Traditional Explanations: Deserving Veterans and Iron Triangles

The most common explanation for the VA’s unusual status within the American welfare state is quite intuitive. Veterans, according to these accounts, are a particularly deserving group of citizens, and the obligation of the state to care for its wounded soldiers is well recognized and accepted by American society. ^{Footnote 20} Yet work that focuses on the unique or privileged status of veterans often ignores the fact that the veterans’ health care system, at least since the 1920s, has never been open to all veterans. Indeed, veterans with no war injuries have never been guaranteed free medical care, and the American state’s ambivalence toward its poor, but unwounded, former soldiers led to the complex means-tested eligibility system that persists to the present day. ^{Footnote 21} Nor does the VA typically serve active-duty or retired military personnel or their dependents, leaving the elite officer corps and career soldiers insulated from the agency’s frequent problems. ^{Footnote 22} For much of its history, then, the VA has operated as a social welfare program for wounded and poor veterans who, until relatively recently, were required to testify to their penury. Moreover, the special status of veterans within the American polity does not provide a satisfactory explanation for why veterans’ health care is delivered in state-owned institutions. Given the relatively low-regard Americans have long had for “government medicine” and the VA itself, an account based purely on the deservingness of veterans is unsatisfactory. After all, even if we accept the argument that veterans are widely considered to be a special class of citizens, why were their health benefits not structured like Medicare with public payment and private delivery? This is particularly puzzling because the VA’s numerous scandals would seem to encourage privatization.

The powerful presence of veterans’ interest groups and the role of distributive politics in VA health care provide the second major explanation for the system’s longevity and its unique structure. According to such accounts, the VA is the archetypical “iron triangle” bureaucracy, serving at the whim of the powerful VSOs and the House and Senate committees on veterans’ affairs, whose members hope to direct VA spending to their districts—or so the standard story goes. ^{Footnote 23} Yet as I will discuss in the coming sections, in both periods under consideration the VA’s unique structure and longevity is poorly explained by the preferences of veterans groups or a simple distributive politics story. First, veterans’ organizations have never succeeded in making medical care a universal benefit for all veterans, despite pushing for this policy for nearly seventy years. Second, although VSOs have long worked to defend the VA as a separate veterans-only health care system, most have vigorously opposed the VA’s longstanding partnership with academic hospitals. As I will show, the preferences of VSOs do not map neatly onto the eventual policy outcomes. Accounts that focus on distributive politics are closer to the mark, but they, too, are caught flatfooted by the VA’s origins and rapid expansion. A pure story of distributive politics, after all, would not predict the VA’s alliance with academic research centers—an alliance that undoubtedly improved the overall quality of medical care, but made it all but impossible to locate hospitals outside urban centers.

The third major narrative, one particularly dominant in public administration accounts of the VA’s transformation during the 1990s, focuses on the role of a small set of officials who implemented management and organizational reforms. ^{Footnote 24} Such explanations are not wrong so much as incomplete. In their effort to highlight the importance of these internal changes, they downplay more important shifts in the political landscape and attribute far too much importance to officials who merely implemented policies that had been under consideration for years. Popular perception notwithstanding, the medical division of the post-war VA has rarely lacked for dedicated and competent leadership; accounts that attribute the rise and fall of this massive agency’s fortunes to the management talents of a few central leaders explain very little.

If these standard accounts of interest group pressure, distributive politics, the unique status of veterans, and management reform fail to explain the unusual development of veterans’ health care, what can? The missing piece of this puzzle, I argue, can be found in strategies and independent interests of the VA bureaucrats themselves. As Daniel Carpenter argues in his landmark work on bureaucratic autonomy, agency officials may, under certain conditions, implement their own policy innovations by bringing political pressure to bear on politicians. ^{Footnote 25} Central to Carpenter’s theory of autonomy is the idea of organizational reputation. Bureaucratic entrepreneurs seek to cultivate reputations for excellence because an agency held in high esteem gains a measure of deference from politicians and other organized interests. ^{Footnote 26} Conversely, agencies with reputations for corruption or incompetence can expect to see less funding, less deference, and possibly even outright elimination. ^{Footnote 27} Yet if organizational esteem is necessary for bureaucratic autonomy and policy innovation, then how can we account for innovations at the VA? After all, the VA’s most innovative moments—the periods that saw major expansions in the VA health system—occurred after some of its most scandalous policy failures and at the nadir of its political reputation.

