Debate over privatizing healthcare services under the Department of Veterans Affairs is nearing a boiling point as President Donald Trump's VA secretary-nominee prepares for a Senate confirmation grilling.
The spark was Trump's firing of David Shulkin, who has since warned loudly that the administration is heading down the privatization road.
A confirmation hearing for the nominee, White House physician Ronny Jackson, is not yet set.
Privatization conversations ramped up in 2014, when the Veterans Health Administration was embroiled in a high-profile negligence scandal after several high-level officials were found falsifying data about patient wait times.
The controversy gave way for the rise of hardline privatization advocacy organizations such as Concerned Veterans for America, funded by Republican donors Charles and David Koch, which pushed for privatizing much of the VA's healthcare services as opposed to reinvesting in the department.
With uncertainty surrounding the future of the VA and potential changes to the ways in which veterans' healthcare services are delivered on the horizon, here are five things to know about potential VA privatization.
1. The state of healthcare in the VA
Widespread privatization would be an ambitious undertaking: The VA oversees 145 hospitals, 300 veterans’ centers and over 1,200 outpatient facilities. As of 2016, the department had more than 377,800 employees, making it the second-largest federal agency.
The U.S. is home to about 22 million veterans, and about 9 million of them are enrolled in the VA. All have varying healthcare needs and geographic differences that impact their access to that care.
"We're getting into a political fight over one-third of the veteran population," Rory Riley, a consultant for veterans organizations such as the National Organization of Veterans' Advocates, told Healthcare Dive. "It's hard to lump them all into one category. One size doesn't fit all."
Many are already getting most of their care through the private sector. A 2014 Congressional Budget Office report comparing private sector and VA healthcare costs found about 70% of veterans enrolled in the VHA system already receive most of their care outside the system.
Bob McDonald, VA secretary under President Barack Obama, cited a higher figure in 2016, saying the average veteran uses the VA for just 34% of their care.
"If that 34% becomes 35%, we need a $1.4 billion increase in budget," he told Fortune in 2016.
The $1.3 trillion omnibus spending bill signed by Trump last month includes about $185 billion in Veterans Affairs funding, though not all goes to care. The bill also left out funding for one VA program that allows veterans to get care through the private sector.
2. What's currently privatized
The Veterans Choice Program was created through the Veterans Access, Choice and Accountability Act, a bipartisan bill signed by Obama in 2014 in response to the wait time scandal. The program, offered through the Office of Community Care, allows veterans the option of receiving care from the private sector if they live more than 40 miles driving distance from a VA facility, or if they have to wait more than 30 days to get an appointment.
The program was originally intended as a pilot that would last two years, and it has faced funding difficulties as it has been extended. In December, Congress approved $2.1 billion for the program, but Shulkin warned before his departure that the program would run out of money by early June.
The $1.3 trillion spending bill did not include funding for Choice. As a result, TriWest, one of two private insurers contracting with the VA to manage the networks for eligible veterans, is preparing to lay off up to 25% of its workforce, about 700 people. The other payer, Health Net Federal, will not get a renewed contract after September.
Republicans back expanding the Choice program to give more veterans the option of getting care through the private sector. Democrats argueexpanding the program would give way to widespread privatization of the agency altogether.
"Rural people may not live close to a VA or private care provider," Riley said. "For them, the consideration is different from someone in New York City who wants to get the best care no matter where it is."
A 2016 RAND report found that veterans relying most on VA care tend to be younger, poorer and to live in rural areas where they lack healthcare from other sources. However, only 25% of veterans live within an hour of a VA medical facility, and access to specialized services is even slimmer. Some 43% of veterans live within 40 miles of VA interventional cardiology services and 55% of veterans live within 40 miles of VA oncology services.
Maggie Elehwany, government affairs and policy vice president at the National Rural Health Association, told Healthcare Dive that the organization is "very pleased" to have a better working relationship with the VA through the Choice program, but "there's still so much to be desired."
The 40-mile mandate, for example, includes Community-Based Outpatient Clinics, which often don't offer specialized services, especially in rural America.
"The VA system can be wonderful, and it offers some of the best specialized care ... but we need to get veterans the ability to better access care in rural areas. They should have the choice to see their local provider," Elehwany said. "When they have been able to access care at a local provider, it's been cumbersome and difficult for the provider to get reimbursement."
The RAND report concludes that Congress "may need to revise VA's authority to purchase outside care" to mitigate barriers to access.
Most hospital groups haven't taken a firm stance on privatization. AHA was not able to comment for this story.
NRHA, according to Elehwany, is a proponent of "hybrid privatization" that gives veterans more options through programs like Choice.
3. Is private sector care better or cheaper? Poor data collection is a barrier.
Inadequate data collection has made it difficult for analysts to determine which type of care has served veterans better. Subsequently, studies on private sector and VA costs are lacking.
