Evaluating Cost for Veterans Health Care
Gary N. Nugent MHCA BS
VA Medical Center
Omaha, NE
Funding Period: July 1998 - February 2002

BACKGROUND/RATIONALE:
Vouchering VA health care is frequently offered by critics as a means to reduce U.S. health spending and improve quality and access for veterans. This project asked the question, "What would it cost to provide the same healthcare benefits as the VA using Medicare as the surrogate payor?" Implications are important to policymakers interested in national health care expenditures.

OBJECTIVE(S):
To identify and quantify all VA services and price them under a Medicare or surrogate payment strategy. The hypothesis is that total VA budgets are less than the expenditures for those same services under a payment system similar to Medicare.

METHODS:
All patient care at six VA medical centers, provided October 1, 1998 through September 30, 1999 was processed according to approved payment criteria and compared to costs in VA’s CDR, reconfigured to reflect Medicare cost categories.

FINDINGS/RESULTS:
The market value for VA services at the study sites in FY 1999 was $974 million, 21 percent greater than VA’s cost of $806 million. Nationally, VA’s costs were $18.8 billion; estimated market value, $22 billion. The greatest estimated savings were for pharmacy and special programs. Expanding patients’ access to care by using private sector health care providers would cost U.S. taxpayers at least 20 percent more than the current VA medical care budget. The estimate is conservative because VA provides a richer benefit package at lower cost than U.S. veterans could get under current Medicare regulations if VA were to buy in to its program. U.S. medical education would also have to be restructured to accommodate the 9 percent of medical residents trained in VA facilities. Coding accuracy at the six VA sites, for billing purposes, was equivalent to private sector in inpatient, outpatient and nursing home care.

IMPACT:
Findings and results have been incorporated into national information technology initiatives. Comparison of costs allows policymakers to examine services with the greatest potential public liability under a voucher system. Overall results apply to evaluations of other public health care systems.

PUBLICATIONS:

Journal Articles

1. Hendricks A, Whitford J, Nugent G. What would VA nursing home care cost? Methods for estimating private sector payments. Medical Care. 2003; 41(6 Suppl): II52-60.
2. Hendricks A, Whitford J, Nugent LB. Estimating private sector payments for VA specialized inpatient care. Medical Care. 2003; 41(6 Suppl): II43-51.
3. Hendricks AM, Lotchin TR, Hutterer J, Swanson J, Kenneally K. Evaluating VA patient-level expenditures: decision support system estimates and Medicare rates. Medical Care. 2003; 41(6 Suppl): II111-7.
4. Nugent G, Grippen G, Parris YC, Mitchell M. Using the cost distribution report in estimating private sector payments: what adjustments should researchers make? Medical Care. 2003; 41(6 Suppl): II80-90.
5. Nugent G, Hendricks A. Estimating private sector values for VA health care: an overview. Medical Care. 2003; 41(6 Suppl): II2-10.
6. Nugent GN, Roselle G, Nugent LB, Render ML. Methods to determine private sector payment for VA outpatient services: institutional payments to providers. Medical Care. 2003; 41(6 Suppl): II33-42.
7. Render ML, Roselle G, Franchi E, Nugent LB. Methods for estimating private sector payments for VA acute inpatient stays. Medical Care. 2003; 41(6 Suppl): II11-22.
8. Render ML, Taylor P, Plunkett J, Nugent GN. Methods to estimate and compare VA expenditures for assistive devices to Medicare payments. Medical Care. 2003; 41(6 Suppl): II70-9.
9. Roselle G, Render ML, Nugent LB, Nugent GN. Estimating private sector professional fees for VA providers. Medical Care. 2003; 41(6 Suppl): II23-32.
10. Rosen AK, Loveland S, Anderson JJ. Applying diagnostic cost groups to examine the disease burden of VA facilities: comparing the six "Evaluating VA Costs" study sites with other VA sites and Medicare. Medical Care. 2003; 41(6 Suppl): II91-102.
11. Shen Y. Applying the 3M All Patient Refined Diagnosis Related Groups Grouper to measure inpatient severity in the VA. Medical Care. 2003; 41(6 Suppl): II103-10.
12. Nugent G, Franchi E, Nugent L, Schehr S, Rodriguez A, Nadeja C. Third party billing in the VHA: A look at cost and policy. Federal Practitioner. 2000; 11: 31-41.

DRA: Aging and Age-Related Changes, Health Services and Systems
DRE: Resource Use and Cost
Keywords: Cost, Organizational issues, VA/non-VA comparisons
MeSH Terms: none