weekly electronic newsletter, and is published every Thursday when Congress is in session.     ★★★PENTAGON BUDGET TARGETS MILITARY HEALTHCAREThe Department of Defense budget request for fiscal 2017, formally unveiled this week, includes reforms to several military personnel programs including TRICARE and military retirement.Again this year, the department seeks to add new fees for TRICARE and TRICARE For Life; however, the budget also seeks to reorganize the current military healthcare system.  The plan would provide TRICARE beneficiaries with two health care alternatives:  TRICARE Select, an HMO-like (managed) option that would be centered on Military Treatment Facilities (MTF) or TRICARE Choice which would function more like a PPO (unmanaged).  The plan emphasizes TRICARE Select which leverages MTFs as the lowest cost option for care to make full use of direct care capacity and also provide needed workload for military providers for readiness training.Retirees who are not eligible for Medicare (not medically retired), their families, and survivors of retirees (except survivors of those who died on active duty) would pay an annual participation fee or forfeit coverage for the plan year.  TRICARE Select participants would pay $350 individual/$700 family.  TRICARE Choice would pay $450 individual/$900 family.  There is no participation fee for active duty members or their family members. Copays will depend on beneficiary category and care venue.  There would be no copays in MTFs but there would be fixed network copays for the TRICARE Choice option without a deductible. There is no change for active duty.  They would maintain priority access to health care without any cost sharing but would still require authorization for civilian care.  The proposal offers all active duty family members (ADFM) a no cost care option regardless of assignment location and zero copays for ADFM emergency room use, including in the network.Medically retired members and their families and survivors of those who died on active duty would be treated the same as ADFMs, with no participation fee and lower cost shares.There would be open season enrollment similar to most commercial plans.  Participants must enroll for a 1-year period of coverage or lose the opportunity.Catastrophic caps would increase from $1000 for ADFMs to $1500.  Retirees’ catastrophic caps are currently $3000.  That amount would see an increase to $4000.  The participation fee would no longer count towards the cap.The Department will offer a second payer option with a lower fee for those with other health insurance.Fees and copays will be indexed at the National Health Expenditures (NHE) per capita.Again this year, the budget proposes to establish an enrollment fee for TRICARE-for-Life beneficiaries which would be tied to retired recipients’ income.  The details:TRICARE-for-Life Annual Family (Two Individuals) Enrollment Fees* Retired PayFY16FY17FY18FY19FY20FY21% Gross PayN/A0.50%1.00%1.50%2.00%2.00%Ceiling$0$150$300$450$600$632 * Individual fees are 50 percent of family fees (e.g., 1 percent of GRP in FY 2020 and after). Ceilings indexed to retiree National Health Expenditures (NHE) per capita after FY 2020Additionally, the Defense Department is requesting another increase in pharmacy fees although prescriptions obtained at the MTF would remain free of charge. Military RetirementThe budget would tweak the blended retirement system established by Congress in the fiscal 2016 National Defense Authorization Act signed into law November 2015.  FY 2016 NDAA                                                                       FY 2017 President’s Budget Request 

• Provided a minimum continuation payment to all members at 12 years of service.

• Seeks flexibility in the application of continuation pay in order to shape the force.

• Provided a 1% automatic TSP contribution to the service member and up to 4% in TSP matching contributions for a total of 5%.

• Seeks to increase TSP matching to 5% for a total contribution of 6%.

• Start date for matching service member TSP contributions is the first day of the third year of service.

• Seeks to amend the start date to the first day of the fifth year of service aligning the start day with a service member’s second enlistment.

• Ceases TSP matching contributions at 26 years of service.

• Seeks to extend TSP matching contributions until the service member’s retirement.

 Under the Pentagon’s plan, the Army’s end strength will not be cut any more than what is already planned.  The Army’s total end strength if the budget request is approved would be 990,000 (Active force - 460,000, Army National Guard – 335,000 and Army Reserve – 195,000).The fiscal 2017 budget proposes a 1.6 percent increase in military basic pay.  This is less than the 2.1 percent increase under the formula in current law, which calls for a military pay raise to equal the annual increase in the wages and salaries of private industry employees as measured by the Employment Cost Index.  The proposed increase of 1.6 percent is 0.3 percent above the fiscal 2016 military pay increase of 1.3 percent. The budget also requested a 2.9 percent increase in basic allowance for housing and a 3.4 percent increase in basic allowance for subsistence.Overall, the budget requests $523.9 billion for the Defense Department’s base budget and $58.5 billion for the Overseas Contingency Operations (OCO) account.  The Army’s share would be $125.1 billion in the base budget plus an additional $23 billion in OCO funds for a total of $148 billion. The budget request mostly conforms to the spending limits set by the Bipartisan Budget Act of 2015 passed by Congress last year.  However, that did not stop Republican appropriators from complaining that the spending plan limits congressional oversight and avoids the budget caps because of requests for mandatory funding for programs that would normally receive discretionary dollars.  Discretionary funds are controlled by Congress. In a statement, Sen. Thad Cochran, R-Miss., chairman of the Senate Appropriations Committee said, “President Obama’s final budget proposal contains all manner of new spending and tax increases, and a troubling reliance on mandatory spending to skirt spending limits.  There will be little appetite in Congress for mandatory spending that diminishes fiscal discipline and congressional oversight.”House Appropriations Chairman Hal Rogers, R-Ky., said, “My Committee intends to produce bills that abide by the budget caps set into place by the Bipartisan Budget Act of 2015 – a total of $1.070 trillion in discretionary spending.  But most importantly, they will be fiscally responsible, reflecting the needs of our federal government and the American people while protecting our financial future."The president’s budget request rolls sequestration back and replaces it with a combination of tax and spend changes including ending tax breaks for the wealthy, an overhaul of the immigration system and modifications to Medicare.  His proposal is likely to go nowhere on the Hill.The budget request largely avoided any major program cuts.  In fact, the proposed cuts amount to $11.2 billion or 2 percent of the entire budget.The budget calls for the Army to receive $923 million to buy new Black Hawk helicopters, including 21 standard UH-60M Black Hawks and 15 HH-60M Black Hawks for medical evacuation.  It also calls for funding for 52 refurbished AH-64E Apache helicopters ($1.1 billion) and 22 refurbished CH-47E Chinooks ($668 million).The bottom line:  The president’s budget request is just that – a request and is only the first step in the budget process.  Congress will ultimately make the final decision.  With regards to the military health care system reform, the House and Senate are also conducting an in-depth study of the current system.  Whether or not they go along with the president’s request will not be revealed until they release the details of their defense authorizations bills later in the year. AUSA will closely study the details of the budget request as we build our legislative strategy.