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Testimony: 

Before the Subcommittee on Military Construction, Veterans Affairs, and 
Related Agencies, Committee on Appropriations, House of 
Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Thursday, March 12, 2009: 

VA Health Care: 

Challenges in Budget Formulation and Execution: 

Statement of Randall B. Williamson:
Director, Health Care: 

GAO-09-459T: 

GAO Highlights: 

Highlights of GAO-09-459T, a testimony before the Subcommittee on 
Military Construction, Veterans Affairs, and Related Agencies, 
Committee on Appropriations, House of Representatives. 

Why GAO Did This Study: 

The Department of Veterans Affairs (VA) estimates it will provide 
health care to 5.8 million patients with appropriations of $41.2 
billion in fiscal year 2009. The President has proposed an increase in 
VA’s health care budget for fiscal year 2010 to expand services for 
veterans. VA’s patient population includes aging veterans who need 
services such as long-term care—including nursing home and 
noninstitutional care provided in veterans’ homes or community—and 
veterans returning from Afghanistan and Iraq. Each year, VA formulates 
its medical care budget, which involves developing estimates of 
spending for VA’s health care services. VA is also responsible for 
budget execution—spending appropriations and monitoring their use. 

GAO was asked to discuss challenges related to VA’s health care 
services budget formulation and execution. This statement focuses on 
(1) challenges VA faces in formulating its health care budget, and (2) 
challenges VA faces in executing its health care budget. 

This testimony is based on three GAO reports: VA Health Care: Budget 
Formulation and Reporting on Budget Execution Need Improvement 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-958] (Sept. 2006); 
VA Heath Care: Spending for Mental Health Strategic Plan Initiatives 
Was Substantially Less Than Planned [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-66] (Nov. 2006); and VA Health Care: Long-Term Care 
Strategic Planning and Budgeting Need Improvement [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-09-145] (Jan. 2009). 

What GAO Found: 

VA faces challenges formulating its health care budget each fiscal 
year. As noted in GAO’s 2006 report on VA’s overall health care budget, 
these include making realistic assumptions about the budgetary impact 
of policy changes, making accurate calculations, and obtaining 
sufficient data for useful budget projections. For example, GAO found 
that VA made unrealistic assumptions about how quickly it would realize 
savings from proposed changes in nursing home policy. While VA took 
steps to respond to GAO’s 2006 recommendations about VA budgeting, 
recent GAO work found similar issues. In 2009, GAO reported on VA’s 
long-term care budget—namely, on challenges in projecting the amount 
and cost of VA long-term care. GAO found that in its fiscal year 2009 
budget justification, VA used assumptions about the cost of nursing 
home and noninstitutional care that appeared unrealistically low given 
recent VA experience and other indicators. VA said it would complete an 
action plan responding to GAO’s 2009 recommendations by the end of 
March 2009. 

VA also faces challenges executing its health care budget. These 
include spending and tracking funds for specific initiatives and 
providing timely and useful information to Congress on budget execution 
progress and problems. GAO’s 2006 report on VA funding for new mental 
health initiatives found VA had difficulty spending and tracking funds 
for initiatives in VA’s mental health strategic plan to expand services 
to address service gaps. The initiatives were to enhance VA’s larger 
mental health program and were to be funded by $100 million in fiscal 
year 2005. Some VA medical centers did not spend all the funds they had 
received for the initiatives by the end of the fiscal year, partly due 
to the time it took to hire staff and renovate space for mental health 
programs. Also, VA did not track how funding allocated for the 
initiatives was spent. GAO’s 2006 report on VA’s overall health care 
budget found that VA monitored its health care budget execution and 
identified execution problems for fiscal years 2005 and 2006, but did 
not report the problems to Congress in a timely way. GAO also found 
that VA’s reporting on budget execution to Congress could have been 
more informative. VA has not fully implemented one of GAO’s two 
recommendations for improving VA budget execution. 

Sound budget formulation, monitoring of budget execution, and the 
reporting of informative and timely information to Congress for 
oversight continue to be essential as VA addresses budget challenges 
GAO has identified. Budgeting involves imperfect information and 
uncertainty, but VA has the opportunity to improve the credibility of 
its budgeting by continuing to address identified problems. This is 
particularly true for long-term care, where for several years GAO work 
has highlighted concerns about workload assumptions and cost 
projections. By improving its budget process, VA can increase the 
credibility and usefulness of information it provides to Congress on 
its budget plans and progress in spending funds. GAO’s prior work on 
new mental health initiatives may provide a cautionary lesson about 
expanding VA programs—namely, that funding availability does not always 
mean that new initiatives will be fully implemented in a given fiscal 
year or that funds will be adequately tracked. 

