ONE
Best Care Anywhere

When you read “veterans hospital,” what comes to mind? Maybe you recall the headlines about the three decomposed bodies found near a veterans medical center in Salem, Virginia, in the early 1990s. Two turned out to be the remains of patients who had wandered off months before. The other patient had been resting in place for more than fifteen years. The Department of Veterans Affairs admitted that its search for the missing patients had been “cursory.”

Or maybe you recall images from movies like Born on the Fourth of July, in which Tom Cruise plays an injured Vietnam vet who becomes radicalized by his shabby treatment in a crumbling, rat-infested veterans hospital in the Bronx. Sample dialogue: “This place is a fuckin’ slum!”

By the mid-1990s, the reputation of veterans hospitals had sunk so low that conservatives routinely used their example as a kind of reductio ad absurdum critique of any move toward “socialized medicine.” Here, for instance, is Jarret B. Wolistein, a right-wing activist and author, railing against the Clinton health-care plan in 1994: “To see the future of health care in America for you and your children under Clinton’s plan,” Wolistein warned, “just visit any Veterans Administration hospital. You’ll find filthy conditions, shortages of everything, and treatment bordering on barbarism.”

Former congressman and one-time attorney for the Department of Veterans Affairs, Robert E. Bauman, made the same point in 1994, in a long and well-documented policy brief for the libertarian Cato Institute. “The history of the [VA] provides cautionary and distressing lessons about how government subsidizes, dictates, and rations health care when it controls a national medical monopoly.”

And so it goes today. If the debate is over health-care reform, it won’t be long before some free-market conservative will jump up and say that the sorry shape of the nation’s veterans hospitals just proves what happens when government gets into the health-care business. In 2009, the organizers of the Tea Party took it up again on their Web site: “LOOK AT THE VETERANS HOSPITALS AND ALL THE PROBLEMS OUR VETS HAVE EXPERIENCED. WE MUST KEEP THE FEDERAL GOVERNMENT OUT OF HEALTHCARE.”

Yet here’s a curious fact that few conservatives or liberals know. Who do you think receives better health care? Medicare patients who are free to pick their own doctors and specialists? Or aging veterans stuck in those presumably filthy VA hospitals, with their antiquated equipment, uncaring administrators, and incompetent staff?

An answer came in 2003, when the prestigious New England Journal of Medicine published a study that used eleven measures of quality to compare veterans health facilities with fee-for-service Medicare. In all eleven measures, the quality of care in veterans facilities proved to be “significantly better.”

Here is another curious fact. The Annals of Internal Medicine in 2004 published a study that compared veterans health facilities with commercial managed care systems in their treatment of diabetes patients. In seven out of seven measures of quality, the VA provided better care. A RAND Corporation study published in the same journal concluded that the VA outperforms all other sectors of American health care in 294 measures of quality.

Or consider this: In 2006, a study comparing the life expectancy of elderly patients in the care of the veterans health system with elderly patients enrolled in the Medicare Advantage Program showed that the mortality rates were “significantly higher” among the latter. The study found that the average male patient had a 40 percent decreased risk of death over the next two years if he was cared for by the VA rather than through the Medicare Advantage program. For women, chances of dying in the next two years were 24 percent less at the VA.

It gets stranger: In 2007, the Milbank Quarterly published a study showing the VA outperforming Medicare, Medicaid, and commercial health care in key quality indicators, including diabetic care, control of hypertension, and preventive care such as mammography. The disparities are often stunning. For example, the VA successfully treats its patients with high blood pressure in 77 percent of cases, while the commercial health-care success rate is just 67 percent.

And low-tech medicine is not the only arena where the VA excels. In the late 1990s, the VA adopted a National Surgical Quality Improvement Program that was soon imitated by private-sector surgeons, but with less than perfect results. In 2009, for example, the Journal of Surgical Research published a study of outcomes of coronary surgery at a VA hospital versus other hospitals. Even though the VA patients were considerably sicker on average, suffering nearly twice the rate of myocardial infarction, for example, their mortality rate after surgery was barely half that of those treated outside the VA system.