Innovation and Expansion through Collaboration and Failure

I suggest that bureaucrats may expand social welfare programs, even in agencies plagued by scandal, by “borrowing” the political capital and reputation of private actors. ^{Footnote 28} These partnerships may become institutionalized over time, but they are not relationships of capture or coercion. If state building through collaboration is a partnership, then both sides should see material gains from cooperation; indeed, the gains must be substantial enough for a private organization to risk this association with a low-reputation bureaucracy. Furthermore, this collaborative form of state building should not be confused with privatization. While public-private partnerships have often meant delegating administrative power to private actors—a common pattern in American social policy—collaborative state building is just the opposite. By pursuing these partnerships, bureaucratic entrepreneurs increase the power and reach of their agency. Such partnerships rely, in part, on cross-cutting professional networks that facilitate contact and trust of the sort that have long attracted talent to government agencies. Although these “weak ties” have always contributed to agency recruitment, I suggest how they can turn into “strong-tie” relationships of collaboration. ^{Footnote 29} Yet professional ties would hardly be enough to convince private actors to form the long-term, mutually-beneficial partnerships described here. The primary incentive comes from the significant resources and jobs controlled by these agencies. To be sure, huge, lumbering bureaucracies like the Bureau of Indian Affairs and the VA suffer from abysmal reputations, but they also exercise considerable discretion over how they spend their appropriations, design their programs, and use their facilities. ^{Footnote 30}

This collaborative form of state-building, I argue, was effectively employed by the VA’s leaders at the end of World War II to create a robust alliance between the veterans’ health care system and American medical schools. The VA agreed to build hospitals in urban areas near medical schools, to pay the salaries of medical school physicians, to provide residencies and internships for medical students, and to allow VA hospitals to be used as centers for medical research in exchange for access to the clinical expertise and the reputation of medical schools. By embedding veterans’ health care into the larger infrastructure of American medicine, the VA gained an immediate boost in reputation and a powerful ally to defend veterans’ health care against criticism from the American Medical Association (AMA) and dominance by the veterans’ service organizations. Rather than “build” a reputation, in other words, it simply “bought” one.

The case of the VA also demonstrates the potential power of bureaucrats to frame policy failures as opportunities for innovation. Although this strategy is not available to all agencies, the disjuncture between the relatively low reputation of the VA itself and the political importance of the constituents it serves has insulated it from its own policy failures. Much like victims of natural disasters, the broad public acceptance of the need to care for veterans provides a powerful incentive for members of Congress and the president to “save” the agency during periods of scandal and decline. ^{Footnote 31} Although veterans represent an important symbolic constituency, the wounded and poor veterans who rely on the VA have rarely been in a position to place regular pressure on elected officials, which helps to explain why the plight of veterans can be ignored for years. Nevertheless, in moments of crisis, VA officials have been able to present attractive policy options to Congress, allowing members to claim credit for helping this symbolically important constituency, while simultaneously expanding the VA.

As I will explain, in the wake of the failure of Clinton health care reform, and amid proposals by some conservatives to dismantle and privatize veterans’ care, VA officials lobbied Congress to approve a series of modest changes to the eligibility rules that would allow it to concentrate on primary care. Although the plan was developed in anticipation of universal healthcare, these changes proved especially attractive to the new Republican majority in Congress because they promised to expand VA clinics into under-served rural areas, particularly in the Sunbelt states, many of which had the added virtue of being rock-ribbed Republican districts. In the end, this strategy dramatically expanded the VA’s patient population and provided authorization to build new clinics in virtually every congressional district, leaving the agency more politically secure than ever before—and preserving its longstanding partnership with medical schools.

The Postwar VA: Forging the Partnership

The public provision of veterans’ health care is not new. The early American republic provided free care at public hospitals for wounded veterans of the Revolutionary War. Abraham Lincoln established the first homes in what would later, in 1866, become a series of National Homes for Disabled and Volunteer Soldiers. ^{Footnote 32} Yet until the end of World War I, veterans’ health care remained a small, scattered system of old-age homes, offering little in the way of actual medical care, but open to all veterans who had served the Union regardless of record or demonstrated need. ^{Footnote 33} The modern-day VA began to take shape in the wake of World War I when Congress established a Veterans Bureau and consolidated a disparate group of veterans insurance and health programs into one agency as Public Health Service hospitals; these primarily served wounded soldiers and were merged with the old-age homes for the old and destitute. This merger, which was intended to modernize veterans’ health care, soon left it mired in one of the most notorious political corruption scandals of the twentieth century. Colonel Charles Forbes, the first director of the Bureau during the Harding administration, spent the majority of his time in office devising ingenious ways to bilk the federal government out of millions of dollars. Under his leadership, the Bureau purchased huge quantities of hospital supplies, including a 100-year supply of floor wax, which were then privately resold as government surplus. In other cases, land for new VA hospitals was purchased at many times its market value in exchange for generous kickbacks for Forbes and his cronies. When this corruption was finally exposed, the loss in waste and fraud was estimated at nearly a quarter billion dollars. For his troubles, Forbes earned a two-year sentence in federal prison, and the VA medical system began its life mired in scandal. ^{Footnote 34}

