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10/11/2012 4:24:00 PM
Health care for all Americans: Finally, a bipartisan solution?
Many on left and right look at Veterans Administration model of health care delivery

Richard Moore
Investigative Reporter

News Analysis

First in a series

As the nation’s candidates hotfoot it toward an extremely close November presidential election, and health care remains as controversial and convoluted an issue as ever, it’s only rational to believe the nation is way too polarized to develop a consensus solution to health-care delivery and access for all, at least anytime soon.

Others, though, believe such a consensus could be just around the corner, literally. 

Can such an outcome really be so close, so simple? Can the nation create a bipartisan model that gives all Americans access to affordable health care, that is patient-centered and evidence-based rather than profit-driven, that improves overall quality while dramatically reducing health-care costs and eliminating skyrocketing Medicare and Medicaid bills, all the while preserving patients’ choice and marketplace competition?

Absolutely, some are saying, and all you have to do to see such a system in action is mosey on over to your local Veterans Administration hospital or clinic. Increasingly, bubbling up through the rhetoric and maze of competing party lines is a narrative proclaiming the government-run VA the best health-care provider in the nation – superior in quality, in cost and in patient satisfaction – and there’s a multitude of studies to back it all up.

If the model can work for veterans, some people are convinced it could work for everybody. In this scenario, the government would run a national civilian hospital and clinic system, with no restrictions, no insurance, no copays. The services would include checkups, preventive and wellness programs, inpatient and outpatient services, prescription coverage, dental and eye care, as well as extended and primary care. 

All for free. All from the cradle to the grave.

Even better, the traditional private health-care market would compete with the government network, with private insurers and providers continuing to offer their products and health-care services to those who opt not to enter the VA-styled network. Not only would the dual systems compete for patients, but patients could alternate between the two, moving at will between them, or choose to use neither. No government penalties involved.

What’s more, traditional insurers and providers would no longer pay for indigent care, or be subject to government mandates. Neither would the American people.


Taking it nationally

The merits of the VA system have been recognized for some years now, most notably by Phillip Longman in his book, Best Care Anywhere, but only recently have some observers begun to try and translate the VA model into a national public option.

One question is, could the VA’s success be plausibly duplicated on such a massive scale? There is evidence it could, primarily because the VA is already the nation’s largest integrated health-care system, with 152 medical centers and almost 1,400 community-based outpatient clinics, community living centers, Vet Centers and domiciliaries. 

All totaled, the VA states, those health care facilities provide care to more than 8.3-million veterans every year.

Supporters say that economy of scale has allowed the VA to address the critical issue of ongoing and debilitating increases in health-care costs, and that a national model could do the same thing – something neither the Affordable Care Act nor the alternative Ryan-Wyden Medicare plan accomplish. 

On the one hand, the Affordable Care Act’s 15 member Independent Payment Advisory Board will almost certainly turn to health-care rationing and reduced payments to providers to try and control costs; its recommendations will be fast-tracked through Congress and subject to only passive congressional review. On the other hand, while the Ryan-Wyden plan offers solid steps to a more secure Medicare future, the proposal eats away at only a single slice of the causes of an accelerating inflation. Its appetite isn’t strong enough, in other words. 

In contrast, the VA model touts fixed budgeting, salaried physicians, integrated health information technology systems, evidence-based quality standards, restricted formularies for managing pharmaceutical costs and an array of management protocols designed explicitly to control across-the-spectrum expenses.

Controlling those expenditures is essential. According to the Henry J. Kaiser Foundation, U.S. health-care expenditures approached $2.6 trillion in 2010, more than 10 times the $256 billion spent in 1980. Costs are projected to continue to climb faster than national income over the foreseeable future, Kaiser reported this year. As for federal government health-care spending, the price tag for Medicare and Medicaid has now topped $1 trillion.

It all works out to a lot of money per person. In 2009, for example, the U.S. spent $7,960 total per capita; in next-door Canada, the figure was but $4,363.

And much of it – nearly $1 in three, a recent study by the Institute of Medicine concluded – is waste and inefficiency, the very kind of spending the VA model is designed to control and prevent. The IOM called for a major overhaul.

“America’s health care system has become too complex and costly to continue business as usual,” the IOM stated. “Inefficiencies, an overwhelming amount of data, and other economic and quality barriers hinder progress in improving health and threaten the nation’s economic stability and global competitiveness.... The costs of the system’s current inefficiency underscore the urgent need for a systemwide transformation.”

