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The primary mission of the military health system, which includes the Defense Department’s
hospitals, clinics, and medical personnel, is to maintain the health of military personnel so they
can carry out their military missions, and to be prepared to deliver health care during wartime.
The military health system also provides health care services through either Department of
Defense (DOD) medical facilities, known as “military treatment facilities” or “MTFs” as space is
available, or, through private health care providers.
Known as “Tricare,” this system of military and private health care offers benefits to active duty
personnel and other beneficiaries, including dependents of active duty personnel, military retirees,
and dependents of retirees. Tricare beneficiaries can obtain prescription drugs through a
pharmacy system that includes MTF pharmacies, network retail pharmacies, non-network retail
pharmacies, and the Tricare Mail Order Program (TMOP). Dependents of active duty personnel
and retirees and dependents under age 65 can choose to enroll in Tricare Prime (a managed care
option), or if they choose not to enroll, they can obtain care through Tricare Standard (a fee-for-
service option) or Tricare Extra (preferred-provider option). Retirees who are eligible for
Medicare can enroll in Tricare For Life (TFL).
The military health system currently includes some 59 inpatient medical facilities and 661
medical and dental clinics serving an eligible population of 9.3 million. It operates worldwide and
employs over 51,000 civilian and 131,700 military personnel. Calculating the total cost of
military medical spending is complicated by the different categories of funds involved; DOD
statistics on total medical spending indicate a growth from $17.5 billion in FY2000 to an enacted
level of estimated $43.8 billion in FY2009 (the latter figure includes $10.4 billion paid to an
accrual fund for Medicare eligible retirees). The FY2010 Budget requested $47.4 billion total for
the unified medical budget of the military health system. DOD projects total medical spending to
grow, perhaps reaching $64 billion in FY2015.
DOD estimates that active duty military and their dependents will make up 43% of Tricare
beneficiaries in 2010. Thirty-five percent of beneficiaries will be retirees under age 65 and their
dependents, and 22% will be retirees age 65 and over and their dependents. DOD estimates that
care provided to retirees and their dependents will make up over 65% of DOD health care costs
by 2015, up from 43% in 1999.
The Obama Administration has not proposed increasing Tricare user fees for 2010. Previously,
the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (P.L. 110-417,
October 14, 2008), prohibited fee increases proposed in the Bush Administration’s 2009 budget to
help address increased defense health care costs. However, this act included measures intended to
contain costs through increased use of preventive care services by Tricare beneficiaries. These
provisions include waiving copayments for preventive services, and demonstration projects to
provide incentives for preventive health care. This report will be updated as new information
becomes available.
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Most Recent Developments............................................................................................................. 1
Background ..................................................................................................................................... 1
Questions and Answers ................................................................................................................... 1
1. What Is the Purpose of DOD’s Military Health System?...................................................... 1
2. What Is the Structure of the Military Health System? .......................................................... 2
3. What is the Unified Medical Budget? ................................................................................... 4
4. What is the Medicare Eligible Retiree Health Care Fund (MERHCF)? ............................... 5
5. How Much Does Military Health Care Cost Beneficiaries? ................................................. 6
6. In What Ways Has the Military Health System Been Changing in Recent Years? ............... 7
7. Who Is Eligible to Receive This Care? ................................................................................. 9
8. How Are Priorities for Care in Military Medical Facilities Assigned? ............................... 10
9. What Is the Relationship of DOD Health Care to Medicare? ..............................................11
10. Have Military Personnel Been Promised Free Medical Care for Life?............................. 12
11. How Are Private Health Care Providers Paid?.................................................................. 12
12. What Will Be the Effect of Base Realignment and Closure (BRAC) on Military
Medical Care? ...................................................................................................................... 13
13. What Is the DOD Pharmacy Benefit? ............................................................................... 14
14. What Medical Benefits are Available to Reservists?......................................................... 15
15. What is the Congressionally Directed Medical Research Program?................................. 15
16. Other Frequently Asked Questions ................................................................................... 16
Does Tricare Cover Abortion? .......................................................................................... 16
Does DOD Use Animals in Medical Research or Training?............................................. 16
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Figure 1. FY 2010 Unified Medical Budget Request ($billions) .................................................... 5
Figure 2. Military Health System Eligible Beneficiaries (millions).............................................. 10
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Table 1. Tricare Fees for Active Duty Personnel, Eligible Reservists, and Dependents ................. 6
Table 2. Tricare Fees for Retirees Under Age 65 and Their Dependents ........................................ 7
Table 3. Appropriation Levels by Fiscal Year(FY) for Selected CDMR Programs....................... 16
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Author Contact Information .......................................................................................................... 17
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The 2010 Budget does not propose to increase Tricare user fees, unlike the three previous
Budgets. Last year, the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009
(P.L. 110-417, October 14, 2008), prohibited fee increases proposed in the Bush Administration’s
2009 budget. This act included measures intended to contain costs through increased use of
preventive care services by Tricare beneficiaries. Other provisions included waiving copayments
for preventive services, a health risk assessment demonstration program, a smoking cessation
program, and a demonstration project to use financial incentives to encourage service members
and their families to get all of the preventive health requirements set forth by DOD.
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Although the Military Health System is the primary source of medical services to active duty
service members, it is also a major source of medical care, in both military and civilian facilities,
to the dependents of active duty personnel, military retirees and their dependents, and survivors of
deceased service members. Since 1966, civilian care to millions of dependents and retirees (and
retirees’ dependents) has been provided through a program still known in law as the Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS) but more commonly
known as Tricare. Tricare has four main benefit plans including a health maintenance
organization option (Tricare Prime), a preferred provider option (Tricare Extra), a fee-for-service
option (Tricare Standard), and a Medicare wrap-around option (Tricare for Life) for Medicare-
eligible retirees. Options available to beneficiaries vary by the beneficiaries duty status and
location.