After the shocking crimes of the Harding administration, veterans' medical care did not attract easy political support during the Depression, in part because veterans' benefits had long been associated with corruption, but also because separate, veterans-only programs threatened to undermine support for universal health and old-age programs. Consequently, during the early New Deal, Roosevelt lowered pensions for wounded veterans and largely eliminated them for veterans without disabilities, pointedly telling the American Legion that veterans would not be placed in “a special class of beneficiaries over and above other citizens.” ^{Footnote 35} Conservatives were often quick to agree. As a 1933 Fortune article put it, medical care for veterans should not be a “sacred white elephant” and recommended that the government distinguish the truly deserving from the “undeserving goats.” ^{Footnote 36} Of course veterans' hospitals did survive the New Deal, but unlike education and housing benefits, access to medical care was never provided to all veterans, nor was it restricted to wounded veterans, leaving the VA system in an unstable position with few political allies.

By 1945, the Truman administration and many New Deal progressives had accepted the fact that a limited veterans-only health care system was inevitable. Although some thought it could provide the foundations for national health care, most agreed with Roosevelt’s earlier critique that an expanded VA would draw down support for universal health benefits. ^{Footnote 37} Conservatives were only too happy to make this argument quite clear, arguing that a universal system of health care would rob veterans of a benefit they had earned through their service, even as these same groups were trying to restrict VA access to all but wounded veterans. ^{Footnote 38} Thus, disliked by conservatives as a first step toward socialized medicine and by progressives as a selective benefit, the VA health system survived in the early post-war era through the support of the powerful VSOs that were themselves responsible for the oversight of VA hospitals and clinics—a fact that did very little for the quality of medical care. ^{Footnote 39}

It was only when a series of scandals erupted, including a magazine exposé condemning the VA as “Third-Rate Medicine for First-Rate Men,” that serious reforms to this unloved agency were first considered. ^{Footnote 40} After this flurry of bad publicity, Truman, who was under enormous political pressure to fix the VA, appointed Gen. Omar Bradley to lead it in 1945. Although this high-profile appointee could do little with a hospital system that lagged behind in medical talent, he did receive authorization from Congress to inaugurate a special medical advisory group on veterans’ medicine (P.L. 79-293). Not that most American physicians were anxious to become involved with a health care system they universally decried as dreadful and that appeared to some as a dangerous precursor to a national system of health care. Nevertheless, in 1946 Bradley persuaded Dr. Charles Mayo of the eponymous Mayo Clinic to lead the group, which provided immediate legitimacy to the VA’s reform project. ^{Footnote 41} That same year Bradley made the equally inspired decision to appoint Dr. Paul Magnuson, an outspoken professor of orthopedic surgery at Northwestern, to take charge of the day-to-day operations of the agency. Although there is no evidence to indicate that Bradley intended these academic physicians to be anything more than short-term consultants, they began to see the VA’s potential as a solution to the postwar shortage of resources for medical research and training—an early indication of the collaborative relationship that would develop.

One problem that had to be confronted immediately was the quality of VA physicians, widely considered to be the dregs of the medical profession, whose appointments had more to do with seniority and political connections than with medical skill. Yet unlike agencies such as the pharmaceutical division of the FDA that had cultivated reputations as attractive places for ambitious scientists to begin their careers, the VA was mainly known for its medical incompetence as well as for its byzantine civil service rules—more than half of the doctors on the civil service list were in their 60s—and these unfortunate facts precluded Magnuson from recruiting top physicians. ^{Footnote 42} What the VA needed were young physicians trained in modern, scientific methods, and the only way to do this was to place hiring decisions in the hands of hospital directors. Although the VA’s physicians and some of their powerful allies in Congress balked at losing control over medical appointments, in early 1946 Truman signed a law to remove VA medical appointments from the traditional civil service. ^{Footnote 43} This was a modest victory, but it still did not solve the VA’s greater problem: How could it attract skilled staff to a medical system that was widely derided for its poor quality and inefficiency? How could it build a reputation for competence when none existed?

