The WasteWatcher: The Staff Blog of Citizens Against Government Waste

The Veterans Administration is a Socialized Healthcare System

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Who said the “VA is a socialized healthcare system?”  Or waxed poetically, “I know about a health care system that has been highly successful in containing costs, yet provides excellent care.  And the story of this system’s success provides a helpful corrective to anti-government ideology.  For the government doesn’t just pay the bills in this system — it runs the hospitals and clinics …The system in question is our very own Veterans Health Administration, whose success story is one of the best-kept secrets in the American policy debate?”  Or who declared the VA is a godsend?  And who promised that he’ll “make the VA a leader of national health care reform so that veterans get the best care possible?”

Answers:  Senate Veterans’ Affairs Committee Chairman Bernard Sanders (I-Vt.); New York Times columnist Paul Krugman; Senate Majority Leader Dick Durbin (D-Ill); and president-elect Barack Obama in 2009, respectively.

Providing benefits to veterans began as early as 1636 when the British colonies provided pensions to veterans who became disabled while fighting Indians.  To encourage enlistments and stop desertions during the Revolutionary War, the Continental Congress passed a pensions law and granted half pay for life in the case of a loss of limb or other serious disability.  Since Congress didn’t have the authority or the funds to make pension payments, the states had to pick up the costs.  With the ratification of the U.S. Constitution in 1789, Congress assumed the burden of paying veterans benefits.

The first federal effort to provide medical care for disabled veterans was the Naval Home that was established in Philadelphia in 1812. It was followed by the Soldiers’ Home in 1853 and St. Elizabeth’s Hospital in 1855, both established in Washington, D.C.

After the Civil War, there were so many disabled veterans that Congress created the National Asylum for Disabled Volunteer Soldiers, which eventually became the National Home for Disabled Volunteer Soldiers.  The federal organization had individual residences, called branches, which provided room and board, and gave incidental medical care to disabled and indigent veterans, regardless of whether their disabilities were service-related.  The first branch was opened in Togus, Maine.  By the late 1920s, medical care at the homes had risen to hospital level.  In 1930, the VA was officially established, combining three agencies, the Veterans Bureau, the Bureau of Pensions of the Interior Department, and the National Home for Disabled Volunteer Soldiers, into one.  From there, the VA’s health system grew into more than 1,700 sites of care, and now serves 8.76 million veterans each year.

Based on its long history, one would think that the government could get it right by the twenty- first century.  Apparently it cannot, because without competition and severe consequences for providing poor service, such as dismissal or a loss of profit, there are insufficient incentives to improve.

Long waits for treatment, price controls that lead to denial of care, bureaucratic inertia, fraud, incompetence, cover-ups, and politics are found in single-payer health systems around the world; the VA is fraught with the same problems.  But this is not a new discovery, since problems at the VA have been consistent and well-known for a long time.

Most developed countries offer “free” healthcare to their citizens.  But free healthcare doesn’t equate to timely healthcare.  Government-run healthcare always leads to over-utilization and skyrocketing costs.  To control costs, price controls are implemented, which lead to decreased innovation and access to care.  The system becomes overwhelmed and long waits to see a doctor or to have a medical procedure become standard.

Our neighbor to the north, Canada, has “free healthcare” but ranks last among 11 Organisation for Economic Co-operation and Development (OECD) countries in how fast patients get to see their family physician.

Waiting for elective procedures in Canada, such as cataract surgery, hip, or knee replacements take far longer compared to the United States.  MacCleans, a Canadian magazine, reported on February 19, 2013, that “25 per cent of Canadian patients waited more than four months for non-emergency, elective surgery, the highest proportion of any country reported.”  For example, the waiting time for a hip replacement in Canada, according to a 2013 OECD report, “Health at a Glance,” took between 80 to 90 days.

Canadians are not the only ones that experience delays for elective surgery such as hip replacements.  The OECD report shows that in 2012 the average waiting time for hip replacement surgery was about 40 days in the Netherlands, but more than 120 days in Spain, Portugal and Finland.  The median waiting times were between 80 to 90 days in the United Kingdom, but more than 100 days in Estonia, Australia, Finland and Portugal.

All of these countries provide universal healthcare.  In the United States, average waiting time for a hip replacement is less than three weeks.

U.S. patients are used to getting quick access to a CT scan or MRI.  But Canadians have trouble even getting access to these procedures.  Carley Weeks reported in a July 23, 2010 Daily Globe and Mail article that a study released by the Canadian Institute for Health Information showed that “More Canadians are receiving computerized diagnostic imaging tests than a few years ago and the number of machines available is growing, but access still varies greatly by province.  The number of magnetic resonance imaging and computed tomography scans performed in Canada each year falls below that of many other countries in the Organisation for Economic Co-operation and Development” and the “findings highlight persistent problems dogging access to important medical services in Canada and raise more doubts over the way Canada manages its health-care resources.”

MRIs and CT scans are used to get clear images of what is happening inside the body.  Delays in diagnosing diseases, such as cancer, lead to a poorer prognosis.