The IOM figured that about 30 percent of health spending in 2009, or approximately $750 billion, was wasted on unnecessary services, excessive administrative costs, fraud, and other problems.  

And cost wasn’t the only deficiency.

“Moreover, inefficiencies cause needless suffering,” the IOM stated. “By one estimate, roughly 75,000 deaths might have been averted in 2005 if every state had delivered care at the quality level of the best performing state.” 

The danger to the nation’s internal fabric was acute, said the IOM’s study committee chairman, Mark D. Smith, president and CEO of California HealthCare Foundation in Oakland. 

“The threats to Americans’ health and economic security are clear and compelling, and it’s time to get all hands on deck,” Smith said. “Our health care system lags in its ability to adapt, affordably meet patients’ needs, and consistently achieve better outcomes. But we have the know-how and technology to make substantial improvement on costs and quality.”


The VA model’s success

What a transformation of the nation’s health-care system would look like depends on whom you ask, of course, but no one can argue with the VA’s ability to offer quality care and to control costs simultaneously.

In the early 2000s, for instance, the VA’s own research wing conducted a comprehensive comparison of actual costs at six VA medical centers to hypothetical fee-for-service payments for the same services that would have been paid by Medicare, using 1999 reported fees and payments. 

The final report issued in 2004 found the hypothetical Medicare payments to be more than 20 percent greater than actual VA per capita allocations, which would have translated into a savings of more than $5 billion in 2003. And that, the study reported, was a conservative estimate.

“Less than half of the difference is due to VA’s low pharmacy costs,” the study stated. “The study demonstrates the potential savings to patients and taxpayers of the VA health care system.”

But don’t take the VA’s word for it. A 2007 review by the nonpartisan Congressional Budget Office found the same thing, only worse. Between 1999 and 2005, the CBO found, the VA’s annual costs per enrollee rose by a mere .3 percent per year, or 1.7 percent for the period, while Medicare per capita expenses exploded by 4.4 percent per year, or 29.4 percent for the same six years.

“Though not the decline in cost per capita that is suggested by unadjusted figures, that estimate still indicates some degree of cost control when compared with Medicare’s real rate of growth of 29.4 percent in cost per capita over that same period,” the CBO stated.


Quality care and satisfaction

Study after study also verifies the comparative superiority of VA care.

In a study published in the New England Journal of Medicine in 2003, “Effect of the Transformation of the Veterans Affairs Health Care System on the Quality of Care,” the VA outperformed Medicare hospitals on 11 out of 11 quality measures.

“In fiscal year 2000, throughout the VA system, the percentage of patients receiving appropriate care was 90 percent or greater for 9 of 17 quality-of-care indicators and exceeded 70 percent for 13 of 17 indicators,” the report stated. “There were statistically significant improvements in quality from 1994–1995 through 2000 for all nine indicators that were collected in all years. As compared with the Medicare fee-for-service program, the VA performed significantly better on all 11 similar quality indicators for the period from 1997 through 1999. In 2000, the VA outperformed Medicare on 12 of 13 indicators.”

Several studies by the RAND Corporation have also produced eye-popping gaps between VA and private-sector care. According to a RAND blog in August by Arthur L. Kellermann, a 2004 RAND study led by Dr. Steven Asch showed the VA system delivering better care than the study’s private hospitals on all measures except acute care, and in acute care two samples performed comparably, Kellerman stated.

“In nearly every other respect, VA patients received consistently better care across the board, including screening, diagnosis, treatment, and access to follow-up,” Kellerman wrote, and, he added, the researchers found the VA to deliver recommended care to patients on a more consistent basis than in the private sector.

“VA patients received about two-thirds of the care recommended by national standards, compared with about half in the national sample,” Kellerman wrote of the findings. “Among chronic care patients, VA patients received about 70 percent of recommended care, compared with about 60 percent in the national sample. For preventive care, the difference was greater: VA patients received 65 percent of recommended care, while patients in the national sample received recommended preventive care roughly 45 percent of the time.”

Then, in 2006, the Department of Veterans Affairs commissioned the Altarum Institute and the RAND Corporation to evaluate its mental health treatment system. Again, the researchers found the VA care “similar to or better than the care given to comparable privately insured patients or those enrolled in Medicare or Medicaid...”


