Medicare Subvention:

Challenges and Opportunities Facing a Possible VA Demonstration

T-HEHS/GGD-99-159: Published: Jul 1, 1999. Publicly Released: Jul 1, 1999.

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William J. Scanlon
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Pursuant to a congressional request, GAO discussed the Department of Veterans Affairs (VA) Medicare subvention demonstration proposal, focusing on: (1) comparing the 1998 House Ways and Means Committee bill on VA subvention with the Senate Finance Committee proposal; (2) the unique characteristics of VA health care that bear on subvention; and (3) the lessons learned from the design and early implementation of the Department of Defense's (DOD) demonstration that may be relevant to VA's proposed demonstration.

GAO noted that: (1) the 1998 House Ways and Means bill and the 1999 Senate Finance proposal are similar in that they both provide for time-limited subvention demonstrations in which Medicare pays VA at a discounted rate to care for veterans who are aged 65 and older and who are covered by Medicare; (2) however, there are also significant differences between the two proposals; (3) for example, the Ways and Means bill includes a permanent program for veterans in rural areas who have low incomes or severe service-connected disabilities, while the Finance proposal would establish two demonstration models--fee-for-service and coordinated care--for lower priority veterans; (4) under any proposal, subvention holds several challenges for VA; (5) it would be challenged to attract to a subvention coordinated care program veterans who enjoy a generous VA benefits package; (6) VA will also need to strengthen its billing systems to operate a fee-for-service model; (7) for both models, VA will need to ensure that veterans' access to services--whether or not they are in the demonstration--is not reduced; (8) learning from DOD's experience to date, VA will need sufficient time to implement a subvention demonstration--officials at every DOD site told GAO that establishing the demonstration was more difficult than they had expected; (9) DOD's experience also shows that VA payment methods must be carefully designed and implemented both to protect the Medicare trust funds and to promote cost consciousness and efficiencies at VA's demonstration sites; and (10) as DOD's experience underscores, sound data systems are essential for managing and evaluating a subvention demonstration.

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