Democratic National Convention via AP
Veterans Affairs nominee Denis McDonough, seen speaking during the second night of the Democratic National Convention this past August
Media speculation about Joe Biden’s choice for secretary of veterans affairs followed the expectation that the nominee would be a former military officer, as is customary for the position. This included past or present elected officials—Illinois Sen. Tammy Duckworth, ex–South Bend Mayor Pete Buttigieg, former House member Patrick J. Murphy, former Missouri Secretary of State Jason Kander—who have made their service a key part of their candidate résumés. Also in the running, it seemed, were veterans with experience at the agency during the Obama presidency: former VA Secretary Bob McDonald, or former Deputy Secretary Scott Gould.
But instead, Biden nominated Denis McDonough, a 51-year-old alumnus of the Obama White House who never served in the military and lacks any background in health care administration (a relevant qualification, because the VA operates the largest public hospital system in the country). After working as a Capitol Hill staffer and Center for American Progress senior fellow, McDonough first joined the Obama administration as a national-security adviser and then became the president’s second-term chief of staff. In the latter role, McDonough is credited with being “deeply involved” in the White House decision to sack Eric Shinseki and replace him with McDonald in 2014. This shake-up occurred after a few VA hospital managers in Phoenix falsified data about how long veterans were waiting for appointments, triggering a major political uproar. According to a White House colleague at the time, McDonough became “obsessed” with health care wait times, and helped solve the problem by using his Capitol Hill contacts to expand outsourcing of veterans’ care via the Veterans Choice program, recently hailed as one of Obama’s “most substantial second-term legislative achievements.”
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Nevertheless, McDonough drew mixed reviews from veterans advocates, who favored the Choice program six years ago, but now may be a bit miffed about their organizational exclusion from Biden’s VA transition team.
“We were expecting a veteran, maybe a post-9/11 veteran. Maybe a woman veteran. Or maybe a veteran who knows the VA exceptionally well,” said Joe Chenelly, executive director of AMVETS. “It’s a shockingly out-of-touch pick,” Paul Rieckhoff, founder of Iraq and Afghanistan Veterans of America, told Politico. “They could have selected someone who’s been a patient there or has any direct experience with that community.”
Even Will Fischer, an adviser to VoteVets, an advocacy group closely aligned with Democrats, acknowledged that “this pick is unexpected and out of left field.” Despite that, Fischer found McDonough’s nomination to be “a grand slam.” While not that enthusiastic, Rick Weidman, legislative director of Vietnam Veterans of America, and other veterans service organization officials do give McDonough credit for being a Washington insider who knows how to get things done. According to Weidman, McDonough “understands the veteran population and listens well. He has the real confidence of Joe Biden.”
A Breath of Fresh Air?
McDonough was once hailed, by a now retired Republican member, as “a breath of fresh air” when he served as Obama’s chief of staff. Assuming his nomination sails through the Senate, the new VA secretary’s top priority should be getting something undone—namely, the partial privatization of the Veterans Health Administration (VHA). That process began with the Choice Act in 2014, legislation that had a sunset provision and was not intended by then–Senate Veterans’ Affairs Committee Chair Bernie Sanders to become a permanent solution to expanding access to outside providers.
As Sanders and others argued, veterans would be better served by Congress investing more in the VHA’s own coordinated system of direct and specialized care for nine million patients. Instead, by the final year of Obama’s presidency, the VHA was making over 25 million outside appointments, under guidelines not based on medical necessity. Between 2014 and 2017, the VHA budget for private-sector care increased by 39 percent, while spending on its own in-house clinical care rose by just 9 percent—a trend that worsened under President Trump. The Choice Act ended up diverting nearly $20 billion from the VHA to private hospitals and doctors, and two for-profit insurers, whose “third party” administration of the program was plagued by overpayments, mishandling of medical record transfers, and botched scheduling of and unacceptable delays for outside appointments.
Veterans groups, like the American Legion and Veterans of Foreign Wars, began complaining about these problems and the quality of care from some Choice providers. By 2018, even Sen. Jon Tester (D-MT), currently the top Democrat on the Veterans’ Affairs Committee, acknowledged that “the Choice program has been a wreck. Every veteran up here will tell you that.”
Sadly, Tester then helped lead a bipartisan charge further in the wrong direction. In June 2018, Congress passed the VA MISSION Act, handing President Trump one of his biggest legislative victories. As reported previously in the Prospect, Trump’s current VA secretary, Robert Wilkie, used his MISSION Act authority to further loosen standards for outsourcing care, which diverted billions more to the private health care industry. At the same time, Wilkie refused to fill 46,000 vacancies in VHA hospitals and clinics, forcing them to make further private referrals.
