Military Personnel
DOD Needs More Data to Address Financial and Health Care Issues Affecting Reservists Gao ID: GAO-03-1004 September 10, 2003Since the 1991 Persian Gulf War, National Guard and Reserve personnel have been deployed to a number of contingency operations. Since September 2001, about 300,000 reservists have been called to active duty, and the pace of reserve operations is expected to remain high for the foreseeable future. House Report 107-436 accompanying the Fiscal Year 2003 National Defense Authorization Act (P.L. 107-314) directed GAO to review compensation programs for reservists serving on active duty. GAO evaluated information on income change reported by reservists when activated; reserve families' readiness for call-ups and their awareness and use of family support programs, focusing on personal financial management; and a legislative proposal for the Department of Defense (DOD) to offer TRICARE, the military's health care program, to reservists and their families when members are not on active duty.
DOD lacks sufficient information on the magnitude, the causes, and the effects of income change to determine the need for compensation programs targeting reservists who (1) fill critical wartime specialties, (2) experience high degrees of income loss when on extended periods of active duty, and (3) demonstrate that income loss is a significant factor in their retention decisions. Such data are critical for assessing the full nature and scope of income change problems and in developing cost-effective solutions. DOD self-reported survey data from past and current military operations indicate that activated reservists have experienced widely varying degrees of income change. While many reservists lost income, more than half of reservists had either no change or a gain in income. However, survey data are questionable primarily because it is unclear what survey respondents considered as income loss or gain in determining their financial status. DOD has placed greater emphasis on preparing reservists' families for potential call-ups, yet survey data show that one-third of spouses do not feel prepared, over half of reservists are not aware of family support programs, and more than 90 percent of spouses do not use these programs. Personal financial management, one of DOD's core family support programs, illustrates the continuing challenges DOD faces in providing outreach to reservists. The 2000 survey data showed that 61 percent of reservists did not know whether personal financial management services were available. The survey also showed that reservists have financial problems similar to their active duty counterparts. DOD is taking steps to improve personal financial management, but it has not assessed the financial well-being of reserve families, assessed the impact of reservists' financial problems on mission readiness, or determined how to tailor its programs to reservists. Available DOD data do not identify a need to offer TRICARE to reservists and their families when members are not on active duty. Estimates from DOD's 2000 survey showed that nearly 80 percent of reservists had health care coverage when they were not on active duty. This rate is similar to that of comparable groups within the overall U.S. population. DOD has expressed concern over the estimated costs of this proposal. Cost estimates range up to $5.1 billion a year. However, DOD has not fully assessed the ramifications of this proposed legislation, including the impact on recruiting and retention, the effects on active duty personnel, the extent reservists and their families might participate in such a program, or the impact on the TRICARE system. In addition, a high percentage of reservists' civilian employers who currently pay some or all of health care premiums for reservists during activations could discontinue providing such assistance. A number of recent improvements have been made to reservists and their families' health care when members are activated. However, DOD lacks data on problems reservists and their families have experienced with health care since the mobilizations following September 11, 2001; the causes of these problems; and their effects on readiness, recruiting, and retention.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-03-1004, Military Personnel: DOD Needs More Data to Address Financial and Health Care Issues Affecting Reservists
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Report to Congressional Committees:
United States General Accounting Office:
GAO:
September 2003:
Military Personnel:
DOD Needs More Data to Address Financial and Health Care Issues
Affecting Reservists:
GAO-03-1004:
GAO Highlights:
Highlights of GAO-03-1004, a report to congressional committees
Why GAO Did This Study:
Since the 1991 Persian Gulf War, National Guard and Reserve personnel
have been deployed to a number of contingency operations. Since
September 2001, about 300,000 reservists have been called to active
duty, and the pace of reserve operations is expected to remain high
for the foreseeable future. House Report 107-436 accompanying the
Fiscal Year 2003 National Defense Authorization Act (P.L. 107-314)
directed GAO to review compensation programs for reservists serving on
active duty. GAO evaluated information on income change reported by
reservists when activated; reserve families‘ readiness for call-ups
and their awareness and use of family support programs, focusing on
personal financial management; and a legislative proposal for the
Department of Defense (DOD) to offer TRICARE, the military‘s health
care program, to reservists and their families when members are not on
active duty.
What GAO Found:
DOD lacks sufficient information on the magnitude, the causes, and the
effects of income change to determine the need for compensation
programs targeting reservists who (1) fill critical wartime
specialties, (2) experience high degrees of income loss when on
extended periods of active duty, and (3) demonstrate that income loss
is a significant factor in their retention decisions. Such data are
critical for assessing the full nature and scope of income change
problems and in developing cost-effective solutions. DOD self-reported
survey data from past and current military operations indicate that
activated reservists have experienced widely varying degrees of income
change. While many reservists lost income, more than half of
reservists had either no change or a gain in income. However, survey
data are questionable primarily because it is unclear what survey
respondents considered as income loss or gain in determining their
financial status.
DOD has placed greater emphasis on preparing reservists‘ families for
potential call-ups, yet survey data show that one-third of spouses do
not feel prepared, over half of reservists are not aware of family
support programs, and more than 90 percent of spouses do not use these
programs. Personal financial management, one of DOD‘s core family
support programs, illustrates the continuing challenges DOD faces in
providing outreach to reservists. The 2000 survey data showed that 61
percent of reservists did not know whether personal financial
management services were available. The survey also showed that
reservists have financial problems similar to their active duty
counterparts. DOD is taking steps to improve personal financial
management, but it has not assessed the financial well-being of
reserve families, assessed the impact of reservists‘ financial
problems on mission readiness, or determined how to tailor its
programs to reservists.
Available DOD data do not identify a need to offer TRICARE to
reservists and their families when members are not on active duty.
Estimates from DOD‘s 2000 survey showed that nearly 80 percent of
reservists had health care coverage when they were not on active duty.
This rate is similar to that of comparable groups within the overall
U.S. population. DOD has expressed concern over the estimated costs of
this proposal. Cost estimates range up to $5.1 billion a year.
However, DOD has not fully assessed the ramifications of this
proposed legislation, including the impact on recruiting and
retention, the effects on active duty personnel, the extent reservists
and their families might participate in such a program, or the impact
on the TRICARE system. In addition, a high percentage of reservists‘
civilian employers who currently pay some or all of health care
premiums for reservists during activations could discontinue providing
such assistance. A number of recent improvements have been made to
reservists and their families‘ health care when members are activated.
However, DOD lacks data on problems reservists and their families have
experienced with health care since the mobilizations following
September 11, 2001; the causes of these problems; and their effects on
readiness, recruiting, and retention.
What GAO Recommends:
GAO recommends that DOD determine the need for and, if necessary,
develop targeted compensation programs to address income loss incurred
by certain activated reservists; improve awareness and access to
personal financial management programs; and assess the need for and
ramifications of additional improvements to health care for reservists
and their families. DOD concurred with our recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-03-1004.
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Derek B. Stewart (202) 512-5559 or
stewartd@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD Lacks Data to Determine the Need for Income Protection Programs:
DOD Faces Challenges in Family Readiness and Support:
DOD Has Not Fully Assessed the Need for Expansion of TRICARE to
Nonactivated Reservists:
Conclusions:
Recommendations for Executive Action:
Matters for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: DOD Surveys of Reservists and Spouses:
Appendix III: Policies and Protections That May Help Mitigate Reservists'
Financial Hardship During Activation:
Appendix IV: Selected States' Policies on Compensation for Activated
Employees:
Appendix V: Preactivation Activities of Spouses of Activated Reservists:
Appendix VI: Comments from the Department of Defense:
Appendix VII: Staff Acknowledgments:
Tables:
Table 1: Estimates of Drilling Unit Members' Total Reported Change in
Family Income for Mobilizations or Deployments Prior to 2001:
Table 2: Estimates of Spouses' Monthly Reported Change in Family Income
during Activation:
Table 3: Reservists' Views on Availability of Selected Family Support
Programs or Services:
Table 4: Income Assistance, Military Leave, and Health Benefits Offered
to State Employees Called to Federal Active Duty:
Table 5: Comparison of Spouses' Preparedness to Preactivation
Activities and Other Factors:
Figures:
Figure 1: Annual Number of Days Per Capita for Reserve Mobilizations
and Support to the Services and Combatant Commands (Fiscal Years 1986-
2002):
Figure 2: Annual Basic Military Compensation for Selected Pay Grades
(Fiscal Years 1990-2003):
Abbreviations:
COBRA: Consolidated Omnibus Budget Reconciliation Act:
DOD: Department of Defense:
OSD: Office of the Secretary of Defense:
United States General Accounting Office:
Washington, DC 20548:
September 10, 2003:
The Honorable John W. Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate:
The Honorable Duncan Hunter
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives:
Since the 1991 Persian Gulf War, National Guard and Reserve[Footnote 1]
personnel have been deployed to a number of contingency operations,
including those in Southwest Asia and the Balkans. About 300,000
reservists have been called to active duty since September 2001 to
support the war on terrorism, conflicts in Afghanistan and Iraq, and
other operations. Some reservists have served for a year or more, and
the pace of reserve operations is expected to remain high for the
foreseeable future. Citing the increased reliance on the reserves,
House Report 107-436 accompanying the Fiscal Year 2003 National Defense
Authorization Act[Footnote 2] directed us to review
compensation[Footnote 3] programs for reservists serving on active
duty. Our objectives were to evaluate (1) information on income change
reported by reservists when activated for a military operation to
determine the need for compensation programs; (2) reserve families'
readiness for call-ups and their awareness and use of family support
programs, specifically focusing on personal financial management; and
(3) a legislative proposal for the Department of Defense (DOD) to offer
TRICARE, the military's health care program, to reservists and their
families when members are not on active duty. This report is a follow-
on to our March 2003 testimony, Military Personnel: Preliminary
Observations Related to Income, Benefits, and Employer Support for
Reservists During Mobilizations, GAO-03-549T (Washington, D.C.: Mar.
19, 2003).[Footnote 4]
Military compensation is one of the tools DOD uses to attract, retain,
and motivate people. One of DOD's guiding principles for military
compensation is that servicemembers, both reserve and active component
members, be treated fairly.[Footnote 5] Military compensation for
reservists is affected by the type of military duty they perform. In
peacetime--when a reservist is training or performing military duty not
related to a contingency operation--certain thresholds are imposed at
particular points in service before a reservist is eligible to receive
the same compensation as a member serving in the active component. For
contingency operations, these same thresholds generally do not apply.
Thus, reservists activated for contingency operations such as Iraqi
Freedom, Noble Eagle, and Enduring Freedom are generally eligible to
receive the same compensation as active component personnel.[Footnote
6]
Our review focused on the more than 870,000 reservists who generally
drill and train part-time with their military units (referred to as
drilling unit members in this report). To review compensation programs
for reservists on active duty, we analyzed legislation, policies, and
other pertinent documents; obtained and analyzed proposals to enhance
reserve compensation; and discussed these with officials from the
Office of the Assistant Secretary of Defense for Reserve Affairs, the
Office of Military Compensation, the Deputy Under Secretary of Defense
for the Office of Military Community and Family Policy, reserve
component headquarters, and the TRICARE Management Activity. To gain
the perspective of reservists and their spouses, we obtained and
analyzed the results of a 2000 DOD survey of reservists, which covered
reservists' experiences during military operations between 1991 and
2000, and a 2002 DOD survey of spouses of activated reservists. (See
app. I for more information on our scope and methodology and app. II
for a description of the 2000 and 2002 surveys.) We completed our work
for this report from March to July 2003 in accordance with generally
accepted government auditing standards.
Results in Brief:
DOD lacks sufficient information on the magnitude, the causes, and the
effects of income change to determine the need for compensation
programs targeting reservists who meet three criteria: (1) fill
critical wartime specialties, (2) experience high degrees of income
loss when on extended periods of active duty, and (3) demonstrate that
income loss is a significant factor in their retention decisions. Such
data are critical for assessing the full nature and scope of income
change problems and in developing cost-effective solutions. DOD self-
reported survey data from past and current military operations indicate
that reservists have experienced widely varying degrees of income
change when they are activated. A 2000 DOD survey of reservists showed
that of those who served in military operations from 1991 to 2000, an
estimated 59 percent of drilling unit members had no change or a gain
in family income when they were mobilized or deployed for a military
operation, and about 41 percent lost income. A higher percentage of
reservists in certain groups, such as self-employed individuals and
health care professionals, lost income compared with reservists
overall. A 2002 DOD survey of spouses of activated reservists showed
that an estimated 70 percent of families experienced a gain or no
change in monthly income and 30 percent experienced a decrease in
monthly income. However, survey data are questionable primarily because
it is unclear what survey respondents considered as income loss or gain
in determining their financial status. Although existing pay policies
and protections may help mitigate reservists' financial hardship during
activation, additional measures have been proposed to provide income
protection to reservists. For example, the Army has proposed a new
special pay targeting certain self-employed physicians to make up for
some of the income loss they may experience while serving on active
duty over an extended period of time. Targeted compensation programs,
such as the Army's special pay proposal, could provide a cost-effective
means of providing income protection to reservists who meet the three
criteria above. Other proposals to provide income protection to
reservists--including legislative proposals to provide differential
pay to activated federal employees and an Air Force proposal to
establish an income insurance program--are not targeted compensation
programs.
Although DOD has placed greater emphasis on family readiness--preparing
servicemembers and their families for potential activation--and on
making family support services available during activation, many
reserve families do not feel prepared and many do not use and are not
aware of family support services. In 2002, one-third of spouses felt
they were unprepared or very unprepared when the member was notified of
active duty, and more than 90 percent of spouses did not use the
military's family support programs. The 2000 survey estimates showed
that more than half of reservists either did not know that family
support services were available or thought they were unavailable. DOD
officials acknowledge that they face outreach challenges in preparing
families and providing family support and have expanded outreach
efforts. Personal financial management, one of DOD's core family
support programs, illustrates some of the challenges DOD faces in
providing outreach to reservists. Under DOD policy, military personnel
bear primary responsibility for the welfare of their families, but the
commitment demanded by military service requires that they be provided
a comprehensive family support system, to include financial planning
assistance. DOD is taking some steps to improve servicemembers'
personal financial management, including drafting a new policy and
developing partnerships with nonprofit groups that support financial
assistance programs. DOD, however, has not assessed the financial well-
being of reserve families or determined how to tailor its programs to
this population. Our review of DOD survey data shows that reservists
reported having many of the same financial problems as their active
duty counterparts. The 2000 DOD survey showed that an estimated 61
percent of drilling unit members did not know whether financial
counseling and management education services were available, and
another 16 percent did not think these services were available. In
addition, DOD has found a link between financial problems and readiness
in the active component. For example, the Navy identified $250 million
in productivity and salary losses due to poor personal financial
management. However, DOD has not assessed the impact of reservists'
financial problems on mission readiness. DOD and the military services
have noted a need to improve reservists' and their spouses' awareness
of and access to personal financial management programs, but they have
not tailored their programs to reservists by developing plans that
specify how these needs will be met.
Available DOD data do not identify a need to offer TRICARE to
reservists and their families when members are not on active duty.
Estimates from DOD's 2000 survey showed that nearly 80 percent of
reservists reported having health care coverage when they were not on
active duty. This rate is similar to that of comparable groups within
the overall U.S. population. DOD has expressed concern over the
estimated costs of this proposal. Cost estimates range up to $5.1
billion a year. However, DOD has not fully assessed the ramifications
of this proposed legislation, including the impact on recruiting and
retention, the effects on active duty personnel, the extent reservists
and their families might participate in such a program, or the impact
on the TRICARE system. In addition, a high percentage of reservists'
civilian employers who currently pay some or all of health care
premiums for reservists during activations could discontinue providing
such assistance. A number of recent improvements have been made to
reservists and their families' health care when members are activated.
Recent improvements include earlier access to certain TRICARE programs
when a member is activated and higher reimbursement rates for care
received from physicians outside DOD's health care networks. However,
DOD lacks data on problems reservists and their families have
experienced in maintaining continuity of health care since the
activations following September 11, 2001; the causes of these problems;
and their effects on readiness, recruiting, and retention.
We are making recommendations in this report to (1) enhance DOD's
ability to determine the need for and, if necessary, develop
compensation programs targeted at reservists in critical specialties
who experience high degrees of income loss when activated; (2) improve
reservists' and their spouses' awareness of and access to personal
financial management programs; and (3) assess the need for and
ramifications of additional improvements to health care for reservists
and their families. In commenting on a draft of this report, DOD
concurred with our recommendations. On the basis of DOD's concurrence
with our recommendation concerning reserve health care benefits, we are
also including matters for congressional consideration concerning the
legislative proposal to extend TRICARE benefits to nonactivated
reservists and their families.
Background:
Components of the Reserve Forces:
The reserve forces are divided into three major categories, one of
which is the Ready Reserve.[Footnote 7] The Ready Reserve, with
approximately 1.2 million reservists at the end of fiscal year 2002, is
further subdivided into the Selected Reserve, the Individual Ready
Reserve, and the Inactive National Guard. The Selected Reserve, with
approximately 880,000 members in fiscal year 2002, includes all
personnel who are active members of reserve units and who participate
in regularly scheduled drills and training. In this report, we refer to
these personnel as "drilling unit members." The Selected Reserve also
includes individual mobilization augmentees--individuals who regularly
train with active component units. The Individual Ready Reserve
principally consists of individuals who have had training and have
previously served in the active forces or in the Selected Reserve, and
the Inactive National Guard contains individuals who are temporarily
unable to participate in regular training with the Guard unit.
