Weekend Economists:Auld Acquaintance Should Be Forgot December 28-30, 2012

[Demeter]

19. Stealth Target of Defense Spending Cuts: VA; MILITARY BENEFITS

Stealth Target of Defense Spending Cuts: America’s Highly Effective Socialized Medicine Provider, the VA System, and Military Benefits Generally

http://www.nakedcapitalism.com/2012/12/stealth-target-of-defense-spending-cuts-americas-highly-effective-socialized-medicine-provider-the-va-system-and-military-benefits-generally.html#wrgkS1ems8jRuGyz.99

One element of the coming budget pact that is not getting the attention it warrants is a covert effort to gut military benefits by privatizing them. Privitization has rarely delivered on its promise of delivering better performance and/or lower costs. Indeed, in the military, it has served as an egregious ground for looting. And curiously the officialdom has chosen to turn its eyes to it. In the Iraq war, for instance, contract drivers allege that trucks that were used for moving corpses and body parts, which decomposed rapidly in the desert heat, were, in violation of regulations, then used for transporting food, such as ice in bulk, without so much as a hosedown in between. The forms of war profiteering have been numerous as the traditional protections against abuses in contracting, such as not allowing the firm that designed a contract to bid on it, have either been eroded through a misguided vogue for deregulation or simply ignored. And in Iraq, the use of sub-contractors, with as many as five or six layers, each taking a cut, means that as much as 50% of the value of a contract ends up being fraudulent through one ruse or another.

The manufactured fiscal cliff crisis means that more profiteering is coming to the military, this by fundamentally changingthe relationship of soldiers to the armed forces. An article in Open Democracy describes how servicemembers were once assured of a high level of benefits in return for the sacrifices made. But the military, which resisted the blandishments of neoliberals, started to succumb in the 1990s. Tellingly, the Army changed its logo from “The Army Takes Care of Its Own” to ““The Army Takes Care of its Own so that They Can Learn to Take Care of Themselves.” This reflected a basic change in attitude:

The contracting out of the Pentagon’s support coincided with neoliberal efforts to combat “dependency” in the military. Policies forcing recipients of public assistance programs to achieve “independence” – largely through mandating employment requirements – had been gaining ground in conservative and neoliberal policy debates in the late 1980s and early 1990s. They also took hold in the military, where in the early 1990s the military retrenched its support for soldiers and their families. As the Army pulled back on spending for support services and contracted out services, for example, it also instituted programs to teach soldiers and their spouses “self-sufficiency.”

The plum for privatizers is the healthcare and pension budgets:

Instead of using the current government-contracted HMO/PPO model, called TriCare, military personnel and their families would receive health care vouchers allowing them to either purchase whatever health care plan they chose from an array of private sector providers. Instead of earning defined retirement benefits – pensions – soldiers, sailors, airmen and marines would each pay into privately held 401K programs – or simply take a lump sum of cash. In a win-win for corporate advocates, cuts to what they call the “excessive” and “burdensome” human side of the military will simultaneously fund greater spending on expensive weapons and communications systems. And under the pretext of providing “choice” to military personnel, the programs decrease total benefits and increase private sector access to government funds and the money of military personnel.

On the healthcare side, this is simply an excuse for the medical industrial complex to get its blood suckers into the huge military budgets, for the VA system is vastly more efficient than private sector providers. From a 2012 post, “‘Socialized’ or Not, We Can Learn from the VA,” on the Rand Corporation’s blog:

RAND’s [2004] study, led by Dr. Steven Asch, found that the VA system delivered higher-quality care than the national sample of private hospitals on all measures except acute care (on which the two samples performed comparably). In nearly every other respect, VA patients received consistently better care across the board, including screening, diagnosis, treatment, and access to follow-up.

Asch and his team also found that VA patients were more likely to receive recommended care than patients in the national sample. VA patients received about two-thirds of the care recommended by national standards, compared with about half in the national sample. Among chronic care patients, VA patients received about 70 percent of recommended care, compared with about 60 percent in the national sample. For preventive care, the difference was greater: VA patients received 65 percent of recommended care, while patients in the national sample received recommended preventive care roughly 45 percent of the time.

