MICHEL MARTIN, HOST:

I'm Michel Martin, and this is TELL ME MORE from NPR News. We're going to start off the week by taking another look at the future of the Department of Veterans Affairs. Interim VA secretary, Sloan Gibson, a former West Point grad and a retired banker, is leading the department after Secretary Eric Shinseki submitted his resignation. And that came, as you probably remember, after weeks of disturbing reports that secret wait lists were created at a number of VA facilities to hide how long veterans were actually waiting for care.

This has obviously been an embarrassing time for the VA. But some say the crisis also offers an opportunity to reshape the VA to better serve the nation's veterans. So we wondered what this would look like. To find out, we've called upon Ed Dorn. He's a former Undersecretary of Defense for personnel and readiness. He's now a professor of public policy at the University of Texas at Austin. He's with us from member station KUT in Austin. Welcome back, Professor Dorn, thanks for joining us once again.

ED DORN: Thank you, Michel.

MARTIN: Also joining us for additional perspective is Michael Cannon. He is the director of health policy studies with the CATO Institute. That's a libertarian think-tank here in Washington, D.C., and he's here with us in our D.C. Studios. Welcome back to you, Michael.

MICHAEL CANNON: Thank you, Michel.

MARTIN: So, Professor Dorn, I'm going to start with you. And I do want to emphasize that I do understand that there's a hand-off from the Defense Department to the veterans administration when a person leaves active duty. But I did want to ask if you have any immediate thoughts about what Sloan Gibson should do right now to deal with this scandal.

DORN: Well, he's doing - and the Congress is doing - the urgent things, which are increasing the resources so that you can shorten those wait times. He also, over the longer term, needs to take a look at the metrics they're using. One of the real problems you have whenever you're running an organization is figuring out what to measure. And in the VA, what turned out was that they may not have been measuring quite the right things. They also seem, at least in some offices, to have had a big problem with people gaming the system. And that's the scandal - the lack of integrity of some of the managers.

MARTIN: Is this an integrity issue of the managers, or is it that they were just given an impossible task? I mean, was it that they simply could not meet the targets and had no way to express that?

DORN: There are ways to express that in any organization. And one of the problems is that in any management system, you have some people who find it easier just to go along with the program and - even when that means falsifying a few things than it is to stand up and risk being penalized. So there is, at least in a few offices in the VA, clearly an integrity problem.

MARTIN: Michael Cannon, I understand you have some thoughts about the future. But I did want to ask you the same question. You know, the House Veterans Affairs committees is hosting hearings today about the troubles at the VA. And I just briefly wanted to ask, what do you hope comes out of that?

CANNON: Well, it's hard to come up with anything that they can do - that the new acting secretary can do to fix these problems beyond transparency because he just doesn't have the authority. And he really is given an impossible task. You've got Congress not funding the Department of Veterans Affairs adequately, and how is it someone is supposed to meet all the commitments that Congress has made to veterans without adequate funding? And then there are all the challenges that you're trying to centrally plan services for so many different people, in so many locations, without the mechanisms that the markets use in order to move resources from one place to another.

MARTIN: Well, in fact this is one of your points. Your point is that Congress is part of the problem here, that Congress plays a very big role here. And you're saying that part of the problem is not the VA itself, but that Congress does not take the full cost of war into account in the decision-making process all down the line. Talk a little bit more about your point of view on that.

CANNON: Well, that's right. Everyone is upset about, and should be upset about, the horrific revelations that we've been getting out of the Veterans Administration. A hundred thousand veterans are waiting for care. There are even allegations that these waits have caused or contributed to their deaths. There's a much bigger scandal at play here, though, and that is that, yes, the Department of Veterans Affairs mistreats sick and disabled veterans who show up on its doorstep. But more fundamentally, the agency's very existence hides from Congress some of the most expensive costs of going to war, the long-term costs of veterans benefits. And because of that, because the veterans - the structure - the Department of Veterans Affairs allows Congress to hide those costs, Congress is more likely to go to war. So the existence of the Department of Veterans Affairs actually leads to - increases the likelihood of more dead and disabled veterans...

MARTIN: Well, why is that?

CANNON: ...And then mistreats them.

MARTIN: I mean, are you saying - I don't understand your point. I mean, obviously that the country, going back to the days - you know, some of the very early days of the Republic, have made a commitment to its veterans. And so how are you saying that that commitment should be expressed?

CANNON: Well, what Congress does not do is it does not pre-fund those commitments. It says we're going to war now, we'll pay those costs later. Imagine a system where Congress had to pay those costs up front. If...

MARTIN: Recognizing that those costs were going to exist.

CANNON: That they are going to exist. Take the Iraq war. In 2002 Congress was debating the authorization - you know, authorizing the Bush administration to invade Iraq. There were estimates, some by the Bush administration's own officials, that that would cost $200 billion - the invasion would cost $200 billion.

