The Evolution of the Military Health Care System: Changes in Public Law and DOD Regulations

The dual mission of the defense health care system involves maintain­ ing the readiness of the medical branches of the armed forces to care for wartime casualties and also providing for the peacetime health care needs of active duty military, their dependents, retirees, their dependents, and survivors. The 1956 Dependents' Medical Care Act officially established the availability of health care services to active duty dependents, retirees, and their dependents at military treatment facilities (MTFs). It also authorized the Secretary of Defense to con­ tract with civilian health care providers for active duty dependents' medical care.

Since 1956, the peacetime mission of the military health care system has expanded significantly. Changes have affected who is eligible for care under the benefit, what services are covered and how much the benefit costs in terms of costs to the beneficiary and program cost strategies for reimbursing providers. Congress consistently has made some type of change to the military health care benefit during every fiscal year since 1976. Although many of the changes to the benefit have been relatively minor, a number have been significant in terms of affecting the structure of the benefit. The following are the major legislative changes to the benefit that we believe have had the greatest impact on the scope of the benefit and associated costs:

• 1956, authorized the offering of civilian health care coverage to active duty dependents
• 1960, required nonavailability statement for nonemergent inpatient care and set coverage limits on care from civilian providers
• 1966, adopted the Military Medical Benefits Amendments
  • Formally established the Civilian Health and Medical Pro­ gram of the Uniformed Services (CHAMPUS), including coverage for retirees and their dependents
  • Expanded MTF and civilian provider coverage
• 1976, introduced the 40-mile radius catchment area rule and defined excluded services under CHAMPUS
• 1983, authorized CHAMPUS as secondary payer
• 1986, created the Dependents' Dental Program
• 1987, made changes to provider reimbursement methods
  • Implemented CHAMPUS Diagnosis-Related Group (DRGs)
  • Authorized MTF third-party billing for inpatient care
• 1988-89, established catastrophic cap
• 1996, changed to TRICARE.

Unfortunately, we cannot directly identify the cumulative effect of these changes in the benefit on Defense Health Program (DHP) costs over time because the Department of Defense does not have histori­ cal, detailed specialty-level cost and workload data for its healthcare program. In addition, we cannot disallow the relative impact of other events occurring over the history of the program, particularly during the Reagan administration in the 1980s. However, our analysis of cur­ rent cost trends does point to the significant influence of the retiree health benefit on current program costs.