The Veterans Health Administration is the largest health-care system in the United States, directly employing more than 371,000 health professionals at 172 medical centers and 1,138 outpatient sites. It was developed to serve the millions of veterans returning from the world wars, and the distribution of its facilities has changed remarkably little since. As a result, the VHA hospital system is poorly aligned with the needs of today’s veteran population—yielding excess capacity in some states, shortfalls in others, and surging payments to private providers to fill the gaps.
The VHA was established to provide medical treatment to former servicemen who had been seriously wounded in the line of duty. Today, it serves veterans who often require medical and long-term-care assistance with amputated limbs, brain injuries, exposure to toxic chemicals, post-traumatic stress, and substance-abuse disorders.
Unlike Medicare or Medicaid, the VHA operates its own facilities. The agency is funded mostly by fixed, annual appropriations by Congress, rather than by expenditures tied to the use of its services. This creates the possibility that funding will run short when the need for care is high, or that spending will remain constant even as the number of patients declines.
Despite its uncontroversial mission, the VHA’s structure has made it the subject of fierce ideological controversy. Proponents of private provision often argue that the system is inefficient and unaccountable. Those who champion publicly delivered healthcare tout the VHA as a model of care.
Even those who support the VHA model note that its hospitals were once considered “dangerous, dirty, and scandal-ridden.” Yet, a 1990s shake-up led to a new wave of liberal enthusiasm for the VHA, with New York Times columnist Paul Krugman declaring it “the true future of American health care.” Krugman’s enthusiasm was based on reporting by Philip Longman, who claimed that the VHA’s insulation from market incentives enabled it to offer the “Best Care Anywhere.” The improvement, however, owed much to the fact that VHA funding increased steadily from 1970 to 2000 despite the veteran share of the U.S. population declining from about 22 percent to 13 percent.
In truth, it is hard to compare the quality and cost of care offered by VHA hospitals with privately operated facilities. Unlike patients under national single-payer health-care regimes, most veterans can use other sources of coverage when the VHA fails to meet their needs. Fewer than half of America’s 18 million veterans are enrolled in the VHA health system, and only 41 percent of those who are see it as their primary source of health care. Eighty-seven percent of veterans have either private health insurance, Medicare, Medicaid, or TRICARE.
Troublingly, the VHA’s facilities have been plagued by allegations of abuse and mismanagement. In 2014, a whistleblower claimed that as many as 40 veterans had died waiting for treatment at the VHA medical center in Phoenix. Evidence soon emerged that staff in another VHA facility had manipulated statistics by holding patients on secret waiting lists. An official audit of the Phoenix system, which did not corroborate the whistleblower’s most striking claims, identified widespread evidence that employees had obscured patients’ waiting times in official records.
Wait times have been a chronic problem for veterans’ facilities. In 2015, Congress commissioned a RAND study, which found that while wait times for VHA care were typically similar to those in the private sector, long waits at some facilities placed patients at risk of poor health outcomes. It further noted that veterans who live far from VHA facilities would struggle to receive needed specialty services.
These backlogs and access problems, particularly those in Phoenix, are the result of the VHA’s rigidity. In 1970, many fewer civilian veterans lived in Arizona (0.2 million) than New York (2.4 million). By 2020, however, the number in Arizona had surged (0.5 million), while that in New York had plummeted (0.6 million). Today, the VHA operates essentially the same hospitals as a half-century ago, with many more facilities in New York than in Arizona—yielding excess capacity and shortfalls in care, respectively.
Instead of shifting VHA resources to match the distribution of patient needs, Congress in 2014 established Community Care, a benefit paying private providers to treat veterans who live far from VHA facilities or face long waits. In 2018, the eligibility criteria were substantially broadened. As a result, in 2022, 40 percent of VHA enrollees received care from private providers.
Liberals argued that “the door was being opened for the bilking of the VHA by private doctors and hospitals,” and pointed to a federal report that found 38 percent of participating medical providers were overcharging the government for care. But their fears that Community Care would drain funds from the VHA never materialized. Following the program’s establishment, federal spending on veteran health benefits skyrocketed from $59 billion in 2014 to $127 billion in 2023—even as enrollment remained flat at 9.1 million. That money has helped alleviate some shortfalls in essential care but has also eliminated pressure on the VHA to reallocate its resources geographically.
Congress tried to apply some pressure in 2018 when it approved the creation of a commission, similar to the military’s Base Realignment And Closure process, to review the distribution of VHA facilities. But this has faced pushback from an alliance of pork-barrel hospital protectionists and ideological opponents of “privatization.”
No other developed nation maintains a similar set of medical facilities dedicated solely to the treatment of its former servicemen. The resulting excess capacity in regions with declining veteran populations results in costly overheads that cannot be used to serve the needs of the civilian population. In the Sun Belt, it has produced shortfalls in access to care that the private sector has stepped in to fill.
It makes little sense to fund billion-dollar hospital systems without considering the demand for their services. As the VHA has proven itself unable to steer medical resources to where veterans most need them, Congress should increasingly rely on other providers to do so.
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