Use savings to pay for reform costs

The July 29 Contributors blog post by American Enterprise Institute fellows Jim Talent and Mackenzie Eaglen (“Defense bill at an impasse, but a solution is within reach”) highlights how nonsensical the Senate proposal is. And from the Military Officers Association of America’s foxhole, it’s simply a foul.

Fortunately the House sees through this and has rejected the White House and Pentagon proposal that calls for doubling or tripling pharmacy copays over 10 years. 

{mosads}The House members realize that retirees have been forced to accept several pharmacy copay increases over the past four years to include tying future yearly plus-ups to annual cost-of-living adjustments and mandating use of the military treatment facilities or mail-order for maintenance medications for all beneficiaries (active-duty family members as well as retirees).

In addition, moving beneficiaries over age 65 into the home delivery program has provided the Pentagon with 80 percent of the cost savings that the Defense health agency has claimed for this past year. These very large cost savings in the hundreds of millions have all been due to, and borne by, actions of the beneficiaries themselves. 

Asking retirees to “fund” the new retirement system for those who serve less than 20 years of service by increasing the healthcare costs of those who serve 20 years or more is the real foul, since the Military Retirement and Modernization Commission estimated the change in the retirement system would save $10 billion per year. The authors should be asking why these “savings” are not part of the solution, rather than adding more costs onto beneficiaries. 

Funding the new retirement system by charging retirees and active-duty family members more for their healthcare simply robs from Peter to pay Paul. This proposal does nothing to make healthcare delivery more efficient — it just shifts more and more cost onto the beneficiaries. 

From Vice Adm. Norb Ryan Jr., U.S. Navy (retired); president, Military Officers Association of America, Alexandria, Va.

Sasha Orloff is exactly right to point out that the Consumer Financial Protection Bureau’s efforts to put the short-term loan industry out of business will leave millions of Americans with no access to credit (“Constraining consumer access doesn’t solve the payday debt trap,” July 28).

However, his assertion that payday loans are a “debt trap” simply is not borne out by the facts. Only a small percentage of borrowers (15 percent) use an extended series of loans, forcing even the CFPB to acknowledge that “most loan sequences are short.” Further, Clarity Services, a credit reporting agency, found that nine out of 10 payday borrowers were not taking on new debt, but rather were using the loan to help manage existing debt. 

Indeed, Orloff’s criticisms of payday loans are disingenuous, as the loan products his company offers are practically identical. Orloff also fails to take into consideration the realities of the market in which short-term loan providers operate. Dozens of financial institutions, including start-ups, nonprofits, banks and credit unions, have tried to introduce cheaper substitutes for loans labeled high cost, only to eliminate the alternative product from their portfolios. Even a federal agency, the FDIC, experimented with providing cheaper alternatives, but banks abandoned the program because the initiative could not be made profitable. 

Regulators should protect consumers, not punish them by restricting their access to the financing options, including payday loans, that ultimately shield them from bankruptcy or by forcing them to rely on inferior credit alternatives.

From Dennis Shaul, chief executive officer, the Community Financial Services Association of America (CFSA), Alexandria, Va.