Private-sector hospitals and health plans soon may be competing with the Department of Veterans Affairs for some Medicare-eligible veterans under legislation the Clinton administration has sent to Congress.
The legislation authorizes an experiment under which Medicare would pay some VA hospitals for treating Medicare-eligible veterans who are not entitled to VA care.
VA officials and veterans groups said the project will save the Medicare Hospital Insurance Trust Fund money because care provided by the VA will be less expensive than that furnished by private providers.
The legislation reprises provisions in national healthcare reform legislation that President Clinton introduced in 1993. It would permit up to eight of the VA's 173 hospitals, or four hospitals and one of the VA's 22 healthcare networks, to receive Medicare payment for caring for Medicare-eligible veterans not entitled to VA care under the department's disability or income criteria.
The only veterans currently entitled to care in the $16.6 billion VA healthcare system are those who are poor or suffer from disabilities from their time in the military.
Those not entitled to care are eligible for treatment when space and resources are available, but they must pay coinsurance. And if those nonentitled veterans are Medicare-eligible, Medicare cannot pay for the care at VA facilities.
The legislation proposes that for nonentitled, Medicare-eligible veterans, Medicare pay VA hospitals 95% or less of what private providers receive for the same services. Such a provision could blunt criticism that allowing Medicare to reimburse the VA would increase Medicare spending.
The project would establish two payment methods: one based on Medicare fee-for-service rates, the other on capitation rates paid to Medicare HMOs.
To carry out the project, the legislation authorizes the VA to establish managed-care plans with a minimum benefit package that at least matches Medicare benefits.
The VA also would be permitted to market its health plans, including even paid advertising, to attract veterans eligible for VA care under the plan. Such a proposal could displease private-sector providers.
But HCFA officials said the potential for such friction with private providers was one reason to have a limited demonstration project.
"One of the things we're interested in is what effect this will have on the local healthcare sector," said Joel Slackman, with HCFA's special analysis staff.
Veterans groups said the demonstration will show that VA hospitals can woo veterans who now use their Medicare benefits to pay for care at private hospitals and healthcare clinics, while at the same time saving money for the now-dwindling Medicare trust fund.
"We think it is going to demonstrate that veterans are going to turn to the VA healthcare system," said Dennis Cullinan, deputy director of the Veterans of Foreign Wars' national legislative service.
"There's little doubt in my mind that VA couldn't provide a certain service for less cost than a private provider," Cullinan said.
Congressional officials overseeing the Medicare program have opposed Medicare reimbursement to VA. But veterans groups argue the VA has subsidized Medicare by treating the nonentitled, Medicare-eligible veterans when they can, as well as providing educational opportunities for medical residents without receiving the Medicare graduate medical education payments that private providers receive.
"We've always contended that Medicare would be paying bills for these veterans anyway," said Richard Fuller, director of health policy program development with Paralyzed Veterans of America. "The VA has subsidized Medicare to the tune of billions of dollars over the past number of years. It's not unreasonable to ask for equity."
"(HCFA officials') primary interest is if we can, in fact, provide service at a lower cost," said Kenneth Kizer, M.D., the VA's undersecretary for health. "I feel really good that we can."
Carmela Coyle, vice president for policy at the American Hospital Association, acknowledged that the program could save Medicare dollars.
But she also cautioned that it could create a new drain on the hospital insurance trust fund.
Care previously paid for out of the VA budget would now be paid for by Medicare. "We should watch this very, very closely and see what we can learn," Coyle said.
The legislation, however, attempts to address that concern by requiring that hospitals participating in the demonstration continue to care for some nonentitled veterans out of appropriated funds.
As a payer, the VA already has embraced the use of Medicare hospital and physician rates when it contracts with private providers in instances in which the VA can't provide a service or when its facilities are too far from a veteran needing care.
Medicare is projected to spend $195.8 billion in fiscal 1996 to care for more than 37 million senior citizens.