

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Michael Higgins, a commissioner on the Military Retirement and Compensation Modernization Commission, speaks at a Jan. 29, 2015 press conference in Arlington, Va., revealing changes to pensions, health care and other troop benefits following its two-year review. (C.J. LIN/STARS AND STRIPES)
Michael Higgins, a commissioner on the Military Retirement and Compensation Modernization Commission, speaks at a Jan. 29, 2015 press conference in Arlington, Va., revealing changes to pensions, health care and other troop benefits following its two-year review. (C.J. LIN/STARS AND STRIPES)

Behind the Hill’s swift reforms of military compensation

by: Tom Philpott | .
Special to Stars and Stripes | .
published: January 20, 2017

Over decades Congress has considered numerous studies on reforming different aspects of military compensation, from retirement and basic pay tables to health care benefits and on-base discount stores.

The armed services committees would hold hearings on the big reports and, after a decent interval, usually shelve the most controversial ideas, opting for modest changes and to preserve the status quo. The pattern became particularly familiar with military retirement, with the direct-care medical system and with commissary and exchange operations.

That pattern of incremental change was shattered the past two years as Congress, frustrated by budget caps in wartime and spurred by findings of the Military Compensation and Retirement Modernization Commission, approved major alterations to retirement, health care and commissaries.

Michael Higgins, an influential member of the commission, this month gave a frank assessment of recent congressional actions to a group of current and retired military compensation experts. Later, he agreed to allow me to share highlights of his presentation with Military Update readers.

Higgins served 20 years in the Air Force as a personnel officer and 23 more as a professional staff member for the House Armed Services Committee. There he helped generations of lawmakers set levels of military pay, determine the mix of benefits and bonuses, and grant force-shaping authorities that sustained America’s all-volunteer force.

Higgins’ influence on the nine-member commission became clear when colleagues often deferred to him during congressional testimony and press conferences to explain the intricacies of their 2015 final recommendations.

In this month’s presentation, Higgins reviewed what Congress has done with commission recommendations since and why, in his view, the changes to retirement and commissaries came quickly after decades of resistance to reform. Higgins even identified himself as having been an “obstructionist.”

On retirement, Congress largely embraced what the commission proposed — a new “blended” plan to take effect for new entrants after Dec. 31, 2017, and to become after that date an alternative to the “High-3” plan for current members who have fewer than 12 years of service.

Higgins expressed pride in the blended plan. It combines a reduced defined annuity for 20 or more years’ service with a portable Thrift Savings Plan (TSP), enriched by government matching of member contributions, and a mid-career cash enticement called a continuation payment.

These reforms, he said, are a good example of successful “incremental change” to improve and modernize a pillar of military compensation, and that government-matching TSP can be “life-altering” if used with discipline.

But Higgins is not thrilled with what Congress enacted to change the commissary system, and he feels it missed an opportunity to reform the oft-criticized direct health care system and Tricare benefit. In time, he hopes military beneficiaries get what the commission proposed, access to a menu of civilian health insurance plans, just like federal civilians have with the Federal Employees Healthcare Benefits Plan (FEHBP), but with military participants paid a new health care allowance to help cover their premiums.

The commission had sought to protect shopping discounts by consolidating all commissary and exchange stores into one resale system under the management of one executive. It called for consolidating back-store operations of base grocery stores (commissaries) with department stores and other resale services (exchanges) to make all more efficient.

Congress took a more aggressive path, promising to protect discounts but trying to lower taxpayer support of commissaries through use of variable pricing and establishing commissary brand products. It will allow conversion of stores to non-appropriated fund activities, just like exchanges, and use private-sector tactics to squeeze lower food prices from manufacturers.

Congress seeks to deeply reduce the $1.3 billion commissary subsidy and yet “protect every aspect of the benefit,” Higgins said. “I’m very close to believing that’s mutually exclusive. I don’t think you can get there.”

Higgins conceded a personal bias that commissaries not be put at risk.

“I’m a true believer in the commissary benefit. But the one caveat to my belief that the status quo is right is if we were staring down the barrel of a doomsday scenario.” That is, “if the commissary is in mortal danger.”

In that case, Higgins said, there is no action “off the table to save that benefit or some aspect of that benefit.” That’s the situation now, he said, as defense leaders including the Joint Chiefs target the commissary subsidy to be able to use that money for more pressing readiness needs.

“We never really had [that] trigger until the 2015 budget request when DOD came out and said, ‘We want the [commissary] money back.’ Now I don’t know how a lot of these decisions get made over in the Pentagon,” Higgins said. “But I believe once they are made they are carved in stone somewhere over there. I don’t care if the president changes, the secretary of defense changes, their attitude (in DOD) is not changing.”

Congress has accepted cutting the subsidy as a priority, a fact that is driving changes to commissary operations. But Higgins said he remains skeptical it can be done without destroying shopping discounts.

“I don’t want to be so crass as to suggest it’s all about the money, but money is a big, big factor here I think,” Higgins said.

Lawmakers who for years protected traditional benefits, such as on-base shopping, increasingly feel the pressure of deficit hawks in Congress demanding that spending on defense become more efficient. Defense leaders in turn want those efficiencies to include personnel accounts.

On health care, Higgins said he has seen 40 years of frustration and dissatisfaction as beneficiaries struggle to gain timely access to quality care in a direct-care system focused on wartime readiness, backed by a DOD-operated constellation of civilian provider contracts constrained by budget limitations. For much of that time, having worked and then retired from his job in Congress, Higgins and his family have been pleased with their health insurance coverage under FEHBP, as are most federal civilian employees.

Last month, Congress voted dozens of changes to the military health care system to try to improve access and patient satisfaction while still feeding patients into a direct-care system preparing for war. Ignored was the commission’s recommendation to force military providers and facilities to compete for patients by offering an FEHBP-like menu of insurance plans as an alternative.

“There’s a lot of disappointed people out there,” Higgins said, and many of their complaints are too familiar, indeed decades old.

“What does it take for a health insurance company to be successful? To make money, right? How do you do that? By attracting people [and] providing quality service to keep them in their health plan.”

Military folks deserve a benefit with the same incentives, he said.

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