STATEMENT ON

PERSONNEL COMPENSATION AND
MEDICAL BENEFITS

TO THE

SUBCOMMITTEE ON MILITARY PERSONNEL AND COMPENSATION
ARMED SERVICES COMMITTEE

U.S. HOUSE OF REPRESENTATIVES

Mr. Chairman, members of this distinguished Committee, it is my privilege to present the views of the Fleet Reserve Association, on the personnel compensation provisions of the amended FY 1989 Defense Budget. As you know, the Fleet Reserve Association is an organization of 150,000 enlisted personnel, active duty and retired, of the U.S. Navy, Marine Corps and Coast Guard. We appreciate this opportunity to give you their views.

During the past two months I have addressed active duty personnel attending FRA Leadership Seminars. The seminars were held in Norfolk, Virginia, San Diego, California and Pensacola and Jacksonville, Florida. Members of the enlisted leadership, (command master chief petty officers, command career counselors and ombudsmen) were invited and all major commands in those four areas were represented. The frank, open exchange of ideas prepared me well for this statement.

MILITARY COMPENSATION:

In the exchange of ideas and opinions at the four FRA Leadership Seminars it was obvious to all that military compensation and access to quality medical care for dependents were the two top personnel issues. To say that all active duty military personnel are well aware that their pay lags behind civilian pay is the understatement of the decade. When personnel grow dissatisfied with their compensation the first indications of the dissatisfaction is felt in recruiting and retention. If you measure retention by years-of-service, you will see that retention has declined in many skills and specialties. In FY '87, the Navy fell 3 percent behind its retention goal for

second-term reenlistments.

What was truly surprising is that it

was also 1 percent short of obtaining its goal for career

reenlistments!

Another warning sign is that the Marine Corps

attained only 93 percent of its first-term reenlistment goal in

FY '87.

There are very obvious and valid reasons for the enlisted's dissatisfaction with their compensation. They know that military pay raises have been capped below private sector pay raises, as measured by the Employment Cost Index (ECI), each year since FY 1982 when military pay comparability was reestablished. This fact has created a 11 percent lag in military pay behind civilian pay. A second obvious reason has been the Congress' constant tinkering with the Variable Housing Allowance (VHA) since it was established in 1980. The latest action on VHA, freezing VHA in FY '88 at FY '87 levels resulted in a reduction of VHA for approximately 60 percent of all military members receiving VHA (about 551,000) and a reduction in take-home pay for over 80,000 personnel even though they received a 2 percent basic pay increase at the same time.

With today's emphasis on readiness of the Armed Forces we cannot afford to miscalculate the importance of people. In FY '87, 93 percent of all new recruits were high school diploma graduates. That is substantially above the 75 percent of the youth population with diplomas. While thus far recruiting and retention have not been seriously damaged by the ever expanding pay gap and the erosion of VHA, let us not forget the costly hemorrhage of enlisted careerists we endured in the 1979-80 time

frame. Unless we demonstrate to our people that we will compensate them fairly, the Services will be unable to recruit and retain the high-quality people needed.

In recognition of all the factors that fit into the military readiness equation, the Fleet Reserve Association feels that it is absolutely imperative that all military personnel be provided a 4.3 percent pay raise in basic pay and a 3.4 percent increase in VHA rates. It is most important to understand that this raise will not make up any of the 11 percent pay gap revealed by the ECI comparison, it simply prevents the 11% gap from getting

larger.

MEDICAL CARE

Following the FRA's last appearance before this Committee regarding medical care for military dependents, military retirees and their dependents, FRA determined to pioneer alternative approaches to enhanced access to quality care with aggressive cost management for active duty dependents.

We conducted research among active duty personnel and their families to learn their medical needs as well as their preferences. We wanted to develop a viable alternative to the CHAMPUS Reform Initiative (CRI) that would act as a model for the local delivery of medical care to active duty dependents. We wanted to include in this model health plan, provisions for preventive as well as acute care medical services. Our plan focuses on changing life style behaviors as the long term solution for truly reducing medical care costs through overall improvement in

beneficiary health.

Our research took us to four military

communities, Norfolk, Virginia, Washington, D.C., Jacksonville/ Mayport, Florida and Corpus Christi, Texas. We conducted twentyfive discussion groups with personnel in pay grades E-4 to E-9 and their spouses. This research clearly revealed that a comprehensive, affordable health care plan that would assure easy and continuous access to top quality medical care and preventive services within the local community setting is sorely needed. FRA'S REVOLUTIONARY HEALTH CARE PLAN: "SUPERCARE"

Local health care delivery means creating a network of performance tested and competent providers from within the community who will provide all services at fixed affordable cost for the beneficiary. This means eliminating all CHAMPUS out-ofpocket costs through the use of comprehensive supplement linked to a network of participating providers. The only cost to the participant is the plan's low premiums.

This health care plan's delivery system is based upon three legs: the Daughters of Charity National Health Systems, Inc. and their affiliates, (all non-profit hospitals); pre-selected, plan authorized, licensed and certified providers who practice within the community and are affiliated with the hospital; and Consumers United Insurance Company, (a not-for-profit insurance company) as the plan's underwriter to work cooperatively thru contracts with the hospitals and their providers to provide for all health care needs of the beneficiary population. This managed care network of participating providers together will operate as a select health plan within the CHAM PUS law and regulations and in cooperation with the military's regional medical commands.