VA Health Care: Retargeting Needed to Better Meet Veterans' Changing
Needs (Chapter Report, 04/21/95, GAO/HEHS-95-39).

Many veterans have health care needs that are not adequately met through
current health care programs, including the Department of Veterans
Affairs' (VA) health care system.  About one-third of the nation's
homeless are veterans, nearly one-half of whom have serious mental
problems, suffer from substance abuse, or both. The homeless have
limited access to health care services and may not seek medical
treatment.  About 38 percent of male and 25 percent of female Vietnam
veterans with Post Traumatic Stress Disorder have not sought treatment.
About 91,000 low-income, uninsured veterans with no apparent health care
options indicated in a 1987 VA survey that they had never used VA health
facilities because they were unaware that they were eligible or they had
concerns about the quality or accessibility of VA health care. VA cannot
adequately address many of these health care needs because (1) it relies
primarily on direct delivery of health care services in VA facilities,
(2) its complex eligibility and entitlement provisions limit the
services that veterans can obtain from VA facilities, and (3) space and
resource limitations prevent eligible veterans from obtaining covered
services.  This report presents several options for restructuring VA's
health care system to enable it to better meet the health care needs of
veterans.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-95-39
     TITLE:  VA Health Care: Retargeting Needed to Better Meet Veterans' 
             Changing Needs
      DATE:  04/21/95
   SUBJECT:  Veterans benefits
             Health care services
             Veterans hospitals
             Health insurance
             Health services administration
             Homelessness
             Disadvantaged persons
             Long-term care
             Eligibility criteria
             Health care planning
IDENTIFIER:  Medicare Program
             Medicaid Program
             CHAMPUS
             Civilian Health and Medical Program of the Uniformed 
             Services
             Federal Employees Health Benefits Program
             Blue Cross-Blue Shield Benefits Insurance Plan
             DOD TRICARE Program
             TennCare
             VA Homeless Chronically Mentally Ill Veterans Program
             VA 1987 Survey of Veterans
             VA Veterans Integrated Service Network
             National Vietnam Veterans Readjustment Study
             Health Security Act
             VA Decision Support System
             Clinton Health Care Plan
             National Health Care Reform Initiative
             
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Cover
================================================================ COVER


Report to Congressional Requesters

April 1995

VA HEALTH CARE - RETARGETING
NEEDED TO BETTER MEET VETERANS'
CHANGING NEEDS

GAO/HEHS-95-39

Veterans' Health Care Needs


Abbreviations
=============================================================== ABBREV

  CHAMPUS - Civilian Health and Medical Program of the Uniformed
     Services
  DOD - Department of Defense
  DRG - Diagnostic Related Groupings
  DSS - Decision Support System
  FY - fiscal year
  HCFA - Health Care Financing Administration
  HCMI - Homeless Chronically Mentally Ill program
  HMO - health maintenance organization
  JCAHO - Joint Commission on the Accreditation of Healthcare
     Organizations
  PTSD - post traumatic stress disorder
  RPM - Resource Planning Methodology
  VA - Department of Veterans Affairs
  VHA - Veterans Health Administration
  VISN - Veterans Integrated Service Network

Letter
=============================================================== LETTER


B-254064

April 21, 1995

The Honorable Frank H.  Murkowski
United States Senate

The Honorable Lane Evans
House of Representatives

This report provides information on (1) how well existing public and
private health benefits programs and the Department of Veterans
Affairs (VA) health care system are meeting the health care needs of
veterans, (2) why most veterans have never used VA health care
services, (3) whether the VA health care system is structured to
enable VA to best meet the needs of veterans, and (4) what options
are available for reconfiguring the VA health care system to better
meet veterans' needs. 

This report was prepared under the direction of James Linz, Assistant
Director, Federal Health Care Delivery Issues, who may be reached at
(202) 512-7116 if you have any questions concerning the report. 
Other major contributors are listed in appendix III. 

David P.  Baine
Director, Federal Health Care
 Delivery Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

The Department of Veterans Affairs (VA) has a $16 billion health care
budget.  It faces increasing pressures to contain or reduce health
care spending as part of governmentwide efforts to reduce the budget
deficit.  VA's health care system also faces increasing challenges
from a changing health care marketplace.  First, changes in the
availability of public and private health insurance can have
significant effects on veterans' demand for VA health care services. 
Second, the veteran population is aging and declining, causing
increasing demand for long-term care services and decreasing demand
for acute hospital care.  Finally, cost-containment measures in other
public and private health benefits programs that limit beneficiaries'
choice of providers, increase cost sharing, or limit covered services
could affect future demand for VA care and the types of services that
veterans seek from VA. 

Senator Frank H.  Murkowski and Representative Lane Evans asked GAO
to determine whether veterans' health care needs are being adequately
addressed in this fast changing health care marketplace.  In doing
so, GAO determined

  how well existing public and private health benefits programs and
     the VA health care system are meeting the health care needs of
     veterans,

  why most veterans have never used VA health care services,

  whether the VA health care system is structured to enable VA to
     best meet the needs of veterans, and

  what options are available for reconfiguring the VA health care
     system to better meet veterans' needs. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

The veterans' health care system was originally established primarily
to treat war-related injuries and help rehabilitate veterans with
such service-connected disabilities as blindness, paralysis, and loss
of limb.  VA became a national leader in such fields as blind
rehabilitation, prosthetics, and treatment of spinal cord injury.  It
also grew into the nation's largest direct delivery system with 171
hospitals, 182 independent outpatient clinics, 128 nursing homes, and
38 domiciliaries. 

Gradually, VA shifted from a system that provided treatment primarily
for service-connected disabilities to a system focusing primarily on
treatment of low-income veterans with no service-connected
disabilities.  In 1991, about 2.2 million veterans made more than 20
million outpatient visits to VA health care facilities and had more
than 970,000 hospital stays.  Of these veterans, about 1 million had
service-connected disabilities and 1.2 million had no disabling
conditions relating to military service.  Even the service-connected
veterans, however, obtained treatments primarily for conditions
unrelated to their service-connected disabilities. 

Significant changes have occurred in health coverage in the 60 years
following the establishment of VA's direct delivery system.  The
availability of private health insurance emerged and public health
benefits programs such as Medicare, Medicaid, and the Civilian Health
and Medical Program of the Uniformed Services (CHAMPUS) were
established to help selected groups such as the elderly, low-income,
and military retirees and dependents pay for health care services. 

Such changes can have unforeseen repercussions.  For example,
decreases in the availability of private health insurance could
increase demand for VA care.  On the other hand, state or nationwide
health reforms that would decrease the number of uninsured could
decrease demand for VA care.  In addition, barring a build up of
military forces, the number of veterans will decrease by about 50
percent between 1990 and 2040.  Consistent with this trend and other
factors, such as the movement toward ambulatory care, VA acute care
hospital discharges dropped about 13 percent between 1988 and 1992. 
Such declines suggest that VA will have to either (1) capture a
steadily increasing marketshare of the veteran population or (2)
expand treatment to nonveterans if it is to maintain utilization at
VA hospitals. 

Dramatic changes are occurring in both private and public health
insurance programs that could make it even more difficult for VA to
maintain its acute care system.  These changes affect where health
care services are provided, how their appropriateness is ensured, and
how they are paid for.  Among the most significant trends in other
health care programs is the move toward managed care.\1 Consistent
with this trend and in an effort to strengthen its competitive
position, VA is already moving toward a managed care system. 


--------------------
\1 The term managed care applies broadly to any system of health care
delivery that influences the utilization and cost of services and
measures performance of the system and its providers.  Important
elements of managed care include utilization review, case management,
provider contracting, and information technology. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

Many veterans have health care needs that are not adequately
addressed through current health care programs, including the VA
health care system.  For example: 

  About one-third of the nation's homeless are veterans, nearly
     one-half of whom have serious mental illnesses, suffer from
     substance abuse, or both.  The homeless have limited access to
     health care services and may not seek medical treatment. 

  About 38 percent of male and 25 percent of female Vietnam veterans
     with Post Traumatic Stress Disorder (PTSD) have not sought
     treatment from either VA or non-VA medical facilities.\2

  About 191,000 low-income, uninsured veterans with no apparent
     health care options indicated in a 1987 VA survey that they had
     never used VA health care facilities because they were not aware
     that they were eligible for VA care or they had concerns about
     the quality or accessibility of VA health care.\3

VA cannot adequately address many of these health care needs because
(1) it relies primarily on direct delivery of health care services in
VA-owned and VA-operated facilities, (2) its complex eligibility and
entitlement provisions limit the services veterans can get from VA
facilities, and (3) space and resource limitations prevent eligible
veterans from obtaining covered services. 

In GAO's view, changes need to be made in the veterans' health care
system to enable it to better meet veterans' health care needs.  To
make optimum use of limited health care resources, such changes would
need to be designed to complement rather than duplicate coverage
provided through other public and private health benefits programs. 
VA's plans for restructuring the VA health care system, however,
focus primarily on preserving and expanding VA's acute care mission
rather than retargeting VA programs and resources to enable VA to
fill the gaps in veterans' coverage under other public and private
health benefits programs.  GAO presents several options for
restructuring VA's health care system to enable it to better meet the
health care needs of veterans. 


--------------------
\2 PTSD refers to such symptoms as nightmares, intrusive
recollections or memories, flashbacks, anxiety, or sudden reactions
after exposure to traumatic conditions. 

\3 VA contracted with a private firm to conduct a new survey of
veterans, but data were not available when we completed our analysis. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      PUBLIC AND PRIVATE HEALTH
      INSURANCE PROGRAMS DO NOT
      MEET ALL VETERANS' NEEDS
-------------------------------------------------------- Chapter 0:4.1

Public and private health insurance programs do not--and cannot be
expected to--meet all of the health care needs of veterans.  About
2.6 million of the nation's veterans have neither public nor private
health insurance to help pay for basic health care items and
services.  This includes about one-third of the country's homeless. 
Nearly one-half of the homeless have serious mental illnesses, suffer
from substance abuse, or both. 

Even veterans with public or private insurance can have unmet health
care needs.  For example, they may have undiagnosed or untreated
problems with substance abuse or mental illness.  Fewer than 15
percent of the estimated 18 million Americans with alcoholism receive
treatment.  Similarly, alcoholism is a frequently undiagnosed and
untreated health problem of veterans using VA medical centers. 

Unmet needs can also arise if high out-of-pocket costs limit access
to needed health care services.  Out-of-pocket costs can arise from
health insurance premiums, copayments and deductibles, charges above
approved rates, and charges for noncovered services or services that
exceed coverage limits. 


      MANY LOW-INCOME AND
      UNINSURED VETERANS HAVE
      NEVER USED VA SERVICES
-------------------------------------------------------- Chapter 0:4.2

GAO's analysis of VA's 1987 Survey of Veterans identified about
855,000 low-income and uninsured veterans who indicated that they had
never used VA health care services.  About 191,000 of these veterans
identified no other health care options available to them but
indicated that they had not used VA because they were not aware that
they were eligible for VA care or because of concerns about the
accessibility or quality of VA health care.\5 Of the 191,000, only
about 10,000 indicated that they had never needed health care. 


--------------------
\5 The remaining veterans did not indicate why they had not used VA
health care services. 


      STRUCTURE OF VA HEALTH CARE
      SYSTEM LIMITS ITS ABILITY TO
      MEET VETERANS' NEEDS
-------------------------------------------------------- Chapter 0:4.3

The structure of the VA health care system limits VA's ability to
meet veterans' health care needs.  First, its reliance on direct
delivery of health care services rather than financing of health care
services provided by private physicians and facilities limits the
accessibility of VA health care services.  Second, the complex
eligibility and entitlement provisions in title 38 of the U.S.  Code
restrict veterans' access to many VA health care services.  This is
particularly true for outpatient care; most veterans are limited to
receiving services to prepare for, obviate the need for, or as a
followup to hospital care. 

Finally, specialized services are frequently unavailable because of
the lack of space or resources.  For example, waiting lists for
inpatient PTSD treatment have averaged between 900 and 1,000 for the
past 3 years. 


      MOST VETERANS USING VA
      FACILITIES HAVE OTHER HEALTH
      CARE OPTIONS
-------------------------------------------------------- Chapter 0:4.4

About 58 percent of veterans who used VA health care facilities in
1990 also had coverage under one or more public or private health
benefits programs.  For example, 47 percent of VA users were
Medicare-eligible and 12 percent were eligible for treatment under
CHAMPUS, in Department of Defense (DOD) health care facilities, or
both.  In addition, 33 percent of VA users reported having private
health insurance coverage. 


      VA RESTRUCTURING EFFORTS
      NEED TO FOCUS ON VETERANS'
      HEALTH CARE NEEDS
-------------------------------------------------------- Chapter 0:4.5

VA's restructuring efforts focus primarily on preserving or expanding
VA's direct care system rather than on how to better meet the
changing health care needs of veterans.  For example, VA is
developing plans to test the use of full-service health care plans in
states that implement health reforms.  Under such plans, most VA
resources would be directed toward duplicating coverages that
veterans would have under other health plans, essentially shifting
costs from public and private programs to VA.  With limited
resources, it may be more cost effective for VA to focus on providing
services to uninsured veterans in states that have not implemented
major health reforms aimed at reducing the number of uninsured or to
provide or pay for services not covered under such state reform
programs.  By taking advantage of veterans' alternative coverage, VA
could provide veterans more extensive health care coverage with
available resources. 

Among the options that could be explored for improving VA's ability
to fulfill its safety net mission in states not implementing health
reforms are expanding VA's current fee basis program;\5 expanding an
existing federal health care program, such as Medicare or CHAMPUS; or
authorizing veterans to enroll in the Federal Employees Health
Benefits Program.  Changes in eligibility for VA care should be an
integral part of any such changes. 

There are also restructuring options that could be considered in
states that implement health reforms.  For example, VA acute care
resources could be retargeted to (1) increase outreach to homeless
veterans; (2) expand services for substance abuse treatment and
mental health counseling not extensively covered under the state
program; (3) identify and treat more veterans with PTSD; (4) expand
health benefits not covered under the state program; or (5) expand
long-term care services.  Other options for financing increased
long-term care services are estate recoveries and greater beneficiary
cost-sharing. 