Together, the Individual Ready Reserve and Inactive National Guard had
about 320,000 members in fiscal year 2002. There are seven reserve
components--the Army Reserve, the Army National Guard, the Air Force
Reserve, the Air National Guard, the Naval Reserve, the Marine Corps
Reserve, and the Coast Guard Reserve.
Reserve Participation in Military Operations:
Since the end of the Cold War, there has been a shift in the way
reserve forces have been used. Previously, reservists were viewed
primarily as an expansion force that would supplement active forces
during a major war. Today, reservists not only supplement but also
replace active forces in military operations worldwide.[Footnote 8] In
fact, DOD has stated that no significant operation can be conducted
without reserve involvement. Figure 1 shows per capita involvement of
reservists annually since 1986 and illustrates the spikes in reserve
participation in military operations in fiscal years 1991 (Desert
Shield and Desert Storm) and 2002 (Noble Eagle and Enduring Freedom),
as well as a fairly steady level of involvement between 1996 and 2001.
We derived per capita calculations by dividing the total days of
support for military missions by the end strength of the Selected
Reserve. However, force structure within the Selected Reserve qualifies
only a portion of those available to serve for a particular mission.
Despite this, the data highlight trends in the average number of
support days served by reservists.
Figure 1: Annual Number of Days Per Capita for Reserve Mobilizations
and Support to the Services and Combatant Commands (Fiscal Years 1986-
2002):
[See PDF for image]
Notes: GAO analysis of Office of the Assistant Secretary of Defense for
Reserve Affairs data.
[End of figure]
This figure includes the contributions of the Coast Guard Reserve.
Mobilizations are operations using the Presidential Reserve Call-up or
mobilization authorities. Support of the services or combatant commands
is mission assistance provided under voluntary orders and includes both
contingency operations and other missions. The figure excludes days for
training as well as support for counterdrug operations, exercises, and
domestic emergencies.
Per capita calculations are derived by dividing the total days of
support for these missions by the end strength of the Selected Reserve.
However, force structure within the Selected Reserve qualifies only a
portion of those available to serve for a particular mission. Despite
this, the data highlight trends in the average number of support days
served by reservists.
There have been wide differences in the operational tempos[Footnote 9]
of individual reservists in certain units and occupations. Prior to the
current mobilization, personnel in the fields of aviation, special
forces, security, intelligence, psychological operations, and civil
affairs had been in high demand, experiencing operational tempos that
were two to seven times higher than those of the average reservist.
Since September 2001, operational tempos have increased significantly
for reservists in DOD reserve components due to the partial
mobilization in effect to support Operations Iraqi Freedom, Noble
Eagle, and Enduring Freedom.
End Strength, Enlistment, and Attrition:
For each year from fiscal year 1997 to 2002, the reserves on the whole
achieved at least 99 percent of their authorized end strength. In 4 of
these 6 years, they met at least 100 percent of their enlistment goals.
During this time period, enlistment rates fluctuated from component to
component. For the fiscal year 1997-2002 period, only the Army National
Guard experienced a slight overall increase in attrition.[Footnote 10]
The attrition data suggest there has not been a consistent relationship
between a component's average attrition rate for a given year and the
attrition rate for that component's high demand capabilities (which
include units and occupations). In other words, attrition rates for
high demand capabilities were higher than average in some cases but
lower than average in other cases. Shortfalls have been identified in
certain specialties, such as health care professionals.
DOD's Use of Survey Data:
DOD uses surveys of reservists and their spouses to obtain information
on reservists' income change when they are activated for a military
operation and to obtain their perspective on a number of issues
relating to activation, including family support and health care. The
most recent survey of reservists was completed in 2000,[Footnote 11]
prior to the terrorist attacks that occurred on September 11, 2001, and
the ensuing mobilization. The 2000 survey included questions on various
aspects of mobilization and deployment for operations dating back to
the 1991 Persian Gulf War. In 2002, the Office of the Assistant
Secretary of Defense for Reserve Affairs surveyed spouses of activated
reservists.[Footnote 12] In 2003, DOD fielded a new "status of forces"
survey of activated reservists. However, the survey had not been
completed at the time we were conducting our work.
Roles and Responsibilities:
The Under Secretary of Defense for Personnel and Readiness has
oversight for policies, plans, and programs for military personnel
management, military compensation, and personnel support programs. The
Assistant Secretary of Defense for Reserve Affairs is responsible for
the overall supervision of issues involving reserve forces. The
Assistant Secretary of Defense for Health Affairs has the
responsibility to execute DOD's health care mission. The TRICARE
Management Activity manages and executes the Defense Health Program
Appropriation and supports the uniformed services in implementation of
TRICARE. Regarding family support programs, the secretaries of the
military departments are responsible for, among other things, ensuring
that comprehensive family support systems are developed at DOD
installations and that family support systems are monitored and
evaluated to ensure that they are accessible, effective, and responsive
to the needs of DOD personnel and their families.
Recent GAO Reports on Reserve Forces:
We have previously reported on several issues surrounding the increased
use of reserve forces. In August 2003, we reported on the efficiency of
DOD's process for mobilizing reservists following September 11,
2001.[Footnote 13] In April 2003, we examined whether the Army was
collecting and maintaining information on the health of early-deploying
reservists.[Footnote 14] In March 2003, we testified before the
Subcommittee on Total Force, House Committee on Armed Services, on our
preliminary observations related to the issues covered in this report,
as well as employer support.[Footnote 15] Also in March 2003, we
testified before the Subcommittee on Total Force concerning DOD's
oversight of TRICARE's network of civilian providers, and we issued a
report on this topic in July 2003.[Footnote 16] In September 2002, we
issued a report in response to a congressional mandate to study the
health care benefits of reserve component members and dependents and
the effect mobilization may have on these benefits.[Footnote 17] In
June 2002, we noted that maintaining employers' continued support for
their reservist employees will be critical if DOD is to retain
experienced reservists in these times of longer and more frequent
deployments.[Footnote 18]
DOD Lacks Data to Determine the Need for Income Protection Programs:
DOD lacks sufficient information from the survey data to determine the
magnitude of income loss or gain experienced by reservists, the causes
for this change, and the effects of income loss on reserve retention.
Such data are critical for assessing the full nature and scope of
income change problems and in developing cost-effective solutions. DOD
self-reported survey data from past and current military operations
indicate that reservists have experienced widely varying degrees of
income change when they are activated. While many reservists have
reported lost income during activation, more than half of reservists
have reported either no change or a gain in income. Current pay
policies and protections, as well as emergency aid services, may help
mitigate reservists' financial hardship during activation. Additional
income protection initiatives for reservists have been proposed. Three
of these proposals are (1) an Army initiative to provide special
deployment pay to self-employed physicians who fill critical medical
wartime positions in the reserves, (2) legislative proposals to
authorize differential pay for federal employee reservists, and (3) an
Air Force initiative to establish an income insurance program for
activated reservists.
Information on Magnitude, Causes, and Effects of Income Loss Is
Incomplete:
The 2000 and 2002 DOD surveys provide incomplete information on the
magnitude of income change experienced by activated reservists, the
causes of income loss, and the effects of income loss on reservists'
attitudes toward military life and on retention. Such data are critical
for assessing the full nature and scope of income change problems and
in developing cost-effective solutions. Based on the 2000 survey data,
DOD estimated that the average total income change for all reservists
(including losses and gains) was almost $1,700 in losses. However, this
figure should be considered with caution because of the estimating
methodology that was used and because it is unclear what survey
respondents considered as income loss or gain in answering this
question.[Footnote 19] For example, when members reported income loss
or gain, they may or may not have included the value of indirect
compensation, such as health care benefits, or considered changes in
their expenses, such as those for household and car maintenance and for
child care. In addition, it is unclear whether survey respondents
included paid civilian leave received concurrently with military pay or
whether they included differential pay if provided by their employer.
Further, reservists were mobilized or deployed for varying lengths of
time, which is likely to affect their overall income change. According
to DOD's analysis of the survey data, certain groups reported greater
losses of income on average. For example, self-employed reservists
reported an average income loss of $6,500, physicians/registered nurses
reported an average income loss of $9,000, and self-employed
physicians/registered nurses reported an average income loss of
$25,600. DOD's analysis presents little data on those groups who
reported an overall income gain. Two groups that were identified as
reporting a gain were clergy and those who worked for a family business
without pay.
The existing survey data provide incomplete information on the causes
of income change. Income change can be attributed to various factors,
including a difference between civilian and military pay, a change in
spousal income, a change resulting from continuing losses from a
business or practice, a different job being performed, or some
combination of these. The 2002 spouse survey estimates showed that
about 60 percent had an increase in the military member's earnings, 10
percent had an increase in their own earnings due to working more hours
or taking a second job, 31 percent had a reduction in the military
member's earnings, 19 percent had a reduction in their own earnings
because they were unable to work as much, 6 percent had other increases
in income, and 15 percent had other reductions in income. In addition
to these factors, military households may also experience a change in
expenses during the activation period. The 2000 survey estimates showed
that about 22 percent of drilling unit members had an increase in
child-care expenses, 26 percent had an increase in household
maintenance and car repair expenses, and 63 percent had an increase in
telephone expenses. However, neither survey provides complete
information on the extent these individual factors contribute to
overall income change.
Although reservists have reported that income loss causes problems for
them, the effects of these problems are not clear. When asked to rank
income loss among other problems they have experienced during
mobilization or deployment, about 41 percent of drilling unit members
ranked it as one of their most serious problems.[Footnote 20] But the
survey data are inconclusive concerning the effects of income loss
problems on servicemembers' attitudes toward military life or on
retention. Our prior work has shown that retention decisions are highly
personal in nature and that many factors may affect the decision of a
servicemember to stay in the military or leave. A 1998 RAND study
conducted for DOD found that income loss during the 1991 Persian Gulf
War, while widespread among reservists, did not have a measurable
effect on the retention of enlisted reservists.[Footnote 21] The study
was cautiously optimistic that mobilizing the reserves under similar
circumstances in the future would not have adverse effects on enlisted
recruiting and retention. However, the effects of future mobilizations
can depend on the mission, the length of time reservists are deployed,
the frequency of deployment, the degree of support from employers and
family members, and other factors. Office of the Secretary of Defense
(OSD) officials told us it was too early to know how the current
mobilization would affect retention or what factors would be driving
reservists' retention decisions.
Reservists Have Experienced Widely Varying Degrees of Income Loss or
Gain:
The 2000 DOD survey showed that an estimated 41 percent of reservists
who were drilling unit members in the Selected Reserve lost family
income when they were mobilized or deployed for a military operation,
30 percent had no change in income, and 29 percent had an increase in
income. Table 1 shows the distribution of income change reported by
drilling unit members in the 2000 survey.
Table 1: Estimates of Drilling Unit Members' Total Reported Change in
Family Income for Mobilizations or Deployments Prior to 2001:
Total income change: Decreased $50,000 or more; Percentage: 0.9.
Total income change: Decreased $25,000 to $49,999; Percentage: 1.5.
Total income change: Decreased $10,000 to $24,999; Percentage: 4.1.
Total income change: Decreased $5,000 to $9,999; Percentage: 6.0.
Total income change: Decreased $2,500 to $4,999; Percentage: 8.9.
Total income change: Decreased $1 to $2,499; Percentage: 19.5.
Total income change: Subtotal; Percentage: 40.9.
Total income change: No change in income; Percentage: 30.0.
Total income change: Subtotal; Percentage: 30.0.
Total income change: Increased $1 to $2,499; Percentage: 16.6.
Total income change: Increased $2,500 to $4,999; Percentage: 6.8.
Total income change: Increased $5,000 or more; Percentage: 5.7.
Total income change: Subtotal; Percentage: 29.1.
Total income change: Total; Percentage: 100.0.
Sources: DOD 2000 Reserve Component Survey (data); GAO (presentation).
[End of table]
Our analysis of the 2000 DOD survey estimates showed that differences
in total family income change were attributable to different civilian
occupations. For example, a higher percentage of self-employed
reservists lost income (55 percent)[Footnote 22] compared with drilling
unit members overall (41 percent). About 10 percent of self-employed
drilling unit members had income loss of $25,000 or more, compared with
about 3 percent for drilling unit members overall. The percentage of
federal employee reservists who lost income did not differ
statistically from the overall average for drilling unit members. Of
federal employee reservists, about 39 percent had an income loss, and
62 percent had no change or a gain in income.[Footnote 23] Of
reservists in selected civilian career fields,[Footnote 24] a higher
percentage of health care professionals had income loss compared with
reservists in other career fields, and about 38 percent of health care
professionals[Footnote 25] had an income loss of $25,000 or more.
Income change differences were also evident based on reserve component
and pay grade. For example, a higher percentage of members in the
Marine Corps Reserve and the Naval Reserve had income loss compared
with members of the Army National Guard.
The 2002 DOD survey of spouses of activated reservists found that an
estimated 58 percent had an increase in monthly family income, 30
percent had a loss in monthly income, and 12 percent experienced no
change in monthly income (see table 2).
Table 2: Estimates of Spouses' Monthly Reported Change in Family Income
during Activation:
Monthly income change: Decreased more than $3,500; Percentage: 3.
Monthly income change: Decreased $2,001-$3,500; Percentage: 4.
Monthly income change: Decreased $1,001-$2,000; Percentage: 7.
Monthly income change: Decreased $501-$1,000; Percentage: 8.
Monthly income change: Decreased $251-$500; Percentage: 6.
Monthly income change: Decreased $1-$250; Percentage: 2.
Monthly income change: Subtotal; Percentage: 30.
Monthly income change: No change; Percentage: 12.
Monthly income change: Subtotal; Percentage: 12.
Monthly income change: Increased $1-$250; Percentage: 8.
Monthly income change: Increased $251-$500; Percentage: 12.
Monthly income change: Increased $501-$1,000; Percentage: 16.
Monthly income change: Increased $1,001-$2,000; Percentage: 14.
Monthly income change: Increased $2,001-$3,500; Percentage: 6.
Monthly income change: Increased more than $3,500; Percentage: 2.
Monthly income change: Subtotal; Percentage: 58.
Monthly income change: Total; Percentage: 100.
Sources: DOD (data); GAO (presentation).
[End of table]
Additional Income Protection Measures Have Been Proposed to Supplement
Existing Pay Policies and Protections:
Current pay policies and protections, as well as emergency aid
services, may help mitigate reservists' financial hardship during
activation. For example, basic military compensation has increased in
recent years. In addition, the Soldiers' and Sailors' Civil Relief Act
provides numerous financial protections to reservists. (See app. III
for more information on existing pay policies and protections.)
Additional income protection measures for reservists have been
proposed. Three proposals are (1) an Army initiative to provide special
deployment pay to self-employed physicians who fill critical medical
wartime positions in the reserves, (2) legislative proposals to
authorize differential pay for federal employee reservists, and (3) an
Air Force initiative to establish income insurance for activated
reservists.
Special Deployment Pay for Physicians in Critical Wartime Specialties:
The Army, through DOD's Unified Legislation and Budgeting
process,[Footnote 26] has proposed a special deployment pay to limit
income loss and improve retention of certain Army Reserve Medical Corps
physicians. The pay would be targeted at reservists called to active
duty who are (1) self-employed,[Footnote 27] (2) serve as officers in
the Army Reserve Medical Corps in critical wartime medical specialties,
and (3) deploy involuntarily beyond the established rotation. The
special deployment pay would be available during contingencies and
funded through a supplemental appropriation. Under this proposal, an
eligible reservist would receive an additional monthly pay that would
vary by specialty, level of training, and years of active duty service
as a Medical Corps officer. The monthly pay would be limited to no more
than twice the special pay currently earned by an eligible individual.
The Army estimates the mean cost at $6,000 per month per eligible
professional. The Army estimates that had this pay policy been in place
in May 2003, Army Reserve physicians deployed beyond the established
rotation period (90 days) would have received a total of $630,000 in
special deployment pay for that month.[Footnote 28]
According to the Army, this special pay is needed because of
difficulties retaining and replacing fully trained physicians[Footnote
29] in the Army Reserve Medical Corps to meet its wartime needs. These
retention difficulties are due, in part, to reservists' concerns about
financial loss during deployment. According to the Army, it has been
unsuccessful in recruiting and retaining enough fully trained
physicians to meet authorized personnel levels in the Selected Reserve
and has had to rely on transfers from the Individual Ready Reserve to
reconstitute its Selected Reserve strength. The Army attributes
retention challenges within the reserves to a decrease in the number of
active duty physicians transferring to the reserve component, attrition
due to an aging force and professionals meeting retirement eligibility,
and the inability of some medical professionals to tolerate income loss
resulting from frequent or lengthy activations.
Every 2 years, the Assistant Secretary of Defense for Health Affairs
publishes a list of critical officer skills needed to meet Ready
Reserve medical shortages and for which the services could offer
retention and recruiting incentives. During fiscal years 2002 and 2003,
the Army Reserve was projected to have critical shortages--that is,
projected to fill less than 80 percent of authorized positions during
the next 24 months--in 18 wartime health care specialties, such as
general surgery, thoracic surgery, and preventative medicine. For
example, as of January 2003, the Army Reserve had filled 78 percent of
authorized general surgeon positions, 62 percent of thoracic surgeon
positions, and 41 percent of preventative medicine positions.
