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Letter to Representative Hensarling and Senator Murray


Location: Washington, DC

U.S. Senator John McCain (R-AZ), Ranking Member of the Senate Armed Services Committee, today sent a letter to Joint Select Committee on Deficit Reduction Co-Chairs Representative Jeb Hensarling (TX-05) and Senator Patty Murray (D-WA) urging the Committee to avoid further cuts to the defense budget and offering additional views on potential changes in military health benefits.

Full Letter Below and attached:

October 14, 2011

The Honorable Jeb Hensarling, Co-Chair

The Honorable Patty Murray, Co-Chair

Joint Select Committee on Deficit Reduction

825B Hart Senate Office Building

Washington, D.C. 20510

Dear Representative Hensarling and Senator Murray,

In advance, I thank you for the work you are doing on the Joint Select Committee on Deficit Reduction. While you debate recommendations on how to best deal with this important topic, I believe it is absolutely critical you take into consideration the views of the appropriate authorizing committees.

In my view, there is no more critical function of our government than to provide for our national security and the protection of our citizens and interests around the world. The strength of our Nation's military not only ensures our safety and provides the foundation for our economic security at home, but it is the bedrock for regional and global stability in many parts of the world that creates the fundamental conditions for prosperity and economic growth for billions of people. Therefore, I believe that if your work is to be successful, it must take all steps possible to avoid further cuts to Department of Defense (DoD) spending beyond the more than $450 billion over the next 10 years that have already been directed by the President.

I believe that the current strategic review by DoD to achieve the massive spending cuts mandated by the President is the only responsible way to identify savings that will not put our national security interests and our all-volunteer military force at an unacceptable risk. Any major budget review, whether conducted by the Administration or Congress, must be accompanied by an honest and comprehensive review of current and future requirements and must include strategic priorities established by the Senate and House committees of jurisdiction. We must also address the threats that we will face in the future to adequately meet new and emerging challenges that may require a shift of resources and priorities.

Based on current needs of the DoD I do not and cannot not support any further cuts to the discretionary accounts for DoD beyond those the President has already directed. And, like Secretary of Defense Panetta, I do not support any proposals for any further reductions in the discretionary budget caps for security or non-security agencies beyond the limits already imposed in title I of the Budget Control Act. I fully support the President's decision not to propose any additional reductions in defense spending limits beyond those he has already called for.

On the issue of mandatory spending, the President recommended that the Select Committee examine changes in military health benefits and offered two TRICARE benefit changes that would reduce, but not eliminate, DoD's financial responsibility for providing generous health care benefits for current military families and retirees. I support the Select Committee's examination of these programs, but offer these observations.

One proposal would establish an annual enrollment fee for TRICARE for Life which currently has no fee for participation. This proposal would be the first such change since Congress established this program in 2001, a period during which national health care costs have risen significantly. If adopted, the proposed fee would still keep the cost of TRICARE for Life well below the costs of comparable "Medigap" policies paid by non-DoD healthcare beneficiaries and would reduce entitlement spending significantly. While this fee increase would hit those age 65 and over, a group on mostly fixed incomes who are vulnerable to unanticipated changes in expenses, I believe this fee increase is a reasonable step and should be considered.

The President's second proposed change to military health benefits would increase fees for pharmacy services and lead to significant increases in out-of-pocket costs for most DoD beneficiaries. The intent of this proposal is to increase financial incentives to promote the use of DoD's less-costly mail-order pharmacy program. While generating savings from the TRICARE pharmacy benefit is feasible, I recommend that you consult with DoD. I also note that pharmacy fee increases are likely to generate both mandatory and discretionary savings, and that DoD could adopt TRICARE pharmacy fee increases independent of the Select Committee in order to reach the discretionary savings goal of more than $450 billion mandated by the President. Coordination with DoD will be necessary to avoid double counting of savings from pharmacy fee changes.

Further, I believe strongly that if fees for pharmacy services are raised in any way that the DoD and the Department of Veterans Affairs must be allowed to use their market force buying power to negotiate lower pharmaceutical costs and that any savings generated by that action be passed on to the men and women who use these services. We cannot allow these fees to be raised without this action.

In addition to the President's proposals, the Congressional Budget Office (CBO) report, "Reducing the Deficit: Spending and Revenue Options," highlights the large potential savings of up to $111 billion over 10 years that could be achieved by restricting working-age military retirees and their dependents from enrolling in TRICARE Prime, the military healthcare option with the lowest out-of-pocket expenses. This CBO option would still allow such retirees and their families access to extremely low-cost medical coverage through TRICARE Standard or Extra, and the option of seeking care at no cost on a space-available basis at military treatment facilities. Active duty personnel would continue to be enrolled automatically in TRICARE Prime, and families of active duty personnel could continue to enroll in Prime at their election. Given the large potential savings of this option, I recommend the Select Committee give this proposal, and the other CBO options involving TRICARE reform, consideration in coordination with DoD. The Co-Chairs' Proposal of the National Commission on Fiscal Responsibility and Reform (the "Simpson-Bowles Commission") also includes a variation of previous TRICARE proposals that merits review.

I also support the President's proposal to establish a commission to review military retirement benefits, and I believe such a commission, and a BRAC-like approach to its recommendations, should also consider changes to the current, largely-outdated military compensation system. That said, I strongly agree with Secretary of Defense Panetta that all current retirees and those currently serving in the military should be "grandfathered" so their current or anticipated retirement benefits are not reduced. While I understand that this limitation would delay most potential savings resulting from reform of military retirement benefits to beyond the 10-year window addressed by the Budget Control Act, it is absolutely essential to honor the commitments we have made to those Americans who have voluntarily chosen to serve their country, particularly given the sacrifices imposed on our military during the last 10 years of war. I will rigorously oppose any recommendation that would break that trust.

The President has also proposed a binding cap on funding for Overseas Contingency Operations (OCO) in order to claim savings from an already anticipated significant reduction in spending on Iraq and Afghanistan compared to the current baseline used by the Congressional Budget Office. I do not support capping OCO spending by some arbitrary number over the next 10 years. At this point, we know that the United States will have long-term relationships with Iraq and Afghanistan that will likely involve the continued presence of some number of U.S. troops. We do not know the exact parameters of such troop commitments or their duration and to hazard a guess looking forward over the next 10 years is a folly that could significantly and negatively impact our ability to sustain the fruits of years of sacrifice by our troops and the investment of hundreds of billions of dollars. Spending on our overseas contingencies should be flexible enough to respond to whatever changes are driven by facts on the ground and should not be bounded by arbitrary and inflexible caps.

Finally, you have a special opportunity to effect real change in a bipartisan way on the spending habits of the Federal Government which have degraded into pork-barrel spending on special interests that is unacceptable during normal times and inexcusable during our current fiscal crisis and time of record deficits. I believe you should seek to restore responsible spending on the part of Congress by requiring that each appropriations line item be authorized by the relevant authorization committee charged by Congress to provide oversight of that agency's activities and programs. As part of its mandate to find savings throughout the federal budget, the Select Committee must look for ways to restore fiscal discipline within Congress and to rein in pork-barrel spending.

I realize you have much to do and very little time to do it in. I stand by to offer you any assistance I can so that your recommendations will ultimately be successful in satisfying the mandate imposed by our unprecedented fiscal crisis.


John McCain

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