Retirement Cuts Offset Health Care Spending Increases in Defense Bill

Africa Studio/

Increased spending on health care for some former members of the military in fiscal 2014 under the Defense authorization bill would be offset by an alteration to retirement benefit calculations, according to the Congressional Budget Office.

The National Defense Authorization Act -- approved by the House Armed Services Committee and awaiting a full vote on the floor -- calls for the Pentagon to give certain TRICARE beneficiaries the option of continued coverage through Prime, the cheaper alternative to TRICARE Standard.

The Pentagon has issued a policy change that would automatically switch 170,000 retirees and their dependents who live 100 miles outside a military treatment facility from Prime to Standard. A provision included in the fiscal 2014 authorization bill, however, would give the retirees a one-time option to retain Prime coverage.

A majority of the affected beneficiaries are former Navy, Air Force and Marine Corps personnel, and thus the associated costs with offering Prime coverage -- $735 million over five years -- are covered under the standard process of appropriating funds.

A small portion of the affected 170,000 beneficiaries -- about 2.5 percent -- are retirees or dependents from the Coast Guard, National Oceanic and Atmospheric Administration or the Uniformed Corps of the Public Health Service. The costs associated with offering Prime to these individuals -- about $33 million over 10  years, or a 25 percent increase over the costs of TRICARE Standard -- are covered under mandatory spending. Per a law known as Pay As You Go, all mandatory spending increases must be offset by cuts elsewhere in the bill.

To cover these TRICARE costs -- as well as other mandatory spending increases in the Defense authorization bill -- the House committee has proposed to alter the formula used to calculate the initial retirement benefit for some retirees.

In 1975, Congress passed a law known as the Tower Amendment, which attempted to fix a loophole that resulted in some retirees receiving a smaller annuity than they would have if they had retired earlier. The Pentagon did not apply the law to certain personnel who retired after the year 2000, when a new retirement calculation was introduced. Recently, however, the Defense Department decided it should have applied it to the new retirees, and stated its intention to issue back pay to the 370,000 affected individuals.

The Defense authorization bill would reverse this Pentagon decision, preventing most of the back payments. The shift would save the Pentagon $212 million over 10 years, according to CBO.

The bill, therefore, has little overall impact on mandatory spending, saving $2 million over 10 years. In total, the bill authorizes appropriations of $632 billion for fiscal 2014, CBO estimated. 

(Image via Africa Studio/

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

  • Federal IT Applications: Assessing Government's Core Drivers

    In order to better understand the current state of external and internal-facing agency workplace applications, Government Business Council (GBC) and Riverbed undertook an in-depth research study of federal employees. Overall, survey findings indicate that federal IT applications still face a gamut of challenges with regard to quality, reliability, and performance management.

  • PIV- I And Multifactor Authentication: The Best Defense for Federal Government Contractors

    This white paper explores NIST SP 800-171 and why compliance is critical to federal government contractors, especially those that work with the Department of Defense, as well as how leveraging PIV-I credentialing with multifactor authentication can be used as a defense against cyberattacks

  • Toward A More Innovative Government

    This research study aims to understand how state and local leaders regard their agency’s innovation efforts and what they are doing to overcome the challenges they face in successfully implementing these efforts.

  • From Volume to Value: UK’s NHS Digital Provides U.S. Healthcare Agencies A Roadmap For Value-Based Payment Models

    The U.S. healthcare industry is rapidly moving away from traditional fee-for-service models and towards value-based purchasing that reimburses physicians for quality of care in place of frequency of care.

  • GBC Flash Poll: Is Your Agency Safe?

    Federal leaders weigh in on the state of information security


When you download a report, your information may be shared with the underwriters of that document.