A 1996 survey conducted for the Chief, Army Reserve, found that 54
percent of Army Reserve physicians cited the financial impact of
mobilization as a primary reason that they did not intend to remain in
the reserves until retirement. The survey showed that catastrophic
financial loss associated with long-term deployments was the primary
factor in their decisions to leave the Army Reserve. Furthermore, over
three-quarters of all Army Reserve physicians surveyed in 1996 and 2001
required mobilization periods of 90 days or less to avoid seriously
affecting their medical practices. Fifty-nine percent of respondents to
the 2001 survey preferred a maximum deployment length of 60 days or
less. However, these respondents indicated that a special deployment
pay would allow them to deploy for longer periods of time and would
increase the likelihood that they would remain in the Army Reserve. The
amount of special pay that respondents would need varied by medical
specialty, with the majority indicating a need for less than $10,000 a
month to maintain their practices while deployed.
To increase retention among medical professionals concerned about the
financial impact of lengthy mobilizations on their practices, the Army
implemented the Presidential Reserve Call-Up 90-Day Rotation Pilot
Program in 1999. The 3-year pilot program limited deployments of
physicians, dentists, and nurse anesthetists to 90 days in the area of
operations. A 2001 survey of Army Reserve medical personnel found that
intent to remain in the Army Reserve increased among self-employed
medical professionals who were aware of the 90-day rotation pilot
program. By 2001, the percentage of Army Reserve medical professionals
who indicated that they did not intend to remain until retirement had
dropped slightly. Those aware of the 90-day cap who indicated that they
would leave because of the financial impact of mobilization decreased
by 23 percent from 1996 to 2001. Moreover, those indicating that they
would leave because of concerns about future mobilizations decreased by
20 percent over the same time period. Respondents to the 2001 survey
indicated that a special deployment pay would allow them to deploy for
longer periods of time. For example, of respondents whose original
optimal deployment length was 31 to 60 days, 76 percent indicated that
they could increase their deployment time up to 90 days with a special
deployment pay.
Differential Pay for Activated Federal Employees:
Federal employee reservists called to active military duty do not
receive paid compensation from their civilian employing agency other
than paid military and annual leave.[Footnote 30] Under various
legislative proposals introduced during the current congressional
cycle,[Footnote 31] federal agencies that employ reservists called to
active duty would be required to pay the difference, if any, between
the employee's civilian pay and military pay from appropriated funds.
DOD's 2000 survey estimates indicated that 9 percent of drilling unit
members were federal employees in 1999. Proponents of differential pay
for federal employee reservists state that providing this pay (1) would
recognize the demands and burdens placed on reservists and their
families, (2) would help federal employee reservists maintain their
standard of living, and (3) would set an example for other employers of
reservists. The Office of Personnel Management has opposed similar
legislation in the past on the basis of equity and cost issues. In
addition, as noted earlier, available data indicate that federal
employee reservists are not suffering income loss to a greater extent
than other reservists, such as certain health care professionals.
Federal law provides many rights and benefits for federal employees
called to active military duty. In December 2001, federal agencies were
granted discretionary authority to pay both the employee and government
shares of the Federal Employees Health Benefits Program premium for any
or all of an 18-month period when an employee is called to active duty
in support of a contingency operation.[Footnote 32] As of March 2003,
about 64 percent of federal agencies reported paying the entire premium
when an employee is called to active duty. At agencies that have not
used this discretionary authority, employees may continue to pay their
share of premiums for the first 12 months and their share of premiums
plus the government's share of premiums and a 2 percent administrative
processing fee for the next 6 months.[Footnote 33]
Other benefits for activated federal employee reservists include the
following:
* continuation of life insurance for up to 12 months at no cost;
* continued accrual of military leave, which may be carried over to the
following fiscal year or used while activated; and:
* retroactive retirement credits upon return to their civilian
positions.
In an August 2002 memorandum, the Office of Personnel Management cited
"equity issues" in its opposition to differential pay for federal
employee reservists. While the Office of Personnel Management did not
elaborate, differential pay could create inequities in pay between
federal employee reservists and their active duty counterparts who are
serving in the same positions and pay grades. Two servicemembers
performing the same military job could receive different amounts of
compensation simply because one is a reservist with a full-time job in
the federal civilian sector. In addition, there may not be a
correlation between a reservist's civilian and military pay grades. A
federal employee's civilian salary is based on work performed at a
certain pay grade and may require different skills and knowledge than
the employee's military job. Providing differential pay would, in
effect, be paying the reservist for a job other than that being
performed.
The Office of Personnel Management also stated that the cost of
providing differential pay for activated federal employee reservists on
an indefinite basis would be significant and that data are lacking to
make an accurate cost projection. It noted that because federal
agencies would fund the cost of differential pay, agencies with greater
numbers of activated reservists would have higher costs, reducing the
amount of funds available for other program operations. The
Congressional Budget Office developed a cost estimate for one of the
legislative proposals.[Footnote 34] It estimated that this proposal
would cost $201 million for the fiscal year 2003-08 period, which
includes retroactive payments for federal employees called to active
duty since September 11, 2001.[Footnote 35]
A factor that complicates calculation of the total cost of differential
pay is DOD's lack of complete information about reservists' employment.
Until recently, DOD did not require reservists to provide information
to DOD about their civilian employers. In response to our
recommendation that DOD collect complete data about reservists'
employment, DOD and the services implemented the Civilian Employment
Information Program in March 2003.[Footnote 36] Under this program,
Selected Reserve members are required to provide their employment
status, employer's name, and civilian job title, among other
information. When fully established, the program will allow DOD to
consider employment-related factors during premobilization planning
and assist the department in accomplishing its employer outreach
efforts. The data could also help to identify the number of federal
employees who could be called to active duty and to develop a total
cost estimate if a pay differential were offered to them.
While civilian employers are not required under the Uniformed Services
Employment and Reemployment Rights Act[Footnote 37] to provide
differential pay to activated reservists, we have found that many
employers do so. As part of our earlier work on employer support for
the Guard and Reserve, we contacted 359 employers of reservists in high
tempo units between November 2001 and March 2002 about their pay
practices for activated employees. Of 183 employers who completed and
returned the survey, about 40 percent indicated that they provide
either full pay, differential pay, or a combination of both to
activated reservists. For this report, we also surveyed officials from
22 states about their compensation policies for state employees called
to federal active duty and found that most offer some type of financial
assistance to their activated employees. Nineteen of the 22 states
offer financial assistance, such as pay differentials, to employees who
are on military leave without pay and can document a loss of income.
(App. IV provides information on income assistance, military leave,
health benefits, and other benefits offered by the 22 states to their
employees who are called to active duty.) DOD's 2002 spouse survey
estimates showed that the reserve member's civilian employer continued
to pay the member's salary in full or in part for 22 percent of
spouses.
Income Insurance for Activated Reservists:
From 1996 to 1997, DOD offered the Ready Reserve Mobilization Income
Insurance Program to reservists as a way to protect their civilian
income when called to active duty. The program was canceled after it
failed financially. Through DOD's Unified Legislation and Budgeting
process, the Air Force has proposed that DOD establish a somewhat
similar income insurance program that addresses some of the problems
associated with the original program but not others.
The original DOD program was initiated after concerns were raised
following the 1991 Persian Gulf War that income loss would adversely
affect retention of reservists. According to a 1991 DOD survey of
reservists activated during the Gulf War, economic loss was widespread
across all pay grades and military occupations. In response to
congressional direction,[Footnote 38] DOD in 1996 established the Ready
Reserve Mobilization Income Insurance Program, an optional, self-funded
income insurance program for members of the Ready Reserve ordered
involuntarily to active duty for more than 30 days. Reservists who
elected to enroll could obtain monthly coverage ranging from $500 to
$5,000 for up to 12 months within an 18-month period. Far fewer
reservists than DOD expected enrolled in the program. Many of those who
enrolled were activated for duty in Bosnia and, thus, entitled to
almost immediate benefits from the program. The program was terminated
in 1997 after going bankrupt.
We reported in 1997 that private sector insurers were not interested in
underwriting a reserve income mobilization insurance program due to
concerns about actuarial soundness and unpredictability of the
frequency, duration, and size of future call-ups.[Footnote 39] Certain
coverage features violated many of the principles private sector
insurers usually require to protect themselves from adverse
selection.[Footnote 40] These features include voluntary coverage and
full self-funding by those insured, the absence of rates that
differentiated between participants based on their likelihood of
mobilization, the ability to choose coverage that could result in full
replacement of their lost income rather than those insured bearing some
loss, and the ability to obtain immediate coverage shortly before an
insured event occurs. DOD officials told us that private sector
insurers remain unsupportive of a new reserve income insurance
mobilization program and that the amount of federal financial
commitment required for the program is prohibitive. Thus, DOD has no
plans to implement a new mobilization insurance program.
However, the Air Force has proposed that DOD establish a self-funded
income insurance program for reserve component members ordered
involuntarily to active duty for more than 30 days, or in support of
forces activated during a war declared by Congress or a period of
national emergency. The Air Force proposal attempts to address adverse
selection, low participation rates, and funding concerns that
contributed to the failure of the Ready Reserve Mobilization Income
Insurance Program. For instance, to address adverse selection and low
participation rates, all drilling unit members and individual
mobilization augmentees would be automatically enrolled in the program
for $1,000 of monthly coverage with the option to opt out. Individual
Ready Reserve members would have the option to enroll. To further
mitigate adverse selection and funding concerns, payments would not be
made during the first 6 months of enrollment in the program, regardless
of mobilization or recall status. This delay would allow funds to
accrue for future payouts. Furthermore, DOD would be able to suspend
the annual enrollment open season during national emergencies and
periods of war that are declared by Congress. Mandatory waiting periods
for coverage to become effective would help counter adverse selection
that resulted when reservists with knowledge of their imminent
mobilization enrolled in the Ready Reserve Mobilization Income
Insurance Program. However, instituting waiting periods and requiring
mandatory participation still would not overcome financial liability
associated with large mobilizations. Even infrequent mobilizations
could produce a large number of claims. As a result, funding for the
program could be exhausted quickly. In 1998, the Congressional Research
Service estimated that if every Selected Reservist were enrolled for
coverage of $1,000 per month and paid premiums of $10 per month, the
fund would accumulate $9 million in income each month and $702 million
over 5 years, assuming that premiums were invested at a 10 percent
compound interest rate.[Footnote 41] A mobilization of 250,000
reservists would create a monthly liability of $250 million, making the
fund insolvent by the fourth month of mobilization.[Footnote 42]
The Air Force proposal does not completely address some of the problems
experienced with the prior program, including adverse selection, low
participation rates, proof of loss of income, and funding concerns. As
currently structured, the Air Force's proposed income insurance program
would not have graduated premiums that differentiate between
participants based on their likelihood of mobilization. However,
participants would be able to purchase additional coverage or opt out
of the program depending on their perceived risk of activation. Similar
to the Ready Reserve Mobilization Income Insurance Program, the Air
Force's proposed program is designed to be financed entirely by
premiums paid by individual members. DOD would need to assume
responsibility for any unfunded liability that may result from a larger
than expected mobilization. As a result, the Secretary of Defense would
need to submit a supplemental appropriation request.
In addition, the Air Force's proposed income insurance program does not
require proof of loss of income. As designed, the program would pay
benefits based on the amount of coverage chosen by the reservists
regardless of actual losses incurred. Premium rates would be set for a
specified amount of insurance coverage. There is no provision to
prevent reservists from subscribing to amounts of coverage
significantly greater than their actual loss of income. To minimize the
program's financial liability, reservists could be required to document
income loss when submitting claims. However, verifying losses from
self-owned businesses, lost commissions or bonuses, or additional
expenses could be difficult and delay timely payment of benefits.
Even if these design criteria were addressed, designing a financially
sound program may not be possible. There is no reliable way to estimate
the duration, number, and timing of future mobilizations and the number
and specialties of reservists that would be called up. DOD's increased
reliance on the reserve components in a changing and unpredictable
world situation makes projections of future call-ups exceedingly
difficult. To be financially sound, an insurance program, at a minimum,
should have a large eligible population of whom a large proportion are
insured and the proportion of those insured who file claims should be
reasonably stable over time. In addition, to be affordable, the
majority of those insured will not, in any period, incur the losses
that they insure against.
Furthermore, it is unclear whether reservists want or need an income
insurance program. Although the 2000 DOD survey indicated that an
estimated 41 percent of drilling unit members had losses in family
income when mobilized or deployed, it is unknown whether reservists
would be willing to participate in a new income insurance program. For
example, high premiums and a mandatory waiting period before becoming
eligible for payouts could discourage participation. A survey conducted
before the Ready Reserve Mobilization Income Insurance Program was
implemented showed that about 70 percent of enlisted members and 55
percent of officers indicated interest in participating in such a
program. The DOD Office of the Actuary estimated that about 40 percent
of reservists would participate. However, only about 3 percent of
Selected Reserve members actually enrolled. The enrollment pattern
indicated that reservists in certain military specialties had a greater
need or demand for income protection. Of the approximate 5,500 military
specialties in the reserve components, about 1,930 (35 percent) had
some reservists enrolled in the program, including 420 military
specialties that had enrollment levels of 10 percent or more. Although
these 420 military specialties accounted for less than 8 percent of the
total military specialties within the reserve components, they made up
over 25 percent of the total reservists enrolled in the program. Of the
420 specialties with enrollment levels of 10 percent or more, 250 were
in aviation, legal, and medical fields.
DOD Faces Challenges in Family Readiness and Support:
Although DOD has placed greater emphasis on family readiness, many
reserve families indicate they do not feel prepared for call-ups. In
addition, although reservists and their families are eligible for
military family support services, many reservists appear not to be
aware of these services, and most spouses of activated reservists have
not used these services. DOD officials have acknowledged they face
challenges in providing family support outreach to reservists and have
taken steps to improve outreach. Personal financial management, one of
DOD's core family support programs, illustrates the continuing
challenges DOD faces in providing outreach to reservists. DOD has not
assessed the financial well-being of reserve families, nor has it
assessed the impact of reservists' financial problems on mission
readiness. DOD has noted a need to improve reservists' and their
spouses' awareness of and access to personal financial management
programs, but it has not tailored its programs to reservists by
developing plans that specify how these needs will be met.
Surveys Indicate a Lack of Readiness among Many Reserve Families and
Low Awareness and Use of Support Programs:
DOD has recognized the importance of family readiness and family
support for its servicemembers, including reservists. Under a 1994 DOD
policy, the military services must "ensure National Guard and Reserve
members and their families are prepared and adequately served by their
services' family care systems and organizations for the contingencies
and stresses incident to military service." According to DOD, families
of reservists who use family support services and who are provided
information from the military cope better during activations.
Furthermore, military members who are preoccupied with family issues
during deployments may not perform well on the job, which in turn, may
negatively affect the mission. According to DOD's 2000 survey
estimates, reservists who had been activated stated that among the most
serious problems they experienced were burdens placed on their spouse
and problems created for their children. More than half of all
reservists are married, and about half have dependents. As of September
2001, there were about 960,000 family members of Selected Reserve
members, including spouses, children, and adult dependents.
Despite this recognition of the importance of family readiness and
family support, many reserve families feel they are not prepared when
the member is notified for active duty. According to DOD officials,
Operations Noble Eagle and Enduring Freedom highlighted that not all
reserve families were prepared. Since many families never thought their
military member would be mobilized, they had not become involved in
their family readiness networks. Results from the 2000 DOD survey also
showed a substantial number of reservists did not anticipate call-up--
about 35 percent of drilling unit members thought it was unlikely or
very unlikely that they would be mobilized or deployed in the next 5
years. Furthermore, about one-fourth of drilling unit members said
their dependent care arrangements were not realistically workable for
deployments lasting longer than 30 days.
DOD's 2002 spouse survey showed that an estimated 33 percent of spouses
felt they were unprepared or very unprepared when they first learned of
the member's order to active duty, while 37 percent felt they were very
well prepared or well prepared and 30 percent felt they were neither
prepared nor unprepared. The survey data indicated that less than half
of spouses were involved in family readiness groups[Footnote 43],
attended readiness briefings, received preactivation materials, or had
a military point of contact to help them deal with emergency issues
that might arise. Our analysis showed that some of these factors
appeared to be related to whether spouses felt prepared or unprepared
when the member was notified for active duty, although involvement in
family readiness groups and receiving preactivation materials upon the
member's notification to active duty did not appear to be significant
factors. (See app. V.) Compared with unprepared spouses, a higher
percentage of prepared spouses had a longer period of notice before the
member was activated. As might be expected, a higher percentage of
prepared spouses than unprepared spouses were coping well or very well
during the activation. An estimated 84 percent of prepared spouses were
coping well or very well, 3 percent were coping poorly or very poorly,
and 13 percent were coping neither poorly nor well. Of unprepared
spouses, 41 percent were coping well or very well, 31 percent were
coping poorly or very poorly, and 28 percent were coping neither poorly
nor well.
Although activated reservists and their family members are eligible for
the same family support services as their active duty counterparts, the
DOD 2000 survey estimates showed that more than half of all reservists
either believed that family support services were not available to them
or did not know whether these services were available (see table 3).