The most recent data point comes from a study of cancer care published in 2011 in the Annals of Internal Medicine. It compared the treatment of older male veterans in the VA with that received by older men under traditional, fee-for-service Medicare. It found the VA offered care that was as good and often better, with the VA particularly exceeding in diagnosing colorectal cancers at earlier stages and at adhering to recommended treatments, including surgery for colon cancer, chemotherapy for lymphoma, and bisphosphonates for myeloma.

According to Nancy Keating, an associate professor of health care policy at Harvard Medical School and the lead author of the study, several factors account for these results. Care at the VA “is much better coordinated than most other settings,” she explains. The VA also “has a good, integrated medical record. Their doctors all work together and communicate more effectively. There are no incentives for the overuse of cancer treatments because [VA] physicians are not rewarded financially for prescribing more drugs or procedures.”

In an editorial accompanying the study, the Annals surveyed these and other demonstrations of the VA’s superior care, as well as the ongoing efforts to repeal “Obamacare,” and argued that the true “public option” should be giving all Americans access to the VA model of care. “Despite the clamor of special interests, corporate lobbying, and the particular American distaste for government-run institutions, the public option may yet find its voice in the latest round of accomplishments demonstrated by the [VA],” the highly prestigious journal predicted. “Thanks to proposals to repeal the historic Patient Protection and Affordable Care Act, it is ironic that the moment for reconsideration has returned—and with it, the opportunity to celebrate more vociferously the triumphs of the country’s largest integrated and publicly funded health care network.”

Or consider what veterans themselves think. Sure, it’s not hard to find vets who complain about difficulties in establishing eligibility. Many are rightly outraged that the Bush administration decided in 2003 to deny previously promised health-care benefits to veterans who don’t have service-related illnesses or who can’t meet a strict means test. Yet these grievances are about access to the system, not about the quality of care. Veterans groups tenaciously defend the VA health-care system and applaud its turnaround. “The quality of care is outstanding,” says Peter Gayton, deputy director for veterans affairs and rehabilitation at the American Legion. The Legion lists among its top legislative priorities a bill that would entitle veterans to trade in their Medicare benefits for treatment by the VA. Its annual survey of deficiencies at the various VA facilities (and of course they exist and often create headlines) is put into context by the publication’s title: A System Worth Saving.

The VA also consistently receives extremely high satisfaction ratings, as measured by the American Consumer Satisfaction Index compiled by the University of Michigan. In 2009, 88 percent of VA patients expressed satisfaction with the care they received. The last time Medicare was compared in the same survey, in 2006, it scored in the low seventies. Private health insurance companies consistently score worse.

Perhaps the surest measure of the VA’s performance is the number of vets who are voting with their feet: despite tightened eligibility rules and the declining population of veterans, the number of patients enrolled by the VA increased from 3.3 million in 2000 to 5.3 million in 2010.

Outside experts agree that the VA has become an industry leader in safety and quality. Dr. Donald M. Berwick, president of the Institute for Healthcare Improvement and one of the nation’s top health-care quality experts, praises the VA’s information technology and use of electronic medical records as “spectacular.” The venerable Institute of Medicine notes that the VA’s “integrated health information system, including its framework for using performance measures to improve quality, is considered one of the best in the nation.” The Journal of the American Medical Association (JAMA) noted in 2005 that the VA’s health-care system has “quickly emerged as a bright star in the constellation of safety practice.” Another study published in JAMA finds that the VA is also distinguished by its ability to overcome racial disparities in health care by doing a much better job than other health-care providers in keeping African-American patients alive.

In 2007, the prestigious British medical journal BMJ noted that while “long derided as a US example of failed Soviet-style central planning,” the VA “has recently emerged as a widely recognized leader in quality improvement and information technology. At present, the Veterans Health Administration offers more equitable care, of higher quality, at comparable or lower cost than private-sector alternatives.”