--------------------
\5 The fee-basis program enables certain veterans, primarily those
with service-connected disabilities, to get care from non-VA
providers at VA expense if VA facilities are geographically
inaccessible or unable to provide the needed service. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

In light of current efforts to reduce the budget deficit while
improving health services, GAO recommends among other things that the
Secretary of Veterans Affairs, in concert with veterans service
organizations and other federal and state agencies with jurisdiction
over health benefits programs, (1) identify and evaluate options to
better target VA resources to meet the health care needs of veterans
and (2) develop legislative proposals to restructure the veterans
health benefits program. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6

VA did not agree with GAO's recommendations and said that they would
result in the dismantling of VA's patient care and other missions. 
VA questioned the accuracy and appropriateness of much of the data
presented in the report.  While GAO agrees that its recommendations
could result in significant changes in VA's direct patient care
mission, they would strengthen VA's role in ensuring that veterans'
health care needs are met either through VA or other programs. 

VA's comments about the accuracy and appropriateness of the report
data are unfounded.  For example, VA said that factual errors exist
in the discussion of eligibility, but VA officials with whom GAO
followed up could cite no examples.  In other criticisms, VA
attributed GAO's analyses to the wrong source when the source was
clearly indicated in the report, and took issue with a statement that
does not appear in the report.  (See pages 50 to 54 and app.  II.)


INTRODUCTION
============================================================ Chapter 1


   BACKGROUND
---------------------------------------------------------- Chapter 1:1

The Department of Veterans Affairs health care system was originally
established primarily to treat war-related injuries and help
rehabilitate veterans with such service-connected disabilities as
blindness, paralysis, and loss of limb.  Because the private sector
lacked the resources and expertise to treat large numbers of
returning war casualties, veterans hospitals were established to meet
the special care needs of America's veterans.  VA became a national
leader in such fields as blind rehabilitation, prosthetics, and
treatment of spinal cord injury.  It also grew into the nation's
largest direct delivery system with a $16 billion budget to maintain
and operate 171 hospitals, 182 independent outpatient clinics, 128
nursing homes, and 38 domiciliaries.\7

As war injuries healed, demand for acute care services declined and
the needs of service-connected veterans increasingly shifted from
treatment of the war injuries to treatment of the lingering effects
of those injuries.  Due in part to the declining demands for care by
service-connected veterans and in part to the limited public and
private insurance coverage available to low-income people, including
veterans, the Congress, over time, developed a second, safety net,
mission for VA.  VA would, to the extent space and resources remained
after meeting the health care needs of service-connected veterans,
provide hospital care to nonservice-connected veterans lacking the
resources to pay for such care from non-VA providers. 

Gradually, VA shifted from a system primarily providing treatment for
service-connected disabilities to a system primarily focusing on
treatment of nonservice-connected disabilities.  In 1991, about 2.2
million veterans made more than 20 million outpatient visits to VA
health care facilities and had more than 970,000 hospital stays.  Of
these veterans, about 1 million had service-connected disabilities
and 1.2 million had no disabling conditions relating to military
service.  Even the service-connected veterans, however, obtained
treatments primarily for conditions unrelated to their
service-connected disabilities. 

Significant changes have occurred in the availability of health
coverage in the 60 years following the establishment of VA's direct
delivery system.  Foremost among these changes has been the growth of
public and private health insurance programs.  Private health
insurance, virtually unknown at the time the VA system was created,
began to emerge with the creation of the first Blue Cross and Blue
Shield plans in the 1930s.  Similarly, public health benefits
programs were established to help selected groups pay for health care
services.  These programs include the Civilian Health and Medical
Program of the Uniformed Services, which covers military retirees and
their dependents and dependents of active duty military personnel;
Medicare, which covers most persons age 65 or older and certain
disabled persons under age 65; and Medicaid, which covers many
low-income persons.  With the growth of public and private insurance
programs, about 9 out of 10 veterans now have coverage under one or
more public or private health benefits programs in addition to their
VA health benefits.\8

When multiple health programs exist, changes in one program can have
unforeseen repercussions on the others.  For example, decreases in
the availability of private health insurance could increase demand
for VA care.  In recent years, the number of uninsured Americans has
steadily increased and, in 1993, an estimated 37 million were
uninsured.  On the other hand, health reforms in individual states or
nationwide that would decrease the number of uninsured could decrease
demand for VA care because veterans would not be as dependent on VA
for their care.  For example, under a universal health care program,
demand for VA hospital care could decrease by about 50 percent.\9

The availability of alternative health insurance, however, is not the
only factor that could decrease future demand for VA acute hospital
services.  Barring wars or a build up of military forces, the number
of veterans will decrease by about 50 percent between 1990 and 2040. 
Consistent with this trend and other factors, such as the movement
toward ambulatory care, VA acute care hospital discharges, which
increased steadily from 1984 to 1988, dropped about 13 percent
between 1988 and 1992.  Such declines suggest that VA will have to
either (1) capture a steadily increasing marketshare of the veteran
population or (2) expand treatment to nonveterans if it is to
maintain utilization at VA hospitals. 

Dramatic changes in both private and public health insurance programs
could make maintaining its acute care system even more difficult for
VA.  These changes affect where health care services are provided,
how the appropriateness of health care services is ensured, and how
beneficiaries pay for health care services.  Among the most
significant trends in other health care programs is the move toward
managed care. 

The term managed care applies broadly to any system of health care
delivery that influences the utilization and cost of services and
measures performance of the system and its providers.  The goal of
managed care is a health care system that delivers value by giving
people access to quality cost-effective health care.  Managed care
arrangements range from incorporating selected elements of managed
care--typically preadmission screening and utilization review--in
traditional fee-for-service health insurance plans to establishing
health maintenance organizations (HMO) or other capitated managed
health care plans.\10

Both the private sector and public health benefits programs are
increasingly moving toward managed care.  Enrollment in HMOs
increased from 9 million in 1982 to nearly 40 million in 1992. 
Similarly, many states, including Arizona, Oregon, California, and
Illinois, have turned to managed care to help control Medicaid
spending.  In addition, the Department of Defense is implementing a
nationwide managed care system--TRICARE--for military dependents and
retirees. 

Consistent with the trend toward managed care in other private and
public health benefits programs and in an effort to strengthen its
competitive position, VA is already moving toward a managed care
system.  For example, VA

  developed a new Resource Planning Methodology (RPM) that contains
     incentives for medical facilities to provide care in the most
     cost-effective setting;

  plans to reorganize its health care facilities into geographic
     networks, known as Veterans Integrated Service Networks (VISN),
     to trim unnecessary management layers, consolidate redundant
     medical services, and use available community services;

  is implementing a Decision Support System (DSS) that will provide
     data on patterns of care and patient outcomes as well as their
     resource and cost implications;

  is developing proposals to reform eligibility for VA care to enable
     VA facilities to provide care in the most cost-effective
     settings; and

  is developing pilot projects that would enable VA to participate
     under state health reform projects such as those planned in
     Washington and Minnesota. 

Washington state's Health Services Act of 1993 enacted a series of
reforms intended to provide universal coverage for all residents by
July 1999.  The act is based on managed competition with price
controls and would establish a uniform benefit package.  The plan's
reforms, which include employer mandates, health insurance purchasing
cooperatives, and expanded public programs, will be phased in over
several years. 

Tennessee inaugurated TennCare, a capitated managed care system
covering its Medicaid and uninsured populations, on January 1, 1994. 
Although veterans were initially excluded from the program because of
their VA eligibility, they can now enroll in TennCare if they meet
eligibility requirements.  An analysis of the TennCare plan by a
local VA medical center concluded that VA could lose a major portion
of its low-income workload. 

The future of these and other state reform efforts, like the
prospects for national health care reforms, is uncertain. 


--------------------
\7 Includes independent, satellite, community-based, rural outreach,
and mobile clinics.  Does not include outpatient clinics operated as
part of a medical center. 

\8 Veterans' Health Care:  Most Care Provided Through Non-VA Programs
(GAO/HEHS-94-104BR, Apr.  25, 1994). 

\9 VA Health Care:  Alternative Health Insurance Reduces Demand for
VA Health Care (GAO/HRD-92-79, June 30, 1992). 

\10 HMOs are entities that provide, offer, or arrange for coverage of
designated health services needed by plan members for a fixed,
prepaid premium. 


   SCOPE AND METHODOLOGY
---------------------------------------------------------- Chapter 1:2

Senator Frank H.  Murkowski and Representative Lane Evans asked us,
in separate requests, to determine whether veterans' health care
needs are being adequately addressed in the fast changing health care
marketplace.\11

To respond to the requests, we examined the following questions: 

  How well do public and private health insurance currently meet the
     health care needs of veterans? 

  Why have most veterans, including many whose health care needs are
     not met through other public or private health insurance
     programs, never used VA health care services? 

  Is the VA health care system structured to meet the needs of
     veterans unable to obtain all the health care services they need
     through other programs? 

  Are VA resources effectively targeted toward veterans with the
     greatest health care needs? 

To determine how well existing public and private health benefits
programs and VA address veterans' health care needs, we relied
primarily on published studies, including

  Report of the Commission on the Future Structure of Veterans Health
     Care (1991);

  Strategy 2000:  The VA Responsibility in Tomorrow's National Health
     Care System, (1992) prepared by the Paralyzed Veterans of
     America;

  Veterans Health Care:  Implications of Other Countries' Reforms for
     the United States (GAO/HEHS-94-210BR, Sept.  27, 1994);

  Health Security Act:  Analysis of Veterans' Health Care Provisions
     (GAO/HEHS-94-205FS, July 15, 1994); and

  VA Health Care:  Comparison of VA Benefits With Other Public and
     Private Programs (GAO/HRD-93-94, July 29, 1993). 

Data on veterans' use of the Department of Veterans Affairs were
obtained through analysis of VA's 1987 Survey of Veterans.  The
survey database contains the latest comprehensive data on veterans'
opinions and use of VA services.\12 We also used the survey to
estimate the number of veterans who have not used VA for health care
and the reasons why.  To determine potential veteran unmet health
needs we analyzed the survey data to determine what portion of
veterans not using VA lacked health insurance and indicated that they
chose not to use VA because they were not aware that they were
eligible for VA care or because they had concerns about the
accessibility or quality of care in VA health care facilities. 

We relied on prior GAO studies in determining whether (1) VA is
structured to meet the health care needs of veterans and (2) VA
resources are effectively targeted toward veterans with the greatest
health care needs.  (See the related GAO products section for a list
of relevant reports and testimonies.)

Our work was conducted between July 1993 and January 1995 in
accordance with generally accepted government auditing standards. 


--------------------
\11 Senator Murkowski was the Ranking Minority Member of the Senate
Committee on Veterans' Affairs and Representative Evans was the
Chairman of the Subcommittee on Oversight and Investigations, House
Committee on Veterans' Affairs at the time they made their requests. 

\12 The Census Bureau conducted the 1987 Survey of Veterans based on
its Current Population Survey, a monthly nationwide survey designed
to obtain information on the employment status and other
characteristics of the population.  Each month, one-eighth of the
households in the Current Population Survey are dropped from the
sample and replaced by new households.  Veterans who were rotated out
of the Current Population Survey between April 1986 and January 1987
were included in the 1987 Survey of Veterans.  A total of 11,439
veterans were sampled.  Among other things, the survey contains
information on the number of veterans, their employment status, their
health insurance coverage, and their reasons for not using VA health
care.  A VA contractor completed an independent study in 1989,
validating the survey methodology.

VA contracted with a private firm to conduct a new survey of
veterans.  The survey was recently completed; however, the results
were not available at the time we completed our audit work.  VA
officials said that the contractor who conducted the survey indicated
the results were not significantly different from the 1987 Survey of
Veterans. 


PUBLIC AND PRIVATE HEALTH
INSURANCE PROGRAMS DO NOT MEET ALL
HEALTH CARE NEEDS OF VETERANS
============================================================ Chapter 2

Public and private health insurance programs do not--and cannot be
expected to--meet all the health care needs of veterans.  Like other
uninsured Americans, the estimated 2.6 million uninsured veterans may
be unable to afford basic health care services for themselves and
their families.  But even those with public or private health
insurance or both can incur high out-of-pocket costs that force them
to delay or forego needed care.  In addition to premiums, copayments,
and deductibles, veterans can be liable for the full costs of health
care services that their insurance does not cover or that exceed the
limits of their coverage.  Still other veterans may have health
problems, such as substance abuse or PTSD, that are undiagnosed or
for which they have not sought treatment.  All these problems--lack
of insurance, high out-of-pocket costs, and substance abuse and other
mental health problems--make the estimated 150,000 to 250,000
homeless veterans a particularly vulnerable population. 


   ABOUT 2.6 MILLION VETERANS ARE
   UNINSURED
---------------------------------------------------------- Chapter 2:1

About 2.6 million veterans (about 9 percent of the veteran
population) had neither public nor private health insurance in 1990
to help pay for needed health care items and services.\13 Without a
demonstrated ability to pay for care, individuals' access to health
care is restricted, increasing their vulnerability to the
consequences of poor health.  Lacking insurance, people often
postpone obtaining care until their conditions become more serious
and require more costly medical services. 


--------------------
\13 See Veterans' Health Care (GAO/HEHS-94-104BR, Apr.  25, 1994). 


   SUBSTANCE ABUSE, PTSD PROBLEMS
   FREQUENTLY GO UNDIAGNOSED AND
   UNTREATED
---------------------------------------------------------- Chapter 2:2

Veterans, like the general public, can have undiagnosed and,
therefore, untreated health care conditions.  Two health problems
that frequently go untreated--substance abuse and PTSD--are
frequently related to military service. 

Substance abuse is a frequently overlooked health problem in the
United States despite its significant medical, economic, social, and
legal consequences.  For example, an estimated 18 million Americans
are either alcoholics or are problem drinkers, but fewer than 15
percent of them receive treatment.  Similarly, alcoholism is a
frequently undiagnosed and untreated health problem of veterans using
VA medical centers. 

In 1990, we surveyed veterans applying for care at five VA medical
centers during a 10-day period to determine the extent of alcoholism
among veterans.\14 Information obtained from 29 percent of the
veterans we surveyed strongly indicated that they had alcoholism.  An
additional 14 percent provided information that raised suspicions of
alcohol abuse problems.  The five medical centers provided alcohol
treatment to fewer than 3 percent of veterans applying for medical
care during fiscal year 1990. 

PTSD can have disruptive effects on family life, work, and leisure
activities.  Veterans with PTSD experience such symptoms as
nightmares, intrusive recollections or memories, flashbacks, anxiety,
or sudden reactions after exposure to traumatic conditions.  Although
PTSD is most commonly associated with Vietnam combat, it has also
been diagnosed in World War II and Korean Conflict veterans, and
among many of the medical personnel who served in Vietnam. 