Table 3: Reservists' Views on Availability of Selected Family Support
Programs or Services:
Estimated percentage of drilling unit members:
Program/service: Services for families during separation; Available
off installation, on installation or both: 25; Not available: 13;
Don't know: 62.
Program/service: Crisis referral services; Available off installation,
on installation or both: 15; Not available: 17; Don't know: 68.
Program/service: Financial counseling/management education; Available
off installation, on installation or both: 22; Not available: 16;
Don't know: 61.
Program/service: Family support centers; Available off installation,
on installation or both: 35; Not available: 14; Don't know: 51.
Sources: DOD 2000 Reserve Component Survey (data); GAO (presentation).
Note: Rows may not add to 100 percent due to rounding.
[End of table]
DOD has found that the degree to which reservists are aware of family
support programs and benefits varies according to component, unit
programs, command emphasis, reserve status, and willingness of the
individual member to receive or seek out information. Among the key
challenges in providing family support are the long distances that many
reservists live from their home unit and military
installations,[Footnote 44] the difficulty in persuading reservists to
share information with their families, the unwillingness of some
reservists and their families to take the responsibility to access
available information, conflicting priorities during drill weekends
that limit the time spent on family support, and a heavy reliance on
volunteers to act as liaisons between families and units.
Spouses of activated reservists have not made extensive use of military
family support programs. DOD's 2002 spouse survey indicated that most
spouses did not use family programs during activation. When asked to
rate the helpfulness of various military support services, an estimated
94 percent of spouses said they had not used family programs. In
response to another survey question concerning the difficulty they
experienced accessing military services, 87 percent said they had not
used family programs. It is unclear from the survey data why spouses
did not use family programs. About 1 percent of spouses rated family
programs as their most important military support service.
DOD has recognized the need for improved outreach. For example, the
department has published benefit guides for reservists and family
members and has enhanced information posted on its Web sites.[Footnote
45] DOD published a "Guide to Reserve Family Member Benefits" that
informs family members about military benefits and entitlements and a
family readiness "tool kit" to enhance communication about
predeployment and mobilization information among commanders,
servicemembers, family members, and family program managers. Each
reserve component has established family program representatives to
provide information and referral services, with volunteers at the unit
level providing additional assistance. The U.S. Marine Corps began
offering an employee assistance program in December 2002 to improve
access to family support services for Marine Corps servicemembers and
their families who reside far from installations. Through this program,
servicemembers and their families can obtain information and referrals
on a number of family issues, including parenting, preparing for and
returning from deployment, basic tax planning, legal issues, and
stress. The National Guard has established family assistance centers
across the United States to act as an entry point for service and
assistance that a family member may need during the current
mobilization. As of May 2003, over 400 family assistance centers had
been established.
DOD Has Identified Outreach Challenges for Personal Financial
Management Programs:
Personal financial management, one of DOD's core family support
programs, illustrates the continuing challenges DOD faces in providing
outreach to reservists. These challenges include improving access to
and awareness of personal financial management programs for reservists
and their family members. Under DOD policy, military personnel bear
primary responsibility for the welfare of their families, but the
commitment demanded by military service requires that they be provided
a comprehensive family support system, to include financial planning
assistance. Servicemembers receive financial management training
during their basic training and, in some cases, during advanced
training. In addition, personal financial management is one of the core
services offered at the military services' family support centers.
Personal financial management consists of programs conducted by
counselors who provide personal and family financial training,
counseling, and assistance.
DOD studies have identified problems with personal financial management
in the active duty force, particularly among junior enlisted members. A
2002 study found that (1) 20 percent of the junior enlisted force in
the active component has financial problems; (2) these personnel have
substantially more financial problems than does the comparable civilian
population; and (3) financial problems are not related to family
income, which suggests that financial problems are shaped by spending
patterns and management skills rather than by the level of
income.[Footnote 46] According to this study, "unit leaders
consistently complained that much of their time was spent dealing
directly with financially overextended members. These problems had a
corrosive effect on the unit because they affected work performance
through added stress on members as well as through absences to deal
with creditors or get credit counseling." A 2000 Navy study found that
57 percent of Navy leaders cited financial concerns as the main
servicemember issue with which they dealt most often.[Footnote 47]
Further, in response to a House Committee on Armed Services requirement
in the Fiscal Year 2002 National Defense Authorization Act, the Navy
identified $250 million in productivity and salary losses due to poor
personal financial management.
In 2002, as part of its human capital strategic plan, DOD identified a
need to improve the financial literacy and responsibility of
servicemembers, including reservists.[Footnote 48] The plan states that
mission readiness and quality of life are dependent upon
servicemembers' using their financial resources responsibly and that
the military services must make a commitment to educate servicemembers
and their families and encourage them to use good financial sense.
Financial literacy training and counseling is one of the pillars that
support financial well-being. However, DOD has not developed plans to
address these needs.
DOD is reviewing a draft uniform personal financial management policy.
Currently, DOD and service regulations address aspects of personal
financial management. The draft policy seeks to establish a uniform
approach to educating and training all servicemembers, including
reservists. Regarding the reserves specifically, the draft policy would
require the military departments to provide a financial planning
package and instructional information to reservists as part of their
mobilization training. In addition, the draft policy outlines metrics
to track financial well-being, such as the number of delinquent
government credit cards, the number of individuals who have had their
wages garnished, the self-reported financial condition of military
personnel and their families, and the number of administrative Uniform
Code of Military Justice actions taken against military personnel for
financial indebtedness and irresponsibility.
In addition to drafting a personal financial management policy, DOD has
taken steps to improve personal financial management programs. In May
2003, DOD formally launched a "financial readiness campaign" to address
servicemembers' poor financial habits and to increase financial
management awareness, savings, and protection against predatory
practices. It has also entered into a number of partnerships with
nonprofit organizations and government agencies that have agreed to
support counselors who offer financial assistance programs to
servicemembers. The services have also made improvements. For example,
the Navy has increased the number of mandatory hours of personal
financial management training and uses mobile financial management
teams to train financial specialists, including in geographically
remote regions where there are no financial educators to provide
training. The services also provide financial planning information on
their Web sites.
As shown in table 3, the 2000 DOD survey showed that an estimated 61
percent of drilling unit members did not know whether financial
counseling and management education services were available, and 16
percent did not think these services were available. DOD's 2002 spouse
survey showed that about 76 percent of spouses did not use the
military's financial information and counseling services, although it
is unclear why they did not. Although DOD has identified challenges in
the service personal financial management programs, it has not
developed plans to provide outreach to reservists and their spouses. A
DOD official from the Office of the Deputy Under Secretary of Defense
for Military Community and Family Policy said that little attention has
been placed on extending personal financial management programs to the
reserve population. In a 2002 report to Congress,[Footnote 49] DOD
stated, "The services should improve access to personal financial
management information by Reserve forces." The DOD report also stated
that most personal financial management training "does not adequately
provide support to spouses." The Army noted that "increasing spouse
participation is not easy and requires significant marketing and
leadership support." The Air Force and the Marine Corps specifically
identified the lack of spousal outreach as a gap in their programs. The
services also recognize a need to improve marketing of financial
management programs to reservists and their spouses. Two services--the
Army and the Air Force--cited lack of resources, including dedicated
personal financial management personnel, as a challenge to increasing
access to and awareness of personal financial management programs.
In addition, while DOD has assessed the financial well-being of the
active duty force, it has not conducted such assessments of reservists.
Our review of DOD survey data showed that reservists reported having
many of the same financial problems as their active duty
counterparts.[Footnote 50] For instance, about 20 percent of reservists
and 19 percent of active duty personnel characterized their family's
financial condition as "in over your head" or "tough to make ends meet
but keeping your head above water." However, a higher percentage of
reservists reported having such financial difficulties as bouncing
checks, receiving a letter of indebtedness, and falling behind in
paying rent or mortgage, than did their active duty counterparts. For
example, 12 percent of reservists fell behind in paying rent or
mortgage compared with 3 percent of active duty members. In addition,
while DOD has found a link between financial problems and readiness in
the active component, it has not assessed the impact of reservists'
financial problems on mission readiness.
DOD Has Not Fully Assessed the Need for Expansion of TRICARE to
Nonactivated Reservists:
Reservists' family members are eligible for TRICARE when reservists
have been activated for 31 days or more, and a number of recent
improvements have been made to reserve family health benefits. These
improvements include earlier access to certain benefits, expanded
options, higher reimbursement rates for nonnetwork physicians, and
efforts to improve outreach. Reserve families may choose to use TRICARE
when reservists are activated or remain under civilian health insurance
coverage. Our prior work showed that despite having access to TRICARE,
most reservists with civilian health insurance had opted to retain
their civilian health care coverage for their families during periods
of activation. To further expand reservists and their family members'
access to health care, Congress is considering legislation to offer
military health care coverage to reservists and their families when
members are not on active duty. However, DOD has not fully assessed the
need for or ramifications of this proposal. For example, DOD does not
know the impact this proposal would have on recruiting and retention,
the effects on active duty personnel, the extent reservists and their
families might participate in such a program, or the impact on the
TRICARE system. Cost estimates range up to $5.1 billion a year.
Improvements to Reserve Family Health Benefits:
When activated for a contingency operation, reservists and their family
members are eligible for health care benefits under TRICARE, DOD's
managed health care program. TRICARE offers beneficiaries three health
care options: Prime, Standard, and Extra. TRICARE Prime is similar to a
private HMO plan and does not require enrollment fees or copayments.
TRICARE Standard, a fee-for-service program, and TRICARE Extra, a
preferred provider option, require copayments and annual deductibles.
None of these three options require reservists to pay a premium.
Benefits under TRICARE are provided at more than 500 military treatment
facilities worldwide, through a network of TRICARE-authorized civilian
providers, or through nonnetwork physicians who will accept TRICARE
reimbursement rates.
Reservists who are activated for 30 days or less are entitled to
receive medical care for injuries and illnesses incurred while on duty.
In addition, Congress requires the Army to monitor the health status of
those designated as early-deploying reservists by providing annual
medical and dental screenings, selected dental treatment, and--for
those over age 40--physical examinations every 2 years. Those under age
40 are required to undergo a physical examination once every 5 years.
For its early-deploying reservists, the Army conducts and pays for
physical and dental examinations and selected dental treatment at
military treatment facilities or pays civilian physicians and dentists
to provide these services. Reservists who are placed on active duty
orders for 31 days or more are automatically enrolled in TRICARE Prime
and receive most care at a military treatment facility. Family members
of reservists who are activated for 31 days or more may obtain coverage
under TRICARE Prime, Standard, or Extra. Family members who participate
in Prime obtain care either at a military treatment facility or through
a network provider. Under Standard or Extra, beneficiaries may use
either a network provider or a nonnetwork physician who will accept
TRICARE rates. Upon release from active duty that extended for at least
30 days, reservists and their family members are entitled to continue
their TRICARE benefits for 60 days or 120 days, depending on the
reservists' cumulative active duty service time. Reservists and their
dependents may also elect to purchase extended health care coverage for
3 months at a time for a maximum of up to either 18 months or 3 years
under the Continued Health Care Benefit Program.
Legislation passed in December 2002 (P.L. 107-314, sec. 702) made
family members of reservists activated for more than 30 days eligible
for TRICARE Prime if they reside more than 50 miles, or an hour's
driving time, from a military treatment facility. In March 2003, DOD
altered TRICARE policy such that all family members of reservists
activated for 31 days or more are eligible for TRICARE Prime. In
conjunction with this change, DOD announced a change in the eligibility
of reserve families for TRICARE Prime Remote for Active Duty Family
Members.[Footnote 51] DOD stated that a legislative provision of the
program that required a family member to "reside with" the
servicemember would be interpreted as meaning that eligible family
members resided with the servicemember before the servicemember left
for their home station, mobilization site, or deployment location, and
the family members continue to reside there.
Under DOD authorities in the National Defense Authorization Acts for
2000 and 2001, DOD instituted several demonstration programs to provide
financial assistance to reservists and family members. For example, DOD
instituted the TRICARE Reserve Component Family Member Demonstration
Project for family members of reservists mobilized for Operations Noble
Eagle and Enduring Freedom to reduce TRICARE costs and assist
dependents of reservists in maintaining relationships with their
current health care providers. The demonstration project eliminates the
TRICARE deductible and the requirement that dependents obtain
statements saying that inpatient care is not available at a military
treatment facility before they can obtain nonemergency treatment from a
civilian hospital. In addition, DOD may pay a nonnetwork physician up
to 15 percent more than the current TRICARE rate.
About 40 percent of the problems reservists have reported relate to
understanding TRICARE's benefits and obtaining assistance when
questions or problems arose. Because these problems could be reduced
through improved education about TRICARE's benefits and better
assistance while navigating the TRICARE system, we recommended in
September 2002 that DOD ensure that reservists, as part of their
ongoing readiness training, receive information and training on health
care coverage available to them and their dependents when mobilized and
provide TRICARE assistance during mobilizations targeted to the needs
of reservists and their dependents.[Footnote 52] DOD has added
information for reservists to its TRICARE Web site and, in response to
our recommendation, has begun to implement a TRICARE reserve
communications plan aimed at outreach and education of reservists and
their families.
The TRICARE Web site is a robust source of information on DOD's health
care benefits. The Web site contains information on all TRICARE
programs, TRICARE eligibility requirements, briefing and brochure
information, location of military treatment facilities, toll free
assistance numbers, network provider locations and other general
network information, beneficiary assistance counselor information, and
enrollment information. There is also a section devoted specifically to
reservists, with information and answers to questions that reservists
are likely to have. Results from DOD's 2000 survey showed that about 9
of every 10 reservists had access to the Internet.
DOD has begun to implement a TRICARE communications plan to educate
reservists and their family members on available health care and dental
benefits. The plan identifies a number of tactics for improving how
health care information is delivered to reservists and their families.
Under the plan, materials are to be delivered through direct mailing
campaigns, fact sheets, brochures, working groups, and briefings. The
plan also identifies methods of measurement that will assist in
identifying the degree information is being requested and received. In
March 2003, OSD distributed educational materials for beneficiary
counseling assistance coordinators, reserve component staff, and
others. In May 2003, the TRICARE Management Activity established a
working group to improve reserve component communications.
Reservists' Families Have Health Care Choices and Challenges:
Most reservists who are not on active duty have civilian health
insurance through either their own or their spouse's employer.
Estimates from DOD's 2000 survey showed that nearly 80 percent of
reservists had health care coverage when they were not on active duty
and about 20 percent did not. According to DOD's 2002 survey, an
estimated 90 percent of spouses of activated reservists had private
health insurance prior to activation, and 4 percent had no insurance.
The other 6 percent had TRICARE coverage or some combination of TRICARE
and private health insurance. While DOD requires activated reservists
to use TRICARE for their own health care, using TRICARE is an option
for their dependents. During mobilization, some reservists may choose
to save the cost of premiums by dropping civilian insurance for their
dependents and relying on TRICARE, which has no associated premium.
However, doing so means that dependents must learn the benefits and
requirements of a new health plan. It also means they may be unable to
use the same civilian providers if these providers do not participate
in TRICARE networks or accept TRICARE patients. Reservists' decisions
regarding health care coverage for their dependents are affected by a
variety of factors--whether they or their spouses have civilian health
coverage, the amount of support civilian employers are willing to
provide with health care premiums, and where they and their dependents
live.
Despite the availability of DOD health care benefits with no associated
premium, our prior work has shown that many reserve family members
elect to maintain their civilian health care insurance during
mobilizations.[Footnote 53] According to estimates from DOD's 2000
survey, about 90 percent of reservists with civilian health care
coverage maintained it during their mobilization. Reservists we
interviewed often told us that they maintained this coverage to better
ensure continuity of health benefits and care for their dependents. The
Uniformed Services Employment and Reemployment Rights Act does not
require employers to continue paying their share of health care
premiums when mobilizations extend beyond 30 days. However, employers
continued to pay at least their portion of health insurance premiums
beyond this 30-day period for about 80 percent of the reservists we
contacted who maintained their employer-sponsored coverage. DOD's 2002
survey of spouses of activated reservists indicated that only a small
percentage of reserve families had to pick up the entire premium in
order to retain the member's civilian health care coverage during
activation. Specifically, the survey estimated that:
* 35 percent of families paid the employee share of the premium,
* 29 percent paid no additional costs because the member's employer
paid the full health care premium,
* 18 percent paid no additional costs because the family was covered
under the spouse's health care plan, and:
* 8 percent paid the full health care premium.[Footnote 54]
Our surveys of reservists' civilian employers also show that a high
percentage of employers provide assistance with continued health care
benefits for their activated reservists. Of the 183 employers of
reservists in high tempo units who completed and returned our survey on
employer support, 121 employers provided information on their health
benefit policies. Of these 121 employers, 105 (88 percent) reported
that they paid the full heath care premium or the employer share of the
health care premium during the activation period. Of the 22 states we
surveyed about pay and benefit policies for their activated reserve
employees, 13 (59 percent) reported that they paid the full health care
premium or the employer share of the health care premium. Most of these
states provided these benefits during the entire activation period.
In our prior work, we found that many reservists who did drop their
civilian insurance and whose dependents did use TRICARE reported
difficulties moving into and out of the system, finding a TRICARE
provider, establishing eligibility, understanding TRICARE benefits,
and knowing where to go for assistance when questions and problems
arose. While reserve and active component beneficiaries report similar
difficulties using the TRICARE system, these difficulties are magnified
for reservists and their dependents. For example, 75 percent of
reservists live more than 50 miles from military treatment facilities,
compared with 5 percent of active component families. As a result,
access to care at military treatment facilities becomes more
challenging for dependents of reservists than their active component
counterparts.
