Value for Taxpayers’ Dollars: What VA Care Would Cost at Medicare Prices

Abstract

Critics charge that Veterans Health Administration (VA) medical centers are inefficient and the cost of veteran health care would be reduced if VApurchased care for its patients directly from private-sector providers. This analysis compares VAmedical care expenditures with estimates of total payments under a hypothetical Medicare fee-for-service payment system reimbursing providers for the same counts of each service VA medical centers provided in fiscal 1999. At six study sites, hypothetical payments were more than 20 percent greater than actual budgets. Nationally, this represented more than $3 billion in 1999 and more than $5 billion in 2003. Data limitations suggest the estimate is conservative. Less than half of the difference is due to VA’s low pharmacy costs. The study demonstrates the potential savings to patients and taxpayers of the VA health care system.