In 1988, the National Vietnam Veterans Readjustment Study, a
comprehensive national epidemiological survey, reported that an
estimated 480,000 Vietnam veterans were suffering from PTSD.  The
study also reported that 38 percent of male veterans and 25 percent
of female veterans who served in Vietnam and have PTSD had not sought
mental health treatment from VA or from non-VA medical facilities. 


--------------------
\14 See VA Health Care:  Alcoholism Screening Procedures Should Be
Improved (GAO/HRD-91-71, Mar.  27, 1991). 


   MEDICARE AND PRIVATE HEALTH
   INSURANCE PROVIDE LIMITED
   COVERAGE OF LONG-TERM CARE
   SERVICES
---------------------------------------------------------- Chapter 2:3

Medicare and private insurance provide only limited coverage for
nursing home and long-term psychiatric care.  For example, skilled
nursing home care under both Medicare and private health insurance is
limited to short-term post-acute care.  Neither Medicare nor private
insurance offers intermediate nursing home care or custodial care.\15
As a result, veterans who need long-term care for chronic conditions
cannot obtain it through either Medicare or private insurance. 
Medicaid covers long-term nursing home care but requires individuals
to spend most of their income and assets on nursing home care before
they can qualify for Medicaid and to apply most of their income
toward the cost of their care while in nursing homes. 

Another aspect of long-term care where veterans can have unmet needs
is long-term hospital care.  Medicare limits inpatient medical and
surgical care to 90 days during any benefit period.\16 For illnesses
requiring more than 90 days of hospitalization, Medicare
beneficiaries are allowed 60 extra hospital days, called reserve
days, during a benefit period but the reserve days are not renewable. 

Medicare and private health insurance limits on inpatient mental
health care can also cause unmet veteran health needs.  Medicare
covers no more than 190 days in a psychiatric hospital per lifetime. 
The limits on care in a hospital, including the reserve days, apply
to both inpatient medical and surgical care and inpatient mental
health care.  According to the Bureau of Labor Statistics, 75 percent
of private health insurance enrollees had limits on inpatient mental
health care; 50 percent had limits on days of care.  In addition, 38
percent had a maximum dollar benefit, usually per lifetime but
occasionally per year. 


--------------------
\15 Intermediate care is provided in nursing homes but is less
intensive than skilled nursing home care.  Patients require
supervision, protection, and assistance but only occasional skilled
nursing or skilled rehabilitation.  Custodial care refers to care
that is primarily for the purpose of helping the patient in meeting
daily living or personal needs and can be provided by people without
professional skill or training in nursing homes or domiciliaries. 

\16 A benefit period begins with admission to a hospital and ends
when the beneficiary has been out of the medical facility for 60
days. 


   MANY HEALTH CARE NEEDS ARE NOT
   COVERED UNDER VETERANS' PUBLIC
   OR PRIVATE INSURANCE
---------------------------------------------------------- Chapter 2:4

Although most private health insurance and Medicare cover a wide
range of health care services, certain health care items and services
are not extensively covered.  Thus, even veterans with private
insurance or Medicare coverage may have unmet health care needs if
they cannot afford to pay for such care.  These areas of unmet needs
include the following: 

  Medicare-eligible veterans can have unmet needs for outpatient
     drugs.  Medicare is the only major health benefits program that
     does not routinely cover outpatient drugs.\17

Medicare covers primarily drugs and medical supplies furnished while
a beneficiary is receiving inpatient care and injections administered
in a doctor's office. 

  Dental care is not extensively covered under either Medicare or
     private health insurance.  Medicare does not cover routine
     dental care; about one-third of private health insurance
     policies do not provide dental coverage.  Of those private
     health insurance policies with dental coverage, over four-fifths
     have an annual maximum plan benefit, most commonly $1,000. 

  Home health care is covered to some extent under virtually all
     health benefits programs, but most programs are oriented toward
     skilled care.  Veterans can, therefore, have unmet needs for
     assistance if they have chronic health care problems that
     require the assistance of others but do not require skilled
     care. 

  Vision care is not extensively covered under either Medicare or
     private health insurance.  Although both will pay for cataract
     surgery and lens implants or glasses associated with such
     surgery, they do not generally pay for routine eye examinations,
     eyeglasses, or contact lenses.  Medicare provides no coverage
     for such services while about 35 percent of private health
     insurance policies provide such coverage. 


--------------------
\17 Outpatient drugs are those drugs and medical supplies intended
for use on an outpatient or at-home basis. 


   VETERANS MAY FORGO TREATMENT
   BECAUSE OF HIGH OUT-OF-POCKET
   COSTS
---------------------------------------------------------- Chapter 2:5

Veterans, particularly those with low incomes, may forgo needed
medical treatment because they cannot afford the high out-of-pocket
costs associated with the care.  Even with health insurance,
out-of-pocket health care costs can amount to thousands of dollars a
year.  Such costs come from many sources, including Medicare part B
or private health insurance premiums, copayments, deductibles,
physician charges that exceed authorized payment levels, and payments
for noncovered services. 

Medicare and private health insurance generally have copayments,
deductibles, or both for inpatient and outpatient care.  For example,
for inpatient care in 1991, Medicare beneficiaries paid a $628
deductible per benefit period and 20 percent of approved professional
charges; for stays of over 60 days, beneficiaries paid copayments of
$157 for the 61st through 90th day and $314 for the 91st through
150th day.  For outpatient care, Medicare beneficiaries have a $100
deductible and pay 20 percent of approved charges. 

While most private insurance does not have a deductible for inpatient
hospital care, over 70 percent of private insurance requires
copayments for hospital stays--most often 20 percent of room and
board and 20 percent of professional charges.  Finally, private
health insurance typically has both deductibles and copayments for
outpatient care.  For example, the Bureau of Labor Statistics reports
that 95 percent of participants in private insurance plans have a
deductible, usually $100.\18 Over 90 percent have copayments for
outpatient medical care, usually 20 percent. 

Copayments and deductibles can be costly and discourage veterans from
seeking needed care.  For example, for a 10-day hospital stay with
major surgery costing $10,500, a service-connected or low-income
veteran would pay nothing through VA, $1,208 through Medicare, and
$2,180 through a typical private insurance plan.  For minor surgery
in a physician's office requiring an approved office visit and
surgical fee totaling $90 and two outpatient prescription medications
totaling $75, a service-connected or low-income veteran would pay $4
under VA, $93 under Medicare, and $33 under a typical private health
insurance plan.\19

The cost of private health insurance can also be significant,
particularly if the veteran is unemployed, works for an employer that
does not provide health insurance, or is self-employed.  Such
veterans would have to pay the full cost of their health insurance. 
Even if veterans are employed, they may have health care premiums to
pay.  An increasing number of private sector employees contribute
toward the cost of their insurance coverage.  In 1991, private health
insurance premiums for enrollees averaged about $324 for single
policies and $1,164 for family coverage. 

Medicare part B premiums and Medicare supplemental insurance (so
called Medigap policies) are potential sources of out-of-pocket costs
for elderly veterans.  Medicare part B premiums are about $493 a year
per beneficiary.  Medigap policies can be as high as $1,500 a year. 

Because Medicare provides only minimal coverage of long-term care
services for the chronically ill elderly, those needing such care can
incur high out-of-pocket costs.  For example, nursing home care costs
average over $30,000 a year. 

Beneficiaries are also liable for the full costs of any services not
covered under their health insurance.  As discussed above, these
items and services frequently include eyeglasses, prescription drugs,
and dental care.  The Health Care Financing Administration (HCFA)
reports that in fiscal year 1991, Medicare beneficiaries incurred
over $15 billion in out-of-pocket expenses for outpatient
prescription drugs, an average of $538 for each Medicare enrollee. 

Finally, beneficiaries can incur high out-of-pocket charges when a
provider charges more than the Medicare- or private-health-insurance-
approved rate.  In fiscal year 1991, Medicare beneficiaries were
liable for over $2 billion in charges by providers in excess of
Medicare-approved rates.  Even with Medigap policies, veterans are
not protected from such charges because policies generally cover only
copayments and deductibles, not charges above Medicare-approved
rates. 


--------------------
\18 Most participants pay two to three times the individual rate for
a family; $200 to $300 being the most common deductible amount. 

\19 See VA Health Care:  Comparison of VA Benefits With Other Public
and Private Programs (GAO/HRD-93-94, July 29, 1993). 


   HOMELESS VETERANS FREQUENTLY
   HAVE UNMET HEALTH CARE NEEDS
---------------------------------------------------------- Chapter 2:6

Veterans are generally thought to constitute about 150,000 to 250,000
of the estimated 500,000 to 600,000 homeless people who live on the
streets or in shelters.\20 According to VA officials, about 40
percent of homeless veterans suffer from serious mental illness and,
with considerable overlap, about 50 percent suffer from alcohol or
other drug abuse.  In addition, about 10 percent suffer from PTSD. 
The homeless generally have neither public nor private health
insurance. 


--------------------
\20 Homelessness:  Demand for Services to Homeless Veterans Exceeds
VA Program Capacity (GAO/HEHS-94-98, Feb.  23, 1994). 


VETERANS HAVE MULTIPLE REASONS FOR
NOT USING VA, BUT MOST PREFER
NON-VA HEALTH CARE
============================================================ Chapter 3

Although public and private health insurance programs do not meet all
the health care needs of veterans, most veterans--both insured and
uninsured--have never used VA health care services.  Veterans cited a
range of reasons for not using VA health care facilities, most
frequently indicating that they preferred non-VA care and had the
resources to pay for such care.  Both the percentage of veterans
using VA and the reasons for not using VA varied by category of
veterans. 


   MOST VETERANS HAVE NEVER USED
   VA HEALTH CARE FACILITIES
---------------------------------------------------------- Chapter 3:1

About 8 out of 10 veterans have never used VA health care services,
but the likelihood of VA use varied significantly by veteran
demographics, our analysis of VA's 1987 Survey of Veterans shows. 
Most likely to have used VA health care were veterans with
service-connected disabilities, in poor health, without health
insurance, with low incomes, and over 75 years old.  Specifically, we
found the following: 

  Over 70 percent of low-income veterans without service- connected
     disabilities and 30 percent of veterans with service-connected
     disabilities had never used VA facilities.  (See fig.  3.1.)

  About 45 percent of veterans who considered themselves to be in
     poor health had never used VA health care compared with over 88
     percent of veterans who considered their health to be excellent. 
     (See fig.  3.2.)

  The percentage of veterans having never used VA health care
     facilities decreased with age, from about 78 percent of veterans
     between 25 and 34 years old to about 68 percent of veterans 75
     years old or older.  (See fig.  3.3.)

  Over 82 percent of veterans with health insurance had never used
     VA, compared with about 56 percent of veterans with no health
     insurance.\21 Consistent with VA's role as a safety net,
     veterans with no health insurance were six times more likely to
     seek care at a VA medical center than were veterans with health
     insurance.  About 42 percent were estimated by VA to be
     medically indigent.  (See fig.  3.4.)

  The likelihood of VA use also decreased as veterans' incomes
     increased, but most veterans in all income categories had never
     used VA health care.  Over 63 percent of veterans with incomes
     under $10,000 had never used VA compared with over 88 percent of
     those with incomes of $40,000 or more.  (See fig.  3.5.)

   Figure 3.1:  Percentage of
   Veterans Who Have Never Used VA
   Health Care, by Service
   Connected Status

   (See figure in printed
   edition.)

Note:  NSC = nonservice-connected. 

Source:  Based on VA's 1987 Survey of Veterans.  Special status
veterans include World War I veterans, former prisoners of war, and
veterans exposed to toxic substances or ionizing radiation. 

   Figure 3.2:  Percentage of
   Veterans Who Have Never Used VA
   Health Care, by Health Status

   (See figure in printed
   edition.)

Note:  Health status is self-reported by veterans. 

Source:  Based on VA's 1987 Survey of Veterans. 

   Figure 3.3:  Percentage of
   Veterans Who Have Never Used VA
   Health Care, by Age

   (See figure in printed
   edition.)

Source:  Based on VA's 1987 Survey of Veterans. 

   Figure 3.4:  Percentage of
   Veterans Who Have Never Used VA
   Health Care, by Insurance
   Coverage

   (See figure in printed
   edition.)

Source:  Based on VA's 1987 Survey of Veterans. 

   Figure 3.5:  Percentage of
   Veterans Who Have Never Used VA
   Health Care, by Personal Income

   (See figure in printed
   edition.)

Source:  Based on VA's 1987 Survey of Veterans. 


--------------------
\21 In 1990, with the creation and expansion of public and private
health benefits programs, about 25.6 million of the nation's
estimated 28.2 million veterans (almost 91 percent) had public or
private health care coverage or both in addition to their VA
coverage.  Over 81 percent of veterans (22.9 million) had private
health insurance; 26 percent (7.4 million) had Medicare coverage; 5.1
percent (1.4 million) had coverage under CHAMPUS; and 1.6 percent
(0.4 million) had Medicaid coverage.  (See GAO/HEHS-94-104BR, Apr. 
25, 1994.)


   VETERANS CITE VARIETY OF
   REASONS FOR NOT USING VA HEALTH
   CARE
---------------------------------------------------------- Chapter 3:2

Veterans responding to VA's 1987 Survey of Veterans cited a variety
of reasons for not using VA health care services, but most indicated
preference for or ability to pay for care elsewhere (see table 3.1). 
Many veterans cited multiple reasons for not using VA health care
facilities.  For example, about 45 percent of those who indicated
that they used their own physician also indicated that they did not
use VA because they had adequate health insurance. 



            Table 3.1 Veterans' Reasons for Not
              Using VA Health Care Facilities

Reason for not using a VA       Percent of veterans citing
facility                                            reason
------------------------------  --------------------------
Used own physician                                    42.6
Have adequate health insurance                        32.4
Didn't know was eligible                              17.9
Never needed medical care                             13.4
Preferred treatment elsewhere                          9.5
Lived too far from a VA                                8.5
 facility
Sent elsewhere by doctor                               6.7
Never been sick                                        6.0
Not eligible for VA care                               5.2
Too long a wait/red tape                               4.7
Used Medicaid/Medicare                                 4.6
Poor VA quality of care                                3.8
Entitled to DOD care                                   2.5
Accident/emergency admission                           2.3
VA refused care                                        1.3
VA didn't offer needed care                            0.8
Lack of privacy                                        0.4
VA inadequate for women                                0.2
Treated elsewhere at VA                                0.1
 expense
Other reasons                                          3.9
----------------------------------------------------------
Source:  VA's 1987 Survey of Veterans. 


