Despite the agreement, however, retirees still should not feel confident about long-term prospects for retaining full or timely inflation protection on their annuities.
Future budget fights will determine whether: the COLA schedule returns permanently to 1 January; lawmakers such as Senator Patrick Moynihan (D-NY) succeed in paring all entitlement COLAs as a simple, quick step toward balancing the budget; and the Clinton administration, as part of its own balanced budget plan, can keep military COLAs delayed until October through at least 1998. For now, language in the 1996 defense authorization bill restores 21 months of lost inflation to military retirees through 1998. To someone drawing $15,744 a year—average retirement pay of all current retirees, both officer and enlisted—the change will be worth between $700 and $800 total over three years.
COLA equity between military and federal civilian retirees first became an issue after passage of a 1993 deficit-reduction law that took unequal swipes at the two programs. It delayed COLAs for federal civilian retirees to 1 April in 1996 but would have returned them to 1 January 1997. For the military. Congress voted COLA delays of nine months—to 1 October—in each of the next three years.
Last summer, military retirees expected to win back 24 months of COLAs after Republicans vowed to restore COLA equity—but the definition of COLA equity began to shift during subsequent budget deliberations. To protect federal civilian workers from the Republican budget blueprint, which contained a provision to raise health care premiums and lower future annuities, lawmakers at the last minute voted instead to keep federal civilian COLAs to the April schedule through 2002.
For a time in December, the budget committees discussed doing the same for military retirees, which would have turned “COLA equity” into a costly proposition. But the armed services committees insisted on giving military retirees at least a partial victory through 1998.
The final COLA deal was hammered out in a meeting between Senate Majority Leader Bob Dole (KS), Senate Armed Services Committee Chairman Strom Thurmund (SC), House Speaker Newt Gingrich (GA). and House Budget Committee Chairman John Kasich (OH). The four agreed both groups of retirees should get their 1996 COLA on 1 April.
Chairman Kasich wants military COLAs to stay on that schedule at least through 2002 and was expected to raise the issue if and when Republicans and the Clinton administration resumed serious negotiations toward a balanced budget. The administration has supplied Chairman Kasich with his opening. The revised Clinton plan to balance the budget within seven years has a surprise for retirees: It recommends keeping military retiree COLAs at 1 October through 1998. In other words, the White House quietly has withdrawn support for COLA equity.
Staffers on the House Budget Committee were pleasantly surprised, suggesting the COLA deal their boss grudgingly accepted in December might not last through 1998. “When they go into budget negotiations,” warned one staffer, “any outcome is possible.”
Elsewhere on Capitol Hill, various alternatives to balance the budget by 2002 include provisions to hold down COLAs for all federal programs, including retirement and Social Security. Senator Moynihan proposed "correcting” the Consumer Price Index on which COLAs are based by cutting the final figure a full percentage point each year. He said it would save $117 billion through 2002. Senator Moynihan and others believe the current Consumer Price Index overstates inflation by as much as 2% annually.
Tricare Prime Makes Test Run
Defense health officials plan this fall to open Tricare Prime, the military’s new managed health care program, to its first group of Medicare-eligible beneficiaries. The “demonstration program” involving older retirees and dependents in at least two states—Washington and Texas—would begin I October.
Initial enrollment could be as high as 20,000 older beneficiaries now banned from Tricare Prime. If the test is successful, enrollment could be opened to all older beneficiaries who live within commuting distance of a military clinic or hospital.
The services have much riding on the Tricare test—including the integrity of health care promises to a generation of aging warriors. Thousands of military retirees already are being turned away from military treatment facilities as the Pentagon, following a congressional mandate, moves to curb costs through managed care. Pentagon health officials say they can not afford to open Tricare Prime to Medicare eligibles unless the Health Care and Financing Administration, manager of the Medicare trust fund, reimburses the services at least part of the cost. The Pentagon no longer is asking the Health Care and Financing Administration to reimburse the full $1.4 billion now spent on care of Medicare eligibles. It does want Medicare to cover future cost growth tied to these beneficiaries.
