Estimating private sector values for VA health care: an overview

To provide an overview of methods used to establish what taxpayer costs would be if all Veterans Health Administration (VA) patient care were paid for by the federal government but provided in the private sector.

Study assumptions included (1) that there would be a hypothetical policy change to pay for VA care through a Medicare-based fee-for-service program, (2) that the VA coverage benefit would not change, (3) that practice styles would remain the same, and (4) that there would be no impact on market values. To achieve the objective, project staff adapted Medicare payment schedules and guidelines, where available, with oversight of an advisory committee with VA and non-VA expertise in costs and data. For six sites, detailed payments were estimated using VA utilization databases and software and Medicare rate schedules available in the private sector. Overhead, interest on capital, and malpractice costs were added to VA-reported operating costs. Patient severity was examined, and patient-level costs were explored.

Detailed methods for pricing seven types of health services are presented. Three methods articles focus on process issues.

Because VA care is not directly comparable with private sector health care as a result in part of differences in benefits covered and the scope of services provided, estimating costs for this care based on a private sector model requires careful consideration of market valuation approaches. The articles in this supplement describe the methods used to estimate market values for VA care so that other researchers can use them in future studies.