VA Health Care: The Problems with Government Agencies By David Henderson

Robert P. Murphy, a frequent writer for Econlib, has a good analysis of Kevin Drum’s (of Mother Jones) comments on the current scandal with Veterans Administration health care. I’ll hit a few highlights and then add some of my own thoughts.

Quick background: Drum makes it clear that he’s not trying to defend Obama or Veterans Administration health care. What he does is give some facts that he fears will be left out of the discussion, facts that, in his view, are somewhat mitigating. His piece is short and so I won’t summarize it further. Instead, I want to highlight one argument he made and one response that Murphy gave to this argument.

Drum writes:

During the Clinton administration, the performance of the VHA was revolutionized under Kenneth Kizer. The old VHA of Born on the 4th of July fame was turned into a top-notch health care provider that garnered great reviews from vets and bipartisan praise on Capitol Hill. The best account of this is Phil Longman’s 2005 article, “Best Care Anywhere.” In 1999, Republicans decided to play dumb political games with Kizer’s reappointment. Eventually, with the handwriting on the wall, he chose to leave the VHA. Under the Bush administration, some of the VHA’s old problems started to re-emerge, most likely because it no longer had either presidential attention or a great administrator. As early as 2002–before the Afghanistan and Iraq wars made things even worse–claims-processing time skyrocketed from 166 days to 224 days. Under the Obama administration, the patient load of the VHA has increased by over a million. Partly this is because of the large number of combat vets returning from the Afghanistan and Iraq wars, and partly it’s because Obama kept his promise to expand access to the VHA. The most sensational charge against the VHA is that 40 or more vets died while they were waiting for appointments at the VA facilities in Phoenix. But so far there’s no evidence of that. The inspector general investigating the VHA testified last week that of the 17 cases they’ve looked at so far, they haven’t found any incidents of a patient death caused by excessive wait times.

Murphy replies:

Look at what Drum is saying here. Even on his own terms, he admits that the VA system used to be awful–hence the reference to the Tom Cruise movie. Then, so long as there was a point man in the federal government committed to cleaning up the system, it worked. But alas, the moment that person left, the system went to hell again.

And:

One of the main virtues of a decentralized market economy is that no one person has the power to kill you. If you don’t get along with your boss, you can quit and work for somebody else–or start your own business. If you don’t like your butcher, you can buy your meat somewhere else. And in a genuinely free market, if you didn’t like the service you were getting from one doctor or hospital, it would be easy to take your business elsewhere. (italics his)

Murphy is right. If Drum’s argument is that running a good health care system depends on having a good President in office and, further, on having that President appoint a good administrator of the system, then that’s a real problem. Indeed, that is a problem I often see with people on the left and the right. On the left, people often complain about how a Republican president runs a part of the government that the left wants the government to run. But they have to know that occasionally there will be a Republican president and that there will even be a Democratic president they like who appoints people they don’t like. On the right, I see Republicans and neo-conservatives advocate a highly interventionist foreign policy and then complain when someone like Obama comes along and carries out that interventionist foreign policy in a way they don’t like. They have to know that occasionally there will be Democratic presidents.

This is one of the major problems with government. The government comes in and sets up an agency, in health care, in foreign policy, or in some other area. Then, whether it runs well depends on which particular appointee runs the agency.

But let’s not carried away with talking about how well the agency ran. Look back at one point made by Drum. Early in the Bush administration, “claims-processing time skyrocketed” to 224 days. That is long. And it skyrocketed from what level? 30 days? 60 days? No. Kevin Drum tells us: 166 days. Now, that is a 35 percent increase, which is a substantial number. But 166 days itself is well over 5 months. So the original claims-processing times were already in the sky.

Maybe, then, we can depend on bloggers and reporters to track the behavior of government agencies so that they will be accountable. Maybe. But notice that in 2011, well into the Obama administration’s time in office, when a lot of these problems with the Veterans Health Administration were happening, blogger Paul Krugman was calling he VHA “a huge policy success story.”

Krugman wrote:

What’s behind this success? Crucially, the V.H.A. is an integrated system, which provides health care as well as paying for it. So it’s free from the perverse incentives created when doctors and hospitals profit from expensive tests and procedures, whether or not those procedures actually make medical sense. And because V.H.A. patients are in it for the long term, the agency has a stronger incentive to invest in prevention than private insurers, many of whose customers move on after a few years.

It’s much better to depend on competition among private firms than on a government-funded agency.