COVID-19 made the undermining of the agency untenable, even for a Republican ideologue like Wilkie. Last spring, Congress authorized—and Trump approved—an emergency infusion of $20 billion for VA hospital expansion, equipment purchases, and new hiring. The VA says it has filled 24,000 of those vacant staff positions, an expedited hiring process that President Trump cited during his re-election campaign as one reason why “veteran trust in the VA reached an all-time high.” Until there is widespread COVID-19 vaccination, sending large numbers of veterans to already overburdened non-VA facilities is not going to be much of an option for any administration.
The Medicare Advantage Model
Unfortunately, based on the track record of the Obama-Biden administration, veterans can’t depend on new leadership and the pandemic to permanently reverse outsourcing at the VHA. Obama never fulfilled his 2008 campaign pledge to eliminate Medicare Advantage, a costly and wasteful partial privatization scheme enacted by his predecessor, George W. Bush. As single-payer advocates David Himmelstein and Steffie Woolhandler have documented, “despite having overhead costs almost seven times that of traditional Medicare (13.7 versus 2 percent), Medicare Advantage plans have grown rapidly. They now cover more than one-third of Medicare beneficiaries, up from 13 percent in 2005.” The Centers for Medicare and Medicaid Services (CMS) did an audit of enrollees’ charts that “indicated that Medicare Advantage plans are collecting $10 billion annually for entirely fabricated diagnoses,” which represents “a small fraction of their overall take from upcoding.” Yet, the Trump administration ordered changes to CMS’s own Medicare website to trumpet the benefits of Medicare Advantage enrollment.
Medicare Advantage plans are now projected to reach nearly 50 percent of all beneficiaries by 2029, if current enrollment trends continue. And that trend line is not just due to Medicare administrator machinations; the insurance industry is investing heavily in Advantage plan marketing, plus making sure, via political spending and lobbying in Washington, that no president or Congress ever restores the primacy of “original Medicare.”
The Choice and MISSION Acts have fostered a similar dynamic, threatening the future of the VHA. In its original form, veterans’ health care was delivered directly, via a well-functioning system of socialized medicine that made the VHA an American cousin of the U.K.’s National Health Service. But in the past six years, the VHA has been partially converted into a Medicare-style payer of bills submitted by other health care providers. Like Medicare Advantage plan providers over the last two decades, private health care interests of all kinds have positioned themselves to turn hundreds of thousands of VA patients into their new customers, as soon as conditions in private hospitals and medical practices permit.
The privatizers have even had some allies in veterans service organizations like AMVETS, which started lobbying last year for a pilot program called “Veterans Advantage.” Its proposed partner was CareSource, a Medicare Advantage provider and one of the nation’s largest Medicaid managed-care plan operators.
Unlike Obama, who criticized John McCain’s defense of Medicare Advantage during the 2008 presidential campaign, Biden’s main criticism of VHA privatization under Trump was that it wasn’t proceeding fast enough, with a wider build-out of MISSION Act–mandated “community care” networks. That may not bode well for undoing the MISSION Act’s damage on McDonough’s watch, particularly if his VA deputy undersecretary for health ends up being an outsourcer, rather than a VHA rebuilder like Dr. Kenneth W. Kizer. A Navy veteran, physician, and public-health expert, Kizer was picked as undersecretary for health by President Bill Clinton in 1994, when the agency was struggling to recover from 12 years of conservative Republican rule. During Kizer’s five years at the helm, VHA made great strides, improving patient safety and primary-care delivery, upgrading in-house electronic medical record-keeping, and decentralizing administrative decision-making by shifting it away from VA headquarters and closer to patients and frontline caregivers, more of whom were deployed in community-based outpatient clinics. By the turn of the century, an agency not used to good press coverage was being hailed by Bloomberg Businessweek for providing “the best medical care in the U.S.” and by the Harvard Business Review for having undertaken one of the most successful hospital system turnarounds in history.
If the Biden administration, and its new VA secretary, want to win laurels like those again, serving veterans better and saving taxpayer money in the process, privatization is not the way. Reproducing the successes of the Kizer era would be a much better strategy, if not one favored by powerful private interests hoping to retain their Choice and MISSION Act–created opportunities and advantages.
