Summary

Combined, the Department of Defense (DOD) and the Department of Veterans Affairs (VA) provide health care services to about 16.8 million beneficiaries at an estimated cost of $58 billion for fiscal year 2005--$30.4 billion for DOD and $27.7 billion for VA. In 1982, the Congress passed the Veterans' Administration and Department of Defense Health Resources Sharing and Emergency Operations Act (Sharing Act) to promote more cost-effective use of health care resources and more efficient delivery of care. Specifically, the Congress authorized DOD and VA to enter into sharing agreements with each other to buy, sell, and barter medical and support services. To further encourage ongoing collaboration, the Congress passed the Bob Stump National Defense Authorization Act (NDAA) for Fiscal Year 2003, which directed the Secretary of Defense and the Secretary of Veterans Affairs to establish a joint incentives program to identify and provide incentives to implement, fund, and evaluate creative health care coordination and sharing initiatives between DOD and VA. Under the program, DOD and VA are to solicit proposals from their program offices, DOD military treatment facilities, or VA medical facilities for project initiatives at least annually. DOD and VA health care officials are to develop program guidelines and establish project evaluation and selection criteria. To facilitate the program, each secretary is required to contribute a minimum of $15 million from each department's appropriation into an account established in the U.S. Treasury for each fiscal year from 2004 through 2007. The Financial Management Workgroup (FMWG) under the Health Executive Council (HEC) administers the Incentive Fund program. The NDAA also requires that we submit a report on the implementation of the program by February 28 of each fiscal year the program is in effect. We reviewed DOD's and VA's plans for implementing the DOD-VA Health Care Sharing Incentive Fund--including proposal submission guidelines and evaluation and selection criteria--and interviewed department officials from DOD and VA involved in the oversight of the program and those facility or program office officials responsible for the projects that were selected for funding during fiscal year 2004.

From December 2002 through January 2005, DOD and VA developed program guidelines and solicited, reviewed, selected, and funded projects. During that time DOD and VA officials completed their review of 58 concept proposals that were submitted, selected 12 projects for implementation, and funded 9 of them. Three projects were awaiting funds as of February 3, 2005. Project selection took place in August 2004, and the departments began funding projects in November 2004. According to the departments, funding could not be provided until project officials and the Surgeons General for DOD's Departments of the Army, Navy, and Air Force completed certain administrative actions. These actions included project officials ensuring that the project would be self-sustaining within 2 years and the Surgeons General ensuring that service-specific department protocols for disbursing funds were followed. DOD and VA officials generally concurred with the information presented in this report.