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Report to Congressional Committees:

United States General Accounting Office:

GAO:

September 2003:

Military Personnel:

DOD Needs More Data to Address Financial and Health Care Issues 
Affecting Reservists:

GAO-03-1004:

GAO Highlights:

Highlights of GAO-03-1004, a report to congressional committees

Why GAO Did This Study:

Since the 1991 Persian Gulf War, National Guard and Reserve personnel 
have been deployed to a number of contingency operations. Since 
September 2001, about 300,000 reservists have been called to active 
duty, and the pace of reserve operations is expected to remain high 
for the foreseeable future. House Report 107-436 accompanying the 
Fiscal Year 2003 National Defense Authorization Act (P.L. 107-314) 
directed GAO to review compensation programs for reservists serving on 
active duty. GAO evaluated information on income change reported by 
reservists when activated; reserve familiesí readiness for call-ups 
and their awareness and use of family support programs, focusing on 
personal financial management; and a legislative proposal for the 
Department of Defense (DOD) to offer TRICARE, the militaryís health 
care program, to reservists and their families when members are not on 
active duty. 

What GAO Found:

DOD lacks sufficient information on the magnitude, the causes, and the 
effects of income change to determine the need for compensation 
programs targeting reservists who (1) fill critical wartime 
specialties, (2) experience high degrees of income loss when on 
extended periods of active duty, and (3) demonstrate that income loss 
is a significant factor in their retention decisions. Such data are 
critical for assessing the full nature and scope of income change 
problems and in developing cost-effective solutions. DOD self-reported 
survey data from past and current military operations indicate that 
activated reservists have experienced widely varying degrees of income 
change. While many reservists lost income, more than half of 
reservists had either no change or a gain in income. However, survey 
data are questionable primarily because it is unclear what survey 
respondents considered as income loss or gain in determining their 
financial status.  

DOD has placed greater emphasis on preparing reservistsí families for 
potential call-ups, yet survey data show that one-third of spouses do 
not feel prepared, over half of reservists are not aware of family 
support programs, and more than 90 percent of spouses do not use these 
programs. Personal financial management, one of DODís core family 
support programs, illustrates the continuing challenges DOD faces in 
providing outreach to reservists. The 2000 survey data showed that 61 
percent of reservists did not know whether personal financial 
management services were available. The survey also showed that 
reservists have financial problems similar to their active duty 
counterparts. DOD is taking steps to improve personal financial 
management, but it has not assessed the financial well-being of 
reserve families, assessed the impact of reservistsí financial 
problems on mission readiness, or determined how to tailor its 
programs to reservists. 

Available DOD data do not identify a need to offer TRICARE to 
reservists and their families when members are not on active duty. 
Estimates from DODís 2000 survey showed that nearly 80 percent of 
reservists had health care coverage when they were not on active duty. 
This rate is similar to that of comparable groups within the overall 
U.S. population. DOD has expressed concern over the estimated costs of 
this proposal. Cost estimates range up to $5.1 billion a year. 
However, DOD has not fully assessed the ramifications of this 
proposed legislation, including the impact on recruiting and 
retention, the effects on active duty personnel, the extent reservists 
and their families might participate in such a program, or the impact 
on the TRICARE system. In addition, a high percentage of reservistsí 
civilian employers who currently pay some or all of health care 
premiums for reservists during activations could discontinue providing 
such assistance. A number of recent improvements have been made to 
reservists and their familiesí health care when members are activated. 
However, DOD lacks data on problems reservists and their families have 
experienced with health care since the mobilizations following 
September 11, 2001; the causes of these problems; and their effects on 
readiness, recruiting, and retention.

What GAO Recommends:

GAO recommends that DOD determine the need for and, if necessary, 
develop targeted compensation programs to address income loss incurred 
by certain activated reservists; improve awareness and access to 
personal financial management programs; and assess the need for and 
ramifications of additional improvements to health care for reservists 
and their families. DOD concurred with our recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-03-1004.
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Derek B. Stewart (202) 512-5559 or 
stewartd@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

DOD Lacks Data to Determine the Need for Income Protection Programs:

DOD Faces Challenges in Family Readiness and Support:

DOD Has Not Fully Assessed the Need for Expansion of TRICARE to 
Nonactivated Reservists:

Conclusions:

Recommendations for Executive Action:

Matters for Congressional Consideration:

Agency Comments and Our Evaluation:

Appendix I: Scope and Methodology:

Appendix II: DOD Surveys of Reservists and Spouses:

Appendix III: Policies and Protections That May Help Mitigate Reservists' 
Financial Hardship During Activation:

Appendix IV: Selected States' Policies on Compensation for Activated 
Employees:

Appendix V: Preactivation Activities of Spouses of Activated Reservists:

Appendix VI: Comments from the Department of Defense:

Appendix VII: Staff Acknowledgments:

Tables:

Table 1: Estimates of Drilling Unit Members' Total Reported Change in 
Family Income for Mobilizations or Deployments Prior to 2001:

Table 2: Estimates of Spouses' Monthly Reported Change in Family Income 
during Activation:

Table 3: Reservists' Views on Availability of Selected Family Support 
Programs or Services:

Table 4: Income Assistance, Military Leave, and Health Benefits Offered 
to State Employees Called to Federal Active Duty:

Table 5: Comparison of Spouses' Preparedness to Preactivation 
Activities and Other Factors:

Figures:

Figure 1: Annual Number of Days Per Capita for Reserve Mobilizations 
and Support to the Services and Combatant Commands (Fiscal Years 1986-
2002):

Figure 2: Annual Basic Military Compensation for Selected Pay Grades 
(Fiscal Years 1990-2003):

Abbreviations:

COBRA: Consolidated Omnibus Budget Reconciliation Act:

DOD: Department of Defense:

OSD: Office of the Secretary of Defense:

United States General Accounting Office:

Washington, DC 20548:

September 10, 2003:

The Honorable John W. Warner 
Chairman 
The Honorable Carl Levin 
Ranking Minority Member 
Committee on Armed Services 
United States Senate:

The Honorable Duncan Hunter 
Chairman 
The Honorable Ike Skelton 
Ranking Minority Member 
Committee on Armed Services 
House of Representatives:

Since the 1991 Persian Gulf War, National Guard and Reserve[Footnote 1] 
personnel have been deployed to a number of contingency operations, 
including those in Southwest Asia and the Balkans. About 300,000 
reservists have been called to active duty since September 2001 to 
support the war on terrorism, conflicts in Afghanistan and Iraq, and 
other operations. Some reservists have served for a year or more, and 
the pace of reserve operations is expected to remain high for the 
foreseeable future. Citing the increased reliance on the reserves, 
House Report 107-436 accompanying the Fiscal Year 2003 National Defense 
Authorization Act[Footnote 2] directed us to review 
compensation[Footnote 3] programs for reservists serving on active 
duty. Our objectives were to evaluate (1) information on income change 
reported by reservists when activated for a military operation to 
determine the need for compensation programs; (2) reserve families' 
readiness for call-ups and their awareness and use of family support 
programs, specifically focusing on personal financial management; and 
(3) a legislative proposal for the Department of Defense (DOD) to offer 
TRICARE, the military's health care program, to reservists and their 
families when members are not on active duty. This report is a follow-
on to our March 2003 testimony, Military Personnel: Preliminary 
Observations Related to Income, Benefits, and Employer Support for 
Reservists During Mobilizations, GAO-03-549T (Washington, D.C.: Mar. 
19, 2003).[Footnote 4]

Military compensation is one of the tools DOD uses to attract, retain, 
and motivate people. One of DOD's guiding principles for military 
compensation is that servicemembers, both reserve and active component 
members, be treated fairly.[Footnote 5] Military compensation for 
reservists is affected by the type of military duty they perform. In 
peacetime--when a reservist is training or performing military duty not 
related to a contingency operation--certain thresholds are imposed at 
particular points in service before a reservist is eligible to receive 
the same compensation as a member serving in the active component. For 
contingency operations, these same thresholds generally do not apply. 
Thus, reservists activated for contingency operations such as Iraqi 
Freedom, Noble Eagle, and Enduring Freedom are generally eligible to 
receive the same compensation as active component personnel.[Footnote 
6]

Our review focused on the more than 870,000 reservists who generally 
drill and train part-time with their military units (referred to as 
drilling unit members in this report). To review compensation programs 
for reservists on active duty, we analyzed legislation, policies, and 
other pertinent documents; obtained and analyzed proposals to enhance 
reserve compensation; and discussed these with officials from the 
Office of the Assistant Secretary of Defense for Reserve Affairs, the 
Office of Military Compensation, the Deputy Under Secretary of Defense 
for the Office of Military Community and Family Policy, reserve 
component headquarters, and the TRICARE Management Activity. To gain 
the perspective of reservists and their spouses, we obtained and 
analyzed the results of a 2000 DOD survey of reservists, which covered 
reservists' experiences during military operations between 1991 and 
2000, and a 2002 DOD survey of spouses of activated reservists. (See 
app. I for more information on our scope and methodology and app. II 
for a description of the 2000 and 2002 surveys.) We completed our work 
for this report from March to July 2003 in accordance with generally 
accepted government auditing standards.

Results in Brief:

DOD lacks sufficient information on the magnitude, the causes, and the 
effects of income change to determine the need for compensation 
programs targeting reservists who meet three criteria: (1) fill 
critical wartime specialties, (2) experience high degrees of income 
loss when on extended periods of active duty, and (3) demonstrate that 
income loss is a significant factor in their retention decisions. Such 
data are critical for assessing the full nature and scope of income 
change problems and in developing cost-effective solutions. DOD self-
reported survey data from past and current military operations indicate 
that reservists have experienced widely varying degrees of income 
change when they are activated. A 2000 DOD survey of reservists showed 
that of those who served in military operations from 1991 to 2000, an 
estimated 59 percent of drilling unit members had no change or a gain 
in family income when they were mobilized or deployed for a military 
operation, and about 41 percent lost income. A higher percentage of 
reservists in certain groups, such as self-employed individuals and 
health care professionals, lost income compared with reservists 
overall. A 2002 DOD survey of spouses of activated reservists showed 
that an estimated 70 percent of families experienced a gain or no 
change in monthly income and 30 percent experienced a decrease in 
monthly income. However, survey data are questionable primarily because 
it is unclear what survey respondents considered as income loss or gain 
in determining their financial status. Although existing pay policies 
and protections may help mitigate reservists' financial hardship during 
activation, additional measures have been proposed to provide income 
protection to reservists. For example, the Army has proposed a new 
special pay targeting certain self-employed physicians to make up for 
some of the income loss they may experience while serving on active 
duty over an extended period of time. Targeted compensation programs, 
such as the Army's special pay proposal, could provide a cost-effective 
means of providing income protection to reservists who meet the three 
criteria above. Other proposals to provide income protection to 
reservists--including legislative proposals to provide differential 
pay to activated federal employees and an Air Force proposal to 
establish an income insurance program--are not targeted compensation 
programs.

Although DOD has placed greater emphasis on family readiness--preparing 
servicemembers and their families for potential activation--and on 
making family support services available during activation, many 
reserve families do not feel prepared and many do not use and are not 
aware of family support services. In 2002, one-third of spouses felt 
they were unprepared or very unprepared when the member was notified of 
active duty, and more than 90 percent of spouses did not use the 
military's family support programs. The 2000 survey estimates showed 
that more than half of reservists either did not know that family 
support services were available or thought they were unavailable. DOD 
officials acknowledge that they face outreach challenges in preparing 
families and providing family support and have expanded outreach 
efforts. Personal financial management, one of DOD's core family 
support programs, illustrates some of the challenges DOD faces in 
providing outreach to reservists. Under DOD policy, military personnel 
bear primary responsibility for the welfare of their families, but the 
commitment demanded by military service requires that they be provided 
a comprehensive family support system, to include financial planning 
assistance. DOD is taking some steps to improve servicemembers' 
personal financial management, including drafting a new policy and 
developing partnerships with nonprofit groups that support financial 
assistance programs. DOD, however, has not assessed the financial well-
being of reserve families or determined how to tailor its programs to 
this population. Our review of DOD survey data shows that reservists 
reported having many of the same financial problems as their active 
duty counterparts. The 2000 DOD survey showed that an estimated 61 
percent of drilling unit members did not know whether financial 
counseling and management education services were available, and 
another 16 percent did not think these services were available. In 
addition, DOD has found a link between financial problems and readiness 
in the active component. For example, the Navy identified $250 million 
in productivity and salary losses due to poor personal financial 
management. However, DOD has not assessed the impact of reservists' 
financial problems on mission readiness. DOD and the military services 
have noted a need to improve reservists' and their spouses' awareness 
of and access to personal financial management programs, but they have 
not tailored their programs to reservists by developing plans that 
specify how these needs will be met.

Available DOD data do not identify a need to offer TRICARE to 
reservists and their families when members are not on active duty. 
Estimates from DOD's 2000 survey showed that nearly 80 percent of 
reservists reported having health care coverage when they were not on 
active duty. This rate is similar to that of comparable groups within 
the overall U.S. population. DOD has expressed concern over the 
estimated costs of this proposal. Cost estimates range up to $5.1 
billion a year. However, DOD has not fully assessed the ramifications 
of this proposed legislation, including the impact on recruiting and 
retention, the effects on active duty personnel, the extent reservists 
and their families might participate in such a program, or the impact 
on the TRICARE system. In addition, a high percentage of reservists' 
civilian employers who currently pay some or all of health care 
premiums for reservists during activations could discontinue providing 
such assistance. A number of recent improvements have been made to 
reservists and their families' health care when members are activated. 
Recent improvements include earlier access to certain TRICARE programs 
when a member is activated and higher reimbursement rates for care 
received from physicians outside DOD's health care networks. However, 
DOD lacks data on problems reservists and their families have 
experienced in maintaining continuity of health care since the 
activations following September 11, 2001; the causes of these problems; 
and their effects on readiness, recruiting, and retention.

We are making recommendations in this report to (1) enhance DOD's 
ability to determine the need for and, if necessary, develop 
compensation programs targeted at reservists in critical specialties 
who experience high degrees of income loss when activated; (2) improve 
reservists' and their spouses' awareness of and access to personal 
financial management programs; and (3) assess the need for and 
ramifications of additional improvements to health care for reservists 
and their families. In commenting on a draft of this report, DOD 
concurred with our recommendations. On the basis of DOD's concurrence 
with our recommendation concerning reserve health care benefits, we are 
also including matters for congressional consideration concerning the 
legislative proposal to extend TRICARE benefits to nonactivated 
reservists and their families.

Background:

Components of the Reserve Forces:

The reserve forces are divided into three major categories, one of 
which is the Ready Reserve.[Footnote 7] The Ready Reserve, with 
approximately 1.2 million reservists at the end of fiscal year 2002, is 
further subdivided into the Selected Reserve, the Individual Ready 
Reserve, and the Inactive National Guard. The Selected Reserve, with 
approximately 880,000 members in fiscal year 2002, includes all 
personnel who are active members of reserve units and who participate 
in regularly scheduled drills and training. In this report, we refer to 
these personnel as "drilling unit members." The Selected Reserve also 
includes individual mobilization augmentees--individuals who regularly 
train with active component units. The Individual Ready Reserve 
principally consists of individuals who have had training and have 
previously served in the active forces or in the Selected Reserve, and 
the Inactive National Guard contains individuals who are temporarily 
unable to participate in regular training with the Guard unit. 
Together, the Individual Ready Reserve and Inactive National Guard had 
about 320,000 members in fiscal year 2002. There are seven reserve 
components--the Army Reserve, the Army National Guard, the Air Force 
Reserve, the Air National Guard, the Naval Reserve, the Marine Corps 
Reserve, and the Coast Guard Reserve.

Reserve Participation in Military Operations:

Since the end of the Cold War, there has been a shift in the way 
reserve forces have been used. Previously, reservists were viewed 
primarily as an expansion force that would supplement active forces 
during a major war. Today, reservists not only supplement but also 
replace active forces in military operations worldwide.[Footnote 8] In 
fact, DOD has stated that no significant operation can be conducted 
without reserve involvement. Figure 1 shows per capita involvement of 
reservists annually since 1986 and illustrates the spikes in reserve 
participation in military operations in fiscal years 1991 (Desert 
Shield and Desert Storm) and 2002 (Noble Eagle and Enduring Freedom), 
as well as a fairly steady level of involvement between 1996 and 2001. 
We derived per capita calculations by dividing the total days of 
support for military missions by the end strength of the Selected 
Reserve. However, force structure within the Selected Reserve qualifies 
only a portion of those available to serve for a particular mission. 
Despite this, the data highlight trends in the average number of 
support days served by reservists.

Figure 1: Annual Number of Days Per Capita for Reserve Mobilizations 
and Support to the Services and Combatant Commands (Fiscal Years 1986-
2002):

[See PDF for image]

Notes: GAO analysis of Office of the Assistant Secretary of Defense for 
Reserve Affairs data.

[End of figure]

This figure includes the contributions of the Coast Guard Reserve.

Mobilizations are operations using the Presidential Reserve Call-up or 
mobilization authorities. Support of the services or combatant commands 
is mission assistance provided under voluntary orders and includes both 
contingency operations and other missions. The figure excludes days for 
training as well as support for counterdrug operations, exercises, and 
domestic emergencies.

Per capita calculations are derived by dividing the total days of 
support for these missions by the end strength of the Selected Reserve. 
However, force structure within the Selected Reserve qualifies only a 
portion of those available to serve for a particular mission. Despite 
this, the data highlight trends in the average number of support days 
served by reservists.

