Military Health Care Endangered by Cuts, Pentagon Says

The Pentagon “might not have enough funds” to pay for its health-care system under automatic spending cuts set to take effect March 1, according to Deputy Defense Secretary Ashton Carter.

A funding gap for the military health-care program called Tricare is among risks from the cuts, known as sequestration, that Carter cited today in testimony prepared for the Senate Armed Services Committee. He was to testify alongside General Martin Dempsey, chairman of the Joint Chiefs of Staff, representatives of the military services, and Pentagon Comptroller Robert Hale.

An across-the-board reduction of about $46 billion imposed on defense programs in the final seven months of the current fiscal year threatens “significant and damaging cuts in nearly every budget category,” Carter said, as Pentagon officials press Congress to craft an alternative that would avert the automatic cuts.

“These devastating events are no longer distant problems,” said Carter. He said “the wolf is at the door.”

Over a decade, the across-the-board cuts would strip $1.2 trillion from government programs, about half of that from defense programs.

The Pentagon faces additional spending restrictions this fiscal year if a stopgap spending measure that’s funding the government through March 27 is extended. The measure freezes Pentagon spending at fiscal 2012 levels.

Unpaid Leave

If the automatic cuts take effect, the military services and defense agencies “will begin laying off a significant portion of our 46,000 temporary and term employees,” Carter said.

The services also are likely to furlough most of the Pentagon’s 800,000 civilian employees one day a week for as long as 22 weeks, resulting in a 20 percent pay cut, Carter said.

The unpaid leave at the Department of Defense would save at most about $5 billion of the $46 billion needed, Carter said.

“Thus, much more cutting of DoD spending will result, affecting many defense workers who are not direct defense employees,” he said.

Carter offered to return 20 percent of his salary to the Treasury Department if furloughs commence and he encouraged all executive and legislative branch officials to do the same.

‘A Mess’

In dollar terms, sequestration wouldn’t cut the Pentagon that deeply, said Todd Harrison, a defense budget analyst with the nonpartisan Center for Strategic and Budgetary Assessments. It would cut “roughly 9 percent of the DoD budget, taking it back to the level it was in 2007 when adjusted for inflation,” he said.

The difficulty “is not the magnitude of the cuts but rather the across-the-board manner in which they are applied,” creating “a mess” with the Pentagon forced to furlough civilian employees and default on certain multiyear contracts, Harrison said in an e-mail.

“Congress could avoid much of that mess by simply giving DoD the ability to choose how the cuts are implemented,” Harrison said.

Readiness Hit

Dempsey told reporters traveling with him to Afghanistan over the weekend that the automatic budget cuts this fiscal year will fall on readiness of U.S. forces more than on major weapons programs.

“Some of the stuff in these big procurement accounts are already locked in for this calendar year and you just can’t touch them,” Dempsey said. “That’s why readiness is going to be so dramatically affected this year.”

Readiness includes training for U.S. forces and operations and maintenance funds for war-fighting equipment.

By the end of this year, about two-thirds of the Army’s active and reserve brigade combat teams, excluding those in Afghanistan, “will be at reduced readiness levels,” Carter said.

The Navy might be forced to reduce by one third the operation of ships and aircraft in the Asia-Pacific region, he said.

Before it's here, it's on the Bloomberg Terminal.