Reservists may also transition into and out of TRICARE several times
throughout a career. These transitions create additional challenges in
ensuring continuity of care, reestablishing eligibility in TRICARE, and
familiarizing or refamiliarizing themselves with the TRICARE system.
Reservists are also not part of the day-to-day military culture and,
according to DOD officials, generally have less incentive to become
familiar with TRICARE because it becomes important to them and their
families only if they are mobilized. Furthermore, when reservists are
first mobilized, they must accomplish many tasks in a compressed
period.[Footnote 55] For example, they must prepare for an extended
absence from home, make arrangements to be away from their civilian
employment, obtain military examinations, and ensure their families are
properly registered in the Defense Enrollment Eligibility Reporting
System (DOD's database system maintaining benefit eligibility status).
It is not surprising that many reservists, when placed under condensed
time frames and high stress conditions, experience difficulties when
transitioning to TRICARE.
DOD Has Not Assessed the Need for or Ramifications of Expanding TRICARE
to Reservists Not on Active Duty and Paying Health Insurance Premiums
of Activated Reservists:
To further expand reservists and their family members' access to health
care, Congress is considering legislation to offer TRICARE to
reservists when they are not on active duty.[Footnote 56] The
legislation would entitle members of the Selected Reserve and certain
members of the Individual Ready Reserve[Footnote 57] and their
dependents to the same TRICARE benefits as a member of the uniformed
services on active duty or a dependent of such a member. An enlisted
reservist enrolled in the TRICARE program would pay an annual premium
of $330 for self only coverage and $560 for self and family coverage,
while a reserve officer would pay an annual premium of $380 for self
only coverage and $610 for self and family coverage. (Military
personnel on active duty and family members of personnel on active duty
do not pay a premium for TRICARE coverage.) The legislation also would
require DOD to pay premium costs incurred by reservists who choose to
continue their civilian health care insurance coverage when activated.
DOD would cover the civilian insurance costs up to the total cost of
the reservist's premium and would be required to pay an amount equal to
TRICARE's average cost of providing TRICARE for self and family
coverage. Proponents have stated that the legislation (1) would
recognize an expansion of reserve roles and missions in recent years
and an increased demand placed on reservists and their families, (2)
would assist DOD in recruiting and retaining reservists, and (3) would
help reservists who opt to join TRICARE maintain continuity of their
health care coverage.
We have a number of concerns with the proposal to extend TRICARE
coverage to reservists not on active duty and their family members and
to require DOD to pay premium costs incurred by reservists who choose
to continue their civilian health care insurance coverage when
activated. First, while there has been an expansion of reserve
participation in military operations, with a dramatic increase in
mobilizations to support operations in Iraq, many reservists have
deployed only once or not at all. According to the results of DOD's
2000 survey, only 25 percent of reservists reported in 2000 that they
had been mobilized or deployed. Of those mobilized or deployed at least
once, nearly 70 percent had participated in only one operation. Since
September 2001, DOD has called 300,000 reservists to active duty,
representing one-fourth of the 1.2 million reservists eligible for
call-up. Second, DOD officials we spoke with about the proposed
legislation noted that DOD currently has not identified an overall
recruiting and retention problem in the reserves and that it was too
early to project the potential for future recruiting and retention
problems that might result from the ongoing mobilization. They also
could not tell us what effect the proposed legislation would have on
the military's ability to recruit and retain reservists. Third, as
noted previously, most reservists activated prior to 2001 achieved
continuity of care for their families by retaining civilian health
insurance during activation. However, DOD officials said that little is
known about reservists' behavior patterns of health care usage during
mobilizations since September 2001 and that it is difficult to project
their behavior if the current proposal were approved. According to a
DOD official, it is unknown whether younger members of the reserve
force would purchase TRICARE health care coverage even at reduced
rates. In addition, a high percentage of reservists' civilian employers
who currently pay some or all of health care premiums for reservists
during activations could discontinue providing such assistance if DOD
makes this coverage available to reservists year-round.
Other concerns with the proposed legislation have also been raised. DOD
officials said that creating greater uniformity of benefits between
active and reserve forces could have unanticipated effects on the
active component if active component members are enticed into leaving
the active component and joining the reserves. The OSD Health Affairs
Policy Director also noted that DOD could have difficulties tracking
reservists' premium costs in order to pay these costs during activation
as required by the legislative proposal. Another concern is the stress
that could be placed upon the TRICARE system. Currently, TRICARE
provides care for 8.7 million beneficiaries--eligible active duty
personnel, retirees, and dependents. It is not clear to what extent
reservists and their eligible dependents would use TRICARE and the
impact this could have on the system. Beneficiary groups have described
problems with access to care from TRICARE civilian providers. In March
2003, we testified on DOD's oversight of the TRICARE civilian provider
network, noting the problems with assessing the network's adequacy due
to insufficient information.
In addition, controlling rising health care costs is a major concern of
DOD's. According to a 2003 Congressional Budget Office analysis of
long-term defense spending,[Footnote 58] spending for military medical
care, which already makes up more than 10 percent of DOD's operation
and support costs, is the fastest growing category of operation and
support spending. In this projection of the administration's plans,
annual medical spending rises by 67 percent over the 2007-2020 period,
from $33 billion to $55 billion. Many of the same forces that cause
national health expenditures to rise--an increase in the volume of
health care services available and expanded use of new, high-cost drugs
and procedures--translate into higher military medical costs. In
addition, retirees and their dependents now make up a larger share of
beneficiaries, increasing the average age and costs of the people who
receive health coverage through DOD. Two reasons military medical costs
are expected to rise dramatically over the next 5 years are (1) new
benefits for military retirees over age 65 (called TRICARE for Life),
which had an actuarial liability estimated at $592 billion as of
September 30, 2001, and (2) a switch to an accrual accounting system--
with DOD's budget being charged each year for the expected costs of
future benefits. DOD's fiscal year 2003 budget for the defense health
program was $14.8 billion.
The Congressional Budget Office estimated that implementing the
legislation--extending TRICARE coverage to reservists not on active
duty and their family members and requiring DOD to pay premium costs
incurred by reservists who choose to continue their civilian health
care insurance coverage when activated--would cost a total of $466
million in 2004 and $7.3 billion over 2004-2008.[Footnote 59]
* The Congressional Budget Office estimated that extending TRICARE
coverage to reservists who are not on active duty would cost $393
million in 2004 and $7.1 billion over 2004-2008. On the basis of DOD
data, the Congressional Budget Office estimated that the provision
would apply to 760,000 reservists after excluding 120,000 who work for
the federal government.[Footnote 60] It also estimated that about 70
percent of qualified reservists would opt to enroll in the TRICARE
program.
* The Congressional Budget Office estimated that requiring DOD to pay
premium costs for continued civilian health care coverage during
activation would cost $73 million in 2004 and $155 million over 2004-
2008. According to this estimate, the amount DOD would pay reservists
would cover about 60 percent of the average civilian premium.[Footnote
61]
DOD estimated that the cost of extending TRICARE coverage to reservists
who are not on active duty would be $5.1 billion per year. DOD's
estimate does not include the costs to pay the premiums of activated
reservists' civilian health care. DOD's estimate is significantly
higher than the Congressional Budget Office estimate due to certain
assumptions concerning the number of potential beneficiaries, the
proportion of potential beneficiaries that would opt to enroll in
TRICARE, and the per capita costs of providing care. DOD officials told
us that they used historical cost profile data to develop their cost
estimates. However, we did not independently verify either the DOD or
the Congressional Budget Office cost estimate. Noting the high cost of
this proposed legislation, the Secretary of Defense has expressed
opposition to this legislation, stating he will recommend that the
President veto the National Defense Authorization Act for Fiscal Year
2004 if a provision to expand TRICARE is included.
Conclusions:
DOD survey estimates showed income change varied considerably among
activated reservists, with a sizeable proportion of reservists
experiencing income loss, but more than half experiencing no change or
a gain in income. However, these data are questionable because it is
unclear what survey respondents considered as income loss or gain in
determining their financial status. For example, the number of
reservists reporting income loss could be lower if respondents did not
include the sum of their military pay--basic pay, special pays,
allowances, and indirect compensation, such as health care benefits.
Currently, DOD cannot determine the need for compensation programs to
provide income protection to reservists because it lacks sufficient
information on the scope and nature of income change experienced by
activated reservists. More specifically, DOD lacks sufficient data on
the magnitude of income change, the causes of income change, and the
effects of income change on reservists' retention decisions. Survey
results showed that a higher percentage of reservists in certain
groups, such as self-employed reservists and health care professionals,
experienced greater income loss compared with reservists overall and
that, for some, income loss or the potential for income loss is a
significant factor in their decisions on whether to stay in the
reserves. A number of approaches to providing income protection have
been proposed, including an income insurance program, differential pay
for activated federal employee reservists, and special pay for certain
reserve physicians. Of these three, only the last is targeted at
reservists who (1) fill critical wartime specialties, (2) experience
high degrees of income loss when on active duty, and (3) demonstrate
that income loss is a significant factor in their retention decisions.
This is the kind of business case approach that we think is necessary
to determine the need for income protection compensation programs.
In the area of family support, DOD and the military services have taken
steps to improve personal financial management programs. They have also
identified challenges such as increasing reservists' and spouses'
awareness of and access to personal financial management programs.
However, they have not developed specific plans to address these
identified needs. Further, while DOD has assessed the financial well-
being of active duty members and linked financial well-being with
mission readiness, it has not conducted similar assessments of the
reserve force. Our review of DOD survey data showed that reservists
reported having many of the same financial problems as their active
duty counterparts. For instance, a higher percentage of reservists
reported having such financial difficulties as bouncing checks and
receiving a letter of indebtedness than have their active duty
counterparts. Conducting these assessments would provide a better
understanding of financial difficulties reservists encounter and the
impact these difficulties have on mission readiness.
Recent improvements have been made to reservists and their families'
access to TRICARE when the member is activated. In past military
operations, most activated reservists retained civilian health care
insurance coverage for their families during the activation period. To
further expand access to health care benefits, legislation has been
proposed that would provide TRICARE benefits to reservists and their
family members when they are not on active duty. Furthermore, the
legislation would require DOD to pay premium costs incurred by
reservists who choose to continue civilian health care insurance
coverage when activated. While proponents have cited a number of
reasons for this legislation, concerns have also been raised. We
believe these concerns may outweigh the perceived benefits and costs of
the legislation. Currently, DOD lacks sufficient information to
determine the need for the expanded health care benefits offered in the
legislation and the implications of the proposal for reservists, active
duty members, and the military health care system. DOD officials
further stated that currently no problem has been demonstrated in
overall reserve recruiting and retention. DOD has not yet identified
problems reservists and their families have experienced with access to
health care during mobilizations since September 11, 2001, such as
problems in maintaining continuity of health care; the causes of these
problems; and their effects on readiness, recruiting, and retention.
Recommendations for Executive Action:
We recommend that the Secretary of Defense direct the Under Secretary
of Defense for Personnel and Readiness to determine the need for
compensation programs aimed at addressing reservists' income loss
during periods of active duty by obtaining more complete information on
the magnitude of income change, the causes of income change, and the
effects of income change on reserve retention. At a minimum, these
efforts should be designed to identify reservists who (1) fill critical
wartime specialties, (2) experience high degrees of income loss when on
active duty, and (3) demonstrate that income loss is a significant
factor in their retention decisions. We further recommend that, on the
basis of this information, the Secretary of Defense develop targeted
compensation programs, as appropriate, to retain these reservists in
the armed forces.
We recommend that the Secretary of Defense direct the Secretaries of
the Army, the Air Force, and the Navy and the Commandant of the Marine
Corps to develop specific plans for improving reservists' and their
spouses' awareness of and access to personal financial management
programs. In developing these plans, the military services, in
conjunction with the Under Secretary of Defense for Personnel and
Readiness, should assess the financial well-being of reservists and
determine whether reservists' financial problems affect mission
readiness.
We recommend that the Secretary of Defense direct the Under Secretary
of Defense for Personnel and Readiness to assess problems reservists
have experienced since the mobilizations following the events of
September 11, 2001, in maintaining continuity of health care; the
causes of these problems; and their effects on readiness, recruiting,
and retention. As part of this assessment, DOD should evaluate the
ramifications of extending TRICARE coverage to reservists not on active
duty and their family members as well as paying premium costs incurred
by reservists who choose to continue their civilian health care
insurance coverage when activated. DOD should also evaluate the
potential impact of extending such coverage on the retention of active
duty personnel and on the TRICARE system.
Matters for Congressional Consideration:
In order to provide DOD an opportunity to determine the need for and
ramifications of expanding TRICARE, Congress may wish to delay a
decision on the legislative proposal to offer TRICARE to reservists and
their families when members are not on active duty. Furthermore,
Congress may wish to direct the Secretary of Defense to assess and
report on reserve health care benefits as we have recommended in this
report.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, DOD concurred with our
recommendations. Regarding our recommendation that DOD develop targeted
compensation programs to retain reservists in the armed forces, DOD
stated that the department must exercise concern about paying its part-
time force more than its full-time force when undertaking similar
duties. As discussed in our report, we agree that equity between active
component and reserve component personnel is one factor that must be
considered in compensation programs that address income loss.
Nevertheless, we believe that DOD could target such compensation
programs appropriately by gathering more complete information on
reservists' income loss and applying the three criteria included in our
recommendation.
On the basis of DOD's concurrence with our recommendation concerning
reserve health care benefits, we have added matters for congressional
consideration concerning the legislative proposal to extend TRICARE
benefits to nonactivated reservists and their families. We believe the
proposed expansion of TRICARE deserves scrutiny due to its high costs,
the current lack of information on the need for this expansion of
TRICARE, and its potential ramifications. An assessment of this
proposed expansion of TRICARE is likely to be a complex and time-
consuming undertaking.
DOD's comments are reprinted in appendix VI.
We are sending copies of this report to the Secretary of Defense, the
Under Secretary of Defense for Personnel and Readiness; the Secretaries
of the Army, the Air Force, and the Navy; and the Commandant of the
Marine Corps. We will also make copies available to appropriate
congressional committees and to other interested parties on request. In
addition, the report will be available at no charge at the GAO Web site
at http://www.gao.gov.
If you or your staff have any questions concerning this report, please
call me at (202) 512-5559. Major contributors to this report are listed
in appendix VII.
Derek B. Stewart
Director, Defense Capabilities and Management:
Signed by Derek B. Stewart:
[End of section]
Appendix I: Scope and Methodology:
To evaluate information on income change reported by reservists when
activated for a military operation, we obtained and analyzed the
results of the Department of Defense's (DOD) 2000 Reserve Component
Survey and 2002 Survey of Spouses of Activated National Guard and
Reserve Component Members. We stratified the results of these surveys
by pay grade group, reserve component, and for certain other groups
such as type of employers. Further, we discussed the extent of income
change with officials from the following offices or commands:
* Office of the Assistant Secretary of Defense for Reserve
Affairs.[Footnote 62]
* Office of the Deputy Under Secretary of Defense for Military
Personnel Policy, Office of Military Compensation.
* National Guard Bureau.
* National Committee for Employer Support of the Guard and Reserve.
* Service Reserve Forces Policy Committees.
* Office of the Assistant Secretary of the Army for Manpower and
Reserve Affairs.
* U.S. Army Reserve Command, Fort McPherson, Georgia.
* Office of the Chief of Army Reserve.
* U.S. Army National Guard.
* U.S. Air Force Reserve.
* U.S. Air National Guard.
* U.S. Naval Reserve.
* U.S. Marine Corps Reserve, Quantico, Virginia.
We reviewed relevant reports from the DOD Office of the Inspector
General and the U.S. Army Audit Agency and our prior GAO reports and
testimony. We discussed with an official from the Congressional Budget
Office the estimated cost of a pay differential for federal employees
who are called to active duty. We did not verify the methodology used
to calculate this estimate. We analyzed current compensation and
benefits policies for activated federal employees from the Office of
Personnel Management. Further, we surveyed officials from 22 states
between May and July 2003 and obtained their compensation and benefits
policies to gain the perspective of state governments' financial
assistance and benefits for state employee reservists called to federal
active duty. To determine the 22 states, we chose the 11 states with
the highest total population of reservists in the state, the 5 states
with the smallest total reservist population, and 6 states in the
middle. We obtained a standard set of information regarding each
state's policy. We also updated information on employer compensation
policies from our June 2002 report on employer support of the National
Guard and the Reserve.[Footnote 63] We had surveyed 359 employers of
reservists in high tempo units between November 2001 and March 2002.
Due to concerns about mail contaminated with anthrax, not all completed
surveys were obtained before issuance of the employer support report.
We updated the data with an additional 72 surveys for a total of 183
completed surveys. Employers were not randomly selected; therefore, the
results are not projectable to all employers. We also reviewed data
from the Defense Manpower Data Center regarding Army Reserve Medical
Corps authorized and actual fill rates for critical medical specialties
and gains and losses from the Army Selected Reserve and the Army
Individual Ready Reserve from 1991 to 2002 to review an Army proposal
for special deployment pay. We reviewed DOD surveys on Army Reserve
physicians' experiences during mobilizations, on a rotation program to
address earlier concerns about the length of deployments, and on
associated catastrophic income loss. We also contacted military aid
associations, including the Army Emergency Relief, the Navy-Marine
Corps Relief Society, and the Air Force Aid Society, to obtain and
review information on emergency loans and financial assistance provided
to activated reservists on active duty.