There have been wide differences in the operational tempos[Footnote 9] 
of individual reservists in certain units and occupations. Prior to the 
current mobilization, personnel in the fields of aviation, special 
forces, security, intelligence, psychological operations, and civil 
affairs had been in high demand, experiencing operational tempos that 
were two to seven times higher than those of the average reservist. 
Since September 2001, operational tempos have increased significantly 
for reservists in DOD reserve components due to the partial 
mobilization in effect to support Operations Iraqi Freedom, Noble 
Eagle, and Enduring Freedom.

End Strength, Enlistment, and Attrition:

For each year from fiscal year 1997 to 2002, the reserves on the whole 
achieved at least 99 percent of their authorized end strength. In 4 of 
these 6 years, they met at least 100 percent of their enlistment goals. 
During this time period, enlistment rates fluctuated from component to 
component. For the fiscal year 1997-2002 period, only the Army National 
Guard experienced a slight overall increase in attrition.[Footnote 10] 
The attrition data suggest there has not been a consistent relationship 
between a component's average attrition rate for a given year and the 
attrition rate for that component's high demand capabilities (which 
include units and occupations). In other words, attrition rates for 
high demand capabilities were higher than average in some cases but 
lower than average in other cases. Shortfalls have been identified in 
certain specialties, such as health care professionals.

DOD's Use of Survey Data:

DOD uses surveys of reservists and their spouses to obtain information 
on reservists' income change when they are activated for a military 
operation and to obtain their perspective on a number of issues 
relating to activation, including family support and health care. The 
most recent survey of reservists was completed in 2000,[Footnote 11] 
prior to the terrorist attacks that occurred on September 11, 2001, and 
the ensuing mobilization. The 2000 survey included questions on various 
aspects of mobilization and deployment for operations dating back to 
the 1991 Persian Gulf War. In 2002, the Office of the Assistant 
Secretary of Defense for Reserve Affairs surveyed spouses of activated 
reservists.[Footnote 12] In 2003, DOD fielded a new "status of forces" 
survey of activated reservists. However, the survey had not been 
completed at the time we were conducting our work.

Roles and Responsibilities:

The Under Secretary of Defense for Personnel and Readiness has 
oversight for policies, plans, and programs for military personnel 
management, military compensation, and personnel support programs. The 
Assistant Secretary of Defense for Reserve Affairs is responsible for 
the overall supervision of issues involving reserve forces. The 
Assistant Secretary of Defense for Health Affairs has the 
responsibility to execute DOD's health care mission. The TRICARE 
Management Activity manages and executes the Defense Health Program 
Appropriation and supports the uniformed services in implementation of 
TRICARE. Regarding family support programs, the secretaries of the 
military departments are responsible for, among other things, ensuring 
that comprehensive family support systems are developed at DOD 
installations and that family support systems are monitored and 
evaluated to ensure that they are accessible, effective, and responsive 
to the needs of DOD personnel and their families.

Recent GAO Reports on Reserve Forces:

We have previously reported on several issues surrounding the increased 
use of reserve forces. In August 2003, we reported on the efficiency of 
DOD's process for mobilizing reservists following September 11, 
2001.[Footnote 13] In April 2003, we examined whether the Army was 
collecting and maintaining information on the health of early-deploying 
reservists.[Footnote 14] In March 2003, we testified before the 
Subcommittee on Total Force, House Committee on Armed Services, on our 
preliminary observations related to the issues covered in this report, 
as well as employer support.[Footnote 15] Also in March 2003, we 
testified before the Subcommittee on Total Force concerning DOD's 
oversight of TRICARE's network of civilian providers, and we issued a 
report on this topic in July 2003.[Footnote 16] In September 2002, we 
issued a report in response to a congressional mandate to study the 
health care benefits of reserve component members and dependents and 
the effect mobilization may have on these benefits.[Footnote 17] In 
June 2002, we noted that maintaining employers' continued support for 
their reservist employees will be critical if DOD is to retain 
experienced reservists in these times of longer and more frequent 
deployments.[Footnote 18]

DOD Lacks Data to Determine the Need for Income Protection Programs:

DOD lacks sufficient information from the survey data to determine the 
magnitude of income loss or gain experienced by reservists, the causes 
for this change, and the effects of income loss on reserve retention. 
Such data are critical for assessing the full nature and scope of 
income change problems and in developing cost-effective solutions. DOD 
self-reported survey data from past and current military operations 
indicate that reservists have experienced widely varying degrees of 
income change when they are activated. While many reservists have 
reported lost income during activation, more than half of reservists 
have reported either no change or a gain in income. Current pay 
policies and protections, as well as emergency aid services, may help 
mitigate reservists' financial hardship during activation. Additional 
income protection initiatives for reservists have been proposed. Three 
of these proposals are (1) an Army initiative to provide special 
deployment pay to self-employed physicians who fill critical medical 
wartime positions in the reserves, (2) legislative proposals to 
authorize differential pay for federal employee reservists, and (3) an 
Air Force initiative to establish an income insurance program for 
activated reservists.

Information on Magnitude, Causes, and Effects of Income Loss Is 
Incomplete:

The 2000 and 2002 DOD surveys provide incomplete information on the 
magnitude of income change experienced by activated reservists, the 
causes of income loss, and the effects of income loss on reservists' 
attitudes toward military life and on retention. Such data are critical 
for assessing the full nature and scope of income change problems and 
in developing cost-effective solutions. Based on the 2000 survey data, 
DOD estimated that the average total income change for all reservists 
(including losses and gains) was almost $1,700 in losses. However, this 
figure should be considered with caution because of the estimating 
methodology that was used and because it is unclear what survey 
respondents considered as income loss or gain in answering this 
question.[Footnote 19] For example, when members reported income loss 
or gain, they may or may not have included the value of indirect 
compensation, such as health care benefits, or considered changes in 
their expenses, such as those for household and car maintenance and for 
child care. In addition, it is unclear whether survey respondents 
included paid civilian leave received concurrently with military pay or 
whether they included differential pay if provided by their employer. 
Further, reservists were mobilized or deployed for varying lengths of 
time, which is likely to affect their overall income change. According 
to DOD's analysis of the survey data, certain groups reported greater 
losses of income on average. For example, self-employed reservists 
reported an average income loss of $6,500, physicians/registered nurses 
reported an average income loss of $9,000, and self-employed 
physicians/registered nurses reported an average income loss of 
$25,600. DOD's analysis presents little data on those groups who 
reported an overall income gain. Two groups that were identified as 
reporting a gain were clergy and those who worked for a family business 
without pay.

The existing survey data provide incomplete information on the causes 
of income change. Income change can be attributed to various factors, 
including a difference between civilian and military pay, a change in 
spousal income, a change resulting from continuing losses from a 
business or practice, a different job being performed, or some 
combination of these. The 2002 spouse survey estimates showed that 
about 60 percent had an increase in the military member's earnings, 10 
percent had an increase in their own earnings due to working more hours 
or taking a second job, 31 percent had a reduction in the military 
member's earnings, 19 percent had a reduction in their own earnings 
because they were unable to work as much, 6 percent had other increases 
in income, and 15 percent had other reductions in income. In addition 
to these factors, military households may also experience a change in 
expenses during the activation period. The 2000 survey estimates showed 
that about 22 percent of drilling unit members had an increase in 
child-care expenses, 26 percent had an increase in household 
maintenance and car repair expenses, and 63 percent had an increase in 
telephone expenses. However, neither survey provides complete 
information on the extent these individual factors contribute to 
overall income change.

Although reservists have reported that income loss causes problems for 
them, the effects of these problems are not clear. When asked to rank 
income loss among other problems they have experienced during 
mobilization or deployment, about 41 percent of drilling unit members 
ranked it as one of their most serious problems.[Footnote 20] But the 
survey data are inconclusive concerning the effects of income loss 
problems on servicemembers' attitudes toward military life or on 
retention. Our prior work has shown that retention decisions are highly 
personal in nature and that many factors may affect the decision of a 
servicemember to stay in the military or leave. A 1998 RAND study 
conducted for DOD found that income loss during the 1991 Persian Gulf 
War, while widespread among reservists, did not have a measurable 
effect on the retention of enlisted reservists.[Footnote 21] The study 
was cautiously optimistic that mobilizing the reserves under similar 
circumstances in the future would not have adverse effects on enlisted 
recruiting and retention. However, the effects of future mobilizations 
can depend on the mission, the length of time reservists are deployed, 
the frequency of deployment, the degree of support from employers and 
family members, and other factors. Office of the Secretary of Defense 
(OSD) officials told us it was too early to know how the current 
mobilization would affect retention or what factors would be driving 
reservists' retention decisions.

Reservists Have Experienced Widely Varying Degrees of Income Loss or 
Gain:

The 2000 DOD survey showed that an estimated 41 percent of reservists 
who were drilling unit members in the Selected Reserve lost family 
income when they were mobilized or deployed for a military operation, 
30 percent had no change in income, and 29 percent had an increase in 
income. Table 1 shows the distribution of income change reported by 
drilling unit members in the 2000 survey.

Table 1: Estimates of Drilling Unit Members' Total Reported Change in 
Family Income for Mobilizations or Deployments Prior to 2001:

Total income change: Decreased $50,000 or more; Percentage: 0.9.

Total income change: Decreased $25,000 to $49,999; Percentage: 1.5.

Total income change: Decreased $10,000 to $24,999; Percentage: 4.1.

Total income change: Decreased $5,000 to $9,999; Percentage: 6.0.

Total income change: Decreased $2,500 to $4,999; Percentage: 8.9.

Total income change: Decreased $1 to $2,499; Percentage: 19.5.

Total income change: Subtotal; Percentage: 40.9.

Total income change: No change in income; Percentage: 30.0.

Total income change: Subtotal; Percentage: 30.0.

Total income change: Increased $1 to $2,499; Percentage: 16.6.

Total income change: Increased $2,500 to $4,999; Percentage: 6.8.

Total income change: Increased $5,000 or more; Percentage: 5.7.

Total income change: Subtotal; Percentage: 29.1.

Total income change: Total; Percentage: 100.0.

Sources: DOD 2000 Reserve Component Survey (data); GAO (presentation).

[End of table]

Our analysis of the 2000 DOD survey estimates showed that differences 
in total family income change were attributable to different civilian 
occupations. For example, a higher percentage of self-employed 
reservists lost income (55 percent)[Footnote 22] compared with drilling 
unit members overall (41 percent). About 10 percent of self-employed 
drilling unit members had income loss of $25,000 or more, compared with 
about 3 percent for drilling unit members overall. The percentage of 
federal employee reservists who lost income did not differ 
statistically from the overall average for drilling unit members. Of 
federal employee reservists, about 39 percent had an income loss, and 
62 percent had no change or a gain in income.[Footnote 23] Of 
reservists in selected civilian career fields,[Footnote 24] a higher 
percentage of health care professionals had income loss compared with 
reservists in other career fields, and about 38 percent of health care 
professionals[Footnote 25] had an income loss of $25,000 or more. 
Income change differences were also evident based on reserve component 
and pay grade. For example, a higher percentage of members in the 
Marine Corps Reserve and the Naval Reserve had income loss compared 
with members of the Army National Guard.

The 2002 DOD survey of spouses of activated reservists found that an 
estimated 58 percent had an increase in monthly family income, 30 
percent had a loss in monthly income, and 12 percent experienced no 
change in monthly income (see table 2).

Table 2: Estimates of Spouses' Monthly Reported Change in Family Income 
during Activation:

Monthly income change: Decreased more than $3,500; Percentage: 3.

Monthly income change: Decreased $2,001-$3,500; Percentage: 4.

Monthly income change: Decreased $1,001-$2,000; Percentage: 7.

Monthly income change: Decreased $501-$1,000; Percentage: 8.

Monthly income change: Decreased $251-$500; Percentage: 6.

Monthly income change: Decreased $1-$250; Percentage: 2.

Monthly income change: Subtotal; Percentage: 30.

Monthly income change: No change; Percentage: 12.

Monthly income change: Subtotal; Percentage: 12.

Monthly income change: Increased $1-$250; Percentage: 8.

Monthly income change: Increased $251-$500; Percentage: 12.

Monthly income change: Increased $501-$1,000; Percentage: 16.

Monthly income change: Increased $1,001-$2,000; Percentage: 14.

Monthly income change: Increased $2,001-$3,500; Percentage: 6.

Monthly income change: Increased more than $3,500; Percentage: 2.

Monthly income change: Subtotal; Percentage: 58.

Monthly income change: Total; Percentage: 100.

Sources: DOD (data); GAO (presentation).

[End of table]

Additional Income Protection Measures Have Been Proposed to Supplement 
Existing Pay Policies and Protections:

Current pay policies and protections, as well as emergency aid 
services, may help mitigate reservists' financial hardship during 
activation. For example, basic military compensation has increased in 
recent years. In addition, the Soldiers' and Sailors' Civil Relief Act 
provides numerous financial protections to reservists. (See app. III 
for more information on existing pay policies and protections.) 
Additional income protection measures for reservists have been 
proposed. Three proposals are (1) an Army initiative to provide special 
deployment pay to self-employed physicians who fill critical medical 
wartime positions in the reserves, (2) legislative proposals to 
authorize differential pay for federal employee reservists, and (3) an 
Air Force initiative to establish income insurance for activated 
reservists.

Special Deployment Pay for Physicians in Critical Wartime Specialties:

The Army, through DOD's Unified Legislation and Budgeting 
process,[Footnote 26] has proposed a special deployment pay to limit 
income loss and improve retention of certain Army Reserve Medical Corps 
physicians. The pay would be targeted at reservists called to active 
duty who are (1) self-employed,[Footnote 27] (2) serve as officers in 
the Army Reserve Medical Corps in critical wartime medical specialties, 
and (3) deploy involuntarily beyond the established rotation. The 
special deployment pay would be available during contingencies and 
funded through a supplemental appropriation. Under this proposal, an 
eligible reservist would receive an additional monthly pay that would 
vary by specialty, level of training, and years of active duty service 
as a Medical Corps officer. The monthly pay would be limited to no more 
than twice the special pay currently earned by an eligible individual. 
The Army estimates the mean cost at $6,000 per month per eligible 
professional. The Army estimates that had this pay policy been in place 
in May 2003, Army Reserve physicians deployed beyond the established 
rotation period (90 days) would have received a total of $630,000 in 
special deployment pay for that month.[Footnote 28]

According to the Army, this special pay is needed because of 
difficulties retaining and replacing fully trained physicians[Footnote 
29] in the Army Reserve Medical Corps to meet its wartime needs. These 
retention difficulties are due, in part, to reservists' concerns about 
financial loss during deployment. According to the Army, it has been 
unsuccessful in recruiting and retaining enough fully trained 
physicians to meet authorized personnel levels in the Selected Reserve 
and has had to rely on transfers from the Individual Ready Reserve to 
reconstitute its Selected Reserve strength. The Army attributes 
retention challenges within the reserves to a decrease in the number of 
active duty physicians transferring to the reserve component, attrition 
due to an aging force and professionals meeting retirement eligibility, 
and the inability of some medical professionals to tolerate income loss 
resulting from frequent or lengthy activations.

Every 2 years, the Assistant Secretary of Defense for Health Affairs 
publishes a list of critical officer skills needed to meet Ready 
Reserve medical shortages and for which the services could offer 
retention and recruiting incentives. During fiscal years 2002 and 2003, 
the Army Reserve was projected to have critical shortages--that is, 
projected to fill less than 80 percent of authorized positions during 
the next 24 months--in 18 wartime health care specialties, such as 
general surgery, thoracic surgery, and preventative medicine. For 
example, as of January 2003, the Army Reserve had filled 78 percent of 
authorized general surgeon positions, 62 percent of thoracic surgeon 
positions, and 41 percent of preventative medicine positions.

A 1996 survey conducted for the Chief, Army Reserve, found that 54 
percent of Army Reserve physicians cited the financial impact of 
mobilization as a primary reason that they did not intend to remain in 
the reserves until retirement. The survey showed that catastrophic 
financial loss associated with long-term deployments was the primary 
factor in their decisions to leave the Army Reserve. Furthermore, over 
three-quarters of all Army Reserve physicians surveyed in 1996 and 2001 
required mobilization periods of 90 days or less to avoid seriously 
affecting their medical practices. Fifty-nine percent of respondents to 
the 2001 survey preferred a maximum deployment length of 60 days or 
less. However, these respondents indicated that a special deployment 
pay would allow them to deploy for longer periods of time and would 
increase the likelihood that they would remain in the Army Reserve. The 
amount of special pay that respondents would need varied by medical 
specialty, with the majority indicating a need for less than $10,000 a 
month to maintain their practices while deployed.

To increase retention among medical professionals concerned about the 
financial impact of lengthy mobilizations on their practices, the Army 
implemented the Presidential Reserve Call-Up 90-Day Rotation Pilot 
Program in 1999. The 3-year pilot program limited deployments of 
physicians, dentists, and nurse anesthetists to 90 days in the area of 
operations. A 2001 survey of Army Reserve medical personnel found that 
intent to remain in the Army Reserve increased among self-employed 
medical professionals who were aware of the 90-day rotation pilot 
program. By 2001, the percentage of Army Reserve medical professionals 
who indicated that they did not intend to remain until retirement had 
dropped slightly. Those aware of the 90-day cap who indicated that they 
would leave because of the financial impact of mobilization decreased 
by 23 percent from 1996 to 2001. Moreover, those indicating that they 
would leave because of concerns about future mobilizations decreased by 
20 percent over the same time period. Respondents to the 2001 survey 
indicated that a special deployment pay would allow them to deploy for 
longer periods of time. For example, of respondents whose original 
optimal deployment length was 31 to 60 days, 76 percent indicated that 
they could increase their deployment time up to 90 days with a special 
deployment pay.