This report attempts to answer basic questions about defense health care, its beneficiary
population, the medical services it provides, its costs, and major changes that are underway or
have been proposed. Citations are made to more detailed CRS studies where appropriate. The
Government Accountability Office (GAO) and the Congressional Budget Office (CBO) have also
published important studies. In addition, the Office of the Assistant Secretary of Defense for
Health Affairs Home Page may be of interest, available at http://www.health.mil/.
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In law, the purpose of the legislation authorizing the military health system is “ to create and
maintain high morale in the uniformed services by providing an improved and uniform program
of medical and dental care for members and certain former members of those services, and for
their dependents.”1 The military health system helps to maintain the health of military personnel
so they can carry out their military missions. The military health system must also be prepared to
deliver health care required during wartime. Often described as the medical readiness mission,
1 10 U.S.C. 1071.
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this effort involves medical testing and screening of recruits, emergency medical treatment of
service members involved in hostilities, and the maintenance of physical standards of those in the
armed services. In addition, recruitment and retention are supported by the provision of health
benefits to military retirees and their dependents.
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The military health system consists of (1) the Defense Health Program (DHP) which is centrally
directed by the Office of the Secretary of Defense and executed by the military departments, and
(2) medical resources under the direction of the combatant or support command within the
military departments. For DOD, the Assistant Secretary of Defense for Health Affairs (ASD(HA))
controls nondeployable medical resources, facilities and personnel. The ASD(HA) reports to the
Undersecretary of Defense Personnel and Readiness who reports to the Deputy Secretary of
Defense. The following all currently report to the ASD/HA:
• Deputy Assistant Secretary of Defense for Clinical and Program Policy
• Deputy Assistant Secretary of Defense for Force Health Protection and Readiness
• Deputy Assistant Secretary of Defense for Health Budget and Financial Policy
• Deputy Director Tricare Management Activity
• Chief Information Officer for Health
• Director, Strategy and Development
• Director, Communication and Media Relations
• Director, Defense Center of Excellence for Psychological Health and Traumatic
Brain Injury
• President, Uniformed Services University of the Health Sciences
Other elements within the Office of the Secretary of Defense, such as the Office of the Director
for Program Analysis and Evaluation and the Office of the Under Secretary of Defense
(Comptroller), are also responsible for various aspects of the military health system.
Within the services, the Surgeons General of the Army, Navy and Air Force retain considerable
responsibility for managing military medical facilities and personnel. The Joint Staff Surgeon
advises the Chairman of the Joint Chiefs of Staff.
The Surgeon General of the Army heads the U.S. Army Medical Command (MEDCOM) which
along with the Office of the Surgeon General itself compose the Army Medical Department
(AMEDD). The Surgeon General of the Army reports directly to the Secretary of the Army.
MEDCOM commands fixed hospitals and other AMEDD commands and agencies. Field medical
units, however, are under the command of the combat commanders.
The Surgeon General of the Navy reports to the Chief of Naval Operations through the Chief,
Navy Staff and Vice Chief of Naval Operations and heads the Navy Bureau of Medicine and
Surgery (BUMED), the headquarters command for Navy Medicine. All Defense Health Program
resources allocated to the DON are administered by BUMED. Also within the Department of the
Navy, the Medical Officer, U.S. Marine Corps advises the Commandant of the Marine Corps and
Headquarters staff agencies on all matters about health services.
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The Surgeon General of the Air Force serves as functional manager of the U.S. Air Force Medical
Service, an element of Headquarters, U.S. Air Force. The Air Force Surgeon General advises the
Secretary of the Air Force and Air Force Chief of Staff.
The recent Final Report of the Task Force on Future of Military Health Care noted that there has
been considerable debate about the appropriate command and control structure for the military
health system.2 Alternatives to the current structure that have been suggested include a defense
health agency or a unified medical command. An October 2007 Government Accountability
Office report faulted DOD’s analysis of these options for the lack of a comprehensive cost-benefit
analysis.3
The military health system currently includes 63 hospitals and over 400 clinics serving an eligible
population of 9.2 million. It operates worldwide and employs some 44,100 civilians and 89,400
military personnel. Direct care costs include the provision of medical care directly to
beneficiaries, the administrative requirements of a large medical establishment, and maintaining a
capability to provide medical care to combat forces in case of hostilities. Civilian providers under
contract to DOD have constituted a major portion of the defense health effort in recent years.
The Tricare Management Activity (TMA) listed above supervises and administers the Tricare
program. TMA is organized into six geographic health service regions:
• Tricare North Region covering Connecticut, Delaware, the District of Columbia,
Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New
Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode
Island, Vermont, Virginia, West Virginia, Wisconsin, and portions of Iowa,
Missouri, and Tennessee. The Tricare North regional contractor is currently
Health Net Federal Services.
• Tricare South Region covering Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, Oklahoma, South Carolina, and most of Tennessee and Texas. The
Tricare South regional contractor is currently Humana Military Health Services.
• Tricare West Region covering Alaska, Arizona, California, Colorado, Hawaii,
Idaho, most of Iowa, Kansas, Minnesota, most of Missouri, Montana, Nebraska,
Nevada, New Mexico, North Dakota, Oregon, South Dakota, portions of Texas,
Utah, Washington, and Wyoming. The Tricare West regional contractor is
TriWest Healthcare Alliance.
