SECTION 1. INCLUSION OF MEDICARE ELIGIBLE COVERED BENEFICIARIES IN 
              FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM.

    (a) FEHBP Option.--(1) Chapter 55 of title 10, United States Code, 
is amended by inserting after section 1079 the following new section:
``Sec. 1079a. Health care coverage through Federal Employees Health 
              Benefits program
    ``(a) FEHBP Option.--The Secretary of Defense, after consulting 
with the other administering Secretaries, shall enter into an agreement 
with the Office of Personnel Management under which covered 
beneficiaries described in subsection (b) will be offered an 
opportunity to enroll in a health benefits plan offered through the 
Federal Employee Health Benefits program under chapter 89 of title 5, 
in lieu of receiving care under this chapter in treatment facilities of 
the uniformed services or through the Civilian Health and Medical 
Program of the Uniformed Services or the TRICARE program. The agreement 
may provide for limitations on enrollment of covered beneficiaries in 
the Federal Employee Health Benefits program if the Office of Personnel 
Management determines the limitations are necessary to allow for 
adequate planning for access for services under Federal Employee Health 
Benefits program.
    ``(b) Eligible Covered Beneficiaries.--A covered beneficiary 
referred to in subsection (a) is a member or former member of the 
uniformed services described in section 1074(b) of this title, and any 
dependents of the member described in section 1076(b) of this title, 
who is or becomes entitled to hospital insurance benefits under part A 
of title XVIII of the Social Security Act (42 U.S.C. 1395c et seq.). 
The covered beneficiary shall not be required to satisfy any 
eligibility criteria specified in chapter 89 of title 5 as a condition 
for enrollment in a health benefits plan offered through the Federal 
Employee Health Benefits program pursuant to subsection (a).
    ``(c) Contributions.--(1) In the case of covered beneficiaries 
described in subsection (b) who enroll in a health benefits plan 
offered through the Federal Employee Health Benefits program pursuant 
to subsection (a), the administering Secretary concerned shall be 
responsible for Government contributions that the Office of Personnel 
Management determines are necessary to cover all costs in excess of 
beneficiary contributions under paragraph (2).
    ``(2) The contribution required from an enrolled covered 
beneficiary shall be equal to the amount that would be withheld from 
the pay of a similarly situated Federal employee who enrolls in a 
health benefits plan under chapter 89 of title 5.
    ``(d) Management of Participation.--The authority responsible for 
approving retired or retainer pay or equivalent pay in the case of a 
member or former member shall manage the participation of the member or 
former member, and dependents of the member or former member, who 
enroll in a health benefits plan offered through the Federal Employee 
Health Benefits program pursuant to subsection (a). The Office of 
Personnel Management shall maintain separate risk pools for enrolled 
covered beneficiaries until such time as the Director of the Office of 
Personnel Management determines that complete inclusion of enrolled 
covered beneficiaries under chapter 89 of title 5 will not adversely 
affect Federal employees and annuitants enrolled in health benefits 
plans under such chapter.
    ``(e) Effect of Cancellation.--The cancellation by a covered 
beneficiary of coverage under the Federal Employee Health Benefits 
program shall be irrevocable for purposes of this section.
    ``(f) Reporting Requirements.--Not later than November 1 of each 
year, the Secretary of Defense and the Director of the Office of 
Personnel Management shall jointly submit a report to Congress 
describing the provision of health care services to covered 
beneficiaries under this section during the preceding fiscal year. The 
report shall address or contain the following:
            ``(1) The number of covered beneficiaries enrolled in 
        health benefits plans offered through the Federal Employee 
        Health Benefits program pursuant to subsection (a), both in 
        terms of total number and as a percentage of all covered 
        beneficiaries receiving health care through the health care 
        system of the uniformed services.
            ``(2) The out-of-pocket cost to enrollees under such health 
        benefits plans.
            ``(3) The cost to the Government (including the Department 
        of Defense, the Department of Transportation, and the 
        Department of Health and Human Services) of providing care 
        under such health benefits plans.
            ``(4) A comparison of the costs determined under paragraphs 
        (2) and (3) and the costs that would have otherwise been 
        incurred by the Government and enrollees under alternative 
        health care options available to the administering Secretaries.
            ``(5) The effect of this section on the cost, access, and 
        utilization rates of other health care options under the health 
        care system of the uniformed services.
    ``(g) Time for Option.--The Secretary of Defense shall begin to 
offer the health benefits option under subsection (a) not later than 
January 1, 1997.''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 1079 the 
following new item:

``1079a. Health care coverage through Federal Employees Health Benefits 
                            program.''.
    (b) Conforming Amendments.--Chapter 89 of title 5, United States 
Code, is amended--
            (1) in section 8905--
                    (A) by redesignating subsections (d) through (f) as 
                subsections (e) through (g), respectively; and
                    (B) by inserting after subsection (c) the following 
                new subsection:
    ``(d) An individual whom the Secretary of Defense determines is an 
eligible covered beneficiary under section 1079a(b) of title 10 may 
enroll in a health benefits plan under this chapter in accordance with 
the agreement under section 1079a(a) of title 10 between the Secretary 
and the Office and applicable regulations under this chapter.'';
            (2) in section 8906(b)--
                    (A) in paragraph (1), by striking ``paragraphs (2) 
                and (3)'' and inserting in lieu thereof ``paragraphs 
                (2), (3), and (4)''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(4) In the case of individuals who enroll in a health plan in 
accordance with section 8905(d) of this title, the Government 
contribution shall be determined under section 1079a(c) of title 10.''; 
and
            (3) in section 8906(g)--
                    (A) in paragraph (1), by striking ``paragraph (2)'' 
                and inserting in lieu thereof ``paragraphs (2) and 
                (3)''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(3) The Government contribution described in subsection (b)(4) 
for beneficiaries who enroll in accordance with section 8905(d) of this 
title shall be paid as provided in section 1079a(c) of title 10.''.
Amends Federal provisions concerning the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) to direct the Secretary of Defense to enter into an agreement with the Office of Personnel Management (OPM) under which covered CHAMPUS beneficiaries who are also entitled to hospital insurance benefits under Part A of title XVIII (Medicare) of the Social Security Act will be permitted to enroll in a health benefits plan offered through the Federal Employees Health Benefits program in lieu of receiving care under CHAMPUS or the TRICARE program.  Outlines provisions concerning:  (1) required contributions for such coverage; and (2) the management of participants in the plan.  Requires the Secretary and the OPM Director to report annually to the Congress describing the provision of health care services to covered beneficiaries under the plan during the preceding fiscal year.
To amend title 10, United States Code, to permit covered beneficiaries under the military health care system who are also entitled to medicare to enroll in the Federal Employees Health Benefits program.