No Cash for Reserves

Pentagon officials are hustling to stabilize a critically flawed federal insurance program that could enrich about 3,000 lucky military reservists at an unanticipated cost of $72 million.

The program--a high priority of assistant secretary for reserve affairs Deborah R. Lee--was established in 1996 after the Persian Gulf war showed how badly reservists can fare financially if they are mobilized for long stints overseas. Physicians had been prominent in lobbying for assistance, citing malpractice insurance and other payments that had to be kept up even as they were assigned to serve in Bosnia and elsewhere.

But when the insurance was offered, far fewer reservists signed up for coverage than early surveys had predicted--2 percent to 3 percent of those eligible, rather than the approximately 40 per cent that officials were counting on to make the program self- sustaining. The Pentagon blames this poor turnout on bad timing set in motion by Congress. The law authorizing the program established an initial signup period in October--and by chance, that was just as many reservists were learning who would be called u p to Bosnia, said Lt. Col. Terry Jones, an aide to Lee. Some reservists, in fact, reportedly had already received mobilization orders before applying for coverage.

Moreover, military officials were given only about seven months to explain the program to reservists--and that actually works out to much less time, since reservists generally report to duty only two days a month, Jones said. "The only people who had time to consider the decision were people looking in the short term at a deployment to Bosnia," Jones said. "If other people had been given an opportunity to look at the long haul, the likelihood is that we probably would have gotten more than just 2-3 percen t."

And worse, most applicants requested the highest level of coverage--$5,000 a month for a monthly premium of $61--even if it was higher than their usual private-sector earnings, which for some reservists was zero. But because the government guaranteed that benefits would be paid, the Pentagon now has to cough up at least $72 million to pay off the lucky ones who signed up for Ready Reserve Mobilization Income Insurance. As one observer put it, "It was like buying a lottery ticket after you knew you've got the winning number."

Though most observers agree that the program began with noble intentions, some experts suggest that even aside from its poor timing, the program might have been doomed from the start.

"What the Pentagon failed to realize is that most reservists are never going to be mobilized short of a World War," said one retired senior reservist with a long career in the Pentagon. "But if you're in a medical unit, if you're in civil affairs, in publ ic affairs or in small logistics units with specialized skills--and if they've already called up similar units before--it makes sense to sign up."

The program is now only accepting applications from people joining the reserves for the first time, and until enough money is found to pay off entire claims, beneficiaries will only receive four cents on the dollar. While reservist groups have been disapp ointed with the program's missteps, they have been generally supportive of it.

In fact, some are criticizing one idea being floated--to shift money from the National Guard and Reserve Equipment Fund so that the benefits can be paid in full. "That's letting the arithmetic run the train, not readiness," says Stephen Anderson, the legi slative counsel to the Reserve Officers Association. "Maybe it needs to come out of the Bosnia supplemental appropriation--it is, after all, a Bosnia problem. I don't think the reserves should be be penalized because the Pentagon did a bad job running the program."

In the meantime, assistant secretary Lee--who has convened working groups to stabilize the program--is said to be on the hot seat in Congress. The retired senior reservist said that Pentagon officials familiar with the case told him that Lee disregarded s taff concerns about the program because she "had her mind made up" about forging ahead. Still, she remains popular among reservists. "Sometimes things take a little while to get born," Anderson says. "Debbie Lee is working very hard to get it back on trac k, and has brought some excellent people on to her team."

And assorted critics aren't happy either. "The first question I have is who's going to be fired over this," said Tom Schatz, president of Citizens Against Government Waste. "Someone should lose their job--whoever is ultimately accountable, even if it's th e head of the division. But the government is just not as concerned about the ultimate liabity when it comes to lending or accouting systems or internal controls. What would Moody's do [to a private-sector firm] that did this?"

And others see a mini-morality play for reservists themselves. "In my opinion, when you commit to being a reservist, you understand what the downside might be," says Chris Hellman, a senior research analyst at the Center for Defense Information, a watchdo g group. "I know there are hardships, and it's reasonable to work out some kind of mechanism for that. But for some of these people, the military helped pay their way through medical school. My response is too bad--that's what a binding contractural agree ment is all about."

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