The scandal unfolding at Walter Reed Army Medical Center and the Veterans Health Administration (VHA) has me wondering: could we improve veterans’ health benefits by eliminating the VHA?
This month, Newsweek reported the stories of Jeffrey Lucey and Jonathan Shulze, two Iraq war veterans who recently took their own lives after having difficulty obtaining mental health services from the VHA.
The VHA is supposed to provide medical, mental health, rehabilitative care to former members of the armed services. Yet it presents many of the same symptoms of other government-run health care systems, such as the Defense Health Program, which operates Walter Reed.
At the VHA, Newsweek found “a grim portrait of an overloaded bureaucracy cluttered with red tape; veterans having to wait weeks or months for mental-health care and other appointments; [and] families sliding into debt as VA case managers study disability claims over many months.” Other symptoms include rapidly growing outlays, political games over funding levels, and a lack of accountability.
Everyone - right, left, and libertarian - wants our vets to be well cared for. But is a government-run system the best way to do it? Or might there be ways to provide vets better health care?
In essence, the VHA combines health and disability insurance with medical care delivery. Taxpayers bear the financial risk of veterans needing care for service-related injuries. When those injuries happen, the taxpayers cover the cost of care and the federal government delivers the care through government-owned VA hospitals.
Consider an alternative. Suppose that instead of providing those benefits itself, the federal government increased military pay enough to enable new personnel to purchase private insurance to cover service-related injuries and illnesses. (Those include illnesses that manifest themselves years later, such as mental illnesses or birth defects that result from exposure to hazardous substances.)
The pay raise would have to be enough to allow new personnel to purchase “veterans’ insurance” that is at least as good as they would receive through the VHA. When they enlist or accept a commission, personnel could be required to purchase health and disability insurance that covers any service-related injuries or illness during that enlistment or commission.
Private insurers would calibrate premiums according to the risks posed by different jobs. Premiums would be higher for helicopter pilots and lower for desk jockeys. To enable everyone to purchase coverage, Congress would have to increase pay for each position according to the risk it entails, much it increases pay during combat. That would basically front-load the cost of caring for service-related injuries.
Vets who would have used the VHA would instead use their private insurance to purchase care from private facilities - not government facilities.
Privatizing both the insurance and delivery components of veterans’ health benefits could have a number of benefits.
First, it would let veterans control the money. That means the system would serve them, not the politicians or the bureaucracy.
Second, it would allow vets to choose where they receive medical care and could reduce waiting times for care. Would the scandalous neglect and mistreatment of patients at Walter Reed have occurred if those same vets had the choice to go elsewhere? Patrick Feges of Sugar Land, Texas, was injured in Ramadi by a mortar. He waited 17 months for his first disability check from the VHA. A private insurer with that kind of reputation would have a hard time attracting customers.
Third, the premiums that private insurers charge would give new personnel an independent assessment of the risk posed by different military jobs.
Fourth, those risk-based premiums would increase when conflict seems imminent, in effect front-loading those war-related costs. Harvard professor Linda Bilmes estimates that caring for an anticipated 700,000 veterans of Iraq and Afghanistan will cost between $350 billion and $700 billion. Since Congress would have to increase pay enough for military personnel to insure against those costs up front, they would have an additional disincentive to start wars. The officials who make such decisions would have to plan for those costs themselves, rather than pass buck to their successors.
Some have argued that the VA should get out of medical care delivery by selling off its hospitals and giving veterans a voucher that they could use to purchase medical care wherever they like. That probably would increase the quality of care that veterans receive. But that would also leave VHA in the health and disability insurance business.
It seems to me that a better approach would be to give vouchers to all personnel currently in the system, but increase pay and let private carriers insure against service-related injuries for all new enlistments and commissions. Such a system could improve the quality of care for vets. It also would give Congress, the armed forces, and the public a lot of very useful information about the costs of foreign policy decisions.