Medicare Subvention

A Medicare subvention under the Department of Veterans Affairs (VA) would have the goal of providing an alternative for delivering accessible and quality care to certain veterans eligible for Medicare without increasing the cost to Medicare or VA. Subvention would allow VA to supplement its funds with Medicare payments. In principle, by paying VA a discounted rate, the Medicare program might save money, so long as it does not pay for services that VA would have previously covered. A three-year Department of Defense (DOD) subvention demonstration program involves about 30,000 retirees and limits Medicare payments to DOD to $65 million a year. However, a nationwide DOD subvention program could potentially involve Medicare payments of several hundred million dollars or more. The potential size of a nationwide VA program may be even greater, with nearly all the nine million veterans aged 65 and older covered by Medicare. Proposed legislation before the House and the Senate would authorize VA subvention demonstrations. Under either bill, VA will (1) be challenged to attract veterans who currently enjoy a generous VA benefits package, (2) need to strengthen its billing systems, and (3) need to ensure that access to services is not reduced. VA will need sufficient time to implement a demonstration, and it must carefully design and implement its payment methods to protect Medicare trust funds and to promote cost consciousness and efficiencies at the demonstration sites. Finally, sound data systems are essential for managing and evaluating a subvention 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.