B-222764, OCT 21, 1986

B-222764, OCT 21, 1986

PRECIS-UNAVAILABLE

MR. CONRAD R. HOFFMAN:

DIRECTOR, OFFICE OF BUDGET AND FINANCE (CONTROLLER)

VETERANS ADMINISTRATION

WASHINGTON, D.C. 20420

THIS RESPONDS TO YOUR REQUEST FOR OUR REVIEW OF ACTIONS TAKEN BY THE DEPARTMENT OF LABOR TO REDUCE REIMBURSEMENTS TO THE VETERANS ADMINISTRATION FOR MEDICAL SERVICES PROVIDED TO RECIPIENTS OF FEDERAL EMPLOYEES' COMPENSATION ACT (FECA) BENEFITS. THE REDUCTIONS IN QUESTION WERE MADE BY THE DEPARTMENT AS PART OF AN OVERALL 7.37 PERCENT REDUCTION IN REIMBURSEMENTS TO MEDICAL PROVIDERS (BOTH PUBLIC AND PRIVATE) UNDER FECA, CARRIED OUT IN ORDER TO COMPLY WITH THE REQUIREMENTS OF THE BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL ACT OF 1985 (PUBLIC LAW 99-177). YOUR LETTER, YOU EXPRESS THE VIEW THAT THE REDUCTIONS IN QUESTION RESULTED IN THE VETERANS ADMINISTRATION SUSTAINING DOUBLE REDUCTIONS UNDER PUBLIC LAW 99-177, AS THE VETERANS ADMINISTRATION WAS ALSO SUBJECT TO REDUCTION UNDER THAT STATUTE. AS DISCUSSED BELOW, WE CONCLUDE THAT THE ACTIONS TAKEN BY THE DEPARTMENT OF LABOR DID NOT CONSTITUTE "DOUBLE REDUCTIONS" OF THE BUDGETARY RESOURCES OF THE VETERANS ADMINISTRATION, FOR PURPOSES OF PUBLIC LAW 99 177.

UNDER PUBLIC LAW 99-177, GOVERNMENTAL SPENDING IS TO BE REDUCED BY UNIFORM PERCENTAGE REDUCTIONS OF THE BUDGETARY RESOURCES OF ALL NONEXEMPT ACCOUNTS OF THE GOVERNMENT. /1/ ALL GOVERNMENTAL PROGRAMS ARE SUBJECT TO REDUCTION UNLESS COVERED BY ONE OF THE MANY EXEMPTIONS, EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES OF THE ACT. IN FISCAL YEAR 1986, ALL THREE AGENCIES RESPONSIBLE FOR IMPLEMENTING THE ACT AGREED THAT MEDICAL BENEFITS PAID BY THE DEPARTMENT OF LABOR UNDER FECA WERE NOT COVERED BY ANY OF THE SPECIFIC EXEMPTIONS OF THE ACT ALTHOUGH CERTAIN OTHER FECA BENEFITS WERE EXEMPT. IN ORDER TO COMPLY WITH THE PROVISIONS OF THE LAW, THE DEPARTMENT REDUCED BY 7.37 PERCENT ALL PAYMENTS MADE AFTER MARCH 1, 1986, TO PHYSICIANS AND OTHER PROVIDERS OF HEALTH CARE SERVICES. /2/ THE DEPARTMENT APPLIED REDUCTIONS ACROSS THE-BOARD, WITHOUT DISTINGUISHING BETWEEN FEDERAL AND NON-FEDERAL PROVIDERS OF MEDICAL SERVICES TO FECA BENEFICIARIES.