To evaluate reserve families' readiness and awareness and use of family
support programs, we reviewed DOD family policy regulations. We also
reviewed DOD Web sites and other materials designed to inform
servicemembers and their families about benefits. To obtain further
insight into reservists' awareness and access to family support
programs, we reviewed service personal financial management regulations
and policies to determine the extent to which these programs are
extended to reservists and their family members. To evaluate the
financial well-being of reservists, we reviewed RAND and other DOD
studies. We also compared the results of the 2000 DOD survey with the
1999 DOD Survey of Active Duty Personnel. Specifically, we met with and
obtained information from DOD officials from the Office of the
Assistant Secretary of Defense for Reserve Affairs, the Office of the
Deputy Under Secretary of Defense for Military Community and Family
Policy, the military services, and reserve components. We also met with
representatives from the National Military Family Association and the
JumpStart Coalition for Financial Literacy to discuss challenges
reservists face when called to active duty.
To evaluate a legislative proposal for DOD to offer TRICARE to
reservists and their families when members are not on active duty, we
reviewed relevant GAO reports. We discussed health care benefits and
eligibility criteria for reservists and their family members and recent
improvements to military health care with DOD health care officials. We
obtained cost estimates of the legislative proposal from the
Congressional Budget Office and DOD, but we did not verify the
methodology used to calculate the estimates. During our survey of
officials from 22 states, we obtained their respective health care
benefits policies to gain the perspective of state governments' health
benefits for state employee reservists called to federal active duty.
We met with and obtained information from DOD officials within the
Office of the Assistant Secretary of Defense for Reserve Affairs,
Office of the Assistant Secretary of Defense for Health Affairs, and
the TRICARE Management Activity.
We completed our work for this report from March to July 2003 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: DOD Surveys of Reservists and Spouses:
This appendix describes DOD's 2000 survey of reserve personnel and 2002
survey of spouses of activated reserve personnel. We did not
participate in the design or collection of the results.
2000 Survey of Reserve Component Personnel:
The 2000 Survey of Reserve Component Personnel is a survey of Selected
Reserve members of the reserve components sponsored by the Office of
the Assistant Secretary of Defense for Reserve Affairs. The study
population consisted of 728,347 members below flag or general officer
rank and having at least 6 months of reserve duty service as of August
2000. The sample consisted of 74,487 members, and eligible respondents
returned 35,223 questionnaires for a response rate of 47 percent. DOD
officials believe that the response rate for the survey is as good as
other similar surveys that they have conducted. However, there is a
potential for bias in the estimates to the extent that respondents and
nonrespondents had different opinions on the questions asked. Data were
weighted by the Defense Manpower Data Center to allow the study to
provide estimates for the study population or subpopulations. This was
a mail-out survey, with the data collection period running from August
16, 2000, through December 29, 2000.
Because this is a probability sample based on random selections, the
sample is only one of a large number of samples that might have been
drawn. Since each sample could have provided different estimates,
confidence in the precision of the particular sample's results is
expressed as a 95 percent confidence interval (e.g., plus or minus 4
percentage points). This is the interval that would contain the actual
population value for 95 percent of the samples that could have been
drawn. As a result, we are 95 percent confident that each of the
confidence intervals in this report will include the true values in the
study population. All percentage estimates from the survey review have
sampling errors of plus or minus 5 percentage points or less, unless
otherwise noted. We used the weighting factors and the sampling error
methodology provided by the Defense Manpower Data Center to develop
2000 estimates and sampling error estimates. In some cases, we used the
estimates developed by the Defense Manpower Data Center.
2002 Survey of Spouses of Activated National Guard and Reserve
Component Members:
The 2002 survey of spouses was sponsored by the Office of the Assistant
Secretary of Defense for Reserve Affairs to assess the needs and
concerns of National Guard and Reserve families prior to and during
activation, to assess the status of family support initiatives, and to
gather data from spouses of members who have been activated since
September 11, 2001. The study population for this survey consisted of
29,673 spouses of reservists activated for Operations Noble Eagle,
Enduring Freedom, Bosnia, Southwest Asia, or Southern Watch. The survey
was a stratified random sample consisting of 7,658 spouses. Eligible
respondents returned 3,874 completed surveys for a response rate of 51
percent. DOD officials believe that the response rate for the survey is
as good as other similar surveys that they have conducted. However,
there is a potential for bias in the estimates to the extent that
respondents and nonrespondents had different opinions on the questions
asked.
As with the 2000 survey, the 2002 spouse survey is also a probability
sample based on random selections, so the sample is only one of a large
number of samples that might have been drawn. For this survey, we
express confidence in the precision of our estimates as a 95 percent
confidence interval. All percentage estimates from the 2002 survey have
sampling errors of plus or minus 5 percentage points or less, unless
otherwise noted. To produce estimates of the study population, the
sample data were weighted to reflect the sample design and to adjust
for nonresponse. Because weighting factors were not provided to us for
use with the data, we computed weighting factors as the ratio of the
population to respondents for each stratum.
[End of section]
Appendix III: Policies and Protections That May Help Mitigate
Reservists' Financial Hardship During Activation:
This appendix discusses existing pay policies and protections, as well
as emergency aid services, that may help mitigate reservists' financial
hardship during activation.
While basic military compensation, in constant dollars, remained fairly
steady during most of the 1990s, it has increased in recent
years.[Footnote 64] As a result, reservists activated today are earning
more in the military than they did just a few years ago. (See fig. 2.)
For example, an enlisted member in pay grade E-4 who is married with no
other dependents would earn $3,156 per month in basic military
compensation in fiscal year 2003, compared with $2,656 per month in
fiscal year 1999, or a 19 percent increase. These figures are
calculated in constant 2003 dollars to account for the effects of
inflation.
Figure 2: Annual Basic Military Compensation for Selected Pay Grades
(Fiscal Years 1990-2003):
[See PDF for image]
Note: GAO analysis.
[End of figure]
In addition to increases in basic military compensation, Congress in
April 2003 increased family separation allowance from $100 to $250 per
month and imminent danger pay from $150 to $225 per month. These
increases expire September 30, 2003.[Footnote 65] The Senate and House
are also considering a new special pay of up to $1,000 per month that
would compensate servicemembers for frequent or lengthy
deployments.[Footnote 66]
In addition to these increases in pay, other pay policies and
protections may help to mitigate reservists' financial hardship during
deployment. For example:
* The Soldiers' and Sailors' Civil Relief Act caps debt interest rates
at 6 percent annually for debts incurred prior to activation and
provides many other financial protections if members can show that
their ability to pay is materially affected by being activated.
Legislation currently before Congress would amend the act to expand
certain protections for activated servicemembers.[Footnote 67]
* Income that servicemembers earn while mobilized in combat zones is
tax-free. The President designates combat zones. Military pay received
while in these combat zones is excluded from gross income and not
subject to federal income tax. Legislation currently before Congress
would expand combat zone tax exemptions to any designated contingency
operation.[Footnote 68]
* For Iraqi Freedom, Noble Eagle, and Enduring Freedom, DOD has
authorized reservists to receive both a housing allowance and per diem
for their entire period of activation, up to 2 years.
* Military Reservist Economic Injury Disaster Loans up to $1.5 million
are available through the Small Business Administration to help small
businesses meet necessary operating expenses and debt payments until a
key employee--including the owner--is able to return from active duty
to the business and normal operations resume.
Servicemembers who are experiencing financial hardship can also obtain
emergency assistance in the form of interest-free loans or grants from
private aid organizations to pay for basic living expenses such as food
or rent during activation. The Army Emergency Relief, the Air Force Aid
Society, and the Navy-Marine Corps Relief Society are nonprofit
charitable organizations that provide financial, educational, and other
assistance to servicemembers and their families who are in need. These
organizations provide assistance to active component members,
reservists, and retirees.
* In 2002, the Navy-Marine Corps Relief Society distributed
approximately $41 million to almost 51,000 individuals, including $1.5
million provided due to inadequate income to meet basic living expenses
such as rent or mortgage, food, and utilities. The Navy-Marine Corps
Relief Society did not track separately the assistance it provided to
reservists.
* The Air Force Aid Society distributed over $24 million in 2002 to
more than 34,000 individuals. Of this amount, $600,000 was provided to
reservists. The Aid Society reported significant increases in
reservists' receiving emergency assistance and phone card use. About
140 reservists received emergency assistance for basic living expenses
because they experienced loss of civilian pay or military pay problems.
* Army Emergency Relief distributed $41 million in 2002 to more than
56,000 people. At least $850,000 went to about 900 reservists for
emergency travel assistance, vehicle repairs, rent or mortgage
assistance, and as an income supplement while waiting for delayed
military pay when called to active duty.
[End of section]
Appendix IV: Selected States' Policies on Compensation for Activated
Employees:
This appendix displays the results of our survey of 22 states to obtain
their policies regarding pay and benefits offered to state employees
who are called to federal active duty. It describes the military leave
policies and financial assistance programs such as state pay
differentials for activated state employees who experience income loss
as a result of federal activation. It also describes each state's
policy on the continuation of dependent health care coverage and other
reported benefits. To determine the 22 states, we chose the 11 states
with the highest total population of reservists in the state, the 5
states with the smallest total reservist population, and 6 states in
the middle. We conducted our survey of the 22 states between April and
July 2003.
In summary, we found that 19 of the 22 states surveyed offer pay
differentials to employees who are on military leave without pay and
can document a loss of income. Of these 19 states, 16 are mandated
under state law or executive order to provide financial assistance,
while 3 states--Colorado, Georgia, and Texas--allow the individual
state agencies to offer pay differentials at the agencies' discretion.
The other three states do not offer pay differentials to activated
employees on unpaid leave. The manner in which states calculate the
amount of the pay differential varies. For example, 7 states calculate
the amount of the pay differential as the difference between an
employee's civilian salary and basic military pay, not including
military special pays and allowances. In contrast, 10 states include
military special pays, allowances, or both in the calculation, which
can lower the differential amount that the state pays to its activated
employees. Georgia allows state agencies to formulate their own
differential calculation, while Pennsylvania offers a flat rate monthly
stipend to all activated employees. States offering financial
assistance do so for a period of time ranging from 90 days in Colorado
to the duration of the activation in states like Florida and Alabama.
We did not find a correlation between the size of a state's reservist
population and the type or extent of financial assistance the state
offers. The results of our survey are presented in table 4.
Table 4: Income Assistance, Military Leave, and Health Benefits Offered
to State Employees Called to Federal Active Duty:
State (Reserve population)[A]: Alabama (22,255); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: Alabama began implementing a
pay differential policy for activated state employees in July 2002. It
is active for the duration of the war on terrorism and retroactive to
September 11, 2001. The state offers 21 working days of paid military
leave each year, after which activated employees are placed on military
leave without pay. Employees activated for 30 or more consecutive days
and who are on military leave without pay are eligible to receive a pay
differential if their state pay exceeds their base military pay,
excluding all special pays and allowances. Employees must submit a
military Leave and Earnings Statement each month to receive the
differential. Activated employees receive the differential for the
duration of their activation; Status of dependent health care coverage
for state employees on federal active duty: The state continues to
contribute its portion of an employee's dependent health care premium
for the duration of the activation; Status of other reported state
benefits for employees on federal active duty[B]: Employees in the
state's retirement system continue to receive retirement credit while
on military leave without pay, unless they receive credit for the time
in another public retirement system, other than the federal social
security system. Employees who used accrued leave while on active duty
for the war on terrorism are eligible to reclaim the expended leave.
Activated state employees do not continue to accrue leave while on
leave without pay.
State (Reserve population)[A]: Alaska (3,650); Income assistance
offered to activated state employees on military leave without pay: Not
available; Military leave and compensation policy for state employees
on federal active duty: Alaska offers its employees 16.5 working days
of paid military leave each year for reserve training, but it does not
offer paid military leave for active duty; Status of dependent health
care coverage for state employees on federal active duty: The state
suspends its employees' dependent health coverage when they are called
to active military duty. Activated employees may continue their
dependent health care coverage under the Consolidated Omnibus Budget
Reconciliation Act (COBRA) in which they must pay the full premium plus
a 2 percent administrative fee; Status of other reported state
benefits for employees on federal active duty[B]: Employees in the
state's retirement system continue to receive retirement credit while
on active military duty.
State (Reserve population)[A]: Arizona (11,041); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: Arizona enacted a pay
differential policy for activated state employees in May 2002. The
policy is retroactive to September 11, 2001, and expires on June 30,
2004. The state offers 60 working days of paid military leave for every
2 consecutive years that a reservist is employed by the state.
Employees who are on military leave without pay and have exhausted all
annual and military leave balances are eligible to receive a pay
differential if their state pay, including all other compensation
except overtime, exceeds the sum of their base military pay, special
pays, and allowances. Employees must submit each military Leave and
Earnings Statement received during the period of active duty to receive
the pay differential. During any consecutive 5-year period, activated
employees may receive a pay differential one time for up to 270 days;
Status of dependent health care coverage for state employees on federal
active duty: Employees on military leave without pay may continue to
participate in the health benefit plan for a maximum of 6 months by
paying both the state and employee contributions. After 6 months, they
are eligible for COBRA; Status of other reported state benefits for
employees on federal active duty[B]: Upon return from active duty, the
employing agency pays the employee's and employer's share of retirement
contributions accrued during the period of active duty.
State (Reserve population)[A]: Arkansas (12,446); Income assistance
offered to activated state employees on military leave without pay: Not
available; Military leave and compensation policy for state employees
on federal active duty: Arkansas offers its employees called to duty in
emergency situations 30 days of paid military leave, after which
activated employees go on military leave without pay; Status of
dependent health care coverage for state employees on federal active
duty: The state continues to contribute a portion of an employee's
dependent health care premium for the duration of an employee's
activation; Status of other reported state benefits for employees on
federal active duty[B]: The state continues to contribute its portion
to any life or disability insurance policies. State employees continue
to accumulate retirement credit while on active duty.
State (Reserve population)[A]: California (57,441); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: California enacted a pay
differential policy for activated state employees in February 2002. The
policy is active for the war on terrorism and is retroactive to
September 11, 2001. It expires December 31, 2003. The state offers 30
days of paid military leave each year, after which activated employees
are placed on military leave without pay. Employees are eligible to
receive a pay differential if their state pay exceeds the sum of their
base military pay, special pays, and allowances. Employees must prepare
a worksheet to receive the pay differential and must provide a copy of
their military Leave and Earnings Statement and military orders to
their supervisor. Employees are eligible to receive the pay
differential until the policy expires in December 2003; Status of
dependent health care coverage for state employees on federal active
duty: While on military leave during war or national emergency,
employees continue to receive state paid health, dental, and vision
care benefits for the duration of the activation or until the policy
expires in December 2003; Status of other reported state benefits for
employees on federal active duty[B]: State employees continue to accrue
retirement credits while on military leave without pay. They also
continue to accrue annual leave, vacation, and sick leave for up to 6
months.
State (Reserve population)[A]: Colorado (13,524); Income assistance
offered to activated state employees on military leave without pay: Pay
differential at agency discretion; Military leave and compensation
policy for state employees on federal active duty: Colorado enacted a
pay differential policy for activated state employees in December 2001.
The policy is retroactive to September 11, 2001, and is active for
military operations designated in the war against terrorism. The policy
authorizes state agencies to provide a pay differential to their
employees at the agencies' discretion. The state offers 15 working days
of paid military leave each year. Following the 15 days of paid leave,
agencies may grant their employees administrative leave, during which
they receive a pay differential if their state pay exceeds the sum of
their base military pay, special pays, and allowances. Employees may
receive administrative leave for up to 90 days. According to a state
official, all Colorado state agencies were offering a pay differential
to their employees as of June 12, 2003. Employees must furnish proof of
their military pay, such as a military Leave and Earnings Statement, to
receive the pay differential; Status of dependent health care coverage
for state employees on federal active duty: The state continues to
contribute the employer portion of an employee's dependent health care
coverage as long as the employee is in a pay status. An employee may
remain in a pay status by using at least 1 day of annual leave each
month while on military leave. Otherwise, an employee can continue
group health insurance benefits by paying the entire premium amount;
Status of other reported state benefits for employees on federal active
duty[B]: The state does not offer any additional benefits while state
employees are on military leave without pay.
State (Reserve population)[A]: Florida (30,477); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: Florida enacted a pay
differential policy for activated state employees in September 2001.
The policy applies to state employees called to active duty for the war
on terrorism. The state offers 30 days of paid military leave per year.
After the first 30 days, employees are eligible for a pay differential
if their state pay exceeds their base military pay, excluding special
pays and allowances. Employees must provide copies of their military
Leave and Earnings Statements to their supervisors to receive the pay
differential. Employees receive the pay differential for the duration
of their activation; Status of dependent health care coverage for
state employees on federal active duty: The state continues to provide
all health insurance and to contribute its portion of an employee's
dependent health care premium for the duration of the activation;
Status of other reported state benefits for employees on federal active
duty[B]: Employees may choose to continue all other benefit programs by
paying their portion of the premiums for the duration of the
activation. Employees on military leave receive full retirement credit
for their period of military service upon their return to employment.