View [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-459T] or key 
components. For more information, contact Randall B. Williamson at 
(202) 512-7114 or williamsonr@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today as you discuss the Department of Veterans 
Affairs' (VA) health care programs and consider the President's budget 
request for fiscal year 2010. These programs form one of the largest 
health care delivery systems in the nation and provide, for eligible 
veterans, a range of services, including preventive and primary health 
care, outpatient and inpatient services, and prescription drugs. For 
example, VA provides a variety of outpatient and inpatient mental 
health services for veterans with conditions such as depression, post- 
traumatic stress disorder, and substance abuse disorders. VA also 
provides a range of long-term care services--including nursing home 
care and noninstitutional care provided in veterans' homes or in the 
community--for veterans needing assistance due to chronic illness or 
physical or mental disability. VA estimated that in fiscal year 2009, 
its health care programs would serve 5.8 million patients with 
appropriations of $41.2 billion. The President recently proposed an 
increase in VA's health care budget for fiscal year 2010 to expand 
health care services for veterans. 

VA formulates its health care budget by developing annual estimates of 
its likely spending for all of its health care programs and services, 
and includes these estimates in its annual congressional budget 
justification to the appropriations subcommittees. VA's formulation of 
its budget is by its very nature challenging, as it is based on 
assumptions and imperfect information on the health care services VA 
expects to provide. For example, VA is responsible for anticipating the 
service needs of two very different populations--an aging veteran 
population and a growing number of veterans returning from the military 
operations in Afghanistan and Iraq, known as Operation Enduring Freedom 
(OEF) and Operation Iraqi Freedom (OIF), respectively--calculating the 
future costs associated with providing VA services, and using these 
factors to develop the department's budget request submitted to the 
Office of Management and Budget (OMB).[Footnote 1] VA uses an actuarial 
model to develop the annual budget estimates for most, but not all, of 
its health care programs, including inpatient acute surgery, outpatient 
care, and prescription drugs. This model estimates future VA health 
care costs by using projections of veterans' demand for VA's health 
care services as well as cost estimates associated with particular 
health care services.[Footnote 2] In fiscal year 2006, VA used the 
actuarial model to estimate about 86 percent of its projected health 
care spending for that year. VA uses other approaches to develop its 
spending estimates for its remaining health care services, such as long-
term care. Long-term care accounted for about 10 percent of VA's 
estimated health care spending for fiscal year 2006. 

VA is also responsible for executing its budget--a responsibility that 
includes spending appropriated funds efficiently and effectively and 
monitoring the use of funds throughout the fiscal year to ensure that 
those funds are used to provide health care services as authorized. VA 
typically receives appropriations that support all its health care 
services rather than appropriations specifically for certain types of 
services. As a result, VA has considerable discretion in how it 
allocates its resources among its various health care services. VA 
allocates most of the appropriations for its health care services to 
VA's 21 health care networks, which in turn allocate funds to the 
medical centers within their networks.[Footnote 3] 

In 2006 and 2009, we issued three reports that examined some of the 
challenges VA faces in budget formulation and execution; these reports 
pertained to VA's overall health care budget as well as portions of its 
budget that pertain to long-term care and to specific mental health 
initiatives.[Footnote 4] You asked us to discuss budget challenges VA 
faces related to its health care programs, and today my remarks are 
based on our issued work on this subject.[Footnote 5] Specifically, I 
will discuss (1) challenges VA faces formulating its health care 
budget, and (2) challenges VA faces executing its health care budget. 

