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Cutting Retiree Benefits A Sore Subject For Military

Bean counters at the Pentagon are working long hours to figure out how to cut close to a trillion dollars from the Department of Defense budget over the next 10 years.

Those were the Pentagon's marching orders after the congressional supercommittee failed to come up with a plan to slash the country's deficit. Pentagon officials are looking at cutting weapons programs, troop levels and possibly even some base closures.

Part of the defense budget usually protected from budget cuts is personnel costs: mainly health care and retirement benefits. While Defense Secretary Leon Panetta has said everything's on the table, cutting benefits for troops is not an easy sell.

Bryan McGrath served in the U.S. Navy for 21 years, part of that time commanding the USS Bulkeley, a naval destroyer. Like many officers, he had enlisted in ROTC in college and figured he'd serve four years, get school paid for and be done.

"The problem was within those first four years, I came to absolutely love what I was doing," McGrath tells weekends on All Things Considered guest host Rachel Martin. "There was no reason to leave."

The Cost Of Benefits

It's easy to listen to someone like McGrath and think the military should be doing everything possible to recruit people like him, and then take care of them after they retire. But McGrath is the first to tell you that his military benefits — his $3,000 pension, and his health care — are costing his country too much money.

"My health care costs me the equivalent of approximately one triple latte a week, about $20 a month," he says. "My view — and this is my view only – is that my 21 years of service [is] rolled up into a great big love of country, and I think my country is in trouble."

Military retiree benefits cost the Pentagon $50 billion a year. That's more than next year's entire budget for the Department of Homeland Security. There are 1.9 million military retirees drawing pay and benefits, compared to 1.5 million in the active duty force. In 2010, then-Defense Secretary Robert Gates said those costs are "eating the Defense Department alive."

(To be clear, veterans are those who have served in the military; they receive benefits from the Department of Veterans Affairs. Military retirees are those who serve 20 years or more — it is their benefits that are often seen as unsustainable.)

"Military retirees who are working age ... for a family plan you pay $460 a year, [and] that covers you and all of your dependents," says Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments in Washington, D.C. "And if you're single, it's $230 a year."

When military retirees reach age 65 and are eligible to go on Medicare, they gets something called TRICARE, a Medicare supplemental insurance plan, Harrison says. It covers everything Medicare doesn't cover. The cost: It's free. In addition to that, retirees also receive pensions. Depending on the rank of the retiree, the pension can be a couple thousand dollars a month or more.

To understand why these benefits are so expensive, you have to think about when military retirees start collecting them. Unlike private sector employees, who don't receive entitlements like Social Security and Medicare until they are 65 years old, military retirees generally begin collecting benefits in their 40s. The average age of officers when they retire is 47, Harrison says. The average age of enlisted soldiers when they retire is 43.

"They're paying retirement benefits to people who are 90 [or] even 100 years old right now, who served a couple of generations ago," he says.

A Sensitive Issue

The cost of military retiree benefits, and the possibility of cutting them, is something no one in Washington wants to talk much about. Arnold Punaro is an exception.

Punaro served as a major general in the Marine Corps and is part of an agency that advises the Pentagon on budget issues. He says the line he often uses to talk about the issue is that, "General Motors didn't start out as a health care company that occasionally builds an automobile."

"We can't let these trends continue so that the [Department of Defense] turns into a benefits company that occasionally kills a terrorist," Punaro tells NPR's Martin.

People at the Pentagon know that the issue is a huge problem, Punaro says, but the problem is finding someone willing to take up the fight. Though he is eligible for military health benefits, Punaro says he chooses not to use a system he criticizes and currently pays "a small fortune" for his health care. What concerns Punaro is that the cost of retiree benefits weakening the current and future military.

"I am very concerned that as current trends continue, this country will not have the strong military it needs 20 years from now, because all of the money is going to go to pay people that are no longer serving," he says.

Punaro says it's not a new problem.

Harrison of the CSBA says military benefits have been growing, unchecked, since the end of the draft in 1973. At the time, there was a sense troops needed to be compensated better, Harrison says. The problem is the way it was done.

"They didn't try to understand how they could get the best value for every dollar of compensation they added," he says. "They basically just spread the benefits all across the board."

Harrison's fear in the current budget environment is that the opposite will occur and that cuts will be made haphazardly.

"If you're smart about it, you can mitigate, even in some cases completely eliminate, any adverse effects on your force in terms of recruiting and retention," he says.

Potential Changes

The Obama administration has suggested retirees pay about $200 a year more for their health care, which the administration says could save $6.7 billion.

Some also suggest that, instead of a pension plan, soldiers should pay into a retirement plan, like a 401(k). But Panetta recently told a group of U.S. service members that he wouldn't support a change like that.

"You're asked to put your lives on the line. You're asked to go into battle. You're asked to be able to fight for America. You're asked to deploy time and time again. Nobody ought to compare what the military is doing to the civilian sector," Panetta said.

Retired Navy Cmdr. Bryan McGrath says that's true, but protecting military benefits shouldn't undercut the military's ability to do what it was created to do: fight and win wars.

"I would submit that support for the troops starts with the notion that our position of world leadership costs something," McGrath says. "Right now, personnel costs [and] personnel entitlements — including those that come to me — are impacting our ability to put the best force on the field and I think that's something that we as a nation need to think very deeply about as we go forward."

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