Differential Pay for Activated Federal Employees:

Federal employee reservists called to active military duty do not 
receive paid compensation from their civilian employing agency other 
than paid military and annual leave.[Footnote 30] Under various 
legislative proposals introduced during the current congressional 
cycle,[Footnote 31] federal agencies that employ reservists called to 
active duty would be required to pay the difference, if any, between 
the employee's civilian pay and military pay from appropriated funds. 
DOD's 2000 survey estimates indicated that 9 percent of drilling unit 
members were federal employees in 1999. Proponents of differential pay 
for federal employee reservists state that providing this pay (1) would 
recognize the demands and burdens placed on reservists and their 
families, (2) would help federal employee reservists maintain their 
standard of living, and (3) would set an example for other employers of 
reservists. The Office of Personnel Management has opposed similar 
legislation in the past on the basis of equity and cost issues. In 
addition, as noted earlier, available data indicate that federal 
employee reservists are not suffering income loss to a greater extent 
than other reservists, such as certain health care professionals.

Federal law provides many rights and benefits for federal employees 
called to active military duty. In December 2001, federal agencies were 
granted discretionary authority to pay both the employee and government 
shares of the Federal Employees Health Benefits Program premium for any 
or all of an 18-month period when an employee is called to active duty 
in support of a contingency operation.[Footnote 32] As of March 2003, 
about 64 percent of federal agencies reported paying the entire premium 
when an employee is called to active duty. At agencies that have not 
used this discretionary authority, employees may continue to pay their 
share of premiums for the first 12 months and their share of premiums 
plus the government's share of premiums and a 2 percent administrative 
processing fee for the next 6 months.[Footnote 33]

Other benefits for activated federal employee reservists include the 
following:

* continuation of life insurance for up to 12 months at no cost;

* continued accrual of military leave, which may be carried over to the 
following fiscal year or used while activated; and:

* retroactive retirement credits upon return to their civilian 
positions.

In an August 2002 memorandum, the Office of Personnel Management cited 
"equity issues" in its opposition to differential pay for federal 
employee reservists. While the Office of Personnel Management did not 
elaborate, differential pay could create inequities in pay between 
federal employee reservists and their active duty counterparts who are 
serving in the same positions and pay grades. Two servicemembers 
performing the same military job could receive different amounts of 
compensation simply because one is a reservist with a full-time job in 
the federal civilian sector. In addition, there may not be a 
correlation between a reservist's civilian and military pay grades. A 
federal employee's civilian salary is based on work performed at a 
certain pay grade and may require different skills and knowledge than 
the employee's military job. Providing differential pay would, in 
effect, be paying the reservist for a job other than that being 
performed.

The Office of Personnel Management also stated that the cost of 
providing differential pay for activated federal employee reservists on 
an indefinite basis would be significant and that data are lacking to 
make an accurate cost projection. It noted that because federal 
agencies would fund the cost of differential pay, agencies with greater 
numbers of activated reservists would have higher costs, reducing the 
amount of funds available for other program operations. The 
Congressional Budget Office developed a cost estimate for one of the 
legislative proposals.[Footnote 34] It estimated that this proposal 
would cost $201 million for the fiscal year 2003-08 period, which 
includes retroactive payments for federal employees called to active 
duty since September 11, 2001.[Footnote 35]

A factor that complicates calculation of the total cost of differential 
pay is DOD's lack of complete information about reservists' employment. 
Until recently, DOD did not require reservists to provide information 
to DOD about their civilian employers. In response to our 
recommendation that DOD collect complete data about reservists' 
employment, DOD and the services implemented the Civilian Employment 
Information Program in March 2003.[Footnote 36] Under this program, 
Selected Reserve members are required to provide their employment 
status, employer's name, and civilian job title, among other 
information. When fully established, the program will allow DOD to 
consider employment-related factors during premobilization planning 
and assist the department in accomplishing its employer outreach 
efforts. The data could also help to identify the number of federal 
employees who could be called to active duty and to develop a total 
cost estimate if a pay differential were offered to them.

While civilian employers are not required under the Uniformed Services 
Employment and Reemployment Rights Act[Footnote 37] to provide 
differential pay to activated reservists, we have found that many 
employers do so. As part of our earlier work on employer support for 
the Guard and Reserve, we contacted 359 employers of reservists in high 
tempo units between November 2001 and March 2002 about their pay 
practices for activated employees. Of 183 employers who completed and 
returned the survey, about 40 percent indicated that they provide 
either full pay, differential pay, or a combination of both to 
activated reservists. For this report, we also surveyed officials from 
22 states about their compensation policies for state employees called 
to federal active duty and found that most offer some type of financial 
assistance to their activated employees. Nineteen of the 22 states 
offer financial assistance, such as pay differentials, to employees who 
are on military leave without pay and can document a loss of income. 
(App. IV provides information on income assistance, military leave, 
health benefits, and other benefits offered by the 22 states to their 
employees who are called to active duty.) DOD's 2002 spouse survey 
estimates showed that the reserve member's civilian employer continued 
to pay the member's salary in full or in part for 22 percent of 
spouses.

Income Insurance for Activated Reservists:

From 1996 to 1997, DOD offered the Ready Reserve Mobilization Income 
Insurance Program to reservists as a way to protect their civilian 
income when called to active duty. The program was canceled after it 
failed financially. Through DOD's Unified Legislation and Budgeting 
process, the Air Force has proposed that DOD establish a somewhat 
similar income insurance program that addresses some of the problems 
associated with the original program but not others.

The original DOD program was initiated after concerns were raised 
following the 1991 Persian Gulf War that income loss would adversely 
affect retention of reservists. According to a 1991 DOD survey of 
reservists activated during the Gulf War, economic loss was widespread 
across all pay grades and military occupations. In response to 
congressional direction,[Footnote 38] DOD in 1996 established the Ready 
Reserve Mobilization Income Insurance Program, an optional, self-funded 
income insurance program for members of the Ready Reserve ordered 
involuntarily to active duty for more than 30 days. Reservists who 
elected to enroll could obtain monthly coverage ranging from $500 to 
$5,000 for up to 12 months within an 18-month period. Far fewer 
reservists than DOD expected enrolled in the program. Many of those who 
enrolled were activated for duty in Bosnia and, thus, entitled to 
almost immediate benefits from the program. The program was terminated 
in 1997 after going bankrupt.

We reported in 1997 that private sector insurers were not interested in 
underwriting a reserve income mobilization insurance program due to 
concerns about actuarial soundness and unpredictability of the 
frequency, duration, and size of future call-ups.[Footnote 39] Certain 
coverage features violated many of the principles private sector 
insurers usually require to protect themselves from adverse 
selection.[Footnote 40] These features include voluntary coverage and 
full self-funding by those insured, the absence of rates that 
differentiated between participants based on their likelihood of 
mobilization, the ability to choose coverage that could result in full 
replacement of their lost income rather than those insured bearing some 
loss, and the ability to obtain immediate coverage shortly before an 
insured event occurs. DOD officials told us that private sector 
insurers remain unsupportive of a new reserve income insurance 
mobilization program and that the amount of federal financial 
commitment required for the program is prohibitive. Thus, DOD has no 
plans to implement a new mobilization insurance program.

However, the Air Force has proposed that DOD establish a self-funded 
income insurance program for reserve component members ordered 
involuntarily to active duty for more than 30 days, or in support of 
forces activated during a war declared by Congress or a period of 
national emergency. The Air Force proposal attempts to address adverse 
selection, low participation rates, and funding concerns that 
contributed to the failure of the Ready Reserve Mobilization Income 
Insurance Program. For instance, to address adverse selection and low 
participation rates, all drilling unit members and individual 
mobilization augmentees would be automatically enrolled in the program 
for $1,000 of monthly coverage with the option to opt out. Individual 
Ready Reserve members would have the option to enroll. To further 
mitigate adverse selection and funding concerns, payments would not be 
made during the first 6 months of enrollment in the program, regardless 
of mobilization or recall status. This delay would allow funds to 
accrue for future payouts. Furthermore, DOD would be able to suspend 
the annual enrollment open season during national emergencies and 
periods of war that are declared by Congress. Mandatory waiting periods 
for coverage to become effective would help counter adverse selection 
that resulted when reservists with knowledge of their imminent 
mobilization enrolled in the Ready Reserve Mobilization Income 
Insurance Program. However, instituting waiting periods and requiring 
mandatory participation still would not overcome financial liability 
associated with large mobilizations. Even infrequent mobilizations 
could produce a large number of claims. As a result, funding for the 
program could be exhausted quickly. In 1998, the Congressional Research 
Service estimated that if every Selected Reservist were enrolled for 
coverage of $1,000 per month and paid premiums of $10 per month, the 
fund would accumulate $9 million in income each month and $702 million 
over 5 years, assuming that premiums were invested at a 10 percent 
compound interest rate.[Footnote 41] A mobilization of 250,000 
reservists would create a monthly liability of $250 million, making the 
fund insolvent by the fourth month of mobilization.[Footnote 42]

The Air Force proposal does not completely address some of the problems 
experienced with the prior program, including adverse selection, low 
participation rates, proof of loss of income, and funding concerns. As 
currently structured, the Air Force's proposed income insurance program 
would not have graduated premiums that differentiate between 
participants based on their likelihood of mobilization. However, 
participants would be able to purchase additional coverage or opt out 
of the program depending on their perceived risk of activation. Similar 
to the Ready Reserve Mobilization Income Insurance Program, the Air 
Force's proposed program is designed to be financed entirely by 
premiums paid by individual members. DOD would need to assume 
responsibility for any unfunded liability that may result from a larger 
than expected mobilization. As a result, the Secretary of Defense would 
need to submit a supplemental appropriation request.

In addition, the Air Force's proposed income insurance program does not 
require proof of loss of income. As designed, the program would pay 
benefits based on the amount of coverage chosen by the reservists 
regardless of actual losses incurred. Premium rates would be set for a 
specified amount of insurance coverage. There is no provision to 
prevent reservists from subscribing to amounts of coverage 
significantly greater than their actual loss of income. To minimize the 
program's financial liability, reservists could be required to document 
income loss when submitting claims. However, verifying losses from 
self-owned businesses, lost commissions or bonuses, or additional 
expenses could be difficult and delay timely payment of benefits.

Even if these design criteria were addressed, designing a financially 
sound program may not be possible. There is no reliable way to estimate 
the duration, number, and timing of future mobilizations and the number 
and specialties of reservists that would be called up. DOD's increased 
reliance on the reserve components in a changing and unpredictable 
world situation makes projections of future call-ups exceedingly 
difficult. To be financially sound, an insurance program, at a minimum, 
should have a large eligible population of whom a large proportion are 
insured and the proportion of those insured who file claims should be 
reasonably stable over time. In addition, to be affordable, the 
majority of those insured will not, in any period, incur the losses 
that they insure against.

Furthermore, it is unclear whether reservists want or need an income 
insurance program. Although the 2000 DOD survey indicated that an 
estimated 41 percent of drilling unit members had losses in family 
income when mobilized or deployed, it is unknown whether reservists 
would be willing to participate in a new income insurance program. For 
example, high premiums and a mandatory waiting period before becoming 
eligible for payouts could discourage participation. A survey conducted 
before the Ready Reserve Mobilization Income Insurance Program was 
implemented showed that about 70 percent of enlisted members and 55 
percent of officers indicated interest in participating in such a 
program. The DOD Office of the Actuary estimated that about 40 percent 
of reservists would participate. However, only about 3 percent of 
Selected Reserve members actually enrolled. The enrollment pattern 
indicated that reservists in certain military specialties had a greater 
need or demand for income protection. Of the approximate 5,500 military 
specialties in the reserve components, about 1,930 (35 percent) had 
some reservists enrolled in the program, including 420 military 
specialties that had enrollment levels of 10 percent or more. Although 
these 420 military specialties accounted for less than 8 percent of the 
total military specialties within the reserve components, they made up 
over 25 percent of the total reservists enrolled in the program. Of the 
420 specialties with enrollment levels of 10 percent or more, 250 were 
in aviation, legal, and medical fields.

DOD Faces Challenges in Family Readiness and Support:

Although DOD has placed greater emphasis on family readiness, many 
reserve families indicate they do not feel prepared for call-ups. In 
addition, although reservists and their families are eligible for 
military family support services, many reservists appear not to be 
aware of these services, and most spouses of activated reservists have 
not used these services. DOD officials have acknowledged they face 
challenges in providing family support outreach to reservists and have 
taken steps to improve outreach. Personal financial management, one of 
DOD's core family support programs, illustrates the continuing 
challenges DOD faces in providing outreach to reservists. DOD has not 
assessed the financial well-being of reserve families, nor has it 
assessed the impact of reservists' financial problems on mission 
readiness. DOD has noted a need to improve reservists' and their 
spouses' awareness of and access to personal financial management 
programs, but it has not tailored its programs to reservists by 
developing plans that specify how these needs will be met.

Surveys Indicate a Lack of Readiness among Many Reserve Families and 
Low Awareness and Use of Support Programs:

DOD has recognized the importance of family readiness and family 
support for its servicemembers, including reservists. Under a 1994 DOD 
policy, the military services must "ensure National Guard and Reserve 
members and their families are prepared and adequately served by their 
services' family care systems and organizations for the contingencies 
and stresses incident to military service." According to DOD, families 
of reservists who use family support services and who are provided 
information from the military cope better during activations. 
Furthermore, military members who are preoccupied with family issues 
during deployments may not perform well on the job, which in turn, may 
negatively affect the mission. According to DOD's 2000 survey 
estimates, reservists who had been activated stated that among the most 
serious problems they experienced were burdens placed on their spouse 
and problems created for their children. More than half of all 
reservists are married, and about half have dependents. As of September 
2001, there were about 960,000 family members of Selected Reserve 
members, including spouses, children, and adult dependents.

Despite this recognition of the importance of family readiness and 
family support, many reserve families feel they are not prepared when 
the member is notified for active duty. According to DOD officials, 
Operations Noble Eagle and Enduring Freedom highlighted that not all 
reserve families were prepared. Since many families never thought their 
military member would be mobilized, they had not become involved in 
their family readiness networks. Results from the 2000 DOD survey also 
showed a substantial number of reservists did not anticipate call-up--
about 35 percent of drilling unit members thought it was unlikely or 
very unlikely that they would be mobilized or deployed in the next 5 
years. Furthermore, about one-fourth of drilling unit members said 
their dependent care arrangements were not realistically workable for 
deployments lasting longer than 30 days.

DOD's 2002 spouse survey showed that an estimated 33 percent of spouses 
felt they were unprepared or very unprepared when they first learned of 
the member's order to active duty, while 37 percent felt they were very 
well prepared or well prepared and 30 percent felt they were neither 
prepared nor unprepared. The survey data indicated that less than half 
of spouses were involved in family readiness groups[Footnote 43], 
attended readiness briefings, received preactivation materials, or had 
a military point of contact to help them deal with emergency issues 
that might arise. Our analysis showed that some of these factors 
appeared to be related to whether spouses felt prepared or unprepared 
when the member was notified for active duty, although involvement in 
family readiness groups and receiving preactivation materials upon the 
member's notification to active duty did not appear to be significant 
factors. (See app. V.) Compared with unprepared spouses, a higher 
percentage of prepared spouses had a longer period of notice before the 
member was activated. As might be expected, a higher percentage of 
prepared spouses than unprepared spouses were coping well or very well 
during the activation. An estimated 84 percent of prepared spouses were 
coping well or very well, 3 percent were coping poorly or very poorly, 
and 13 percent were coping neither poorly nor well. Of unprepared 
spouses, 41 percent were coping well or very well, 31 percent were 
coping poorly or very poorly, and 28 percent were coping neither poorly 
nor well.

Although activated reservists and their family members are eligible for 
the same family support services as their active duty counterparts, the 
DOD 2000 survey estimates showed that more than half of all reservists 
either believed that family support services were not available to them 
or did not know whether these services were available (see table 3).

Table 3: Reservists' Views on Availability of Selected Family Support 
Programs or Services:

Estimated percentage of drilling unit members: 

Program/service: Services for families during separation; Available 
off installation, on installation or both: 25; Not available: 13; 
Don't know: 62.

Program/service: Crisis referral services; Available off installation, 
on installation or both: 15; Not available: 17; Don't know: 68.

Program/service: Financial counseling/management education; Available 
off installation, on installation or both: 22; Not available: 16; 
Don't know: 61.

Program/service: Family support centers; Available off installation, 
on installation or both: 35; Not available: 14; Don't know: 51.

Sources: DOD 2000 Reserve Component Survey (data); GAO (presentation).

Note: Rows may not add to 100 percent due to rounding.

[End of table]

DOD has found that the degree to which reservists are aware of family 
support programs and benefits varies according to component, unit 
programs, command emphasis, reserve status, and willingness of the 
individual member to receive or seek out information. Among the key 
challenges in providing family support are the long distances that many 
reservists live from their home unit and military 
installations,[Footnote 44] the difficulty in persuading reservists to 
share information with their families, the unwillingness of some 
reservists and their families to take the responsibility to access 
available information, conflicting priorities during drill weekends 
that limit the time spent on family support, and a heavy reliance on 
volunteers to act as liaisons between families and units.

Spouses of activated reservists have not made extensive use of military 
family support programs. DOD's 2002 spouse survey indicated that most 
spouses did not use family programs during activation. When asked to 
rate the helpfulness of various military support services, an estimated 
94 percent of spouses said they had not used family programs. In 
response to another survey question concerning the difficulty they 
experienced accessing military services, 87 percent said they had not 
used family programs. It is unclear from the survey data why spouses 
did not use family programs. About 1 percent of spouses rated family 
programs as their most important military support service.