THE VETERANS ADMINISTRATION, AS YOU NOTE IN YOUR LETTER, WAS ALSO SUBJECT TO REDUCTION UNDER PUBLIC LAW 99-177. UNDER SECTION 256(K) OF THE ACT, THE VETERANS' MEDICAL CARE ACCOUNT (WHICH IS USED TO PAY FOR THE SERVICES IN QUESTION) WAS SUBJECT TO A REDUCTION OF 1 PERCENT IN FISCAL YEAR 1986. IN ADDITION, UNDER SECTION 256(B)(1) OF THE ACT, THE ACCOUNT WAS ALSO SUBJECT TO REDUCTION (4.3 PERCENT) FOR ADMINISTRATIVE EXPENSES. CALCULATING THE RESOURCES SUBJECT TO REDUCTION UNDER THE ACT, HOWEVER, CBO, OMB, AND THIS OFFICE EACH EXCLUDED FROM THE SEQUESTRABLE BASE OF THE ACCOUNT THE AUTHORITY TO EXPEND REIMBURSEMENTS COLLECTED FROM OTHER AGENCIES, ON THE GROUNDS THAT THOSE REIMBURSEMENTS CONSTITUTED INTRAGOVERNMENTAL FUNDS (EXEMPT UNDER SECTION 255(G)(1)), AND THAT THEY HAD ALREADY BEEN SUBJECT TO REDUCTION IN THE SOURCE ACCOUNTS. BECAUSE OF THIS EXCLUSION, THOSE PORTIONS OF THE VETERANS ADMINISTRATION'S PROGRAMS FINANCED FROM OFFSETTING COLLECTIONS FROM OTHER FEDERAL AGENCIES (SUCH AS THOSE IN THE PRESENT CASE) WERE NOT SUBJECT TO REDUCTION AS PART OF THE VETERANS ADMINISTRATION'S FISCAL YEAR 1986 REDUCTION UNDER PUBLIC LAW 99-177.

BASED ON THE FOREGOING, WE CONCLUDE THAT REDUCTIONS IN FECA REIMBURSEMENTS TO THE VA BY THE DEPARTMENT OF LABOR UNDER PUBLIC LAW 99-177 DID NOT CONSTITUTE DOUBLE REDUCTIONS, AND WERE CONSISTENT WITH THE REQUIREMENTS OF THE ACT.

/1/ AS ORIGINALLY ENACTED, REDUCTIONS WERE TO BE MADE UNDER AN ORDER ISSUED BY THE PRESIDENT BASED ON REDUCTIONS SPECIFIED IN A REPORT ISSUED BY THE GENERAL ACCOUNTING OFFICE. GAO'S REPORT WAS TO BE BASED ON A REPORT ISSUED JOINTLY BY THE OFFICE OF MANAGEMENT AND BUDGET AND THE CONGRESSIONAL BUDGET OFFICE. THOSE PROCEDURES WERE ACTUALLY FOLLOWED IN FISCAL YEAR 1986. BECAUSE OF THE SUPREME COURT'S DECISION IN BOWSHER V. SYNAR, 106 S.CT. 3181 (1986), THIS OFFICE NO LONGER HAS A DIRECT ROLE IN THE DEFICIT REDUCTION PROCESS. THE FISCAL YEAR 1986 REDUCTIONS SPECIFIED BY THIS OFFICE, HOWEVER, WERE LEGISLATIVELY RATIFIED BY THE CONGRESS THROUGH PUBLIC LAW 99-336 (JULY 31, 1986).

/2/ MOST NONDEFENSE ACCOUNTS WERE SUBJECT TO A 4.3 PERCENT REDUCTION IN FISCAL YEAR 1986. BECAUSE A SUBSTANTIAL AMOUNT OF BUDGETARY RESOURCES OF THE ACCOUNT USED TO PAY FECA MEDICAL BENEFITS HAD BEEN EXPENDED PRIOR TO THE EFFECTIVE DATE OF THE SEQUESTER ORDER, THE DEPARTMENT OF LABOR WAS REQUIRED TO REDUCE REMAINING BUDGETARY RESOURCES BY 7.37 PERCENT, IN ORDER TO MAKE THE FULL AMOUNT OF REDUCTIONS REQUIRED BY THE ORDER.