Summary: A Medicare subvention under the Department of Veterans Affairs (VA) would have the goal of providing an alternative for delivering accessible and quality care to certain veterans eligible for Medicare without increasing the cost to Medicare or VA. Subvention would allow VA to supplement its funds with Medicare payments. In principle, by paying VA a discounted rate, the Medicare program might save money, so long as it does not pay for services that VA would have previously covered. A three-year Department of Defense (DOD) subvention demonstration program involves about 30,000 retirees and limits Medicare payments to DOD to $65 million a year. However, a nationwide DOD subvention program could potentially involve Medicare payments of several hundred million dollars or more. The potential size of a nationwide VA program may be even greater, with nearly all the nine million veterans aged 65 and older covered by Medicare. Proposed legislation before the House and the Senate would authorize VA subvention demonstrations. Under either bill, VA will (1) be challenged to attract veterans who currently enjoy a generous VA benefits package, (2) need to strengthen its billing systems, and (3) need to ensure that access to services is not reduced. VA will need sufficient time to implement a demonstration, and it must carefully design and implement its payment methods to protect Medicare trust funds and to promote cost consciousness and efficiencies at the demonstration sites. Finally, sound data systems are essential for managing and evaluating a subvention demonstration.
