Trump’s path to privatizing VA hospitals — by the numbers

Democrats and Veterans groups are complaining that President Trump wants to “privatize” the nation’s largest integrated health system, the Veterans Health Administration (VHA) system. The real danger though is that Trump may not go far enough.

Is there any reason to maintain this parallel system of health facilities that duplicates services already available in the community? The answer is no — the VHA should be downsized and replaced with guaranteed insurance that ensures that all veterans have access to high quality, private care.

{mosads}In 2017, the VHA will consume 38 percent of the Department of Veterans Affairs’ (VA) $182.3 billion budget.

The VHA includes over 1,200 VA outpatient sites, 300 Veterans Centers offering counseling, suicide prevention and other services and 144 VA hospitals. Most veterans, however, do not rely on this extensive system. Only 9 million of the approximately 22 million veterans are enrolled in the VHA.

According to the Congressional Budget Office (CBO) and the VHA, veterans enrolled in VHA obtain most of their healthcare — about 70 percent — outside the system. About half of enrolled veterans are covered under Medicare or Medicaid and many others have private insurance.

Supporters of the VA system claim outcomes in VA hospitals are as good as, or better than, outcomes in private hospitals and that the care costs less. But it is not hard to contain costs when you don’t deliver care.

Reports of systemic waiting list fraud and fatal treatment delays in the VHA were what prompted Congress to expand the ability of veterans to seek care outside the VHA in the first place.

Salaried VHA providers, protected by federal employment regulations, have no incentive to do more than the necessary minimum. Patients who wait months for treatment eventually seek care elsewhere or die. It seems foolhardy to rely on outcomes data from a system that routinely and systematically lies about its waiting times.

Federal bureaucracy makes the VHA less responsive to evolving needs than the private sector.

The Commission on Care established by Congress to investigate the VHA recently reported that while the care provided by VHA can be comparable or sometimes better than that generally available in the private sector:

“It is inconsistent from facility to facility, and can be substantially compromised by problems with access, service, and poorly functioning operational systems and processes.”

The CBO found veterans have difficulty accessing care because VHA facilities are not conveniently located and wait times are long. And the VA 2017 Fiscal Year Budget Request reported that VHA enrollees can only access medical care in non-VA settings through:

“A multitude of programs with varying rules, requirements, and eligibility criteria. These bureaucratic obstacles result in programs that are plagued by inefficiency, inconsistency, and place unnecessary burdens on veterans.”

Claims that patient satisfaction is higher at VHA than non-VA facilities — like the VHA wait times reports — are of doubtful validity. A survey by one of the nation’s largest non-profit veteran service organizations, the Disabled American Veterans, found that at least half of all veterans feel the VHA is not providing quality, accessible healthcare.

The attachment of mainstream veterans groups to the existing VHA system appears to be caused by a desire to preserve a tangible, visible symbol of the importance of veterans rather than by careful consideration of what’s best for the health of veterans.

Access to care would be much improved if, instead of maintaining a separate VHA system, veterans were offered — without premiums and regardless of age — Medicare insurance which is widely accepted by providers across the country. As in the current VHA system, veterans in high priority groups — veterans with severe, service-connected disabilities — should bear no out-of-pocket costs (co-payments, deductibles).

Would this cost more? While bookkeeping issues and lack of transparency make it difficult to compare costs between VA and non-VA systems, a 2009 study found that VHA’s costs were “considerably higher” than the private sector.

In contrast, a 2004 study estimated that VHA costs for care provided in 1999 nationwide would have been 17 percent higher if those same services had been privately provided at Medicare payment rates. But the lower costs only applied to outpatient care — VHA’s inpatient costs were 10 percent higher.

In addition, half of the VHA’s lower costs were due to lower prescription drug prices which the VA obtains through federal price controls. But Medicare now pays for services and drugs differently than it did 17 years ago and covers outpatient drugs under Medicare Part D. And the narrow VA formulary — the restricted list of drugs VHA physicians may prescribe — includes only half of all medically necessary FDA approved drugs available to Medicare patients

Phasing out most VHA facilities and retaining only those providing selected services where the VA has a clear advantage — e.g., prosthetics and mental healthcare for post-traumatic distress disorder — could potentially save billions by eliminating a huge bureaucracy and shuttering duplicate facilities.

More importantly, it would broaden the ability of veterans to choose providers and services that best meet their needs.

Joel Zinberg, M.D., J.D., F.A.C.S., a visiting scholar at the American Enterprise Institute, is a practicing surgeon at Mount Sinai Hospital and an associate clinical professor of surgery at the Icahn School of Medicine.