Pursuant to a congressional request, GAO reviewed how various health care reforms could affect Medicare-eligible veterans' demands for health care services, focusing on the: (1) extent to which veterans use the Department of Veterans Affairs (VA) to obtain services not extensively covered under Medicare; and (2) income and private health insurance coverage of Medicare-eligible veterans who chose either Medicare or VA services.

GAO found that: (1) Medicare-eligible veterans make substantial use of VA services not extensively covered under Medicare; (2) many Medicare-eligible veterans use VA specifically to obtain prescription drugs, inpatient psychiatric care, and long-term nursing home care services; (3) Medicare-eligible veterans who use VA health care facilities generally have lower incomes and less private insurance than veterans who rely solely on Medicare; (4) significant out-of-pocket costs have influenced veterans' decisions to use VA health care services; (5) adding Medicare benefits or reducing beneficiary cost sharing could reduce the demand for VA health care services; (6) changes in VA benefits including eliminating access restrictions to outpatient services, improving access to care, and expanding entitlement to free care, could increase the demand for VA health care services; and (7) the continued availability of traditional fee-for-service care under Medicare and the reluctance of Medicare beneficiaries to enroll in health maintenance organizations could reduce veterans' willingness to enroll in VA health plans.