That was such a sensitive issue, the cost of the war, that the Bush administration walked that back. They said, no, it would be less than $50 billion. And of course that $200 billion estimate proved to be too low. But there have been credible estimates that the cost of just providing services to the veterans of the Iraq war, just the veterans benefits are going to cost half a trillion dollars. If Congress had more information about those costs at the time it was cast - it was making that decision, authorizing the use of force, Congress might have made a better decision. If they had more information, they might not have given the Bush administration that authority. We might have avoided an unnecessary war. But...

MARTIN: Or if they had accounted for the full cost of that decision at the outset.

CANNON: Exactly

MARTIN: I see what you're saying. If you're just joining us, we're talking about reshaping the VA in the wake of these revelations about the secrete wait lists and other management failures at the VA. Our guest are Michael Cannon, who's director of health policy studies with the CATO Institute - that's a libertarian think-tank - and Professor Ed Dorn, former Undersecretary of Defense for personnel and readiness.

Professor Dorn, how do you react to Michael Cannon's suggestion here, that, you know, part of the problem here is Congress - that Congress doesn't actually account for these issues when it makes the decision to send troops to war?

DORN: I agree wholeheartedly in principle that if Congress had known all the facts associated with the war in Iraq, different judgments would have been made. But we don't know whether VA actually is underfunded at this point or whether the resources simply are not being allocated appropriately.

We have to be the very careful as we go through this not to do anything that's going to prejudge questions about resources and organization. You have to look very closely at the way the system is structured. Are there real systems of accountability? In hospitals, do we know exactly who is responsible for what?

MARTIN: Michael Cannon, the bigness of the VA is part of your objection to it, is that right? I mean, it's that your argument would be that this is an opportunity for there to be more private-sector involvement, and that would increase efficiency. So you talk a little bit more about what your vision is here.

CANNON: Well, sure. Big isn't necessarily bad. What's the problem is that Congress isn't very good at dealing with big. And if you look at the VA, you see a lot of classic problems that you'll see in other socialized - and even supporters of the Veterans Health Administration will use that word. They'll say it's a socialized health care system. You will have...

MARTIN: Well, it is because the costs are distributed.

CANNON: Right. Right. Right, and...

MARTIN: The costs are distributed over a number of people. They're not solely borne by the people directly affected, so.

CANNON: Right, and so it's also run by a government agency and funded by Congress. So the problem is that you have people who pay little or nothing for medical care. So there's no cost consciousness. There's no check on demand. And Congress only provides a limited amount of resources. So you'll always get shortages in enterprises like this. And you'll also get gluts.

You know, the VA has some facilities that are not being used - they're not being used optimally - and shortages in other areas. One of the great benefits of a market system is that it uses prices in order to eliminate gluts and shortages so that if there are not enough psychiatrists in one area, prices will go up. That will draw more psychiatrists to the area.

You don't get that in a centrally planned system like the Veterans Health Administration. The information that the bureaucrats get, they get - it takes much longer for them to get the information about where the shortages are. And it's much harder for them to move the resources to where they need to be.

MARTIN: OK, so give me an idea - final thought from you, as briefly as you can...

CANNON: So...

MARTIN: ...Give me an idea of what your vision is for the future.

CANNON: I think Congress should try to solve both with the VA - first the one that I mentioned before. They should pre-fund veterans benefit so that they are less eager to go to war, and that'll be the most important thing they can do to protect our veterans. And number two, I think they should do so in a way that allows for market mechanisms to avoid the problems that we're seeing right now - that allows veterans to fire their insurance company or the health care providers if they're receiving lousy service. That's something they cannot do at the VA right now.

MARTIN: And, Ed Dorm, a final thought from you?

DORN: Well, I'm not nearly as sanguine as Michael Cannon is about the efficiency of the private health care system. In fact, anybody who's been in a hospital recently and has seen his bill would wonder about what seem to be absolutely arbitrary pricing mechanisms. So I'm not sure that privatizing anything is a solution.

They do need to look at resources and at the allocation of resources. They need to look at organization that is - is it clear who is responsible for what? They need to look at metrics - are we measuring the right things? They need to look at incentives - are we rewarding people for doing the right things, or are we inviting sort of a collapse of integrity among our managers? That's going to take quite a while. But this is an opportunity to look at a large system, which by the way, actually functions pretty well in spite of this recent scandal. So I don't - I'm not sure this is a situation in which we have to tear the whole thing apart and start all over again.

MARTIN: Ed Dorn is a former Undersecretary of Defense for personnel and readiness. He's now a professor of public policy at the University of Texas at Austin. We reached him in Austin, Texas. Michael Cannon is director of health policy studies with the CATO Institute. That's a libertarian think-tank here in Washington, D.C. And he joined us from there. Thank you both so much for speaking with us.

DORN: Thank you, Michel.

CANNON: Thank you, Michel. Transcript provided by NPR, Copyright NPR.