VA gets new power to cut community care rates by location
H.R. 874 — To amend title 38, United States Code, to modify the rate of pay for care or services provided under the Community Care Program of the Department of Veterans Affairs based on the location at which such care or services were provided, and for other purposes. · Filed by Rich McCormick (R-GA) · 1 cosponsor · Introduced Jan 31, 2025 · Referred to committee
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What it does
This bill modifies how the VA pays for community care (non-VA medical services purchased on behalf of veterans). Instead of paying a single rate nationwide, the VA will now set different payment rates based on the physical location where care is delivered—distinguishing between hospital inpatient, hospital outpatient (on-campus vs. off-campus), ambulatory surgical centers, and physician offices. When multiple rates apply, the VA must pay the lowest one. The change takes effect January 1, 2026.
Why we flagged it
The bill's operative mechanism is a pricing reform that grants the VA Secretary discretion to set location-specific reimbursement rates for community care and mandates lowest-rate payment. This is a cost-containment and administrative efficiency measure, not a benefit expansion or restriction on veteran eligibility.
What the text implies
- The 'lowest rate' mandate (new paragraph 7) may create perverse incentives: if the VA establishes multiple rates for the same service at the same location (e.g., due to provider type or contract tier), it must always pay the lowest, potentially undercutting negotiated rates and reducing provider willingness to serve veterans.
- Location-specific rates tied to facility type (inpatient vs. outpatient, on-campus vs. off-campus) mirror Medicare's Outpatient Prospective Payment System (OPPS) structure, which historically pays off-campus outpatient departments at lower rates than on-campus departments. Veterans in rural or underserved areas may face reduced access if providers exit the VA network due to lower reimbursement.
The full analysis lists 4 implications of this text.
Who stands to gain
Department of Veterans Affairs (cost savings from lower reimbursement rates); Federal budget (reduced community care expenditures)