• Tricare Europe Area covering Europe, Africa, and the Middle East.
• Tricare Latin America and Canada Area covering Central and South America, the
Caribbean Basin, Canada, Puerto Rico and the Virgin Islands.
• Tricare Pacific Area covering Guam, Japan, Korea, Asia, New Zealand, India and
Western Pacific remote countries.
More information is available at http://www.tricare.mil/tma/AboutTMA.aspx.
2 Department of Defense, Task Force on the Future of Military Health Care, December 2007, pp. 113-116.
3 GAO-08-122, Defense Health Care: DOD Needs to Address the Expected Benefits, Costs, and Risks for Its Newly
Approved Medical Command Structure October 2007, p. 15.
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Even if the number of active duty personnel in DOD remained the same over the next few years,
costs associated with the military health system are expected to grow. This results from general
inflation in the cost of health care and an increasing percentage of care being provided to retirees
and their dependents. DOD estimates that in 2010 active duty military and their dependents will
make up 43% and retirees and their dependents 57% of eligible Tricare beneficiaries. dependents.
DOD estimates that care provided to retirees and their dependents will make up over 65% of
DOD health care costs by 2015, up from 43% in 1999.4
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ASD(HA) prepares and submits a unified medical budget which includes resources for the
medical activities under his or her control within the DOD. The unified medical budget includes
funding for all fixed medical treatment facilities/activities, including such costs as real property
maintenance, environmental compliance, minor construction and base operations support. Funds
for medical personnel and accrual payments to the Medicare Eligible Retiree Health Care Fund
(MERHCF - see What is the MERHCF? below) are also included. The unified medical budget
does not include resources associated with combat support medical units/activities. In these
instances the funding responsibility is assigned to military service combatant or support
command.
Unified medical budget funding has traditionally been appropriated in several places:
• The defense appropriations bill provides Operation and Maintenance (O&M),
Procurement, and Research, Development, Test and Evaluation (RDT&E)
funding under the heading “Defense Health Program.”
• Funding for military medical personnel (doctors, corpsmen, and other health care
providers) and Tricare for Life accrual payments are generally provided in the
defense appropriations bill under the “Military Personnel”(MILPERS) title.
• Funding for medical military construction (MILCON) is generally provided
under the “Department of Defense” title of the military construction and veterans
affairs bill.
• A standing authorization for transfers from the MERHCF to reimburse Tricare
for the cost of services provided to Medicare eligible retirees is provided by 10
U.S.C. 1113.
• Costs of war related military health care is generally funded through
supplemental appropriations bills.
Other resources are made available to the military health system from third party collections
authorized by 10 U.S.C. 1097b(b) and a number of other reimbursable program and transfer
authorities. The President’s budget typically refers to the unified medical budget request as its
funding request for the military health system but only includes an exhibit for the DHP in the
“Department of Defense - Military” chapter and exhibits for the MERHCF in the “Other
Defense—Civil Programs” chapter of the Appendix volume. Medical MILCON and MILPERS
request levels are generally found in DOD’s budget submissions to Congress.
4 Department of Defense, Report of The Tenth Quadrennial Review of Military Compensation: Volume II Deferred and
Noncash Compensation, July 2008, p. 45.
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As illustrated in Figure 1 below, the Obama Administration’s 2010 unified medical budget
request5 totals $47.4 billion and includes:
• $26.2 billion for the Defense Health Program (not including “Wounded, Ill, and
Injured” funding;
• $7.7 billion for military personnel;
• $1.7 billion for “Wounded, Ill, and Injured” funding for the Defense Health
Program;
• $1.0 billion for medical military construction, and;
• $10.8 billion for accrual payments to the MERHCF ($9.1 billion from which
would be transferred to the Defense Health Program for 2010 expenses).
Much more detailed breakouts are available in budget exhibits published by the Department of
Defense at www.budget.mil.
Figure 1. FY 2010 Unified Medical Budget Request ($billions)
Source: Department of Defense. Adapted by CRS Graphics.
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The Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001(P.L. 106-398)
directed the establishment of the Medicare-Eligible Retiree Health Care Fund to pay for
Medicare-eligible retiree health care beginning on October 1, 2002. Prior to this date, care for
5 Department of Defense, FY 2010 Budget Request Summary Justification, Special Topics, May 2009, pp. 2-2,
http://www.defenselink.mil/comptroller/defbudget/fy2010/fy2010_SSJ_Special_Topics.pdf.
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Medicare-eligible beneficiaries was space available care in MTFs. The MERHCF covers
Medicare-eligible beneficiaries, regardless of age. The NDAA also established an independent
three-member DOD Medicare-Eligible Retiree Health Care Board of Actuaries appointed by the
Secretary of Defense. Accrual deposits are made by the agencies who employ future beneficiaries
(DOD and the other uniformed services including the Public Health Service, the Coast Guard, and
the National Oceanic & Atmospheric Agency) into the Fund based upon estimates of future
Tricare for Life expenses, and transfers out are made to the Defense Health Program based on
estimates of the cost of care actually provided each year. As of September 30, 2008, the Fund had
assets of over $134 billion to cover future expenses.6 The Board is required to review the actuarial
status of the fund; to report annually to the Secretary of Defense, and to report to the President
and the Congress on the status of the fund at least every four years. The DOD Office of the
Actuary provides all technical and administrative support to the Board.
