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Cost Analysis:

Asset and Infrastructure Review (AIR) Commission Facility Closure

December 15, 2018
Download a copy of this analysis.

Background

The VA MISSION Act of 2018 establishes an external Asset and Infrastructure Review (AIR) Commission to evaluate all Veterans Health Administration (VHA) facilities with respect to under and over-utilization. In 2023, the AIR Commission will recommend which facilities to close, condense or expand. Congressional members will have limited authority to alter final recommendations.     

The MISSION Act also creates new prerogatives — e.g. access to private sector walk-in care and freedom to select Veterans Community Care Program (VCCP) providers — that are explicitly intended to shift the provision of services from VHA facilities to the private sector. The more care that is delivered in the private sector over the next four years, the more likely that VHA facilities will become underutilized and potentially included on the AIR Commission’s closure list.

Cost Analysis

The AIR Commission differs from the Department of Defense’s Base Realignment and Closure (BRAC) process after which it is modeled. Unlike BRAC consolidations, veterans receiving care at a closed facility would not transfer to another VHA. In nearly all instances, other facilities are too far away. In the few areas where another VHA is within a short distance, there is little capacity to absorb redistributed veterans. All veterans at the closed facility would be offered vouchers for VCCP services.

Overall costs associated with closing a VHA facility will be significantly higher than keeping it open because the number of veterans whose care the VHA finances will automatically increase. The table below shows where that increase would occur:

  A B C  
  Enrolled and had some VHA paid care in the last year Enrolled but had no VHA paid care in the last year Eligible for VHA authorized paid care, but not enrolled Total
Approximate % of U.S. veterans 32% 14% 54% 100%
Approximate total # of U.S. veterans 6.34M 2.81M 10.45M 19.6M
VHA pays for purchased care if facility is open yes no no  
VHA pays for purchased care if facility is closed yes YES If the veteran enrolls  

At present, and for as long as a facility remains open, the VHA pays for VHA facility and purchased VCCP healthcare only for veterans in column A. Veterans in columns B and C use their own public or private insurance. If the AIR Commission closes a facility, VHA will offer VCCP vouchers to all local veterans in columns A and B. That would increase the percentage of local veterans whose yearly care is potentially paid by VHA from 32% to 46%. That percentage will increase even higher depending on how many veterans in column C decide to enroll.

While not every column B veteran will utilize the VCCP vouchers, it is expected that many if not most will, given the financial advantageous in doing so. Further, a sizable percentage of column C veterans are expected to enroll in order to utilize these benefits. According to a 2016 report, the total systemic cost of one proposal to allow private care for veterans could increase outlays by $96 billion to $179 billion a year.

Further costs will accrue when a facility closes because additional VHA staff will be needed to administer the oversight and reimbursement of private sector care.

Summary

Closure of any VHA facility will significantly increase costs to taxpayers and divert critical funds away from the national VHA system.


About the Table:

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The

Privatization Checklist

An easy-to-follow guide to privatize the Veterans Health Administration.

In Washington, political leaders insist they are not trying to privatize the Veterans Health Administration (VHA). Actions, however, speak louder than words.

Privatization does not only mean selling off public sector resources to private sector interests. It involves a range of actions that create the perception that public sector systems do not, and can never, deliver high-quality services. Specific policies and actions then proceed to make this a self-fulfilling prophecy. And voila! You have it: PRIVATIZATION!

To justify privatizing the VHA, they:

  • Portray the public system as broken, or beyond repair.

  • Portray the private sector system as the solution to any quality or service problems in the public sector.

  • Blame any problems in the public system on its employees or administrators rather than on complex social problems or political decisions.

  • Create draconian accountability measures and standards that deprive employees of their workplace rights.

  • Create a ‘shame and blame’ atmosphere in the workplace that demoralizes the public sector workforce.

  • Attack public sector unions as obstacles to “reform,” progress, or the delivery of high quality services.

  • Starve the public sector system of needed resources and appropriate staff.

  • Fail to adequately maintain and improve infrastructure and provide needed equipment and renovate or construct needed facilities.

  • Shift public funds to the private sector.

  • Spin deals with for-profit companies to provide services that have been adequately delivered in the public sector system.

  • Produce erosion of services and respond to service users’ complaints by arguing for further privatization.

How’d we get to this point? The Battle for Veterans’ Healthcare is a long and winding road and if it’s lost, veterans won’t be the only ones who suffer. If the Department of Veterans Affairs is privatized, America’s only integrated health care system will disappear to the detriment of all Americans.


Suzanne Gordon is an award-winning healthcare journalist and VHPI Senior Policy Analyst.

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