Private Medicare Advantage plans being paid for phantom care of VA patients

Duplicate Federal Payments for Dual Enrollees in Medicare Advantage Plans and the Veterans Affairs Health Care System

By Amal N. Trivedi, MD, MPH; Regina C. Grebla, MGA, MPH, PhD; Lan Jiang, MS; Jean Yoon, PhD; Jent Mor, PhD; Kenneth W. Kizer, MD, MPH
JAMA, June 26, 2012


Context: Some veterans are eligible to enroll simultaneously in a Medicare Advantage (MA) plan and the Veterans Affairs health care system (VA). This scenario produces the potential for redundant federal spending because MA plans would receive payments to insure veterans who receive care from the VA, another taxpayer-funded health plan.

Objective: To quantify the prevalence of dual enrollment in VA and MA, the concurrent use of health services in each setting, and the estimated costs of VA care provided to MA enrollees.

Design: Retrospective analysis of 1 245 657 veterans simultaneously enrolled in the VA and an MA plan between 2004-2009.

Main Outcome Measures: Use of health services and inflation-adjusted estimated VA health care costs.

Results: Among individuals who were eligible to enroll in the VA and in an MA plan, the number of persons dually enrolled increased from 485 651 in 2004 to 924 792 in 2009. In 2009, 8.3% of the MA population was enrolled in the VA and 5.0% of MA beneficiaries were VA users. The estimated VA health care costs for MA enrollees totaled $13.0 billion over 6 years, increasing from $1.3 billion in 2004 to $3.2 billion in 2009. Among dual enrollees, 10% exclusively used the VA for outpatient and acute inpatient services, 35% exclusively used the MA plan, 50% used both the VA and MA, and 4% received no services during the calendar year. The VA financed 44% of all outpatient visits (n = 21 353 841), 15% of all acute medical and surgical admissions (n = 177 663), and 18% of all acute medical and surgical inpatient days (n = 1 106 284) for this dually enrolled population. In 2009, the VA billed private insurers $52.3 million to reimburse care provided to MA enrollees and collected $9.4 million (18% of the billed amount; 0.3% of the total cost of care).

Conclusions: The federal government spends a substantial and increasing amount of potentially duplicative funds in 2 separate managed care programs for the care of same individuals.


By Don McCanne, MD

Most veterans who are eligible for enrollment in the Veterans Administration health care system are also eligible for enrollment in Medicare when they turn 65. Many of these veterans elect to enroll in the publicly-financed but private Medicare Advantage plans. This study shows that these private plans benefit greatly by receiving full capitation payments for all care in spite of the fact that they avoid the costs of the care that is actually delivered in our publicly-financed VA system. Thus taxpayers are paying twice for the same care - real care in the VA system and phantom care under the Medicare Advantage plans.

The authors suggest that rules could be changed to rectify this. Either the VA could be authorized to bill the private Medicare Advantage plans for care delivered by the VA (currently prohibited by federal law - a law dating back to before private Medicare plans were available), or the capitation payments to the Medicare Advantage plans could be adjusted downward to reflect the use of VA facilities.

There is a far better choice. The traditional Medicare program could be improved by expanding benefits and eliminating out-of-pocket cost sharing. Then we could get rid of the private Medicare Advantage plans with their profound administrative waste and the restrictions in health care choices that they inflict upon their patients. The VA-eligible patient would be able to choose either Medicare or the VA system, but regardless, we would be paying for the care only once, instead of twice like we are now.

In fact, the improved Medicare system would be so effective that we should all be able to have it as participants in a single payer national health program. Providing veterans with the choice of the VA system would not be much different from providing the rest of us with the choice of an integrated health care delivery system such as Kaiser Permanente. It would be just another health care delivery option under an improved Medicare for all.