March 17, 2006 | WebMemo on Health Care
To provide improved health care services to more veterans, some propose to expand the size and scope of the Veterans Affairs (VA) medical system beyond its current population and capacity. The core mission of the VA is "to serve current combat veterans and veterans with service disabilities, lower-incomes, and special needs." Efforts to broaden this mission to include nearly all veterans are unwise. Rather than expand the VA's role, policymakers should consider alternatives that would preserve the core mission of the VA medical system while providing more meaningful assistance to others who have served the United States.
The VA's Unique Structure
Unlike Medicare and Medicaid, which reimburse private providers, the VA medical system is owned and operated by the VA. The VA builds its own hospitals and facilities and hires its own physicians and ancillary health care providers as employees. The VA does have some advantages. For example, the VA has a long tradition of training medical students and recently has implemented a state-of-the-art information technology (IT) system to improve patient care.
The VA currently receives its funding at Congress's discretion. Because these funds are limited, Congress required that the VA categorize each veteran into one of seven classes, from the highest priority (Priority 1) to lowest (Priority 7). In 2002, Congress created Priority 8, separating higher-income veterans suffering from conditions not related to their service from Priority 7, thus, reserving Priority 7 for lower-income veterans suffering from such conditions. In 2003, the Bush Administration suspended new enrollment of Priority 8 veterans so that the VA could focus on those veterans most in need.
As with any government-run health care program, the VA's greatest difficulty is balancing cost and demand. Health care costs have been rising across the economy, and the VA program is no exception. In 2001, the VA spent $21 billion on medical care for veterans. In 2004, this spending reached $27 billion, and it is expected to reach $30 billon by 2007. Between 2001 and 2004, the number of patients treated in the VA system increased 22 percent from 4 million in 2001 to 5 million. Of the veterans currently enrolled in the VA, only 27 percent are in the lower-priority categories.
While the VA provides high-quality care to the veterans that it serves, forcing the VA to spread its limited resources across a broader, more diverse population could put the quality of care for the most needy and deserving at risk. The VA is known for its specialized treatments and for dealing with difficult and complex health conditions. Expanding its services to meet the basic health care needs of the broader veteran population could cause general health services to crowd out more specialized treatment within the system.
Incorporating a large pool of new beneficiaries with less-specialized medical needs into the system would alter the political and budget calculus of the VA system. Because beneficiaries with general needs would substantially outnumber beneficiaries with specialized needs, future attempts to control cost growth would likely restrict access to specialized care.
The experience of Medicaid, the government healthcare program for the poor, demonstrates the danger of expanding a healthcare program beyond its original purpose. The more Medicaid eligibility expands up the income scale, the more cost-containment measures are imposed to keep expenditures under control. However, many of these techniques actually put patients at greater risk. For example, limitations on prescription drug access in Medicaid have had significant adverse affects on some of the most vulnerable populations, such as the mentally disabled. In the VA system, the most vulnerable would be those veterans injured in service to their country.
A Better Solution
Congress should recognize that two separate issues are at play in this debate. The first is whether additional health care benefits should be provided to all veterans, and the second is how such additional benefits might be provided. If Congress does decide to expand benefits to non-service-related conditions and lower-priority veterans, then it should consider alternatives to expanding the existing VA medical system.
For example, Congress could authorize and fund health insurance subsidies for certain lower-priority categories of veterans that would assist them in purchasing private health insurance coverage and related medical services. Because these veterans suffer from conditions that are indistinguishable from those suffered in the general population, the same arrangements that cover the general population are well designed to cover them. A subsidy program would allow the VA to continue to focus on those who are in most need while providing some assistance to more of those who served their country.
Two advantages of this approach are particularly important. First, subsidies would ensure continuity of coverage and care for the vast majority of veterans in the lower-priority categories who already have insurance coverage and relationships with hospitals and doctors. Second, it would avoid the substantial capital expenditures necessary to expand the current VA system to accommodate more patients.
In terms of both total cost and quality of care for all veterans, expanding the VA medical system is not the best way to provide improved health care services to those veterans now outside of the system. Subsidies to purchase private insurance plans would serve these veterans better and protect the care that those who were injured in service to their country depend upon.
Nina Owcharenko is Senior Policy Analyst in the Center for Health Policy Studies at The Heritage Foundation.
 The Office of Management and Budget, Budget of the United States Government, Fiscal Year 2007 (Washington, D.C.: U.S. Government Printing Office, 2006), p. 238 at www.whitehouse.gov/omb/budget/fy2007/pdf/budget/veterans.pdf.
 For a detailed explanation of the Priorities, see "Federal Benefits for Veterans and Dependents," 2005 Edition, Department of Veterans Affairs, pp. 6-7 at /static/reportimages/6886FD0502617D7D45B11B2EC8686B68.pdf.
 Sprague, p. 4.
 Budget for Fiscal Year 2007, p. 238.
 Ibid, p. 66.
 "Facts About the Department of Veterans Affairs" Department of Veterans Affairs Fact Sheet, June 2005, p. 3 at /static/reportimages/BB09E82EE320909C33D712F5DB2AD7C2.pdf.
 These individuals were enrolled prior to the Administrations change and were able to retain their eligibility. See Budget for Fiscal Year 2007, p. 238.