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TRICARE, the health benefits program created for beneficiaries of the U.S. Department of Defense, covers health care provided in military treatment facilities and by civilian providers. Congress is now considering how to update TRICARE, which was first developed in the 1980s drawing on managed care concepts from civilian health plans. This Perspective places TRICARE's current managed care strategy in historical context and describes recent innovations by private insurers and Medicare intended to enhance the value — cost and quality — of the care they purchase for their members. With this movement toward value-based purchasing as background, the authors evaluate two existing proposals for reform and describe an alternative approach that blends the existing proposals.