The Honda of Health Care

Stranger still, all the while that the VA has been winning these encomiums, it has tightly contained its cost per patient. Even as inflation in the rest of the U.S. health-care sector has been running in double digits, the VA is not only raising the quality, safety, and effectiveness of the care it provides, but also controlling costs. As Harvard’s John F. Kennedy School of Government gushed, in awarding the VA a top prize in 2006 for innovation in government: “While the costs of healthcare continue to soar for most Americans, the VA is reducing costs, reducing errors, and becoming the model for what modern health care management and delivery should look like.”

Precise comparisons of year-to-year costs per patient are difficult, since the mix of patients changes over time with changes in eligibility rules and with the amount of combat American forces face. In addition, many people enrolled with the VA also receive health care elsewhere, so only estimated comparisons are possible between the VA’s cost efficiency and that of other providers. But here’s a suggestive statistic: After adjusting for the changing mix of patients, the Congressional Budget Office estimates that the VA’s spending per enrollee grew by 1.7 percent in real terms from 1999 to 2005. Compare that 1.7 percent with Medicare’s real rate of growth of 29.4 percent in cost per capita over that same period.

Or consider this measure of the VA’s medical efficiency: Veterans enrolled in its health-care system are, as a group, far older, sicker, poorer, and more prone to mental illness, homelessness, and substance abuse than the population as a whole. Half of all VA enrollees are over age sixty-five. More than a third smoke. One in five veterans has diabetes, compared with one in fourteen U.S. residents in general. Name any chronic disease—Alzheimer’s, cancer, congestive heart failure, sclerosis of the liver—and a much higher percentage of veterans have it than do Americans in general. In recent years, the VA has also had to invest massively to meet the needs of recent combat vets suffering from traumatic brain injury, post-traumatic stress syndrome, and an extraordinary level of other mental health needs. It has had to do so even while caring for Vietnam-era veterans who are more and more beset not only with the normal chronic conditions of age, but with delayed complications now linked to exposure to Agent Orange, such as type II diabetes. Yet from 2002 to 2007, a period of intense combat for U.S. forces, during which the VA generally excluded new enrollments by vets lacking service-related disabilities, the VA’s spending per patient rose no faster than Medicare’s. One study done before the wars started asked: “What would it cost to provide the same healthcare benefits as the VA using Medicare as the surrogate payor?” The answer that came back was that Medicare would cost 21 percent more.

You might well think that the untold story here is that the VA engages in rationing. And indeed, according to a RAND study published in the New England Journal of Medicine in 2006, VA patients received only about 67 percent of the care that experts believe they should get. But before you say, “I knew there was a catch,” consider this: the same study found that the U.S. health-care system as a whole delivers only 54.9 percent of the treatments recommended by evidence-based medicine.

Because the VA lacks any financial incentive to engage in overtreatment, it saves money by avoiding unnecessary surgery and redundant testing. But “rationing” is hardly the right word to explain the VA’s cost-effectiveness. Instead, Americans who don’t use the VA stand the greatest risk of receiving inappropriate care, ranging from doctors who fail to prescribe routine preventive measures such as flu vaccines or medicine to control hypertension to vast amounts of over-treatment. According to the same study, even Americans with $50,000 or more in family income receive lower-quality health care than do VA patients in general.

What a concept! Cost containment and quality improvement go hand in hand in many industries, but in health care this combination is virtually unheard of. If the VA were a car company, it would be Honda. Today’s VA produces the equivalent of well-engineered, efficient, reliable, reasonably priced cars with few defects and great safety records, using proven scientific techniques and a culture of continuously improving quality control. By contrast, if America’s most prestigious hospitals were auto companies, most would build cars like Alfa Romeos or Renaults—classy to look at, and often very innovative, but unsafe, inefficient, temperamental, ridiculously expensive, and an unwise choice of transportation in situations where your life actually depends on their not breaking down.

