The treatment would be available to those with serious genital injuries.
Dr Fox told the Commons that a veterans' card allowing discounts and privileges would be launched, and that a new fund would support state schools with large numbers of service children.
And council tax relief for overseas personnel is rising from 25% to 50%.
The announcement of three cycles is in line with official guidelines, although not all health trusts fund that many.
The defence secretary also said the government was allocating up to ?30m over the next four years to support joint projects between local communities and the Armed Forces or veterans groups.
The British Legion said it was a "historic breakthrough" which would benefit servicemen and their families for generations to come.
'Balancing act'The announcement comes as the Ministry of Defence said it was seeking to find more savings from the armed forces in the next financial year.
Dr Fox told the House of Commons that the obligation owed by the nation to its servicemen and women was enormous.
He added: "In the current financial climate we are not able to do as much to honour that obligation, nor to do it as quickly as we would like. But we can make clear the road on which we are embarked."
Dr Fox also said that in publishing a new version of the Armed Forces Covenant, written on a tri-service basis for the Army, Royal Navy and Royal Air Force, a careful balancing act had to be made.
"On one hand we don't want to see the chain of command undermined or the military permanently involved in human-rights cases in the European courts," he said.
Continue reading the main storyThe Secretary of State finds himself in a peculiar position today of announcing a policy that he recently voted against”End Quote Jim Murphy Shadow defence secretary "On the other we must ensure that the legitimate aspirations of the wider service community, the armed forces charities and the British public, for our armed forces are met.
"We believe that a sensible way forward, that will give the right kind of legal basis to the Armed Forces Covenant for the first time in our history, is to enshrine the principles in law, provide a regular review of the policies that will make them a reality, ensure that parliament has a chance to scrutinise this review through the annual report, and to ensure that the report itself is widely informed, consultative and transparent."
Cuts reportShadow defence secretary Jim Murphy welcomed the announcement, but accused the Cabinet of backtracking on the issue, saying it had previously opposed the idea of a military covenant.
He said: "The secretary of state finds himself in a peculiar position today of announcing a policy that he recently voted against.
"In February, I and my colleagues tabled an opposition day debate which called for, and I quote, 'establishing in law the definition of a military covenant, in so doing fulfilling the prime minister's pledge'.
"The secretary of state, his front bench and the entire Cabinet voted against it."
A spokesman for the British Legion said: "This is an impressive package of support, but even more impressive is the irrevocable legacy of at last getting the principles of the Armed Forces Covenant written into law.
"This is a major step forward for the whole Armed Forces community."
Meanwhile, a three-month study into further potential MoD cuts, reporting in July, will consider which personnel and equipment programmes could be cut.
Last October's strategic defence and security review set out plans to scrap HMS Ark Royal and the Harrier fleet and cut 42,000 forces and civilian jobs.
The MoD said it was assessing whether spending assumptions made in the past were still affordable.
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