Graeme Sloan/Sipa USA via AP Images
Veterans Affairs Secretary Denis McDonough testifies during a House Appropriations Subcommittee hearing at the Capitol in Washington, April 16, 2024.
When Denis McDonough became Joe Biden’s Veterans Affairs secretary in January 2021, it wasn’t because he had a history of neglecting to read high-level reports. Or failing to absorb the critical information they provide. Or dropping the ball on Capitol Hill, in the face of headline-hunting members of Congress.
A well-credentialed graduate of the Georgetown School of Foreign Service, McDonough had previously served as both National Security Council chief of staff and then deputy national security adviser. Between 2009 and 2013, he kept President Obama fully briefed about global crises.
After performing so well in those roles, McDonough became White House chief of staff during Obama’s second term. There, he helped advance the administration’s legislative agenda where possible and get presidential appointees approved.
When Cabinet officers faced pesky questioning by members of Congress, McDonough made sure they were well prepared to answer them at oversight hearings.
Yet when McDonough, at age 52, shifted from White House coach to Cabinet official in 2021, his own congressional performances somehow got worse, not better.
Repeated Fumbles
The latest and most shocking examples of McDonough’s Capitol Hill fumbles occurred, in serial fashion, during a three-week period this spring. At hearings of the House Veterans’ Affairs Committee (HVAC) on April 11 and Senate Veterans’ Affairs Committee (SVAC) on May 1, McDonough was repeatedly questioned about a so-called “Red Team” report sent to the Department of Veterans Affairs (VA) in mid-March by a panel of outside experts on veterans’ health care.
As Prospect readers learned on April 11, based on a leaked copy of this document, a crack team of veterans and military health experts found that the VA-run Veterans Health Administration (VHA) faces an “existential crisis.”
The authors of this report, entitled “The Urgent Need to Address VHA Community Care Spending and Access Strategies,” warned that out-of-control spending on outsourcing may soon force the nation’s largest public health care system to eliminate direct-care services, reduce staff, and close facilities.
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McDonough’s VHA leaders commissioned this report, and he met with its authors in Washington just three months ago.
On April 11, out-of-control private-sector spending got the attention of HVAC members on both sides of the aisle. Rep. Mark Takano (D-CA), former chair of the committee and now its ranking Democrat, agreed that the “VA’s health care budget is out of balance … Rather than directing billions of dollars to the community, we must provide VA with enough resources and staffing.”
Later in the hearing, Rep. Chris Deluzio (D-PA), a military veteran and VHA patient himself, pointed out that the impact of privatization was neither “fiscally responsible” nor “good for veterans.” He asked why the Biden administration’s proposed VHA budget for 2025-2026 was still “encouraging these trends.”
A Republican booster of privatization, Rep. Mariannette Miller-Meeks (R-IA) sought McDonough’s reaction to the report’s findings. In the first of his head-scratching responses, the VA secretary claimed that he was not “intimately familiar with the group or the contents of the report.” But, he assured Miller-Meeks, “I will get there.”
“Still Have Not Seen It”
Three weeks later, in the SVAC hearing, McDonough again insisted he had not yet read the report, which is only 23 pages long (hardly the Pentagon Papers).
Sen. Bill Cassidy (R-LA) asked McDonough about the “Red Team analysis which you gave us.” Reading directly from a copy of the report, Cassidy, who is a physician, cited its warning about the adverse impact of outsourcing on the VHA’s critical role as a training ground for thousands of medical school and nursing students, and other health care professionals.
Before addressing the issue, McDonough corrected Cassidy. “Your staff gave you that [report],” he said. “I still have not seen the report, but I’m glad you’ve seen it.”
But “it’s generated by your folks,” Cassidy replied. No, McDonough corrected him again. “It’s generated by our Red Team we asked to stand up to take an independent look at what’s been happening. I still have not seen it, but I’m glad you have.”
By the time of this exchange, the Red Team report was in the hands of members and staff on both Veterans’ Affairs Committees, had been the subject of a press release by the American Federation of Government Employees (AFGE) triggered by reporting in the Prospect, and was even posted in its entirety by a conservative watchdog group, Empower Oversight. But it still has not been officially released by the VA.
Meanwhile, bipartisan concern was mounting about the rapidly unfolding real-world implications of the trends highlighted in the report. For example, McDonough’s latest VA budget proposal would eliminate 10,000 VHA jobs, through attrition and voluntary separation. In a joint letter to McDonough on April 15, SVAC chair Jon Tester (D-MT) and ranking Republican Jerry Moran (R-KS) blasted this “zero growth” staffing decision as “drastic” and “shortsighted.”
Cost Savings Ignored
As one longtime VA observer told the Prospect, “It’s incredible to me that the secretary does not take the time to attend to a report that clearly states that the system he administers is facing an existential threat. It’s even more concerning that he isn’t interested in recommendations that could save the agency and taxpayers billions [of dollars] a year.”
