The proposal -- intended to save the Department of Veterans Affairs $530 million a year -- would authorize VA to bill private insurance companies for the treatment of injuries and medical conditions related to military service, such as amputations, post-traumatic stress disorder and other battle wounds. VA already pursues such third-party billing for conditions that are not service-related.
Veterans groups said the change would be an abrogation of the government's responsibility to care for the war wounded. And they expressed concern that the new policy would make employers less willing to hire veterans, for fear of the cost of insuring them, and that insurance benefits for veterans' families would be jeopardized.
Lawmakers explicitly ruled out the proposal yesterday in budget recommendations from the Senate and House veterans' affairs committees.
The chairman of the Senate panel, Daniel K. Akaka (D-Hawaii), said a majority of the committee members say the plan is fundamentally unfair.
"America's veterans and their families pay the true cost of war everyday, and we must pay for the care and benefits they have earned. I look forward to working with my colleagues and the Administration to pass a budget worthy of their service," Akaka said in a statement.
Sen. Patty Murray (D-Wash.), a senior member of the Veterans' Affairs and Budget committees, warned VA Secretary Eric K. Shinseki last week that the idea would be "dead on arrival," and she vowed yesterday that any budget containing the provision "is not going to pass."
"The VA has an obligation to pay for service-related care, and they should not be nickel-and-diming vets in the process," she said in an interview. "This proposal means that family members will be hurt because, if a vet meets the maximum [benefit amount] for their insurance, their wife and kids would not be able to get insurance [benefits] anymore. . . . God forbid a wounded vet from Iraq has a wife who gets breast cancer."
White House press secretary Robert Gibbs said yesterday that the Obama administration has not made "the final . . . decision on third-party billing as it relates to service-related injuries."
At the same time, Gibbs noted that the administration is seeking an 11 percent increase in discretionary spending in the VA budget, a decision lawmakers and veterans groups have praised. "This president takes very seriously the needs of our wounded warriors that have given so much to protect our freedom on battlefields throughout the world," Gibbs said at a White House news conference.
VA and the Office of Management and Budget did not respond to requests for more details on the proposal.
Veterans groups said the plan was a puzzling political misstep by the new administration in its relations with the 25 million Americans who have served in the military. Obama heard firsthand about such objections Monday when he met with leaders of the groups at the White House.
"To ask veterans to save $500 million in a [VA] budget of over $100 billion is not only bad policy, it is bad politics," said Paul Rieckhoff, executive director of Iraq and Afghanistan Veterans of America, who attended the meeting.
"It could be a rookie mistake," he said. "Ultimately, it's only going to hurt the president."
Another problem, critics said, is that the proposal could hurt wounded veterans' employment opportunities, particularly with small businesses.
"A small company is not going to want to take on the burden of increased premiums" by hiring a wounded veteran, said Craig Roberts, media relations manager for the American Legion. He added that the proposal could make buying private health insurance prohibitively expensive for these veterans.
Details of the proposal remained unclear yesterday, and a spokesman for the health insurance industry said its potential impact is difficult to assess. "We are going to carefully evaluate any proposal that is made," said Robert Zirkelbach, spokesman for the trade association America's Health Insurance Plans.
Lawmakers and veterans advocates said VA could save $500 million by simply collecting from private insurers all that it is authorized to bill for non-service injuries each year.
More broadly, the issue underscores a significant challenge confronting the administration: ballooning health-care costs for veterans and active military members taking up an ever-larger share of VA and Pentagon budgets.
It is uncertain how many veterans would be affected by the proposed change, which would concern only those with private health insurance. As many as 7 million veterans are enrolled in the VA health-care program, and about 5 million use VA facilities each year.
Some veterans groups voiced concern that the administration's plan could represent a move toward privatizing VA benefits.
Other experts said it reflects the broader dilemma of how to increase cost-sharing for medical care in comprehensive programs such as the VA one. "There has been no change in cost-sharing features for 10 or 12 or more years," said William Winkenwerder Jr., the Pentagon's former top health official, who runs a private health strategy and consulting firm in the Washington area. "That is what is most responsible for driving up the cost of those programs to the government," he said.
Still, any proposals to increase cost-sharing "tend not to be very popular politically, especially at this time," Winkenwerder said.