For our 2006 report on VA's overall health care budget for fiscal years 
2005 and 2006, we analyzed and reviewed budget documents, including 
VA's budget justifications for health care programs for fiscal years 
2005 and 2006, and interviewed VA officials responsible for VA health 
care budget issues and for developing budget projections. In addition, 
from August to September 2008, we reviewed VA documents to determine 
whether VA had implemented the recommendations we made in our 2006 
report. For our other 2006 report, on VA's budget for specific mental 
health initiatives, we reviewed documents related to the funding of 
these initiatives. We interviewed VA headquarters officials responsible 
for VA's mental health services and budget functions. We also conducted 
site visits and phone interviews with officials from selected VA health 
care networks and VA medical centers. In September 2008, we reviewed VA 
documents to determine whether VA had implemented the recommendations 
we made in that report. For our 2009 report on VA's long-term care 
budget, we reviewed VA's fiscal year 2009 congressional budget 
justification and related documents. We also interviewed VA officials. 
We conducted our work for these performance audits in accordance with 
generally accepted government auditing standards.[Footnote 6] Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

VA Faces Challenges in Formulating Its Health Care Budget: 

Our prior work highlights some of the challenges VA faces in 
formulating its budget. As we reported in 2006, these challenges 
include making realistic assumptions about the budgetary impact of some 
of its policies, making accurate calculations, and obtaining sufficient 
data for useful budget projections. In 2009, we again reported on VA's 
budget formulation challenges--specifically, VA's challenges projecting 
the amount of long-term care it will provide and estimating the costs 
of this care. 

Challenges Making Realistic Assumptions Related to Proposed Policy 
Changes, Making Accurate Calculations, and Obtaining Sufficient Data: 

Our 2006 report on VA's overall health care budget illustrated that in 
formulating its budget, VA faces challenges making realistic 
assumptions about the budgetary impact of its proposed policies. We 
reported that the President's requests for additional funding for VA's 
medical programs for fiscal years 2005 and 2006[Footnote 7] were in 
part due to unrealistic assumptions VA made about how quickly the 
department would realize savings from proposed changes in its nursing 
home policy.[Footnote 8] Specifically, we found that: 

* VA's fiscal year 2005 budget justification included a proposal to 
reduce the amount of care VA provides--known as workload--in VA- 
operated nursing homes, one of three settings which provide VA nursing 
home services.[Footnote 9] VA assumed that savings from this reduction 
in workload would be realized on the first day of fiscal year 2005. VA 
officials later told us that this assumption had been unrealistic 
because of the accelerated time frame of the planned policy change. The 
change would have required transferring or discharging veterans from 
the nursing homes in an extremely compressed time frame; moreover, 
achievement of substantial savings from this policy would have also 
likely required reducing the number of VA employees. 

* VA's fiscal year 2006 budget justification included a policy proposal 
to reduce patient workload and costs by prioritizing the veterans who 
would receive a certain type of VA nursing home care.[Footnote 10] VA 
assumed that savings resulting from the policy change could be realized 
before the start of the 2006 fiscal year; however, VA officials said 
they later realized that time frame was unrealistic. 

In our 2006 report, we recommended that VA improve its budget 
formulation processes by explaining in its budget justifications the 
relationship between the implementation of proposed policy changes and 
the expected timing of cost savings to be achieved. VA agreed with this 
recommendation and acted on this recommendation in VA's fiscal year 
2009 budget justification. 

Our 2006 report also illustrated that VA faces challenges making 
accurate calculations during budget formulation. As we reported, VA 
made computation errors when estimating the effect of its proposed 
fiscal year 2006 nursing home policy, and this contributed to requests 
for supplemental funding that year. We found that VA underestimated 
workload and the costs of providing care in all three of its nursing 
home settings. VA officials said that the errors resulted from 
calculations being made in haste during the OMB appeal process, 
[Footnote 11] and that a more standardized approach to long-term care 
calculations could provide stronger quality assurance to help prevent 
future mistakes. In 2006, we recommended that VA strengthen its 
internal controls to better ensure the accuracy of calculations it uses 
in preparing budget requests. VA agreed with and implemented this 
recommendation and had the savings estimates from proposed policy 
changes in its fiscal year 2009 budget justification validated by an 
outside actuarial firm. 