Within DOD, the Office of the Under Secretary of Defense for Personnel and Readiness, through
the Office of the Assistant Secretary of Defense (OASD) for Health Affairs (HA) has as one of its
missions operational oversight of the defense health program including management of the
MERHCF. The Defense Finance and Accounting Service provides accounting and investment
services for the fund.
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Active duty service members receive medical care at no cost. Other beneficiaries pay differing
amounts depending on their status, the Tricare option enrolled in, and where they receive care.
Tables1and 2 below illustrate the costs to beneficiaries.
Table 1. Tricare Fees for Active Duty Personnel, Eligible Reservists, and Dependents
Prime
Extra
Standard
Annual Deductible
None $150/individual
or $150/individual or $300/family for E-
$300/family for E-5 and
5 and above; $50/$100 under E-5.
above; $50/$100 under E-
5.
Annual Premium
None None
None
Civilian Outpatient
None
15% of negotiated fee.
20% of allowed charges for covered
Visit Cost Share
services.
Civilian Inpatient
None
Greater of $25 per
Greater of $25 per admission or
Admission Cost Share
admission or $14.35/day.
$14.35/day. No cost for separately
No cost for separately
billed professional charges.
billed professional charges.
Civilian Inpatient
None
Greater of $25 or
Greater of $25 or $20/day. No cost
Behavioral Health
$20/day. No cost for
for separately billed professional
Cost Share
separately billed
charges.
6 Department of Defense, Fiscal Year 2008 Medicare-Eligible Retiree Health Care Fun Audited Financial Statements,
October 31, 2008, p. 13,
http://www.defenselink.mil/comptroller/cfs/fy2008/12_Medicare_Eligible_Retiree_Health_Care_Fund/Fiscal_Year_20
08_Medicare_Eligible_Retiree_Health_Care_Fund_Financial_Statements_and_Notes.pdf.
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Prime
Extra
Standard
professional charges.
Civilian Inpatient
None
Greater of $25 per
Greater of $25 per admission or
Skilled Nursing Facility
admission or $11/day. No
$11/day. No cost for separately
Cost Share
cost for separately billed
billed professional charges.
professional charges.
Source: Department of Defense, Tenth Quadrennial Review of Military Compensation, page 44.
Table 2. Tricare Fees for Retirees Under Age 65 and Their Dependents
Prime
Extra
Standard
Annual Deductible
None
$150/individual or $300/family. $150/individual or
$300/family.
Annual Premium
$230/individual or
None None
$460/family
Civilian Outpatient Visit None
20% of negotiated fee.
25% of allowed charges
Cost Share
for covered services.
Civilian Inpatient
Greater of $25 per
Lesser of $250/day or 25% of Greater of $535/day
Admission Cost Share admission or $11/day. negotiated fee, plus 20% of
or25% of hospital per
No cost for separately negotiated professional fees.
diem plus 25% of
billed professional
allowable charge for
charges.
separately billed
professional services.
Civilian Inpatient
$40/day. No cost for
20% of total charge plus 20%
Lesser of $175/day or 25%
Behavioral Health Cost separately billed
of allowable charge for
of hospital per diem plus
Share
professional charges.
separately billed professional
25% of allowable charge
services.
for separately billed
professional services.
Civilian Inpatient Skilled Greater of $25 per
Lesser of $250/day or 20% of 25% of allowed charges
Nursing Facility Cost
admission or $11/day. negotiated fee, plus 20% of
plus 25% of allowable
Share
separately billed professional
charges for separately
charges..
billed professional
services.
Source: Department of Defense, Tenth Quadrennial Review of Military Compensation, page 45.
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During the Cold War, military health care was designed to support a full-scale, extremely violent
war with the Soviet Union and its allies in Europe. High casualties were anticipated along with a
need for in-theater medical treatment facilities. However, the collapse of the Soviet Union and the
end of the Warsaw Pact led to a major reassessment of U.S. defense policy. This led defense
planners to believe, the most likely conflicts will be of limited duration and involve smaller
numbers of troops in the future. Indeed, the overall size of the active duty force has been reduced
by one-third since the mid-1980s. Planners expected that casualties can be treated locally (with
greater reliance on telemedicine) or, if necessary, evacuated to military medical facilities in the
continental United States (CONUS). This strategic planning, along with associated military
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personnel reductions, required a smaller medical establishment, fewer military medical personnel,
and the closure of a number of hospitals and clinics.
More recently, considerations driven by the events of September 11, 2001, and the resulting
Global Ware on Terrorism(GWOT) have driven changes in DOD’s planning. The 2006 edition of
the Quadrennial Defense Review (QDR) focused DOD on better defining its responsibilities for
homeland defense within a broader national framework including GWOT, counterterrorism,
counterinsurgency, and military support for stabilization and reconstruction efforts. With respect
to the military health system, the QDR process identified 18 initiatives across 4 focus areas: (1)
transform the force, (2) transform the infrastructure, (3) transform the business, and (4) sustain
the benefit.7 As part of this process, DOD launched a Medical Readiness Review (MRR) in
August 2004. The MRR was intended to determine the optimal size of the active duty medical
force. The results of the MRR led to plans for converting military health billets to civilian jobs.
From FY2005 to FY2007, the Navy converted 2,676 military positions to civilian positions,
created a hiring plan for 2,116 converted positions, and hired 1,349 civilian employees. The Army
planned to convert 1,588 positions in fiscal years 2006 and 2007. And the Air Force planned to
convert 1,216 military positions to civilian jobs.8 These conversions have been controversial
within the military services and Congress has imposed limitations on these so called “mil-civ”
conversions in each of the last three NDAAs.