Take-Home Lessons

If this contrast gives you cognitive dissonance, it should. The VA, after all, is a massive bureaucracy headquartered in Washington. Its medical division alone, known as the Veterans Health Administration (VHA), employs more than 247,000 workers represented by five different unions. Even many of its doctors are organized into bargaining units. It’s micromanaged by Congress and political appointees. The VA is the last place most people, including myself, would expect to find true innovation in technology or human organization, let alone a world-class exemplar of best practices in health care. As one British health-care researcher puts it with typical English understatement: “It may be somewhat ironic, to both Americans and non-Americans, that through the VHA the United States has implemented a model of integrated public-sector health care that appears, on balance, to work quite well. And therein lies perhaps the most potent message of the VHA story.”

The VA’s performance is particularly difficult for conservatives to process. Back in 2004, when the Bush administration pushed for greater use of information technology in health care as a means of improving quality and holding down costs, it wound up choosing not some well-endowed, prestigious private hospital as the place to showcase the potential, but the Baltimore VA Medical Center. That’s because, despite the administration’s overall faith in market forces, it could find no private-sector hospital that could begin to match the VA’s use of electronic medical records. Astonishingly, twenty years after the digital revolution, only 1.5 percent of hospitals today have integrated IT systems like the VA uses, and those that do often find their commercial software programs to be buggy and inadequate. “I know the veterans who are here are going to be proud to hear that the Veterans Administration is on the leading edge of change,” Bush found himself exclaiming in his remarks at the Baltimore VA Medical Center. If Bush found it strange or disorienting to be saying this about the largest actual example of socialized medicine in the United States, he didn’t express any curiosity about how and why it might be true.

Which is regrettable. Because the story of how and why the VA became the benchmark for quality medicine in the United States suggests that vast swaths of what we think we know about health, health care, and medical economics are just wrong.

It’s natural to believe, for example, as I long did, that more competition and consumer choice in health care will lead to greater quality and lower costs, because in almost every other realm it does. That’s why conservatives in general have pushed for individual “health savings accounts” and high-deductible insurance plans. Together, these measures are supposed to encourage patients to do more comparison shopping, therefore creating more market discipline in the system.

But when it comes to health care, it’s a government bureaucracy that’s setting the standard for best practices while controlling costs, and it’s the private sector that’s lagging in quality and cost-effectiveness. That unexpected reality needs examining if we’re to have any hope of understanding what’s wrong with America’s health-care system and how to fix it.

It turns out that precisely because the VA is a big, government-run system that has nearly a lifetime relationship with its patients, it has incentives for investing in prevention and effective treatment that are lacking in private-sector medicine, including that which is underwritten by Medicare and Medicaid. As we’ll see, these incentives became particularly sharp beginning at the VA’s lowest moment in the late 1970s. Even as the VA faced severe budget cuts and loss of political support, the large numbers of World War II and Korean War veterans it served were then beginning to experience the infirmities of old age. VA doctors in that era found themselves dealing more and more with aging patients beset by chronic conditions such as hypertension, diabetes, and cancer, and they had to find a way to manage these diseases with dwindling resources. The happy, if unexpected, result was an explosion of organizational and technological innovation, most of it started by individual VA doctors acting on their own, that the private sector still cannot match.

During the period of the VA’s transformation, chronic illnesses still affected a comparatively small share of the population as a whole but are now becoming widespread as the baby boom generation ages and as increasing numbers of younger Americans experience the consequences of obesity and sedentary lifestyle. The increase in chronic illnesses gives the story of the VA’s turnaround a growing relevancy. Some 20 years ahead of their time, VA doctors felt compelled to begin developing a new, highly effective model of care stressing prevention as well as safe and effective management of chronic disease. Today, the continuing improvement of this model, which is based largely on the skillful use of information technology in both treatment and medical research, has propelled the VA into the vanguard of twenty-first-century medicine. The purpose of this book is to explain the VA’s unexpected triumph and to show how to make its benefits available to all Americans.