Socialized Medicine: America’s best health-care organization?

The 14,500 doctors and 58,000 nurses of this health-care organization serve 7.6 million enrollees, delivering care that outperforms both commericial insurance and Medicare–let alone poor, underfunded Medicaid–on a host of indicators of quality of process and outcome. While Medicare costs increased from $5,000 to $6,800 (36 percent) per patient-year between 1996 and 2004, its costs stayed constant at $5,000 per patient-year. And the patients receiving this high-quality, moderate-cost care are disproportionately poor and disabled.

Is it Kaiser Permanente? Is it a new for-profit chain of health clinics? No, it’s the Veterans Health Administration (VHA).

I have dreadful memories of visiting the VA hospital with my grandmother, a social worker, in the early 1970’s. And the VHA had a reputation for bad care as recently as the early 1990’s, when Republican threatend to replace it with voucherization of veterans health care. But the VHA underwent substantial “reinvention” in the 1990’s and emerged as an extraordinary health-care organization that can truly be called a health maintenance organization in the best sense of the word: an organization dedicated to maintaining the health of a population.

What are the lessons?

  • Systematic delivery of primary care can improve our health. As part of its commitment to primary care, the VHA uses centralized Electronic Health Records (EHR) to make sure that the right care is delivered to the people who need it. The system yields superior results with screening, such as mammography (86 percent of VHA enrollees compared to only 74 percent of Medicare enrollees) and colorectal cancer screening (76 percent for VHA versus 53 percent for Medicare), and with care for chronic illnesses such as diabetes, hypertension, and mental illness. One of the greatest shortcomings of the fragmented American system of health care is its failure to provide continuity of care; important health information about patients doesn’t travel from provider to provider and screening and follow-up are inadequate and uncoordinated.
  • Large, single-payer organizations offer cost advantages.
    • Unlike the fragmented American system of health care, the VHA keeps down costs in paperwork and administration.
    • The VA bargains hard with pharmaceutical companies over the price of drugs. In contrast, the Republican Congress explicitly forbade Medicare from bargaining with pharmaceutical companies over the price of drugs in the 2006-enacted Medicare Part D. The difference in drug prices paid by the two public systems, the VHA and Medicare Part D, would be enough to eliminate the hefty patient share of costs in Medicare Part D.
  • The public sector can deliver highest-quality health care at better prices. Of course, there’s no profit to pay out in the VHA. I have carefully developed the trope of saying,“Now when I advocate single-payer health care, I am not suggesting — shudder — the kind of socialized medicine where doctors and nurse are all public sector employees and the hospitals are all government owned, as in Britain. I mean only that the government should be the insurer and payor, not the health care provider.” But it turns out that the U.S. public sector can be an exceptionally good direct provider of care.


Adam Oliver, “The Veterans Health Administration: An American Success Story?” The Milbank Quarterly, Vol. 85, No. 1, 2007 (pp. 5—35), gives an excellent narrative of the re-engineering of the VHA, which he attrributes to policy entrepreneurship and favorable circumstances (“agent of change” and “window of opportunity” in public-administration parlance).

Paul Krugman and Robin Wells, “The Health Care Crisis and What to Do About It,” New York Review of Books, 2005 , tipped me off to look at the VHA experience. Also, an exceptionally good analysis of the health care crisis and what to do about it. Required reading.

Dean Baker, The Savings from an Efficient Medicare Prescription Drug Plan, Center for Economic Policy Research, January 2006, discusses the public gains from bargaining with pharmaceutical companies about drug prices.