The 2014 CBO analysis, which is based on old and sparse research itself, notes that by 2000, only two studies had attempted to calculate the costs of services VHA provided using private sector rates, each of which were limited in scope. Those studies estimated that VHA’s inpatient care cost was about 10% less than comparable services in the private sector.
Another study published in 2009 compared spending between VHA and estimated costs for comparable services in the private sector and found VHA's costs to be "considerably higher." The CBO notes that that study, too, is "relatively weak."
"Comparing health care costs in the VHA system and the private sector is difficult partly because the Department of Veterans Affairs, which runs VHA, has provided limited data to the Congress and the public about its costs and operational performance," the authors noted in 2014.
A CBO spokeswoman told Healthcare Dive the agency doesn't have additional information or context to provide since the report was published. The authors "don't have anything further to offer regarding more current comparisons or findings," she said.
"The VA is notoriously not good at keeping track of its own data," Riley said. That has a direct impact on policy.
According to a National Academies of Practice evaluation of the VA's mental health services published in January, the VA has "not yet operationalized a comprehensive system for collecting health outcome data with standardized patient-reported outcome measures," making it difficult to assess whether or not care, especially specialized care for veterans, is better provided by the VA or in the private sector.
4. Most veterans groups like the VA health system, despite its problems
Aside from the Koch-backed group, most veteran groups largely support VA care.
"From our perspective, the VA is the best place for veterans with polytrauma, veterans who need prosthetics, veterans who need comprehensive care for especially battlefield injuries," said Joe Plenzler, director of media relations at advocacy organization American Legion.
A VFW report published last year found that 92% of veterans preferred fixing the VA's deficiencies over dismantling the system or a universal healthcare card that would allow them to see any private provider, an idea Trump campaigned on.
The Koch-backed Concerned Veterans of America has been lobbying for making the VA health system a nonprofit contracted by the government. Opponents say that level of privatization places profits over people.
“I am convinced that privatization is a political issue aimed at rewarding select people and companies with profits, even if it undermines care for veterans," Shulkin wrote in his post-resignation New York Times op-ed.
"There are many things I think the private sector does well," Riley said. "If they were given the opportunity to compete, they'd be able to do it as well if not better than what the VA currently provides."
Rep. Phil Roe, R-TN, chairman of the House Committee on Veterans Affairs, said as much at a committee hearing last year, stressing the need to give veterans options while preserving the VA's place as their "central coordinator for care."
The VA denied privatization efforts in a statement earlier this month, saying "to suggest otherwise is completely false and a red herring designed to distract and avoid honest debate on the real issues surrounding veterans' health care."
But there is an effort in Congress to push further down the privatization route. Sen. Jerry Moran, R-KS, has argued for weaning veterans off the Choice program and touted his own bill with Sen. John McCain, R-AZ, that would give more veterans the option of choosing where to receive care through a revamped program.
Moran, whose campaigns have been funded by the Kochs, has denied that the bill gives way for privatization.
"Proposals to reform and consolidate community care were fully supported and endorsed by those who now want to call it privatization,” Moran wrote in an op-ed earlier this month.
5. The private sector may not be ready for wholesale privatization
According to RAND research, about 31% of Iraq and Afghanistan veterans suffer from a mental health condition or have reported experiencing a traumatic brain injury.
The National Academies of Practice found the VA's ability to provide high-quality mental health care consistently to be "an ongoing challenge," with progress stifled by staffing, infrastructure and scheduling. However, the study found a majority of Operation Enduring Freedom, Iraqi Freedom and New Dawn era veterans reported "positive aspects" of experiences with the VA's mental health services.
When RAND surveyed New York state providers' readiness to accept veterans as patients earlier this year, they found that of the 92% of providers accepting new patients, only 2.3% met criteria for efficiently serving veterans. Of the providers surveyed, mental health professionals were the least likely to participate in VA Community Care.
Shulkin, who served as a executive for providers like Beth Israel Medical Center in New York City and Morristown Medical Center in New Jersey before being appointed VA secretary, argues that the private sector is "ill-prepared to handle the number and complexity of patients" that would require their services if VA facilities were shuttered or downsized, "particularly when it involves the mental health needs of people scarred by the horrors of war."
Some experts say physician burnout, already a potential problem, will become exacerbated by moving more VA services into the private sector. In a testimony delivered to the House Committee on Veterans Affairs in 2014, the AHA voiced hesitation over taking on more patients without receiving special protections as contractors.
Aside from headaches stemming from pre-clearance permissions, obligations that the Department of Labor’s Office of Federal Contract Compliance Programs imposes on federal contractors "will only add to hospitals' costs and frustration without enhancing protections against discrimination," the AHA said.
An earlier version of the omnibus bill included a mandate for promptly paying private providers in the Choice Program. With the future of the program in flux, the private sector's place in veterans care is still to be determined.
Riley said the issue has become unnecessarily polarized.
"People are treating this as an all-or-nothing proposition. Either invest in the VA or send all the vets out to the private sector," she said. "I don't think it has to be that. It's not black and white. We need to have a more nuanced discussion."
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