The Military Health System in the U.S.

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How can the system be reorganised?

Since the end of the Second World War, there has been repeated discussion of the need to create a unified military health system. Some observers have argued that a unified organisation could lead to cost savings, better integration of healthcare services, more efficient administrative processes and better training.

A recent study by RAND, commissioned by the Secretary of Defense (Personnel and Readiness), developed options for organizing the military health care system and highlighted the trade-offs involved in choosing among these options. Susan D. Hosek and Gary Cecchine presented this analysis in “Reorganizing the Military Health Care System: Should There Be a Joint Command?”, concluding that TRICARE, the reorganization of military health care for active duty and retirees and their families, should be carefully considered, but that the additional benefits of a joint command are harder to assess.

Dual military medical mission

The Department of Defense manages one of the largest and most complex healthcare organizations in the country. In 1999, the Army, Navy, and Air Force, along with their overseas installations, operated about 450 military medical facilities, including 91 hospitals and 374 clinics. MTFs serve just over 8 million active military, retirees and dependents. This care is provided by TRICARE, which offers both managed care and fee-for-service. TRICARE managed care providers include multilateral transport networks and a network of civilian providers managed through regional contracts with civilian health care organizations. The fee-for-service option also covers care provided by non-network civilian providers.

At first glance, the military health care system looks like a fairly typical US managed care organization. However, as a military health care system, it has a unique responsibility because of its dual mission:

  • Preparedness: ensuring and maintaining the ability to provide and support health care services to the military during military operations.
  • Benefit: Providing health care and support services to members of the armed forces, their dependents, and others entitled to health care from the armed forces.


The training mission includes the deployment of medical personnel and equipment, as required, to support the world's armed forces in wartime, peacekeeping and humanitarian operations, and military training. Providing training for medical and other military personnel also contributes to the medical training mission.

The purpose of the benefits is to provide health care benefits for military personnel and their family members during active service and after retirement. Traditionally, multi-year travel centers have provided about two-thirds of the health care used by all TRICARE beneficiaries (measured by number of visits) and nearly all of the health care used by active duty personnel. The remainder of care was provided by civilian providers.

These two functions are linked in two ways. First, the medical care provided by TRICARE also contributes to readiness; it keeps active duty personnel at peak military effectiveness and ensures that their families are cared for when they are away from home. Second, the same medical personnel are used in both operations.

Current organisation of the system

The current organisational structure of TRICARE is shown in Figure 1. It consists of four hierarchies: the Office of the Secretary of Defence (OSD), three military units and the medical services. Each of these oversees the providers who deliver medical services to TRICARE beneficiaries (dark gray boxes in the figure). OSD's Office of Health Affairs is responsible for TRICARE contracts (light gray boxes). Health resources and administrative power are fragmented as they move through all branches of the system.

The RAND research team compared the structure shown in Figure 1 with the organizational approaches described in the healthcare management literature used by four large private sector managed care companies – Kaiser Permanente, UnitedHealthcare, Sutter Health System, and Tenet Healthcare. The research team also reviewed previous studies on military healthcare and interviewed key government officials to better understand the specific mission needs of military system readiness.

Four alternative organisational structures

The analysis showed that reform of TRICARE governance is essential. To address this need, the report “Reorganising the Military Health System” outlines four alternative organisational structures that the military could consider. One option would be to change the current structure. The other three would be based on a unified command, which, as defined in Title 10, is a combined military command with a broad and continuous mission, including forces from two or more military departments. The four command structures would consolidate authority over TRICARE assets and create clear accountability for results.

Option 1 would retain much of the current organizational structure, but would require a number of changes to clarify TRICARE's management responsibilities and facilitate resource management and health service integration. TRICARE would manage the health plan with support from local market actors.

The three shared health governance options illustrate significant organisational differences. Under option 2, all health activities would be organised in single command centres. The MTF commanders would also be local TRICARE managers, a dual function structure that has not worked well in the private sector. Option 3 is similar to Option 2, but follows the more common private sector practice of separating responsibility for managing health plans from that of providers by adding a TRICARE component. Option 4 involves the most radical change: it would functionally structure health activities into a training component (organised by department) and a TRICARE component (organised geographically).

A single command centre is unlikely to be achieved without a more fundamental reorganisation of the system. TRICARE is currently testing at its headquarters in north-west Thailand whether strengthening TRICARE's regional management (Option 1) would improve TRICARE's mandate and accountability. If the test is successful, the Department of Defense should consider implementing the broader changes proposed in Option 1. If the test does not significantly improve authority and accountability, the study recommends that the Department of Defense consider joint management and restructuring under Options 3 or 4.

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