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Institute for Population Health Improvement

Institute for Population Health Improvement

NEWS | June 26, 2012

Duplicate spending on veterans' care costs billions

(SACRAMENTO, Calif.)

A new study published today in the Journal of the American Medical Association (JAMA) found that the federal government made about $13 billion in duplicative payments to provide health-care services to veterans who were simultaneously enrolled in Medicare Advantage plans from 2004-2009. The study was conducted by researchers at Brown University, VA Palo Alto Medical Center and the Institute for Population Health Improvement at UC Davis Health System.

Some veterans are entitled to health-care coverage through both the U.S. Department of Veterans Affairs Health Care System and Medicare. But under current law, the federal government often ends up paying twice for care of veterans when they are also enrolled in Medicare Advantage managed-care plans. And with the growing popularity of Medicare Advantage plans among all seniors, including veterans, the annual duplicative costs are rising. Nearly 30 percent of Medicare beneficiaries are now enrolled in Medicare Advantage plans.

"These 'dual eligible' veterans earned the right to receive care through both VA and Medicare, but that does not mean that the government has to pay twice for their care," said Kenneth W. Kizer, a former VA Under Secretary for Health and now a professor and director of the Institute for Population Health Improvement at the University of California, Davis, Health System. "The problem could be fixed without reducing benefits to veterans.

"Duplicative costs occur because of way the federal government pays for Medicare Advantage services for veterans, not because veterans are receiving unnecessary care or doing anything wrong," he added.

Veterans who are disabled or over age 65 and have been paying into the Medicare program are eligible for Medicare just like any other American. Veterans who live far from a VA hospital or clinic may especially rely on Medicare coverage for acute or emergency care. But unlike the traditional Medicare fee-for-service program, Medicare Advantage plans are paid in advance to provide all needed care for the beneficiary. If the person enrolled in the Medicare Advantage plan then gets his or her medical care in another federal health plan such as the VA, it means that the federal government has paid twice for care of the same person. Most of the Medicare Advantage plans are for-profit health plans.

To assess duplicative costs, the researchers conducted a comprehensive review of VA and Medicare records for more than 1 million veterans over a 6-year period. The researchers found that 61 percent of doubly-covered veterans used both VA and Medicare Advantage coverage, with 10 percent of dual-eligible veterans receiving all their health care from the VA. That is, 10 percent of these dual eligible veterans received all their health care from the VA despite Medicare paying the Medicare Advantage plan to provide those services. About 4 percent of the dual-eligible veterans sought no care from Medicare Advantage or the VA, and 35 percent used Medicare only. 

The number of veterans doubly covered by Medicare Advantage and the VA has risen nearly 53 percent in recent years, from 485,651 in 2004 to 924,792 in 2009. The yearly federal spending in the VA for these dual-eligible veterans rose from $1.3 billion in 2004 to $3.2 billion in 2009. The costs to take care of Medicare Advantage beneficiaries now amounts to 10 percent of the VA's budget for medical care.

But Kizer believes the government can eliminate the duplicative spending without reducing care for veterans by changing the way that Medicare Advantage payment rates are calculated or by changing the law so that the VA could bill Medicare Advantage plans for care that it provides to veterans, as is currently the case with private insurance plans. While the VA may bill private insurers, the law does not allow VA to bill Medicare or Medicare Advantage plans.

"In light of the severe financial pressure facing the Medicare program, policymakers should take steps to identify and eliminate redundant expenditures such as found in this study," Kizer said.

In addition to Kizer, the study's other authors include Amal Trivedi, Regina Grebla, Lan Jiang and Vincent Mor at the Providence VA Medical Center and Jean Yoon at the VA Palo Alto Medical Center.

The research was supported by the U.S. Department of Veterans Affairs, Veterans Health Administration, Office of Research and Development, Health Services Research and Development Service, and the National Institute of Aging (5RC1AG036158). 

UC Davis Health System is improving lives and transforming health care by providing excellent patient care, conducting groundbreaking research, fostering innovative, interprofessional education, and creating dynamic, productive partnerships with the community. The academic health system includes one of the country's best medical schools, a 619-bed acute-care teaching hospital, a 1000-member physician's practice group and the new Betty Irene Moore School of Nursing. It is home to a National Cancer Institute-designated comprehensive cancer center, an international neurodevelopmental institute, a stem cell institute and a comprehensive children's hospital. Other nationally prominent centers focus on advancing telemedicine, improving vascular care, eliminating health disparities and translating research findings into new treatments for patients. Together, they make UC Davis a hub of innovation that is transforming health for all. For more information, visit healthsystem.ucdavis.edu.