What the VA Health System Shows About Single-Payer Healthcare

How does the VA health system work?

The VA directly delivers care to millions of veterans through government-owned hospitals and clinics. It negotiates drug prices, employs medical personnel as public employees, and runs a fully integrated health system throughout the country. Nearly 70% of all physicians working in the U.S. spend some of their time training or working at VA hospitals. Today, the VA serves roughly 9 million enrolled veterans and operates more than 1,300 facilities nationwide.

VA health care is available to veterans who qualify based on service history and disability status. Sometimes veteran family members are also eligible for VA care when a veteran has experienced a total disability, or through other related programs like the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA).

As an example of a “single-payer” system, the VA model has no premiums for most enrollees (there are some exceptions for beneficiaries who are not veterans themselves), an integrated electronic health records system, and government-negotiated drug prices. Moreover, because VA physicians are salaried rather than paid per service, the VA does not systematically incentivize additional billing or higher procedure volume. However, the lack of financial incentives and the resources that sometimes go hand-and-hand can, in some cases, limit access (available options and wait times) and overall quality of care.

How is the VA system different from Medicare or Medicaid?

The VA is funded through annual congressional appropriations. Unlike Medicare, which relies heavily on payroll taxes and premiums, and Medicaid, which uses a federal-state matching formula, the VA is financed directly by Congress through the federal budget.

Medicare and Medicaid are also public insurance programs, but they function very differently from the VA. Neither program directly operates hospitals nor employs providers. Instead, they reimburse private hospitals, clinics, and physicians for services rendered. And this reimbursement-based model results in more complex, individualized billing systems, with subsequent administrative overhead, and wide variation in pricing.

A 2022 study found that VA-provided hospital care was 21% less expensive than Medicare-funded care, with a survival rate about 5% higher. A 2014 study by the nonpartisan Congressional Budget Office came to similar conclusions about cost savings. Both analyses explain the savings by citing the differences mentioned earlier: salaried employees, unified electronic records, and drug price negotiations. These findings are particularly notable because Medicare reimbursement rates are already significantly lower than most insurance plans.

What would scaling the VA model nationwide require?

Expanding a VA-style system to cover all Americans would require major structural changes. Extending care to more than 330 million Americans would require either massive construction of hospitals and clinics or the repurposing of current private facilities. The federal government would also have to hire medical personnel from private practice and existing hospital systems, as well as expand its administrative capacity to deliver all non-medical aspects of care.

Supporters argue that such a system could reduce administrative costs by having a similar experience for everyone and provide greater access to more people. Critics worry about longer wait times for government-run services, reduced provider flexibility, difficulty attracting skilled talent, limited advancements in overall prevention and treatment, and potentially higher costs. Finally, because the current VA system cares for adults and a high percentage of retirees, new staff and facilities would be needed to care for infants and children.

The Takeaway

The VA is a large-scale, government-run health system in the United States, offering a real-world model of what a single-payer health system could look like.