The Institute for Defense Analyses was asked to support the Military Compensation and Retirement Modernization Commission by providing analyses to assist the Commission's considerations of potential modifications to the provision of health-related services. This document presents a detailed discussion of military healthcare costs under the current system and then develops the estimated cost of providing care for a subset of the Department of Defense beneficiary population through an alternative premium-based health care model. Results indicate that movement towards the premium-based model would produce an annual budgetary cost savings in the $2 to $4 billion range with a best savings estimate of $3.2 billion.