Pleased, not pleased

Ditto on patient satisfaction. 

The 2007 CBO report took a look at that comparison using the American Customer Satisfaction Index, which, the CBO stated, ranks customer satisfaction with a variety of federal programs and private-sector industries.

“In 2005, VA achieved a satisfaction score of 83 (out of 100) on the ACSI for inpatient care and 80 (out of 100) for outpatient care, compared with averages for private-sector providers of 73 for inpatient care and 75 for outpatient care,” the CBO stated. “In 2004, the ratings were higher for both VA and the private sector. For VA, the scores for inpatient and outpatient care were 84 and 83, respectively, while the average scores for the private sector were 79 and 81.”

Of course, things don’t always go right for the VA. A look at end-stage renal cancer patient records by the University of Illinois at Chicago found VA care lacking for those who received hemodialysis care at VA versus private sector facilities. The VA dialysis group had more comorbidities, outpatient and emergency visits, more prescriptions, and longer hospital stays.

The price tag was higher, too: In adjusted analysis, the VA dialysis group had $36,431 higher costs than those in the private sector dialysis group, the researchers reported.

In more recent days, the administration has been tangled in some bureaucratic snafus. A backlog of veterans’ disability claims has long plagued the agency, but critics now point to a 179-percent jump in the number of backlogged claims since President Barack Obama took office, climbing at one point to 883,949.

That was a near record high, and, reported CNSNews, 65.8 percent of the claims had been backlogged for 125 days or more.

The agency defended itself against the allegations, saying the backlog has nothing to do with bureaucratic entanglements and everything to do with an administration decision to grant claims going back not only to Gulf War Syndrome occurrences 20 years ago but to Agent Orange exposures more than 50 years ago. An agency spokesman said the VA hadn’t take care of business when it had been supposed to and was doing to so now.

The VA has in recent weeks also come under fire for late payments to employees within its work-study program. The employees, college students who served in the military, have routinely waited one to two months and even four months for wages to be paid, NBC News reported last week. 

Still, those issues seem like an anomaly, given the VA’s consistent rating of better care, lower costs, superior management and even patient satisfaction over the past decade. That overall performance has put the VA on a much high plane than the private health-care sector in the eyes of many observers.


But how? 

Given such glowing results, the VA system’s performance might seem like magic, but it was really rooted in necessity. In the early-to-mid 1990s, the VA lived at the bottom of the health-care trash heap – it epitomized the worst of giant government bureaucracies – but, led by Dr. Ken Kizer in the Clinton administration, the VA engineered an unprecedented turnaround of its Veterans Health Administration division based on a set of common-sense nonprofit principles.

In short, Kizer and others began a drive to create an integrated health-care system that would deliver high-quality services within a framework of reasonably managed costs.

That meant, among other things, wiring the entire system with the state-of-the-art technology needed to share electronic information thoroughly and quickly, using evidence-based medicine to decide treatment options, decentralizing management to recognize that one size does not fit all, using salaried physicians, maintaining fixed-budget operations, and restricting pharmaceutical formularies.

Operating on a fixed-budget principle, rather than on Medicare’s fee-for-service rule, has been a critical component of VA success, both in cost and quality. Simply put, having to operate within a disciplined fiscal atmosphere promotes the use of proven if not necessarily high-cost treatments, rather than merely employing unneeded services that are built around a need to push shareholders’ values and physician incomes higher.

While some argue that a fixed-budget approach encourages lower-quality treatment – discharging patients too quickly,  for instance – in practice the opposite has been true, with old-line treatments being employed successfully while fee-for-service operations have driven up costs merely because they could do so, not because it represented any better ministrations.

In fact, many times it represents lower-quality care – not high-quality but high-cost treatment. Indeed, when the IOM released its waste and inefficiency numbers, it found the unnecessary use of high-cost services to be a major culprit in the ongoing waste of valuable health-care resources.


Evidence-based medicine

The fixed budget approach has been accompanied by the use of evidence-based medicine, in which comprehensive research teams compile the best available evidence to assess the risks and benefits of various therapies and diagnostic procedures, as well as the risks and benefits of not treating a certain condition or of not ordering up a certain test.

At the VA, two groups of investigators have worked in evidence-based research since 2007 as part of the Evidence Synthesis Program funded by the VA’s Health Services Research and Development.