They also accrue full annual and sick leave and holiday pay.
State (Reserve population)[A]: Georgia (25,123); Income assistance
offered to activated state employees on military leave without pay: Pay
differential at agency discretion; Military leave and compensation
policy for state employees on federal active duty: Georgia authorized
state agencies to offer a pay differential to their activated state
employees at the agencies' discretion in July 2002. The state offers 18
working days of paid military leave each year, after which employees
are placed on military leave without pay. State agencies have the
discretion to offer a pay differential and independently determine the
calculation of the pay differential. A pay differential is the
difference between state government and military salaries; Status of
dependent health care coverage for state employees on federal active
duty: The state continues to contribute its portion of an employee's
dependent health care premium for up to 18 months if the employee was
activated on an emergency basis. After 18 months, employees may retain
health insurance for their family by paying 102 percent of the premium
as specified under the COBRA provisions; Status of other reported
state benefits for employees on federal active duty[B]: The state
suspends retirement benefits while the employees are on military leave
without pay. The activated employees have the option of paying their
premiums retroactively upon return from active duty to reclaim lost
credits. They do not accrue any kind of leave while on leave without
pay.
State (Reserve population)[A]: Illinois (24,382); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: Illinois enacted a pay
differential policy for activated state employees in February 2003.
While on military leave, activated employees are eligible for a pay
differential if their state pay exceeds their base military pay,
excluding special pays and allowances. Employees must submit a copy of
their military Leave and Earnings Statement to their employing agency
to receive the pay differential. Employees receive the pay differential
for the duration of their activation; Status of dependent health care
coverage for state employees on federal active duty: The state
continues to contribute its portion of an employee's dependent health
care premium for the duration of the activation; Status of other
reported state benefits for employees on federal active duty[B]: The
state continues to pay an employee's full retirement coverage while on
military leave without pay. Employees also continue to accrue vacation
and sick leave.
State (Reserve population)[A]: Iowa (12,593); Income assistance offered
to activated state employees on military leave without pay: Not
available; Military leave and compensation policy for state employees
on federal active duty: The state offers its employees 30 days of paid
military leave each year, after which activated employees go on
military leave without pay; Status of dependent health care coverage
for state employees on federal active duty: The state suspends its
contributions for dependent health care coverage for employees on
military leave without pay. Employees may continue their dependent
health care coverage under COBRA; Status of other reported state
benefits for employees on federal active duty[B]: Employees continue to
accrue retirement credit while on military leave without pay.
State (Reserve population)[A]: Nevada (3,939); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: Nevada enacted a pay
differential policy for activated state employees in October 2001. The
state offers 15 working days of paid administrative leave each year for
employees called to active military duty. Employees are then placed on
civil leave at reduced pay and receive a pay differential if their
state pay exceeds the sum of their base military pay, special pays, and
allowances except for clothing. To receive the differential, employees
must provide their supervisor copies of their deployment orders and
military Leave and Earnings Statements, among other forms, each month
they are on active duty. Employees receive the pay differential for the
duration of their activation; Status of dependent health care coverage
for state employees on federal active duty: The state allows its
employees to continue dependent health care coverage for the duration
of the activation if the employees pay the full premium; Status of
other reported state benefits for employees on federal active duty[B]:
The state offers two retirement policies. Under one policy, the
employee can elect to pay for a portion of the premium and the state
contributes the remainder. Under the second option, the state pays the
entire premium, but the employee either receives less pay or forfeits
the equivalent basic salary and/or cost-of living increases. According
to a state official, the state encourages its employees who are called
to active duty to transition their retirement coverage to the second
option, which allows them to continue to accumulate retirement credit
while on active duty.
State (Reserve population)[A]: New Hampshire (3,617); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: New Hampshire enacted a pay
differential policy for activated full-time, permanent state employees
in March 2003. The policy applies only to the conflict in Iraq. The
state offers 15 days of paid military leave each federal fiscal year to
eligible employees called to active military duty, after which
employees are placed on military leave without pay. Employees receive a
pay differential if their state pay exceeds their base military pay,
excluding special pays and allowances. To receive the differential,
employees must submit an application and a military Leave and Earnings
Statement to the Adjutant General's office. They receive the pay
differential for up to 1 year after activation beginning March 21,
2003; Status of dependent health care coverage for state employees on
federal active duty: The state pays the full premium for all state
employees' dependent health care coverage and continues to pay the full
premium for the duration of their military activation; Status of other
reported state benefits for employees on federal active duty[B]: State
employees continue to accrue retirement credit while on military leave
without pay.
State (Reserve population)[A]: New Jersey (15,891); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: New Jersey enacted a pay
differential policy for activated state employees in February 2003. The
policy applies to the global war on terrorism, armed conflict in Iraq,
or heightened tensions with North Korea. The state also authorized pay
differentials for employees called to active service to support the
Bosnia and Kosovo missions. The state offers 90 days of paid military
leave to state employees serving in the National Guard and 30 days of
paid leave to members of the Reserves. After employees exhaust their
paid military leave they are placed on leave without pay, but without
loss of time, during which they receive a pay differential if their
state pay exceeds their base military pay, excluding special pays and
allowances. Employees must submit their orders to their employing
agency to receive the pay differential. Employees remain on partial
military leave for the duration of their time on active duty; Status
of dependent health care coverage for state employees on federal active
duty: The state continues to contribute its portion of an employee's
dependent health care premium for the duration of the activation;
Status of other reported state benefits for employees on federal active
duty[B]: The state continues to contribute its portion to an employee's
life insurance and pension coverage during federal active duty.
State (Reserve population)[A]: New York (30,997); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: New York enacted a pay
differential policy for activated state employees in September 2000.
The policy expires in December 2004. The state offers 44 working days
or 60 days (whichever is longer) of paid military leave each year or
continuous period of absence that spans more than 1 calendar year,
after which activated employees are placed on military leave at reduced
pay. Employees receive a pay differential if their state pay exceeds
the sum of their base military pay, basic allowance for housing, and
basic allowance for subsistence. They must submit a military Leave and
Earnings Statement to their employing agency to receive the pay
differential. Activated employees receive the differential until the
policy expires; Status of dependent health care coverage for state
employees on federal active duty: The state offers its employees on
military leave at reduced pay continued health care coverage for their
dependents at no cost for the duration of the employees' activation;
Status of other reported state benefits for employees on federal active
duty[B]: Employees enrolled in the M/C Life Insurance Program may
continue their life insurance coverage by paying their portion of the
premiums.
State (Reserve population)[A]: North Carolina (20,697); Income
assistance offered to activated state employees on military leave
without pay: State pay differential; Military leave and compensation
policy for state employees on federal active duty: North Carolina
extended its pay differential policy for involuntarily activated state
employees to include all reservists in September 2001. The state offers
30 days of paid military leave for each period of involuntary service,
after which activated employees are placed on military leave without
pay. Employees receive a pay differential if their state pay exceeds
their base military pay, excluding special pays and allowances. To
receive the differential, employees must provide their military Leave
and Earnings Statements to their employing agency. They receive the pay
differential for the duration of their activation; Status of dependent
health care coverage for state employees on federal active duty: The
state continues to contribute its portion of an employee's dependent
health care premium for 30 days from the date of active service. After
30 days, an employee may choose to continue dependent coverage in the
State Health Plan by paying the full premium; Status of other reported
state benefits for employees on federal active duty[B]: Activated state
employees continue to receive retirement service credit while on
military leave without pay and to accrue vacation and sick leave.
State (Reserve population)[A]: Ohio (28,080); Income assistance offered
to activated state employees on military leave without pay: State pay
differential; Military leave and compensation policy for state
employees on federal active duty: Ohio enacted a pay differential
policy for activated state employees in 1991. The state offers 22
working days of paid military leave each year, after which activated
employees are placed on military leave without pay. Employees receive a
pay differential if their state pay exceeds the sum of their base
military pay, special pays, and allowances. They must apply for the pay
differential on a pay period-by-pay period basis and submit each
military Leave and Earnings Statement they receive while on active duty
to their employing agency. They receive the pay differential for the
duration of their activation; Status of dependent health care coverage
for state employees on federal active duty: The state continues to
contribute its portion of an employee's dependent health care coverage
for the duration of the employee's time on active duty; Status of
other reported state benefits for employees on federal active duty[B]:
Employees continue to earn retirement credit while on active military
duty for up to 10 years if they meet certain state employment
criteria.
State (Reserve population)[A]: Oklahoma (15,502); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: Oklahoma enacted a pay
differential for activated state employees in May 2003. The policy is
retroactive to September 11, 2001. The state offers 20 days of paid
military leave each federal fiscal year, after which activated
employees are placed on military leave without pay. State agencies must
grant their employees on military leave without pay a pay differential
for active service on or after September 11, 2001, during the period
Operation Enduring Freedom is in effect, if the employees' state pay
exceeds the sum of their base military pay and housing allowance.
Agencies may require employees to submit a military Leave and Earnings
Statement to receive the differential. Employees receive the pay
differential for the duration of their activation; Status of dependent
health care coverage for state employees on federal active duty: To
ensure continuation of state-sponsored dependent health care coverage,
activated employees may choose to use annual leave each month to remain
in pay status. Employees continue to pay their portion of the premium
if they remain in pay status, and the amount of state pay received for
the used annual leave is deducted from the pay differential payments;
The state suspends its employees' dependent health benefits when they
are on military leave without pay. Employees may retain health
insurance for their family by paying 102 percent of the premium as
specified under COBRA provisions; Status of other reported state
benefits for employees on federal active duty[B]: Activated employees
may continue to pay into their retirement accounts.
State (Reserve population)[A]: Pennsylvania (35,189); Income
assistance offered to activated state employees on military leave
without pay: Stipend; Military leave and compensation policy for state
employees on federal active duty: Pennsylvania began offering stipends
to all activated permanent state employees in September 2001. The state
offers 30 days of paid military leave, after which activated employees
are placed on military leave without pay. All employees on military
leave without pay receive a $500 monthly stipend, regardless of whether
they gain or lose income as a result of being called to federal active
duty. Activated employees must show their military orders to their
employing agency to receive military leave. Employees receive the
stipend for the duration of their activation; Status of dependent
health care coverage for state employees on federal active duty: The
state pays the full premium for all state employees' dependent health
care coverage and continues to pay the full premium for the duration of
state employees' military activation; Status of other reported state
benefits for employees on federal active duty[B]: Employees retain
retirement and supplemental health benefits if they continue to pay
their portion of the premium.
State (Reserve population)[A]: Texas (46,922); Income assistance
offered to activated state employees on military leave without pay: Pay
differential at agency discretion; Military leave and compensation
policy for state employees on federal active duty: The governor of
Texas encouraged agencies to provide pay differentials to federally
activated employees in November 2001. The state offers 15 working days
of paid military leave each federal fiscal year, after which employees
are placed on military leave without pay. Agency heads may grant
federally activated employees on leave without pay a pay differential
if their state pay exceeds the sum of their base military pay, special
pays, and allowances; A new law requires state agencies to provide a
pay differential to their employees in September 2003. The employing
agency requests a copy of the employee's military Leave and Earnings
Statement to determine the differential. Under the new law, employees
can receive the pay differential up to 5 years; Status of dependent
health care coverage for state employees on federal active duty: The
state will continue to contribute its portion of employees' dependent
health care coverage for employees who are still in a pay status
beginning September 2003. Activated employees can remain on a pay
status by using as little as 1 hour of paid leave (compensatory,
overtime, vacation, etc.) each month they are on military leave. If
employees are unable or choose not to remain in a pay status, they may
retain dependent health insurance coverage for up to 12 months by
paying the full premium; Status of other reported state benefits for
employees on federal active duty[B]: Employees will continue to accrue
full retirement credit by receiving at least 1 hour of state pay during
each month of active military service by using any combination of paid
leave beginning September 2003.
State (Reserve population)[A]: Vermont (3,824); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: Vermont enacted a pay
differential policy for activated state employees in 2001. The policy
expires June 2005. The state offers 11 working days of paid military
leave each federal fiscal year to its employees, after which they are
placed on military leave without pay. Employees receive a pay
differential if their state pay exceeds the sum of their base military
pay, special pays, and allowances. Employees must provide a military
Leave and Earnings Statement to their employing agency to receive the
differential. Employees can receive the pay differential for a period
of up to 6 months from their date of activation; Status of dependent
health care coverage for state employees on federal active duty: The
state continues to contribute the employer portion of an activated
employee's dependent health care coverage for 1 month after the
employee's activation. After 1 month, employees may continue their
dependent health care coverage by paying the full premium; Status of
other reported state benefits for employees on federal active duty[B]:
The state does not offer any additional benefits while state employees
are on military leave without pay.
State (Reserve population)[A]: Virginia (22,458); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: Virginia enacted a pay
differential policy for activated classified state employees in March
2002. The state offers 15 working days of paid military leave each
federal fiscal year to its employees, after which they are placed on
military leave without pay. Employees receive a pay differential if
their state pay exceeds the sum of their base military pay, special
pays, and allowances. Employees must provide a military Leave and
Earnings Statement to their employing agency to receive the
differential. Employees may receive the pay differential for the
duration of their activation; Status of dependent health care coverage
for state employees on federal active duty: The state continues to
contribute the employer portion of an activated employee's dependent
health care coverage and the additional 2 percent administrative fee
under COBRA for up to 18 months. After 18 months, employees may convert
their dependent health care to nongroup coverage; Status of other
reported state benefits for employees on federal active duty[B]:
Employees continue to receive retirement credit while on active duty if
they receive an honorable discharge. The state continues to pay basic
life insurance for up to 2 years from the date military leave without
pay begins. Optional life insurance can be continued if the employee
continues to pay the premiums.
State (Reserve population)[A]: Wyoming (2,344); Income assistance
offered to activated state employees on military leave without pay:
State pay differential; Military leave and compensation policy for
state employees on federal active duty: Wyoming enacted a pay
differential policy for activated state employees in October 2001. The
policy expires in October 2005. The state offers up to 15 calendar days
of paid military leave in any calendar year, after which employees are
placed on military leave without pay. While on military leave without
pay, activated employees are eligible for a pay differential if their
state pay exceeds their base military pay, excluding special pays and
allowances. Employees must submit a copy of each military Leave and
Earnings Statement they receive while on active military duty to their
employing agency to receive the pay differential. Employees receive the
pay differential for the duration of their activation; Status of
dependent health care coverage for state employees on federal active
duty: The state continues to contribute its portion of an employee's
dependent health care coverage for the duration of the activation;
Status of other reported state benefits for employees on federal active
duty[B]: The state continues to match any type of pay deferrals that
activated employees make to their deferred compensation plans.
Employees continue to accrue vacation leave while on active military
duty. Life insurance continues if employees continue to pay their
portion of the premium.
Source: GAO.
[A] Reserve population denotes the total number of reserve members
residing in the state as of April 2003 and includes, but is not limited
to, state employees who are reservists. The population figures exclude
Active Guard/Reserve members.
[B] Information in this column reflects responses to an open-ended
question regarding state benefits, other than health coverage, for
state employees activated for federal duty and may not necessarily
describe the full range of benefits offered to state employees on
federal active duty.
[End of table]
[End of section]
Appendix V: Preactivation Activities of Spouses of Activated
Reservists:
This appendix provides an analysis of data from the 2002 DOD survey of
spouses of activated reservists concerning preactivation activities of
spouses. Based on spouses' self-reported feelings of being prepared or
unprepared upon receiving a notice of activation for the military
member, we compared their responses to questions concerning
preactivation activities--volunteering or participating in unit family
readiness programs or groups, attending preactivation briefings,
receiving preactivation materials. We also compared their responses to
questions concerning other factors that could affect preparedness, such
as being assigned a military point of contact and the amount of advance
notice received prior to activation. Finally, we compared their
responses to a question concerning how well they have coped with the
activation. The results of our analysis are presented in table 5.
Table 5: Comparison of Spouses' Preparedness to Preactivation
Activities and Other Factors:
[See PDF for image]
Source: GAO analysis of DOD 2002 Survey of Spouses of Activated
National Guard and Reserve Component Members.
Note: Percentages may not add to 100 due to rounding.
[End of table]
[End of section]
Appendix VI: Comments from the Department of Defense:
ASSISTANT SECRETARY OF DEFENSE 1500 DEFENSE PENTAGON WASHINGTON, DC
20301-1500:
RESERVE AFFAIRS:
21 AUG 2003:
Mr. Derek B. Stewart:
Director, Defense Capabilities Management U. S. General Accounting
Office Washington, D. C. 20548:
Dear Mr. Stewart:
This is the Department of Defense (DoD) response to the GAO draft
report GAO-03-1004, "MILITARY PERSONNEL: DoD Needs More Data to Address
Financial and Health Care Issues Affecting Reservists," GAO Code 350343
(formally GAO Code 350264). I appreciate the opportunity to review and
comment on the draft GAO report.
We concur with each of the GAO recommendations, number 1 - 5. However,
specific comments/concerns have been provided on recommendations 2 - 5
for your consideration.
The Department's comments on the draft report recommendations are
provided in the enclosure. No technical changes were identified by
reviewers for separate forwarding to the GAO staff.
