VA Health Care:

Budget Formulation and Reporting on Budget Execution Need Improvement

GAO-06-958: Published: Sep 20, 2006. Publicly Released: Sep 20, 2006.

Additional Materials:

Contact:

Randall B. Williamson
(202) 512-2758
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The Department of Veterans Affairs (VA) estimates it will serve 5.4 million patients in fiscal year 2006. Medical services for these patients are funded with appropriations, after consideration by Congress of the President's budget request. VA formulates the medical programs portion of that request. VA is also responsible for budget execution--using appropriations and monitoring their use for providing care. For fiscal years 2005 and 2006, the President requested additional funding for VA medical programs, beyond what had been originally requested. GAO was asked to examine for fiscal years 2005 and 2006 (1) how the President's budget requests for VA medical programs were formulated, (2) how VA monitored and reported to Congress on its budget execution, and (3) which key factors in the budget formulation process contributed to requests for additional funding. To do this, GAO analyzed budget documents and interviewed VA and Office of Management and Budget (OMB) officials.

The formulation of the President's budget requests for VA medical programs for fiscal years 2005 and 2006 was informed by VA's comparison of its cost estimate of projected demand for medical services to its anticipated resources. VA projected about 86 percent of its costs using an actuarial model that estimated veterans' demand for health care. To project the costs of long-term care (about 10 percent of the funds for VA medical programs in each of these years) and the remaining medical care costs (about 4 percent), separate estimation approaches were used that did not rely upon an actuarial model but used other methods instead. The agency anticipated resources based on prior year appropriations, guidance from OMB, and other factors. For both fiscal years, VA officials told GAO that projected costs--calculated from the actuarial model and other approaches--exceeded anticipated resources and that they addressed the difference in budget requests for those years with cost-saving policy proposals and management efficiencies. Although VA staff closely monitored budget execution and identified problems for fiscal years 2005 and 2006, VA did not report this information to Congress in a sufficiently informative manner. VA closely monitored the fiscal year 2005 budget as early as October 2004, anticipating challenges managing within its resources. However, Congress did not learn of these challenges until April 2005. VA initially planned to manage within its budget for fiscal year 2005 by delaying some spending on equipment and nonrecurring maintenance and drawing on funds it had planned to carry over into 2006. Instead, the President requested additional funds from Congress for both fiscal years 2005 (a $975 million supplemental appropriation in June 2005) and 2006 (a budget amendment of $1.977 billion in July 2005). Congress included in the 2006 appropriations act a requirement for VA to submit quarterly reports regarding the medical programs budget status during this fiscal year. These reports have not included some of the measures that would be useful for congressional oversight, such as patient workload measures to capture costs and the time required for new patients to be scheduled for their first primary care appointment. Unrealistic assumptions, errors in estimation, and insufficient data were key factors in VA's budget formulation process that contributed to the requests for additional funding for fiscal years 2005 and 2006. Unrealistic assumptions about how quickly cost savings could be realized from proposed nursing home policy changes contributed to the additional requests, as did computation errors measuring the estimated effect of one of these changes. Insufficient data in VA's initial budget projections also contributed to the additional funding requests. For example, VA underestimated the cost of serving veterans returning from Iraq and Afghanistan, in part because estimates for fiscal year 2005 were based on data that largely predated the Iraq conflict and because according to VA, the agency had challenges for fiscal year 2006 in obtaining data from the Department of Defense.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: VA agreed with this recommendation and implemented it in its fiscal year 2009 President's budget for VA medical services submitted in February 2008. In this appropriations request, VA proposed three policy changes and explained the expected timing of the budgetary impact from these changes. In addition, VA explained that these proposals would not impact the fiscal year 2009 appropriations request for medical services. The policy proposals were as follows: 1.) VA proposed an enrollment fee for certain veterans, with mandatory receipts to the Treasury starting one year later in FY 2010. 2.) VA proposed a pharmacy co-payment increase for certain veterans, with mandatory receipts to the Treasury starting in FY 2009. 3) VA proposed eliminating the current practice of VA offsetting or reducing third-party billings to insurance companies based upon the direct co-payment responsibilities of the veteran, with mandatory receipts to the Treasury starting in FY 2009.

    Recommendation: To help improve VA's budget formulation of its medical programs budget and facilitate congressional oversight, the Secretary of Veterans Affairs should explain the relationship between implementation of proposed policy changes and the expected timing of when cost savings would be achieved.

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Implemented

    Comments: VA has taken steps to improve its overall quality control and made technical changes to strengthen the accuracy of its formulation methodologies and assessments of cost savings in the FY 2007 and FY 2008 budgets. As an internal control, VA had the savings estimates from proposed policy changes, in its fiscal year 2009 President's budget for VA medical services submitted in February 2008, validated by an outside actuarial firm.

    Recommendation: To help improve VA's budget formulation of its medical programs budget and facilitate congressional oversight, the Secretary of Veterans Affairs should improve its internal controls to provide stronger assurance that calculations used to formulate policy projections in the President's budget submissions are accurate.

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: In response to our recommendation, the Department of Veterans Affairs (VA) has included in its quarterly report to Congress measures of waiting times: (1) the percent of new patient appointments completed within 30 days of the desired date, and (2) the percent of patients seen within 30 days of the desired appointment date. VA has also included a measure of patient workload that reflects costs: the number of basic (or less expensive) and complex (or more expensive) pro-rated patients. Both types of measures were included in the quarterly report VA submitted to Congress in early 2009. The inclusion of this information will facilitate congressional oversight and help Congress identify potential problems VA may face in managing within its budget

    Recommendation: To help improve VA's budget formulation of its medical programs budget and facilitate congressional oversight, the Secretary of Veterans Affairs should incorporate into VA's reporting to Congress (1) measures of patient workload, in addition to unique patients, that would capture the costliness of patient care; and (2) a measure of waiting times to schedule veterans' first primary care appointment for new patients.

    Agency Affected: Department of Veterans Affairs

 

Explore the full database of GAO's Open Recommendations »

Nov 25, 2014

Jul 29, 2014

Jul 18, 2014

Jun 23, 2014

Jun 17, 2014

Jun 12, 2014

Jun 10, 2014

May 28, 2014

Mar 27, 2014

Looking for more? Browse all our products here