DOD has recognized the need for improved outreach. For example, the 
department has published benefit guides for reservists and family 
members and has enhanced information posted on its Web sites.[Footnote 
45] DOD published a "Guide to Reserve Family Member Benefits" that 
informs family members about military benefits and entitlements and a 
family readiness "tool kit" to enhance communication about 
predeployment and mobilization information among commanders, 
servicemembers, family members, and family program managers. Each 
reserve component has established family program representatives to 
provide information and referral services, with volunteers at the unit 
level providing additional assistance. The U.S. Marine Corps began 
offering an employee assistance program in December 2002 to improve 
access to family support services for Marine Corps servicemembers and 
their families who reside far from installations. Through this program, 
servicemembers and their families can obtain information and referrals 
on a number of family issues, including parenting, preparing for and 
returning from deployment, basic tax planning, legal issues, and 
stress. The National Guard has established family assistance centers 
across the United States to act as an entry point for service and 
assistance that a family member may need during the current 
mobilization. As of May 2003, over 400 family assistance centers had 
been established.

DOD Has Identified Outreach Challenges for Personal Financial 
Management Programs:

Personal financial management, one of DOD's core family support 
programs, illustrates the continuing challenges DOD faces in providing 
outreach to reservists. These challenges include improving access to 
and awareness of personal financial management programs for reservists 
and their family members. Under DOD policy, military personnel bear 
primary responsibility for the welfare of their families, but the 
commitment demanded by military service requires that they be provided 
a comprehensive family support system, to include financial planning 
assistance. Servicemembers receive financial management training 
during their basic training and, in some cases, during advanced 
training. In addition, personal financial management is one of the core 
services offered at the military services' family support centers. 
Personal financial management consists of programs conducted by 
counselors who provide personal and family financial training, 
counseling, and assistance.

DOD studies have identified problems with personal financial management 
in the active duty force, particularly among junior enlisted members. A 
2002 study found that (1) 20 percent of the junior enlisted force in 
the active component has financial problems; (2) these personnel have 
substantially more financial problems than does the comparable civilian 
population; and (3) financial problems are not related to family 
income, which suggests that financial problems are shaped by spending 
patterns and management skills rather than by the level of 
income.[Footnote 46] According to this study, "unit leaders 
consistently complained that much of their time was spent dealing 
directly with financially overextended members. These problems had a 
corrosive effect on the unit because they affected work performance 
through added stress on members as well as through absences to deal 
with creditors or get credit counseling." A 2000 Navy study found that 
57 percent of Navy leaders cited financial concerns as the main 
servicemember issue with which they dealt most often.[Footnote 47] 
Further, in response to a House Committee on Armed Services requirement 
in the Fiscal Year 2002 National Defense Authorization Act, the Navy 
identified $250 million in productivity and salary losses due to poor 
personal financial management.

In 2002, as part of its human capital strategic plan, DOD identified a 
need to improve the financial literacy and responsibility of 
servicemembers, including reservists.[Footnote 48] The plan states that 
mission readiness and quality of life are dependent upon 
servicemembers' using their financial resources responsibly and that 
the military services must make a commitment to educate servicemembers 
and their families and encourage them to use good financial sense. 
Financial literacy training and counseling is one of the pillars that 
support financial well-being. However, DOD has not developed plans to 
address these needs.

DOD is reviewing a draft uniform personal financial management policy. 
Currently, DOD and service regulations address aspects of personal 
financial management. The draft policy seeks to establish a uniform 
approach to educating and training all servicemembers, including 
reservists. Regarding the reserves specifically, the draft policy would 
require the military departments to provide a financial planning 
package and instructional information to reservists as part of their 
mobilization training. In addition, the draft policy outlines metrics 
to track financial well-being, such as the number of delinquent 
government credit cards, the number of individuals who have had their 
wages garnished, the self-reported financial condition of military 
personnel and their families, and the number of administrative Uniform 
Code of Military Justice actions taken against military personnel for 
financial indebtedness and irresponsibility.

In addition to drafting a personal financial management policy, DOD has 
taken steps to improve personal financial management programs. In May 
2003, DOD formally launched a "financial readiness campaign" to address 
servicemembers' poor financial habits and to increase financial 
management awareness, savings, and protection against predatory 
practices. It has also entered into a number of partnerships with 
nonprofit organizations and government agencies that have agreed to 
support counselors who offer financial assistance programs to 
servicemembers. The services have also made improvements. For example, 
the Navy has increased the number of mandatory hours of personal 
financial management training and uses mobile financial management 
teams to train financial specialists, including in geographically 
remote regions where there are no financial educators to provide 
training. The services also provide financial planning information on 
their Web sites.

As shown in table 3, the 2000 DOD survey showed that an estimated 61 
percent of drilling unit members did not know whether financial 
counseling and management education services were available, and 16 
percent did not think these services were available. DOD's 2002 spouse 
survey showed that about 76 percent of spouses did not use the 
military's financial information and counseling services, although it 
is unclear why they did not. Although DOD has identified challenges in 
the service personal financial management programs, it has not 
developed plans to provide outreach to reservists and their spouses. A 
DOD official from the Office of the Deputy Under Secretary of Defense 
for Military Community and Family Policy said that little attention has 
been placed on extending personal financial management programs to the 
reserve population. In a 2002 report to Congress,[Footnote 49] DOD 
stated, "The services should improve access to personal financial 
management information by Reserve forces." The DOD report also stated 
that most personal financial management training "does not adequately 
provide support to spouses." The Army noted that "increasing spouse 
participation is not easy and requires significant marketing and 
leadership support." The Air Force and the Marine Corps specifically 
identified the lack of spousal outreach as a gap in their programs. The 
services also recognize a need to improve marketing of financial 
management programs to reservists and their spouses. Two services--the 
Army and the Air Force--cited lack of resources, including dedicated 
personal financial management personnel, as a challenge to increasing 
access to and awareness of personal financial management programs.

In addition, while DOD has assessed the financial well-being of the 
active duty force, it has not conducted such assessments of reservists. 
Our review of DOD survey data showed that reservists reported having 
many of the same financial problems as their active duty 
counterparts.[Footnote 50] For instance, about 20 percent of reservists 
and 19 percent of active duty personnel characterized their family's 
financial condition as "in over your head" or "tough to make ends meet 
but keeping your head above water." However, a higher percentage of 
reservists reported having such financial difficulties as bouncing 
checks, receiving a letter of indebtedness, and falling behind in 
paying rent or mortgage, than did their active duty counterparts. For 
example, 12 percent of reservists fell behind in paying rent or 
mortgage compared with 3 percent of active duty members. In addition, 
while DOD has found a link between financial problems and readiness in 
the active component, it has not assessed the impact of reservists' 
financial problems on mission readiness.

DOD Has Not Fully Assessed the Need for Expansion of TRICARE to 
Nonactivated Reservists:

Reservists' family members are eligible for TRICARE when reservists 
have been activated for 31 days or more, and a number of recent 
improvements have been made to reserve family health benefits. These 
improvements include earlier access to certain benefits, expanded 
options, higher reimbursement rates for nonnetwork physicians, and 
efforts to improve outreach. Reserve families may choose to use TRICARE 
when reservists are activated or remain under civilian health insurance 
coverage. Our prior work showed that despite having access to TRICARE, 
most reservists with civilian health insurance had opted to retain 
their civilian health care coverage for their families during periods 
of activation. To further expand reservists and their family members' 
access to health care, Congress is considering legislation to offer 
military health care coverage to reservists and their families when 
members are not on active duty. However, DOD has not fully assessed the 
need for or ramifications of this proposal. For example, DOD does not 
know the impact this proposal would have on recruiting and retention, 
the effects on active duty personnel, the extent reservists and their 
families might participate in such a program, or the impact on the 
TRICARE system. Cost estimates range up to $5.1 billion a year.

Improvements to Reserve Family Health Benefits:

When activated for a contingency operation, reservists and their family 
members are eligible for health care benefits under TRICARE, DOD's 
managed health care program. TRICARE offers beneficiaries three health 
care options: Prime, Standard, and Extra. TRICARE Prime is similar to a 
private HMO plan and does not require enrollment fees or copayments. 
TRICARE Standard, a fee-for-service program, and TRICARE Extra, a 
preferred provider option, require copayments and annual deductibles. 
None of these three options require reservists to pay a premium. 
Benefits under TRICARE are provided at more than 500 military treatment 
facilities worldwide, through a network of TRICARE-authorized civilian 
providers, or through nonnetwork physicians who will accept TRICARE 
reimbursement rates.

Reservists who are activated for 30 days or less are entitled to 
receive medical care for injuries and illnesses incurred while on duty. 
In addition, Congress requires the Army to monitor the health status of 
those designated as early-deploying reservists by providing annual 
medical and dental screenings, selected dental treatment, and--for 
those over age 40--physical examinations every 2 years. Those under age 
40 are required to undergo a physical examination once every 5 years. 
For its early-deploying reservists, the Army conducts and pays for 
physical and dental examinations and selected dental treatment at 
military treatment facilities or pays civilian physicians and dentists 
to provide these services. Reservists who are placed on active duty 
orders for 31 days or more are automatically enrolled in TRICARE Prime 
and receive most care at a military treatment facility. Family members 
of reservists who are activated for 31 days or more may obtain coverage 
under TRICARE Prime, Standard, or Extra. Family members who participate 
in Prime obtain care either at a military treatment facility or through 
a network provider. Under Standard or Extra, beneficiaries may use 
either a network provider or a nonnetwork physician who will accept 
TRICARE rates. Upon release from active duty that extended for at least 
30 days, reservists and their family members are entitled to continue 
their TRICARE benefits for 60 days or 120 days, depending on the 
reservists' cumulative active duty service time. Reservists and their 
dependents may also elect to purchase extended health care coverage for 
3 months at a time for a maximum of up to either 18 months or 3 years 
under the Continued Health Care Benefit Program.

Legislation passed in December 2002 (P.L. 107-314, sec. 702) made 
family members of reservists activated for more than 30 days eligible 
for TRICARE Prime if they reside more than 50 miles, or an hour's 
driving time, from a military treatment facility. In March 2003, DOD 
altered TRICARE policy such that all family members of reservists 
activated for 31 days or more are eligible for TRICARE Prime. In 
conjunction with this change, DOD announced a change in the eligibility 
of reserve families for TRICARE Prime Remote for Active Duty Family 
Members.[Footnote 51] DOD stated that a legislative provision of the 
program that required a family member to "reside with" the 
servicemember would be interpreted as meaning that eligible family 
members resided with the servicemember before the servicemember left 
for their home station, mobilization site, or deployment location, and 
the family members continue to reside there.

Under DOD authorities in the National Defense Authorization Acts for 
2000 and 2001, DOD instituted several demonstration programs to provide 
financial assistance to reservists and family members. For example, DOD 
instituted the TRICARE Reserve Component Family Member Demonstration 
Project for family members of reservists mobilized for Operations Noble 
Eagle and Enduring Freedom to reduce TRICARE costs and assist 
dependents of reservists in maintaining relationships with their 
current health care providers. The demonstration project eliminates the 
TRICARE deductible and the requirement that dependents obtain 
statements saying that inpatient care is not available at a military 
treatment facility before they can obtain nonemergency treatment from a 
civilian hospital. In addition, DOD may pay a nonnetwork physician up 
to 15 percent more than the current TRICARE rate.

About 40 percent of the problems reservists have reported relate to 
understanding TRICARE's benefits and obtaining assistance when 
questions or problems arose. Because these problems could be reduced 
through improved education about TRICARE's benefits and better 
assistance while navigating the TRICARE system, we recommended in 
September 2002 that DOD ensure that reservists, as part of their 
ongoing readiness training, receive information and training on health 
care coverage available to them and their dependents when mobilized and 
provide TRICARE assistance during mobilizations targeted to the needs 
of reservists and their dependents.[Footnote 52] DOD has added 
information for reservists to its TRICARE Web site and, in response to 
our recommendation, has begun to implement a TRICARE reserve 
communications plan aimed at outreach and education of reservists and 
their families.

The TRICARE Web site is a robust source of information on DOD's health 
care benefits. The Web site contains information on all TRICARE 
programs, TRICARE eligibility requirements, briefing and brochure 
information, location of military treatment facilities, toll free 
assistance numbers, network provider locations and other general 
network information, beneficiary assistance counselor information, and 
enrollment information. There is also a section devoted specifically to 
reservists, with information and answers to questions that reservists 
are likely to have. Results from DOD's 2000 survey showed that about 9 
of every 10 reservists had access to the Internet.

DOD has begun to implement a TRICARE communications plan to educate 
reservists and their family members on available health care and dental 
benefits. The plan identifies a number of tactics for improving how 
health care information is delivered to reservists and their families. 
Under the plan, materials are to be delivered through direct mailing 
campaigns, fact sheets, brochures, working groups, and briefings. The 
plan also identifies methods of measurement that will assist in 
identifying the degree information is being requested and received. In 
March 2003, OSD distributed educational materials for beneficiary 
counseling assistance coordinators, reserve component staff, and 
others. In May 2003, the TRICARE Management Activity established a 
working group to improve reserve component communications.

Reservists' Families Have Health Care Choices and Challenges:

Most reservists who are not on active duty have civilian health 
insurance through either their own or their spouse's employer. 
Estimates from DOD's 2000 survey showed that nearly 80 percent of 
reservists had health care coverage when they were not on active duty 
and about 20 percent did not. According to DOD's 2002 survey, an 
estimated 90 percent of spouses of activated reservists had private 
health insurance prior to activation, and 4 percent had no insurance. 
The other 6 percent had TRICARE coverage or some combination of TRICARE 
and private health insurance. While DOD requires activated reservists 
to use TRICARE for their own health care, using TRICARE is an option 
for their dependents. During mobilization, some reservists may choose 
to save the cost of premiums by dropping civilian insurance for their 
dependents and relying on TRICARE, which has no associated premium. 
However, doing so means that dependents must learn the benefits and 
requirements of a new health plan. It also means they may be unable to 
use the same civilian providers if these providers do not participate 
in TRICARE networks or accept TRICARE patients. Reservists' decisions 
regarding health care coverage for their dependents are affected by a 
variety of factors--whether they or their spouses have civilian health 
coverage, the amount of support civilian employers are willing to 
provide with health care premiums, and where they and their dependents 
live.

Despite the availability of DOD health care benefits with no associated 
premium, our prior work has shown that many reserve family members 
elect to maintain their civilian health care insurance during 
mobilizations.[Footnote 53] According to estimates from DOD's 2000 
survey, about 90 percent of reservists with civilian health care 
coverage maintained it during their mobilization. Reservists we 
interviewed often told us that they maintained this coverage to better 
ensure continuity of health benefits and care for their dependents. The 
Uniformed Services Employment and Reemployment Rights Act does not 
require employers to continue paying their share of health care 
premiums when mobilizations extend beyond 30 days. However, employers 
continued to pay at least their portion of health insurance premiums 
beyond this 30-day period for about 80 percent of the reservists we 
contacted who maintained their employer-sponsored coverage. DOD's 2002 
survey of spouses of activated reservists indicated that only a small 
percentage of reserve families had to pick up the entire premium in 
order to retain the member's civilian health care coverage during 
activation. Specifically, the survey estimated that:

* 35 percent of families paid the employee share of the premium,

* 29 percent paid no additional costs because the member's employer 
paid the full health care premium,

* 18 percent paid no additional costs because the family was covered 
under the spouse's health care plan, and:

* 8 percent paid the full health care premium.[Footnote 54]

Our surveys of reservists' civilian employers also show that a high 
percentage of employers provide assistance with continued health care 
benefits for their activated reservists. Of the 183 employers of 
reservists in high tempo units who completed and returned our survey on 
employer support, 121 employers provided information on their health 
benefit policies. Of these 121 employers, 105 (88 percent) reported 
that they paid the full heath care premium or the employer share of the 
health care premium during the activation period. Of the 22 states we 
surveyed about pay and benefit policies for their activated reserve 
employees, 13 (59 percent) reported that they paid the full health care 
premium or the employer share of the health care premium. Most of these 
states provided these benefits during the entire activation period.

In our prior work, we found that many reservists who did drop their 
civilian insurance and whose dependents did use TRICARE reported 
difficulties moving into and out of the system, finding a TRICARE 
provider, establishing eligibility, understanding TRICARE benefits, 
and knowing where to go for assistance when questions and problems 
arose. While reserve and active component beneficiaries report similar 
difficulties using the TRICARE system, these difficulties are magnified 
for reservists and their dependents. For example, 75 percent of 
reservists live more than 50 miles from military treatment facilities, 
compared with 5 percent of active component families. As a result, 
access to care at military treatment facilities becomes more 
challenging for dependents of reservists than their active component 
counterparts.

Reservists may also transition into and out of TRICARE several times 
throughout a career. These transitions create additional challenges in 
ensuring continuity of care, reestablishing eligibility in TRICARE, and 
familiarizing or refamiliarizing themselves with the TRICARE system. 
Reservists are also not part of the day-to-day military culture and, 
according to DOD officials, generally have less incentive to become 
familiar with TRICARE because it becomes important to them and their 
families only if they are mobilized. Furthermore, when reservists are 
first mobilized, they must accomplish many tasks in a compressed 
period.[Footnote 55] For example, they must prepare for an extended 
absence from home, make arrangements to be away from their civilian 
employment, obtain military examinations, and ensure their families are 
properly registered in the Defense Enrollment Eligibility Reporting 
System (DOD's database system maintaining benefit eligibility status). 
It is not surprising that many reservists, when placed under condensed 
time frames and high stress conditions, experience difficulties when 
transitioning to TRICARE.

