The Congressional Budget Office (CBO) used the Medical Expenditure Panel Survey, conducted by the Agency for Healthcare Research and Quality, to identify a civilian population of beneficiaries that was comparable to the Department of Defense's (DoD's) and examined the relative medical expenditures of that civilian population.⁽¹⁾ CBO broke the population down by sex and by age group (up to 17 years of age, 18 to 44, 45 to 64, and 65 or older). Average total medical expenditures varied among those groups from around $1,000 for females up to age 17 to over $5,800 for males age 65 or older (see Table B-1). Using males who were 18 to 44 years old as the base group, CBO converted average expenditures into relative weights ranging from 0.87 to 4.95.⁽²⁾ For example, the figure for males age 65 or older indicates that that group spent, on average, 4.95 times as much as males between 18 and 44 years old did (see Figure B-1).

Table B-1.
Total Annual Medical Expenditures per Capita in a Civilian Population, by Age and Sex
	Expenditures in 2002 Dollars		Relative Expenditures
Age Group	Males	Females	Males	Females
0 to 17 Years	1,114	1,028	0.95	0.87
18 to 44 Years	1,177	2,009	1.00	1.71
45 to 64 Years	2,865	3,071	2.43	2.61
65 or Older	5,823	5,306	4.95	4.51
Source: Congressional Budget Office using data from the Agency for Healthcare Research and Quality's 1996 Medical Expenditure Panel Survey.
Notes: To provide a comparable civilian population, CBO included only people with private insurance and/or Medicare because the uninsured and people with only Medicaid probably use the health care system substantially differently from the ways that the Department of Defense's beneficiaries do.
The base group consisted of males who were 18 to 44 years old to correspond to the bulk of the Department of Defense's beneficiaries on active duty.
CBO excluded from its sample very high cost outliers--or people with annual expenditures over $250,000--because of their disproportionate effect on average costs.

 

Figure B-1.

Relative Medical Costs for a Civilian Population, by Age and Sex

(Ratio)

Source: Congressional Budget Office using data from the Agency for Healthcare Research and Quality's 1996 Medical Expenditure Panel Survey.

Note: CBO used a comparable civilian population that included only those with private insurance and/or Medicare because the uninsured and people with only Medicaid probably use the health care system substantially differently from the ways that the Department of Defense's beneficiaries do. The base group consisted of males who were 18 to 44 years old to correspond to the bulk of the Department of Defense's beneficiaries on active duty. CBO excluded from its sample very high cost outliers--or people with annual expenditures over $250,000--because of their disproportionate effect on average costs.

CBO then divided the population of DoD beneficiaries up into those same groups and multiplied the total number in each group by the appropriate weight. Because older beneficiaries impose a heavier burden on any health care system, converting each beneficiary into an imaginary number of "weighted beneficiary units" makes tracking the total demand placed on the system easier. For example, if 450 beneficiaries convert into 875 weighted beneficiary units, the demand on the system would equal that by a beneficiary population consisting of 875 males between 18 and 44 years of age and no one else.

CBO then adjusted those weighted beneficiary units for the beneficiaries' different rates of reliance on DoD's health care system (including both military medical treatment facilities and civilian providers) by multiplying the number of weighted beneficiary units in each category by the following full-time-equivalent weights:

• Active-duty personnel: 1.00
  
  
• Family members of active-duty personnel: 0.95
  
  
• Retirees, family members, and survivors under age 65: 0.64
  
  
• Retirees, family members, and survivors over age 65: 0.30

Those figures represent the approximate average rates of reliance for each group, as revealed by surveys by DoD taken from 1994 to 1998. In reality, utilization by some groups, particularly retirees over age 65, fell during the time when the surveys were taken. Older retirees sought 32 percent of their care from military medical treatment facilities in 1994 but less than 25 percent by 1998, probably because the closure and downsizing of military medical treatment facilities made it more difficult to obtain care on a space-available basis (see Figure B-2).
 

Figure B-2.

Percentage of Care Provided by the TRICARE Program

(Percent)

Source: Department of Defense, Office of the Assistant Secretary for Health Affairs.

While it might be possible to vary the adjustment factors to reflect changes in the rates of reliance over time, doing so would mask the impact of those changes in reliance on DoD's system and attribute them to the changing mix of beneficiaries rather than to the reduced use of the system by some groups. Such reduced use could reflect growing access to or preference for alternative sources of care (such as employer-provided health insurance or Medicare), or it could reflect the "squeezing out" of some beneficiaries as space-available care became more difficult to obtain.

After weighting the beneficiary population by sex/age group and by rates of reliance, the end result is a number of "full-time-equivalent beneficiary units"--essentially, the number of full-time active-duty males ages 18 to 44 that it would take to impose the same approximate demand on the system as the actual mix does. While the number of beneficiaries decreased from 9.5 million to 8.5 million from 1988 to 2003 (an 11 percent decrease), the number of full-time-equivalent beneficiary units dropped from 11.4 million to 10.4 million (a 9 percent decrease). (See Figure B-3.)
 

Figure B-3.

The Department of Defense's Health Care Beneficiaries and Full-Time-Equivalent Beneficiaries, 1988 to 2003

(Millions)

Source: Congressional Budget Office based on data from the Defense Enrollment Eligibility Reporting System and the Managed Care Forecasting and Analysis System.

Dividing DoD's total medical expenditures by the number of full-time-equivalent beneficiary units, CBO finds that real spending per unit rose from $1,300 in 1988 to $2,600 in 2003, or by about 5 percent annually.