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Comparing the Costs of the Veterans' Health Care System with Private-Sector Costs 1 (December 2014)

handle is hein.congrec/cbo2018 and id is 1 raw text is: DECEMBER 2014 Comparing the Costs of the Veterans' Health Care System With Private-Sector Costs Summary Legislation enacted in 2014 calls for the Veterans Health Administration (VHA) to expand the availability of health care to eligible veterans. That legislation provided temporary funding to expand VHAs capacity to deliver care and to increase the amount of care purchased from the private sector. The Congressional Budget Office (CBO) has conducted a limited examination of how the costs of health care pro- vided by VHA compare with the costs of care provided in the private sector. Although the structure of VHA and published studies suggest that VHA care has been cheaper than care provided by the private sector, limited evidence and substantial uncertainty make it difficult to reach firm conclusions about those relative costs or about whether it would be cheaper to expand veterans access to health care in the future through VHA facilities or the private sector. Uncertainty about relative costs in the future is compounded by uncertainty about how VHA would structure contracts with private-sector providers. This report briefly describes some of the features that dis- tinguish the health care system run by VHA from health care provided in the private sector. It also examines the available evidence about the relative costs of VHA and private-sector care and explores possible reasons why costs might differ in the two settings and why they can be diffi- cult to compare. Finally, CBO briefly considers some factors that could influence the cost-effectiveness of alter- native means of expanding health care services te veterans in the future. What Has Previous Research Concluded? Distinctive features of the VHA system-such as its mission, mix ofenrollees, and financing mechanism- complicate cost comparisons with other sources of health care. One useful analytic approach, which was most carefully and comprehensively employed by researchers in 2004, estimates what costs would be if private-sector doctors, hospitals, and other health care providers sup- plied the same number and types of services as those actually delivered by VHA. Similar to earlier studies, those researchers concluded that the health care provided by VHA generally cost less than would equivalent care provided in the private sector, even though the compari- son used Medicare's relatively low payment rates for private-sector doctors and hospitals. How Applicable Are Previous Findings Now? Whether such findings can be extrapolated to the present is uncertain, for several reasons. The limited number of comprehensive studies that have been done and the com- plexity of the research methods contribute to uncertainty about their conclusions. In addition, previous research has generally relied on cost information from 1999 or earlier, but changes since then in the VHA system and the health care sector as a whole could produce different results today. Such differences could go in either direc- tion, which increases the range of uncertainty. Another complication is that past studies do not fully explain why VHA care might be less expensive than private-sector care-making it hard to tell whether the same considerations apply now-and do not address whether patients would get the same amount and mix of services in both systems. More broadly, cost comparisons

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