DOD Has Not Assessed the Need for or Ramifications of Expanding TRICARE 
to Reservists Not on Active Duty and Paying Health Insurance Premiums 
of Activated Reservists:

To further expand reservists and their family members' access to health 
care, Congress is considering legislation to offer TRICARE to 
reservists when they are not on active duty.[Footnote 56] The 
legislation would entitle members of the Selected Reserve and certain 
members of the Individual Ready Reserve[Footnote 57] and their 
dependents to the same TRICARE benefits as a member of the uniformed 
services on active duty or a dependent of such a member. An enlisted 
reservist enrolled in the TRICARE program would pay an annual premium 
of $330 for self only coverage and $560 for self and family coverage, 
while a reserve officer would pay an annual premium of $380 for self 
only coverage and $610 for self and family coverage. (Military 
personnel on active duty and family members of personnel on active duty 
do not pay a premium for TRICARE coverage.) The legislation also would 
require DOD to pay premium costs incurred by reservists who choose to 
continue their civilian health care insurance coverage when activated. 
DOD would cover the civilian insurance costs up to the total cost of 
the reservist's premium and would be required to pay an amount equal to 
TRICARE's average cost of providing TRICARE for self and family 
coverage. Proponents have stated that the legislation (1) would 
recognize an expansion of reserve roles and missions in recent years 
and an increased demand placed on reservists and their families, (2) 
would assist DOD in recruiting and retaining reservists, and (3) would 
help reservists who opt to join TRICARE maintain continuity of their 
health care coverage.

We have a number of concerns with the proposal to extend TRICARE 
coverage to reservists not on active duty and their family members and 
to require DOD to pay premium costs incurred by reservists who choose 
to continue their civilian health care insurance coverage when 
activated. First, while there has been an expansion of reserve 
participation in military operations, with a dramatic increase in 
mobilizations to support operations in Iraq, many reservists have 
deployed only once or not at all. According to the results of DOD's 
2000 survey, only 25 percent of reservists reported in 2000 that they 
had been mobilized or deployed. Of those mobilized or deployed at least 
once, nearly 70 percent had participated in only one operation. Since 
September 2001, DOD has called 300,000 reservists to active duty, 
representing one-fourth of the 1.2 million reservists eligible for 
call-up. Second, DOD officials we spoke with about the proposed 
legislation noted that DOD currently has not identified an overall 
recruiting and retention problem in the reserves and that it was too 
early to project the potential for future recruiting and retention 
problems that might result from the ongoing mobilization. They also 
could not tell us what effect the proposed legislation would have on 
the military's ability to recruit and retain reservists. Third, as 
noted previously, most reservists activated prior to 2001 achieved 
continuity of care for their families by retaining civilian health 
insurance during activation. However, DOD officials said that little is 
known about reservists' behavior patterns of health care usage during 
mobilizations since September 2001 and that it is difficult to project 
their behavior if the current proposal were approved. According to a 
DOD official, it is unknown whether younger members of the reserve 
force would purchase TRICARE health care coverage even at reduced 
rates. In addition, a high percentage of reservists' civilian employers 
who currently pay some or all of health care premiums for reservists 
during activations could discontinue providing such assistance if DOD 
makes this coverage available to reservists year-round.

Other concerns with the proposed legislation have also been raised. DOD 
officials said that creating greater uniformity of benefits between 
active and reserve forces could have unanticipated effects on the 
active component if active component members are enticed into leaving 
the active component and joining the reserves. The OSD Health Affairs 
Policy Director also noted that DOD could have difficulties tracking 
reservists' premium costs in order to pay these costs during activation 
as required by the legislative proposal. Another concern is the stress 
that could be placed upon the TRICARE system. Currently, TRICARE 
provides care for 8.7 million beneficiaries--eligible active duty 
personnel, retirees, and dependents. It is not clear to what extent 
reservists and their eligible dependents would use TRICARE and the 
impact this could have on the system. Beneficiary groups have described 
problems with access to care from TRICARE civilian providers. In March 
2003, we testified on DOD's oversight of the TRICARE civilian provider 
network, noting the problems with assessing the network's adequacy due 
to insufficient information.

In addition, controlling rising health care costs is a major concern of 
DOD's. According to a 2003 Congressional Budget Office analysis of 
long-term defense spending,[Footnote 58] spending for military medical 
care, which already makes up more than 10 percent of DOD's operation 
and support costs, is the fastest growing category of operation and 
support spending. In this projection of the administration's plans, 
annual medical spending rises by 67 percent over the 2007-2020 period, 
from $33 billion to $55 billion. Many of the same forces that cause 
national health expenditures to rise--an increase in the volume of 
health care services available and expanded use of new, high-cost drugs 
and procedures--translate into higher military medical costs. In 
addition, retirees and their dependents now make up a larger share of 
beneficiaries, increasing the average age and costs of the people who 
receive health coverage through DOD. Two reasons military medical costs 
are expected to rise dramatically over the next 5 years are (1) new 
benefits for military retirees over age 65 (called TRICARE for Life), 
which had an actuarial liability estimated at $592 billion as of 
September 30, 2001, and (2) a switch to an accrual accounting system--
with DOD's budget being charged each year for the expected costs of 
future benefits. DOD's fiscal year 2003 budget for the defense health 
program was $14.8 billion.

The Congressional Budget Office estimated that implementing the 
legislation--extending TRICARE coverage to reservists not on active 
duty and their family members and requiring DOD to pay premium costs 
incurred by reservists who choose to continue their civilian health 
care insurance coverage when activated--would cost a total of $466 
million in 2004 and $7.3 billion over 2004-2008.[Footnote 59]

* The Congressional Budget Office estimated that extending TRICARE 
coverage to reservists who are not on active duty would cost $393 
million in 2004 and $7.1 billion over 2004-2008. On the basis of DOD 
data, the Congressional Budget Office estimated that the provision 
would apply to 760,000 reservists after excluding 120,000 who work for 
the federal government.[Footnote 60] It also estimated that about 70 
percent of qualified reservists would opt to enroll in the TRICARE 
program.

* The Congressional Budget Office estimated that requiring DOD to pay 
premium costs for continued civilian health care coverage during 
activation would cost $73 million in 2004 and $155 million over 2004-
2008. According to this estimate, the amount DOD would pay reservists 
would cover about 60 percent of the average civilian premium.[Footnote 
61]

DOD estimated that the cost of extending TRICARE coverage to reservists 
who are not on active duty would be $5.1 billion per year. DOD's 
estimate does not include the costs to pay the premiums of activated 
reservists' civilian health care. DOD's estimate is significantly 
higher than the Congressional Budget Office estimate due to certain 
assumptions concerning the number of potential beneficiaries, the 
proportion of potential beneficiaries that would opt to enroll in 
TRICARE, and the per capita costs of providing care. DOD officials told 
us that they used historical cost profile data to develop their cost 
estimates. However, we did not independently verify either the DOD or 
the Congressional Budget Office cost estimate. Noting the high cost of 
this proposed legislation, the Secretary of Defense has expressed 
opposition to this legislation, stating he will recommend that the 
President veto the National Defense Authorization Act for Fiscal Year 
2004 if a provision to expand TRICARE is included.

Conclusions:

DOD survey estimates showed income change varied considerably among 
activated reservists, with a sizeable proportion of reservists 
experiencing income loss, but more than half experiencing no change or 
a gain in income. However, these data are questionable because it is 
unclear what survey respondents considered as income loss or gain in 
determining their financial status. For example, the number of 
reservists reporting income loss could be lower if respondents did not 
include the sum of their military pay--basic pay, special pays, 
allowances, and indirect compensation, such as health care benefits. 
Currently, DOD cannot determine the need for compensation programs to 
provide income protection to reservists because it lacks sufficient 
information on the scope and nature of income change experienced by 
activated reservists. More specifically, DOD lacks sufficient data on 
the magnitude of income change, the causes of income change, and the 
effects of income change on reservists' retention decisions. Survey 
results showed that a higher percentage of reservists in certain 
groups, such as self-employed reservists and health care professionals, 
experienced greater income loss compared with reservists overall and 
that, for some, income loss or the potential for income loss is a 
significant factor in their decisions on whether to stay in the 
reserves. A number of approaches to providing income protection have 
been proposed, including an income insurance program, differential pay 
for activated federal employee reservists, and special pay for certain 
reserve physicians. Of these three, only the last is targeted at 
reservists who (1) fill critical wartime specialties, (2) experience 
high degrees of income loss when on active duty, and (3) demonstrate 
that income loss is a significant factor in their retention decisions. 
This is the kind of business case approach that we think is necessary 
to determine the need for income protection compensation programs.

In the area of family support, DOD and the military services have taken 
steps to improve personal financial management programs. They have also 
identified challenges such as increasing reservists' and spouses' 
awareness of and access to personal financial management programs. 
However, they have not developed specific plans to address these 
identified needs. Further, while DOD has assessed the financial well-
being of active duty members and linked financial well-being with 
mission readiness, it has not conducted similar assessments of the 
reserve force. Our review of DOD survey data showed that reservists 
reported having many of the same financial problems as their active 
duty counterparts. For instance, a higher percentage of reservists 
reported having such financial difficulties as bouncing checks and 
receiving a letter of indebtedness than have their active duty 
counterparts. Conducting these assessments would provide a better 
understanding of financial difficulties reservists encounter and the 
impact these difficulties have on mission readiness.

Recent improvements have been made to reservists and their families' 
access to TRICARE when the member is activated. In past military 
operations, most activated reservists retained civilian health care 
insurance coverage for their families during the activation period. To 
further expand access to health care benefits, legislation has been 
proposed that would provide TRICARE benefits to reservists and their 
family members when they are not on active duty. Furthermore, the 
legislation would require DOD to pay premium costs incurred by 
reservists who choose to continue civilian health care insurance 
coverage when activated. While proponents have cited a number of 
reasons for this legislation, concerns have also been raised. We 
believe these concerns may outweigh the perceived benefits and costs of 
the legislation. Currently, DOD lacks sufficient information to 
determine the need for the expanded health care benefits offered in the 
legislation and the implications of the proposal for reservists, active 
duty members, and the military health care system. DOD officials 
further stated that currently no problem has been demonstrated in 
overall reserve recruiting and retention. DOD has not yet identified 
problems reservists and their families have experienced with access to 
health care during mobilizations since September 11, 2001, such as 
problems in maintaining continuity of health care; the causes of these 
problems; and their effects on readiness, recruiting, and retention.

Recommendations for Executive Action:

We recommend that the Secretary of Defense direct the Under Secretary 
of Defense for Personnel and Readiness to determine the need for 
compensation programs aimed at addressing reservists' income loss 
during periods of active duty by obtaining more complete information on 
the magnitude of income change, the causes of income change, and the 
effects of income change on reserve retention. At a minimum, these 
efforts should be designed to identify reservists who (1) fill critical 
wartime specialties, (2) experience high degrees of income loss when on 
active duty, and (3) demonstrate that income loss is a significant 
factor in their retention decisions. We further recommend that, on the 
basis of this information, the Secretary of Defense develop targeted 
compensation programs, as appropriate, to retain these reservists in 
the armed forces.

We recommend that the Secretary of Defense direct the Secretaries of 
the Army, the Air Force, and the Navy and the Commandant of the Marine 
Corps to develop specific plans for improving reservists' and their 
spouses' awareness of and access to personal financial management 
programs. In developing these plans, the military services, in 
conjunction with the Under Secretary of Defense for Personnel and 
Readiness, should assess the financial well-being of reservists and 
determine whether reservists' financial problems affect mission 
readiness.

We recommend that the Secretary of Defense direct the Under Secretary 
of Defense for Personnel and Readiness to assess problems reservists 
have experienced since the mobilizations following the events of 
September 11, 2001, in maintaining continuity of health care; the 
causes of these problems; and their effects on readiness, recruiting, 
and retention. As part of this assessment, DOD should evaluate the 
ramifications of extending TRICARE coverage to reservists not on active 
duty and their family members as well as paying premium costs incurred 
by reservists who choose to continue their civilian health care 
insurance coverage when activated. DOD should also evaluate the 
potential impact of extending such coverage on the retention of active 
duty personnel and on the TRICARE system.

Matters for Congressional Consideration:

In order to provide DOD an opportunity to determine the need for and 
ramifications of expanding TRICARE, Congress may wish to delay a 
decision on the legislative proposal to offer TRICARE to reservists and 
their families when members are not on active duty. Furthermore, 
Congress may wish to direct the Secretary of Defense to assess and 
report on reserve health care benefits as we have recommended in this 
report.

Agency Comments and Our Evaluation:

In written comments on a draft of this report, DOD concurred with our 
recommendations. Regarding our recommendation that DOD develop targeted 
compensation programs to retain reservists in the armed forces, DOD 
stated that the department must exercise concern about paying its part-
time force more than its full-time force when undertaking similar 
duties. As discussed in our report, we agree that equity between active 
component and reserve component personnel is one factor that must be 
considered in compensation programs that address income loss. 
Nevertheless, we believe that DOD could target such compensation 
programs appropriately by gathering more complete information on 
reservists' income loss and applying the three criteria included in our 
recommendation.

On the basis of DOD's concurrence with our recommendation concerning 
reserve health care benefits, we have added matters for congressional 
consideration concerning the legislative proposal to extend TRICARE 
benefits to nonactivated reservists and their families. We believe the 
proposed expansion of TRICARE deserves scrutiny due to its high costs, 
the current lack of information on the need for this expansion of 
TRICARE, and its potential ramifications. An assessment of this 
proposed expansion of TRICARE is likely to be a complex and time-
consuming undertaking.

DOD's comments are reprinted in appendix VI.

We are sending copies of this report to the Secretary of Defense, the 
Under Secretary of Defense for Personnel and Readiness; the Secretaries 
of the Army, the Air Force, and the Navy; and the Commandant of the 
Marine Corps. We will also make copies available to appropriate 
congressional committees and to other interested parties on request. In 
addition, the report will be available at no charge at the GAO Web site 
at http://www.gao.gov.

If you or your staff have any questions concerning this report, please 
call me at (202) 512-5559. Major contributors to this report are listed 
in appendix VII.

Derek B. Stewart 
Director, Defense Capabilities and Management:

Signed by Derek B. Stewart: 

[End of section]

Appendix I: Scope and Methodology:

To evaluate information on income change reported by reservists when 
activated for a military operation, we obtained and analyzed the 
results of the Department of Defense's (DOD) 2000 Reserve Component 
Survey and 2002 Survey of Spouses of Activated National Guard and 
Reserve Component Members. We stratified the results of these surveys 
by pay grade group, reserve component, and for certain other groups 
such as type of employers. Further, we discussed the extent of income 
change with officials from the following offices or commands:

* Office of the Assistant Secretary of Defense for Reserve 
Affairs.[Footnote 62]

* Office of the Deputy Under Secretary of Defense for Military 
Personnel Policy, Office of Military Compensation.

* National Guard Bureau.

* National Committee for Employer Support of the Guard and Reserve.

* Service Reserve Forces Policy Committees.

* Office of the Assistant Secretary of the Army for Manpower and 
Reserve Affairs.

* U.S. Army Reserve Command, Fort McPherson, Georgia.

* Office of the Chief of Army Reserve.

* U.S. Army National Guard.

* U.S. Air Force Reserve.

* U.S. Air National Guard.

* U.S. Naval Reserve.

* U.S. Marine Corps Reserve, Quantico, Virginia.

We reviewed relevant reports from the DOD Office of the Inspector 
General and the U.S. Army Audit Agency and our prior GAO reports and 
testimony. We discussed with an official from the Congressional Budget 
Office the estimated cost of a pay differential for federal employees 
who are called to active duty. We did not verify the methodology used 
to calculate this estimate. We analyzed current compensation and 
benefits policies for activated federal employees from the Office of 
Personnel Management. Further, we surveyed officials from 22 states 
between May and July 2003 and obtained their compensation and benefits 
policies to gain the perspective of state governments' financial 
assistance and benefits for state employee reservists called to federal 
active duty. To determine the 22 states, we chose the 11 states with 
the highest total population of reservists in the state, the 5 states 
with the smallest total reservist population, and 6 states in the 
middle. We obtained a standard set of information regarding each 
state's policy. We also updated information on employer compensation 
policies from our June 2002 report on employer support of the National 
Guard and the Reserve.[Footnote 63] We had surveyed 359 employers of 
reservists in high tempo units between November 2001 and March 2002. 
Due to concerns about mail contaminated with anthrax, not all completed 
surveys were obtained before issuance of the employer support report. 
We updated the data with an additional 72 surveys for a total of 183 
completed surveys. Employers were not randomly selected; therefore, the 
results are not projectable to all employers. We also reviewed data 
from the Defense Manpower Data Center regarding Army Reserve Medical 
Corps authorized and actual fill rates for critical medical specialties 
and gains and losses from the Army Selected Reserve and the Army 
Individual Ready Reserve from 1991 to 2002 to review an Army proposal 
for special deployment pay. We reviewed DOD surveys on Army Reserve 
physicians' experiences during mobilizations, on a rotation program to 
address earlier concerns about the length of deployments, and on 
associated catastrophic income loss. We also contacted military aid 
associations, including the Army Emergency Relief, the Navy-Marine 
Corps Relief Society, and the Air Force Aid Society, to obtain and 
review information on emergency loans and financial assistance provided 
to activated reservists on active duty.

To evaluate reserve families' readiness and awareness and use of family 
support programs, we reviewed DOD family policy regulations. We also 
reviewed DOD Web sites and other materials designed to inform 
servicemembers and their families about benefits. To obtain further 
insight into reservists' awareness and access to family support 
programs, we reviewed service personal financial management regulations 
and policies to determine the extent to which these programs are 
extended to reservists and their family members. To evaluate the 
financial well-being of reservists, we reviewed RAND and other DOD 
studies. We also compared the results of the 2000 DOD survey with the 
1999 DOD Survey of Active Duty Personnel. Specifically, we met with and 
obtained information from DOD officials from the Office of the 
Assistant Secretary of Defense for Reserve Affairs, the Office of the 
Deputy Under Secretary of Defense for Military Community and Family 
Policy, the military services, and reserve components. We also met with 
representatives from the National Military Family Association and the 
JumpStart Coalition for Financial Literacy to discuss challenges 
reservists face when called to active duty.