Here’s how the VA website puts it:  “Like detectives, ESP investigators comb through evidence – in this case, published research findings. They look for clues others may have missed. They rigorously evaluate, analyze and synthesize data. They uncover previously unrecognized patterns and reveal new insights. Their goal is to provide the best possible information to guide medical care. The end product is a comprehensive, incisive report that gets disseminated widely within VA, primarily to top health care planners and managers. The reports also get published in the general medical literature for clinicians worldwide to learn from.”

As the 2007 CBO report stated, the VA tracks the quality of its medical care using a variety of indicators for such areas as adherence to clinical guidelines.

“One key index is the Clinical Practice Guidelines Index, which measures the degree to which a provider follows nationally recognized standards of care that have been shown to improve health outcomes,” the CBO report stated. “Another is the Prevention Index II, which VA uses to track compliance with clinical guidelines for preventive care that research has tied to improved health and well-being.”

Those key indexes used by VA focus on process measures of quality rather than outcome measures, the CBO stated. 

“First, process measures are easier to track – for example, VA’s electronic health information system can easily identify what percentage of heart patients had their blood pressure checked during their last primary care visit,” the CBO stated. “Second, process measures are easier to compare among facilities; they do not need to be adjusted for differences in the risk of the population of patients. Third, the process measures that are tracked are drawn from published clinical guidelines, which in turn are based on published research regarding health outcomes for patients.”

Accompanying the fixed-budget and evidence-based approaches has been tight control of the VA’s pharmaceutical formularies, or recommended drugs, in which proven “workhorse” drugs are used in lieu of embracing the newest and most expensive drugs. It’s not to say newer drugs aren’t used if they are more effective, but the evidence-based approach guides their inclusion in the VA’s pharmaceutical medicine cabinet.

And what about paid doctors? What doctor in her or his right mind would eschew the riches doctors reap in the private sector for a salaried position within the VA system?

As it turns out, plenty would.

While the VA acknowledges that salaried positions aren’t for every doctor – and the VA does use independent contractors who sometimes combine part-time roles to form a full-time position – it stresses the advantages of the salaried lifestyle, particularly its conduciveness to family life. The VA typically offers generous vacation schedules, a 40-hour work week with days ending on time, and electronic records allow physicians to perform a variety of tasks at home.

Add to all this state-of-the-art technology, decentralized regional structures rather than a concentration of power in Washington – recognizing that managing and coordinating care in Texas might be somewhat different than managing and coordinating care in New York – and mandated transparency conventions, and you have the summarized reasons for the VA’s outstanding success.


Paying for it: the Fair Tax

After listening to tales of looming Medicare nightmares or of Obamacare horror chambers and death panels, to many the VA model sounds like the silver bullet for health care.

That said, silver bullets come with a price tag, and the question is how to pay for it all if it were to be implemented nationwide.

In the third edition of his book, Best Care Anywhere (which outlines in detail many of the VA advantages mentioned in this article), Longman broached the idea of VA-styled care for everyone but fashioned it around the existing Medicare system. In his conception, existing providers would have to become certified to receive Medicare reimbursements by becoming nonprofit institutions, and using salaried doctors, evidence-based  practices, fixed budgets and integrated health information technologies.

Those facilities that did not want to do so would be forced by the market to merge with those that did, or to reform themselves in order to compete, Longman wrote, and the certified institutions would attract younger people mandated to buy health insurance under Obamacare because they would present an “inherently efficient model of care.”

But supporters of a public option dare to be bolder. Most important, they want guaranteed health care for all Americans, which the Longman plan would not provide. That blueprint would also keep Medicare in place, albeit with cost controls and without a fee-for-service infrastructure, but it would nonetheless be inherently targeted at one population segment while leaving burdensome government mandates in place.

But creating the government-operated nationwide network of hospitals and clinics that they advocate is problematic as well.

First, there would be start-up costs, namely, building or acquiring medical facilities throughout the nation, a step requiring hundreds of billions of dollars from the get-go. Supporters of a national VA-styled system do have ideas and proposals for initial funding, but that is an in-depth issue to be explored in a subsequent article.

Assuming that hurdle could be overcome, how would the system be financed operationally?

Supporters have a ready answer. It’s called comprehensive tax reform, and, specifically, the adoption of a Fair Tax system in the United States.

