Over a four-year period, the federal government double-paid for the health care of 4,764 recipients of coronary revascularization procedures, leading to $214 million in redundant spending. This wasteful spending occurs due to policies governing the Medicare Advantage program for Veterans that do not reflect how the U.S. health care system is currently structured. We published these findings last week in JAMA Network Open.

Elias J. Dayoub, MD, MPP is a fellow in the National Clinician Scholars Program at Penn and an LDI Associate Fellow.

Specifically, the duplicative spending is a direct result of overlapping coverage when veterans are simultaneously enrolled in Medicare Advantage (MA) and the Veterans Affairs (VA) health system. The federal government issues a capitated payment to private MA plans to provide comprehensive health care to enrollees, and under typical circumstances the MA plan is then responsible for paying any health care costs incurred by the enrollee. However, whenever a patient who is dually enrolled in both MA and VA receives a Medicare-covered service through the VA, the VA is not reimbursed by the private plan for the cost of the health care it provides. In effect, in these cases the federal government has made two payments for the same service.

Our analysis focused on two coronary revascularization procedures – percutaneous coronary intervention (PCI) and coronary artery bypass graft (CABG) surgery – that are high-cost, relatively common, and covered by Medicare. From 2010 to 2013, there were 4,764 coronary revascularization procedures performed at the VA for veterans who were simultaneously enrolled in MA, totaling $214 million in duplicate spending. While sizeable, this redundant spending reflects only two medical procedures and thus represents only a fraction of the double payments the government makes when a dual-enrolled veteran opts to receive a Medicare-covered service at the VA.

A previous study estimated the amount of total duplicative spending (i.e., accounting for all Medicare-covered services) that occurred in 2009 was $3.2 billion. However, duplicative spending has likely grown significantly in the past decade because enrollment in MA has steadily increased and is expected to continue growing. The number of enrollees in MA has grown from 8.4 million in 2007 to 19.0 million in 2017, an increase from 19% to 34% of all Medicare beneficiaries. The amount of duplicative spending is expected to continue to grow with increasing numbers of veterans opting into MA each year.

Fortunately, there are policy solutions to this policy-derived problem. Perhaps the most straightforward policy approach would be to allow the VA to collect reimbursements from MA plans for Medicare-covered services provided by the VA, similar to how the VA bills private insurers when providing care to veterans enrolled in a non-Medicare private insurance plan. Currently, Section 1862 of the Social Security Act prohibits Medicare from making payment for services that are paid for directly or indirectly by another government entity. This section was enacted in 1965, long before the introduction of the MA program and thus poorly designed for the current U.S. health care system in which private MA plans are common. Another approach would be for Centers for Medicare & Medicaid Services to adjust capitation payments to MA plans for veterans who receive a significant amount of care through the VA system.

Under current policy, the federal government double-pays billions of dollars for medical services received by veterans enrolled in MA, leading to a large windfall for the private MA plans that receive capitation payments but then avoid the costs of care provided by VA. Given the growing financial pressures that both Medicare and VA face, policymakers should consider policy solutions to mitigate redundant federal spending and improve the health care system’s efficiency.

The article, “Federal Payments for Coronary Revascularization Procedures Among Dual Enrollees in Medicare Advantage and the Veterans Affairs Health Care System,“ was published in JAMA Network Open on April 6, 2020.  Authors are Elias J. Dayoub, MD, MPP; Elena L. Medvedeva, MS; Sameed Ahmed M. Khatana, MD, MPH; Ashwin S. Nathan, MD; Andrew J. Epstein, PhD; and Peter W. Groeneveld, MD, MS.