Other studies have generated similar findings. In 2010, an interdisciplinary team of researchers published a systematic review of prior research that compared the quality of surgical care provided by the VA with that provided by relevant non-VA hospitals and healthcare systems. Based on the available evidence, the authors determined that VA and non-VA settings generally provided comparable surgical care and achieved similar outcomes. What differences the team did find favored VA care in 3 instances and non-VA care in 5. In 15 comparisons, care was not different.

The following year, this team published a second systematic review, this time focusing on how well VA and non-VA facilities deliver medical and non-surgical care. After examining 36 high-quality studies, the team concluded that the VA almost always came out on top when the study examined how well health systems follow recommended processes of care. When the study compared mortality rates, VA and non-VA facilities generally achieved similar outcomes…

“Government health care” is often characterized as wasteful and inefficient. But here too the VA’s experience suggests otherwise. In 2007, the nonpartisan Congressional Budget Office (CBO) released a report (PDF) that concluded that the VA is doing a much better job of controlling health care costs than the private sector. After adjusting for a changing case mix as younger veterans return from Iraq and Afghanistan, the CBO calculated that the VA’s average health care cost per enrollee grew by roughly 1.7% from 1999 to 2005, an annual growth rate of 0.3%. During the same time period, Medicare’s per capita costs grew by 29.4 %, an annual growth rate of 4.4 %. In the private insurance market, premiums for family coverage jumped by more than 70% (PDF), according to the Kaiser Family Foundation.

The VA delivers high quality medical care at a more favorable cost than the private sector, meaning veterans will get a double whammy if the neoliberals succeed: lower health care allotments by virtue of spending reductions, with the impact made more severe by the use of vouchers rather than relying on the established, effective VA system. And there’s no reason to hope for better with the contracting of other social services provided by the military. In the UK, outsourcing has led to various contract service providers achieving “too big to fail” status. From the New Statesman:

If the company were to go under, it would cause severe disruption to public services. The growth of such contractors that are “too big to fail” began under New Labour and has continued apace. Why did it happen? In the report, Matthew Taylor, former director of policy for the Labour Party, provides a clue: “One of the funny stories I heard about this is that the government wanted to move into agile commissioning. And immediately, all the large providers employed a Head of Agile. Of course, smaller providers can’t afford a Head of Agile.” The biggest companies are best placed to meet Government guidelines.

In the early years of outsourcing under New Labour, the commissioners at local and national level lacked experience and confidence, so they went with the biggest firms, whom they felt they could trust. Rather than tear up these contracts, in recent years they simply expanded them with “bolt-ons”, in many cases due to fear of litigation. It’s an understandable fear – the larger the corporation, the more litigious it’s likely to be…

I could cite the catalogue of failures I wrote about prior to the G4S debacle. Or the £529,770 that was lost from staff fraud or abuse from the Flexible New Deal 2010-11. Or the clinical failures that saw London hospitals being forced to lend money to Serco. Or the chaos that followed the privatisation of our court translation services. Or A4E’s company director payments, which saw the-then CEO Emma Harrison pay herself £8.6m, in a year when fewer than 4 in every 100 unemployed people seen by the firm managed to secure jobs for longer than 13 weeks. Or the nine prisons put out to tender in November in 2011 in spite of high-profile failings in the private sector (as the report says, in the very same bidding round the Wolds was returned to the public sector following the expiration of G4S’s contract, having seen poor inmate behaviour and high levels of drug abuse). Or the closure of Southern Cross as a result of complex financial deals designed to maximise financial gain, which left taxpayers picking up the pieces. Or…

There’s nothing inherently wrong with a market. But cases like these show that we’re getting all the downsides of privatisation – the stripping away of money through profits, above all – and none of the upsides, because there isn’t genuine competition. This is market failure, pure and simple.