To Transform Veterans Health Care For The Next Generation, We Should Learn From TRICARE

In previous posts, we reviewed challenges facing the Veterans Health Administration (VHA), explored long-term solutions to improve veterans’ health benefits and care delivery, and explained how creating a managed competition Marketplace—the Veterans Health Advantage Program (VHAP)—would expand veterans’ health care choices and access. In this post, we review the evolution of the Military Health System (MHS) and the TRICARE program, point out similarities and differences between the military and veterans’ health care systems, and describe how models used successfully in the MHS can help advance the VHA’s transformation. Finally, we discuss next steps that the VHA and Congress should undertake to modernize veterans’ health care for the next generation.

The Military Health System And TRICARE Have Evolved With The Times

Situated within the Department of Defense (DoD), the MHS serves multiple roles, organizing health benefits and delivering health care to 9.6 million active duty and retired personnel and their civilian dependents while also maintaining medical force readiness. Over the past 50 years, the publicly funded MHS has morphed into a government-administered health benefit with hybrid public-private care delivery.

While health care for members of the military dates back to before the Civil War, care for dependents remained fragmented until the passage of the 1956 Dependents’ Medical Care Act. A response to the rise of employer-sponsored insurance, the act created the first statutory benefit for military dependents, retirees, and active-duty members while simultaneously enabling the first contracted health benefit and supporting network. Subsequent legislative efforts in 1966 resulted in CHAMPUS, or the Civilian Health and Medical Program of the Uniformed Services. CHAMPUS beneficiaries were responsible for basic cost sharing through annual deductibles and subsequent copayments. Later, rising program and overall health care costs led to the implementation of CHAMPUS Prime, a health maintenance organization (HMO) option that deployed managed care cost-control tools such as use review.

By the mid-1990s, the managed care concept evolved to become the nationwide TRICARE program. The 2017 National Defense Authorization Act consolidated administrative and management responsibilities of military treatment facilities (MTFs) and TRICARE under the DoD-operated Defense Health Agency (DHA). The DHA oversees TRICARE, an entitlement benefit jointly administered by the government and private contractors, with contractors competing to fulfill roles such as claims processing and oversight for program integrity. TRICARE-enrolled members and their dependents can choose between a closed-network HMO model (TRICARE Prime) or TRICARE Select, a preferred provider organization (PPO). Beneficiaries enrolled in TRICARE Prime access care predominantly at MTFs, and their care is coordinated by assigned or chosen primary care providers. Beneficiaries in TRICARE Select access care through public and private delivery with a tiered network and do not need referrals to access specialty care. Retirees can access their military health benefits through a Medicare supplemental plan: TRICARE for Life. The plan, coupled with TRICARE Senior Pharmacy, functions as Medicare wraparound and prescription drug coverage, with no extra premium beyond the Medicare Part B premium.

Today’s MHS provides publicly funded benefits with structured product choices. TRICARE members can choose either an HMO or PPO plan, with clear tradeoffs among network breadth, plan design, and cost. The MHS comprises a direct care system consisting of 50 hospitals, 673 clinics, 144,000 employees, and a TRICARE network that contracts with 500,000 providers at more than 4,300 hospitals worldwide. More than 60 percent of health care in the MHS is privately delivered. Evolution and improvements are ongoing, with a new electronic health record system rolling out across MTFs and continuing innovation in integrated benefits and care delivery.

Public-Private Partnership Has Been Key To Success

Key to the continued popularity of the MHS is its ability to maintain financial protections for beneficiaries, through low deductibles and cost sharing, while offering access to care for all active-duty military families through a public-private network of providers. In contrast, the VHA has struggled with ballooning costs and access challenges. Policy makers responded to the VHA’s access challenges with the 2014 CHOICE Act and 2018 MISSION Act, marking the beginning of a similar transformation of veterans health care that enabled veterans to access private health care services depending on VA facility wait times, service ratings, and veterans’ distance from these facilities.

While the CHOICE and MISSION Acts marked the beginning of public-private care delivery to help increase supply and unmet demand, the VHA faces persistent financing difficulties due the nature of annual appropriations, difficulties in estimating service demand, and regional asymmetries between provider supply and demand for services. At the same time, the agency faces a crisis of confidence among veterans, along with growing responsibilities associated with serving a high-need, high-cost population. Compared to active-duty TRICARE beneficiaries, retirees, and their dependents, veterans are on average older, poorer, and historically bear greater burdens of morbidity and disability.

Expanded Health Care Choices  

As highlighted in our previous post, the manipulation of wait times at Veterans Affairs (VA) facilities in multiple states highlighted the need for both continued investment in the VA and the rapid expansion of care delivery; the latter should be executed through both the expansion of telehealth services and integration of private-care delivery for veterans. TRICARE serves as a model for melding public and private care, as it enables active-duty beneficiaries and their families to make informed choices by weighing tradeoffs among network breadth, levels of care management, and cost. Whereas TRICARE members can choose between HMO- and PPO-style plans offering varying combinations of public- and private-sector health care providers, the VHA offers veterans no such clear choice. VA health benefits cover services of private-sector providers only when the agency is unable to deliver a service or when clinical processes and outcome metrics indicate that quality is lacking. Eligibility for VA health care benefits is determined by which of eight priority groups a veteran is assigned to, based on factors such as military service history, service connection (disease or illness tied to military service), and income. As we have proposed, a Veterans Health Advantage Program would provide structured tradeoffs among cost, access, and degrees of care management through a choice of HMO and PPO plans, along with an annual enrollment period that allows for plan changes based on evolving needs and preferences.