In formulating its budget, VA also faces the challenge of obtaining 
sufficient data for useful workload projections, as illustrated in our 
2006 report. We reported that the President's requests for additional 
funding for VA health care programs in fiscal years 2005 and 2006 were, 
in part, due to the lack of sufficient data on how many OEF/OIF 
veterans VA would care for in those fiscal years. In its fiscal year 
2005 budget justification, VA projected that it would need to provide 
care to about 23,500 returning OEF/OIF veterans. VA subsequently 
revised its projections to indicate that VA would serve nearly 100,000 
OEF/OIF veterans. According to VA officials, the original projections 
for providing care to OEF/OIF veterans had been understated for fiscal 
year 2005 in part because the projections were based on insufficient 
data on veterans returning from Iraq and Afghanistan. Insufficient data 
on returning OEF/OIF veterans continued to be a challenge in 
formulating VA's fiscal year 2006 budget justification. VA officials 
told us they did not have sufficient data for that fiscal year due to 
challenges obtaining data needed to identify these veterans from the 
Department of Defense (DOD). After the President submitted the fiscal 
year 2006 budget request, VA determined that it expected to provide 
care to approximately 87,000 more veterans than initially projected for 
fiscal year 2006. According to VA officials, the agency subsequently 
began receiving the DOD data it requires to identify OEF/OIF veterans 
on a monthly basis rather than the quarterly reports it used to 
receive. 

Challenges Projecting the Amount and Cost of Long-Term Care Services: 

Our recent work on VA's budget showed how VA continued to face 
challenges formulating its budget for long-term care services.[Footnote 
12] In January 2009, we reported on VA's challenges developing 
realistic assumptions to project the amount of noninstitutional long- 
term care services it would provide to veterans. We found that, in its 
fiscal year 2009 budget justification, VA included a spending estimate 
for noninstitutional long-term care services that appeared unreliable, 
in part because this spending estimate was based on a workload 
projection that appeared to be unrealistically high, given recent VA 
experience providing these services. Specifically, in an effort to help 
meet veterans' demand for noninstitutional services, VA projected that 
it would increase its noninstitutional workload 38 percent from fiscal 
year 2008 to fiscal year 2009. VA included this projection in the 
budget despite the fact that from fiscal year 2006 to fiscal year 2007-
-the most recent year for which workload data are available--VA's 
actual workload for these services decreased about 5 percent, rather 
than increasing as projected. (See figure 1.) In its fiscal year 2009 
budget justification, VA did not provide information regarding its 
plans for how it will increase noninstitutional workload 38 percent 
from fiscal year 2008 to fiscal year 2009. 

Figure 1: VA Actual and Estimated Noninstitutional Workload, Fiscal 
Year 2006 through Fiscal Year 2009: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2006; 
Actual Workload: 43,325. 

Fiscal year: 2007; 
Actual Workload: 41,022 (decrease of about 5%). 

Fiscal year: 2008; 
Estimated Workload: 44.192. 

Fiscal year: 2009; 
Estimated Workload: 61,029. 

Source: GAO analysis of VA data. 

Note: Workload is measured in average daily census. Average daily 
census reflects the average number of veterans in VA noninstitutional 
long-term care services on any given day during the course of a year. 

[End of figure] 

To strengthen the credibility of the estimates of long-term care 
spending in VA's budgeting proposals and increase transparency for 
Congress and stakeholders, we recommended that in future budget 
justifications VA use workload projections for estimating 
noninstitutional long-term care spending that are consistent with VA's 
recent experience or report the rationale for using projections that 
are not. In commenting on a draft of our report, VA did not indicate 
whether it agreed with this recommendation, but stated it would 
complete an action plan that responds to the recommendation by the end 
of March 2009. 

In addition to having difficulty developing reliable projections on the 
amount of long-term care services it will provide, VA also faces 
challenges developing realistic assumptions about the cost of providing 
these services when formulating its budget. In January 2009, we 
reported that VA may have underestimated its nursing home spending for 
fiscal year 2009 because it used a cost assumption that appeared 
unrealistically low, given both recent VA experience and economic 
forecasts of increases in health care costs. To formulate its nursing 
home spending estimate, VA assumed that the cost of providing a day of 
nursing home care would increase 2.5 percent from fiscal year 2008 to 
fiscal year 2009. However, from fiscal year 2006 to fiscal year 2007-- 
the most recent year for which actual cost data are available--the cost 
to provide this care increased approximately 5.5 percent. Similarly, 
for fiscal year 2007 to fiscal year 2008, VA estimated that its nursing 
home costs would increase approximately 11 percent. In addition to its 
recent experience, VA's 2.5 percent cost increase is also less than the 
rate provided in OMB guidance to VA to help with its budget estimates-
-which forecasted a rate of inflation for medical services of 3.8 
percent for the same time period. 