In addition to revisions in military planning, nation-wide changes in the practice of medicine have
also affected DOD. In particular, managed care initiatives and capitated budgeting that are widely
adopted in the civilian community are being implemented in DOD’s Tricare program. Tricare is
also designed to coordinate medical care efforts of the three military departments in three
geographical regions, each under a single military commander known as a lead agent. The lead
agents are responsible for managing care provided by all military medical facilities in their
respective regions, and for contracting for additional care from civilian providers. These
competitively-bid, region-wide contracts represent a significant change in delivery of defense
health care and will, it is anticipated, result in cost savings. Detailed regulations governing
Tricare were made effective on November 1, 1995 (32 CFR 199). Although care continues to be
centered around military medical facilities, heavy reliance is placed on civilian contractors
managed by the lead agent were necessary.
The centerpiece of Tricare is the Tricare Prime option, a DOD version of a health maintenance
organization (HMO) that the beneficiary joins, and which provides essentially all of his or her
medical care. Care is provided through DOD medical personnel, hospitals, and clinics, as well as
affiliated civilian physicians, hospitals, and other providers. Costs are contained through
administrative controls and treatment protocols. In civilian practice, HMOs have been credited
with some success in reducing costs, although opponents of these systems complain about
restrictions on provider choice and incentives that may be created to constrain the delivery of
services.
Tricare Standard has been the military equivalent of a health insurance plan, run by DOD, for
active duty dependents, military retirees and the dependents of retirees, survivors of deceased
7 Office of the Assistant Secretary of Defense for Health Affairs, Quadrennial Defense Review: Roadmap for Medical
Transformation, April 3, 2006, pages 1-2.
8 Department of Defense, Task Force on the Future of Military Health Care Final Report, December 2007, page 111.
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members, and certain former spouses.9 Unlike private insurance plans, Tricare Standard does not
require premiums. If care at a military facility cannot be provided (due to space limitations,
limitations on the types of services that a facility is capable of providing, or due to the fact that a
beneficiary may not live close enough to a military facility to make such travel reasonable),
Tricare Standard will share responsibility with the beneficiary for the payment of care received
from non-military health care providers, subject to regulations. Certain types of care, such as
most dentistry and chiropractic services, are excluded.
In addition to Tricare Standard and Tricare Prime there is a preferred-provider option, Tricare
Extra. In Tricare Extra beneficiaries do not enroll or pay annual premiums but use physicians and
specialists in the Tricare network and are charged 5% less for medical services.
Many of the changes made in the past decade have been intended to improve medical care
available to the active duty population, but they have also resulted in less medical care available
in military facilities for retired personnel and their dependents. The introduction of Tricare for
Life in FY2002 provided coverage for retired beneficiaries, but most of their care will
undoubtedly be obtained from civilian providers reimbursed by Medicare and Tricare.
The establishment of Tricare for Life and the current pharmaceutical benefit have contributed to
significant growth in health care spending by DOD. The expanding costs of military healthcare
reached an estimated $41.6 billion in FY2009 with the majority of the spending going to provide
care to individuals no longer on active duty or to their family members. The Congressional
Budget Office has also projected that DOD’s medical spending will grow by more than 80% in
real terms by 2024.10
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Current law provides that active duty personnel are entitled to receive health care at military
medical facilities. In addition, active duty dependents, military retirees and their dependents, and
survivors of deceased members are eligible to receive health care at military medical facilities
when space and professional services are available. Also eligible to receive care for a fixed fee in
these facilities are certain government officials (including the President and Members of
Congress) and certain foreign military personnel on active duty in the U.S. Reserve Component
(their dependents are also entitled to care in military medical facilities and participation in Tricare
under certain conditions, as discussed in question 14 below).
Since 1967, DOD has funded care by civilian providers to dependents, retirees, and dependents of
retirees who are under age 65 and unable to obtain access in a military health facility. After 1991
DOD began, with congressional support, moving towards managed care arrangements under the
Tricare program that include greater use of civilian health care providers even for active duty
personnel.
Figure 2 below illustrates the major categories of eligible beneficiaries.
9 For more information on those benefits available to former spouses, see CRS Report RL31663, Military Benefits for
Former Spouses: Legislation and Policy Issues, by David F. Burrelli.
10 Congressional Budget Office, Long-Term Implications of Current Defense Plans and Alternatives: Summary Update
for Fiscal Year 2006, October 2005.
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Figure 2. Military Health System Eligible Beneficiaries (millions)
Source: Department of Defense. Adapted by CRS.
Note: 2007 projection of 2010 enrollment.
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Active duty personnel, military retirees, and their respective dependents are not afforded equal
access to care in military medical facilities. Active duty personnel are entitled to health care in a
military medical facility (10 U.S.C. 1074).
According to 10 U.S.C. 1076, dependents of active duty personnel are “entitled, upon request, to
medical and dental care” on a space-available basis at a military medical facility. Title 10 U.S.C.
1074 states that “a member or former member of the uniformed services who is entitled to retired
or retainer pay ... may, upon request, be given medical and dental care in any facility of the
uniformed service” on a space-available basis.
This language entitles active duty dependents to medical and dental care subject to space-
available limitations. No such entitlement or “right” is provided to retirees or their dependents.
Instead, retirees and their dependents may be given medical and dental care, subject to the same
space-available limitations. This language gives active duty personnel and their dependents
priority in receiving medical and dental care at any facility of the uniformed services over
military members entitled to receive retired pay and their dependents. The policy of providing
active duty dependents priority over retirees in the receipt of medical and dental care in any
facility of the uniformed services has existed in law since at least September 2, 1958 (P.L. 85-
861).
