Document Type

Working Paper

Date of This Version

1-1-2009

Abstract

During the mid-1990s, the U.S. Department of Veterans Affairs overhauled its health care system in an attempt to increase quality and efficiency. The restructuring involved the adoption of a capitated payment system and treatment methods based on the managed care model. This reorganization was accompanied by a major expansion in the population eligible to receive VA care. Using the National Health Interview Survey and VA medical claims data, this study analyzes both the efficiency of providing public health care in a managed care setting and the effectiveness of expanding coverage to healthier and wealthier populations. I estimate that between 35 and 70 percent of new take-up of VA care was the result of individuals dropping private health insurance. While utilization of services increased, estimates of the impact on aggregate veteran health imply that the policy change did not result in net health improvements. Regions providing more care to healthier, newly-eligible veterans had bigger reductions in hospital care and larger increases in outpatient services for previously-eligible veterans. This shift away from specialty care may help to explain the aggregate health declines.

Working Paper Number

0902

Included in

Economics Commons

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