In our January 2009 report, we also found that VA's estimate of the 
amount it would spend for noninstitutional long-term care services in 
fiscal year 2009 appeared to be unreliable--in part because VA based 
this estimate on a cost assumption that appeared unrealistically low, 
when compared to VA's recent experience and to economic forecasts of 
increases in health care costs. Specifically, VA assumed that the cost 
of providing a day of noninstitutional long-term care would not 
increase from its fiscal year 2008 level. VA used this assumption to 
formulate its noninstitutional long-term care spending estimate despite 
the fact that from fiscal year 2006 to fiscal year 2007--the most 
recent year for which actual cost data are available--the cost of 
providing these services increased 19 percent. VA's cost assumption is 
also inconsistent with the OMB guidance provided to VA. In its fiscal 
year 2009 budget justification, VA did not provide information 
regarding its nursing home or noninstitutional cost assumptions. 
However, VA officials told us that they made these assumptions in order 
to be conservative in VA's fiscal year 2009 budget estimates. 

To strengthen the credibility of the estimates of long-term care 
spending in VA's budgeting proposals and increase transparency for 
Congress and stakeholders, we recommended that VA, in future budget 
justifications, use cost assumptions for estimating both nursing home 
and noninstitutional long-term care spending that are consistent with 
VA's recent experience or report the rationale for using cost 
assumptions that are not. In commenting on a draft of our report, VA 
did not indicate whether it agreed with these recommendations, but 
stated it would complete an action plan that responds to the 
recommendations, again by the end of March 2009. 

VA Faces Challenges in Executing Its Budget for Health Care Services: 

Our prior work highlights some of the challenges VA faces in executing 
its health care budget. These challenges include spending and tracking 
funds designated by VA for specific health care initiatives as well as 
providing timely and useful information to Congress regarding budget 
execution progress and problems. 

Challenges Spending and Tracking Funds Designated for VA Health Care 
Initiatives: 

After formulating its estimates of likely spending on its health care 
services, VA is also responsible for executing its budget efficiently 
and effectively. However, our 2006 report on VA's funding for specific 
mental health initiatives[Footnote 13] showed that in executing its 
budget, VA faces challenges spending and tracking the use of funds 
designated by VA for specific VA health care initiatives, in particular 
funds that VA intends to use to expand services to improve access to 
care for its veteran population. For example, in 2006, we reported that 
in fiscal years 2005 and 2006, VA had difficulty spending and tracking 
funds it had designated for new initiatives included in VA's mental 
health strategic plan, which were to expand mental health services in 
order to address gaps previously identified by VA. These initiatives-- 
which were to be funded by $100 million in fiscal year 2005 and $200 
million in fiscal year 2006--were intended to enhance VA's larger 
mental health program.[Footnote 14] In both fiscal years, VA allocated 
funds to VA medical centers and offices that were to be used for mental 
health strategic plan initiatives during those fiscal years, as part of 
VA's efforts to expand these services. As we reported in 2006, VA faced 
challenges in both spending the funds and tracking their use in fiscal 
years 2005 and 2006: 

* Challenges in spending funds--We found that, by the end of fiscal 
years 2005 and 2006, some VA medical centers had not spent all of the 
funds they had received for mental health strategic plan initiatives 
for those fiscal years, according to VA medical center officials and 
other available information. In fiscal year 2005, this was due to 
factors such as the length of time it took the medical centers to hire 
new staff and locate or renovate space for new mental health programs. 

* Challenges in tracking the use of funds--In both fiscal years, VA did 
not have an adequate method in place for tracking spending for its new 
mental health strategic plan initiatives. VA did not track how funds 
allocated for plan initiatives were spent, and as a result, VA could 
not determine to what extent the funds for plan initiatives were spent 
on those initiatives. 

To provide information for improved management and oversight, we 
recommended that VA track the extent to which the funds allocated for 
mental health strategic plan initiatives are spent for those 
initiatives. Since we reported on this issue in November 2006, VA has 
implemented a tracking system to monitor spending on mental health 
strategic plan initiatives and help determine the extent to which funds 
allocated for mental health strategic plan initiatives are spent for 
those initiatives. 

