Between 2000 and 2012, the cost of providing health care to service members, retirees, and their families increased by 130 percent (after adjusting for inflation). What approaches might curtail the growth in those costs?

The cost of providing that care has increased rapidly as a share of the defense budget over the past decade, outpacing growth in the economy, growth in per capita health care spending in the United States, and growth in funding for DoD's base budget (which finances the department's routine activities but has excluded funding for operations in Iraq and Afghanistan). Between 2000 and 2012, funding for military health care increased by 130 percent, over and above the effects of overall inflation in the economy. In 2000, funding for health care accounted for about 6 percent of DoD's base budget; by 2012, that share had reached nearly 10 percent. By 2028, health care would claim 11 percent of the cost of implementing DoD's plans, the Congressional Budget Office (CBO) estimates (see Summary Figure 1). The Budget Control Act of 2011 (as modified by subsequent legislation) capped funding for national defense between 2014 and 2021 at about 10 percent below CBO's projection of the cost of DoD's plans as of November 2013, using DoD's estimates of prices.1 The share of health care costs in future budgets will depend on how DoD adjusts its plans to comply with those caps. For example, if the growth in health care costs is unconstrained by new policies and cuts are made in funding for other defense activities (such as the development and procurement of weapon systems), then health care costs could account for an even larger percentage of the department's future spending.

The health care benefits provided to military service members, retirees, and their families are more generous than those generally provided through private or employment-based health insurance. Between 2000 and 2012, the cost of providing military health care increased by 130 percent (after adjusting for inflation). This report examines some options for constraining those costs. The largest savings would come from increasing cost sharing for military retirees.

The health care benefits provided to military service members, retirees, and their families are more generous than those generally provided through private or employment-based health insurance. Between 2000 and 2012, the cost of providing military health care increased by 130 percent (after adjusting for inflation). This report examines some options for constraining those costs. The largest savings would come from increasing cost sharing for military retirees.

In 2012, the Department of Defense (DoD) spent $52 billion on health care for service members, retirees, and their families. The department offers health care to nearly 10 million people through its TRICARE program, an integrated system of military health care providers and regional networks of civilian providers. Established in 1993, TRICARE now consists of three major plans: TRICARE Prime, TRICARE Standard, and TRICARE Extra. The cost of providing this care has increased rapidly as a share of the defense budget over the past decade, outpacing growth in the economy, growth in per capita health care spending in the United States, and growth in funding for DoD's base budget. This book focuses on the approaches that can be taken to reduce federal spending on military care, and continues to provide information on management practices available to help achieve efficiencies within the military health system.

The appropriation for Military Personnel (which includes pay and benefits) has been one of the major growth areas in the defense budget. A significant amount of military compensation is in the form of noncash or deferred benefits. Reforming military retirement is another approach to reducing spending. CBO estimates show that the Senate-passed retirement proposal would increase the deficit but reduce DoD's spending over 10 years.