The VA’s answer to this dilemma came in the form of a short memo that committed veterans’ hospitals to a partnership with American medical schools. Unable to quickly develop a reputation of their own, they would simply buy one. With no direct authorization from Congress, on January 30, 1946, Bradley issued Policy Memorandum No. 2, which formalized a partnership between the veterans’ hospital system and American medical schools. ^{Footnote 44} Through a governing body known as the Deans’ Committee, medical schools would share access to VA facilities and medical school faculty would serve joint-appointments as VA staff physicians. “There can be no doubt of the good faith of both parties,” the memo read.

This bureaucratic rule—one announced with little political notice—committed the VA to medical care and research along with the care of wounded soldiers. The alliance was nothing short of radical, and, as one official would later describe it, “intentionally non-specific, and designed to permit the maximum flexibility for affiliations to develop that best fit the local setting.” ^{Footnote 46} As a result, a massive federal agency would give over control of many of its hiring decision and share its facilities with private organizations. ^{Footnote 47} The emergence of such a close affiliation is all the more surprising given the VA’s low reputation as a medical facility and a lingering suspicion among elite American physicians that the VA was the first step on the path to socialized medicine. How, then, were VA officials able to convince medical schools to join them in an alliance that would become central to the development of academic medicine?

The answer is that the VA, as a traditional bureaucracy responsible for delivering medical services directly to veterans, commanded enormous resources. The earlier scandals had created the crisis that led to the VA’s increased discretion over hiring and hospital construction decisions. Magnuson could now entice the academic medical community with promises of new faculty hires and hospitals. And his offer, it seems, was too attractive to refuse. Quite simply, American medical schools needed more personnel and more residency placements for their students, and the VA needed high-quality physicians. As Magnuson later recalled in his memoirs,

Or, as he explained to the deans of Stanford and the University of California, San Francisco, “You’ve got a hospital here which is easily accessible to both of your medical schools and you can set up your own teaching program and appoint your own staff.” ^{Footnote 49} Magnuson’s efforts to guarantee the deans’ autonomy and control over faculty appointments proved successful, and by the summer of 1946, the VA had established residency programs for 63 of the 77 medical schools in the United States. ^{Footnote 50} To be sure, this partnership allowed the agency new prominence in American medicine—the number of articles by VA physicians in medical journals grew from 21 in 1945 to 804 by 1949—and dramatically improved the VA’s reputation as a health care system “second to none.” ^{Footnote 51} In fact, the VA’s top officials quickly came to think about the partnerships as the very foundation of veterans’ medicine, and one that had broken the stranglehold that the VSOs had held on the VA hospital system in the prewar period. ^{Footnote 52} Agency officials thus used the VA’s early missteps in the post-war era as a justification for more funding and discretion.

Despite the success of the medical school partnership, the status of VA medicine remained uncertain at the end of World War II. As I will show, while the VA-medical school alliance was used to great effect to expand the scope of care in the postwar era, its very existence provoked the ire of the VSOs and the AMA—some of most powerful interest groups in the United States.

Political Success through Collaboration

Although the initial years of the partnership were greeted with generally positive press coverage, this collaborative state-building strategy did come at a political cost. How the VA and its medical school partners weathered this storm provides a revealing look at just how robust the partnership became. ^{Footnote 53} First, VSOs realized that some federal funds were now indirectly used to provide support to medical schools, leading the National Commander of the American Legion to denounce it as “an unholy alliance” and a VFW official to criticize its use of “money appropriated for the care of disabled veterans.” ^{Footnote 54} Second, as Charles Mayo bluntly pointed out, the partnership necessitated “that the institutions be located in urban areas where there are large concentrations of physicians and other medical personnel,” a fact that led to the cancellation of twenty-four proposed hospitals in rural areas and dramatically reduced the power of Congress to direct the construction of VA facilities. ^{Footnote 55} Third, and perhaps most controversially, the partnership instilled the perception—one that persists to the present day—that medical school affiliation would cause veterans whose cases were deemed medically “uninteresting” to receive substandard care—a charge that was vehemently denied by VA officials. ^{Footnote 56}