Drawing from models used in the Affordable Care Act (ACA) Marketplaces and TRICARE, VA priority groups could receive tiered subsidies for a base benefits package in the VHAP Marketplace, or “VA Prime.” This plan, akin to TRICARE Prime, would be a closed-network HMO product including only VA care sites and pharmacies. For multiple priority groups, VA Prime would be a zero-premium plan, and small but increasing premiums tied to priority group would apply for veterans in lower-priority groups, thus maximizing access to the VHA.

VA Select, akin to TRICARE Select, would feature a PPO network, composed of both VHA and private-sector providers. Veterans of all priority groups would pay a premium above the level specified for their priority-group benefit if they choose any of the VA Select products, which would be organized and administered by private health plans and offered in a VHA-run Marketplace. VA Select plans would compete on the basis of tradeoffs among network breadth, financial protection, veteran experience, medical quality metrics (such as HEDIS measures), and supplemental benefits. Even with these changes, we expect that most veteran-specific specialty care would still be provided at government facilities, given the VHA’s expertise and experience in polytrauma rehabilitation, traumatic brain injury care, substance use disorder treatment, and many other highly specialized, veteran-specific services.

VA For Life

Benefits coordination presents unique challenges for veterans, who are frequently unable to seamlessly combine health benefits from multiple sources to pay for their health care. Recognizing the financing differences between Medicare—an entitlement program—and veterans benefits, which are funded through an annual appropriation, the VA recommends that beneficiaries sign up for Medicare, to reduce pressure on the already strained VHA system. But veterans who enroll in Medicare without purchasing supplemental coverage face unlimited out-of-pocket liability for catastrophic care. Unlike the MHS, which offers TRICARE for Life as a Medicare supplemental plan, the VHA does not allow veterans to use their veterans’ health benefits as a Medicare supplemental plan. Consequently, many veterans default to the VA for their primary source of health benefits financing due to its greater financial protections despite access limitations.

To improve access to care and choice for veterans, legislative action is needed to transition the VA to a secondary payer for veterans who enroll in Medicare. In addition, we envision a third benefits package in the VHAP Marketplace: “VA for Life,” or a Medicare supplemental plan. This new option would allow veterans to use their Medicare and VHA benefits together so that they could access the Medicare provider network without a financial penalty. Transitioning Medicare to a primary payer for retired veterans who primarily use private services would decrease the financial strain on the VHA and expand access to the VHA for lower-priority veterans’ groups. While this change may increase fiscal pressure on the Medicare program, experts have proposed varying solutions, including full implementation of payment site neutrality, graduate medical education spending reform, and a transition to premium support.

Providing Clearly Defined Options Will Enable Informed Decision Making

As proposed, VHAP would offer a set of clearly defined options so that veterans can make informed decisions about tradeoffs among access, network breadth, and cost. In this modernized system, veterans could choose a VHA-only network of providers or various combinations of VHA facilities and private providers. Veteran financial responsibility as tied to priority groups would become clearer, allowing the highest-priority groups to have access to VA Prime as a zero-premium choice, with the option to access an expanded provider network by paying a small premium through VA Select.

Once the VHAP becomes operational—either through an initial regional demonstration or a multiyear phased national rollout—benefits could be further customized to expand access to the VHA for lower-priority groups, thus providing the flexibility to coordinate their veterans benefits with other public or private health coverage. For example, employed veterans who suffer from chronic disease may benefit from a specialized plan that allows them to use their VHA pharmacy benefit and network in conjunction with private employer-sponsored insurance.

Any proposed programmatic changes should take into account the great ongoing debt that our country owes veterans and build in adequate consumer protections to support optimal choice. Other managed competition Marketplaces, such as the ACA exchanges, the Federal Health Employee Benefits Program, and the Medicare Advantage Marketplace, operate as “any-willing plan” Marketplaces with high beneficiary satisfaction. In these settings, beneficiaries may become overwhelmed with plan options, experiencing choice paralysis and selecting plans that are suboptimal for their circumstances. MHS helps avoid this problem by offering a limited selection of products under administration of the DHA. Drawing from this model, we envision the VHAP will have structured benefits options as follows: VA Prime, VA Select, and VA for Life, with the latter two offering multiple products.

Roadmap To A Modernized Veterans Health Care System

The key to successful implementation of any health benefits program is continued legislative and administrative evolution; the VHA is no exception. To sustain and modernize veterans’ health care for the next generation, Congress, the VHA, and veterans’ groups should learn from the MHS’s successes and work together to explore solutions. Providing tiered subsidies for an HMO-model benefits package, while structuring optional hybrid benefits such as a PPO-style option, VA Select, would allow veterans to make informed choices about cost, access, and provider networks. Transitioning the VA to a secondary payer for veterans who elect Medicare and creating a new Medicare supplemental plan, VA for Life, would allow veterans to “mix and match” health benefits to meet their individual needs. As the financial pressures on the VHA decrease in response to this change, the system could expand to cover other priority groups who are not currently eligible. These new options would increase health care choices for veterans while advancing the VA’s core values—integrity, commitment, advocacy, respect, and excellence—for years to come.

Authors’ Note

Dr. Wilensky reports serving as a board director at UnitedHealth Group.