   REASONS FOR NOT USING VA VARY
   BY VETERAN DEMOGRAPHICS
---------------------------------------------------------- Chapter 3:3

The reasons veterans gave for not using VA health care facilities
varied based on demographic characteristics of the veterans.  For
example: 

  Younger veterans and nonservice-connected veterans with low incomes
     were the least likely to cite use of their own physician as a
     reason for not using VA.  About 32 percent of veterans between
     the ages of 25 and 34 cited "Used Own Physician" as a reason for
     not using VA compared to 53 percent of veterans between the ages
     of 70 and 74.  Similarly, about 36 percent of
     nonservice-connected veterans with low incomes cited the use of
     their own physician as a reason for not using VA, whereas about
     47 percent of service-connected and higher income
     nonservice-connected veterans cited the use of their own
     physician as a reason for not using VA. 

  Service-connected veterans and older veterans, the two groups of
     veterans most likely to use VA health care, appeared to be more
     aware of their veterans' health care benefits.  About 7.5
     percent of service-connected veterans cited "Didn't Know Was
     Eligible" as a reason for not using VA, compared with 19.6
     percent of higher-income nonservice-connected veterans. 
     Similarly, about 12 percent of veterans between the ages of 70
     and 74 cited "Didn't Know Was Eligible" as a reason for not
     using VA, compared with over 22 percent of veterans between the
     ages of 25 and 34. 

  Low-income veterans and younger veterans were generally the least
     likely to cite having adequate health insurance as a reason for
     not using VA health care.  About 23 percent of veterans with
     incomes below $10,000 identified adequate health insurance as a
     reason for not using VA compared with about 43 percent of those
     with incomes of $40,000 or more.  Similarly, about 22 percent of
     veterans between 25 and 34 years old identified adequate
     insurance as a reason for not using VA compared with about 37
     percent of veterans between 55 and 59 years old. 

  Not surprisingly, there were strong correlations between the
     frequency with which veterans cited "Never Needed Medical Care"
     as a reason for not seeking VA care and veterans' ages and
     health status.  About 22 percent of veterans who perceived their
     health status as excellent cited "Never Needed Medical Care" as
     a reason for not using VA compared with only 0.2 percent of
     those who perceived their health as poor.  Similarly, about 23
     percent of veterans between 25 and 34 years old indicated that
     they never needed medical care, but only about 4 percent of
     veterans 75 years old or older said they had never needed
     medical care.  Veterans with service-connected disabilities were
     also less likely to cite "Never Needed Medical Care" than
     low-income nonservice-connected veterans (7 percent compared
     with 17 percent). 

  Distance from a VA facility appears to be a significant barrier to
     use of VA health care for veterans with service-connected
     disabilities, elderly veterans, veterans in poor health, and
     veterans with incomes of less than $10,000.  About 13 percent of
     veterans between 70 and 74 years old cited distance as a reason
     for not using VA compared with fewer than 7 percent of veterans
     between 25 and 34 years old.  Of service-connected veterans, 20
     percent cited distance as a reason for not using VA, compared
     with about 7 percent of higher-income nonservice-connected
     veterans.  Only about 4 percent of veterans reporting their
     health status as excellent cited distance as a reason for not
     using VA, whereas 22 percent of veterans in poor health cited
     distance from a VA facility as a reason for not using VA. 
     Finally, about 13 percent of veterans with incomes below $10,000
     cited distance as a reason for not using VA, whereas 6 percent
     of those earning $40,000 or more said distance was one of the
     reasons they did not use VA. 

  Service-connected veterans were the most likely to indicate that
     they "Preferred Treatment Elsewhere" as a reason for not using
     VA care.  Over 17 percent of service-connected veterans said
     that they preferred to obtain treatment elsewhere; overall 9.5
     percent of veterans cited such a preference as a reason for not
     using VA care. 


   MANY LOW-INCOME, UNINSURED
   VETERANS DO NOT USE VA BECAUSE
   OF ELIGIBILITY, QUALITY, OR
   ACCESS CONCERNS
---------------------------------------------------------- Chapter 3:4

VA's 1987 Survey of Veterans estimated that 21 million veterans had
never used VA health care services.  About 18.1 million of the 21
million veterans cited reasons for not using VA that suggested that
they had other health care options.  Still, about 2.9 million
veterans with no apparent health care options chose not to use VA
because VA health care was not accessible, they were not aware of
their VA eligibility, or they had concerns about the quality of VA
care. 

When taking the 1987 Survey of Veterans, veterans who indicated that
they had not used VA health care services were given a list of 20
possible reasons why they had not used VA services and asked to
select all that applied.  We analyzed the responses to determine how
many veterans cited reasons related to accessibility, eligibility, or
quality but not reasons related to having health care options. 
Veterans who gave reasons indicating that they preferred treatment
elsewhere, used their own physicians, or had adequate insurance, were
considered to have health care options and were excluded from further
analysis even if they cited concerns about quality or access as
additional reasons for not using VA health care.  Based on this
analysis, we estimate that 2.9 million veterans not indicating
options for care chose not to use VA health care for reasons related
to quality, accessibility, or unawareness of eligibility. 

We then conducted further analysis of the Survey of Veterans data to
estimate the incomes and health insurance coverage of such veterans. 
On the basis of this analysis, we estimate that 320,000 of the 2.9
million veterans who chose not to use VA because they had concerns
about the accessibility or quality of VA care or because they lacked
knowledge about their VA eligibility, do not have health insurance;
about 191,000 of these veterans have incomes below $15,000. 

The 320,000 uninsured veterans, especially the 191,000 with low
incomes, represent a potentially medically underserved population
because of their lack of access to VA medical centers or
unwillingness to use them.\22 As discussed in chapter 2, the
uninsured use significantly fewer health care services than those
with health insurance.  As a result, those uninsured and low-income
veterans who do not use VA because they are not aware of their
eligibility or have concerns about the quality or accessibility of VA
care are potentially medically underserved.  Only about 10,000 of the
191,000 low-income uninsured veterans indicated that they had never
needed medical care. 


--------------------
\22 An additional 220,000 veterans were uninsured and did not give
reasons for why they chose not to use VA. 


STRUCTURE OF THE VA HEALTH CARE
SYSTEM LIMITS ITS ABILITY TO MEET
VETERANS' HEALTH CARE NEEDS
============================================================ Chapter 4

The VA health care system is not currently structured to meet the
health care needs of most veterans.  For example: 

  Although virtually all veterans are eligible for at least some VA
     health care, most veterans are not eligible for comprehensive
     outpatient services.  Access to many other benefits is linked to
     care in a VA hospital, limiting the availability of needed care. 

  Unlike private health insurance and most public health benefits
     programs such as Medicare and Medicaid, being eligible for VA
     care does not guarantee the availability of care.  Most care is
     dependent on the availability of space and resources.  Several
     specialized VA programs have waiting lists because of space or
     resource limits. 

  VA's direct delivery approach to providing health care services
     limits the availability of services.  VA has limited authority
     to supplement care available in its facilities by purchasing
     care from other providers. 


   COMPLEX ELIGIBILITY AND
   ENTITLEMENT PROVISIONS LIMIT
   ACCESS TO CARE
---------------------------------------------------------- Chapter 4:1

Complex eligibility and entitlement requirements limit veterans'
access to many health care services.  Although all veterans are
eligible for some VA health care, most veterans cannot rely on VA as
their sole source of health care.  This is because most veterans (1)
are not eligible for comprehensive outpatient services, (2) are
eligible for the services only to the extent that space and resources
are available, or (3) must have treatment initiated in a VA hospital
to be eligible to receive the service. 

Other health benefits programs define a set of covered services and
entitle everyone to the full range of services.  VA has a broader
range of covered services than most health insurance plans, but no
veteran is currently entitled to the full range of VA services. 


      ALL VETERANS ARE ELIGIBLE
      FOR SOME VA HEALTH CARE
      SERVICES
-------------------------------------------------------- Chapter 4:1.1

Any person who served on active duty in the uniformed services for
the minimum amount of time specified by law and who was discharged,
released, or retired under "other than dishonorable conditions" is
eligible for at least some VA health care benefits.\23 For example,
all veterans are eligible for VA hospital and nursing home care,
although the provision of care is based on the availability of space
and resources as discussed below. 


--------------------
\23 The amount of required active duty service varies depending upon
when the person entered the military. 


      MOST VETERANS HAVE LIMITED
      COVERAGE OF OUTPATIENT
      SERVICES
-------------------------------------------------------- Chapter 4:1.2

Only those veterans with service-connected disabilities rated at 50
percent or more are currently entitled to comprehensive outpatient
services.  VA may provide comprehensive outpatient care to veterans
who (1) are former prisoners of war, (2) served during World War I or
the Mexican border period, (3) are housebound or in need of aid and
attendance, or (4) are participants in VA-approved vocational
rehabilitation programs. 

VA must furnish all outpatient services needed for treatment of
conditions related to any veteran's service-connected disability
regardless of the veteran's disability rating.  VA must also provide
hospital-related outpatient care to veterans (1) with
service-connected disabilities rated at 30 or 40 percent or (2) whose
annual incomes do not exceed VA's pension rate for veterans in need
of regular aid and attendance.\24 \25 VA may, to the extent resources
permit, furnish hospital-related outpatient care to all veterans not
otherwise entitled to outpatient care.  Additional restrictions apply
to the availability of dental care. 


--------------------
\24 Hospital-related refers to those outpatient services needed to
(1) prepare for a hospital admission, (2) obviate the need for a
hospital admission, or (3) complete treatment begun during a hospital
stay. 

\25 In 1991, the income limits were $11,409 or less for veterans with
no dependents or $13,620 or less if married or single with one
dependent plus $1,213 for each additional dependent. 


      ELIGIBILITY FOR SOME
      SERVICES LINKED TO RECEIPT
      OF HOSPITAL CARE
-------------------------------------------------------- Chapter 4:1.3

Eligibility for some VA health care services is linked to receipt of
hospital care in a VA facility.  For example, dental care is
available to veterans with nonservice-connected disabilities only if
the veteran was examined and had treatment started while an
inpatient.  Similarly, veterans with nonservice-connected conditions
must be admitted to a VA hospital before they can receive
VA-supported community nursing home care.  Finally, access to some
services, such as vision and hearing care, is limited because of the
"obviate the need" requirements discussed above.  In other words,
most veterans can obtain those services only if they are needed to
obviate the need for inpatient care, are provided while they are
inpatients, or are provided as a followup to inpatient care. 


      ENTITLEMENT TO CARE LIMITED
      TO AVAILABLE SPACE AND
      RESOURCES
-------------------------------------------------------- Chapter 4:1.4

Even those veterans eligible for care in the VA system can obtain
care only if space and resources are available.  VA uses a complex
priority system to determine which veterans receive care within
available space and resources.  For example, priority for receiving
VA hospital and nursing home care is divided into two
categories--mandatory and discretionary.  VA must provide hospital
care and if space and resources are available may provide cost-free
nursing home care to veterans in the mandatory category.  VA may
provide hospital and nursing home care to those in the discretionary
category if space and resources are available in VA facilities. 

Included in the mandatory care category are veterans who

  have service-connected disabilities,

  are former prisoners of war,

  served during the Mexican border period or World War I,

  were exposed to certain toxic substances or radiation and need
     treatment for related conditions, or

  have nonservice-connected disabilities and are unable to defray the
     cost of care.  Veterans eligible for Medicaid, receiving a VA
     pension, or having financial resources below a prescribed level
     are considered unable to defray the cost of necessary care. 

Priority for receiving outpatient services is similarly divided into
mandatory and discretionary categories.  All service-connected
veterans must be provided outpatient care related to their
service-connected disabilities, but only service-connected veterans
with disabilities rated at 30 percent or higher and
nonservice-connected veterans with incomes below the maximum VA
pension rate are in the mandatory care category for other covered
outpatient care services.  Other nonservice-connected veterans and
service-connected veterans with disabilities rated at 20 percent or
less are in the discretionary care category for covered
nonservice-connected outpatient care. 


   LACK OF SPACE AND RESOURCES
   LIMITS AVAILABILITY OF CARE
---------------------------------------------------------- Chapter 4:2

Because of space and resource limitations, VA is not able to provide
care needed by some veterans.  Specific data on unmet needs are not
generated by VA, but there are indications that space and resource
restrictions are limiting VA's ability to meet veterans' health care
needs. 

  In 1992, the VA Eligibility Reform Task Force developed estimates
     of the potential demand for nursing home care if current
     resource constraints were removed.\26 The task force estimated
     that if resource constraints were removed, the projected nursing
     home daily census would rise from approximately 36,000 patients
     to about 59,000 patients, an increase of about 60 percent. 

  Specialized VA PTSD programs are operating at or beyond capacity
     and waiting lists exist particularly for inpatient treatment. 
     Treatment waiting lists have hovered between 900 and 1,000
     veterans for the past 3 years.  While VA has been able to reduce
     the waiting lists, the number of veterans seeking PTSD care
     continues to increase even though the Vietnam war ended 20 years
     ago. 

  Limited resources make it difficult for VA to care for homeless
     veterans.  VA's current programs constitute a small portion of
     what is likely needed to fully address the needs of the homeless
     veteran population.  For example, in the San Francisco area, the
     Homeless Chronically Mentally Ill (HCMI) program, established to
     locate and provide clinical care to mentally ill homeless
     veterans, has only 11 beds available to meet the needs of an
     estimated 2,000 to 3,300 homeless veterans in the area. 
     Similarly, veterans may wait up to 2 months before being
     admitted to a residential program. 

A similar situation exists in Washington, D.C.  Its HCMI has an
average of 11 contract beds to serve an estimated 3,300 to 6,700
homeless veterans.  Eligible veterans wait up to 6 weeks for
admission to the program. 

  A lack of resources prevents VA from operating programs for
     homeless veterans in some areas.  In Flint, Michigan, VA decided
     not to start a homeless veterans outreach program because
     medical services were not available close enough to the
     community.  The distance to the nearest medical center (Saginaw,
     Michigan) was too great and would be a barrier to getting
     medical care to the homeless who do not have the means to travel
     long distances.  Similarly, Pensacola, Florida, VA personnel did
     not do outreach in the homeless community because the VA
     outpatient clinic was at capacity. 