The AMA soon joined this chorus of criticism to complain about the VA’s continued admission of veterans with non-service-connected injuries—a practice, they claimed, that smacked of socialism. Although there was near-universal agreement—even in the AMA—that the federal government would provide care for wounded soldiers, the fact that medical care was given to other veterans quickly became a matter of controversy. Since the end of World War I, VA health care had been provided to indigent veterans on a space-available basis, provided they were willing to sign a statement attesting to their poverty. At the end of World War II, however, the AMA began to see the expansion of the VA as a sort of “Trojan Horse” for socialized medicine. ^{Footnote 57} As early as 1945, an AMA resolution announced its “long-established opposition to any attempt at the socialization of medicine in America by extending medical benefits under the Veterans Administration to encompass disabilities that obviously are not service-connected or to general medical care of the dependents of veterans.” ^{Footnote 58} The head of the VA’s medical division assured the AMA that the VA was a force preventing socialized medicine by removing poor veterans who might otherwise agitate for such a system, but this did little to end the controversy. ^{Footnote 59} The situation became critical when, following the lead of its state-level medical societies, a national AMA resolution pointedly warned that the American people would be led to socialized medicine “indirectly if the VA is allowed to expand its already-vast program of tax-paid medical care for a large and growing proportion of our population.” ^{Footnote 60} This statement was countered by equally inflammatory resolutions from the VSOs, which denounced the AMA’s “continued unwarranted attack upon veterans as a class and as individuals.” ^{Footnote 61}

Yet focusing exclusively on these two rivals, as, indeed, most accounts of the evolution of veterans’ health care have done, misses the unexpected political power of the VA-medical school partnership, and its essential role giving poor veterans access to the VA. This was not because medical schools were particularly interested in the plight of veterans, but because they had come to rely on VA hospitals for training and research money. Thus, the American Association of Medical Colleges (AAMC), the professional organization of American medical schools, which had never had occasion to involve itself in veterans’ health care, now emerged as one of the VA’s biggest champions. Should the VA health system dramatically shrink, as it most likely would if it could no longer treat poor veterans, the medical schools would lose a valuable resource. As the chairman of one AAMC committee explained the situation in 1952,

The VA recognized this, too, and mounted a vigorous defense of these practices, threatening that if the AMA got its way veterans would be “given indifferent care by incompetent medical hacks and politically appointed lame ducks of medicine who are the only ones interested in sinecures.” ^{Footnote 63} And, it seems, the AAMC was willing to direct considerable political resources to defeating the AMA’s proposals. Throughout the 1950s, the AAMC repeatedly instructed its member deans to prevent Congress from denying poor veterans access to VA care and to defend the institution from the AMA. ^{Footnote 64} For its part, the VA proved equally adept at defending medical schools from various criticisms lodged by the VSOs. ^{Footnote 65} As the head of the VA medical system explained to Truman’s health care commission in 1953, “[I] told the Veterans of Foreign Wars in no unspeakable terms that it was indispensable and that we could not survive and conduct the medical program without it. We are most dependent on it.” ^{Footnote 66} The end result of this two-pronged defense was almost total victory for the VA and its medical schools. The affiliation and financial support of the VA would continue, and non-service-connected veterans—the majority of VA patients—would still be admitted to veterans’ hospitals. Although other variables may have contributed to this outcome, it is clear that the partnership with medical schools not only improved the VA’s reputation for quality medicine, it also gave the bureaucracy increased autonomy from two powerful interests—the VSOs and the AMA—that may otherwise have easily captured it. This section has presented an initial evaluation for evidence of the politically important and enduring relationship between the VA and American medical schools. Such public-private partnerships often are viewed as the first step toward the erosion of social welfare programs, but at least under certain circumstances, may also provide a robust defense of expanded benefits.

The Post-War Decline

As successful as the VA had been in improving the quality of its health care and its reputation in the postwar era, it did not fare well during the Vietnam War. After a flurry of bad publicity, including a 1970 Life magazine exposé of the Bronx hospital, the VA developed a popular reputation as a sclerotic bureaucracy delivering poor health care in dilapidated facilities. ^{Footnote 67} VA officials were not oblivious to the long decline of their agency’s reputation, and they proposed a number of reforms during the Nixon administration, including a “regionalization” program that would save money and bring the VA more in line with current thinking about community medicine. ^{Footnote 68} Although parts of this program were tested as pilots among various hospitals, they were eventually scrapped, and the VA itself remained an important, if increasingly inconvenient and outmoded, health care provider for millions of poor veterans throughout the 1970s. ^{Footnote 69} Later reform proposals proved no more successful. A suggestion from the Office of Management and Budget during the 1980s to privatize VA services and end such “excess medical capacity” barely got off the ground before being condemned by the VSOs ^{Footnote 70} and the VA’s medical school partners, who continued to pressure Congress to provide more funding for VA medical centers. ^{Footnote 71} The most ambitious attempt came in 1991 when the VA recommended that more care be moved to outpatient clinics, and that some veterans’ hospitals begin accepting Medicaid patients. ^{Footnote 72} As with earlier efforts at regionalization, however, this proposal caused an uproar among VSOs furious about giving non-veterans access to VA facilities. ^{Footnote 73} By the 1980s, then, the VA was left with few political allies. Its medical school partners and the VSOs were able to maintain the status quo, but there was little interest in dramatic reforms to improve or expand a beleaguered agency that mainly served wounded, poor, and increasingly homeless veterans—a symbolically important, but organizationally weak, constituency.