To evaluate a legislative proposal for DOD to offer TRICARE to 
reservists and their families when members are not on active duty, we 
reviewed relevant GAO reports. We discussed health care benefits and 
eligibility criteria for reservists and their family members and recent 
improvements to military health care with DOD health care officials. We 
obtained cost estimates of the legislative proposal from the 
Congressional Budget Office and DOD, but we did not verify the 
methodology used to calculate the estimates. During our survey of 
officials from 22 states, we obtained their respective health care 
benefits policies to gain the perspective of state governments' health 
benefits for state employee reservists called to federal active duty. 
We met with and obtained information from DOD officials within the 
Office of the Assistant Secretary of Defense for Reserve Affairs, 
Office of the Assistant Secretary of Defense for Health Affairs, and 
the TRICARE Management Activity.

We completed our work for this report from March to July 2003 in 
accordance with generally accepted government auditing standards.

[End of section]

Appendix II: DOD Surveys of Reservists and Spouses:

This appendix describes DOD's 2000 survey of reserve personnel and 2002 
survey of spouses of activated reserve personnel. We did not 
participate in the design or collection of the results.

2000 Survey of Reserve Component Personnel:

The 2000 Survey of Reserve Component Personnel is a survey of Selected 
Reserve members of the reserve components sponsored by the Office of 
the Assistant Secretary of Defense for Reserve Affairs. The study 
population consisted of 728,347 members below flag or general officer 
rank and having at least 6 months of reserve duty service as of August 
2000. The sample consisted of 74,487 members, and eligible respondents 
returned 35,223 questionnaires for a response rate of 47 percent. DOD 
officials believe that the response rate for the survey is as good as 
other similar surveys that they have conducted. However, there is a 
potential for bias in the estimates to the extent that respondents and 
nonrespondents had different opinions on the questions asked. Data were 
weighted by the Defense Manpower Data Center to allow the study to 
provide estimates for the study population or subpopulations. This was 
a mail-out survey, with the data collection period running from August 
16, 2000, through December 29, 2000.

Because this is a probability sample based on random selections, the 
sample is only one of a large number of samples that might have been 
drawn. Since each sample could have provided different estimates, 
confidence in the precision of the particular sample's results is 
expressed as a 95 percent confidence interval (e.g., plus or minus 4 
percentage points). This is the interval that would contain the actual 
population value for 95 percent of the samples that could have been 
drawn. As a result, we are 95 percent confident that each of the 
confidence intervals in this report will include the true values in the 
study population. All percentage estimates from the survey review have 
sampling errors of plus or minus 5 percentage points or less, unless 
otherwise noted. We used the weighting factors and the sampling error 
methodology provided by the Defense Manpower Data Center to develop 
2000 estimates and sampling error estimates. In some cases, we used the 
estimates developed by the Defense Manpower Data Center.

2002 Survey of Spouses of Activated National Guard and Reserve 
Component Members:

The 2002 survey of spouses was sponsored by the Office of the Assistant 
Secretary of Defense for Reserve Affairs to assess the needs and 
concerns of National Guard and Reserve families prior to and during 
activation, to assess the status of family support initiatives, and to 
gather data from spouses of members who have been activated since 
September 11, 2001. The study population for this survey consisted of 
29,673 spouses of reservists activated for Operations Noble Eagle, 
Enduring Freedom, Bosnia, Southwest Asia, or Southern Watch. The survey 
was a stratified random sample consisting of 7,658 spouses. Eligible 
respondents returned 3,874 completed surveys for a response rate of 51 
percent. DOD officials believe that the response rate for the survey is 
as good as other similar surveys that they have conducted. However, 
there is a potential for bias in the estimates to the extent that 
respondents and nonrespondents had different opinions on the questions 
asked.

As with the 2000 survey, the 2002 spouse survey is also a probability 
sample based on random selections, so the sample is only one of a large 
number of samples that might have been drawn. For this survey, we 
express confidence in the precision of our estimates as a 95 percent 
confidence interval. All percentage estimates from the 2002 survey have 
sampling errors of plus or minus 5 percentage points or less, unless 
otherwise noted. To produce estimates of the study population, the 
sample data were weighted to reflect the sample design and to adjust 
for nonresponse. Because weighting factors were not provided to us for 
use with the data, we computed weighting factors as the ratio of the 
population to respondents for each stratum.

[End of section]

Appendix III: Policies and Protections That May Help Mitigate 
Reservists' Financial Hardship During Activation:

This appendix discusses existing pay policies and protections, as well 
as emergency aid services, that may help mitigate reservists' financial 
hardship during activation.

While basic military compensation, in constant dollars, remained fairly 
steady during most of the 1990s, it has increased in recent 
years.[Footnote 64] As a result, reservists activated today are earning 
more in the military than they did just a few years ago. (See fig. 2.) 
For example, an enlisted member in pay grade E-4 who is married with no 
other dependents would earn $3,156 per month in basic military 
compensation in fiscal year 2003, compared with $2,656 per month in 
fiscal year 1999, or a 19 percent increase. These figures are 
calculated in constant 2003 dollars to account for the effects of 
inflation.

Figure 2: Annual Basic Military Compensation for Selected Pay Grades 
(Fiscal Years 1990-2003):

[See PDF for image]

Note: GAO analysis.

[End of figure]

In addition to increases in basic military compensation, Congress in 
April 2003 increased family separation allowance from $100 to $250 per 
month and imminent danger pay from $150 to $225 per month. These 
increases expire September 30, 2003.[Footnote 65] The Senate and House 
are also considering a new special pay of up to $1,000 per month that 
would compensate servicemembers for frequent or lengthy 
deployments.[Footnote 66]

In addition to these increases in pay, other pay policies and 
protections may help to mitigate reservists' financial hardship during 
deployment. For example:

* The Soldiers' and Sailors' Civil Relief Act caps debt interest rates 
at 6 percent annually for debts incurred prior to activation and 
provides many other financial protections if members can show that 
their ability to pay is materially affected by being activated. 
Legislation currently before Congress would amend the act to expand 
certain protections for activated servicemembers.[Footnote 67]

* Income that servicemembers earn while mobilized in combat zones is 
tax-free. The President designates combat zones. Military pay received 
while in these combat zones is excluded from gross income and not 
subject to federal income tax. Legislation currently before Congress 
would expand combat zone tax exemptions to any designated contingency 
operation.[Footnote 68]

* For Iraqi Freedom, Noble Eagle, and Enduring Freedom, DOD has 
authorized reservists to receive both a housing allowance and per diem 
for their entire period of activation, up to 2 years.

* Military Reservist Economic Injury Disaster Loans up to $1.5 million 
are available through the Small Business Administration to help small 
businesses meet necessary operating expenses and debt payments until a 
key employee--including the owner--is able to return from active duty 
to the business and normal operations resume.

Servicemembers who are experiencing financial hardship can also obtain 
emergency assistance in the form of interest-free loans or grants from 
private aid organizations to pay for basic living expenses such as food 
or rent during activation. The Army Emergency Relief, the Air Force Aid 
Society, and the Navy-Marine Corps Relief Society are nonprofit 
charitable organizations that provide financial, educational, and other 
assistance to servicemembers and their families who are in need. These 
organizations provide assistance to active component members, 
reservists, and retirees.

* In 2002, the Navy-Marine Corps Relief Society distributed 
approximately $41 million to almost 51,000 individuals, including $1.5 
million provided due to inadequate income to meet basic living expenses 
such as rent or mortgage, food, and utilities. The Navy-Marine Corps 
Relief Society did not track separately the assistance it provided to 
reservists.

* The Air Force Aid Society distributed over $24 million in 2002 to 
more than 34,000 individuals. Of this amount, $600,000 was provided to 
reservists. The Aid Society reported significant increases in 
reservists' receiving emergency assistance and phone card use. About 
140 reservists received emergency assistance for basic living expenses 
because they experienced loss of civilian pay or military pay problems.

* Army Emergency Relief distributed $41 million in 2002 to more than 
56,000 people. At least $850,000 went to about 900 reservists for 
emergency travel assistance, vehicle repairs, rent or mortgage 
assistance, and as an income supplement while waiting for delayed 
military pay when called to active duty.

[End of section]

Appendix IV: Selected States' Policies on Compensation for Activated 
Employees:

This appendix displays the results of our survey of 22 states to obtain 
their policies regarding pay and benefits offered to state employees 
who are called to federal active duty. It describes the military leave 
policies and financial assistance programs such as state pay 
differentials for activated state employees who experience income loss 
as a result of federal activation. It also describes each state's 
policy on the continuation of dependent health care coverage and other 
reported benefits. To determine the 22 states, we chose the 11 states 
with the highest total population of reservists in the state, the 5 
states with the smallest total reservist population, and 6 states in 
the middle. We conducted our survey of the 22 states between April and 
July 2003.

In summary, we found that 19 of the 22 states surveyed offer pay 
differentials to employees who are on military leave without pay and 
can document a loss of income. Of these 19 states, 16 are mandated 
under state law or executive order to provide financial assistance, 
while 3 states--Colorado, Georgia, and Texas--allow the individual 
state agencies to offer pay differentials at the agencies' discretion. 
The other three states do not offer pay differentials to activated 
employees on unpaid leave. The manner in which states calculate the 
amount of the pay differential varies. For example, 7 states calculate 
the amount of the pay differential as the difference between an 
employee's civilian salary and basic military pay, not including 
military special pays and allowances. In contrast, 10 states include 
military special pays, allowances, or both in the calculation, which 
can lower the differential amount that the state pays to its activated 
employees. Georgia allows state agencies to formulate their own 
differential calculation, while Pennsylvania offers a flat rate monthly 
stipend to all activated employees. States offering financial 
assistance do so for a period of time ranging from 90 days in Colorado 
to the duration of the activation in states like Florida and Alabama. 
We did not find a correlation between the size of a state's reservist 
population and the type or extent of financial assistance the state 
offers. The results of our survey are presented in table 4.

Table 4: Income Assistance, Military Leave, and Health Benefits Offered 
to State Employees Called to Federal Active Duty:

State (Reserve population)[A]: Alabama (22,255); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: Alabama began implementing a 
pay differential policy for activated state employees in July 2002. It 
is active for the duration of the war on terrorism and retroactive to 
September 11, 2001. The state offers 21 working days of paid military 
leave each year, after which activated employees are placed on military 
leave without pay. Employees activated for 30 or more consecutive days 
and who are on military leave without pay are eligible to receive a pay 
differential if their state pay exceeds their base military pay, 
excluding all special pays and allowances. Employees must submit a 
military Leave and Earnings Statement each month to receive the 
differential. Activated employees receive the differential for the 
duration of their activation; Status of dependent health care coverage 
for state employees on federal active duty: The state continues to 
contribute its portion of an employee's dependent health care premium 
for the duration of the activation; Status of other reported state 
benefits for employees on federal active duty[B]: Employees in the 
state's retirement system continue to receive retirement credit while 
on military leave without pay, unless they receive credit for the time 
in another public retirement system, other than the federal social 
security system. Employees who used accrued leave while on active duty 
for the war on terrorism are eligible to reclaim the expended leave. 
Activated state employees do not continue to accrue leave while on 
leave without pay. 

State (Reserve population)[A]: Alaska (3,650); Income assistance 
offered to activated state employees on military leave without pay: Not 
available; Military leave and compensation policy for state employees 
on federal active duty: Alaska offers its employees 16.5 working days 
of paid military leave each year for reserve training, but it does not 
offer paid military leave for active duty; Status of dependent health 
care coverage for state employees on federal active duty: The state 
suspends its employees' dependent health coverage when they are called 
to active military duty. Activated employees may continue their 
dependent health care coverage under the Consolidated Omnibus Budget 
Reconciliation Act (COBRA) in which they must pay the full premium plus 
a 2 percent administrative fee; Status of other reported state 
benefits for employees on federal active duty[B]: Employees in the 
state's retirement system continue to receive retirement credit while 
on active military duty. 

State (Reserve population)[A]: Arizona (11,041); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: Arizona enacted a pay 
differential policy for activated state employees in May 2002. The 
policy is retroactive to September 11, 2001, and expires on June 30, 
2004. The state offers 60 working days of paid military leave for every 
2 consecutive years that a reservist is employed by the state. 
Employees who are on military leave without pay and have exhausted all 
annual and military leave balances are eligible to receive a pay 
differential if their state pay, including all other compensation 
except overtime, exceeds the sum of their base military pay, special 
pays, and allowances. Employees must submit each military Leave and 
Earnings Statement received during the period of active duty to receive 
the pay differential. During any consecutive 5-year period, activated 
employees may receive a pay differential one time for up to 270 days; 
Status of dependent health care coverage for state employees on federal 
active duty: Employees on military leave without pay may continue to 
participate in the health benefit plan for a maximum of 6 months by 
paying both the state and employee contributions. After 6 months, they 
are eligible for COBRA; Status of other reported state benefits for 
employees on federal active duty[B]: Upon return from active duty, the 
employing agency pays the employee's and employer's share of retirement 
contributions accrued during the period of active duty. 

State (Reserve population)[A]: Arkansas (12,446); Income assistance 
offered to activated state employees on military leave without pay: Not 
available; Military leave and compensation policy for state employees 
on federal active duty: Arkansas offers its employees called to duty in 
emergency situations 30 days of paid military leave, after which 
activated employees go on military leave without pay; Status of 
dependent health care coverage for state employees on federal active 
duty: The state continues to contribute a portion of an employee's 
dependent health care premium for the duration of an employee's 
activation; Status of other reported state benefits for employees on 
federal active duty[B]: The state continues to contribute its portion 
to any life or disability insurance policies. State employees continue 
to accumulate retirement credit while on active duty. 

State (Reserve population)[A]: California (57,441); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: California enacted a pay 
differential policy for activated state employees in February 2002. The 
policy is active for the war on terrorism and is retroactive to 
September 11, 2001. It expires December 31, 2003. The state offers 30 
days of paid military leave each year, after which activated employees 
are placed on military leave without pay. Employees are eligible to 
receive a pay differential if their state pay exceeds the sum of their 
base military pay, special pays, and allowances. Employees must prepare 
a worksheet to receive the pay differential and must provide a copy of 
their military Leave and Earnings Statement and military orders to 
their supervisor. Employees are eligible to receive the pay 
differential until the policy expires in December 2003; Status of 
dependent health care coverage for state employees on federal active 
duty: While on military leave during war or national emergency, 
employees continue to receive state paid health, dental, and vision 
care benefits for the duration of the activation or until the policy 
expires in December 2003; Status of other reported state benefits for 
employees on federal active duty[B]: State employees continue to accrue 
retirement credits while on military leave without pay. They also 
continue to accrue annual leave, vacation, and sick leave for up to 6 
months. 

State (Reserve population)[A]: Colorado (13,524); Income assistance 
offered to activated state employees on military leave without pay: Pay 
differential at agency discretion; Military leave and compensation 
policy for state employees on federal active duty: Colorado enacted a 
pay differential policy for activated state employees in December 2001. 
The policy is retroactive to September 11, 2001, and is active for 
military operations designated in the war against terrorism. The policy 
authorizes state agencies to provide a pay differential to their 
employees at the agencies' discretion. The state offers 15 working days 
of paid military leave each year. Following the 15 days of paid leave, 
agencies may grant their employees administrative leave, during which 
they receive a pay differential if their state pay exceeds the sum of 
their base military pay, special pays, and allowances. Employees may 
receive administrative leave for up to 90 days. According to a state 
official, all Colorado state agencies were offering a pay differential 
to their employees as of June 12, 2003. Employees must furnish proof of 
their military pay, such as a military Leave and Earnings Statement, to 
receive the pay differential; Status of dependent health care coverage 
for state employees on federal active duty: The state continues to 
contribute the employer portion of an employee's dependent health care 
coverage as long as the employee is in a pay status. An employee may 
remain in a pay status by using at least 1 day of annual leave each 
month while on military leave. Otherwise, an employee can continue 
group health insurance benefits by paying the entire premium amount; 
Status of other reported state benefits for employees on federal active 
duty[B]: The state does not offer any additional benefits while state 
employees are on military leave without pay. 

State (Reserve population)[A]: Florida (30,477); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: Florida enacted a pay 
differential policy for activated state employees in September 2001. 
The policy applies to state employees called to active duty for the war 
on terrorism. The state offers 30 days of paid military leave per year. 
After the first 30 days, employees are eligible for a pay differential 
if their state pay exceeds their base military pay, excluding special 
pays and allowances. Employees must provide copies of their military 
Leave and Earnings Statements to their supervisors to receive the pay 
differential. Employees receive the pay differential for the duration 
of their activation; Status of dependent health care coverage for 
state employees on federal active duty: The state continues to provide 
all health insurance and to contribute its portion of an employee's 
dependent health care premium for the duration of the activation; 
Status of other reported state benefits for employees on federal active 
duty[B]: Employees may choose to continue all other benefit programs by 
paying their portion of the premiums for the duration of the 
activation. Employees on military leave receive full retirement credit 
for their period of military service upon their return to employment. 
They also accrue full annual and sick leave and holiday pay. 

State (Reserve population)[A]: Georgia (25,123); Income assistance 
offered to activated state employees on military leave without pay: Pay 
differential at agency discretion; Military leave and compensation 
policy for state employees on federal active duty: Georgia authorized 
state agencies to offer a pay differential to their activated state 
employees at the agencies' discretion in July 2002. The state offers 18 
working days of paid military leave each year, after which employees 
are placed on military leave without pay. State agencies have the 
discretion to offer a pay differential and independently determine the 
calculation of the pay differential. A pay differential is the 
difference between state government and military salaries; Status of 
dependent health care coverage for state employees on federal active 
duty: The state continues to contribute its portion of an employee's 
dependent health care premium for up to 18 months if the employee was 
activated on an emergency basis. After 18 months, employees may retain 
health insurance for their family by paying 102 percent of the premium 
as specified under the COBRA provisions; Status of other reported 
state benefits for employees on federal active duty[B]: The state 
suspends retirement benefits while the employees are on military leave 
without pay. The activated employees have the option of paying their 
premiums retroactively upon return from active duty to reclaim lost 
credits. They do not accrue any kind of leave while on leave without 
pay. 