Since the establishment of Tricare and pursuant to the Defense Authorization Act of FY1996 (P.L.
104-106), DOD has established the following basic priorities (with certain special provisions):
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Priority 1: Active-duty service members;
Priority 2: Active-duty family members who are enrolled in Tricare Prime;
Priority 3: Retirees, their family members and survivors who are enrolled in Tricare Prime;
Priority 4: Active-duty family members who are not enrolled in Tricare Prime;
Priority 5: All other eligible persons.
The priority is given to active duty dependents to help them obtain care easily, and thus make it
possible for active duty members to perform their military service without worrying about health
care for their dependents. This is particularly important for active duty personnel who may be
assigned overseas or aboard ship and separated from their dependents. As retirees are not subject
to such imposed separations, they are considered to be in a better position to see that their
dependents receive care, if care cannot be provided in a military facility. Thus, the role of health
care delivery recognizes the unique needs of the military mission. The role of health care in the
military is qualitatively different, and, therefore, not necessarily comparable to the civilian sector.
The benefits available to service members or retirees, which require comparatively little or no
contributions from the beneficiaries themselves, are considered by some to be a more generous
benefit package than is available to civil servants or to most people in the private sector. Retirees
may also be eligible to receive medical care at Department of Veterans Affairs (VA) medical
facilities.11
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Active duty military personnel have been fully covered by Social Security and have paid Social
Security taxes since January 1, 1957. Social Security coverage includes eligibility for health care
coverage under Medicare at age 65. It was the legislative intent of the Congress that retired
members of the uniformed services and their eligible dependents be provided with medical care
after they retire from the military, usually between their late-30s and mid-40s. CHAMPUS was
intended to supplement—not to replace—military health care. Likewise, Congress did not intend
that CHAMPUS should replace Medicare as a supplemental benefit to military health care. For
this reason, retirees became ineligible to receive CHAMPUS benefits when, at age 65, they
become eligible for Medicare.
Many argued that the structure was inherently unfair because retirees lost Tricare/CHAMPUS
benefits at the stage in life when they were increasingly likely to need them. It was argued that
military personnel had been promised free medical care for life, not just until age 65. After
considerable debate over various options for ensuring medical care to retired beneficiaries,
Congress in the FY2001 Defense Authorization Act (P.L. 106-259) provided that, beginning
October 1, 2001, Tricare pays out-of-pocket costs for services provided under Medicare for
beneficiaries over age 64 if they are enrolled in Medicare Part B. This benefit is known as Tricare
for Life (TFL). Disabled persons under 65 who are entitled to Medicare may continue to receive
CHAMPUS benefits as a second payer to Medicare Parts A and B (with some restrictions).
11 See CRS Report RL32975, Veterans’ Medical Care: FY2006 Appropriations, by Sidath Viranga Panangala.
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The requirement for enrollment in Medicare Part B, which cost $96.40 per month in 2008 for
most military retirees is a source of concern to some beneficiaries, especially those who did not
enroll in Part B when they became 65 and thus must pay significant penalties. Some argue that
this requirement is unfair since Part B enrollment was not originally a prerequisite for access to
any DOD medical care. On the other hand, waiving the penalty for military retirees could be
considered unfair to other Medicare-users who did not enroll in Part B upon turning 65. The
Medicare Prescription Drug, Improvement, and Modernization Act (P.L. 108-173), passed in
December 2003, waived penalties for military retirees in certain circumstances during an open
season in 2004.12
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Some military personnel and former military personnel maintain that they and their dependents
were promised “free medical care for life” at the time of their enlistment. Such promises may
have been made by military recruiters and in recruiting brochures; however, if they were made,
they were not based upon laws or official regulations which provide only for access to military
medical facilities for non-active duty personnel if space is available as described above. Space
was not always available and Tricare options could involve significant costs to beneficiaries. Rear
Admiral Harold M. Koenig, the Deputy Assistant Secretary of Defense for Health Affairs,
testified in May 1993: “We have a medical care program for life for our beneficiaries, and it is
pretty well defined in the law. That easily gets interpreted to, or reinterpreted into, free medical
care for the rest of your life. That is a pretty easy transition for people to make in their thinking,
and it is pervasive. We [DOD] spend an incredible amount of effort trying to re-educate people
[that] that is not their benefit.”13
Dr. Stephen C. Joseph, Assistant Secretary of Defense for Health Affairs in April 1998, however,
argued that because retirees believe they have had a promise of free care, the government did
have an obligation. Joseph did not specify the precise extent of the obligation. The FY1998
Defense Authorization Act (P.L. 105-85) included (in Section 752) a finding that “many retired
military personnel believe that they were promised lifetime health care in exchange for 20 or
more years of service,” and expressed the sense of Congress that “the United States has incurred a
moral obligation to provide health care to members and [retired] members of the Armed
Services.” Further, it is necessary “to provide quality, affordable care to such retirees.”14
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By law (P.L. 102-396) and Federal Regulation (32 CFR 199.14), health care providers treating
Tricare patients cannot bill for more than 115% of charges authorized by a DOD fee schedule. In
some geographic areas, providers have been unwilling to accept Tricare patients because of the
12 See CRS Report RS21731, Medicare: Part B Premium Penalty, by Jennifer O’Sullivan.
13 U.S. Congress, House of Representatives, Committee on Armed Services, Military Forces and Personnel
Subcommittee, 103rd Congress, 1st session, National Defense Authorization Act for Fiscal Year 1994—H.R. 2401 and
Oversight of Previously Authorized Programs, Hearings, H.A.S.C. No. 103-13, April 27, 28, May 10, 11, and 13, 1993,
p. 505.