Consequently, by the 1990s many on the left and right were calling for the VA to be dismantled. Some recommended that veterans be provided with vouchers to seek their care through the private sector, while others proposed that the VA focus on specialized and long-term care and narrow its eligibility requirements. ^{Footnote 74} Conservatives used it as a prime example of “socialized medicine writ large.” ^{Footnote 75} The New York Times columnist William Safire, for example, dismissed the VA as a “self-perpetuating government bureaucracy,” and suggested that the government ought to “privatize the present system of socialized medicine, giving disabled veterans vouchers to buy insurance for private medical care that treats them with dignity.” ^{Footnote 76} Even left-leading students of American health care thought the VA had outlived its usefulness. Paul Starr, echoing earlier points made by Roosevelt, argued that veterans should be free to pick their own health care providers; indeed, he saw national health insurance as a way to “eliminate the dependence of medically indigent veterans upon the VA system,” and cause “their interest in maintaining the VA system as a separate system for veterans [to] evaporate.” ^{Footnote 77}

Given this limited support, few would have predicted that, in less than a decade, the VA would emerge as an integrated health care system with a quickly expanding patient population and robust political support. It would take two unexpected developments to make this transformation: the threat and failure of national health care reform and the subsequent “Republican Revolution” of 1994.

From Decline to Rebirth: The VA after Health Care Reform

The VA’s numerous scandals during the 1980s and 1990s left the agency increasingly demoralized and isolated. Although the future status of veterans’ health care was not a prominent part of the Clinton administration’s plans for national health insurance, it was clear to bureaucrats within the agency that comprehensive health care reform could easily lead to the end of a veterans-only medical system. As one of Hillary Clinton’s senior policy advisors wrote to her in the months following the inauguration, “One extraordinarily important political goal of any health reform proposal is to design it in such a way that a vote against the Clinton health reform initiative is a vote against veterans.” ^{Footnote 78} This, however, did not necessarily mean that the VA would survive health care reform, particularly if veterans were provided with generous, but private, accountable care plans of their own.

VA officials were well aware of this, and framed their proposals to emphasize the political danger of adopting anything but an expanded role for the VA under health care reform. ^{Footnote 79} With no changes to the status quo, agency bureaucrats claimed that the VA would slowly “whither away,” pointedly warning that “the demand decline could be so extreme it would threaten the existence of VA direct acute care.” ^{Footnote 80} A second proposal reduced the VA to a provider of specialized services, focusing on spinal cord injuries and post-traumatic stress disorder. This option was dismissed because, as the agency’s presentation put it, the VA’s “role in medical education would have to be assumed by the private sector creating a major impact on medical schools.” ^{Footnote 81} A third proposal called for the VA to continue providing health care directly to wounded veterans, but to open its infrastructure to all federal beneficiaries, and, in some cases, to the general public—a prospect that horrified the VSOs. ^{Footnote 82} This left the VA’s preferred option—one officials had been pushing for some time—as the only politically viable solution: the VA would be transformed into an accountable care plan for veterans and compete with other health care plans. ^{Footnote 83} This would “open up” the VA system to higher-income veterans whose care would be financed not from direct congressional appropriations, but from reimbursements to the VA through Medicare and private insurers. Through this option, the report concluded that “the VA health care system is preserved as the nation’s largest direct health care system allowing the VA to continue its current missions of direct high quality medical services to veterans, medical education, research, and contingency back up to [the Department of Defense] in case of war or national emergency.” ^{Footnote 84} It was clear early in the negotiations that this plan had the strong support of most VA officials—many of whom had desired these changes for decades—and the VA’s medical school partners who feared the loss of VA hospitals and financial support. By changing the eligibility rules, it was thought, the VA could increase its own market share by attracting veterans who had never before used VA care by expanding outpatient services and long-term care facilities. ^{Footnote 85} As in earlier decades, the VA’s longtime alliance with medical schools protected it from complete privatization or a smaller role treating wounded veterans—but Clinton heath care reform also offered it a chance to expand its services to middle class veterans.

