The military provides health services to dependents and retirees through two systems: (1) the on-base military health system, Military Treatment Facilities (MTFs); and (2) the private health care system, CHAMPUS (Civilian Health and Medical Plan for the Uniformed Services). The continuing rapid increase in total military health expenditures has focused attention on these systems. Because the average cost per visit has been estimated to be less in the MTFs, it has been suggested that increasing MTF staffing levels might draw into the MTFs patients who otherwise would use CHAMPUS--thereby decreasing total military health expenditures. This report examines this claim. Using economic theory, survey results, and regression analysis, the authors conclude that additional patients seen in the MTF as a result of increased MTF staffing will not all come from CHAMPUS cases. Moreover, many of the services provided to the additional MTF patients will be services that--without the increased staffing--would have been reimbursed by other (non-CHAMPUS) health insurance, paid for by the patient, or gone unprovided. Therefore, for many services, unless the MTF can provide care at a substantially lower cost, increasing MTF staffing may actually increase total medical costs. This result is consistent with the findings of the Department of Defense Comprehensive Study of the Military Medical Care System (DoD, 1994), which used different data and methods. The findings of this study will be of special interest to government and other agencies concerned with the efficient use of resources in the military health care system.