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The Israeli National Health Insurance Law allocates a national healthcare budget to the sickness funds, which provide medical care to civilian population. Medical care for members of the IDF is financed through the budget of the Ministry of Defense and is not included in the national healthcare budget. Benefits provided to soldiers serving in the permanent forces are far more extensive than those provided to civilians. Because of no co-payments, poor management, and the cost-based budget, military healthcare costs in Israel are expected to exceed civilian healthcare costs, adjusting for age and sex. The present paper derives age- and sex-based capitation rates for military personnel, and compares military and civilian age-based expenditure and capitation rates. The study population comprised career soldiers and civilians aged 21–54 years. Expenses of career soldiers were calculated to provide information on the financial costs of medical services for each age group in 2003. Overall expenses for women were higher than for men in all age groups. As anticipated, the older the group, the higher the total expenditure for both men and women. In-patient care represented a higher percentage of the total costs for men (28.3%) than for women (22.1%). Emergency room care was higher for women in the 22–24 age group but comparable to that of men in higher age groups. Specialist visits represented a significantly higher percentage of the total costs for women than for men in the 22–24 and 25–34 age groups (by 6% and 15%, respectively). The difference decreased to 13% in the 35–44 age groups and, in the 45–54 age group, the difference for men was 14% higher than for women. Military costs were similar to civilian costs in the 22–24 age groups, higher in the following two groups, and lower in the 45–54 age group. Like in other organizations, military healthcare services might benefit from outsourcing. The inequality in medical services to soldiers and civilians, the over-use of the military healthcare system, and the decrease of standards and budgetary resources will compel the establishment of more creative means of providing these services through contracts and agreements, perhaps through the civilian sickness funds. © 2006 Elsevier Ireland Ltd. All rights reserved.