The Other VA Scandal

by Veronique de Rugy

Wars are expensive, and they always end up costing more than what was announced going in. Mitch Daniels, then the director of the Office of Management and Budget, predicted that the war in Iraq launched in 2003 would cost $50 to $60 billion, including the costs of reconstruction and clean-up. Bush economic adviser Larry Lindsey got in trouble for suggesting that it could cost as much as $100 billion. But as of 2013, the Department of Defense thinks the war will cost roughly $770 billion. On top of DOD appropriations, the total costs of the Iraq war through 2013 appears to be about $1.7 trillion. When you add the costs of caring for veterans, the number rises to $2.1 trillion or so. If you add interest paid on the debt we needed to pay for the war, the cost goes even higher.

Politicians have every incentive not to be upfront about the future costs of military engagement, and the way the VA is funded allows them to ignore these costs. As Cato Institute’s Michael Cannon and Chris Preble explain in the New York Times a few days ago:

Veterans’ health and disability benefits are some of the largest costs involved in any military conflict, but they are delayed costs, typically reaching their peak 40 or 50 years after the conflict ends. Congress funds these commitments — through the Department of Veterans Affairs — only once they come due. As a result, when Congress debates whether to authorize and fund military action, it can act as if those costs don’t exist. 

But as we know, these costs do exist. That’s the other VA scandal. Unfortunately, even if the Department of Veteran Affairs weren’t plagued with massive inefficiencies and mismanagement, it probably wouldn’t be ready for veterans when they come back from wars. 

How much would it cost to adequately cover them? The Wall Street Journal has an estimate of one plan going through Congress to address the inadequate supply of care for current veterans:

The Senate recently whisked through with only three dissenting votes a bill cobbled together by Bernie Sanders and John McCain that authorizes $500 million to hire additional VA providers, over $200 million to lease 26 medical facilities and an unspecified amount to contract private care for veterans who live more than 40 miles from the nearest VA or experience treatment delays. Minutes before the vote, CBO issued a “preliminary” estimate that private care would cost $35 billion over the next two years and $50 billion annually thereafter.  …

 As CBO notes, the “magnitude of [the bill's] budgetary effects is highly uncertain” because it’s unclear how many more veterans will seek care once they don’t have to drive four hours or wait three months to get it. Only 8.4 million of more than 16 million veterans who qualify for VA care are enrolled.

Nor is it clear how much more care veterans will seek. The VA doesn’t charge premiums, immunizations and preventative screenings are free, and out-of-pocket costs are negligible. Even the lowest “priority group” pays a mere $10 daily co-pay for inpatient care. The upshot of this all-you-can-eat buffet has been rationed care, which is the real cause of the VA waiting-list scandal.

You can pile that bill onto the other bills that Millennials will have to shoulder when they grow up. 

Is there a better way? Yes, say Preble and Cannon. In fact, they have a clever plan that would take care of the budgetary impact of treating veterans, the poor quality of service they get now, and the lack of transparency about the cost of wars. 

We propose a system of veterans’ benefits that would be funded by Congress in advance. It would allow veterans to purchase life, disability and health insurance from private insurers. Those policies would cover losses related to their term of service, and would pay benefits when they left active duty through the remainder of their lives.

To cover the cost, military personnel would receive additional pay sufficient to purchase a statutorily defined package of benefits at actuarially fair rates. The precise amount would be determined with reference to premiums quoted by competing insurers, and would vary with the risks posed by particular military jobs.

Insurers and providers would be more responsive because veterans could fire them — something they cannot do to the Department of Veterans Affairs. Veterans’ insurance premiums would also reveal, and enable recruits and active-duty personnel to compare, the risks posed by various military jobs and career paths.

Most important, under this system, when a military conflict increases the risk to life and limb, insurers would adjust veterans’ insurance premiums upward, and Congress would have to increase military pay immediately to enable military personnel to cover those added costs.

Sounds great to me. The whole thing is here

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