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What the VA scandal tells us about health care rationing

Rob Stothard

Hank Aaron is a senior fellow in economic studies at the Brookings Institution. He has written extensively on health care budgeting and rationing, looking at how systems cope with medical demands that outpace spending.  He has also testified before Congress on issues related to Veterans Affairs.

"The problem is that in the real world of limited medical resources, denial of beneficial care is inescapable," Aaron wrote in 2000. "And the diversity of managed-care organizations means that they are likely to adopt different rules and to reach different judgments about what care, though beneficial, is not worth the cost."

Aaron and I spoke Thursday about the unfolding scandal at Veterans Affairs, how that relates to fixed budgets in health care and how other countries handle constrained medical resources. What follows is a transcript of our conversation, lightly edited for length and clarity.

Sarah Kliff: What's your view on the issues driving the scandal at the VA?

Henry Aaron: Most of this comes from reading the papers, but my understanding is that they've had a lot more to do because we've had wars and a lot of people coming back who are damaged, and need help. Of necessity, where they were put in a situation where they had to exclude certain classes that were previously admitted. It seems they decided they would go through it in an inappropriate fashion, and got themselves in a very bad position.

SK: One area you've written extensively on is rationing, and how health care systems prioritize resources. So I was curious how you think about what has been happening at Veterans Affairs, where something appears to have gone clearly wrong with how care was delivered. Are these type of problems endemic to systems with a capped health care budget?

HA: When resources are inadequate, you have to engage in triage of some sort or another. From what I'm gathering in these news reports, they've chosen a particularly unfortunate way of dealing with it. Unfortunate is probably too gentle — stupid is probably a better word.

The rationing in Britain started with the general practitioners, who would realize there wasn't capacity to take their patients further along in the system, so they would have different standards for referring them for tertiary care. You would have dialysis clinics that were in fact part of a system that was pretty brutally rationing, and patients might never get to them.

Here, you have the combination of veterans coming back from Iraq and Afghanistan in addition to the increasingly flow of problems from the Vietnam years and the aging of that population.

SK: I've heard some suggestions that what's happening at the VA is a preview of what will happen with IPAB, since that board is charged with getting Medicare costs to grow at a certain rate. The idea I've heard raised is that, with those constrained budgets, you could see similarly mismanaged care.

HA: The comparison to the IPAB is, to put it mildly, premature. CBO a couple of years ago said they didn't think anything would happen with IPAB for the next few years since costs have been coming in below costs. Even if members get nominated and appointed, both of which seem remote at a present time, those limits are not going to bite and they're not going to bite hard.

SK: But are there any possible parallels between the idea that Veterans Affairs has to work within a fixed budget, and that's essentially the direction that IPAB wants to push Medicare towards? The idea there, as I understand it, is to constrain Medicare growth to a more predictable target.

HA: The comparison of the IPAB and VA is not helpful at this point. The VA, even back a decade ago, when it was getting all this good press, wasn't able to take care of the entire population who was legally eligible to receive services. Medicare is, and I think virtually everybody recognizes this, part of an overall system where virtually everybody who is a candidate for care gets care.

[With all the veterans coming back from war now,] it would be like having IPAB set a budget that was in existence for Medicare, and then all of a sudden being told they had to cover the aged population of China in addition to the United States population. That would create chaos. What looks to have happened at the VA is its had a lot of problems dumped on it, with some additional resources.

The US health-care system spends a lot more than other countries do, but let's just suppose a nuclear war occurred and it dumped millions of millions of people into the system. It would break down for a lack of resources. That isn't what happened in a quantitative sense to the VA but, in a qualitative sense it mirrors what's going on.

SK: It seems like one of the challenges in setting a fixed health care budget is finding a balance between providing enough funding to cover necessary care, but also not enough to be wasting money. How do other countries manage to strike that balance?

HA: It is usually a political process that sets the budget, when you look at other countries. There is some evidence they do it in a way that may produce somewhat fewer services, but do it in a way that commands general, societal support. There are many people who feel that's the wrong way to about things, that it should be set up more through a market process. then there are others who argue that markets don't function well, in the health care system.