Revelations of chronic delays at Veterans Administration VA hospitals and inexcusable fraud in record keeping have spurred calls for reform of the VA system. Politicians have been eager to jump in front of cameras to declare their support for veterans. But House and Senate VA reform bills represent only tentative first steps towards empowering veterans to take ownership over their health care and hold the VA accountable.
The bigger problem is the absence of a coherent co-payment system to incentivize veterans to think through their health care decisions. Contrary to conventional wisdom, VA health care is free only to veterans with severe, service-related conditions. A byzantine co-insurance system exists in which the cost of care is linked to the severity of a veteran’s condition and the degree to which the condition is service-related. Veterans additionally receive a monthly tax-free cash payment based on the severity of their service-related health condition. The result is that veterans face perverse incentives to let their health deteriorate to the point where they can avoid copayments and receive higher monthly financial support. Reform should focus on redesigning VA co-insurance to give veterans incentives to embrace preventive care and take greater ownership over their health care decisions.