Although Clinton’s health care reform bill was dead by September 1994, the plan to reform the VA was not. During the extensive hearings held by Congress in June 1996 on VA health care reform, the proposals presented were, for the most part, precisely the same proposals the VA presented during the health care reform negotiations. ^{Footnote 86} During these negotiations, VA officials labored to give fiscal conservatives some political cover by claiming that the conversion of the VA from an acute-care hospital system into a primary care network was likely to be revenue neutral and would not lead to an influx of new patients. ^{Footnote 87} Such predictions were, at best, suspect given the VA’s earlier estimates about the costs of VA health care under the universal health care. In fact, the primary opposition to the proposed policy conversion came from the Congressional Budget Office, which correctly concluded that VA health care costs would rise exponentially if the changes were approved. ^{Footnote 88} This was dramatically different than the VA’s own cost estimates, which claimed that the reform might even allow it to save money by shifting more of its care to outpatient facilities. ^{Footnote 89} Yet the VA arrived at that conclusion only by making the rather heroic assumption that congressional appropriations would remain entirely independent of increases in the VA’s patient population. This assumption seems all the more implausible given the fact that the VA had earlier proposed a nearly identical plan that would allow it to expand its patient population to compete with private providers. Nevertheless, on the subcommittee itself, there seemed to be bipartisan agreement (whether sincere or not) that the CBO’s estimates were incorrect, and even some skepticism that the VA would ever succeed in attracting patients from private providers. Tim Hutchinson (R-AR), for example, chairman of the Subcommittee on Hospitals and Health Care, announced that “an awful lot of people who are studying the plan and looking at it would question the ability of the VHA to attract large numbers of veterans.” ^{Footnote 90} And Chet Edwards (D-TX) expressed his frustration that “some numbers crunchers” had put an inappropriate price on a bill that “would simply let us do a better job of defining eligibility,” and in “encouraging outpatient care.” ^{Footnote 91} The “number crunchers” turned out to be right. Since the 1996 reforms were adopted into law, the number of veterans receiving care from the VA has more than doubled and the VA’s budget has grown at an even greater rate to more than $53 billion. ^{Footnote 92}

The end result was a compromise bill that maintained the VA a separate system with similar care priorities, but changed its eligibility rules. ^{Footnote 93} Indeed, the eventual changes to the VA system were remarkably similar to the changes that were earlier developed within the VA to integrate the veterans’ health system into the Clinton health care plan. Yet the relative ease with which this bill passed was remarkable given that it proposed to dramatically expand the VA as a social welfare agency. Republicans had opposed the extension of VA services to more veterans with no service-connected injuries for nearly fifty years—and then, in 1996, they quickly approved it. Republican support can be explained, in part, as an appeal to veterans in rural communities who would be among the chief beneficiaries of the 1996 reorganization. ^{Footnote 94} The VA’s plans called for shifting the agency’s focus to integrated, comprehensive care, which made its services more attractive to older, middle class veterans. It also meant that hundreds of VA clinics would be constructed in nearly every congressional district in the nation, allowing the VA to provide comprehensive outpatient care in rural areas and growing communities in the South and Southwest. This greater access to the VA system, combined with a parallel set of improvements in the quality its care, led to the dramatic expansion of the VA’s patient population and annual appropriations. ^{Footnote 95}

Relaxing the income requirements for VA care did more than simply attract more veterans. For the first time in the VA’s history, veterans’ health care benefits were available not just to wounded and destitute veterans, but to middle class veterans as well. In a dramatic reversal, then, the VA has become a more expansive welfare program. Although the number of veterans with service-connected injuries has grown over the past decade as a result of the wars in Iraq and Afghanistan, the most dramatic increase has come from veterans with no service-connected injuries, many of whom have incomes that place them comfortably in the middle class. ^{Footnote 96} The increasing costs of health care as well as easy access to VA facilities has made it a more attractive option even for veterans’ who qualify for Medicare. As the program grows, more and more veterans elect to receive their health care from the VA even when they have other options. ^{Footnote 97} For example, although 80 percent of veterans enrolled in the VA system have access to some other form of health insurance—a majority qualify for Medicare–over half of these so-called “dual-eligibles” used some combination of VA and Medicare, relying particularly on VA clinics for their primary care and pharmaceuticals. ^{Footnote 98} Rather than see the value of its benefits slowly wither away as has happened with many American social programs, the VA has become a more generous program and one that increasingly serves the middle class over the past decade—a development that is almost unheard of in the American context and one that is difficult to explain without understanding its unusual policy history and the strategic maneuvers of its officials. ^{Footnote 99}