According to the Prospect’s own calculations based on the FY2024 Veterans Community Care Program’s estimated budget allocation, if McDonough implemented just six of the Red Team’s nearly 30 proposals, that would save more than $23 billion a year. For example, using in-house emergency room services rather than private hospital ERs could save $10.9 billion alone. Providing VHA geriatric and extended care, rather than outsourcing it, would add $7.3 billion in annual savings. Limiting the use of expensive private-sector orthopedic, oncology, and mental health care would reduce reimbursement in those areas by $1.4 billion, $1.8 billion, and $1.8 billion, respectively.
McDonough has himself estimated that counting VHA telehealth services as access to care could save a billion dollars a year. “Even if VA cut ER, geriatric and extended, mental health, oncology, and orthopedic community care by half, the savings would be enormous,” one Hill staffer told the Prospect.
Sen. Cassidy, a conservative believer in market-based health care delivery, questioned McDonough about the cost and wisdom of sending veterans to private-sector doctors who, in a fee-for-service system, have a strong financial incentive to do multiple tests and unnecessary procedures. Instead of agreeing that was a good reason to reduce patient referrals outside the VHA, McDonough blamed his own agency for failing to secure more pre-authorizations for such treatment and not coordinating better with “community care” providers.
Healthy Competition
This response is a familiar one from the secretary, whose own neoliberal worship of market “competition” was again on full display in his recent congressional testimony. In the course of a single six-minute exchange with Tester and Moran at the SVAC hearing on May 1, McDonough used the terms “compete,” “competitive,” and “competing” eight times. It was all an echo of his report to Congress two years ago on the status of outsourcing where, despite mounting evidence to the contrary, McDonough claimed that the VHA and its “community providers are engaged in friendly, healthy competition to be the best, most accessible, highest-quality option.”
Such framing ignores the fact that private-sector firms vying for market share in health care do not recruit 1.7 million “out-of-network” providers, freely refer their own patients to these “competitors,” and then pay them $30 billion a year for services that their own in-house caregivers are capable of providing, in facilities that must be staffed and maintained to remain in business.
When Americans who are not veterans choose a health plan, offered by their employer or through an Affordable Care Act health insurance exchange, they’re not free to go to any doctor or hospital of their choice without hefty financial penalties.
The VHA patient referral standards inherited from the Trump administration—which McDonough has refused to change for three years—have no precedent or parallel. As the VA secretary himself reminded Congress in his 2022 report, “a patient is generally not authorized to use out-of-network providers without prior approval or higher patient out-of-pocket payments, even if that individual patient must travel farther or wait longer for in-network care than the designated standard.”
If any big private “managed care” plan was run the way the VHA has been operated under Obama, Trump, and now Biden, it would probably go bankrupt, due to huge revenue losses.
This misguided notion of competition doesn’t only mislead veterans and the public, it also fuels right-wing proponents of privatization, like Darin Selnick of the Koch-backed Concerned Veterans for America, who just penned an attack on the Red Team report on the conservative website The Daily Caller. Selnick, who was one of the authors of the MISSION Act, accused Red Team authors and by extension the VA of trying to limit veterans’ choices and stymie competition.
“A Thousand Cuts”
As frontline caregivers report, it is the so-called competition, as the Red Team report predicts, that is limiting veterans’ options by depriving VA of needed staff. Doctor Harold Kudler, a psychiatrist who has treated veterans for four decades and spent several years shaping mental health policy at VA Central Office in Washington, D.C., told the Prospect that inquiries from residents in psychiatry and psychology about working at the VHA are not even being answered. In addition, employment offers already made to therapists are being rescinded.
“All this,” Kudler says, “is occurring in the context of a serious national shortage of psychiatrists and mental health professionals. And it’s creating a word of mouth among prospective hires that VA can’t be counted on as an employer of choice. This is likely to hurt our ability to recruit, not just now but in the future.”
At a strategy session about fighting privatization held in Chicago last month, Jim Martin, an emergency room doctor and president of AFGE Local 2107, was among the frontline caregivers warning about the impact of outsourcing on 300,000 current employees. “We are dying a death of a thousand cuts,” Martin told the Labor Notes conference audience. “It’s the end of the VA, if we don’t do something.”
Representatives of AFGE, National Nurses United, the National Federation of Federal Employees, and the American Federation of Teachers (which represents VA nurses in Wisconsin) discussed the need for more informational picketing and protest rallies at VHA hospitals and clinics around the country. On May 8, registered nurses and their community supporters at the San Francisco VA Medical Center held a demonstration against what their union calls “the ongoing nurse burnout crisis and rollback of flexible RN work schedules.”
NNU plans to bring its “Stop the Cuts” campaign to Washington in early June, deploying a contingent of VHA nurses in a multiday lobbying effort on Capitol Hill that will also help amplify the warnings of McDonough’s “Red Team,” and put further pressure on him to finally read and act upon its report.
Such action is critical, as Congress now considers an omnibus bill that includes misguided provisions that would encourage the outsourcing of even more VHA care to the private sector.
