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Friday, May 30, 2008

Universal Health Care and Military Retention

Worries that universal health care will hurt military recruiting:

Health’s Gain May Be Army’s Loss, by Floyd Norris, Commentary, NY Times: Call it the law of unintended consequences. When you fix one thing, it messes up other things.

If the Democrats win the election this year, and are able to enact a health care plan that extends adequate coverage to all Americans, the loser could be the Army. Getting enough people to enlist could become a major problem for the next president. ...

Government polls show that the proportion of young people who think they might enlist is roughly half what it was in the late 1980s. The military has responded with more recruiters and higher cash enlistment bonuses, and has met its goals. A significant factor for many recruits, it turns out, is the military’s generous health benefits for dependants.

Michael Massing, writing in the April 3 issue of The New York Review of Books, tells the story of one part-time college student from Brooklyn, who was holding down two jobs but still going into debt. “Meanwhile, he got married, his wife got pregnant, and he had no health care. From a brother in the military, he had learned of the Army’s many benefits, and, visiting a recruiter, he heard about Tricare, the military’s generous health plan.” He enlisted. ... All that could change if the push for some kind of national health insurance program were to be successful. ...

[I]f such a program were adopted, it seems likely that the military, and particularly the Army, would feel the immediate effect. To expand the Army, as all the candidates say they want to do, would require some other incentive for enlistment... In the near term, it is possible that a recession will improve the military’s recruiting success. ...

One partial solution to the negative effect on enlistment of a health care plan for all could be a new G.I. education benefit. Both the House and Senate have approved such a plan... President Bush is opposed to the legislation, which its sponsors say would cost $50 billion over 10 years, and it is far from clear it will be enacted. ...

Senator Jim Webb, a freshman Democrat and Vietnam veteran, is the principal Senate sponsor of the legislation. He argued — with something less than precise data — that passage of the bill would increase enlistment by 16 percent...

Senator McCain has proposed a less costly alternative that would provide better benefits to those who stay in the military longer. He may have a point. Last year about three-quarters of Army volunteers who completed their first term of enlistment, and nearly as many marines, chose not to re-enlist. ...

If we get a real health care plan for all Americans, it might require something like the Webb bill — or a very unpopular revival of the draft — just to keep fighting in Iraq and Afghanistan. The backers of health care legislation do not want to hurt the Army, but that is what could happen.

Continuing a discussion of this topic from not too long ago, the right way to do this is to state the the goals we are trying to reach, then build incentives into the polices that direct people toward those goals with as few negative consequences as possible.

One possible goal is retention. If you want people to stay longer, deferred compensation schemes are a way to accomplish that goal. We need to decide how many people we want to stay for additional terms, and then set the compensation incentives accordingly (these can be tweaked as needed, e.g. you can have incentives for reenlistment at each decision point, or you can discourage reenlistment after some number of terms if there is some reason to do so). Yes, it may require that the government pay people serving in the military more, at least those who stay longer, but that is simply what it will cost to reach the goal, that's the price to command these resources. People who applaud the ability of markets to value resources should understand that. If it costs too much to induce sufficient reenlistment, i.e. if the costs of producing higher retention rates are greater than the benefits, then it's not a very good policy anyway.

But if the goals are different, e.g. if the goal is to provide educational benefits to make up for lost opportunities in the private sector due to service in the military, the the policy will, of course, be different as well. When evaluating a proposed policy to, for example, increase educational benefits all of the consequences, including the effects on retention, should be examined. But this is part of a cost benefit calculation. If the educational benefit - the goal of the policy - exceeds the retention cost, then it's still worthwhile.

And it may not be necessary to give up on the retention goal just because you offer educational benefits, one does not have to be traded against the other. It's possible - if you are willing to pay the cost - to offer both higher education benefits and higher deferred compensation so that both goals are attained. More help for education is available for those who choose to leave when their term ends, but since deferred compensation is higher for those who reenlist, just as many stay as before. Whether it's worth it to do this is  matter of comparing the costs and benefits, but increasing education benefits does not have to lower retention rates.

If national health care is enacted and that lowers the incentive to enlist, or to reenlist, then the compensation levels will have to be adjusted to compensate, but it doesn't have to change retention rates or the ability to provide education benefits after people leave the military if we are willing to pay what's needed to induce the desired behavior.

    Posted by on Friday, May 30, 2008 at 12:24 AM in Economics, Health Care, Universities | Permalink  TrackBack (1)  Comments (15)


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