There can be no doubt that the VA serves a singular population, and we should exercise caution when attempting to generalize beyond this case. Yet as I have argued here, the status of veterans as deserving citizens cannot fully account for its continued operation as a government-run health system or its expansion at some of the darker moments of its history. It is also not the only federal agency to show unusual resilience in the face of reputational failures; indeed, the VA shares certain characteristics with another federal agency that has suffered its own share of scandals: FEMA. Much like the VA, FEMA gained a popular reputation for incompetence after its poor response to several disasters, including the 1989 Loma Prieta earthquake in San Francisco and Hurricane Andrew in 1992. ^{Footnote 100} Nevertheless, as described in recent work by Patrick Roberts, FEMA’s failures to provide disaster relief have led Congress to give it more power and autonomy. ^{Footnote 101} Although FEMA remains a relatively small organization compared to the VA, the expansion of its resources for disaster relief owes much to its support and alliance with university-based programs in emergency management. After years of serving as a byword for government incompetence, FEMA was reborn in the 1990s under entrepreneurial director James Lee Witt who persuaded members of Congress and state-level politicians that an autonomous, effective disaster agency would serve their own interests. ^{Footnote 102} Witt was able to improve the agency’s reputation by forming close partnerships with university-based disaster management programs, and carving out some autonomy for the agency by demonstrating to state and federal politicians that an effective FEMA run by experts would serve them better in the long run—a fact that led to increased capacity and funding for the agency as the number of disaster declarations increased during the Clinton administration. ^{Footnote 103} Unfortunately, much like the VA, FEMA’s expanded capacity did not translate into long-term reputational success. As Roberts argues, FEMA’s scandalous failures during Hurricane Katrina were, in part, a product of its lack of resources and a failure to “live up to the expanded sense of its responsibilities to protect the public.” ^{Footnote 104} A similar combination of bold promises and dwindling resources would cause the VA to experience its most public failure in two decades during the summer of 2014.

Implications of the Waiting-List Scandal

Less than two decades ago, the VA was fighting for its political survival against proposals—on the left and right—to privatize the entire system or to dramatically shrink it. Today, the VA has more patients than ever before and a physical presence in nearly every congressional district. Over the last decade, it has also made dramatic improvements in the quality of its patient care. According to many health economists, the VA appears to be outperforming Medicare and private health providers. ^{Footnote 105} Although these improvements in the quality of care did not necessarily translate into an improvement of the VA’s reputation among the public or most politicians, its hundreds of outpatient clinics and new middle class clientele mean that the VA system may be more politically secure than at any point in its history. This may seem a bold claim to make in light of the VA’s most recent scandal over patient waiting times, but recent developments indicate that the VA, far from being penalized for its failures, has actually emerged from this crisis even stronger.

In the spring of 2014, a scandal over waiting times at the Phoenix VA Medical Center became national news. Reports indicated that some veterans had waited as many as 115 days for their first appointment. What’s more, senior staff were found to have manipulated waiting times to comply with an ill-advised incentive system that tied bonuses to the maintenance of a 14-day waiting period. In many respects, the VA was a victim of its own successful push to increase its patient population. The demand for VA care simply could not keep up with the agency’s ability to recruit doctors and nurses, while the ambiguity of the changes in eligibility for VA health care made it tremendously difficult to plan for future health care needs of veterans. While the VA had exaggerated its capacity to incorporate thousands of new veterans into the system, Congress did not provide appropriate funding to care for the aging veterans who flooded into the VA system after the 1996 eligibility reforms. The increased pressure to care for thousands of wounded veterans returning from Iraq and Afghanistan stretched its resources to the breaking point, leading the Government Accountability Office to voice serious concerns about the VA’s ability to offer timely appointment to veterans. ^{Footnote 106} Yet it would take a series of articles in the Arizona Republic about secret waiting lists at the Phoenix VA to finally draw political attention to these issues. ^{Footnote 107}

The VA spent much of the summer of 2014 in a reputational tailspin, bombarded by negative media coverage and criticism from President Obama and Congress. ^{Footnote 108} Although publicly castigated by members of Congress and President Obama who confessed to being shocked by the VA’s troubles, the agency has emerged relatively unscathed. To be sure, the White House’s post-crisis report was replete with critical comments about the agency’s “corrosive culture” and its failure “to better plan and invest now for anticipated changes in the demographics of veterans,” but it ultimately recommended that the VA receive more money and personnel. ^{Footnote 109} What is even more remarkable, and demonstrates the agency’s increased political power despite its abysmal reputation, was the fact that, in one of the most polarized Congress’s in American history, Senator Bernie Sanders (I-VT), Chairman of the Senate Veterans’ Affairs Committee, and Jeff Miller (R-FL), Chairman of the House Veterans’ Affairs Committee, were able to agree relatively quickly on a bill to “save” the agency. In the final bill signed by President Obama in August 2014, the VA will receive a $16.3 billion increase in its funding with $5 billion dedicated to hiring new physicians and staff nurses. ^{Footnote 110}