Our study produces evidence, albeit mixed, that the distance to VA and Medicare providers influences choices between the two sectors among dually eligible veterans with MH/SA diagnoses. In general, greater distance from Medicare inpatient facilities is associated with higher VA and lower Medicare expenditures, and greater distance from VA inpatient facilities is associated with lower VA and higher Medicare expenditures. This tendency is observed for both aged and disabled patients, although the effects are more evident for total than for MH/SA expenditures. The larger impact of access to MH facilities on total costs than on MH/SA costs might result from veterans starting to use the VA for medical care after initially seeking MH/SA services from the VA.
Among the aged, distance to a VA outpatient medical or MH facility does not seem to be a factor in sectoral choice. However, among the disabled, total VA costs are significantly lower for veterans living at greater distances from VA outpatient facilities. These lower expenditures do not appear to be offset by increases in Medicare expenditures. Among both the aged and disabled, expenditures for schizophrenia patients are especially affected by distance to VA services, particularly inpatient MH facilities.
Results suggest a distinction between aged and disabled veterans in choice of sector for outpatient care. The distance from a VA outpatient medical or MH facility did not make a difference in the allocation of expenditures between VA and Medicare for aged veterans. However, distance from a VA outpatient MH facility did matter for disabled veterans, perhaps because they relied much more heavily on VA than on Medicare for MH/SA services than did the aged veterans. Among all veterans, the disabled had 3.9 times more VA than Medicare MH/SA expenditures, compared with 1.4 times for the aged. The failure of our results to indicate significant associations between geographic proximity to VA outpatient services and choice of sector by aged veterans may be due to the relatively small portion of medical expenditures that is accounted for by outpatient care, particularly for the elderly. Total VA and Medicare expenditures may be dominated more by costly inpatient care in this group, even for MH/SA services, if elderly veterans have more comorbidities than younger veterans and are more likely to be treated for MH/SA problems at a VA inpatient facility.
Although not fully consistent, overall our results do support a model of substitution, in which dually eligible veterans increasingly turn to Medicare providers when VA services become less geographically accessible. However, even when effects went in the expected direction and were significant, they were relatively small in magnitude. For example, controlling for other observable differences, aged dual eligibles would be expected to have $1,913 less in VA costs if they lived 62 instead of 8 miles away from a VA mental health facility, yet only $570 more in Medicare costs. So while there does appear to be a substitution effect, the increased Medicare expenditures do not fully offset the decreased VA expenditures. Moreover, the magnitudes of these effects represent only a relatively small portion of overall average expenditure per individual. Other effect sizes were even smaller. Because the substitution effects are small, the inability of earlier studies to examine crossover to Medicare mental health services may not have created serious bias.
We conclude that cost-shifting between sectors as a result of geographic access barriers may not be of great concern to policy makers. What may be of greater importance from a policy perspective is whether veterans who are at a geographic disadvantage vis-à-vis VA services have alternative sources of health care. Patients with schizophrenia may be particularly vulnerable in this regard. As we found no evidence of complementarity between the two sectors, our study does not support the conjecture that greater distance from VA facilities results in diminished awareness of potential mental health care needs among veterans. Rather, VA policy makers need to be more focused on improving outreach to veterans, because for many veterans who are not eligible for Medicare, the VA is the medical provider of last resort. We chose to examine the cost-shifting issue among dually eligible patients in the area of mental health because of VA's particular strength as a provider in this area, in addition to the growing need for behavioral health services among veterans. Caution should be exercised in generalizing the conclusions of this analysis to other VA subpopulations.
There are several limitations to our analyses. We did not examine dually eligible veterans who used only Medicare services or who had mental health care needs but received no services in either sector. These biases seem likely to lead to conservative estimates of the substitution between VA and Medicare services, because veterans who live very far away from VA services (and use only Medicare services as a result) are excluded from our sample; if we had been able to include them, the distance measures would have shown stronger effects. We were also unable to obtain reliable data on income of veterans, which is a potential driver of expenditures. Claims data lack detailed clinical information, limiting our ability to adjust completely for risk. On the other hand, bias is primarily a concern when the omitted measures are correlated with the covariates of interest, which seems less likely to be true for the access measures on which we focus. Finally, given our large sample sizes, we chose a more conservative 1 percent (instead of 5 percent) significance level cutoff value and base our conclusions on broad patterns of results rather than individually significant estimates.
Major events have taken place since the time period we studied, elevating the importance of the issues raised in this paper. In the conflicts occurring in Southwest Asia, which include Operation Enduring Freedom (OEF) in Afghanistan and Operation Iraqi Freedom (OIF), improved defense and medical capabilities have vastly improved the survival rates of soldiers (Gawande 2004
), but have also created a new generation of veterans who are presenting at VA facilities with multiple traumas, injuries, and disabilities. The increasing incidence of mental health problems among our newest veterans has also now been documented (Hoge, Auchterlonie, and Milliken 2006
; Seal et al. 2007
), as has the association between severe physical injuries in this veteran population and the prevalence of mental health diagnoses (Grieger et al. 2006
). Many of the newly disabled veterans will become dually eligible for VA and Medicare services. VA is currently grappling with the very difficult task of meeting the needs of returning OEF/OIF soldiers under conditions of strained resources. While the time period we studied predates these new conflicts, the results generated here suggest that distance from both inpatient and outpatient care may be an important factor for younger veterans in choosing to seek mental health care in VA. Moreover, even if returning veterans were to become eligible for Medicare on the basis of disability, the behavioral health services offered by Medicare may not be able to compensate adequately for poor access to these services within the VA.
Although our study has focused on veterans, our findings speak more broadly to the need for analyses using multiple data sources to assess the policy “big picture.” The President's New Freedom Commission on Mental Health (Azrin, Moran, and Myers 2003
) highlighted our fragmented services system as “one of several systemic barriers impeding the delivery of effective mental health care.” From a social planning perspective, the system as a whole has an incentive to try to coordinate care across sectors in order to best to meet the clinical needs of patients. Policies made in one sector, e.g., cutting back on mental health benefits or programs, or expanding geographic availability of services, may directly influence the demand placed on other sectors, so that potential “spillover” effects need to be taken into account at the system level. Fragmentation creates incentives for cost-shifting across sectors, and mental health care, for which benefits tend to be relatively volatile, is particularly vulnerable to spillover. VA and Medicare, as well as private sector administrators, naturally focus on their individual budgets when making policy decisions, and may perceive savings when in reality costs are merely being shifted to another sector. From a societal perspective, it is important that we examine our broader system of mental health care to see the extent to which spillover is occurring.