Why You Shouldn’t Be Upset About Budget ‘Cuts’

Why You Shouldn't Be Upset About Budget 'Cuts' http://wp.me/p1d7d0-9q1

Every single time I hear of any proposed changes to any military benefits, they’re quickly followed by the standard comments: “This is just the start,” “If we let them take this, they’ll take more,” and my personal pet peeve, “It’s a slippery slope.”

I’ve had my eye on military benefits for over 20 years, and what I’ve seen is a huge increase in benefits available to military families, with very few overall cutbacks. If you feel like there have been cuts, you’re not exactly wrong. Yes, benefits seem less generous if you only compare the current system with what was offered at the height of the current wars. But that’s not surprising — making benefits better so that more people want to serve is just logical.

But are we under the intense benefit cuts that others seem to think (including writers on this site)? Historically, no. Historically speaking, we are now in the money and life is good.

Let’s look at a few controversial topics:

Basic Allowance for Housing

The government’s funding of housing costs for military members has climbed dramatically in the last 20 years, with average covered costs rising from around 80% to a current 99%. In 1996, what we now call Basic Allowance for Housing (BAH) was a different program that utilized two allowances, Basic Allowance for Quarters (BAQ) and Variable Housing Allowance (VHA). BAQ was a set rate tied to pay rates, and VHA varied based upon your location, pay grade, and dependency status. In theory, BAQ plus VHA was supposed to cover 85% of housing expenses, but the way that BAQ was calculated meant that the average total housing allowance covered closer to 80% of average housing costs. Today, BAH is designed to cover 99% of housing expenses, with a plan to reduce it to 95% in future years.

In addition, the amount of VHA that you received depended on your actual housing costs. If your housing expenses did not use the entire amount of your VHA, then the allowance was “offset” so that you only received one-half of the difference. Today, service members receive the full amount of BAH even if they pay no housing costs at all.

The VHA offset particularly penalized military members who chose to share with other military members, or dual military couples. Often, sharers or dual military would receive significantly smaller VHA payments than their counterparts who chose to live alone or were married to civilians. Today, dual military couples each receive BAH.

Rate protection for housing allowances didn’t happen until 1997. Prior to then, if the rate for your area when down, you got the lower rate regardless of your actual expenses. Today, service members retain the higher BAH rate as long as they are stationed in the same area, no matter how low actual housing costs fall.

Housing allowances: big wins for the service member.

Post 9/11 GI Bill

The subject of this week’s outrage, the Post 9/11 GI Bill is a relatively new program and it represents a huge increase in benefits over its predecessor.

In 1996, the available veterans’ education benefit was the Montgomery GI Bill. In return for forfeiting $100 of pay for each of the first 12 months of service, the veteran would be eligible to receive up to 36 months worth of set monthly payments designed to cover both the cost of the education and any living expenses. For reference, the current basic monthly Montgomery GI Bill benefit rate is $1789.00, with lower amounts for certain situations. The Post 9/11 GI Bill does not require any “buy-in,” and it provides up to $21,084.89 per academic year per year in tuition coverage, a book stipend, and a monthly housing allowance based upon the location of the school (currently topping out over $4,000 per month for the most expensive places in the US.)

Montgomery GI Bill benefits expired ten (10) years after leaving the military. Post 9/11 GI Bill benefits expire 15 years after leaving the military, for the veterans themselves and for spouses using transferred benefits. Children using transferred benefits have until age 26, regardless of how long the veteran who earned the benefit has been out of the military.

Montgomery GI Bill benefits were available to nearly all enlisted service members and some officers, depending on the funding of their original college education. Post 9/11 GI Bill benefits are available to all military members.

In addition, there is absolutely no way to compare the ability to transfer Post 9/11 GI Bill benefits to spouses or children. This option, which became available in 2009, is unprecedented and will probably never be seen again.

You can’t even compare the educational benefits available today to the educational benefits available 20 years ago – the value is so much higher now that a comparison isn’t fair.

Tricare Health Coverage

Despite the concern about cuts to Tricare benefits, many benefits are less expensive or more generous than they were 20 years ago.

In 1996, military families were covered by various Tricare offerings almost identical to the Tricare offered today. One notable difference is that in 1996, active duty family members who used Tricare Prime coverage for civilian care were responsible for co-pays for service. This was eliminated in 2001.

In 1996, dependent children lost all Tricare options when they turned age 21, or age 23 if a full-time student. In 2016, dependent children beyond those ages are eligible to purchase highly competitive Tricare Young Adult until they turn 26.

