How VA Hospitals Are a Government-run Disaster

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The news is shocking: Patients dying on the waiting list for government-provided healthcare. But this is not a report from Canada or the British National Health Service. It’s right here in America, in the health system administered by the Department of Veterans Affairs.

The problems first surfaced in Phoenix, where the wait to receive care at VA facilities had grown so long that 1,400 to 1,600 sick veterans were forced to wait months to see a doctor. As many as 40 veterans reportedly died because they couldn’t get the care they needed. VA administrators tried to cover up the problems by establishing secret waiting lists and falsifying reports.

The scandal has now spread to other veteran facilities. VA employees at an outpatient clinic in Fort Collins, Colo., falsified appointment records to hide the fact that as many as 6,300 veterans treated at the outpatient clinic waited months to be seen for treatment. In Wyoming, whistleblowers have accused officials of manipulating records to hide wait times.

VA officers in San Antonio and Austin, Texas, have been accused of similar efforts to hide long waits. And in Pittsburgh, VA officials are accused of covering up the death of several patients after the water in a VA hospital became infected with bacteria. The officials reportedly tried to hide the information not only from patients and superiors, but even from hospital staff.

Earlier this month, the American Legion called for Secretary of Veterans Affairs Eric Shinseki to resign. No doubt Gen. Shinseki was asleep at the switch. But the problem goes well beyond an incompetent cabinet secretary or a few corrupt local bureaucrats.

Nobel Prize-winning economist and New York Times columnist Paul Krugman has long touted the VA system as the epitome of government-run healthcare. “Exhibit A for the advantages of government provision [of healthcare] is the veterans administration, which runs its own hospitals and clinics, and provides some of the best-quality healthcare in America at far lower cost than the private sector,” Krugman claims.

And he is right … at least about the VA being exhibit A for government healthcare.

Like all single-payer health systems around the world, the VA controls costs by imposing a “global budget” — a limit to how much it can spend on care. Thus year-to-year funding varies according to the whims of Congress, not according to what consumers want or are willing to spend.

With tens of thousands of wounded soldiers returning from the wars in Iraq and Afghanistan, the demand for care is rising dramatically. Enrollment in VA services has increased by 13% from 2007 to 2012. Despite a 76% increase in expenditures ($24 billion) over that period, the program still suffers from chronic budget problems. In fact, the Congressional Budget Office estimates that it would require as much as a 75% increase in inflation-adjusted funding for the VA to treat all veterans.

When resources can’t meet demand in a given year, the VA does what other single-payer systems do: It rations.

Even accessing the system can be a major problem. Currently, the case-processing backlog exceeds 344,000 claims. Although the VA says it has a policy of processing claims within 125 days, it actually takes an average of 160 days for a veteran to gain access to his health benefits. Moreover, the VA itself estimates that it has at least a 9% error rate in processing claims. Outside groups claim the error rate is much higher.

Appealing a VA decision can be an even more arduous process. A veteran who takes an appeal through all available administrative steps faces an average wait of 1,598 days, according to VA figures for 2013.

Moreover, because funding decisions are determined through the political process rather than by patient preference, the money is often misallocated. VA hospitals with low utilization rates are built or kept open not out of need, but because they reside in the districts of powerful congressional committee leaders. At the same time, other hospitals without political clout are overflowing.

The same issues beset other government-run health-care programs.

Take Medicaid. A study in the New England Journal of Medicine found that Medicaid recipients were six times more likely to be denied an appointment than people with private insurance. And according to a second study, when they do get an appointment, they wait an average of 42 days to see a doctor, twice as long as the privately insured.

In fact, Medicaid may not even be better than being uninsured altogether. The Oregon Health Insurance Exchange study, the first randomized controlled study of Medicaid outcomes, recently concluded that “Medicaid coverage generated no significant improvements in measured physical-health outcomes.”

Even Medicare, by far the most popular government-run healthcare program, has problems with access and quality. Studies have long shown that there is little correlation between Medicare spending and healthy outcomes. In fact, some of the regions where Medicare spends the most per patient have the poorest results.

As Harvard economists Katherine Baicker and Amitabh Chandra point out, higher Medicare spending “is not merely uncorrelated with the quality of care provided” but “negatively correlated with the use of effective care.”

Moreover, the Federal Trade Commission and Department of Justice have found that one “unintended consequence of [Medicare’s] administered pricing systems has been to make some hospital services extraordinarily lucrative and others unprofitable. As a result, some services are more available (and others less available) than they would be in a competitive market … which may or may not reflect consumers’ needs and preferences.”

As the federal government takes over more and more of the healthcare system, there should be a lesson for us. Simply promising more healthcare does not mean delivering more healthcare. And government healthcare systems have a very poor record of delivering what they promise.