14 For additional background, see CRS Report 98-1006, Military Health Care: The Issue of “Promised” Benefits, by
David F. Burrelli.
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limits on fees that can be charged. DOD has authority to grant exceptions. Statutes (10 U.S.C.
1079) also require that payment levels for health care services provided under Tricare be aligned
with Medicare’s fee schedule “to the extent practicable.” Over 90% of Tricare payment levels are
now equivalent to those authorized by Medicare, about 10% are higher, and steps are being taken
to adjust some to Medicare levels.
For institutional providers of outpatient services, Tricare recently published a final regulation15
that became effective on May 1, 2009, implementing the Tricare outpatient prospective payment
system (OPPS). Under 10 U.S.C. 1079(h) and 1079(j)(2), DOD is required to use Medicare’s
reimbursement payment system for hospital outpatient services to the extent practicable. Under
the OPPS, hospital outpatient services are paid on a rate-per-service basis that varies according to
the Ambulatory Payment Classification (APC) group to which the services are assigned. Group
services identified by Health Care Procedure Coding System (HCPCS) codes and descriptors
within APC groups are the basis for setting payment rates under the hospital OPPS. To receive
Tricare reimbursement under the OPPS, providers must follow all Medicare specific coding
requirements, except in those instances where the Tricare Management Activity (TMA) develops
specific APCs for those services that are unique to the Tricare beneficiary population. For
inpatient services, TMA regularly publishes reimbursement schedules through the Federal
Register.
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Base realignment and closures undertaken as part of the restructuring of the Defense Department
in the post-Cold War period have prompted changes in the military health services system. As a
result of base realignment and closure (BRAC) actions, 35% of the DOD medical treatment
facilities providing services in 1987 were closed by the end of 1997 (although the number of
eligible beneficiaries decreased by only 9%). Another BRAC round was undertaken in 2005.16
Criteria for realignments and closures, established by DOD with congressional consent, include
the need to deploy a force structure capable of protecting the national security, anticipated
funding levels, and a number of military, fiscal, and environmental considerations that encompass
community economic impact and community infrastructure.
Four BRAC Commissions have specifically considered the effect of closing DOD hospitals and
clinics on active duty military personnel as well as on other beneficiaries and potential
beneficiaries. The first two BRAC Commissions recommended 18 military hospital closures; the
third BRAC Commission recommended an additional 10. Facilities closed include hospitals in
Philadelphia, PA; Oakland, CA; Orlando, FL; San Francisco, CA; Ft. Devens, MA; Ft. Ord, CA;
and Long Beach, CA. In one case, the Commission overruled a DOD proposal to close the Naval
Hospital in Charleston, SC.
While DOD had commissioned a study group to examine military treatment facilities for the 1995
BRAC round, the assessment of military medical services appears to have been more
comprehensive in 2005. A Medical Joint Cross-Service Group (JCSG) was established to review
15 Department of Defense, "TRICARE: Outpatient Hospital Prospective Payment System (OPPS); Delay of Effective
Date and Additional Opportunity for Public Comment," 74 Federal Register 6228, February 6, 2009.
16 See CRS Report RL32216, Military Base Closures: Implementing the 2005 Round, by David E. Lockwood.
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DOD healthcare functions and to provide BRAC recommendations. The review included
healthcare education and training, healthcare services, medical and dental research, development,
and acquisition. The Surgeon General of the Air Force chaired the Medical JCSG; other members
included representatives from the military services, the Joint Staff, and the Office of the Secretary
of Defense. The recommendations were submitted to senior DOD leadership for consideration in
the preparations of the Secretary of Defense’s recommended BRAC actions. Recommendations
included closing Brooks City-Base, San Antonio, TX; realigning Walter Reed Medical Center,
Washington, DC; realigning the inpatient medical function at Lackland Air Force Base in San
Antonio, TX and other initiatives.17
With congressional encouragement, DOD has developed transition medical plans for certain
closure sites. Medicare-eligible users of closed military hospitals will be encouraged to avail
themselves of Tricare for Life and DOD’s mail order pharmacy. Nonetheless, the closure of
military hospitals and clinics can be a source of anxiety, especially in communities that have
attracted large numbers of residents seeking access to military medical care.
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Those with access to military treatment facilities and those who are enrolled in Tricare Prime
receive prescribed pharmaceuticals free of charge. In accordance with the provisions of the
FY2001 Defense Authorization Act (P.L. 106-398), effective April 1, 2001, retirees have access to
DOD’s National Mail Order Pharmacy and retail pharmacies in addition to pharmacies in military
treatment facilities. Beneficiaries who turned 65 prior to April 1, 2001, qualify for the benefit
whether or not they purchased Medicare Part B; beneficiaries who attain the age of 65 on or after
April 1, 2001, must be enrolled in Medicare Part B to receive the pharmacy benefit. (There are
deductibles for use of non-network pharmacies and co-payments for pharmaceuticals received
from the National Mail Order Pharmacy and from retail pharmacies.)
Military pharmacies do not necessarily carry every pharmaceutical available; thus, even some
with access to military facilities must have certain prescriptions filled in civilian pharmacies; for
these prescriptions beneficiaries can be reimbursed through Tricare. In October 1997, DOD
implemented the National Mail Order Pharmacy (subsequently known as the Tricare Mail Order
Pharmacy) that allows beneficiaries to obtain some pharmaceuticals by mail with small handling
charges. The mail order program is designed to fill long-term prescriptions to treat conditions
such as high blood pressure, asthma, or diabetes; it does not include medications that require
immediate attention such as some antibiotics.
