Congressional Budget Office Proposes Cuts to Military and Veterans Benefits

The Congressional Budget Office has been tasked with an enormous responsibility – to find opportunities for cutting the federal budget and reigning in the federal deficit. On the docket are over 100 potential budget cuts, some of which would have a direct impact on military and veterans benefits.

These options come at an important time, because Congress needs to make budget cuts and get them signed into law before Sequestration initiates automatic budget cuts (Sequestration hasn’t been solved yet; the politicians have only come up with temporary solutions up to this point).

Areas singled out by the CBO include: Capping Military Pay Raises, Increasing TRICARE Fees, Changing Concurrent Receipt Rules, Changing VA Service-Connected Eligibility for Certain Conditions, Tighten Individual Unemployability Benefits.

Let’s take a look at some of the options on the cutting board (as seen in this article by Military.com):

Capping Military Pay Raises

Military pay has come a long way in the last 15 years, when the government made a concerted effort to bring military pay up to par with civilian standards. The effect was positive for troop retention, and in many cases, military pay was brought closer civilian standards (there will never be an apples to apples comparison between civilian and military pay, just as there is no apples to apples comparison to pay in a major city on one of the coasts vs. someone who lives in a small rural town in the South).





The problem is that pay rate changes are cumulative, and add up to a substantial burden over time, especially when it trickles into military retirement pensions. The option put on the table isn’t to cut military pay, but to cap the growth rate. Instead of seeing pay rates rise at the rate of a half-percentage growth above the civilian sector wage growth, the CBO lays the option of growing military pay rates at half a percentage point below civilian sector pay rate growth. The CBO doesn’t anticipate a major change to retention in the near term, and of course, they could always recommend wage growth in the event retention rates stalled or decreased.

Increasing TRICARE Fees

TRICARE is one of the most beloved benefits among troops, retirees, and their respective families. It is also one of the largest and fastest growing expenses related to military personnel. And with the rates that health care expenses are increasing, this isn’t expected to change soon. The CBO hasn’t listed any options for increasing TRICARE costs for active duty members and their families, but they do list increasing TRICARE fees for retirees as an option. And I don’t think this is the last we will hear about this.

The Congressional Budget Office lists two options for increasing TRICARE fees:

  • Require TRICARE for Life members (retirees, spouses, and survivors age 65 and older) to pay the first $550 of medical care expenses not covered by Medicare, then pay 50% of the next $4,950 in expenses for a total out of pocket expense of $3,025 ($2,475 + $550).
  • Make changes to retiree health care for retirees enrolled in TRICARE Prime, including raising fees, deductibles, and co-pays.

These changes would save the government billions of dollars over the next decade. unfortunately, they would also have a large impact on retirees and others on a fixed income – the people who can least afford to handle increased living expenses.

Changing Concurrent Receipt Rules

Concurrent Receipt is a law that allows military retirees with a service-connected disability of 50% or greater to collect both their full retirement pension and their service-connected disability compensation payment from the VA. Before this law was enacted, retirees who received service-connected compensation pay saw the same amount of money reduced from their retirement check each month (those with a service-connected disability rating below 50% continue to see this reduction in retirement pay).

According to Tom Philpott of Military.com, Concurrent Receipt was received by 420,000 retirees last year, at a cost of $7 billion. Removing this benefit could save the government well over $100 billion over the next decade.

The effect on retirees, of course, would be massive, as it would reduce their monthly pay and compensation.




Changing VA Service-Connected Eligibility for Certain Conditions

The VA usually defines a service-connected disability as a medical condition in which the symptoms first appeared, or worsened, during military service. However, the CBO points out that the VA is paying out service-connected disability payments to veterans for conditions that aren’t attributable to military service.

According to Military.com, Last year, the VA paid 520,000 veterans a total of $2.9 billion “for seven medical conditions that… are generally neither caused nor aggravated by military service.” And the VA could save $20 billion, from 2015 to 2023, if it stopped compensating veterans for the following: chronic obstructive pulmonary disease; arteriosclerotic heart disease; hemorrhoids; uterine fibroids; multiple sclerosis; Crohn’s disease and osteoarthritis.

The CBO also points out that the savings could be greater if Congress eliminated compensation for all disabilities unrelated to military duties.

Tighten Individual Unemployability Benefits

Individual Unemployability Benefits (IU benefits) are a type of disability compensation given to veterans who are disabled at less than 100%, but are deemed “unable to engage in substantial work.” Approximately 300,000 veterans receive this compensation each month, with the average compensation being $1,800 a month.

The CBO points out that about 1/3 of the veterans receiving this compensation are over the age of 65, which is an age at which many people retire and begin receiving full social security benefits. The CBO points out the government could save $15 billion between 2015 and 2023 if they stopped issuing IU to older veterans.

A note about this report: The Congressional Budget Office has gone on the record stating that these are not “recommendations” for budget cuts, simply options for cutting the federal budget. Also keep in mind that there are over 100 options listed. So they are not singling our military members or veterans.

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Date published: November 19, 2013. Last updated: March 4, 2014.

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Ryan Guina is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years in the USAF and also writes about money management, small business, and career topics at Cash Money Life. You can also see his profile on Google

Comments

  1. Thanks Ryan…I just hope that any cuts to any military and veterans benefits would be a last resort after looking at other government entitlements (i.e. welfare, ever growing subsidies associated with ACA, etc.). Military and veterans benefits seem to be an easy target for these lawmakers and bean counters (a vast majority of which have not served in uniform a day in their life and therefore have no appreciation for what the men and women of our military and our veterans have had to sacrifice in defense of this great nation) when it comes to tightening government spending. There are excesses in government that require further scrutiny…why not reduce welfare benefits when I’ve read that in 35 of the 50 states, welfare benefits are more than what a employee earning minimum wage makes, further incentivizing unemployment. Or how about the erroneous EITC payments the IRS made for the last decade to the tune of $132.6 billion (with a B), or the tens of billions of dollars paid in erroneous unemployment benefits.
    Here’s hoping that cuts would not fall on the backs of those who selflessly serve/served our nation thru her armed services. They/we deserve better.

  2. Why won’t Ryan propose a new bill, ‘Cut pension benefits to all federal employees’. Better yet let’s start with congress. Congress receives a nice paycheck, then they wait til they’re 66 to apply for full Soc Sec benefits, which is why they oppose means testing. Talk about double dipping. The military was, is and always will be at the bottom of the food chain.

  3. Jerome E. Goodwin Sr. says:

    I don’t see Congress taking any cut in their retirement, benefits or pay.

  4. People have bills according to their income, Vets have earned every penny they get, they have to put in 20 or more years to get their retirement pay, in case of disabled vets, if it weren’t for injuries sustained in the Military, they would get employment after time served, they can’t, so the disability pay they get compensates for that. It is unfair, unjust and immoral that politicians get 100% pay after serving less time, their pay is much more, and they don’t sacrifice at all, they actually live a pretty good life while in office. Enough already, leave vets, retirees alone. If any of their pay is cut, they would end up losing a home, can’t make payments for their car, etc.

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