Choice Between Public and Private Healthcare Systems: Evidence from Veterans

This paper examines the choice between public and private healthcare systems among elderly veterans, who are dually eligible to obtain care through the publicly operated Veterans Health Administration (VA) and through private providers financed by Medicare. We analyze health system choice among veterans who move across areas with differing rates of VA utilization to quantify the relative importance of individual-specific factors (e.g., preferences, income, health) and place-specific factors (e.g., local access, quality, and convenience). Our estimates indicate that 50–60% of geographic variation in VA use is attributable to demand-side individual factors, with the remainder explained by place-based factors. We also document important heterogeneity across types of care, with place-based factors playing a larger role for inpatient and emergency care than for outpatient and primary care. Additional analysis suggests that the supply-side features emphasized in recent legislation—distance to VA facilities and wait times—explain only a small share of estimated place effects. These findings highlight the importance of individual factors in health system choice and have implications for policies aimed at reducing geographic disparities in VA utilization.