In 2004 DOD, in response to guidance in the FY2000 Defense Authorization Act (P.L. 106-65,
section 701), established a uniform formulary to discourage use of expensive pharmaceuticals
when others are medically appropriate. Regulations to this effect were published in the Federal
Register on April 1, 2004 (vol. 69, pp. 17035-17052). Prescriptions filled by the Tricare Mail
Order Pharmacy currently cost $3 for a 90-day supply of a generic medication, $9 for a 90-day
supply of a brand-name formulary medication, and $22 for a 30-day supply of a non-formulary
medication.
17 For further information, see the DOD BRAC website, http://www.defenselink.mil/brac/.
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Section 703 of the FY2008 National Defense Authorization (P.L. 110-181) made pharmaceuticals
purchased by Tricare beneficiaries through retail pharmacies subject to federal pricing schedules.
The effective date of the final regulation implementing this provision is May 26, 2009.18
Section 702 of the FY2009 Defense Authorization Act (P.L. 110-417) prohibited increases in
pharmacy co-payments for beneficiaries through the end of FY2009.
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Reservists and National Guardsmen (members of the “Reserve Component”) who are serving on
active duty have the same medical benefits as regular military personnel. Reserve personnel while
on active duty for training and during weekly or monthly drills also are covered for illnesses
incurred while on training or traveling to or from their duty station. In recent years, especially as
members of the Reserve Component have had a larger role in combat operations overseas,
Congress has broadened the medical benefits for Reservists. Those who have been notified that
they are to be activated are now covered by Tricare up to 90 days before reporting. Reservists
who have served more than 30 days after having been called up for active duty in a contingency
are eligible for 180 days of Tricare coverage after the end of their service under the Transitional
Assistance Management Program (TAMP). In addition, in 2004 Congress authorized (in P.L. 108-
375, section 701) the Tricare Reserve Select (TRS) program for Reserve Component members
called to active duty, under Title 10, in support of a contingency operation after September 11,
2001. To be eligible for TRS, reservists must agree to stay in the Reserves for one or more years
and must pay monthly premiums (in 2008, $81 for an individual; $253 for a member and family
coverage).
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Many different entities within the Department of Defense request appropriations for and and
are funded to conduct a wide range of medical research. Over the last 17 years, Congress has
supplemented the DOD appropriations to include additional unrequested funding for specific
medical research funding. In 1992, Congress appropriated $25M for breast cancer research to
be managed by DOD’s U.S. Army Medical Research and Materiel Command (USAMRMC).
The following year, Congress appropriated $210M to the DOD for extramural, peer-reviewed
breast cancer research. Following this, DOD established the Congressionally Directed
Medical Research Programs (CDMRP), within USAMRMC. The program now manages
congressionally-directed breast cancer appropriations, as well as other targeted appropriations
totaling $4.8 billion through fiscal year 2008 for research on breast, prostate, and ovarian
cancers; neurofibromatosis; military health; chronic myelogenous leukemia; tuberous
sclerosis complex; autism; psychological health and traumatic brain injury; amyotrophic
lateral sclerosis; Gulf War Illness; deployment-related health research; and other health
concerns.19 This addition, unrequested funding, now appears in the Defense Health Program
18 Department of Defense, “Inclusion of TRICARE Retail Pharmacy Program in Federal Procurement of
Pharmaceuticals.,” 74 Federal Register 11279, March 17, 2009.
19 Department of Defense, Congressionally Directed Medical Research Program: FY 2008 Annual Report, September
30, 2008, pp. 1-2, http://cdmrp.army.mil/annreports/2008annrep/default.htm.
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RDT&E appropriation. Conference report language usually includes a table instructing the
Department of Defense on how to allocate the additional funding to specific diseases and
research areas. This guidance is typically not considered to be an earmark because the
funding is normally used for peer-reviewed, competitively awarded research grants.
Table 3 below, depicts appropriations for selected CDMRP programs.
Table 3. Appropriation Levels by Fiscal Year(FY) for Selected CDMR Programs
(in millions of current dollars)
FY
2007a FY
2008b FY
2009c
Autism 7.5 6.4 8
Breast Cancer
127.5
138
150
Gulf War Illness
0
10
8
Neurofibramatosis 10
8
10
Ovarian Cancer
10
10
20
Peer Reviewed Medical
0 50 50
Research
Prostate Cancer
80
80
80
Tuberous Sclerosis
0
4
6
Notes:
a. Funds appropriated by Public Law 110-5 (see House Report 109-676 to H.R. 5631, September 25, 2006,
pages 248-250).
b. Funds appropriated by Public Law 110-116. See Congressional Record, November 6, 2007, page H13119.
c. Funds appropriated by Division C of Public Law 110-329. See Congressional Record, September 24, 2008,
pages H9725 and H9726.
The CDMRP web site (http://cdmrp.army.mil/) also provides specific descriptions and funding
histories of the different research programs.
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10 U.S.C. 1093 provides that “Funds available to the Department of Defense may not be used to
perform abortions except where the life of the mother would be endangered if the fetus were
carried to term.”
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Yes. DOD policy is that live animals will not be used for training and education except where,
after exhaustive analysis, no alternatives are available. Currently approved uses are for pre-
deployment training for medical personnel and include infant intubation (ferrets); microsurgery
(rodents); and combat trauma training (goats and swine).
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Don J. Jansen
Analyst in Defense Health Care Policy
djansen@crs.loc.gov, 7-4769
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