Signed for:
T. F. Hall:
Enclosure: As stated:
GAO DRAFT REPORT - DATED AUGUST 1, 2003 GAO CODE 350343/GAO-03-1004:
"MILITARY PERSONNEL: DoD Needs More Data to Address Financial and
Health Care Issues Affecting Reservists":
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of the Defense
direct the Under Secretary of Defense for Personnel and Readiness to
determine the need for compensation programs aimed at addressing
reservists' income loss during periods of active duty by obtaining more
complete information on the magnitude of income change, the causes of
income change, and the effects of income change on reserve retention.
At a minimum, those efforts should be designed to identify reservists
who (1) fill critical wartime specialties, (2) experience high degrees
of income loss when on active duty, and (3) demonstrate that income
loss is a significant factor in their retention decisions. (Pages 37-
38/GAO Draft Report):
DOD RESPONSE: Concur.
RECOMMENDATION 2: The GAO recommended that, on the basis of the above
information, the Secretary of the Defense develop targeted compensation
programs, as appropriate, to retain those reservists in the armed
forces. (Page 38/GAO Draft Report):
. DOD RESPONSE: Partially concur. The Department is constantly
examining and reexamining bonuses and special pays, which are targeted
at individuals with critical skills that are considered hard to fill or
that are inherently dangerous, hazardous or unattractive. Bonus
agreements are effected in exchange for a commitment to serve in the
Selected Reserve, and Reservists that qualify for the special or
incentive pays are compensated for each day or period they are in a
duty status. With respect to establishing programs that provide income
protection to Reservists, the Department must continue to exercise
concern about paying its part-time force more than its full-time force,
when undertaking similar duties. Also, Reserve personnel receive a
significant pension at age 60, if they completed at least 20 qualifying
years of service. This represents deferred compensation for earlier
service, which may have involved some income loss.
RECOMMENDATION 3: The GAO recommended that the Secretary of the Defense
direct the Secretaries of the Army, the Air Force, and the Navy, and
the Commandant of the Marine Corps to develop specific plans for
improving reservists' and their spouses' awareness of and access to
personal financial management programs. (Page 38/GAO Draft Report):
DOD RESPONSE: Concur. The Under Secretary of Defense for Personnel and
Readiness recently launched a DoD Financial Readiness Campaign aimed at
improving the education and assistance available to Service members and
their families and to stimulate a culture that values savings and
responsible financial behavior. The campaign supports the ongoing
efforts of the Services with products and services provided by 26
Federal Agencies and nonprofit organizations. Many of these products and
services can also support members of the Reserve component, and will be
provided where meaningful and applicable. Additionally, a draft policy
is pending final review by the Military Departments that will require
the Services to provide personal financial planning materials to
National Guard and Reserve personnel as an integral part of
mobilization training.
RECOMMENDATION 4: The GAO recommended that the Secretary of the Defense
direct the Military Services, in conjunction with the Under Secretary
of Defense for Personnel and Readiness, to assess the financial well
being of reservists and determine whether reservists' financial
problems affect mission readiness. (Page 38/GAO Draft Report):
DOD RESPONSE: Concur. The Under Secretary of Defense will include the
Reserve Components in the on-going efforts to assess financial well
being of Service members and the impact of financial problems on
mission readiness.
RECOMMENDATION 5: The GAO recommended that the Secretary of the Defense
direct the Under Secretary of Defense for Personnel and Readiness to
assess problems reservists have experienced since the mobilizations
following the events of September 11, 2001, in maintaining continuity
of health care; the causes of those problems; and their effects on
readiness, recruiting, and retention. As part of this assessment, DoD
should evaluate the ramifications of extending TRICARE coverage to
reservists not on active duty and their family members as well as
paying premium costs incurred by reservists who choose to continue
their civilian health care insurance coverage when activated. DoD
should also evaluate the potential impact of extending such coverage on
the retention of active duty personnel and on the TRICARE system. (Page
38/GAO Draft Report):
DOD RESPONSE: Concur. It is important to note that many Reserve TRICARE
problems are the result of a lack of information and understanding
concerning enrollment and participation in TRICARE. Efforts to educate
Reservists and their families concerning their TRICARE benefits and
entitlements and the need to ensure dependent information in the
Defense Enrollment Eligibility Reporting System (DEERS) is accurate and
up-to-date, must be continuous, ongoing and widespread. Also, it is
worth nothing that, while over 30% of the Reserve force does not have
dental insurance, less than 5 % of that force has enrolled in the
TRICARE Dental Program, which is a relatively cost effective and
benefit rich dental plan. If TRICARE were offered, there is no
indication reservists would sign up in any greater numbers than they
have for the TRICARE Dental Program.
[End of section]
Appendix VII: Staff Acknowledgments:
Acknowledgments:
Kelly Baumgartner, Brenda S. Farrell, Thomas W. Gosling, Krislin M.
Nalwalk, Jennifer R. Popovic, Mark F. Ramage, Loch-Hung Leo Sze, and
Nicole Volchko made significant contributions to this report.
FOOTNOTES
[1] We use the generic terms "reserves" and "reservists" throughout
this report to refer to both National Guard and Reserve personnel.
[2] Public Law 107-314, Dec. 2, 2002.
[3] For this report, we use the term "compensation" to refer to both
pay and employee benefits, to include programs and services that
support servicemembers and their families.
[4] In response to the mandate, we also issued a report on special pay
for duty in the polar regions. See U.S. General Accounting Office,
Military Personnel: DOD Needs to Assess Certain Factors in Determining
Whether Hazardous Duty Pay Is Warranted for Duty in the Polar Regions,
GAO-03-554 (Washington, D.C.: Apr. 29, 2003).
[5] Department of Defense, Office of the Secretary of Defense, Military
Compensation Background Papers: Compensation Elements and Related
Manpower Cost Items, Their Purposes and Legislative Backgrounds
(September 1996).
[6] In a prior report comparing the benefits offered to active duty
servicemembers with those offered in the private sector, we found no
significant gaps in military benefits. See U.S. General Accounting
Office, Military Personnel: Active Duty Benefits Reflect Changing
Demographics, but Opportunities Exist to Improve, GAO-02-935
(Washington, D.C.: Sept. 18, 2002).
[7] The other two categories of the reserve forces are the Standby
Reserve and the Retired Reserve.
[8] The average reservist trains 38 or 39 days per year. In addition to
this training, some reservists provide support for counterdrug
operations, domestic emergencies, exercises, and established and
emerging operations, including those involving either presidential
call-ups or mobilizations.
[9] For this report, operational tempo refers to the total days
reservists spend participating in normal drills, training, and
exercises, as well as domestic and overseas operational missions.
[10] Attrition is the total number of personnel losses from the
Selected Reserve divided by the average Selected Reserve end strength
for the year. Under this definition, attrition is not a true measure of
retention since it does not reflect the number of personnel who left
compared with the eligible population of those who could have left.
[11] The population of interest consisted of all Selected Reserve
members below flag or general officer rank, with at least 6 months of
service when the questionnaires were first mailed in August 2000. The
sample consisted of 74,487 members. Eligible respondents returned
35,223 completed surveys.
[12] The population of interest was spouses of reservists activated for
Operations Noble Eagle, Enduring Freedom, Bosnia, Southwest Asia, or
Southern Watch. The sample consisted of 7,658 spouses when the survey
was first mailed in August 2002. Eligible respondents returned 3,874
completed surveys.
[13] U.S. General Accounting Office, Military Personnel: DOD Actions
Needed to Improve the Efficiency of Mobilizations for Reserve Forces,
GAO-03-921 (Washington, D.C.: Aug. 21, 2003).
[14] U.S. General Accounting Office, Defense Health Care: Army Needs to
Assess the Health Status of All Early-Deploying Reservists, GAO-03-437
(Washington, D.C.: Apr. 15, 2003).
[15] GAO-03-549T. We also provided a statement for the record to the
Subcommittee on Personnel, Senate Committee on Armed Services, titled
Military Personnel: Preliminary Observations Related to Income,
Benefits, and Employer Support for Reservists During Mobilization,
GAO-03-573T (Washington, D.C.: Mar. 19, 2003).
[16] U.S. General Accounting Office, Defense Health Care: Oversight of
the Adequacy of TRICARE's Civilian Provider Network Has Weaknesses,
GAO-03-592T (Washington, D.C.: Mar. 27, 2003) and Defense Health Care:
Oversight of the TRICARE Civilian Provider Network Should Be Improved,
GAO-03-928 (Washington, D.C.: July 31, 2003).
[17] U.S. General Accounting Office, Defense Health Care: Most
Reservists Have Civilian Health Coverage but More Assistance Is Needed
When TRICARE Is Used, GAO-02-829 (Washington, D.C.: Sept. 6, 2002).
[18] U.S. General Accounting Office, Reserve Forces: DOD Actions Needed
to Better Manage Relations between Reservists and Their Employers,
GAO-02-608 (Washington, D.C.: June 13, 2002).
[19] The 2000 survey asked respondents: "Please estimate your (and your
spouse's) total income change from all sources as a result of your most
recent mobilization and deployment. If you (and your spouse) have
continuing losses from a business or practice, include those in your
estimate."
[20] The survey listed 22 possible problems and asked respondents to
choose their top 3 most serious problems experienced during
mobilization or deployment.
[21] RAND, The Effect of Mobilization on Retention of Enlisted
Reservists After Operation Desert Shield/Storm, MR-943-OSD (1998). The
study did not include officers.
[22] The sampling error for this estimate is plus or minus 9 percentage
points.
[23] The percentages do not add to 100 due to rounding. Sampling errors
for federal employees who had a decrease, no change, or a gain in
income were about plus or minus 6 percentage points.
[24] The 2000 survey obtained information on reservists in the
following civilian career fields: medical professionals, lawyers,
information technology specialists, clergy, and pilots/navigators.
[25] The sampling error for this estimate was about plus or minus 8
percentage points.
[26] DOD established the Unified Legislation and Budgeting process in
1994 to develop and review personnel compensation proposals.
[27] Internal Revenue Publication 533 defines "self-employed"
individuals as sole proprietors or independent contractors; members of
a partnership that carries on a trade or business; or otherwise in
business for themselves. A 2001 survey of medical personnel conducted
for the Army Surgeon General found that almost 40 percent of Army
Reserve Medical Corps officers identified themselves as self-employed.
[28] The cost estimate assumes that about 30 percent of the 350 Army
Reserve Medical Corps officers deployed in May 2003 would have
qualified for the special deployment pay. The actual total monthly cost
may be less since this figure assumes that all qualifying physicians
had been deployed involuntarily beyond the 90-day rotation schedule.
[29] The Army considers physicians to be fully trained and deployable
when they have passed a written exam and completed their residency.
[30] Activated federal employees who use military leave receive full
compensation from their civilian agency in addition to their military
pay for the same period. Federal employee reservists earn up to 15 days
of military leave a year. Employees who perform active military duty to
assist domestic civilian authorities in the protection of life or
property may be granted an additional 22 days of military leave.
[31] Four legislative proposals that would offer differential pay to
activated federal employee reservists are S. 593, Reservists Pay
Security Act of 2003; S. 442, Reservists and Guardsmen Pay Protection
Act of 2003; H.R. 217, Reservists Pay Security Act of 2003; and H.R.
1345, Equity for Reservists Pay Act of 2003.
[32] Public Law 107-107, sec. 519. (Dec. 28, 2001) 5 U.S.C. sec.
8906(e)(3).
[33] Federal employees can extend coverage beyond 18 months for 31 days
and convert to an individual policy offered by the plan carrier. Public
Law 103-353, Oct. 13, 1994, 38 U.S.C. sec. 4301-4333.
[34] S. 593, Reservist Pay Security Act of 2003, as introduced on March
11, 2003.
[35] For its analysis, the Congressional Budget Office assumed that (1)
15 percent of those reserves called to active duty at any time are
federal employees; (2) the average annual reduction in salary while
serving on active duty is about $3,000; and (3) an average of 20,000
federal employees will be on active duty military service between July
1, 2003, and September 30, 2003, diminishing to about 2,000 by 2008.
Lengthier, larger, or more frequent deployments could increase the
costs of differential pay.
[36] GAO-02-608.
[37] Public Law 103-353, 38 U.S.C., sec. 4301-4333.
[38] See section 512, National Defense Authorization Act for Fiscal
Year 1996 (P.L. 104-106).
[39] U.S. General Accounting Office, Reserve Forces: Observations on
the Ready Reserve Mobilization Income Insurance Program, GAO/
T-NSIAD-97-154 (Washington, D.C.: May 8, 1997).
[40] Adverse selection occurs when those enrolling in an insurance
program have significantly higher claim probabilities than the average
for the population to which the insurance is offered.
[41] This estimate seems overly optimistic in today's environment based
on the assumed 10 percent compound interest rate.
[42] Reserve mobilizations exceeded 200,000 by mid-March 2003 and
remained above that level into July 2003.
[43] Asked what prevented them from participating with their unit's
family readiness program or from being a member of their unit's family
readiness group, about 37 percent of spouses were not aware of a family
readiness group, 34 percent did not have time, for 31 percent the
location was not convenient, and 30 percent had not been asked. (These
percentages do not add to 100 percent because more than one reason
could be indicated.)
[44] The 2000 survey of reservists showed that about 40 percent of
drilling unit members lived 50 miles or farther from their home unit.
The 2002 survey of spouses showed that about 22 percent lived more than
100 miles away from where the member's unit regularly drills or trains.
In addition, 28 percent of spouses said they lived more than 50 miles
from the nearest military installation.
[45] Examples of these Web sites are www.armyfamilyteambuilding.org/
home.asp, www.afcrossroads.com/index-home.cfm, www.usmc-mcss.org/
mcftb/fa_te_build_main.html, and www.cnet.navy.mil.
[46] RAND, Assessing the Personal Financial Problems of Junior Enlisted
Personnel, MR-1444-OSD (2002).
[47] Caliber Associates, U.S. Navy Family Service Center Leadership
Survey 2000.
[48] Department of Defense, Deputy Assistant Secretary of Defense
(Military Community and Family Policy), A New Social Compact: A
Reciprocal Partnership Between the Department of Defense, Service
Members, and Families (July 2002).
[49] In 2001, Congress expressed concern that the military departments
were not providing sufficient personal financial management training
and that when personal financial problems occurred, the services were
not providing adequate supervision to ensure that servicemembers and
their families regained financial security. Due to these concerns,
Congress directed DOD to review personal financial management programs.
H. Rpt. 107-194.
[50] We compared responses to identical questions included in DOD's
1999 Survey of Active Duty Members and the 2000 Reserve Component
Survey.
[51] TRICARE Prime Remote for Active Duty Family Members provides
reserve component families with access to civilian health care
providers when the servicemember and family reside more than 50 miles,
or a 1-hour commute, from a military medical treatment facility.
[52] GAO-02-829.
[53] GAO-02-829.
[54] An estimated 11 percent of the spouses did not know how much it
cost.
[55] OSD has established a goal of providing reservists with at least
30 days notice prior to mobilization when operationally feasible. Our
prior work on DOD's mobilization process found that advance notice was
often not possible following the events of September 11, 2001.
[56] See S. 1050, amend. 696.
[57] The amendment applies to a special category of Individual Ready
Reserve members who have volunteered to be called to active duty under
Presidential Reserve Call-up authority when needed.
[58] Congressional Budget Office, The Long-Term Implications of Current
Defense Plans (Washington, D.C.: January 2003).
[59] Congressional Budget Office, Cost Estimate, S. 1050, National
Defense Authorization Act for Fiscal Year 2004 as passed by the Senate
(June 2, 2003).
[60] Federal government employees in the reserves who are called to
active duty continue to receive health benefits under the Federal
Employee Health Benefits Program up to 18 months.
[61] The Congressional Budget Office projected that the average cost of
self and family TRICARE coverage in 2004 will be $5,600.
[62] Unless otherwise noted, the officials listed in this scope and
methodology appendix have their offices in the Pentagon or at other
locations in the Washington, D.C., metropolitan area.
[63] GAO-02-608.
[64] Basic military compensation consists of basic pay, basic allowance
for housing, basic allowance for subsistence, and the federal tax
advantage. It does not include special and incentive pays, other
allowances, and the value of fringe benefits such as health care and
retirement.
[65] Public Law 108-11, section 1316, April 16, 2003.
[66] Senate Bill 1050, the National Defense Authorization Act for
Fiscal Year 2004, would require payment of up to $1,000 each month
during which a member has been (1) deployed for at least 401 days out
of the preceding 730 days; (2) deployed continuously for more than 191
days; or (3) in the case of a reservist called or ordered to active
duty for a period of more than 30 days, if this period begins within 1
year after the date on which the member was released from previous
active-duty service lasting more than 30 days. The House version of the
act contains similar language. This high tempo allowance would replace
a $100 per diem allowance authorized for servicemembers deployed for
more than 400 days in a 720-day period. However, DOD has suspended the
payment of this per diem.
[67] H.R. 100, the Servicemembers Civil Relief Act, passed the House of
Representatives by a vote of 425 to 0 in May 2003. As approved by the
House, the bill would delay eviction proceedings for at least 3 months
if rent does not exceed $1,700 and the servicemember invokes the act;
guarantee the payment of premiums for a servicemember's life insurance
policy for policies up to $250,000; and give protection to a
servicemember who has fallen behind on car payments by requiring the
lessor to obtain a court order before repossessing the car.
[68] H.R. 1307, the Armed Forces Tax Fairness Act of 2003, passed the
House of Representatives in March 2003.
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