In 1996, military retirees below the age of 65 were eligible to choose between Tricare plans including Tricare Prime, Tricare Standard, and Tricare Extra. Those who selected Tricare Prime paid annual premiums of $460 per year for family coverage. In 2016, that same coverage costs $565.20/year for a retired family, with prices frozen for survivors of active duty deaths or medically retired service members and their families. Note that $460 in 1996 dollars is approximately $708.80 in today’s dollars, and that similar civilian health care plans have increased even more significantly during this time. To have premiums that don’t even keep up with inflation seems like a win to me. Also interesting to note: It is estimated that if Tricare retiree premiums had increased at the same rate of increase as comparable civilian health care plan premiums, Tricare for retirees would currently cost more than $5,000 per year.

In 1996, military retirees and their dependents age 65 and over were excluded from military health care insurance. They were eligible for Medicare, including paying certain Medicare premiums, and many purchased costly Medicare supplements to ensure that their health care coverage was adequate. In 2016, retirees and their dependents age 65 and older are covered by Tricare for Life. Tricare for Life requires enrollment in Medicare and the payment of Medicare Part B premiums, but covers nearly all other care (excluding long-term care) with no deductible, no premiums, and no cost-shares.

While there have not been huge increases in Tricare benefits, there has been no erosion of benefits, and the addition of Tricare for Life and Tricare Young Adult have greatly benefited many military families.

Death Gratuity, SGLI, SBP, and other death benefits

The benefits to take care of military survivors have also grown in the last 20 years.

In 1996, the family of a fallen service member could expect to receive:

$6,000 death gratuity,

monthly Dependency and Indemnity Compensation (DIC) payment, with 2016 rate of $1254.19 for a spouse, and additional amounts for children,

up to 45 months of Survivors’ and Dependents’ Educational Assistance Program (DEA) benefits for each eligible beneficiary. Current DEA benefits are $1003 per month to pay for tuition and living expenses,

180 days of base housing or the equivalent in BAH payment, and

$200,00 in service members’ Group Life Insurance (SGLI) benefit, or a lower amount as selected by the service member.

The family of a service member who dies in 2016 will, in most cases, receive:

  • $100,000 death gratuity, paid almost immediately,
  • monthly Survivor Benefit Plan (SBP) payments in the amount of 55% of 75% of base pay, offset by the Dependency and Indemnity Compensation (DIC) payments as allowed by law,
  • monthly Dependency and Indemnity Compensation (DIC) payment, with a 2016 rate of $1254.19 for a spouse, and additional amounts for children,
  • Marine Gunnery Sergeant John David Fry Scholarship benefits for each eligible beneficiary, equal to the benefits of the Post 9/11 GI Bill, including up to $21,084.89 per academic year per year in tuition coverage, a book stipend, and a monthly housing allowance based upon the location of the school,
  • 365 days of base housing or the equivalent in BAH payment, transitional medical benefits, during which time medical benefits are available at the active duty rates vs. the retiree rates. Transitional medical benefits are available for three years for the spouse and up to age 21 or 23 for children, and
  • $400,000 in SGLI benefit, or a lower amount as selected by the service member.

Survivors of fallen service members receive significantly more benefits in 2016 than in 1996, including nearly $100,000 more in additional cash benefits from the military, $200,000 additional SGLI (if not declined), possible additional monthly income due to SBP for active duty members, and drastically larger educational benefits.

In addition to these four major benefits groups, there are literally hundreds of smaller programs and benefits that are new in the last 20 years. These include:

  • MyCAA educational assistance,
  • spouse employment and hiring initiatives,
  • Military and Family Life Consultant program,
  • protections of the Military Spouses Residency Relief Act,
  • free tax preparation through VITA, Military One Source’s H&R Block online program, or other resources,
  • Expanded child care options,
  • On-base computer labs,
  • Tutor.com educational assistance, and
  • Free resources including downloadable music and books through the individual services online library systems.

These additional advantages are just the ones I could think of quickly at the end of writing this challenging and research-intensive post; there are many more.

When I hear military families complaining about how their benefits are being cut, I can only assume that they have no idea what they’re talking about, and it frustrates me. Military families are being better compensated and receive more benefits than at any other time in the history of our country. As a result, the outrage over potential changes sounds a lot more like entitlement and selfishness than legitimate concern.


Photo from CheapFullCoverageAutoInsurance.com via the Creative Commons license.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.