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Senior DoD leaders warn of rising personnel costs

May. 10, 2010 - 06:00AM   |  
By JOHN T. BENNETT   |   Comments

A handful of warnings about the ballooning costs of U.S. military pay, benefits and health care has become a clarion call by the Pentagon's senior leaders: Get personnel spending under control before it cannibalizes operations and acquisition funds.

"Health-care costs are eating the Defense Department alive," U.S. Defense Secretary Robert Gates said during a Saturday 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."

Gates also noted that Congress routinely adds around half a percent to the White House's request for an annual pay raise for military personnel. Now, the Pentagon is working hard to persuade lawmakers to cut back.

A month before Gates' Kansas speech, Gen. Norton Schwartz, the Air Force chief of staff, invoked personnel costs as he urged lawmakers to resist padding the 1.4 percent military pay hike proposed in the Obama administration's 2011 budget request.

"We certainly are grateful for their generosity," Schwartz testified April 6. "However, it comes from someplace; it requires a trade. And that is why each of us has said in our own way that for now, 1.4 [percent] is enough."

The House Armed Services Committee appears ready to endorse a 1.9 percent increase; it is unclear where senators stand on the issue.

In a later interview, Schwartz said, "We're going to have to again look at ourselves and the proportion of dollars that we invest in personnel, and personnel programs and family programs."

He said defense officials must examine "where we might be able to sort of reduce the growth in our personnel costs. I think any strategic leader has to look at that."

He said the services would likely cut benefits to troops and veterans.

"I think that is in the cards," he said.

Analysts said military compensation reform likely will be a tough sell on Capitol Hill for the remainder of this year, with midterm congressional elections coming up in November. Health Care Another primary driver is military health care. No adjustments to health care programs have been made in "half a decade," which must change lest they "continue to eat our lunch," said Gen. James Conway, commandant of the Marine Corps. "Hard choices are going to be necessary."

Navy Adm. Gary Roughead, chief of naval operations, said May 3 that the cost of health care "looms large" and could "cut into procurement."

Adm. Thad Allen, commandant of the Coast Guard, also spoke about health care May 3 at the Navy League conference. He noted he is headed for retirement soon and recently filled out his Tricare Prime paperwork.

For Allen and his wife, one year under that plan will cost "only $469," he said. "At some [point], we're going to have to come to grips with that."

One option to start correcting the problem might be increasing Tricare premiums, Korb said.

"Now, that won't be easy, but Gates might be the one guy with the credibility to pitch it," he said.

Earlier this year, a report by the Washington-based Center for Strategic and Budgetary Assessments said personnel-related bills will keep growing "Health care costs comprise $47 billion of the budget request and are projected to continue to increase by 5 percent to 7 percent annually," the August report said. "Outside of the DoD budget, the cost of veterans' benefits [which includes additional health care expenses] is rising at an even higher rate. The [Obama] administration is requesting $110 billion in funding for veterans, a real increase of 12 percent from FY 2009."

The money will likely come out of weapons development and purchases, the report said.

"If allowed to continue, personnel-related costs will begin to crowd out other parts of the budget, specifically procurement and [research, development, test and evaluation], and will hamper the department's ability to properly equip the force," it said.

A November report prepared by Jim Arkedis of the Washington-based Progressive Policy Institute (PPI) put projected 2010 costs at $59.7 billion: defense health program ($28 billion); military health care ($21 billion); and retiree health benefits ($10.7 billion).

Missed Opportunities? Defense officials say the military is looking hard at the problem. Marine Lt. Gen. John Paxton, director of operations (J-3) for the Joint Staff, said March 26 that Pentagon officials are beginning to take a "hard look" at skyrocketing personnel costs and how to deal with them.

But some analysts say the Pentagon missed an opportunity this year.

"My question is: Why didn't they do this with the [fiscal 2011 defense] budget" the Pentagon sent Congress in February, asked Larry Korb, a former Pentagon official who is an analyst at the Center for American Progress in Washington. Korb dubbed the ticking personnel cost bomb "a failure of leadership at all levels, and for a number of years."

Mackenzie Eaglen, a former Republican Senate defense aide and now a Heritage Foundation analyst, noted that Many problems that plague the nation's health care system "are already eating at the Pentagon's program."

"The real cost of the health care legislation on DoD is that the larger debate did not spark a serious conversation in Congress about how to sustain DoD's exploding and unaffordable health care and retirement bills," she said.

Still other observers note that some lawmakers and analysts expected the 2010 Quadrennial Defense Review to take on the issue and map out a plan for trimming personnel costs, it did not.

Arkedis of the PPI said the recent wars have helped push costs skyward.

"You can't nit-pick the problem away through selective cuts to benefit programs because, first, there's a core constituency of hard-working military members, families and retirees who depend on them," he said. "And second, frankly, it wouldn't solve enough of the problem anyway. The key cost drivers are large-scale military deployments abroad."

To Arkedis, "The moral of the story is that if you want to control personnel costs, you have to be really careful about which wars you fight they better be the right ones."

During a breakfast with reporters last Thursday, Gen. George Casey, the Army chief of staff, acknowledged that bigger and bigger personnel costs are a looming issue.

"People ask me all the time, ‘Is the Army big enough? How big should the Army be?'" Casey said. "And my response to them is, it needs to be big enough to meet the demands, but it shouldn't be so big that the personnel costs absorb our ability to adequately train and equip and support the Army. And so, that's my challenge, in finding the right balance."

So far, the Army and its personnel costs are still growing.

Casey said the Army is "moving" to bring on 15,000 additional soldiers and next month will make a recommendation to Gates on whether to pursue 7,000 beyond that.

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Joe Gould and Kate Brannen contributed to this report.

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