  In April 1994, VA reported that its substance abuse programs were
     providing services near their capacity as of January 1, 1992. 
     Extended care programs were more restrictive in their admissions
     and maintained longer waiting lists. 

  VA's current goal is to meet the nursing home needs of only 16
     percent of veterans needing such care through its own
     facilities, contracts with community nursing homes, and per diem
     payments to state veterans' homes.  The remaining 84 percent of
     veterans needing nursing home care, once their Medicare or
     private health insurance coverage is exhausted, must either pay
     for their care out-of-pocket, forego needed care, or spend their
     income and assets on care until they qualify for Medicaid.  Once
     they qualify for Medicaid, most of their income must be applied
     toward the cost of their care. 


--------------------
\26 The Task Force applied nursing home usage patterns among
individuals in the general population who share the same
characteristics as veterans to the historic VA nursing home user
population.  Characteristics included age, gender, and levels of
disability. 


   RELIANCE ON DIRECT DELIVERY
   LIMITS ABILITY TO MEET VETERANS
   HEALTH CARE NEEDS
---------------------------------------------------------- Chapter 4:3

Although VA operates one of the largest health care systems in the
country, its reliance on the direct delivery of services limits its
ability to meet the health care needs of veterans not living close to
a VA facility.  In addition, the capabilities of individual VA
hospitals and outpatient clinics vary significantly.  As a result,
veterans living close to a VA facility may not be able to obtain the
health care services they need from that facility.  Although VA will
reimburse some veterans for travel to another VA facility, it
generally will not purchase the service locally. 

Unlike VA, DOD's direct delivery system has a backup
system--CHAMPUS--to help finance services for certain beneficiaries
who either live too far from a DOD facility or cannot obtain the
health care services they need from a nearby DOD facility.  Through
the combination of direct delivery and financed care, the DOD system
provides dependents of active duty personnel and retirees and their
dependents access to a uniform set of benefits.\27

By contrast, veterans do not currently have equal access to VA
benefits even within eligibility categories.  Those veterans living
closest to comprehensive VA facilities have better access to VA
benefits than do those veterans living near VA hospitals offering
more limited services.  Veterans living in areas that do not have
nearby VA facilities have even more limited access to VA services. 

As discussed in chapter 3, veterans in poor health, veterans with
service-connected disabilities, elderly veterans, and low-income
veterans were most likely to cite distance from a VA facility as a
reason they do not use VA care.  These groups are among the veterans
who should have the highest priorities for VA care. 


--------------------
\27 CHAMPUS eligibility ends at age 65. 


MOST VA USERS HAVE OTHER HEALTH
CARE OPTIONS
============================================================ Chapter 5

Although VA is an important safety net for many veterans, most VA
users have other health care options.  Over one-half are covered for
acute care services under other public health benefits programs and
about one-third under private health insurance.  In addition, many of
the veterans using VA health care facilities have incomes of $20,000
or more and may have adequate resources to pay for all or a portion
of their care from private providers.  Finally, many VA nursing home
patients could have qualified for Medicaid through that program's
spend-down provisions. 


   OVER ONE-HALF OF VA USERS
   COVERED UNDER OTHER PUBLIC OR
   PRIVATE HEALTH BENEFITS
   PROGRAMS
---------------------------------------------------------- Chapter 5:1

About 58 percent of the veterans who used VA health care services in
1990 had other public or private health care coverage; many had
coverage under multiple programs.  In fact, veterans using VA health
services were more likely to have other federal health care coverage
than those veterans who do not use VA.  For example, 47 percent of
the veterans who used the VA system in 1990 were Medicare-eligible,
even though only 26 percent of all veterans were Medicare-eligible. 
Because VA does not receive payments from Medicare, a significant
portion of VA resources are spent providing health care services to
veterans who could have obtained the same services through Medicare,
but with higher out-of-pocket costs.\28

While Medicare was the primary source of alternate federal coverage,
about 12 percent of veterans using VA health care services during
1990 were eligible for care from DOD, CHAMPUS, or both.  Military
retirees lose their CHAMPUS eligibility when they become
Medicare-eligible but can continue to use DOD health care facilities
on a space-available basis. 

Finally, VA's 1988 Survey of Medical System Users found that about
one-third of VA users had private health insurance.  (See fig.  5.1.)

   Figure 5.1:  Health Care
   Options of Veterans Using VA
   Health Care During 1990

   (See figure in printed
   edition.)

Notes:  Percentages do not add to 100 because some veterans have
multiple coverages.

Data on private health insurance coverage and the percentage of
veterans with no health care options are from the VA Survey of
Medical System Users.

Data on Medicaid and the Indian Health Service were not readily
available. 


--------------------
\28 Medicare-eligible veterans also tend to use VA for services such
as prescription drugs and long-term nursing home and psychiatric care
not generally available through Medicare.  See Veterans' Health Care: 
Use of VA Services by Medicare-Eligible Veterans (GAO/HEHS-95-13,
Oct.  24, 1994). 


   SIGNIFICANT RESOURCES USED TO
   PROVIDE CARE TO VETERANS WITH
   INCOMES ABOVE $20,000
---------------------------------------------------------- Chapter 5:2

VA spends a significant portion of its health care resources
providing inpatient and outpatient care to veterans with incomes of
$20,000 or more.  About one-third (716,000) of the 2.2 million VA
users in 1991 had incomes of $20,000 or more.  Among both single and
married veterans, users with service-connected disabilities tended to
have higher incomes than nonservice-connected users. 

Still, about 15 percent (319,000) of the 2.2 million veterans using
VA medical centers in 1991 were nonservice-connected veterans with
incomes of $20,000 or more.  About 11 percent (91,520) of the single
nonservice-connected veterans (832,000) and 57 percent (227,430) of
married nonservice-connected veterans (399,000) using VA medical
centers in 1991 had incomes of $20,000 or more.  Among married
nonservice-connected veterans using VA medical centers, 21 percent
(84,000) had incomes of $40,000 or more and 16 percent (64,000) had
incomes between $30,000 and $39,999. 


   VETERANS HAVE MEDICAID COVERAGE
   FOR NURSING HOME CARE
---------------------------------------------------------- Chapter 5:3

Veterans, like other Americans, can qualify for Medicaid assistance
in paying for nursing home care if they lack the income and resources
to pay for such care.  VA spends over $1 billion a year to provide
nursing home care, a discretionary benefit for all veterans,
including those with service-connected disabilities. 

To be eligible for nursing home care under Medicaid, persons must
meet specified income and asset limits, which vary by state. 
Frequently, persons enter nursing homes as private-pay patients and
convert to Medicaid after having spent their available income and
resources on nursing home care.  And, once eligible, patients must
apply their income, with certain exceptions, toward the cost of their
nursing home care on an ongoing basis.  Medicaid pays the difference
between the Medicaid payment rate and the amount of the recipients'
income applied toward the cost of care.\29

All veterans with a medical need for nursing home care are eligible
to receive such care in VA and community facilities to the extent
that space and resources are available.\30

Unlike Medicaid, which requires beneficiaries to spend most of their
income and assets on nursing home or other health care services
before Medicaid assists them in paying for additional nursing home
care, the VA nursing home program has no spend-down requirements and
minimal cost sharing.  Generally, veterans with service-connected
disabilities and those nonservice-connected veterans with incomes
below designated levels (about $20,000) are not required to
contribute toward the cost of their nursing home care.  Those higher
income nonservice-connected veterans required to contribute toward
the cost of their care make copayments averaging $12 a day. 

In fiscal year 1991, VA provided nursing home care to about 47,000
veterans in VA facilities and 28,000 veterans in contract community
facilities at a combined cost of almost $1.2 billion.  VA recovered
less than one-tenth of 1 percent of its costs to provide nursing home
care through copayments. 


--------------------
\29 There are no limits on the length of stay under Medicaid's
nursing home benefit. 

\30 Veterans who do not have a service-connected disability are
limited to 6 months in community nursing homes, but there is no limit
on length of stay in VA-operated nursing homes for either
service-connected or nonservice-connected veterans. 


RETARGETING NEEDED TO ENABLE VA TO
BETTER MEET VETERANS' CHANGING
HEALTH CARE NEEDS
============================================================ Chapter 6

Since establishment of the VA health care system over 60 years ago,
significant changes have occurred in how Americans obtain their
health care, where they get it, and how they pay for it.  Major
changes have also occurred in veterans' health care needs; veterans
who once needed acute treatment for brain trauma, spinal cord
injuries, and other war-related injuries increasingly need treatment
for the lingering effects of those disabilities.  In addition, the
rapidly aging World War II veteran population increasingly needs
long-term rather than acute care services. 

The changes that have already occurred--and the potential for further
changes through reform of the health care system either nationally or
in individual states--provide an opportunity to reevaluate the VA
health care system and determine how it can be changed to better meet
the changing health care needs of veterans.  Such an evaluation
should not be constrained by the current VA structure.  Rather, it
should start with a clean slate and determine how a veterans health
benefits program should be designed in today's health care
environment.  In addition, it should be conducted in concert with
governmentwide efforts to reduce the budget deficit while improving
services to veterans in response to recommendations contained in the
National Performance Review.\31

Just as it is unlikely that either national or state health care
reforms will address all the health care needs of Americans, it is
also unlikely that the VA health care system will ever have adequate
resources to meet every health care need of veterans.  As a result,
it is important that the VA system (1) have clear priorities for how
limited health care resources will be targeted and (2) be designed to
supplement rather than unnecessarily duplicate health care coverage
available under other programs. 

VA's restructuring efforts, however, have focused primarily on how to
preserve its direct delivery system rather than on how to better
target its limited resources toward meeting the changing health care
needs of veterans.  For example, VA's efforts (1) do not focus on
outreach to better inform low-income uninsured veterans of their
eligibility for VA care, (2) do not explore ways to expand the
availability of nursing home care to an aging population, and (3) do
not consider shifting resources to expand the availability of
specialized services not extensively covered under other health care
programs. 


--------------------
\31 The National Performance Review, under the direction of the Vice
President, is a major management reform initiative by the
administration and is intended to identify ways to make the
government work better and cost less. 


   CHANGES NEEDED IF VA IS TO
   FULFILL ITS SAFETY NET MISSION
---------------------------------------------------------- Chapter 6:1

Beyond its obligation to treat service-connected disabilities and the
lingering effects of such disabilities, one of VA's highest
priorities is to serve as a safety net for veterans--both those with
service-connected and those with nonservice-connected
disabilities--unable to afford basic health care services.  VA cannot
adequately fulfill its safety net mission because it is constrained
by its direct delivery structure and eligibility and entitlement
provisions. 


      ELIGIBILITY REFORM
-------------------------------------------------------- Chapter 6:1.1

Clearly, eligibility reform is an essential ingredient in any effort
to improve VA's ability to fulfill its safety net mission.  As
discussed in chapter 4, VA eligibility reform would be needed to
enable VA to provide a uniform set of services to all veterans. 
Currently, about 450,000 veterans are entitled to free comprehensive
VA health care services.\32

Expanding this entitlement to all veterans currently eligible for
some free care could add billions of dollars to VA's health care
budget.\33 One option for limiting the cost of any eligibility
expansion is the use of cost sharing to offset the costs of the
expanded benefits.  For example, VA might be authorized to provide
veterans any available health care service without changing existing
eligibility for free care.  In other words, veterans could purchase,
or use their private health insurance to purchase, additional health
care services from VA.  Such a change, however, would not
significantly strengthen VA's safety net role because low-income and
uninsured veterans would likely be unable to pay for many additional
health care services even if VA were authorized to provide them. 

Another option would be to reform eligibility to create a uniform
benefits package but narrow the scope of services included in the
benefits package.  In other words, some veterans would get additional
benefits while others would receive a narrower range of free
services.  This approach, however, would essentially take some
benefits away from service-connected veterans with the greatest
disabilities and give additional benefits to service-connected
veterans with lesser disabilities and to nonservice-connected
veterans. 

One potential way to pay for eligibility expansions would be to
authorize VA to recover from Medicare the costs of services VA
facilities provide to Medicare-eligible veterans.  Such recoveries,
however, would not improve VA's ability to fulfill its safety net
mission unless VA were allowed to keep the recovered funds in
addition to its appropriation.  In other words, if the recoveries are
returned to the Department of the Treasury, then services provided to
Medicare-eligible veterans would reduce rather than enhance the funds
available to treat low-income and uninsured veterans. 

On the other hand, allowing VA to retain recoveries from Medicare
would create a strong incentive for VA facilities to shift their
priorities toward providing care to veterans with Medicare coverage. 
More important, while it would make additional funds available for
providing care to low-income and uninsured veterans, it could also
significantly increase the overall costs of the VA system.  In
addition, authorizing VA recoveries from Medicare could increase
overall federal health care costs regardless of whether VA is allowed
to keep all or a portion of the recoveries.  This is because it would
essentially transfer funds between federal agencies while adding
administrative costs. 


--------------------
\32 Nursing home care is an optional benefit for all veterans. 

\33 VA Health Care Reform:  Financial Implications of the Proposed
Health Security Act (GAO/T-HEHS-94-148, May 5, 1994).

Veterans' Health Care:  Efforts to Make VA Competitive May Create
Significant Risks (GAO/T-HEHS-94-197, June 29, 1994). 


      INCREASED OUTREACH
-------------------------------------------------------- Chapter 6:1.2

With large numbers of service-connected and low-income veterans being
unaware of their eligibility for VA health care, eligibility reform
alone will not enable VA to improve services to all low-income and
uninsured veterans.  VA needs to expand outreach to such veterans to
ensure that they are aware of their eligibility for VA care,
particularly in those states not implementing health reforms. 


      IMPROVED ACCESSIBILITY
-------------------------------------------------------- Chapter 6:1.3

Similarly, as discussed in chapter 3, many veterans do not use VA
simply because VA facilities are not accessible.  Potential options
for making VA health care benefits more accessible include

  expanding VA's fee basis program or establishing a new VA health
     financing program to provide veterans unable to use VA
     facilities access to non-VA acute care services;

  converting VA facilities into managed care plans and contracting
     with private providers to improve availability of VA services;

  expanding an existing federal health care program, such as CHAMPUS
     or Medicare, to provide coverage for veterans;

  authorizing veterans to enroll in the Federal Employees Health
     Benefits Program, with subsidies provided for low-income
     veterans;

  giving veterans vouchers to purchase health insurance; and

  expanding VA's direct delivery system to reach more veterans. 

