From fiscal year 1988 to 2003, the Department of Defense's (DoD's) spending on medical care almost doubled in real terms. That growth occurred despite large reductions in the size of the active-duty military force and a substantial reduction in the size of the military's own hospital system. This Congressional Budget Office (CBO) study--prepared at the request of the Chairman of the Senate Budget Committee--examines the reasons for those increases and considers directions for the future. Already, DoD's total spending on health care is more than half as large as its cash compensation. Looking forward, CBO's analysis examines how overall growth of health care costs in the economy could affect DoD's health care costs through 2020, as well how changes in benefits could do so. In keeping with CBO's mandate to provide objective, impartial analysis, this study makes no recommendations.

Allison Percy of CBO's National Security Division wrote the study under the general supervision of Deborah Clay-Mendez and J. Michael Gilmore. Sam Papenfuss of CBO's Budget Analysis Division prepared the cost estimates in Chapter 3 and wrote Appendix C under the general supervision of Jo Ann Vines and Peter H. Fontaine. Julie H. Topoleski of CBO's Health and Human Resources Division provided assistance with the projection methodology in Chapter 2. Carla Tighe Murray of the National Security Division helped review the manuscript for factual accuracy. Arlene Holen, Julie Lee, Robert P. Murphy, Carla Tighe Murray, Sam Papenfuss, Rachel Schmidt, Jo Ann Vines, and G. Thomas Woodward provided thoughtful comments on a draft of the study, as did external reviewer Paul F. Dickens.

John Skeen edited the study, and Christine Bogusz proofread it. Cindy Cleveland produced drafts of the manuscript, and Christian Spoor prepared the study for publication. Lenny Skutnik printed the initial copies, and Annette Kalicki prepared the electronic versions for CBO's Web site.

Douglas Holtz-Eakin
Director
September 2003