In spite of the fact that waiting times for accessing care continue to be a problem for many citizens around the world with single-payer healthcare systems, many U.S. politicians still see government-run healthcare as a panacea.  They try to adopt many of the measures other countries utilize to control costs but in reality, end up causing harm.  This is especially seen in the area of pharmaceutical distribution.

During the 2009-2010 healthcare reform debate there were calls to change how Medicare Part D operates, purportedly to lower drugs costs, such as adopting the VA drug acquisition and formulary scheme and following the Canadian model of instituting price controls.  But our vets and Canadians pay a price for their price-controlled drugs.

The VA (as well as Medicaid) sets prices for pharmaceuticals by employing price controls and rebates so there is no real negotiation over prices.  If the drug company doesn’t meet the price the VA wants, it cannot sell the drug to the VA.

The VA’s price-controlled drugs and strict formulary means there are fewer choices for veterans compared to Medicare Part D beneficiaries.  An October 2013 study by the Lewin Group found that the two Medicare Part D plans with the highest enrollments provided “greater breadth of drug coverage than the VA formulary.”  The study compiled a list of the 300 most prescribed drugs in the United States and found that the two most popular Medicare Part D plans covered 97 and 94 percent of the drugs respectively.  The VA’s formulary was at 87 percent.  The two highest enrollment Part D plans covered 99 and 96 percent respectively of brand name drugs while the VA only covered 57 percent.

While Medicare Part D is a government-created program, private sector players, including pharmaceutical companies, pharmaceutical benefit managers, and pharmacies negotiate drug prices, not the government, due to the statutory “non-interference” clause.  Because of this prohibition against the Department of Health and Human Services (HHS) meddling in contract negotiations, Medicare Part D has worked well both for beneficiaries and taxpayers.  The program has consistently come in lower than the projected Congressional Budget Office cost and maintains high satisfaction rates among seniors.

This praise, however, should not be interpreted as approval of the entire Medicare program.  Even though Medicare Part D works well for a government-created program, it only does so because the private sector is allowed to compete, at least for now.  HHS bureaucrats, liberal-leaning think tanks, and elected officials have long called for and consistently attempted to intervene into Part D’s inner workings.

In addition, Medicare as a whole is a single-payer system.  It uses the private sector to deliver care and providers behave like public utilities for the government.  Medicare is rife with waste, fraud, and abuse and is going broke.   Many doctors are limiting the number of Medicare patients they will see because they are tired of dealing with the bureaucracy and poor reimbursement.  It is not a model for healthcare reform.

Canada may have cheaper drugs but does very little pharmaceutical research compared to the United States.  The U.S. leads the world in biopharmaceutical intellectual property.  Based on figures from the National Science Board and compiled by the Pharmaceutical Research and Manufacturers of America, U.S. inventors held 53.7 percent of the patents for new medicines between 1995 and 2010.  The entire European Union held 26.0 percent; Japan held 10.3 percent; South Korea, Taiwan, and India together held 2.7 percent; China held 0.4 percent; and all other countries, which includes Canada, came in at 7.0 percent.

Robust R&D equates to technological advancement and high-tech, good-paying jobs.  Economist Paul Roderick Gregory reported in a July 1, 2012 article in Forbes Magazine that 95 percent of new drugs that come to the marketplace are developed in the United States.  The world rides on U.S. drug research and development, but citizens in other countries don’t help to pay for new drugs because of price controls.

The problems at the VA have caught the attention of a well-known Canadian conservative political opinion writer.  Lorne Gunter of the Toronto Sun wrote in a May 24, 2014 column, “For Canadians paying attention to the Veterans Affairs (VA) health care scandal in the United States, it can’t have come as much of a surprise:  A government agency with monopoly control over patient care uses waiting lists to ration services.  Patients suffer pain and quality-of-life loss while being denied needed procedures in a timely fashion.  A few poor souls even die while they wait.  Meanwhile bureaucrats and politicians who favour government health monopolies insist there is nothing wrong, the system is among the finest in the world.  Sounds like Canada.”

Gunter added that, “The final parallel between the Canadian and VA systems is doctors.  Here, the cost of physicians to the system is regulated by controlling the number of physicians.  Governments limit how many doctors will graduate and control which doctors will be licensed.”

“At the VA, the budget for doctors is controlled because the docs are on salary.  They draw a monthly payment rather than a fee for each patient they see.

“This keeps down cost, but it also keeps down service.  Many full-time VA doctors see one-third as many patients in a day as their private care counterparts.  In several cases, VA doctors have been seeing as few as two veterans per day.  There is no incentive to see more.”

While VA wait times are bad, according to Gunter, “The typical wait for a non-urgent colonoscopy in Canada is six months – at least 50% longer than what is considered a shamefully long wait at the VA.  The average wait for non-life-threatening specialized care here is 17 weeks.  At the VA, it’s slightly less than that.”

Disturbingly, Gunter says, “Watching the situation unfold from north of the 49th, it is interesting that what is considered scandalously negligent care in the U.S. is the accepted norm up here.”

Americans cannot allow the problems at the VA become the “accepted norm” in the United States.  While there are discussions in Congress to allow vets to use vouchers to access the U.S. private health sector for care in order to avoid the long waits at the VA, much more needs to be done to make sure our injured vets get the care they were promised and need.

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