Veterans Wonder: Will Biden’s VA Pick Halt Slide Toward Privatization?

Advance media speculation about Joe Biden’s choice for Secretary of Veterans Affairs reflected the common assumption that, per usual, a military veteran would get the job. Instead, Biden has nominated Denis McDonough, a 51-year old veteran of the Obama White House who never served in the military and also lacks any background in health care administration–a relevant qualification because the Department of Veterans Affairs (VA) operates the largest public hospital system in the country.

After working as a Capitol Hill staffer and Center for American Progress senior fellow, McDonough first joined the Obama Administration as a national security advisor. Later, he became the president’s second-term chief of staff.  In that role, McDonough is credited with being “deeply involved” in the White House shake-up of the VA leadership after veterans’ hospital managers in Phoenix falsified data about how long patients were waiting for appointments, triggering a major political uproar. According to a colleague at the time, McDonough became “obsessed” with healthcare wait times. He helped solve that problem by rounding up Capitol Hill support for VA outsourcing  via the Veterans’ Choice program, recently hailed by the New York Times as one of Obama’s “most substantial second-term legislative achievements.”

Despite their own support for Choice six years ago, advocates for veterans are giving McDonough mixed reviews now, in the wake of their own organizational exclusion from Biden’s VA transition team. “We were expecting a veteran, maybe a post 9/11 veteran,” huffed Joe Chenelly, executive director of AMVETS. “Maybe a woman veteran. Or maybe a veteran who knows the VA exceptionally well.” Paul Rieckhoff, a co-founder of Iraq and Afghanistan Veterans of America, finds McDonough to be “a shockingly out of touch pick. They could have selected someone who’s been a patient there or has any direct experience with that community.” Pam Campos-Palma, from Vets for the People, expressed similar alarm that “the Biden team didn’t choose someone the veteran community saw themselves in or can trust to know our struggles.”

Other advocacy groups, from Vote Vets to Common Defense, quickly fell in line. They echoed Biden’s own fulsome praise of McDonough’s managerial skills and insider knowledge of how to get things done in Washington. For his part, McDonough struck all the right diversity notes about “making our VA more welcoming to all veterans, including our women veterans, veterans of color and LGBTQ veterans,” and “delivering care and support second to none.”

A Charge in Wrong Direction

At the VA, McDonough’s top priority should be getting something undone—namely, the partial privatization of its Veterans Health Administration (VHA). That process began with the Choice Act in 2014, legislation that had a sunset provision and was not intended by then-Senate Veterans Affairs Committee chair Bernie Sanders to become a permanent solution to expanding access to outside providers.  As Sanders and others argued, veterans would be better served by Congress investing more in the VHA’s own coordinated system of direct and specialized care for nine million patients. Instead, by the final year of Obama’s presidency, the VHA was making over 25 million outside appointments, under guidelines not based on medical necessity. Between 2014 and 2017, the VHA budget for private sector care increased by 39 percent while spending on its own in-house clinical care rose by just 9 percent—a trend which worsened under President Trump. The Choice Act ended up diverting nearly $20 billion from the VHA to private hospitals and doctors, and two for-profit insurers, whose “third party” administration of the program was plagued by over-payments, mishandling of medical record transfers, and botched scheduling of and unacceptable delays for outside appointments.

Veterans groups, like the American Legion and Veterans of Foreign Wars, began complaining about these problems and the quality of care from some Choice providers. By 2018, even Senator Jon Tester (D-MT), currently the top Democrat on the Veterans Affairs Committee, acknowledged that “the Choice program has been a wreck. Every veteran up here will tell you that.”  Unfortunately, that didn’t stop Tester from leading a bipartisan charge further in the wrong direction. In June 2018, Congress passed the VA MISSION Act, handing President Trump one of his biggest legislative victories. Trump’s current VA Secretary, Robert Wilkie, used his MISSION Act authority to further loosen standards for outsourcing care, which diverted billions more to the private healthcare industry. At the same time, Wilkie refused to fill 46,000 vacancies in VHA hospitals and clinics, forcing them to make further private referrals.

