States Save by Moving Vets From Medicaid’s Rolls to VA’s

A growing number of states are shifting health care costs to the federal government by finding military veterans who receive Medicaid and signing them up for medical benefits through the U.S. Department of Veterans Affairs.

Arizona, California and Texas are among the states that are working to replicate a program first launched in Washington State. That program, begun in 2003, has moved some 9,500 veterans from the state’s Medicaid rolls to the VA’s. Washington State has avoided paying $27 million in health care bills this way — enough to make a small dent in a strained state budget. And veterans generally find that the benefits offered through the VA are more generous that what they were getting through the state.

“The fact that it saves Medicaid dollars is an added benefit,” says Bill Allman, who created the Washington State program and is its biggest advocate nationally. “That would appear to make it a no-brainer for each and every state.” 

Of course, Allman’s program doesn’t result in less spending on health care — what saves money for the state costs money for the feds. But at a time when federal stimulus dollars have dried up, it represents a clever way to get the federal government to pick up one of the states’ bills.

Generally, anyone who has served in the military for 24 continuous months or the full period for which they were called to active duty, and meets other criteria set by Congress, is eligible for VA health benefits. Of the 22.6 million veterans n ationwide, only 8.3 million received health care in VA facilities in 2010, according to the U.S. Department of Veterans Affairs. Many do not know they are eligible. Some 40 percent of current veterans are over the age of 65.

Anti-fraud database is linchpin

Allman came up with the idea for the program while working with a database intended to catch welfare fraud. Allman works in the Washington State Health Care Authority. He also served in Vietnam. He discovered that the federal database known as the “Public Assistance Reporting Information System,” or PARIS, could also tell him which Medicaid clients were veterans. With that information, Allman’s office could work with the state VA to determine which benefits those veterans were eligible for but not receiving and encourage them to sign up. 

Under Allman’s program, the state spends less money and the veteran gets equal or more generous coverage. That’s particularly true when it comes to long-term care. If a veteran dies while receiving long-term care services from Medicaid, the state can claim assets such as a family home to repay taxpayers for the cost of their care. Veterans’ benefits don’t have that string attached because the veterans earned the benefits through their military service.

“Medicaid is a payer of last resort,” Allman says. “Speaking as a Vietnam veteran, I would much rather collect benefits that I earned than to request state aid.”

Millions in savings

It costs states money to set up and manage a program like Washington’s. But Allman figures that for every $1 spent on the program, the state gets back $8 in health bills paid by the federal government. The experience was much the same in Montana, which copied the program in 2008 and shifted $900,000 in costs off its books in the first year. Maryland expects to save $750,000 in the first year of its program. And in California, which will go statewide with a pilot program it had initiated in several counties, the Legislative Analyst’s Office ran its own numbers and estimated that the state could save $250 million by shifting 144,000 veterans from Medicaid to VA health care.

The federal government doesn’t track how many states have implemented the veterans program or estimate how much extra it costs the VA as a result. For the states, says Tom Miller, a PARIS Project Officer with the U.S. Department of Health and Human Services, “The benefits outweigh the cost of administering a program like the state of Washington’s.” 

Not all states have come around to using PARIS this way. For example, New York has been aggressive about using the database to crack down on benefits fraud; it saved $62 million in 2009 after PARIS showed that more than 10,000 Medicaid, welfare and food stamp recipients had moved out of state. New York, however, currently does not use PARIS to link veterans with federal government benefits. “All we can say at this point is that New York is looking into this program,” says Peter Constantakes, a spokesman for the New York State Department of Health.

Allman says that as more troops return from Iraq and Afghanistan and retire from the military, the Washington program is just one way to help ensure veterans get the benefits they are owed for their service. “It is the most rewarding program that I’ve ever been involved with in my 27-year state government career,” he says.