VA Health Care:

Changes Needed to Improve Resource Allocation to Health Care Networks

GAO-02-744T: Published: May 14, 2002. Publicly Released: May 14, 2002.

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The Department of Veterans Affairs (VA) spent $21 billion in fiscal year 2001 to treat 3.8 million veterans--most of whom had service-connected disabilities or low incomes. Since 1997, VA has used the Veterans Equitable Resource Allocation (VERA) system to allocate most of its medical care appropriation. GAO found that VERA has had a substantial impact on network resource allocations and workloads. VERA shifted $921 million from networks primarily in the northeast and midwest to networks in the south and west in fiscal year 2001. VERA, along with other VA initiatives, has provided an incentive for networks to serve more veterans. In GAO's view, VERA's overall design is a reasonable approach to allocating resources according to workloads. It provides a predetermined dollar amount per veteran served to each of VA's 22 health care networks. This amount varies depending upon the health care needs of the veteran served and local cost differences. However, GAO identified weaknesses in VERA's implementation. First, VERA excludes about one fifth of VA's workload in determining each network's allocation. Second, VERA does not account well for cost differences among networks resulting from variation in their patients' health care needs. Third, the process for providing supplemental resources to networks through VA's National Reserve Fund has not been used to analyze how the need for such resources is caused by potential problems in VERA's allocation, network inefficiency, or other factors. This testimony is based on an April report (GAO-02-338).

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