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More Out-of-Pocket Expenses to Hit Military Families

Wednesday, February 04, 2015

The fiscal year (FY) 2016 defense budget announced Feb. 2 includes modest increases in military basic pay and housing allowances that could leave some military families holding on a little tighter to their wallets.

For FY 2016, which begins Oct. 1, the Defense Department’s $536 billion budget request includes a $1.7 billion decrease in pay and compensation. Over five years, the cuts would total $18 billion.

Savings is the result of continuing to cap basic pay and basic allowance for housing increases. The budget calls for a 1.3 percent basic pay increase, effective Jan. 1, 2016, that is larger than the 1 percent pay raises received in 2014 and 2015, but lower than the 2.3 percent military raise called for under a federal pay formula that links raises to the Employment Cost Index, a measure of private-sector salaries.

Additionally, the 2016 Pentagon budget calls for a second year of capping basic allowance for housing rate increases to slightly less than the rise in local housing costs.  With the change, allowance rates adjustments effective Jan. 1, 2016, would be 2 percentage points less than the full cost of rental housing.

The benefits plan would have to be approved by Congress.

Commissary subsidies would also be reduced by the 2016 budget, which calls for a $100 million reduction in 2016 in what had been $1.3 billion worth of annual taxpayer support. Budget documents say the savings would come from “efficiencies and operating changes that do not require legislative changes.” Military families should expect to see some reductions in operating days and hours.

A consolidated Tricare Health Plan has been proposed that will streamline the current Tricare system and provide incentives for wellness and decreases overutilization of services. Active duty members will remain exempt from co-pays or fees and active duty family members will be provided a “no-cost option no matter of their location or availability/access” to a military treatment facility.

There is also a proposed enrollment fee for new Tricare for Life beneficiaries, with fees based on a percentage of the beneficiary’s military gross retired pay, and changes in the Tricare pharmacy fees to be phased in over nine years. Beginning in FY 2016, co-pay for retail prescriptions will grow from $8 generic/ $28 brand to $14 generic/ $46 brand in FY 2025.

Proposed funding levels for military family support programs will rise from $7.8 billion in FY 2015 to $8 billion in FY 2016, which is good news for families.  Key programs include child care and youth programs, morale, welfare, and recreation programs, warfighter and family services, Department of Defense Education Activity schools as well as continuing support for spouse employment programs and Military OneSource.

There is work to do before the proposed budget becomes law. Both the House Armed Services Committee and the Senate Armed Services Committee will hold hearings beginning in early February. AUSA will provide input to military and congressional leaders throughout the process.