July 11, 2013

The Cost and Quality Implications of Dual Use of VA and Medicare 

Health Services

HSR&D Cyberseminar

Steven D. Pizer, PhD

Director, Health Care Financing & Economics, VA Boston
VETERANS HEALTH ADMINISTRATION

Overview

• VA-Medicare Dual Use: What it is; Why we care

• Research: What we know

– The Basic Facts

– Who Are Dual Users

– Factors That Affect Dual Use

– Consequences of Dual Use

• Policy Responses

– Expand? Privatize?

– Move to comprehensive model? 

• PACT 

– Improve gap model? 

• MyHealtheVet/Blue Button

• NwHIN

• Future Research: The Affordable Care Act

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VETERANS HEALTH ADMINISTRATION

Poll Question #1

• What is your primary role in VA? 

– student, trainee, or fellow

– clinician

– researcher

– manager or policy-maker

– other
VETERANS HEALTH ADMINISTRATION

VA-Medicare Dual Use: What it is; Why we care

• Over half of VA enrollees are also enrolled in Medicare

• Most dual enrollees use mixtures of services from VA and Medicare

• This has cost and quality implications

• Cost

– When VA resources are at capacity, many Veterans can obtain Medicare services

– When VA improves access or quality, there is a reservoir of demand

• Quality

– VA and Medicare provider networks do not overlap

– Dual use implies transitions between providers

– Coordination of care may suffer

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VETERANS HEALTH ADMINISTRATION

VA-Medicare Dual Use: Some Basic Facts

• VA enrollees’ other insurance

• Reliance on VA for outpatient care by type of Veteran

• VA and Medicare dual use by detailed service

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VETERANS HEALTH ADMINISTRATION

VA Enrollee’s Other Insurance

0 

10 

20 

30 

40 

50 

60 

Medicare Medigap Medicaid TRICARE Private Ins No Coverage

% Enrollees

Source: ADUSH 2010 Survey of Enrollees 5 
VETERANS HEALTH ADMINISTRATION

VA Enrollees with Any Medicare Coverage

0 

10 

20 

30 

40 

50 

60 

70 

80 

Priority 1-3 Priority 4-6 Priority 7-8

% with Medicare

Source: ADUSH 2010 Survey of Enrollees 6 
VETERANS HEALTH ADMINISTRATION

VA Reliance for Outpatient Care

7 

Source: ADUSH 2010 Survey of Enrollees
VETERANS HEALTH ADMINISTRATION

VA Reliance for Outpatient Care

8 

Source: ADUSH 2010 Survey of Enrollees
VETERANS HEALTH ADMINISTRATION

VA Reliance for Outpatient Care

9 

Source: ADUSH 2010 Survey of Enrollees
VETERANS HEALTH ADMINISTRATION

VA Reliance for Outpatient Care

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Source: ADUSH 2010 Survey of Enrollees
VETERANS HEALTH ADMINISTRATION

VA Reliance for Outpatient Care

0 

0.1 

0.2 

0.3 

0.4 

0.5 

0.6 

0.7 

0.8 

0.9 

Under 65 65-74 Over 75

Mean Reliance by Age

Source: Petersen et al., HSR 2010 11
VETERANS HEALTH ADMINISTRATION

VA-Medicare Dual Use by Service

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Source: “Quality Initiatives Undertaken by the Veterans Health Administration,” CBO, August 2009
VETERANS HEALTH ADMINISTRATION

VA-Medicare Dual Use by Inpatient Service

13

Source: “Quality Initiatives Undertaken by the Veterans Health Administration,” CBO, August 2009
VETERANS HEALTH ADMINISTRATION

VA-Medicare Dual Use by Outpatient Service

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Source: “Quality Initiatives Undertaken by the Veterans Health Administration,” CBO, August 2009

Medicare Medicare + VA VA Pr(use)
VETERANS HEALTH ADMINISTRATION

VA-Medicare Dual Use: The Basic Facts

• Half of VA enrollees have Medicare coverage

• VA reliance is about 40% for outpatient care, lower for inpatient care

• Inpatient demand is strongest for psychiatric and substance abuse care

• Outpatient demand is also strong for primary care and hearing/speech

• Demand is strongest from un/underinsured, high priority, lower income, under 65

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VETERANS HEALTH ADMINISTRATION

Who Are Dual Users?

0 

2 

4 

6 

8 

10 

12 

14 

16 

18 

20 

VA-only Mostly VA Dual Mostly 

Medicare

Medicare-only

% Black

Source: Hynes, Koelling, Stroupe et al., Med Care 2007 16
VETERANS HEALTH ADMINISTRATION

Who Are Dual Users?

0 

5 

10 

15 

20 

25 

30 

35 

40 

VA-only Mostly VA Dual Mostly 

Medicare

Medicare-only

Median Distance to VAMC

Source: Hynes, Koelling, Stroupe et al., Med Care 2007 17
VETERANS HEALTH ADMINISTRATION

Who Are Dual Users?