COVID-19 made undermining VA care temporarily untenable, even for a Republican ideologue like Wilkie. Last spring, Congress authorized—and Trump approved—an emergency infusion of $20 billion for VA hospital expansion, equipment purchases, and new hiring. The VA reports it has filled 24,000 of those vacant staff positions, an expedited hiring process that President Trump cited during his re-election campaign as one reason why “veteran trust in the VA reached an all-time high.” Until there is widespread COVID-19 vaccination, sending large numbers of veterans to already overburdened non-VA facilities is not going to be much of an option for any Administration.

The Medicare Advantage Model

Based on the track record of the Obama-Biden administration, veterans can’t depend on new leadership and the pandemic to permanently reverse VHA outsourcing. When Obama became responsible for administering Medicare, he never fulfilled his 2008 campaign pledge to eliminate Medicare Advantage, a costly and wasteful partial privatization scheme enacted by his predecessor, George W. Bush. As single-payer advocates David Himmelstein and Steffi Woolhandler have documented, “despite having overhead costs almost seven times that of traditional Medicare (13.7 versus 2 percent), Medicare Advantage plans have grown rapidly. They now cover more than one-third of Medicare beneficiaries, up from 13 percent in 2005.” The Centers for Medicare and Medicaid Services (CMS) did an audit of enrollees’ charts which “indicated that Medicare Advantage plans are collecting $10 billion annually for entirely fabricated diagnoses,” which represents “a small fraction of their overall take from upcoding.” Yet, the Trump Administration ordered changes to CMS’s own Medicare website to trumpet the benefits of Medicare Advantage enrollment.

Medicare Advantage plans are now projected to reach nearly 50 percent of all beneficiaries by 2029, if current enrollment trends continue. And that trendline is not just due to conservative Medicare administrator machinations; the insurance industry is investing heavily in Advantage plan marketing, plus making sure, via political spending and lobbying in Washington, that no president or Congress ever restores the primacy of “original Medicare.”

The Choice and MISSION Acts have fostered a similar dynamic, threatening the future of the VHA. In its original form, veterans’ healthcare was delivered directly, via a well-functioning system of socialized medicine that made the VHA an American cousin of the UK’s National Health Service. But in the past six years, the VHA has been partially converted into a Medicare-style payer of bills submitted by other healthcare providers. Like Medicare Advantage plan providers over the last two decades, private healthcare interests of all kinds have positioned themselves to turn hundreds of thousands of VA patients into their new customers, as soon as conditions in private hospitals and medical practices permit.  The privatizers even have allies in some veterans’ service organizations like AMVETS, which started lobbying last year for a pilot program, called “Veterans Advantage.” Its proposed partner was Care Source, a Medicare Advantage provider and one of the nation’s largest Medicaid managed care plan operators.

Unlike Obama, who criticized John McCain’s defense of Medicare Advantage during the 2008 presidential campaign, Biden’s main criticism of VHA privatization under Trump was that it wasn’t proceeding fast enough, with a wider build-out of MISSION Act-mandated “community care” networks. That may not bode well for undoing the MISSION Act’s damage on McDonough’s watch, particularly if his VA Deputy Under Secretary for Health ends up being an outsourcer, rather than a VHA rebuilder like Dr. Kenneth W.  Kizer. A Navy veteran, physician, and public health expert, Kizer became Under Secretary for Health in 1994 when the agency was struggling to recover from 12 years of conservative Republican rule.

During Kizer’s five years at the helm, VHA made great strides, improving patient safety and primary care delivery, upgrading in-house electronic medical record-keeping, and decentralizing administrative decision-making by shifting it away from VA headquarters and closer to patients and frontline caregivers, more of whom were deployed in community-based outpatient clinics. By the turn of the century, an agency not used to good press coverage was being hailed by Bloomberg Business Week for providing “the best medical care in the U.S.” and by the Harvard Business Review for having undertaken one of the most successful hospital system turnarounds in history.

If the Biden Administration, and its new VA Secretary, want to win plaudits like those again, serving veterans better and saving taxpayer money in the process, privatization is not the way. Reproducing the success of the Ken Kizer era would be a much better strategy, if not one favored by powerful private interests profiting from advantages they’ve gained under the Choice and MISSION Acts.