##It's in the dye
It's in the dye
It's very simple.
There is a single red dye is used universally for all red fabric across the whole of CAST. This dye was synthesised from an organic molecule found in a specific parasitic worm, and has become widely used because it is easy and cheap to replicate in large quantities.
Unfortunately, this specific dye has a property that is heretofore unknown: when absorbed into the body via the skin, it can trigger a neurological response that inhibits the individual's sense of danger.
Those wearing red become very slightly more willing to take risks. The more you wear it, the more likely you are put yourself into a position that will get you killed.
Why would the original parasitic worm have a molecule that can do this... maybe it has a life cycle similar to Toxoplasma gondii. It just so happens that the same molecule that helps the parasite do brain control also happens to be a perfect red fabric dye.
Well... perfect, except for one tiny detail...
[edit]
As for why the continue wearing red clothes despite the increased death rate, the reason is simple:
The same neurological response that makes you more prone to getting killed also makes you a better soldier. You respond to dangerous situations with more bravery and selflessness, and ultimately improve the chances for everyone else.
There are more deaths among wearers of red, but also more medals and more heroes.