0 

0.2 

0.4 

0.6 

0.8 

1 

1.2 

1.4 

1.6 

VA-only Mostly VA Dual Mostly 

Medicare

Medicare-only

Median Risk Score

Source: Hynes, Koelling, Stroupe et al., Med Care 2007 18
VETERANS HEALTH ADMINISTRATION

Factors That Affect Dual Use

• African-Americans and Veterans who live near VAMC are more likely to rely 

exclusively on VA

• As disease burden grows, Veterans rely more heavily on Medicare

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VETERANS HEALTH ADMINISTRATION

Consequences of Dual Use: VA Cost

$1,056 

$2,055 

Average Outpatient Cost, 1999

VA

Medicare

Source: Hynes, Koelling, Stroupe et al., Med Care 2007 20
VETERANS HEALTH ADMINISTRATION

Consequences of Dual Use: Veteran’s Cost 

• Pizer and Prentice, Journal of Health Economics 2011, “Time is Money: Outpatient 

Waiting Times and Health Insurance Choices of Elderly Veterans in the United 

States”

• Study Medigap purchasing by Medicare-VA duals in Medicare Current Beneficiary 

Survey

• Link to VA administrative data on waiting times from appointment request to 

actual appointment

• 10% increase in VA wait time leads to 5% increase in demand for Medigap

• Representative Veteran indifferent between 5-day wait increase and $300 annual 

premium increase

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5-day wait

$300 premium
VETERANS HEALTH ADMINISTRATION

Consequences of Dual Use: Quality

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0 

0.5 

1 

1.5 

2 

2.5 

3 

3.5 

Rehospitalization Stroke Rehosp Death

VA-Medicare vs. VA-Only Stroke Patients (AORs)

Source: Jia, Zheng, Reker et al., Stroke 2007
VETERANS HEALTH ADMINISTRATION

Consequences of Dual Use: Quality

• Wow! Those are big effects of dual use

• Jia and colleagues controlled for demographics, length of stay, stroke type, 

comorbidity index, ICU days, stroke and TIA history, other variables

• But dual users may have been sicker in unmeasured ways

• Can we do a study that filters out effects of unobserved differences?

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VETERANS HEALTH ADMINISTRATION

Brief Detour: How Instrumental Variables Work

• We have a question about a treatment

• Plan A: Run an experiment!

• Randomize into treatment; compare outcomes

• We can’t

• Plan B: Build a statistical model of probability of treatment

• Find a variable that affects treatment probability, but not outcome (except thru Tx) 

• Isolate variation in Tx that’s due to quasi-random variable

• Measure only effect of quasi-random variation on outcome

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VETERANS HEALTH ADMINISTRATION

Consequences Of Dual Use: Quality 

• Pizer and Gardner, Inquiry 2011, “Is Fragmented Financing Bad For Your Health?”

• 288,000 observations on Veterans with VA and/or Medicare outpatient use

• Calculated “fragmentation of financing” = 1 – max(VA%, Mcare%)

– VA or Mcare only => zero fragmentation

– Max fragmentation is 0.5

• Outcome: Hospitalization for ambulatory care sensitive condition (AHRQ, 2001)

• Methodological challenge: Fragmentation and ACSC hospitalization jointly 

determined

• Solution: Use distance to VA as instrumental variable to predict fragmentation, 

then measure effect of predictable component only

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VETERANS HEALTH ADMINISTRATION

Results: Fragmentation Moves Hospitalization Risk 20%

0 

0.01 

0.02 

0.03 

0.04 

0.05 

0.06 

Prob(ACSC Hosp)

- 1 SD Frag

Average

+ 1 SD Frag

Source: Pizer and Gardner, Inquiry 2011 26
VETERANS HEALTH ADMINISTRATION

Implications

• Coordination problems between VA & Medicare are serious

• Effects on Veterans’ health and budgets are significant

• Quality consequences are costly for both systems

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VETERANS HEALTH ADMINISTRATION

Poll Question #2: Policy Responses

• What is the best policy response to dual use?

– Expand VA services (VA absorbs Medicare services)

– Privatize VA services (Medicare absorbs VA services)

– Change to comprehensive model (e.g., PACT)

– Improve VA-Non-VA coordination (e.g., MyHealtheVet) 

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VETERANS HEALTH ADMINISTRATION

Policy Responses: Expand VA Services?

• Could VA provide comprehensive care to current enrollees?

– Roughly double volume of outpatient care

– Increase inpatient volume much more (4-5X?)

– Increase prescription volume

• If VA provided more comprehensive care, would demand for enrollment grow?

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This we could do!
VETERANS HEALTH ADMINISTRATION 30

Source: Frakt, Pizer, Hendricks, JHPPL 2008
VETERANS HEALTH ADMINISTRATION

Policy Responses: Expand VA Services?