Changes in veterans benefits that would improve access to community
providers have significant implications both for maintenance of the
direct delivery system and for VA costs.\34

In addition, to the extent such changes involve other public or
private health insurance programs, costs to those programs and total
government costs might be affected. 

Two options for limiting the cost of such expanded access would be to
(1) make VA coverage secondary to any other public or private
coverage or (2) limit coverage to those veterans not having other
public or private health insurance.  For example, Medicare-eligible
veterans might continue to be restricted to use of VA facilities on a
space- and resource-available basis much as military retirees are
under CHAMPUS.  Once a military retiree becomes Medicare-eligible, he
or she can continue to use DOD facilities on a space-available basis
but is no longer eligible for CHAMPUS.  In effect, the costs of care
for Medicare-eligible military retirees are shifted from CHAMPUS to
Medicare. 

A VA health financing benefit could similarly be structured in such a
way that veterans' entitlement to the financing benefits would
terminate for all or some veterans when they become
Medicare-eligible.  Another option that could be explored would be to
convert VA coverage to supplement Medicare for low-income or
service-connected veterans.  In other words, VA could pay the
copayments and deductibles for low-income and service-connected
veterans eligible for Medicare. 


--------------------
\34 Veterans' Health Care:  Implications of Other Countries' Reforms
for the United States (GAO/HEHS-94-210BR, Sept.  27, 1994). 


   SPECIAL CARE NEEDS OF VETERANS
   SHOULD BE TARGETED
---------------------------------------------------------- Chapter 6:2

As discussed in chapters 3 and 4, veterans have a variety of special
care needs that VA is unable to adequately meet because of resource
constraints and limited outreach efforts.  Neither national nor state
health reforms are likely to adequately address these special care
needs in the foreseeable future.  For example, veterans who are
homeless or suffer from a mental illness such as PTSD would continue
to be less likely to seek health care.  In addition, veterans would
continue to be undertreated for ailments that are not well diagnosed,
such as alcoholism. 

Because VA may no longer need to meet the basic health care needs of
most veterans in states that implement comprehensive health reforms,
it has the opportunity to recreate itself in a way that targets the
specific needs of veterans in those states, diverts scarce resources
to strengthen its ability to fulfill its safety net mission in other
states, or both.  For example: 

  VA could serve as an outreach agent to medically underserved
     populations, such as homeless veterans.  Outreach workers could
     enroll the homeless in non-VA plans to ensure that they receive
     needed health care services. 

  VA could shift resources to programs that address specific veteran
     needs.  For example, VA could expand the availability of PTSD
     programs, including intensive outreach to affected veterans and
     readily available treatment facilities. 

  VA could expand the availability of health benefits not covered
     under the minimum benefits package established under a state
     health reform program.  For example, veterans could be offered a
     dental or vision plan if such services were not covered under
     the minimum benefits package. 


   COST SHARING COULD INCREASE
   AVAILABILITY OF LONG-TERM CARE
   BENEFITS
---------------------------------------------------------- Chapter 6:3

Although VA currently lacks adequate resources to meet the long-term
care needs of the aging veteran population, it could serve more
veterans with available funds by (1) adopting the copayment practices
used by state veterans' homes, (2) establishing an estate recovery
program patterned after those operated by increasing numbers of state
Medicaid programs, or (3) creating a mixture of both practices. 

In fiscal year 1990, VA offset--through copayments of $260,389--less
than one-tenth of 1 percent of its costs to provide nursing home care
and domiciliary care in VA and community facilities.  In comparison,
eight states that charge for care offset from 4 to 43 percent of
state veterans' home operating costs through copayments.\35 If VA had
offset similar percentages, its yearly recoveries would have been
between $43 million and $464 million depending on which state
copayment provisions were adopted. 

The states were able to offset a larger percentage of their operating
costs through copayments than VA because

  more veterans were required to make copayments and

  veterans who contributed toward the cost of their care were
     typically required to make larger copayments. 

Safeguards were used in each of the eight states to help prevent
copayments from impoverishing a veteran's spouse or dependent
children and to help ensure that veterans capable of returning home
retain sufficient financial resources to return to the community.\36

VA could also offset a significant portion of its nursing home and
domiciliary care costs if it had the same authority states were given
to operate estate recovery programs under Medicaid.  Estate recovery,
a process through which a government agency recovers the costs of
services provided to a beneficiary by filing a legal claim against
the beneficiary's estate, can be used by VA only to collect unpaid
nursing home copayments.  Because few veterans are required to make
copayments and those who are required to contribute toward the cost
of their care make only nominal payments, VA has never attempted to
recover its costs for providing nursing home care from veterans'
estates. 

By contrast, states are authorized by title XIX of the Social
Security Act to recover part of the nursing home costs paid by
Medicaid from recipients' estates if the Medicaid recipient had no
surviving spouse or children under 21 years old, blind, or totally
and permanently disabled.  Individuals are not allowed to give away
or transfer ownership of assets for less than fair market value
within 30 months of applying for Medicaid eligibility if the intent
of such action is to qualify for Medicaid. 

Estate recovery programs can offset a significant portion of the
costs of providing nursing home care to residents who own homes.  In
six states that did not have estate recovery programs, we estimated
that estate recovery programs could potentially recover 68 percent of
the Medicaid nursing home benefits paid for recipients who owned
homes.\37

The potential for recovering nursing home and domiciliary costs
through estate recoveries may be greater for veterans than for
Medicaid recipients.  This is because (1) home ownership--the primary
asset of most elderly persons--is significantly higher among elderly
veterans than among Medicaid nursing home recipients and (2) veterans
living in VA facilities generally contribute much less of their
incomes toward the cost of their care than do Medicaid recipients,
allowing veterans to build bigger estates.  Veterans using
VA-supported nursing homes appear to have hundreds of millions of
dollars in assets that could, upon their death or the death of their
surviving spouses or dependent children, be used to help offset VA's
costs for providing care or to expand the availability of
VA-supported nursing home care.\38


--------------------
\35 In 1991, 39 of the 40 states with veterans homes required
veterans to contribute to the cost of their care; only Georgia did
not require veterans to make copayments. 

\36 VA Health Care:  Offsetting Long-Term Care Costs by Adopting
State Copayment Practices (GAO/HRD-92-96, Aug.  12, 1992). 

\37 Medicaid:  Recoveries From Nursing Home Residents' Estates Could
Offset Program Costs (GAO/HRD-89-56, Mar.  7, 1989). 

\38 VA Health Care:  Potential for Offsetting Long-Term Care Costs
Through Estate Recovery (GAO/HRD-93-68, July 27, 1993). 


   VA'S RESTRUCTURING DIRECTED
   TOWARD COMPETITION WITH PRIVATE
   SECTOR RATHER THAN VETERANS'
   NEEDS
---------------------------------------------------------- Chapter 6:4

While many options are available for improving health care services
for veterans, VA has focused its restructuring efforts more on
preserving VA's direct delivery system than on addressing the
changing health care needs of veterans.  First, plans developed
during the 103rd Congress based on the administration's ill-fated
Health Security Act (H.R.  3600) would have turned VA health care
facilities into a series of prepaid managed care plans providing
essentially the same health care services that would have been
available to veterans through enrollment in any of the competing
health plans.  VA's plans, we reported, could have actually decreased
VA's ability to meet the special care needs of veterans. 

Second, in seeking proposals for pilot projects in states
implementing health reforms, VA again focused on competing as a
full-service managed care plan.\39 The July 1994 VA Solicitation for
Proposals for State Health Care Reform Pilot Projects did not seek
proposals that would retarget VA resources in the states to services
not covered under the state reform program.  Rather, it sought
proposals focusing on development of VA health plans competing to
provide the same basic benefit package veterans would receive under
other health plans.  In addition, pilot projects were not solicited
from VA medical centers in states not implementing health reforms. 


--------------------
\39 Legislation to authorize the pilot projects was considered but
not enacted during the 103rd Congress.  VA expects to propose similar
legislation during the 104th Congress. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 6:5

Regardless of whether there are national or state health care
reforms, major changes are needed in the VA health care system to
enable it to better meet the health care needs of veterans.  VA's
current and past efforts, however, have focused more on options for
preserving the VA direct delivery system than on restructuring VA
health care benefits to meet the changing health care needs of
veterans.  Nowhere is this clearer than in VA's current effort to
develop pilot projects in states planning to implement comprehensive
health care reforms. 

In states implementing comprehensive health reforms, virtually all
veterans would have basic acute care coverage even if there was no VA
health care system.  VA, however, wants to create and pilot test VA
managed care plans to compete with private sector health plans
providing essentially the same benefits.  In states that do not plan
health reforms to cover the uninsured, however, large numbers of
low-income veterans are likely to continue to be without health care
options.  In our opinion, VA should focus its restructuring efforts
on pilot testing ways to ensure that all veterans in states not
planning health care reforms have at least one accessible health care
option before trying to compete to provide veterans in states
implementing health reforms an additional health care option. 

State health reforms also provide VA the opportunity to pilot test
other restructuring options that would transform the VA system into a
form of supplementary insurance program to complement rather than
duplicate coverage available under other programs. 


   RECOMMENDATIONS TO THE
   SECRETARY OF VETERANS AFFAIRS
---------------------------------------------------------- Chapter 6:6

In light of governmentwide efforts to reduce the budget deficit and
improve services to the public, we recommend that the Secretary of
Veterans Affairs, in concert with veterans service organizations and
other federal and state agencies with jurisdiction over health
benefits programs, (1) identify and evaluate options to better target
VA resources to meet the health care needs of veterans and (2)
develop legislative proposals to restructure the veterans health
benefits program. 

In considering options, the Secretary should, to the extent feasible,
retarget VA resources toward supplementing rather than duplicating
health care services available under other public and private health
benefits programs.  In addition, the Secretary should assess the
costs associated with any expansion of VA eligibility and identify
and evaluate options for paying for any such expansions. 

Finally, the Secretary should reevaluate VA's role in meeting the
long-term care needs of an aging veteran population and explore
options, such as estate recoveries and cost sharing, for paying for
any expanded role. 


   VA COMMENTS AND OUR EVALUATION
---------------------------------------------------------- Chapter 6:7

The Secretary of Veterans Affairs, by letter dated February 22, 1995,
said that VA does not agree with our recommendations that it (1)
identify and evaluate options to better target VA resources to meet
the health care needs of veterans and (2) develop legislative
proposals to restructure the veterans health benefits program. 


      POTENTIAL EFFECTS OF GAO'S
      RECOMMENDATIONS
-------------------------------------------------------- Chapter 6:7.1

Our recommendations would, the Secretary said, result in dismantling
VA's patient care and other missions (medical research, medical
education, and military backup), relegate VA to a largely
administrative role as a "niche" provider, and mainstream veterans
into a fragmented private health care system.  Our report, according
to the Secretary, denies the significant contributions VA has made to
the overall quality of our nation's health and VA's long-standing
commitments to veterans' health care. 

We agree that VA has made significant contributions to the nation's
health through its research and medical education missions but see no
reason why such missions could not be maintained or even enhanced
under a restructured veterans health care program.  For example, if
the VA system was restructured to focus on direct delivery of
services such as blind rehabilitation and spinal cord injury
treatment not extensively covered under other public and private
programs, VA could fund research and support medical education
relating to those medical specialties.  This would further strengthen
VA's already prominent position in these areas. 

VA's military backup mission could be similarly redefined to focus on
those areas, such as blind rehabilitation and spinal cord injury
treatment, where community facilities lack the ability and/or
capacity to absorb returning casualties.  Likewise, enhancing VA's
ability to treat PTSD would improve VA's ability to provide backup
support to DOD in any future conflict.  Support for such war-related
stress is not likely to be widely available in the private sector. 
In our opinion, such retargeting would strengthen, not weaken, VA's
role as a backup to DOD. 

Chapter 6 identifies several options for improving veterans' access
to health care but it was not our intent to identify and evaluate an
exhaustive list of options and recommend one alternative.  Rather, we
have recommended that VA identify and evaluate options.  Moreover,
the options discussed range from expanding VA's direct delivery
system to reach more veterans to offering veterans vouchers to be
used in purchasing care from private sector providers.  Although VA
has not submitted legislative proposals to the new Congress for
restructuring veterans health benefits, we included VA's plans for
converting VA facilities into managed care plans as an option based
on the administration's proposal under last year's Health Security
Act. 

Obviously, many factors need to be considered in identifying and
evaluating options including (1) how well veterans' health care needs
would be addressed (considering both care available through VA and
through other sources), (2) the effects on health care costs through
both VA and other public and private insurance programs, (3) how VA's
role in medical education, research, and military backup would be
affected, and (4) how VA facilities and staff would be affected. 
Although VA's secondary missions and the existing VA direct care
infrastructure are important factors to consider in evaluating
options, we do not believe that they should preclude consideration of
other options.  In our opinion, VA needs to determine how veterans
can be assured the availability of the widest range of services at
the lowest cost to the government.  In other words, VA needs to focus
more on ensuring that veterans obtain needed health care services
than on ensuring that VA, rather than some other health care provider
or managed care plan, pays for that care. 


      VA EFFORTS TO ADDRESS
      CHANGING NEEDS
-------------------------------------------------------- Chapter 6:7.2

VA said that our report does not acknowledge its efforts to address
veterans' changing health care needs and redefine VA's role in the
marketplace.  VA is, the Secretary said, redefining its health care
system to ensure that all veterans' health care needs are effectively
assessed and met.  VA said that it is positioning itself to compete
and increase its market share of those veterans who, for whatever
reason, do not currently use VA.  Specifically, VA said that it has
developed a number of initiatives for improving access to care
including a review of eligibility rules.  These initiatives, VA said,
would allow it to provide managed care and primary care to more
veterans in a cost effective manner.  Its proposals will, according
to VA, promote continuity of care and eliminate veterans' confusion
about their eligibility. 

Our report discusses (see pages 3 and 14) VA's plans to move toward a
managed care system and its efforts to develop pilot projects to test
managed care in states implementing comprehensive health reforms. 
Because VA has not submitted specific legislative proposals for
eligibility reform or released details of its planned reorganization,
we are unable to fully discuss those efforts.  We have, however,
expanded the discussion on page 14 to acknowledge that these and
other initiatives are ongoing. 