Although VA took steps to address its challenges tracking its spending 
on mental health initiatives, our more recent work in 2009 shows how VA 
continues to face spending challenges when the department undertakes 
efforts to expand services for veterans. In January 2009 we reported 
that VA's fiscal year 2009 budget justification included plans to 
increase VA's spending on noninstitutional long-term care services, in 
order to partially close previously identified gaps in the provision of 
these services. VA assumed it would be able to increase its 
noninstitutional workload by 38 percent from fiscal year 2008 to fiscal 
year 2009. However, in our report we raised questions about VA's 
ability to achieve this increase in workload. As we noted in our 
report, VA officials stated that increasing noninstitutional workload 
is challenging. Similar to VA's prior mental health initiatives, many 
of VA's noninstitutional services are provided by VA personnel, and as 
a result, VA must take the time to hire and train more personnel before 
it has the capacity to serve an increased workload. These factors 
suggest that VA may have difficulty spending its resources as planned. 
In its budget justification, VA did not explain how it plans to achieve 
this increase in noninstitutional workload. 

Challenges Providing Timely and Useful Information to Congress 
Regarding Budget Execution Progress and Problems: 

As VA executes its budget, VA also faces the challenge of providing 
timely information to Congress about the agency's progress and any 
problems the agency encounters during this process. For example, in our 
2006 report on VA's overall health care budget, we reported that 
although VA staff had closely monitored its budget execution and 
identified problems for fiscal years 2005 and 2006, VA did not report 
this information to Congress in a timely manner. For example, 
anticipating challenges in managing within its resources, VA had 
closely monitored the fiscal year 2005 budget as early as October 2004. 
However, Congress did not learn of the budget challenges facing VA 
until April 2005. 

In addition, VA faces a challenge in providing information to Congress 
that would be useful for congressional oversight of VA's budget. For 
example, in 2006, we also found that VA's reporting of its budget 
execution progress and problems to Congress could have been more 
informative. In the appropriations act for fiscal year 2006, Congress 
included a requirement for VA to submit quarterly reports regarding the 
status of the medical programs budget during that fiscal year.[Footnote 
15] In addition, the conference report accompanying the appropriations 
act directed VA to include waiting list performance measures, among 
other things.[Footnote 16] We found that VA did not include in its 
quarterly reports certain types of information that would have been 
useful for congressional oversight. For example, in its reports to 
Congress, VA used a patient workload measure that counted patients only 
once no matter how many times they used VA services within the fiscal 
year. This measure did not capture the difference between patients 
predominantly using low-cost services such as primary care outpatient 
visits and those using high-cost services such as acute inpatient 
hospital care. In contrast, VA provided in its reports to OMB other 
workload measures that provided a more complete picture of whether new 
patients were receiving low-or high-cost services. Some of those 
measures provided to OMB included a measure of one type of inpatient 
care--nursing home workload--and the number of outpatient visits. 

In addition, in one of its quarterly reports to Congress, VA reported 
access measures for existing VA patients--the percentage of primary 
care and percentage of specialty care appointments scheduled within 30 
days of the desired date--where VA was exceeding its performance goals. 
However, VA did not provide one access measure identified in the 
conference report: the time required for new patients to get their 
first appointment. Although not the same measure, a similar measure VA 
produced for other purposes showed the number of new patients waiting 
for their first appointment to be scheduled. This measure showed that 
the number of new patients waiting for their first appointment to be 
scheduled almost doubled from April 2005 to March 2006, indicating a 
potential problem in the first quarter of fiscal year 2006. 

We recommended that VA improve its reporting of budget execution 
progress to Congress by incorporating measures of patient workload to 
capture the costliness of care and a measure of waiting times. These 
measures might help alert Congress to potential problems VA may face in 
managing within its budget in future years. VA implemented part of this 
recommendation in the quarterly report it submitted to Congress in May 
2008, in which VA reported two measures related to waiting times. 
Although the inclusion of these measures in VA's quarterly reports can 
help facilitate congressional oversight, VA could provide additional 
information to inform Congress about the costliness of VA care. 

