Summary

The Department of Veterans Affairs (VA), which operates one of the nation's largest health care systems, faces increasing pressure to contain or reduce spending as part of governmentwide efforts to balance the budget. This report discusses ways VA could operate more efficiently and reduce the resources needed to meet the needs of veterans in what is commonly referred to as the mandatory care category. GAO addresses (1) VA's forecasts of future resource needs, (2) opportunities to run VA's system more efficiently, (3) differences between VA and the private sector in efficiency incentives, and (4) recent VA efforts to reorganize its health care system and create efficiency incentives. GAO concludes that successful implementation of a range of reforms, coupled with reduced demand for services, could save the VA health care system billions of dollars during the next seven years. The success of these efforts, however, depends on introducing efficiency incentives at VA that have long existed in the private sector.

GAO found that: (1) the VA health care system should be able to respond to deficit reduction within the next seven years; (2) VA has overstated the level of resources that it would need to satisfy veterans health care requirements in the next seven to ten years; (3) VA did not adequately consider the impact of the declining veteran population on the future demand for inpatient hospital care; (4) a significant portion of VA resources is used to provide services to veterans in the discretionary care category; (5) VA could significantly reduce its operating costs over the next seven years by completing actions on a wide range of efficiency improvements; (6) the success of these efforts depends on how VA health care facilities spend appropriated funds; (7) VA managers often find ways to operate more efficiently when they need resources to implement new services or expand existing services; (8) VA is holding network directors accountable for the Veterans Integrated Service Network's (VISN) performance; (9) the Under Secretary for Health distributed criteria to help VISN directors develop efficiency initiatives and gave VISN and facility directors authority to realign VA medical centers to achieve efficiencies; (10) VA plans to develop a capitation funding process that provides greater efficiency incentives for VA facilities; and (11) VA must implement clear mechanisms and verify management data to achieve its workload, efficiency, and other performance targets.