The Fair Tax is, of course, a national sales tax. Adopted in its fullest form, the plan would implement a national 23-percent sales tax on the purchase of new goods and services. The purchase of used goods and services would not be taxed, the Fair Tax would replace not only the income but the payroll tax, and the poor would not have to pay through a prebate mailed to them by the government.

The tax is designed to be revenue neutral, with studies pointing to a 23-percent rate to offset current taxes. Americans would no longer have to contend with a complicated tax code, and the IRS would be abolished.

It’s possible, as a compromise, a national sales tax could be designed just for the health-care system. That would entail a tax in the neighborhood of 5 percent, assuming the VA model would lower current federal health-care spending from about $1 trillion to the neighborhood of $600 billion or $700 billion. Every 1 percent of a national sales tax would generate about $117 billion. 


Liberal v conservative

The $64,000 question is whether conservatives and liberals can agree enough to actually coalesce around a VA-styled model. There are certainly attractive elements for each side – not to mention a potential final resolution to the nation’s long-festering health-care dilemma, a desirable outcome for both – as well as red flags each side could and likely would raise.

For liberals, obviously, obtaining universal guaranteed health care for all Americans would be a pie-in-the-sky, pinch-me moment, superior even to the night they passed Obamacare. It would accomplish one of the left’s all-time social policy objectives, and that would seem enough in itself to bring them to the table.

But there is of plenty of good for conservatives, too. For one thing, assuming it worked as proponents say it would, it would help reduce the federal deficit by reducing federal expenditures in health care – a huge fiscal victory – all the while preserving a competitive private marketplace and patient choice. 

In addition, it would not only avoid a centrally run government system whereby bureaucrats make decisions about health choices – Obamacare – but actually remove mandates and taxes from private health-care delivery.

In this system, doctors and patients would make the choices based on the evidence at hand, not in the minds of bureaucrats. This would expand patient choice not only in the private sector but in the VA-styled system. 

Indeed, it has done so already in today’s VA compared to the current private sector. To cite just one example, there’s only one hospital in Milwaukee, Wisconsin, that supports popular art therapy programs for its patients with full-time art therapists, and that is the VA hospital. The VA embraces it because it is evidence based and centered in patient choice; the current private sector has not because it has not yet figured how to profit from it. High tech and high profit carry the day.

And yet, there are those red flags. Some conservatives will argue the private sector cannot remain competitive in an environment in which its competitor boasts free health care and gets all of the tax money, too. 

Supporters will counter that private providers will no longer be burdened paying for indigent care – one of the financially oppressive conditions threatening private hospitals today – and would be freed from onerous government mandates. Private insurer plans would also not be taxed, bolstering the incentive for employers to provide such plans – and for individual consumers to purchase them – increasing the pool for the private sector market. 

After all, the counterpoint goes, the nation has a free public school system that nets virtually all tax dollars, and yet a private school system has flourished alongside it.

A stronger conservative argument, perhaps, is that the whole network could end up like the educational system: The affluent get to go to private schools and hospitals, while the poor and middle-class would end up trapped in increasingly inferior public hospitals that, having all the tax funding, have little incentive to compete.

Supporters have an answer for that, as well. For one thing, they say, competition would be ensured because, unlike in the history of public schools, performance mandates and fiscal requirements would be built into the system from the start, as would restrictions on the power of public-sector unions to change those requirements and mandates through collective bargaining.

Finally, some conservatives will cringe at the thought of a federally run system with no state role, not to mention the constitutional validity of such a system, but that could be overcome either by restricting the federal role to the collection and distribution of revenues, while states carry out the mandates with some policy flexibility, or by fashioning a compromise based along the lines of the current VA’s decentralized system.

Liberals, too, could rise on the horizon with various objections. Any attempt to restrict the role of public-sector unions would likely make them bristle, and it is unclear the left would ever accept a national sales tax as a device for financing the system because of its long-term implications for other social policy objectives. 

To wit, a national sales tax would deprive the left of its ability to influence social policy through taxing instruments.

But perhaps, just perhaps, the pots of gold at the end of the rainbow are enough to overcome the objections. Finally providing universal health care to all Americans while simultaneously solving one of the nation’s most hectoring fiscal dilemmas satisfies two of the most central goals of the left and of the right.

Richard Moore may be reached at richardmoore.gov@gmail.com.

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