VA, in its comments, indicates no plans to assess the costs
associated with its planned eligibility expansion or to evaluate
options for paying for any such expansions.  As discussed in our
reports and testimonies on the eligibility and entitlement provisions
VA supported as part of last year's proposed Health Security Act, the
administration significantly underestimated the budgetary
implications of the provisions. 


      VA'S ROLE IN HEALTH REFORM
      DEBATE
-------------------------------------------------------- Chapter 6:7.3

Our report, according to VA, fails to acknowledge that much of VA's
effort during the national health care reform debate was designed to
rationally provide for equity of access to VA health care and to
allow veterans a choice of providers, goals that continue for VA,
despite the failure of national reforms. 

As discussed above, our reports and testimonies on the veterans'
provisions of the administration's proposed Health Security Act
detailed numerous concerns about the provisions.  For example, the
eligibility provisions could have required tens of billions of
dollars in additional VA appropriations and yet reduced access to
specialized services such as blind rehabilitation and spinal cord
injury treatment.  We chose not to discuss the weaknesses in VA's
proposal during the national health care debate because the
administration has identified no plans to reintroduce the Health
Security Act. 


      VA COVERAGE IN STATES WITH
      HEALTH REFORMS
-------------------------------------------------------- Chapter 6:7.4

VA disagreed with our suggestion that it limit its health care
coverage in states that have enacted health care reform legislation
or provide coverage only to those veterans who lack private or other
public health insurance.  To do so would, according to VA,
discriminate against veterans who have earned the right to a national
standard of health care services and remove the safety net for
veterans. 

In an era of limited government resources, we believe it imprudent to
invest additional resources in an attempt to attract veterans away
from other health care plans and, in effect, shift resources from
other payers to the federal government.  For veterans, other than
those with service-connected disabilities rated at 50 percent or
higher, the "national standard of health care services" to which
veterans currently have a right is lower than the standard to which
veterans and other residents would be entitled under the state reform
proposals.  Veterans in states implementing comprehensive reforms no
longer need VA as a safety net (other than those veterans not covered
under the state reforms).  As discussed in chapter 3, however, there
are many veterans in states not implementing comprehensive reforms
who are falling through holes in VA's safety net.  In our opinion, VA
should focus on closing holes in its safety net before developing
plans to increase its market share of privately insured veterans. 


      ACCURACY AND APPROPRIATENESS
      OF SUPPORTING DATA
-------------------------------------------------------- Chapter 6:7.5

Finally, VA said that our report is based on (1) unsupported
supposition about what will happen with health care delivery in the
public and private sectors, (2) factual errors in the discussion of
VA eligibility, and (3) questionable interpretation of data.  VA
provided a detailed listing of concerns about the accuracy and
appropriateness of data in our report. 

After careful review of VA's additional comments and followup with VA
officials, we found nearly all of VA's concerns about the accuracy
and appropriateness of our supporting data to be unfounded. 
Specifically,

  VA said that there were factual errors in our discussion of
     eligibility.  The additional VA comments cited no examples of
     factual errors, and the VA officials we followed up with could
     cite none. 

  VA said that our report stated that only 1 in 10 veterans use VA
     health care.  The report contained no such statement. 

  VA said we inappropriately used the 1987 Survey of Veterans for
     analyzing substance abuse treatment in VA.  Our analysis was
     based on detailed assessments at five VA medical centers not on
     the 1987 Survey of Veterans (see p.  18). 

  VA criticized us for using data on private health insurance
     coverage of hospital inpatients rather than data on all users. 
     We used the VA Survey of Medical System Users which states that
     ".  .  .  one in three medical system users .  .  .  have any
     private health insurance."

Appendix II contains a detailed analysis of VA's additional comments. 




(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
VETERANS AFFAIRS
============================================================ Chapter 6



(See figure in printed edition.)


EVALUATION OF ADDITIONAL VA
COMMENTS
========================================================== Appendix II

VA's additional comments noted on the following pages are copied from
the enclosure that accompanied its February 22, 1995, letter to GAO. 
References to pages in the draft report have been changed to refer to
pages in the final report.  Each section of VA comments is followed
by our evaluation. 


   VA COMMENT 1
-------------------------------------------------------- Appendix II:1

For example, veterans who are eligible for Medicare and required to
use that program for their health care needs would be subjected to
deductibles, copayments, and time-eligibility rules that are both
costly to the veteran and ultimately restrictive on the amount of
services the veteran could receive.  As the report indicates,
outpatient prescriptions, dental and vision care, nursing home care,
and long-term psychiatric care are either not covered or only partly
covered by Medicare.  Denying them these services can only increase
unmet need.  It seems inconceivable that the report states that
veterans may forgo treatment because of high out-of-pocket costs on
one page and then concludes that veterans should be subjected to
out-of-pocket costs as dictated by their insurers. 


   GAO EVALUATION
-------------------------------------------------------- Appendix II:2

We did not conclude or recommend that eligible veterans should be
restricted to use of the Medicare program and forced to endure the
shortcomings of that program.  Our discussion of potential changes in
the relationship between VA and other health benefits programs was
presented in the context of the significant cost implications of
expanding access through the VA health care system.  We mentioned two
options for limiting the cost of such expanded access:  VA coverage
(1) might be made secondary to any other public or private health
insurance or (2) might be limited to those veterans not having other
public or private health insurance. 

With respect to Medicare, we stated that a new VA health financing
benefit could, like CHAMPUS, be structured to terminate for all or
some veterans when they become Medicare-eligible.  We made no such
suggestion with respect to termination of veterans benefits under the
current direct delivery system.  In fact, we suggested that
Medicare-eligible veterans might continue to use VA facilities on a
space and resource availability basis much as military retirees use
DOD facilities once their CHAMPUS eligibility ends.  We went on to
suggest that another option that could be explored would be to
convert VA coverage to supplement Medicare for low-income or
service-connected veterans or both. 

We point out in chapter 2 that veterans may forgo treatment under
public and private health insurance programs because of high
out-of-pocket costs stemming from deductibles and copayments.  We
also point out that some medical services such as outpatient
prescription drugs and long-term care are not covered under these
programs.  Such shortcomings in Medicare coverage and coverage under
other health insurance programs are the types of unmet health care
needs that the VA medical system might be restructured to more
effectively address. 


   VA COMMENT 2
-------------------------------------------------------- Appendix II:3

In discussing veterans' reasons for not using VA, (page 32), the
ordering of the reference to quality, accessibility, and awareness is
misleading.  It implies that quality was a primary issue, when, in
fact, Table 3.1 indicates that only 3.8% of veterans cited poor
quality as a factor.  Eleven other issues were rated as having higher
impact on choice.  VA's respondent rate with respect to quality of
care compares favorably with that of the private sector.  This is
consistent with recent findings of the Joint Commission on the
Accreditation of Healthcare Organizations (JCAHO), which document
that the care provided in the VA system compares exceptionally well
with private sector counterparts. 


   GAO EVALUATION
-------------------------------------------------------- Appendix II:4

The data VA cites are not comparable.  Table 3.1 summarizes the
reasons the estimated 21 million veterans (including both high- and
low-income and insured and uninsured veterans) who had never used VA
health care services gave for not using VA.  As discussed on page 32,
we conducted further analyses of the 1987 Survey of Veterans to
determine how many veterans cited reasons related to accessibility,
eligibility, or quality but not reasons indicating that they had
health care options in addition to VA.  This analysis identified 18.1
million nonusers who cited reasons indicating that they had other
health care options.  The estimated 2.9 million veterans not
indicating options for care chose not to use VA health care for
reasons related to accessibility of VA care, unawareness of their
eligibility for VA care, or concerns about the quality of VA care. 
Wording on page 32 has been revised to reemphasize that most veterans
cited reasons for not using VA health care that suggest that they had
other health care options. 


   VA COMMENT 3
-------------------------------------------------------- Appendix II:5

In one of numerous examples of poor data analyses and presentation,
GAO mixes data about VA inpatient users with all users (Figure 5.1). 
It appears more to GAO's purpose to report the much lower private
health insurance coverage rate of VA's inpatients (33%) rather than
the rate for all users (71%).  Similarly, GAO reports the much higher
"no coverage" rate of VA inpatients rather than for all VA users
(12%). 


   GAO EVALUATION
-------------------------------------------------------- Appendix II:6

As indicated in the footnote to figure 5.1, our data on private
health insurance coverage came from the VA Survey of Medical System
Users which states "[o]nly one in three VA medical system users (33%)
have any private health insurance .  .  .." The major veterans
service organizations cite this same statistic in their 1996
Independent Budget. 

We obtained and reviewed backup documentation for VA's estimates of
private health insurance coverage of VA users.  VA based its
estimates largely on responses to a question in the 1987 Survey of
Veterans that VA had previously advised us was unreliable.  In its
analysis, VA counted as VA outpatient users those veterans who
responded affirmatively to a question about whether they had gone
"[t]o a private, non-VA doctor, clinic, health maintenance
organization, or other medical facility AT VA EXPENSE." The question
was intended to determine how many veterans had used the fee-basis
program. 

As VA noted in its comments on our 1992 report VA Health Care: 
Alternative Health Insurance Reduces Demand for VA Care,
significantly more veterans answered this question affirmatively than
answered the preceding question concerning use of VA outpatient
clinics.  In fact, the survey projected that significantly more
veterans had used the fee-basis program in the preceding year than
there were total fee-basis visits in that year.  VA, both in its
comments on our 1992 report, and in the analysis supporting its
estimate that 71 percent of VA users have private health insurance,
assumed that the veterans who incorrectly interpreted the fee-basis
question intended to indicate that they had used VA outpatient
clinics. 

We noted VA's concern about the accuracy of the questionnaire
responses in our 1992 report but noted that we did not believe it
would be appropriate to combine the responses to the two questions as
an estimate of VA outpatient users because it would also include
those veterans who understood the question and used only fee-basis
care.  Subsequently, we conducted further analyses of the health
insurance coverage of respondents to the two questions VA cited and
the question that immediately followed them that asked the veterans
whether they had gone "[t]o a private, non-VA doctor, clinic, health
maintenance organization, hospital (outpatient), or other medical
facility AT YOUR OWN EXPENSE OR COVERED BY INSURANCE?"

This analysis showed dramatic differences between the insurance
coverages of veterans who indicated that they had used a VA clinic
and those that indicated that they had used a private facility at VA
expense.  For example, 39 percent of those who indicated that they
had used a VA clinic had no public or private insurance while only 6
percent of those who indicated that they used a private doctor at VA
expense said that they had no health care coverage.  Similarly, 34
percent of veterans who indicated that they used VA clinics said that
they had only private health insurance while 67 percent of those who
indicated that they used a private doctor at VA expense said that
they had only private health insurance.  The insurance coverages of
veterans who indicated that they used private doctors at their own
expense or covered by insurance, however, are very close to the
coverages of veterans who said they used non-VA doctors at VA
expense. 

Because so many veterans answered the defective question
affirmatively (1,963,813) compared with those who indicated that they
used VA clinics (1,323,377), their responses overwhelmed VA's
analysis once VA assumed that both groups should be counted as VA
clinic users.  This problem with VA's analysis was previously brought
to the attention of VA officials but apparently continues to form the
basis for analyses by VA's Health Care Transition Office. 

Contrary to VA's suggestion, it would have been more to our purpose
in chapter 5, entitled "Most VA Users Have Other Health Care
Options," to have used higher estimates of veterans' private
insurance coverage, such as those VA cites.  But we do not believe
such estimates are supportable. 


   VA COMMENT 4
-------------------------------------------------------- Appendix II:7

GAO states that there is significantly improved health insurance
available today than when VA was established in 1930.  While this
statement is generally true, questions of affordability and
accessibility of that insurance for many veterans are not addressed. 
Medicare copayments, which are quite high, are out of reach for many
veterans, and those copayments do not include coverage for
prescriptions. 


   GAO EVALUATION
-------------------------------------------------------- Appendix II:8

We agree that health insurance remains unavailable to many veterans
for a variety of reasons, but disagree with VA's assertion that our
report does not address questions about the availability and
affordability of health insurance.  Chapter 2 specifically focuses on
the 2.6 million veterans who had neither public nor private health
insurance in 1990 and discusses the effects that out-of-pocket costs
and coverage limits can have on insured veterans' access to health
care services.  It is such unmet needs that we are suggesting VA
focus on rather than competing to provide services already available
to veterans through other programs. 


   VA COMMENT 5
-------------------------------------------------------- Appendix II:9

Access to Medicaid requires that veterans, in essence, spend all of
their assets before they are eligible for services such as long term
care.  Forcing veterans to spend all assets before eligibility is
granted is not acceptable. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:10

By providing essentially cost-free nursing home care (VA recovers
less than one-tenth of one percent of its nursing home costs through
copayments), VA limits the number of veterans it can serve within
available resources.  With available resources, VA currently provides
nursing home care to only about 16 percent of veterans in need of
such care, essentially forcing most veterans who need nursing home
care to either pay for their own nursing home care or spend all of
their income and assets on health care and become Medicaid eligible. 

In other words, VA, by directing all of its nursing home care
resources toward providing essentially cost-free care to 16 percent
of veterans needing such care, is, in effect, forcing the remaining
84 percent of veterans needing nursing home care to do what it terms
"not acceptable."


   VA COMMENT 6
------------------------------------------------------- Appendix II:11

Many veterans would not be eligible for many existing health
insurance programs due to pre-existing conditions.  On page 40, GAO
notes that 15% of veterans using VA have incomes over $20,000.  That
still leaves a substantial 85% of veterans (many of whom have
families) with annual incomes of less than $20,000. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:12

We agree and believe that VA should focus its limited resources on
helping veterans who lack other health care options.  As discussed in
chapter 4, about 191,000 low-income and uninsured veterans with no
other apparent health care options have not used VA health care
because they are not aware of their eligibility, VA care is not
accessible to them, or they have concerns about the quality of VA
care.  In our opinion, VA should focus its restructuring efforts on
identifying and serving such veterans before attempting to attract
privately insured veterans and Medicare-eligible veterans away from
their private sector providers. 


   VA COMMENT 7
------------------------------------------------------- Appendix II:13

The GAO cites previously published report findings as being factual,
when, in fact, VHA criticized GAO's methodology and findings in our
official responses.  For example, a GAO report suggesting a potential
50% decline in demand for VA care in the event of national health
insurance implementation has substantial weaknesses and
methodological faults. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:14

VA's comments on our earlier reports were included and fully
evaluated in those reports.  Our methodology and findings in the
report VA cites were thoroughly reevaluated in response to VA's
comments and found to be sound. 


