A total of 242 former troops have been presented with one-off lump sum payments of about Â£140,000 since 2016 after having developed mesothelioma.
The illness is an aggressive form of cancer often caused following prolonged exposure to toxic asbestos.
In December 2015, the MoD changed the rules to allow veterans diagnosed with mesothelioma on or after that date to have the choice between a one-off, tax-free lump sum or regular smaller payments.
It came after a public outcry over the unfair treatment of retired service personnel '“ who had been denied the six-figure compensation given to civilians with the same condition.
Now figures released by parliament and revealed by The News have shown the MoD's health bill for veterans battling the condition has hit an estimated Â£31,936,095.70.
Anne Moylan, is a mesothelioma clinical nurse specialist with Queen Alexandra Hospital, and is part of health charity Mesothelioma UK, which has supported forces personnel with cancer.
She welcomed the figures but said the MoD still needed to do more.
She said: '˜The lump sum is a step forward but more does need to be done.
'˜It's disappointing that it hasn't risen in line with any normal parametersÂ like pensions.
'˜It it isn't equivalent to the lump sums that civilian work forces can get.'
Between April 2016 and March 2017, 119 veterans received payments amounting to Â£15,174,249.69.
The following year saw 85 people splitting Â£10,592,161.28 between them while figures dated from April this year to November 13 show 38 veterans have received a total of Â£6,169,684.73.
However, despite the cash payouts, campaigners have said more still needs to be done to bring lump sums veterans receive in line with their civilian counterparts.
Veterans charity the Royal British Legion has welcomed the cash surge.
The cause spearheaded the campaign for change in 2016, claiming many veterans suffering from asbestos-related cancer were receiving '˜significantly less compensation than their civilian peers'.
A spokeswoman added: '˜This was a clear breach of the Armed Forces Covenant, which states that members of the armed forces should not face disadvantages because of military service. Â
'˜So we are pleased to see that the change in legislation has enabled many veterans to access fairer mesothelioma compensation.
'˜It is vital that the Ministry of Defence continue to ensure those diagnosed with mesothelioma receive adequate information and support to make truly informed decisions about choices available to them.'
Veterans with diffuse mesothelioma caused by service can now choose whether to receive a lump sum payment of around Â£140,000, or regular smaller pension payments under the War Pension Scheme.
A spokeswoman from the MoD said: '˜Veterans living with mesothelioma due to their service are rightly entitled to compensation. That's why we introduced a lump sum payment option for the condition under the War Pension Scheme in 2016. Â We are pleased that this money is providing the help they need.'