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Conclusions

Savings equal to the pension payments currently made during the time period represented by accumulated unused leave can be obtained by revision of existing law to prohibit such overlapping of compensation.

Recommendations

OSD 27-1: The effective date for the commencement of retirement pay should be moved forward from the active duty termination date by the number of days of accumulated unused leave. This will ensure that a retiring member does not receive retirement pay for a period during which he or she is also eligible for active duty compensation.

Savings and Impact Analysis

The Office of the Secretary of Defense (OSD) Task Force calculated that savings of $37.9 million would have been realized in FY 1981 if this proposal had been in effect. FY 1981 was the latest year for which actual data were available on the number of retirees and their average number of days of accumulated unused leave. Estimated savings are calculated in Exhibit II-16, at the end of this issue.

Assuming an annual inflation factor of 10 percent, the estimated savings in the first three years would be:

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DOD should seek legislation to provide for commencement of retirement benefits subsequent to expiration of accumulated leave.

Exhibit II-15

ACCUMULATED UNUSED LEAVE AT TIME OF RETIREMENT
(Average Number of Days)

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Source: "Justification of Estimates for Fiscal Year 1983."

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Source:

"DOD Statistical Report on the Military Retirement System, FY 1981."

II. ISSUES AND RECOMMENDATION SUMMARIES (CONT'D)

D. HEALTH ISSUES

OVERVIEW

The health care costs of the Department of Defense (DOD) have risen significantly over the past few years, without sign of abatement.

DOD's cost experience is exacerbated by the interplay between the direct care system and the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). While these two systems should be closely tied together in order to make efficient use of DOD's health care dollars, they are not well coordinated. In fact, those incentives which are in place strike in the wrong direction.

On the whole, the direct care hospitals are seriously underutilized, with average occupancy levels far below those considered marginal for civilian hospitals. While this should encourage diversion of CHAMPUS users to the direct care system, it simply has not. Because the direct care systems are budgeted within the services and CHAMPUS is budgeted by the Office of the Secretary of Defense (OSD), financial incentives cause the direct care facilities to push prospective patients to CHAMPUS.

The OSD Task Force has determined that DOD's current organization with respect to health care makes cost effective management impossible. While it is provided by law that the Assistant Secretary of Defense for Health Affairs is responsible for the overall supervision of DOD health affairs, effective control is limited to CHAMPUS and the Tri-Service Medical Information System Program Office. The services directly control their respective direct care systems with minimal oversight by OSD.

Strong centralized management must be put in place to coordinate, plan and allocate resources and oversee health care delivery. This centralization would also be useful for enhancing medical readiness for wartime. The OSD Task Force recommends that a Defense Health Agency be established under the direction of the Assistant Secretary of Defense for Health Affairs.

Health care decisions throughout DOD should be made through a health care management chain, not by operational military leaders.

The OSD Task Force also recommends several cost containment steps similar to those utilized in private sector health plans.

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