   VA COMMENT 8
------------------------------------------------------- Appendix II:15

GAO states that only one in ten veterans use VA health care services. 
This is a misrepresentation of statistics.  The preliminary 1994
National Survey of Veterans reveals that of all veterans surveyed,
54.8% received some kind of medical care in 1992.  This means that of
approximately 27.4 million veterans, 15 million received health care
in 1992.  During this period, VA provided medical care to
approximately 20% of all veterans requiring medical care. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:16

Our draft report neither stated nor implied that only 1 in 10
veterans use VA health care services. 


   VA COMMENT 9
------------------------------------------------------- Appendix II:17

GAO states that the 1994 National Survey of Veterans is not expected
to produce substantially different results.  However, the 1994 survey
was redesigned in such a manner as to overcome the deficiencies of
the 1987 survey.  For example, the initial survey was a simple random
survey which under-sampled in several veteran categories.  In
contrast, the new survey has a stratified random sample and employed
under- and over-sampling for the first time.  This technique will
produce more statistically valid estimates. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:18

We repeatedly attempted to obtain data from the 1994 survey to
determine whether there have been significant changes in veteran
responses, but were told that data were not yet available.  However,
a VA official involved in designing and analyzing the 1994 survey
told us that the 1994 survey results appear not to be significantly
different than the 1987 survey results. 


   VA COMMENT 10
------------------------------------------------------- Appendix II:19

Many of the assumptions GAO makes in this report have cost
ramifications.  For example, on page 4, GAO states that VA should
design its health care to complement rather than duplicate coverage
provided through other public and private health benefits programs. 
It is very likely that redesigning VA's health care system to
complement public and private sector programs will result in an
increase in the overall costs to provide care, since some entity will
have to pick up the costs of the basic benefits that had been
provided (if, in fact, they would be available at all to many
veterans). 


   GAO EVALUATION
------------------------------------------------------- Appendix II:20

In authorizing VA recoveries from private health insurance, the
Congress determined that VA does not have the primary responsibility
for paying for health care services provided to privately insured
veterans except in the case of care provided for service-connected
conditions.  In our opinion, VA should be concerned with designing
veterans health care benefits that will give the largest number of
veterans the broadest array of services with the lowest out-of-pocket
costs within available resources, regardless of source of payment. 
In other words, we see nothing wrong with a VA case manager referring
a veteran to a community-run meals-on-wheels program or substance
abuse program if it will conserve VA resources and expand VA's
ability to meet veterans' health care needs.  Overall health care
costs are likely to increase only to the extent that retargeting VA
health care programs is successful in expanding services provided to
veterans.  In our opinion, using VA resources to expand services to
veterans is appropriate.  The costs of doing such might be covered by
savings from eliminating duplicative, competing services. 


   VA COMMENT 11
------------------------------------------------------- Appendix II:21

GAO also suggests that the Fee Basis Program could be expanded to
improve access, and though not explicitly stated in the text, the
implication is that a decrease in the number of employees would
result.  It is true that Fee Basis could be expanded.  However, it
must also be realized that care delivered in the Fee Basis Program is
significantly more expensive per patient than that delivered by VA
personnel.  This is one reason why the Department maintains tight
eligibility controls for this program. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:22

VA provides no data to support its statement that fee-basis care is
significantly more expensive than outpatient care delivered by VA
personnel.  Although performing valid cost comparisons is
complicated, readily available data suggest that VA's statement is
questionable.  In fiscal year 1994, VA paid an average of $96 per
fee-basis visit.  By comparison, VA's fiscal year 1994 billing rate
for outpatient care provided in a VA clinic was $158. 


   VA COMMENT 12
------------------------------------------------------- Appendix II:23

GAO also suggests that VA focus on care for the homeless, PTSD,
chronic psychiatry and long term care patients.  VA continues to
expand services to veterans in these areas.  Nevertheless, GAO fails
to acknowledge that it is not for VA alone to address what are major
societal problems and shortcomings in the general health care system. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:24

As stated on pages 18 and 43, it is unlikely that either public and
private health insurance or the veterans health program will ever
have adequate resources to meet all of the health care needs of every
veteran.  As a result, it is important that the VA system have clear
priorities for how limited health care resources will be targeted and
designed to supplement rather than unnecessarily duplicate health
care coverage available under other programs.  We do not agree with
VA, however, that it does not have primary responsibility for
treating service-related PTSD. 


   VA COMMENT 13
------------------------------------------------------- Appendix II:25

GAO states (page 5) that alcoholism is a frequently undiagnosed and
untreated problem of veterans using VA medical centers.  Although
there are undoubtedly many undiagnosed substance abusers among
veterans, substance abuse continues to be the most frequent of the
Diagnostic Related Groupings (DRG) in VA.  It is diagnosed at a much
higher rate in VA than in the private sector.  However, diagnosis of
a substance abuse problem does not preclude the common refusal of
patients to undergo treatment. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:26

On both page 5 and page 18, our discussions of substance abuse begin
with statistics showing that substance abuse is a frequently
undiagnosed and untreated problem in the general public.  For
example, we point out that less than 15 percent of the estimated 18
million Americans with alcoholism receive treatment.  Information on
VA is presented to show that VA is not adequately filling the gap
created through public and private health insurance, rather than to
compare the relative effectiveness of two programs, neither of which
is adequately meeting the health care needs of veterans. 


   VA COMMENT 14
------------------------------------------------------- Appendix II:27

In other areas of the report, GAO inappropriately bases estimates of
the extent of undiagnosed, untreated alcoholism on the responses
contained in the 1987 Survey of Veterans, rather than on a
clinician's diagnosis or assessment.  This is unsupportable. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:28

We did not use the 1987 Survey of Veterans to estimate the extent of
undiagnosed, untreated substance abuse.  Our estimates of the extent
of undiagnosed, untreated substance abuse are, as stated on page 18,
based on our 1990 survey of veterans applying for care at five VA
medical centers during a 10-day period.  In that study we applied a
generally accepted alcoholism screening instrument to over 2,200
veterans and met with 20 VA physicians responsible for their care. 


   VA COMMENT 15
------------------------------------------------------- Appendix II:29

On page 3, GAO links the decreasing number of veterans with the
decrease in the number of discharges since 1988 (through 1992).  The
causal relationship between these two facts is just that.  Other
important factors, such as the rapid movement towards ambulatory care
and improved utilization management, have also led to a decrease in
the number of non-acute admissions.  Utilization of acute care beds
has been decreasing rapidly in private sector facilities, as well,
and the VA phenomenon must be interpreted in light of the overall
trend in health care. 

In contrast, a review of outpatient workload during this same time
period reflected an increase of 9%.  This is not mentioned in the
report nor is there any correlation made with new unique veterans or
with deaths.  In addition, during this same period, laws governing VA
medical benefits were significantly changed.  P.L.  100-322 added
additional criteria for income screening when providing outpatient
care to certain veterans.  Because this period showed great
inconsistency in the manner in which access to care was addressed,
the validity of access/use data from this time frame is questionable. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:30

We agree that many factors contribute to changes in VA's inpatient
workload and have revised the discussion on page 3 to show that a
number of factors contribute to the decline in VA discharges.  These
factors, however, highlight the challenge facing VA's acute care
hospitals.  Regardless of the reasons for declining inpatient
hospital utilization, VA will have to either capture an ever
increasing market share of the veteran population or open its
facilities to nonveterans if it is to maintain its acute care
utilization. 


   VA COMMENT 16
------------------------------------------------------- Appendix II:31

GAO reviewers appear to be unaware of the fact that although long
term care needs do increase as people age, so to [sic] does the need
for acute care.  Older people have a higher rate of acute episodes
and take longer to recover.  This is not discussed in the report. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:32

We agree that the elderly have increased acute hospital needs.  The
focus of our report, however, is on health care needs that are not
met through existing public and private health insurance programs or
VA.  We do not believe acute hospital care is generally an unmet need
because virtually all elderly veterans have Medicare part A coverage
providing comprehensive acute hospital coverage.  We also recognize
in chapter 2 that out-of-pocket costs under Medicare can be a barrier
to access for low-income veterans.  We believe paying such
out-of-pocket costs (to the extent they are not paid through the
Medicaid program or Medicare supplemental policies) would be an
appropriate focus for the VA health care system. 


   VA COMMENT 17
------------------------------------------------------- Appendix II:33

Plans for reorganization of the field and VA Central Office have the
potential to decentralize decision-making and to allow determination
of the most effective means of meeting veteran health care needs,
whether through VA resources or through contract arrangements with
private providers.  Additional plans to have more community based
clinics will provide access to care for those veterans who do not
live within reasonable proximity to a medical center. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:34

Details of VA's planned reorganization have not been made available. 
As a result, we are unable to evaluate the extent to which such a
reorganization would be responsive to our report recommendation or
the extent to which it would improve services to veterans.  As
described in VA's comments, however, the reorganization appears to be
focused more on expanding VA's direct delivery system than on
developing a veterans benefits program that supplements those
programs. 


   VA COMMENT 18
------------------------------------------------------- Appendix II:35

The [fourth] paragraph on page 2 states that gradually VA has shifted
to "a system focusing primarily on treatment of low income veterans
with no service-connected disabilities." This statement is followed
by data that indicate that nearly half of veterans served in 1991 had
service connected disabilities.  These statements imply that this is
inappropriate utilization of services without any supporting data to
validate this line of reasoning. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:36

In providing background on the patient population served by VA, we
are not implying that the shift away from treating service-connected
disabilities toward treatment of low-income veterans for
nonservice-connected disabilities is "inappropriate." The information
is presented to demonstrate that VA hospitals are, by and large,
competing to provide veterans the same acute care services available
to them in private sector hospitals.  The primary difference between
VA acute care services and private sector services is the source of
payment. 


   VA COMMENT 19
------------------------------------------------------- Appendix II:37

The third paragraph on page 4 states that "VA cannot adequately
address many of these health care needs because of its reliance on
direct delivery of health care services in VA owned and operated
facilities." There is no acknowledgement by GAO of the many
alternative VHA provisions for care, including fee-basis services,
contract hospitalization, community and state home programs, and
services secured through sharing agreements with affiliates and the
Department of Defense.  Neither does GAO recognize that VHA has
issued a directive to implement primary care in every VHA facility by
FY 1996 along with the expansion of access points to care.  The
impression left by GAO is that VA is serving veterans solely from
within the existing infrastructure.  The report also does not mention
or consider community-based care as a long-term care option. 
Hospital Based Home Care, Home Health Services, Adult Day Health
Care, and Community Residential care need to be recognized. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:38

We agree that VA has numerous community-based options, but use of
these options is limited.  For example, VA points out elsewhere in
its comments that it intentionally makes limited use of its fee-basis
program.  Similarly, VA spends only about $100 million of its $16
billion health care budget on contract hospitalization, using the
program primarily for emergency admissions.  We have, however,
revised the statement on page 4 to indicate that VA relies
"primarily" on direct delivery. 


   VA COMMENT 20
------------------------------------------------------- Appendix II:39

On page 34, the report states that VA "has a broader range of covered
services than most health insurance plans, but no veteran is
currently entitled to the full range of VA services." While this
statement may be accurate, veterans with 100% service-connected
disabilities are eligible for the full range of services.  The only
services not fully available to veterans with disabilities of 50% or
more are certain dental procedures. 


   GAO EVALUATION
------------------------------------------------------- Appendix II:40

Our statement is accurate.  Chapter 4 explains the difference between
eligibility and entitlement to VA health care and points out that
veterans with service-connected disabilities rated at 50 percent or
higher are entitled to comprehensive outpatient and inpatient
hospital services.  They are eligible for, but not entitled to,
nursing home care. 


GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================= Appendix III

GAO CONTACTS

James R.  Linz, Assistant Director, (202) 512-7116
Thomas P.  Monahan, Evaluator-in-Charge, (415) 904-2250

ACKNOWLEDGMENT

Evan L.  Stoll conducted the computer analyses of data from VA's 1987
Survey of Veterans. 


RELATED GAO PRODUCTS
============================================================ Chapter 1

Veterans' Health Care:  Veterans' Perceptions of VA Services and VA's
Role in Health Reform (GAO/HEHS-95-14, Dec.  23, 1994). 

Veterans' Health Care:  Use of VA Services by Medicare-Eligible
Veterans (GAO/HEHS-95-13, Oct.  24, 1994). 

Veterans' Health Care:  Implications of Other Countries' Reforms for
the United States (GAO/HEHS-94-210BR, Sept.  27, 1994). 

Health Security Act:  Analysis of Veterans' Health Care Provisions
(GAO/HEHS-94-205FS, July 15, 1994). 

Veterans' Health Care:  Efforts to Make VA Competitive May Create
Significant Risks (GAO/T-HEHS-94-197, June 29, 1994). 

VA Health Care:  VA and the Health Security Act (GAO/HEHS-94-159R,
May 9, 1994). 

VA Health Care Reform:  Financial Implications of the Proposed Health
Security Act (GAO/T-HEHS-94-148, May 5, 1994). 

Veterans' Health Care:  Most Care Provided Through Non-VA Programs
(GAO/HEHS-94-104BR, Apr.  25, 1994). 

VA Health Care:  Veteran's Perceptions of VA Services and Its Role in
Health Reform (GAO/T-HEHS-94-150, Apr.  20, 1994). 

VA Health Care:  A Profile of Veterans Using VA Medical Centers in
1991 (GAO/HEHS-94-113FS, Mar.  29, 1994). 

Homelessness:  Demand for Services to Homeless Veterans Exceeds VA
Program Capacity (GAO/HEHS-94-98, Feb.  23, 1994). 

VA Health Care:  Restructuring Ambulatory Care System Would Improve
Service to Veterans (GAO/HRD-94-4, Oct.  15, 1993). 

VA Health Care:  Comparison of VA Benefits With Other Public and
Private Programs (GAO/HRD-93-94, July 29, 1993). 

Veterans Affairs:  Accessibility of Outpatient Care at VA Medical
Centers (GAO/T-HRD-93-29, July 21, 1993). 

VA Health Care:  Veterans' Efforts to Obtain Outpatient Care From
Alternative Sources (GAO/HRD-93-123, June 30 1993). 

VA Health Care:  Alternative Health Insurance Reduces Demand for VA
Health Care (GAO/HRD-92-79, June 30, 1992). 

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