Points of Interest: Uneasy Compromise Reached on Retiree COLAs
By Tom Philpott
Military retirees can expect to see a 2.6% cost-of-living adjustment (COLA) on 1 April, six months earlier than scheduled, thanks to a hard-fought “COLA equity” deal reached between House and Senate Republicans.
Despite the agreement, however, retirees still should not feel confident about long-term prospects for retaining full or timely inflation protection on their annuities.
Future budget fights will determine whether: the COLA schedule returns permanently to 1 January; lawmakers such as Senator Patrick Moynihan (D-NY) succeed in paring all entitlement COLAs as a simple, quick step toward balancing the budget; and the Clinton administration, as part of its own balanced budget plan, can keep military COLAs delayed until October through at least 1998. For now, language in the 1996 defense authorization bill restores 21 months of lost inflation to military retirees through 1998. To someone drawing $15,744 a year—average retirement pay of all current retirees, both officer and enlisted—the change will be worth between $700 and $800 total over three years.
COLA equity between military and federal civilian retirees first became an issue after passage of a 1993 deficit-reduction law that took unequal swipes at the two programs. It delayed COLAs for federal civilian retirees to 1 April in 1996 but would have returned them to 1 January 1997. For the military. Congress voted COLA delays of nine months—to 1 October—in each of the next three years.
Last summer, military retirees expected to win back 24 months of COLAs after Republicans vowed to restore COLA equity—but the definition of COLA equity began to shift during subsequent budget deliberations. To protect federal civilian workers from the Republican budget blueprint, which contained a provision to raise health care premiums and lower future annuities, lawmakers at the last minute voted instead to keep federal civilian COLAs to the April schedule through 2002.
For a time in December, the budget committees discussed doing the same for military retirees, which would have turned “COLA equity” into a costly proposition. But the armed services committees insisted on giving military retirees at least a partial victory through 1998.
The final COLA deal was hammered out in a meeting between Senate Majority Leader Bob Dole (KS), Senate Armed Services Committee Chairman Strom Thurmund (SC), House Speaker Newt Gingrich (GA). and House Budget Committee Chairman John Kasich (OH). The four agreed both groups of retirees should get their 1996 COLA on 1 April.
Chairman Kasich wants military COLAs to stay on that schedule at least through 2002 and was expected to raise the issue if and when Republicans and the Clinton administration resumed serious negotiations toward a balanced budget. The administration has supplied Chairman Kasich with his opening. The revised Clinton plan to balance the budget within seven years has a surprise for retirees: It recommends keeping military retiree COLAs at 1 October through 1998. In other words, the White House quietly has withdrawn support for COLA equity.
Staffers on the House Budget Committee were pleasantly surprised, suggesting the COLA deal their boss grudgingly accepted in December might not last through 1998. “When they go into budget negotiations,” warned one staffer, “any outcome is possible.”
Elsewhere on Capitol Hill, various alternatives to balance the budget by 2002 include provisions to hold down COLAs for all federal programs, including retirement and Social Security. Senator Moynihan proposed "correcting” the Consumer Price Index on which COLAs are based by cutting the final figure a full percentage point each year. He said it would save $117 billion through 2002. Senator Moynihan and others believe the current Consumer Price Index overstates inflation by as much as 2% annually.
Tricare Prime Makes Test Run
Defense health officials plan this fall to open Tricare Prime, the military’s new managed health care program, to its first group of Medicare-eligible beneficiaries. The “demonstration program” involving older retirees and dependents in at least two states—Washington and Texas—would begin I October.
Initial enrollment could be as high as 20,000 older beneficiaries now banned from Tricare Prime. If the test is successful, enrollment could be opened to all older beneficiaries who live within commuting distance of a military clinic or hospital.
The services have much riding on the Tricare test—including the integrity of health care promises to a generation of aging warriors. Thousands of military retirees already are being turned away from military treatment facilities as the Pentagon, following a congressional mandate, moves to curb costs through managed care. Pentagon health officials say they can not afford to open Tricare Prime to Medicare eligibles unless the Health Care and Financing Administration, manager of the Medicare trust fund, reimburses the services at least part of the cost. The Pentagon no longer is asking the Health Care and Financing Administration to reimburse the full $1.4 billion now spent on care of Medicare eligibles. It does want Medicare to cover future cost growth tied to these beneficiaries.