David R. Henderson  

VA Health Care: The Problems with Government Agencies

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Robert P. Murphy, a frequent writer for Econlib, has a good analysis of Kevin Drum's (of Mother Jones) comments on the current scandal with Veterans Administration health care. I'll hit a few highlights and then add some of my own thoughts.

Quick background: Drum makes it clear that he's not trying to defend Obama or Veterans Administration health care. What he does is give some facts that he fears will be left out of the discussion, facts that, in his view, are somewhat mitigating. His piece is short and so I won't summarize it further. Instead, I want to highlight one argument he made and one response that Murphy gave to this argument.

Drum writes:

During the Clinton administration, the performance of the VHA was revolutionized under Kenneth Kizer. The old VHA of Born on the 4th of July fame was turned into a top-notch health care provider that garnered great reviews from vets and bipartisan praise on Capitol Hill. The best account of this is Phil Longman's 2005 article, "Best Care Anywhere."

In 1999, Republicans decided to play dumb political games with Kizer's reappointment. Eventually, with the handwriting on the wall, he chose to leave the VHA.

Under the Bush administration, some of the VHA's old problems started to re-emerge, most likely because it no longer had either presidential attention or a great administrator. As early as 2002--before the Afghanistan and Iraq wars made things even worse--claims-processing time skyrocketed from 166 days to 224 days.

Under the Obama administration, the patient load of the VHA has increased by over a million. Partly this is because of the large number of combat vets returning from the Afghanistan and Iraq wars, and partly it's because Obama kept his promise to expand access to the VHA.

The most sensational charge against the VHA is that 40 or more vets died while they were waiting for appointments at the VA facilities in Phoenix. But so far there's no evidence of that. The inspector general investigating the VHA testified last week that of the 17 cases they've looked at so far, they haven't found any incidents of a patient death caused by excessive wait times.


Murphy replies:
Look at what Drum is saying here. Even on his own terms, he admits that the VA system used to be awful--hence the reference to the Tom Cruise movie. Then, so long as there was a point man in the federal government committed to cleaning up the system, it worked. But alas, the moment that person left, the system went to hell again.

And:
One of the main virtues of a decentralized market economy is that no one person has the power to kill you. If you don't get along with your boss, you can quit and work for somebody else--or start your own business. If you don't like your butcher, you can buy your meat somewhere else. And in a genuinely free market, if you didn't like the service you were getting from one doctor or hospital, it would be easy to take your business elsewhere. (italics his)

Murphy is right. If Drum's argument is that running a good health care system depends on having a good President in office and, further, on having that President appoint a good administrator of the system, then that's a real problem. Indeed, that is a problem I often see with people on the left and the right. On the left, people often complain about how a Republican president runs a part of the government that the left wants the government to run. But they have to know that occasionally there will be a Republican president and that there will even be a Democratic president they like who appoints people they don't like. On the right, I see Republicans and neo-conservatives advocate a highly interventionist foreign policy and then complain when someone like Obama comes along and carries out that interventionist foreign policy in a way they don't like. They have to know that occasionally there will be Democratic presidents.

This is one of the major problems with government. The government comes in and sets up an agency, in health care, in foreign policy, or in some other area. Then, whether it runs well depends on which particular appointee runs the agency.

But let's not carried away with talking about how well the agency ran. Look back at one point made by Drum. Early in the Bush administration, "claims-processing time skyrocketed" to 224 days. That is long. And it skyrocketed from what level? 30 days? 60 days? No. Kevin Drum tells us: 166 days. Now, that is a 35 percent increase, which is a substantial number. But 166 days itself is well over 5 months. So the original claims-processing times were already in the sky.

Maybe, then, we can depend on bloggers and reporters to track the behavior of government agencies so that they will be accountable. Maybe. But notice that in 2011, well into the Obama administration's time in office, when a lot of these problems with the Veterans Health Administration were happening, blogger Paul Krugman was calling he VHA "a huge policy success story."

Krugman wrote:

What's behind this success? Crucially, the V.H.A. is an integrated system, which provides health care as well as paying for it. So it's free from the perverse incentives created when doctors and hospitals profit from expensive tests and procedures, whether or not those procedures actually make medical sense. And because V.H.A. patients are in it for the long term, the agency has a stronger incentive to invest in prevention than private insurers, many of whose customers move on after a few years.

It's much better to depend on competition among private firms than on a government-funded agency.


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COMMENTS (5 to date)
Tom West writes:

The general point about competition is well-made, but I'll throw in 2 points against lightly-regulated private health-care provision:

One, comparison of outcomes, waiting times, etc. of private competition is often very difficult, as private companies, in the absence of government-enforced regulation usually have little or negative incentive to release meaningful statistics that can be used for comparison.

Of course, the same can be said of government, but at least in the case of the VA, those statistics *do* exist, so information that is not in the best interests of the administrators does make it out.

Second, having theoretical choice means very little (from a consequentialist POV) if people don't use that choice. My personal experience is that when there is a large gap is both knowledge and education, people rarely feel they have the means to evaluate between the health-care competitors and thus stick with their first choice based on most compelling advertising, etc.

While choice benefits the segment of the population who are capable of making such comparisons and willing to switch, if that's a small segment of the population, average care may go down as competitors realize that quality of care is only marginally significant to the patient retention and patient cost, especially in the absence of externally enforced standards and regulation.

eric mcfadden writes:

I joined the Army from the age of 25 to 30 and got out 4 years ago. Over the past 4 years I have only gone to the VA for healthcare.

The wait times to see your primary care doctor are in 2 to 3 week range. That would be if you hurt your knee playing racquetball or something like that. If it was an acute injury you can go to a local ER and they will pay the bill, but it has to be life threatening.
I made an appointment to have a mole removed and the earliest they could get me in was 2 months later. Same for an MRI or CT scan. Seeing a specialist is about a month long wait.
These wait times are stupid, and push people into putting off getting care.
My opinion is that the government is a bad provider of services. The consumer would do a much better job of finding medical care on their own. They trusted me to shoot people. I can pick whichever urgent care place I want to get this wart clipped off my finger, promise.

zc writes:

You're spot on with regards to the VA and government failure.

It's always amusing when any talking head or public official highlights the VA as some great exemplar of a healthcare ideal; the VA is invariably a joke to physicians, many of whom spend at least some time at a VA somewhere during the course of their education and training, so have first hand knowledge of their dreadful inefficiency and other failings.

Pajser writes:

The state can organize competition if it is needed. The states fund many universities and they compete like private universities do. But I don't think competition is needed on the level of institutions. Cuban health system works great.

The advantage of state is conceptual. The state works for common good; private business works in self-interest of its private owners, already rich people.

Yancey Ward writes:

Pajser,

That was hilarious.

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