The Department of Veterans Affairs (VA) is reporting an almost $15 billion budget shortfall. Congress has been asked to authorize these additional funds to stabilize the VA’s finances.
This will be challenging for many reasons, including the need for Congress to identify offsetting “pay-fors.” But without a solution, we are in danger of being unable to deliver on our commitment to our nation’s military heroes.
There are a number of reasons for the VA’s deficit. There is $3 billion tied to benefit expansion, but that leaves $12 billion for an increase in medical care. In a health system with a budget of more than $369 billion a year, there are certainly opportunities to improve efficiency and reduce waste, but a significant part of the deficit can be traced to the growth in veteran enrollment. Due to the eligibility changes enacted as part of the PACT Act, the VA has enrolled more than 740,000 veterans in the VA health administration in the past 24 months, a 33% increase from the previous two-year period.
Taking care of more veterans is a good thing, but the VA budget cannot expect unlimited growth without corresponding reductions in other parts of the broader health system. After all, when veterans receive their care from the VA, they are receiving less care from other government-sponsored programs and private health insurance companies. Those savings should be used to make up the VA’s operating losses, at least in large part.
The way to fix this problem is called “insurance subvention.” Subvention would allow for a structural change in reimbursement that aligns funding with the channels through which the care is delivered. The largest of these programs are Medicare and Medicaid. Medicare and Medicaid subvention would allow the VA to receive reimbursement from those programs when they care for a veteran who is also enrolled in Medicare or Medicaid.
Subvention does more than just align financial resources to the way care is delivered. Receiving payment for caring for patients with Medicare and Medicaid coverage will also orient VA leaders to improving access that invites further growth and to increasing performance and the quality of care to be competitive with other options for health care that veterans may have.
Medicare subvention is not a new idea. Decades ago, the Department of Defense completed a demonstration project with military retirees. At the VA, Medicare subvention was proposed in 1999, back when the VA’s budget was only $43 billion, but there was no political will to take this shift on.
As secretary of Veterans Affairs more recently, I sought to implement Medicare subvention to correct the misaligned resource allocation in the system, only to be blocked by the Office of Management and Budget (OMB). The financial actuaries at OMB worried that the program might reduce the Medicare trust fund’s financial sustainability, a politically sensitive topic.
Yet unless the structural issues of financing are fixed, the system continues to grow increasingly inefficient for taxpayers and leaves the VA without adequate funds to care for new veterans entering the system.
The VA already bills private insurers, as secondary payers, for veterans who seek care in the VA. However, the VA should consider switching from being the primary payer to becoming a secondary payer for veterans with private health insurance options. The key here is to ensure veterans are not penalized and do not incur any greater financial obligations than in the current system.
Insurance subvention is complicated and takes some political will. But not addressing this now, and pasting over the problem with another $15 billion taxpayer funded authorization, is simply kicking the can down the road and ultimately doing our veterans a disservice.
David Shulkin served as the ninth secretary of the U.S. Department of Veterans Affairs in the Trump administration and as the VA’s undersecretary of health in the Obama administration. He currently serves as executive vice president at Sanford Health, one of the country’s largest rural health care systems.
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