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Troops not safe from sequestration

Exemption from cuts covers only service members' paychecks, not their health benefits.

If Washington’s defense community has achieved one thing over the past year, it’s spreading the message of how the fiscal cliff could desecrate the military. Sequestration cuts of $55 billion would jeopardize weapons contracts, furlough civilian staff, and imperil national security, defense hawks say.

One glaring casualty has gotten far less notice: the military’s $37 billion health account. In designing the trigger mechanism, members of Congress were careful to make sure that the men and women in uniform wouldn’t suffer because of the cuts—but not careful enough. Now, without a compromise on Capitol Hill during the lame-duck session, the deal the committee crafted would cause a rollback in health benefits for active-duty troops, veterans, and their families.

When lawmakers wrote the Budget Control Act (which set up the fiscal cliff), they gave President Obama the option, which he has already exercised, to exempt military-personnel accounts and the Veterans Affairs budget. Many observers believe, falsely, that these groups are safe: That exemption covers only troops’ paychecks, not their health benefits, which fall under another part of the Pentagon budget.

About 9 million active-duty soldiers, retirees, and families are enrolled in the military’s health care system, known as Tricare. While other massive federal health programs are largely shielded from the effects of sequestration—Medicare is limited to a 2 percent cut and Medicaid is completely exempted—discretionary spending for military health programs such as Tricare could see a 9.4 percent reduction in 2013 if the automatic cuts take effect. (The military’s Tricare for Life program, which covers Medicare co-pays and premiums for retirees over 65, is protected.)

Defense health accountants have never tried to absorb steep cuts on short notice. Steve Strobridge, director of government relations for the Military Officers Association of America, says that the cuts could rattle the entire Tricare system, from hospitals to doctors to drug coverage. “It could affect anything from mowing the lawn, to not having the formulary cover as many medications, to cutting physicians so it takes longer to get an appointment, to actually reducing what Tricare pays,” he says.

The Tricare cuts are an obvious political grenade: No one in Congress or the administration wants to be seen as breaking faith with the troops because of budget gridlock. Policymakers may try to snatch Tricare’s sequestered $3.3 billion from other defense accounts so they don’t have to face stories about active-duty troops and their family members getting cut off from lifesaving drugs. But it wouldn’t be easy to find that money when every account has been slashed by nearly 10 percent.

Pentagon Comptroller Robert Hale told the House Armed Services Committee in late September that it would be “very difficult, frankly,” to save the defense health account. “We can only do it through reprogramming, and you’ve got to find something to cut. And as I’ve learned painfully over the last four years, that’s very hard to do.” Instead, the military would probably be unable to pay its Tricare bills until the end of fiscal 2013, Hale said. “I’m not quite sure what our providers would do in that case.… We’d try to fix it in ’14.”

Todd Harrison of the Center for Strategic and Budgetary Assessments describes another unpleasant possibility: Health care providers could ration care. “You could have some sort of triage system where you say, ‘If this is something that can wait, a low priority, we’re not going to see you,’ and focus care on some of the highest-priority patients,” Harrison says. To fix the problem, Congress could amend the Budget Control Act to let Obama exempt defense health care, too. In that case, though, other defense accounts (which the sequester will already cut by 9.4 percent) would face a much steeper reduction than the 8.2 percent falloff in nondefense spending.

Still, even this option carries significant political risks. As the clock ticks down to the new year’s deadline, Obama is not likely to want to discuss how best to gouge other defense accounts further. And at every turn, the administration has insisted it will not plan for the looming cuts, rebuffing the GOP’s effort to make the White House spell out how it might mitigate the damage of sequestration. The White House says that members of Congress should spend their time and energy reaching a deficit deal so the cuts don’t take effect, instead of hashing out details in case of failure. Opening up last-minute heated political negotiations—even to something all sides would presumably want—could also start congressional turf wars over, say, what weapons systems in what districts might be slashed or delayed.

So Congress is unlikely to revisit the sequestration rules before the deadline. In other words, those deficit hawks worried about desecrating the military were closer to the mark than they knew.