State (Reserve population)[A]: Illinois (24,382); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: Illinois enacted a pay 
differential policy for activated state employees in February 2003. 
While on military leave, activated employees are eligible for a pay 
differential if their state pay exceeds their base military pay, 
excluding special pays and allowances. Employees must submit a copy of 
their military Leave and Earnings Statement to their employing agency 
to receive the pay differential. Employees receive the pay differential 
for the duration of their activation; Status of dependent health care 
coverage for state employees on federal active duty: The state 
continues to contribute its portion of an employee's dependent health 
care premium for the duration of the activation; Status of other 
reported state benefits for employees on federal active duty[B]: The 
state continues to pay an employee's full retirement coverage while on 
military leave without pay. Employees also continue to accrue vacation 
and sick leave. 

State (Reserve population)[A]: Iowa (12,593); Income assistance offered 
to activated state employees on military leave without pay: Not 
available; Military leave and compensation policy for state employees 
on federal active duty: The state offers its employees 30 days of paid 
military leave each year, after which activated employees go on 
military leave without pay; Status of dependent health care coverage 
for state employees on federal active duty: The state suspends its 
contributions for dependent health care coverage for employees on 
military leave without pay. Employees may continue their dependent 
health care coverage under COBRA; Status of other reported state 
benefits for employees on federal active duty[B]: Employees continue to 
accrue retirement credit while on military leave without pay. 

State (Reserve population)[A]: Nevada (3,939); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: Nevada enacted a pay 
differential policy for activated state employees in October 2001. The 
state offers 15 working days of paid administrative leave each year for 
employees called to active military duty. Employees are then placed on 
civil leave at reduced pay and receive a pay differential if their 
state pay exceeds the sum of their base military pay, special pays, and 
allowances except for clothing. To receive the differential, employees 
must provide their supervisor copies of their deployment orders and 
military Leave and Earnings Statements, among other forms, each month 
they are on active duty. Employees receive the pay differential for the 
duration of their activation; Status of dependent health care coverage 
for state employees on federal active duty: The state allows its 
employees to continue dependent health care coverage for the duration 
of the activation if the employees pay the full premium; Status of 
other reported state benefits for employees on federal active duty[B]: 
The state offers two retirement policies. Under one policy, the 
employee can elect to pay for a portion of the premium and the state 
contributes the remainder. Under the second option, the state pays the 
entire premium, but the employee either receives less pay or forfeits 
the equivalent basic salary and/or cost-of living increases. According 
to a state official, the state encourages its employees who are called 
to active duty to transition their retirement coverage to the second 
option, which allows them to continue to accumulate retirement credit 
while on active duty. 

State (Reserve population)[A]: New Hampshire (3,617); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: New Hampshire enacted a pay 
differential policy for activated full-time, permanent state employees 
in March 2003. The policy applies only to the conflict in Iraq. The 
state offers 15 days of paid military leave each federal fiscal year to 
eligible employees called to active military duty, after which 
employees are placed on military leave without pay. Employees receive a 
pay differential if their state pay exceeds their base military pay, 
excluding special pays and allowances. To receive the differential, 
employees must submit an application and a military Leave and Earnings 
Statement to the Adjutant General's office. They receive the pay 
differential for up to 1 year after activation beginning March 21, 
2003; Status of dependent health care coverage for state employees on 
federal active duty: The state pays the full premium for all state 
employees' dependent health care coverage and continues to pay the full 
premium for the duration of their military activation; Status of other 
reported state benefits for employees on federal active duty[B]: State 
employees continue to accrue retirement credit while on military leave 
without pay. 

State (Reserve population)[A]: New Jersey (15,891); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: New Jersey enacted a pay 
differential policy for activated state employees in February 2003. The 
policy applies to the global war on terrorism, armed conflict in Iraq, 
or heightened tensions with North Korea. The state also authorized pay 
differentials for employees called to active service to support the 
Bosnia and Kosovo missions. The state offers 90 days of paid military 
leave to state employees serving in the National Guard and 30 days of 
paid leave to members of the Reserves. After employees exhaust their 
paid military leave they are placed on leave without pay, but without 
loss of time, during which they receive a pay differential if their 
state pay exceeds their base military pay, excluding special pays and 
allowances. Employees must submit their orders to their employing 
agency to receive the pay differential. Employees remain on partial 
military leave for the duration of their time on active duty; Status 
of dependent health care coverage for state employees on federal active 
duty: The state continues to contribute its portion of an employee's 
dependent health care premium for the duration of the activation; 
Status of other reported state benefits for employees on federal active 
duty[B]: The state continues to contribute its portion to an employee's 
life insurance and pension coverage during federal active duty. 

State (Reserve population)[A]: New York (30,997); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: New York enacted a pay 
differential policy for activated state employees in September 2000. 
The policy expires in December 2004. The state offers 44 working days 
or 60 days (whichever is longer) of paid military leave each year or 
continuous period of absence that spans more than 1 calendar year, 
after which activated employees are placed on military leave at reduced 
pay. Employees receive a pay differential if their state pay exceeds 
the sum of their base military pay, basic allowance for housing, and 
basic allowance for subsistence. They must submit a military Leave and 
Earnings Statement to their employing agency to receive the pay 
differential. Activated employees receive the differential until the 
policy expires; Status of dependent health care coverage for state 
employees on federal active duty: The state offers its employees on 
military leave at reduced pay continued health care coverage for their 
dependents at no cost for the duration of the employees' activation; 
Status of other reported state benefits for employees on federal active 
duty[B]: Employees enrolled in the M/C Life Insurance Program may 
continue their life insurance coverage by paying their portion of the 
premiums. 

State (Reserve population)[A]: North Carolina (20,697); Income 
assistance offered to activated state employees on military leave 
without pay: State pay differential; Military leave and compensation 
policy for state employees on federal active duty: North Carolina 
extended its pay differential policy for involuntarily activated state 
employees to include all reservists in September 2001. The state offers 
30 days of paid military leave for each period of involuntary service, 
after which activated employees are placed on military leave without 
pay. Employees receive a pay differential if their state pay exceeds 
their base military pay, excluding special pays and allowances. To 
receive the differential, employees must provide their military Leave 
and Earnings Statements to their employing agency. They receive the pay 
differential for the duration of their activation; Status of dependent 
health care coverage for state employees on federal active duty: The 
state continues to contribute its portion of an employee's dependent 
health care premium for 30 days from the date of active service. After 
30 days, an employee may choose to continue dependent coverage in the 
State Health Plan by paying the full premium; Status of other reported 
state benefits for employees on federal active duty[B]: Activated state 
employees continue to receive retirement service credit while on 
military leave without pay and to accrue vacation and sick leave. 

State (Reserve population)[A]: Ohio (28,080); Income assistance offered 
to activated state employees on military leave without pay: State pay 
differential; Military leave and compensation policy for state 
employees on federal active duty: Ohio enacted a pay differential 
policy for activated state employees in 1991. The state offers 22 
working days of paid military leave each year, after which activated 
employees are placed on military leave without pay. Employees receive a 
pay differential if their state pay exceeds the sum of their base 
military pay, special pays, and allowances. They must apply for the pay 
differential on a pay period-by-pay period basis and submit each 
military Leave and Earnings Statement they receive while on active duty 
to their employing agency. They receive the pay differential for the 
duration of their activation; Status of dependent health care coverage 
for state employees on federal active duty: The state continues to 
contribute its portion of an employee's dependent health care coverage 
for the duration of the employee's time on active duty; Status of 
other reported state benefits for employees on federal active duty[B]: 
Employees continue to earn retirement credit while on active military 
duty for up to 10 years if they meet certain state employment 
criteria. 

State (Reserve population)[A]: Oklahoma (15,502); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: Oklahoma enacted a pay 
differential for activated state employees in May 2003. The policy is 
retroactive to September 11, 2001. The state offers 20 days of paid 
military leave each federal fiscal year, after which activated 
employees are placed on military leave without pay. State agencies must 
grant their employees on military leave without pay a pay differential 
for active service on or after September 11, 2001, during the period 
Operation Enduring Freedom is in effect, if the employees' state pay 
exceeds the sum of their base military pay and housing allowance. 
Agencies may require employees to submit a military Leave and Earnings 
Statement to receive the differential. Employees receive the pay 
differential for the duration of their activation; Status of dependent 
health care coverage for state employees on federal active duty: To 
ensure continuation of state-sponsored dependent health care coverage, 
activated employees may choose to use annual leave each month to remain 
in pay status. Employees continue to pay their portion of the premium 
if they remain in pay status, and the amount of state pay received for 
the used annual leave is deducted from the pay differential payments; 
The state suspends its employees' dependent health benefits when they 
are on military leave without pay. Employees may retain health 
insurance for their family by paying 102 percent of the premium as 
specified under COBRA provisions; Status of other reported state 
benefits for employees on federal active duty[B]: Activated employees 
may continue to pay into their retirement accounts. 

State (Reserve population)[A]: Pennsylvania (35,189); Income 
assistance offered to activated state employees on military leave 
without pay: Stipend; Military leave and compensation policy for state 
employees on federal active duty: Pennsylvania began offering stipends 
to all activated permanent state employees in September 2001. The state 
offers 30 days of paid military leave, after which activated employees 
are placed on military leave without pay. All employees on military 
leave without pay receive a $500 monthly stipend, regardless of whether 
they gain or lose income as a result of being called to federal active 
duty. Activated employees must show their military orders to their 
employing agency to receive military leave. Employees receive the 
stipend for the duration of their activation; Status of dependent 
health care coverage for state employees on federal active duty: The 
state pays the full premium for all state employees' dependent health 
care coverage and continues to pay the full premium for the duration of 
state employees' military activation; Status of other reported state 
benefits for employees on federal active duty[B]: Employees retain 
retirement and supplemental health benefits if they continue to pay 
their portion of the premium. 

State (Reserve population)[A]: Texas (46,922); Income assistance 
offered to activated state employees on military leave without pay: Pay 
differential at agency discretion; Military leave and compensation 
policy for state employees on federal active duty: The governor of 
Texas encouraged agencies to provide pay differentials to federally 
activated employees in November 2001. The state offers 15 working days 
of paid military leave each federal fiscal year, after which employees 
are placed on military leave without pay. Agency heads may grant 
federally activated employees on leave without pay a pay differential 
if their state pay exceeds the sum of their base military pay, special 
pays, and allowances; A new law requires state agencies to provide a 
pay differential to their employees in September 2003. The employing 
agency requests a copy of the employee's military Leave and Earnings 
Statement to determine the differential. Under the new law, employees 
can receive the pay differential up to 5 years; Status of dependent 
health care coverage for state employees on federal active duty: The 
state will continue to contribute its portion of employees' dependent 
health care coverage for employees who are still in a pay status 
beginning September 2003. Activated employees can remain on a pay 
status by using as little as 1 hour of paid leave (compensatory, 
overtime, vacation, etc.) each month they are on military leave. If 
employees are unable or choose not to remain in a pay status, they may 
retain dependent health insurance coverage for up to 12 months by 
paying the full premium; Status of other reported state benefits for 
employees on federal active duty[B]: Employees will continue to accrue 
full retirement credit by receiving at least 1 hour of state pay during 
each month of active military service by using any combination of paid 
leave beginning September 2003. 

State (Reserve population)[A]: Vermont (3,824); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: Vermont enacted a pay 
differential policy for activated state employees in 2001. The policy 
expires June 2005. The state offers 11 working days of paid military 
leave each federal fiscal year to its employees, after which they are 
placed on military leave without pay. Employees receive a pay 
differential if their state pay exceeds the sum of their base military 
pay, special pays, and allowances. Employees must provide a military 
Leave and Earnings Statement to their employing agency to receive the 
differential. Employees can receive the pay differential for a period 
of up to 6 months from their date of activation; Status of dependent 
health care coverage for state employees on federal active duty: The 
state continues to contribute the employer portion of an activated 
employee's dependent health care coverage for 1 month after the 
employee's activation. After 1 month, employees may continue their 
dependent health care coverage by paying the full premium; Status of 
other reported state benefits for employees on federal active duty[B]: 
The state does not offer any additional benefits while state employees 
are on military leave without pay. 

State (Reserve population)[A]: Virginia (22,458); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: Virginia enacted a pay 
differential policy for activated classified state employees in March 
2002. The state offers 15 working days of paid military leave each 
federal fiscal year to its employees, after which they are placed on 
military leave without pay. Employees receive a pay differential if 
their state pay exceeds the sum of their base military pay, special 
pays, and allowances. Employees must provide a military Leave and 
Earnings Statement to their employing agency to receive the 
differential. Employees may receive the pay differential for the 
duration of their activation; Status of dependent health care coverage 
for state employees on federal active duty: The state continues to 
contribute the employer portion of an activated employee's dependent 
health care coverage and the additional 2 percent administrative fee 
under COBRA for up to 18 months. After 18 months, employees may convert 
their dependent health care to nongroup coverage; Status of other 
reported state benefits for employees on federal active duty[B]: 
Employees continue to receive retirement credit while on active duty if 
they receive an honorable discharge. The state continues to pay basic 
life insurance for up to 2 years from the date military leave without 
pay begins. Optional life insurance can be continued if the employee 
continues to pay the premiums. 

State (Reserve population)[A]: Wyoming (2,344); Income assistance 
offered to activated state employees on military leave without pay: 
State pay differential; Military leave and compensation policy for 
state employees on federal active duty: Wyoming enacted a pay 
differential policy for activated state employees in October 2001. The 
policy expires in October 2005. The state offers up to 15 calendar days 
of paid military leave in any calendar year, after which employees are 
placed on military leave without pay. While on military leave without 
pay, activated employees are eligible for a pay differential if their 
state pay exceeds their base military pay, excluding special pays and 
allowances. Employees must submit a copy of each military Leave and 
Earnings Statement they receive while on active military duty to their 
employing agency to receive the pay differential. Employees receive the 
pay differential for the duration of their activation; Status of 
dependent health care coverage for state employees on federal active 
duty: The state continues to contribute its portion of an employee's 
dependent health care coverage for the duration of the activation; 
Status of other reported state benefits for employees on federal active 
duty[B]: The state continues to match any type of pay deferrals that 
activated employees make to their deferred compensation plans. 
Employees continue to accrue vacation leave while on active military 
duty. Life insurance continues if employees continue to pay their 
portion of the premium. 

Source: GAO.

[A] Reserve population denotes the total number of reserve members 
residing in the state as of April 2003 and includes, but is not limited 
to, state employees who are reservists. The population figures exclude 
Active Guard/Reserve members.

[B] Information in this column reflects responses to an open-ended 
question regarding state benefits, other than health coverage, for 
state employees activated for federal duty and may not necessarily 
describe the full range of benefits offered to state employees on 
federal active duty.

[End of table]

[End of section]

Appendix V: Preactivation Activities of Spouses of Activated 
Reservists:

This appendix provides an analysis of data from the 2002 DOD survey of 
spouses of activated reservists concerning preactivation activities of 
spouses. Based on spouses' self-reported feelings of being prepared or 
unprepared upon receiving a notice of activation for the military 
member, we compared their responses to questions concerning 
preactivation activities--volunteering or participating in unit family 
readiness programs or groups, attending preactivation briefings, 
receiving preactivation materials. We also compared their responses to 
questions concerning other factors that could affect preparedness, such 
as being assigned a military point of contact and the amount of advance 
notice received prior to activation. Finally, we compared their 
responses to a question concerning how well they have coped with the 
activation. The results of our analysis are presented in table 5.

Table 5: Comparison of Spouses' Preparedness to Preactivation 
Activities and Other Factors:

[See PDF for image]

Source: GAO analysis of DOD 2002 Survey of Spouses of Activated 
National Guard and Reserve Component Members.

Note: Percentages may not add to 100 due to rounding.

[End of table]

[End of section]

Appendix VI: Comments from the Department of Defense:

ASSISTANT SECRETARY OF DEFENSE 1500 DEFENSE PENTAGON WASHINGTON, DC 
20301-1500:

RESERVE AFFAIRS:

21 AUG 2003:

Mr. Derek B. Stewart:

Director, Defense Capabilities Management U. S. General Accounting 
Office Washington, D. C. 20548:

Dear Mr. Stewart:

This is the Department of Defense (DoD) response to the GAO draft 
report GAO-03-1004, "MILITARY PERSONNEL: DoD Needs More Data to Address 
Financial and Health Care Issues Affecting Reservists," GAO Code 350343 
(formally GAO Code 350264). I appreciate the opportunity to review and 
comment on the draft GAO report.

We concur with each of the GAO recommendations, number 1 - 5. However, 
specific comments/concerns have been provided on recommendations 2 - 5 
for your consideration.

The Department's comments on the draft report recommendations are 
provided in the enclosure. No technical changes were identified by 
reviewers for separate forwarding to the GAO staff.