Concluding Observations: 

Sound budget formulation, monitoring of budget execution, and the 
reporting of informative and timely information to Congress for 
oversight continue to be essential as VA addresses budget challenges we 
have identified in recent years. While the budget process inevitably 
involves imperfect information and uncertainty about future events, VA 
has the opportunity to improve the credibility of its budgeting process 
by continuing to address problems that we have identified in recent 
years. Doing so can increase the credibility and usefulness of 
information that VA provides to Congress and affected stakeholders on 
its annual budget plans and the progress it makes in spending 
appropriated funds as planned. This is particularly the case for long- 
term care services, where budget workload assumptions and cost 
projections, as highlighted by our work for several years, raise 
questions regarding the credibility and usefulness of projected 
spending estimates. In addition, our prior report on new VA mental 
health initiatives to address identified gaps in services may provide a 
cautionary lesson regarding the expansion of new VA health care 
programs more generally. Namely, that the availability of funding for 
new health care initiatives does not in itself mean that these 
initiatives will be fully implemented within a given fiscal year--in 
part because new initiatives can bring challenges in hiring and 
training new staff--or that monitoring and tracking of such funding 
will be adequate to report the extent to which new initiatives are 
being implemented as planned. 

Mr. Chairman, this concludes my prepared remarks. I would be happy to 
answer any questions you or other members of the Subcommittee may have. 

Contact and Acknowledgments: 

For more information regarding this testimony, please contact Randall 
B. Williamson at (202) 512-7114 or williamsonr@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this statement. In addition, James C. 
Musselwhite, Assistant Director; Deirdre Brown; Robin Burke; and 
Krister Friday made key contributions to this testimony. 

Footnotes: 

[1] VA begins to formulate its own budget request approximately 18 
months before the start of the fiscal year to which the request relates 
and about 10 months before transmission of the President's budget 
request, which usually occurs in early February. 

[2] The actuarial model reflects factors such as the age, sex, and 
morbidity of the veteran population as well as the extent to which 
veterans are expected to seek care from VA rather than health care 
providers reimbursed by other payers such as Medicare and Medicaid. 

[3] VA delegates decision making regarding health care financing and 
service delivery to its health care networks, including most budget and 
management responsibilities concerning medical center operations. 

[4] See GAO, VA Health Care: Budget Formulation and Reporting on Budget 
Execution Need Improvement, [hyperlink, 
http://www.gao.gov/products/GAO-06-958] (Washington, D.C.: Sept. 20, 
2006); GAO, VA Health Care: Long-Term Care Strategic Planning and 
Budgeting Need Improvement, [hyperlink, 
http://www.gao.gov/products/GAO-09-145] (Washington, D.C.: Jan. 23, 
2009); and GAO, VA Health Care: Spending for Mental Health Strategic 
Plan Initiatives Was Substantially Less Than Planned, [hyperlink, 
http://www.gao.gov/products/GAO-07-66] (Washington, D.C.: Nov. 21, 2006). 

[5] We currently have work underway on other VA health care related 
issues, including aspects of VA's mental health programs. 

[6] We conducted our work on VA's overall health care budget from 
October 2005 through September 2006, our work on VA's mental health 
initiative funding from January through November 2006, and our work on 
VA's long-term care budget from November 2007 through January 2009. 

[7] In June 2005, the President requested a $975 million supplemental 
appropriation for fiscal year 2005, and in July 2005, the President 
submitted a $1.977 billion budget amendment for the fiscal year 2006 
appropriation. 

[8] See [hyperlink, http://www.gao.gov/products/GAO-06-958]. 

[9] VA also provides nursing home services through community nursing 
homes and state veterans' nursing homes. 

[10] This policy proposal was related to long-stay nursing home care 
provided in all three of VA's nursing home settings. Long-stay care 
includes nursing home care needed by veterans who cannot be cared for 
at home because of severe, chronic physical or mental impairments such 
as the inability to independently eat or the need for supervision 
because of dementia. Under the proposed policy, many veterans receiving 
VA nursing home care would no longer have qualified for long-stay care. 

[11] In late November, OMB "passes back" budget decisions to the 
agencies on the President's budget requests for their programs, a 
process known as "passback." These decisions may involve, among other 
things, funding levels, program policy changes, and personnel ceilings. 
The agencies may appeal decisions with which they disagree. 

[12] See [hyperlink, http://www.gao.gov/products/GAO-09-145]. 

[13] See [hyperlink, http://www.gao.gov/products/GAO-07-66]. 

[14] These funds represented a small portion of the overall funds 
available to support VA mental health services in those two fiscal 
years. For example, VA expected to spend more than $2 billion on mental 
health services in fiscal year 2006. 

[15] Pub. L. No. 109-114, § 222, 119 Stat. 2372, 2391 (2005). 

[16] See H.R. Conf. Rep No. 109-305, at 50 (2005). 

[End of section] 

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