Why Is the Biden Administration Continuing Trump’s Veterans Privatization Scheme?

In recent years, many Republicans have railed against overreach by the “administrative state”—which, in their breathless telling, takes the form of rulemaking by federal agencies that goes far beyond their statutory authority.

However, when Republicans are in charge of those same agencies, they have no qualms about using administrative rulemaking to expand the reach of legislation. And based on the recent performance of Joe Biden’s Department of Veterans Affairs (VA), some Democratic appointees won’t rescind deeply flawed administrative rules promulgated by their predecessors.

There’s no better case study in Republican rulemaking audacity, followed by Democratic timidity, than the VA MISSION Act. This 2018 legislation was passed with bipartisan support and signed by President Donald Trump so the patients served by the VA-run Veterans Health Administration (VHA) could have more access to private-sector care when in-house treatment was unavailable in a timely manner.

The legislation had its critics, including House Speaker Nancy Pelosi and Senator Bernie Sanders, who cast one of five Senate votes against the bill. The Vermonter feared it would “open the door to the draining, year after year, of much-needed resources from the VA.”

The act authorized the VA to create a national network of Veterans Community Care Program providers to supplement, but not supplant, services provided by the nation’s largest public health care system, serving 9 million patients. (MISSION is an acronym for Maintaining Internal Systems and Strengthening Integrated Outside Networks.) According to Senator Jon Tester, the chair of the Senate Veterans Affairs Committee and a bill sponsor, the act was not intended to divert billions of dollars from the VHA’s direct care budget, with little oversight and no cost controls. But that is what happened.

Trump’s VA secretary, Robert Wilkie, developed criteria for referring as many patients as possible to non-VHA providers. Wilkie’s proposed “access standards” weren’t based on medical necessity, which Democratic supporters said was the legislation’s intent, but on drive and wait times. If a VHA patient faced more than a 20-day wait for—or a 30-minute drive to—a VHA mental health appointment, the patient would be able to get private-sector care. The same would be true of a veteran who would have to wait for 28 days or make a 60-minute trip to a VHA for an appointment with a medical specialist.

Wilkie’s draft rules were, of course, subject to “public comment.” But, after they were posted in the Federal Register, two conservative groups flooded the VA with thousands of nearly identical pro-outsourcing messages. Objections to the standards—not used by any other insurer or health care system in the United States—were ignored. Their adoption was a victory for Concerned Veterans for America, funded by the Koch family, which seeks to discredit government involvement in health care.

Because of Wilkie’s rules, the VHA schedules 33 million private medical appointments annually. It has become a Medicare-style payer of bills submitted by private health care, eager to expand its market share among veterans. Thousands of VHA staffers hired to treat patients have been forced to become managers of non-VA care that is costlier and less effective, and often requires longer waits than if the patients had gone to a VHA facility. A recent RAND report confirmed that the quality of privatized care is difficult for the federal government to monitor.

Enter Wilkie’s successor, Veterans Affairs Secretary Denis McDonough, who served as chief of staff in President Barack Obama’s White House. McDonough has the authority to change Wilkie’s access standards, which have remained in effect throughout the Biden administration. He is also mandated, by the VA MISSION Act, to review their impact.

In June, McDonough informed the Senate Veterans Affairs Committee that outsourcing now consumes a third of the VHA’s direct care budget. He warned the panel that this growth rate—a 7 percent increase over the previous fiscal year—was not sustainable. “My hunch,” he said, “is that we should change access standards.”

McDonough did not follow through on that hunch. In September, three months after his Capitol Hill appearance, the secretary delivered a written report to Congress that echoed and ignored his in-person testimony. Its bottom line: Nearly half of all veterans health care will soon be provided by non-VHA providers even though, according to McDonough, this outsourcing trend “threatens to harm the V.A.’s training, research, and emergency preparedness missions.”

Have veterans benefited from this incremental privatization? Do they get better or faster treatment outside the VHA? McDonough’s own report confirmed what many scientific studies have long documented: “V.A. direct care has been consistently shown to outperform most private sector hospitals in core measures of inpatient quality of care.” The secretary reported that veterans “trust the V.A. to provide equal or better care than the community,” are “satisfied” with VA care, including its telehealth services, and “find accessing direct care easier than accessing community care.” McDonough also acknowledged that some patients “are driving further or waiting longer for that care than they would if V.A. provided that care … Veterans are also experiencing fragmentation of care, duplicative testing, and unnecessary and improper billing from community providers.”

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Unfortunately, McDonough ignored his own findings and warnings. His report concluded that the VHA and its outside contractors are engaged in a “healthy competition to be the best, most accessible highest quality option” for patients. As a result, McDonough’s VA “is proposing no immediate changes” to Trump administration access standards, except possibly in the area of telehealth services.

For the past three years, the VHA has not been able to count any patient’s in-house telehealth appointment—even if readily available—as sufficient access to care. That’s because Wilkie’s referral rules have a pro-privatization tilt toward outsourced telehealth. For reimbursement purposes, it is treated the same as an in-person health care or mental health consultation. So, according to McDonough’s report, eliminating this double standard would redirect about $1 billion annually back to the VHA and allow vets greater utilization of its high-quality telehealth. Yet, in an appearance before the Senate Veterans Affairs Committee last month, McDonough equivocated about when he would change this telehealth rule.

Despite McDonough’s near-total capitulation to privatization advocates, he’s received little congratulation from Republicans. Instead, at the September hearing, Senator Dan Sullivan accused “Biden’s VA” of “undermining the law that gives veterans access to private health care.” Sullivan argued that the department’s “Choose VA” website, which provides information on patient services, reflected McDonough’s “blatant bias” in favor of his own agency.

Senator Jerry Moran, the committee’s ranking Republican member, accused McDonough of trying to “undo” the VA MISSION Act. Moran said if he becomes chairman next year, he will work to turn Wilkie’s access standards into law, so they cannot be altered by rulemaking alone.

For their part, Senators Sanders and Sherrod Brown raised questions about the qualifications of private-sector providers. They also questioned the high cost of third-party administration of the VHA’s outside provider network by insurance companies like Optum and TriWest.

As Sanders pressed McDonough for answers, he got no help from other members of the committee. It was a telling and ironic moment. The condition of the broader healthcare system and its capacity to care for veterans is exactly what should have been debated. As a result, the VA MISSION Act is being implemented as the Trump administration intended. In large numbers, veterans are unduly referred outside the VHA. The nation’s biggest public health care system remains on a forced march toward staff cuts and facility closings as its spending on direct care steadily shrinks. 

Clarification: Based on a mistaken transcription of the September hearing, an earlier version of this article erroneously attributed a quotation about Senator Sanders’s discussion of privatizing VA health care to Senator Tester.