The Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) — a health plan for military dependents, retirees, and retirees' dependents — has experienced significant problems in recent years. The costs of the program have risen to well over $2 billion per year, and its beneficiaries have complained about the amount they must pay for services, and the obstacles presented by the bureaucratic complexity of the program. In 1987, in an effort to improve health care delivery and contain costs, the Department of Defense proposed a set of modifications, known as the CHAMPUS Reform Initiative (CRI). Before initiating the CRI nationwide, Congress required a test of the initiative's feasibility and cost effectiveness. This Note presents preliminary findings concerning the operations of the major CRI programs and their effects on CHAMPUS costs in California and Hawaii. The findings suggest that the CRI has, for the most part, dealt with significant problems in implementing important program elements. The program appears to be in place as designed and has attracted the beneficiary participation necessary for a meaningful trial. The limited information available suggests that program costs are running substantially below costs in other areas.