Signed for: 

T. F. Hall:

Enclosure: As stated:

GAO DRAFT REPORT - DATED AUGUST 1, 2003 GAO CODE 350343/GAO-03-1004:

"MILITARY PERSONNEL: DoD Needs More Data to Address Financial and 
Health Care Issues Affecting Reservists":

DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:

RECOMMENDATION 1: The GAO recommended that the Secretary of the Defense 
direct the Under Secretary of Defense for Personnel and Readiness to 
determine the need for compensation programs aimed at addressing 
reservists' income loss during periods of active duty by obtaining more 
complete information on the magnitude of income change, the causes of 
income change, and the effects of income change on reserve retention. 
At a minimum, those efforts should be designed to identify reservists 
who (1) fill critical wartime specialties, (2) experience high degrees 
of income loss when on active duty, and (3) demonstrate that income 
loss is a significant factor in their retention decisions. (Pages 37-
38/GAO Draft Report):

DOD RESPONSE: Concur.

RECOMMENDATION 2: The GAO recommended that, on the basis of the above 
information, the Secretary of the Defense develop targeted compensation 
programs, as appropriate, to retain those reservists in the armed 
forces. (Page 38/GAO Draft Report):

. DOD RESPONSE: Partially concur. The Department is constantly 
examining and reexamining bonuses and special pays, which are targeted 
at individuals with critical skills that are considered hard to fill or 
that are inherently dangerous, hazardous or unattractive. Bonus 
agreements are effected in exchange for a commitment to serve in the 
Selected Reserve, and Reservists that qualify for the special or 
incentive pays are compensated for each day or period they are in a 
duty status. With respect to establishing programs that provide income 
protection to Reservists, the Department must continue to exercise 
concern about paying its part-time force more than its full-time force, 
when undertaking similar duties. Also, Reserve personnel receive a 
significant pension at age 60, if they completed at least 20 qualifying 
years of service. This represents deferred compensation for earlier 
service, which may have involved some income loss.

RECOMMENDATION 3: The GAO recommended that the Secretary of the Defense 
direct the Secretaries of the Army, the Air Force, and the Navy, and 
the Commandant of the Marine Corps to develop specific plans for 
improving reservists' and their spouses' awareness of and access to 
personal financial management programs. (Page 38/GAO Draft Report):

DOD RESPONSE: Concur. The Under Secretary of Defense for Personnel and 
Readiness recently launched a DoD Financial Readiness Campaign aimed at 
improving the education and assistance available to Service members and 
their families and to stimulate a culture that values savings and 
responsible financial behavior. The campaign supports the ongoing 
efforts of the Services with products and services provided by 26 
Federal Agencies and nonprofit organizations.	Many of these products and 
services can also support members of the Reserve component, and will be 
provided where meaningful and applicable. Additionally, a draft policy 
is pending final review by the Military Departments that will require 
the Services to provide personal financial planning materials to 
National Guard and Reserve personnel as an integral part of 
mobilization training.

RECOMMENDATION 4: The GAO recommended that the Secretary of the Defense 
direct the Military Services, in conjunction with the Under Secretary 
of Defense for Personnel and Readiness, to assess the financial well 
being of reservists and determine whether reservists' financial 
problems affect mission readiness. (Page 38/GAO Draft Report):

DOD RESPONSE: Concur. The Under Secretary of Defense will include the 
Reserve Components in the on-going efforts to assess financial well 
being of Service members and the impact of financial problems on 
mission readiness.

RECOMMENDATION 5: The GAO recommended that the Secretary of the Defense 
direct the Under Secretary of Defense for Personnel and Readiness to 
assess problems reservists have experienced since the mobilizations 
following the events of September 11, 2001, in maintaining continuity 
of health care; the causes of those problems; and their effects on 
readiness, recruiting, and retention. As part of this assessment, DoD 
should evaluate the ramifications of extending TRICARE coverage to 
reservists not on active duty and their family members as well as 
paying premium costs incurred by reservists who choose to continue 
their civilian health care insurance coverage when activated. DoD 
should also evaluate the potential impact of extending such coverage on 
the retention of active duty personnel and on the TRICARE system. (Page 
38/GAO Draft Report):

DOD RESPONSE: Concur. It is important to note that many Reserve TRICARE 
problems are the result of a lack of information and understanding 
concerning enrollment and participation in TRICARE. Efforts to educate 
Reservists and their families concerning their TRICARE benefits and 
entitlements and the need to ensure dependent information in the 
Defense Enrollment Eligibility Reporting System (DEERS) is accurate and 
up-to-date, must be continuous, ongoing and widespread. Also, it is 
worth nothing that, while over 30% of the Reserve force does not have 
dental insurance, less than 5 % of that force has enrolled in the 
TRICARE Dental Program, which is a relatively cost effective and 
benefit rich dental plan. If TRICARE were offered, there is no 
indication reservists would sign up in any greater numbers than they 
have for the TRICARE Dental Program.

[End of section]

Appendix VII: Staff Acknowledgments:

Acknowledgments:

Kelly Baumgartner, Brenda S. Farrell, Thomas W. Gosling, Krislin M. 
Nalwalk, Jennifer R. Popovic, Mark F. Ramage, Loch-Hung Leo Sze, and 
Nicole Volchko made significant contributions to this report.

FOOTNOTES

[1] We use the generic terms "reserves" and "reservists" throughout 
this report to refer to both National Guard and Reserve personnel.

[2] Public Law 107-314, Dec. 2, 2002.

[3] For this report, we use the term "compensation" to refer to both 
pay and employee benefits, to include programs and services that 
support servicemembers and their families.

[4] In response to the mandate, we also issued a report on special pay 
for duty in the polar regions. See U.S. General Accounting Office, 
Military Personnel: DOD Needs to Assess Certain Factors in Determining 
Whether Hazardous Duty Pay Is Warranted for Duty in the Polar Regions, 
GAO-03-554 (Washington, D.C.: Apr. 29, 2003).

[5] Department of Defense, Office of the Secretary of Defense, Military 
Compensation Background Papers: Compensation Elements and Related 
Manpower Cost Items, Their Purposes and Legislative Backgrounds 
(September 1996).

[6] In a prior report comparing the benefits offered to active duty 
servicemembers with those offered in the private sector, we found no 
significant gaps in military benefits. See U.S. General Accounting 
Office, Military Personnel: Active Duty Benefits Reflect Changing 
Demographics, but Opportunities Exist to Improve, GAO-02-935 
(Washington, D.C.: Sept. 18, 2002).

[7] The other two categories of the reserve forces are the Standby 
Reserve and the Retired Reserve.

[8] The average reservist trains 38 or 39 days per year. In addition to 
this training, some reservists provide support for counterdrug 
operations, domestic emergencies, exercises, and established and 
emerging operations, including those involving either presidential 
call-ups or mobilizations. 

[9] For this report, operational tempo refers to the total days 
reservists spend participating in normal drills, training, and 
exercises, as well as domestic and overseas operational missions.

[10] Attrition is the total number of personnel losses from the 
Selected Reserve divided by the average Selected Reserve end strength 
for the year. Under this definition, attrition is not a true measure of 
retention since it does not reflect the number of personnel who left 
compared with the eligible population of those who could have left. 

[11] The population of interest consisted of all Selected Reserve 
members below flag or general officer rank, with at least 6 months of 
service when the questionnaires were first mailed in August 2000. The 
sample consisted of 74,487 members. Eligible respondents returned 
35,223 completed surveys.

[12] The population of interest was spouses of reservists activated for 
Operations Noble Eagle, Enduring Freedom, Bosnia, Southwest Asia, or 
Southern Watch. The sample consisted of 7,658 spouses when the survey 
was first mailed in August 2002. Eligible respondents returned 3,874 
completed surveys.

[13] U.S. General Accounting Office, Military Personnel: DOD Actions 
Needed to Improve the Efficiency of Mobilizations for Reserve Forces, 
GAO-03-921 (Washington, D.C.: Aug. 21, 2003).

[14] U.S. General Accounting Office, Defense Health Care: Army Needs to 
Assess the Health Status of All Early-Deploying Reservists, GAO-03-437 
(Washington, D.C.: Apr. 15, 2003).

[15] GAO-03-549T. We also provided a statement for the record to the 
Subcommittee on Personnel, Senate Committee on Armed Services, titled 
Military Personnel: Preliminary Observations Related to Income, 
Benefits, and Employer Support for Reservists During Mobilization, 
GAO-03-573T (Washington, D.C.: Mar. 19, 2003).

[16] U.S. General Accounting Office, Defense Health Care: Oversight of 
the Adequacy of TRICARE's Civilian Provider Network Has Weaknesses, 
GAO-03-592T (Washington, D.C.: Mar. 27, 2003) and Defense Health Care: 
Oversight of the TRICARE Civilian Provider Network Should Be Improved, 
GAO-03-928 (Washington, D.C.: July 31, 2003). 

[17] U.S. General Accounting Office, Defense Health Care: Most 
Reservists Have Civilian Health Coverage but More Assistance Is Needed 
When TRICARE Is Used, GAO-02-829 (Washington, D.C.: Sept. 6, 2002).

[18] U.S. General Accounting Office, Reserve Forces: DOD Actions Needed 
to Better Manage Relations between Reservists and Their Employers, 
GAO-02-608 (Washington, D.C.: June 13, 2002).

[19] The 2000 survey asked respondents: "Please estimate your (and your 
spouse's) total income change from all sources as a result of your most 
recent mobilization and deployment. If you (and your spouse) have 
continuing losses from a business or practice, include those in your 
estimate." 

[20] The survey listed 22 possible problems and asked respondents to 
choose their top 3 most serious problems experienced during 
mobilization or deployment.

[21] RAND, The Effect of Mobilization on Retention of Enlisted 
Reservists After Operation Desert Shield/Storm, MR-943-OSD (1998). The 
study did not include officers.

[22] The sampling error for this estimate is plus or minus 9 percentage 
points.

[23] The percentages do not add to 100 due to rounding. Sampling errors 
for federal employees who had a decrease, no change, or a gain in 
income were about plus or minus 6 percentage points.

[24] The 2000 survey obtained information on reservists in the 
following civilian career fields: medical professionals, lawyers, 
information technology specialists, clergy, and pilots/navigators.

[25] The sampling error for this estimate was about plus or minus 8 
percentage points.

[26] DOD established the Unified Legislation and Budgeting process in 
1994 to develop and review personnel compensation proposals.

[27] Internal Revenue Publication 533 defines "self-employed" 
individuals as sole proprietors or independent contractors; members of 
a partnership that carries on a trade or business; or otherwise in 
business for themselves. A 2001 survey of medical personnel conducted 
for the Army Surgeon General found that almost 40 percent of Army 
Reserve Medical Corps officers identified themselves as self-employed. 

[28] The cost estimate assumes that about 30 percent of the 350 Army 
Reserve Medical Corps officers deployed in May 2003 would have 
qualified for the special deployment pay. The actual total monthly cost 
may be less since this figure assumes that all qualifying physicians 
had been deployed involuntarily beyond the 90-day rotation schedule.

[29] The Army considers physicians to be fully trained and deployable 
when they have passed a written exam and completed their residency.

[30] Activated federal employees who use military leave receive full 
compensation from their civilian agency in addition to their military 
pay for the same period. Federal employee reservists earn up to 15 days 
of military leave a year. Employees who perform active military duty to 
assist domestic civilian authorities in the protection of life or 
property may be granted an additional 22 days of military leave.

[31] Four legislative proposals that would offer differential pay to 
activated federal employee reservists are S. 593, Reservists Pay 
Security Act of 2003; S. 442, Reservists and Guardsmen Pay Protection 
Act of 2003; H.R. 217, Reservists Pay Security Act of 2003; and H.R. 
1345, Equity for Reservists Pay Act of 2003.

[32] Public Law 107-107, sec. 519. (Dec. 28, 2001) 5 U.S.C. sec. 
8906(e)(3).

[33] Federal employees can extend coverage beyond 18 months for 31 days 
and convert to an individual policy offered by the plan carrier. Public 
Law 103-353, Oct. 13, 1994, 38 U.S.C. sec. 4301-4333.

[34] S. 593, Reservist Pay Security Act of 2003, as introduced on March 
11, 2003.

[35] For its analysis, the Congressional Budget Office assumed that (1) 
15 percent of those reserves called to active duty at any time are 
federal employees; (2) the average annual reduction in salary while 
serving on active duty is about $3,000; and (3) an average of 20,000 
federal employees will be on active duty military service between July 
1, 2003, and September 30, 2003, diminishing to about 2,000 by 2008. 
Lengthier, larger, or more frequent deployments could increase the 
costs of differential pay.

[36] GAO-02-608.

[37] Public Law 103-353, 38 U.S.C., sec. 4301-4333.

[38] See section 512, National Defense Authorization Act for Fiscal 
Year 1996 (P.L. 104-106).

[39] U.S. General Accounting Office, Reserve Forces: Observations on 
the Ready Reserve Mobilization Income Insurance Program, GAO/
T-NSIAD-97-154 (Washington, D.C.: May 8, 1997).

[40] Adverse selection occurs when those enrolling in an insurance 
program have significantly higher claim probabilities than the average 
for the population to which the insurance is offered.

[41] This estimate seems overly optimistic in today's environment based 
on the assumed 10 percent compound interest rate.

[42] Reserve mobilizations exceeded 200,000 by mid-March 2003 and 
remained above that level into July 2003.

[43] Asked what prevented them from participating with their unit's 
family readiness program or from being a member of their unit's family 
readiness group, about 37 percent of spouses were not aware of a family 
readiness group, 34 percent did not have time, for 31 percent the 
location was not convenient, and 30 percent had not been asked. (These 
percentages do not add to 100 percent because more than one reason 
could be indicated.)

[44] The 2000 survey of reservists showed that about 40 percent of 
drilling unit members lived 50 miles or farther from their home unit. 
The 2002 survey of spouses showed that about 22 percent lived more than 
100 miles away from where the member's unit regularly drills or trains. 
In addition, 28 percent of spouses said they lived more than 50 miles 
from the nearest military installation.

[45] Examples of these Web sites are www.armyfamilyteambuilding.org/
home.asp, www.afcrossroads.com/index-home.cfm, www.usmc-mcss.org/
mcftb/fa_te_build_main.html, and www.cnet.navy.mil. 

[46] RAND, Assessing the Personal Financial Problems of Junior Enlisted 
Personnel, MR-1444-OSD (2002). 

[47] Caliber Associates, U.S. Navy Family Service Center Leadership 
Survey 2000. 

[48] Department of Defense, Deputy Assistant Secretary of Defense 
(Military Community and Family Policy), A New Social Compact: A 
Reciprocal Partnership Between the Department of Defense, Service 
Members, and Families (July 2002). 

[49] In 2001, Congress expressed concern that the military departments 
were not providing sufficient personal financial management training 
and that when personal financial problems occurred, the services were 
not providing adequate supervision to ensure that servicemembers and 
their families regained financial security. Due to these concerns, 
Congress directed DOD to review personal financial management programs. 
H. Rpt. 107-194.

[50] We compared responses to identical questions included in DOD's 
1999 Survey of Active Duty Members and the 2000 Reserve Component 
Survey.

[51] TRICARE Prime Remote for Active Duty Family Members provides 
reserve component families with access to civilian health care 
providers when the servicemember and family reside more than 50 miles, 
or a 1-hour commute, from a military medical treatment facility.

[52] GAO-02-829.

[53] GAO-02-829.

[54] An estimated 11 percent of the spouses did not know how much it 
cost.

[55] OSD has established a goal of providing reservists with at least 
30 days notice prior to mobilization when operationally feasible. Our 
prior work on DOD's mobilization process found that advance notice was 
often not possible following the events of September 11, 2001.

[56] See S. 1050, amend. 696.

[57] The amendment applies to a special category of Individual Ready 
Reserve members who have volunteered to be called to active duty under 
Presidential Reserve Call-up authority when needed.

[58] Congressional Budget Office, The Long-Term Implications of Current 
Defense Plans (Washington, D.C.: January 2003).

[59] Congressional Budget Office, Cost Estimate, S. 1050, National 
Defense Authorization Act for Fiscal Year 2004 as passed by the Senate 
(June 2, 2003).

[60] Federal government employees in the reserves who are called to 
active duty continue to receive health benefits under the Federal 
Employee Health Benefits Program up to 18 months. 

[61] The Congressional Budget Office projected that the average cost of 
self and family TRICARE coverage in 2004 will be $5,600.

[62] Unless otherwise noted, the officials listed in this scope and 
methodology appendix have their offices in the Pentagon or at other 
locations in the Washington, D.C., metropolitan area. 

[63] GAO-02-608. 

[64] Basic military compensation consists of basic pay, basic allowance 
for housing, basic allowance for subsistence, and the federal tax 
advantage. It does not include special and incentive pays, other 
allowances, and the value of fringe benefits such as health care and 
retirement.

[65] Public Law 108-11, section 1316, April 16, 2003.

[66] Senate Bill 1050, the National Defense Authorization Act for 
Fiscal Year 2004, would require payment of up to $1,000 each month 
during which a member has been (1) deployed for at least 401 days out 
of the preceding 730 days; (2) deployed continuously for more than 191 
days; or (3) in the case of a reservist called or ordered to active 
duty for a period of more than 30 days, if this period begins within 1 
year after the date on which the member was released from previous 
active-duty service lasting more than 30 days. The House version of the 
act contains similar language. This high tempo allowance would replace 
a $100 per diem allowance authorized for servicemembers deployed for 
more than 400 days in a 720-day period. However, DOD has suspended the 
payment of this per diem.

[67] H.R. 100, the Servicemembers Civil Relief Act, passed the House of 
Representatives by a vote of 425 to 0 in May 2003. As approved by the 
House, the bill would delay eviction proceedings for at least 3 months 
if rent does not exceed $1,700 and the servicemember invokes the act; 
guarantee the payment of premiums for a servicemember's life insurance 
policy for policies up to $250,000; and give protection to a 
servicemember who has fallen behind on car payments by requiring the 
lessor to obtain a court order before repossessing the car.

[68] H.R. 1307, the Armed Forces Tax Fairness Act of 2003, passed the 
House of Representatives in March 2003.

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