• Rate of VA capacity growth limits expansion 

– Exception: VA could offer a Medicare prescription drug plan (Frakt, Pizer, Hendricks 

2008)

• Potential demand for VA care is vastly larger than likely capacity

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VETERANS HEALTH ADMINISTRATION

Policy Responses: Privatize VA Services?

• If VA can’t absorb Medicare utilization, should Medicare (or TRICARE) absorb VA?

– Perennial question in Congress

• Nugent, Hendricks, Nugent, Render, MCCR 2004 “Value for Taxpayers’ Dollars: 

What VA Care Would Cost at Medicare Prices”

• Constructed Medicare prices for VA services delivered at 6 sites in 1999

• Used results to estimate Medicare costs for VA services nationwide

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VETERANS HEALTH ADMINISTRATION

Policy Responses: Privatize VA Services?

0 

0.2 

0.4 

0.6 

0.8 

1 

1.2 

1.4 

1.6 

1.8 

Total Inpatient Outpatient Pharmacy

VA Costs = 1.00

Medicare Costs

Source: Nugent et al., 2004 33
VETERANS HEALTH ADMINISTRATION

Policy Responses: Privatize VA Services?

• Overall, Medicare prices were 20% higher than VA costs

• In 2003, it would have cost $5 Billion more to provide VA services through 

Medicare, nationwide

• Clearly not an efficient solution to the problem

• Quality and access issues too (e.g., mental health services)

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VETERANS HEALTH ADMINISTRATION

Policy Responses: Change to Comprehensive Model?

• Patient-Aligned Care Teams (PACT) designed to provide 

comprehensive care

• Improve coordination, communication

• PACT evaluation finding modest savings for <65, not for >65

– <65 ACSC hosp and OP primary care were lower

– >65 no change in ACSC hosp and OP primary care was higher

• PACT is costing about $2 billion; hard to justify w/o savings for >65

• Is lack of savings for >65 because of increased VA reliance?

• Either way, VA primary care has to coordinate with non-VA 

specialty care

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VETERANS HEALTH ADMINISTRATION

Policy Responses: Improve VA-Non-VA Coordination?

• Personal Health Record: MyHealtheVet

• Sharing clinical data through Nationwide Health Information Network (NwHIN) 

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VETERANS HEALTH ADMINISTRATION

Personal Health Record (PHR)

• MyHealtheVet personal health record (PHR) 

designed to improve communication 

• Veteran-provider (secure messaging)

• VA provider – Medicare provider?

• PHR interoperability still in infancy

• Blue Button is a first step

– Burden on patient to print & carry

– Very few actually do it

• Privacy vs. coordination

• Privacy is formidable concern, but battle is 

not over

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VETERANS HEALTH ADMINISTRATION

Interoperable PHR: The Potential

Survey

• Zulman et al., Annals 2011, “Patient 

Interest in Sharing Personal Health Record 

Information”

• Web survey of 18,471 users of 

MyHealtheVet

• Convenience sample; may not be 

representative

Results

0 

Spouse Child Non-VA 

Provider

% Interest in Sharing

10

20 

30 

40 

50 

60 

70 

38
VETERANS HEALTH ADMINISTRATION

Sharing the EMR: NwHIN and VLER Health

• Virtual Lifetime Electronic Record (VLER) started as VA-DOD data sharing in 2009

• VLER Health links VA and non-VA providers through local exchanges participating 

in Nationwide Health Information Network (NwHIN)

• 13 pilot sites as of March 2012 including: San Diego, Puget Sound, Minneapolis, 

Indianapolis, Buffalo

• Data elements include: allergies, medications, labs, vitals, immunizations, 

problems, encounters, procedures, other unstructured data including reports and 

notes

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VETERANS HEALTH ADMINISTRATION

Challenges to EMR Sharing

• VA can plug into regional HIN, but it won’t help if non-VA providers aren’t plugged 

in yet 

• Long-term VA HIN software development projects have suffered from OIT 

reorganization, budgetary changes, shifting priorities

• Will data sharing approval process be too burdensome for patients and clinicians 

on both sides to use?

– As of May, 68,000 Veterans authorized VA to share, but community partner may also 

require authorization

– Current HSR&D study of local exchange in Indianapolis (PI: Haggstrom)

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VETERANS HEALTH ADMINISTRATION

Future Research: The Affordable Care Act

• ACA uses mostly federal funds to expand eligibility for Medicaid to 138% of Federal 

Poverty Line in states that opt in

• Currently 24 states likely to expand; 6 still considering

• In addition, individuals without employer-sponsored insurance will qualify for 

subsidized coverage through insurance exchanges

• VA enrollment qualifies as coverage

• Will there be more dual users?

– VA enrollment might increase to comply with individual mandate

– Dual use might increase due to Medicaid expansion and exchanges

• How will dual use be different under ACA?

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VETERANS HEALTH ADMINISTRATION

Discussion

• Questions?

• Additional questions or comments: Steven.Pizer@va.gov

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