Mr. Carl Blake
Chairman Miller, Ranking Member Filner, and members of the Committee, as one of the four co-authors of The Independent Budget (IB), Paralyzed Veterans of America (PVA) is pleased to present the views of The Independent Budget regarding the funding requirements for the Department of Veterans Affairs (VA) health care system for FY 2013.
As the country faces a difficult and uncertain fiscal future, the Department of Veterans Affairs likewise faces significant challenges ahead. Following months of rancorous debate about the national debt and federal deficit during the summer of 2011, Congress agreed upon a deficit reduction measure, P.L. 112-25, that could lead to cuts in discretionary and mandatory spending for VA. The coauthors of The Independent Budget—AMVETS, Disabled American Veterans, Paralyzed Veterans of America, and the Veterans of Foreign Wars—have serious concerns about the potential reductions in VA spending. While changes to benefits programs and cuts to discretionary programs have unique differences, the impact of these possibilities will be equally devastating for veterans and their families.
Discretionary spending in VA accounts for approximately $62 billion. Of that amount, nearly 90 percent of that funding is directed toward VA medical care programs. The VA is the best health-care provider for veterans. Providing primary care and specialized health services is an integral component of VA’s core mission and responsibility to veterans. Across the nation, VA is a model health-care provider that has led the way in various areas of medical research, specialized services, and health-care technology. The VA’s unique system of care is one of the nation’s only health-care systems that provides developed expertise in a broad continuum of care. Currently, the Veterans Health Administration serves more than 8 million veterans and provides specialized health-care services that include program specific centers for care in the areas of spinal cord injury/disease, blind rehabilitation, traumatic brain injury, prosthetic services, mental health, and war-related polytraumatic injuries. Such quality and expertise on veterans’ health care cannot be adequately duplicated in the private sector. Any reduction in spending on VA health-care programs would only serve to degrade these critical services.
Moreover, The Independent Budget veterans service organizations (IBVSOs) are especially concerned about steps VA has taken in recent years in order to generate resources to meet ever-growing demand on the VA health-care system. In fact, the FY 2012 and FY 2013 advance appropriation budget proposal released by the Administration last year included “management improvements,” a popular gimmick used by previous Administrations to generate savings and offset the growing costs to deliver care. Unfortunately, these savings were often never realized leaving VA short of necessary funding to address ever-growing demand on the health-care system. We believe that continued pressure to reduce federal spending will only lead to greater reliance on gimmicks and false assumptions to generate apparent but illusory funding. In fact, the Government Accountability Office (GAO) outlined its concerns with this budget accounting technique in a report released to the House and Senate Committees on Veterans’ Affairs in June 2011. In its report, the GAO states:
If the estimated savings for fiscal years 2012 and 2013 do not materialize and VA receives appropriations in the amount requested by the President, VA may have to make difficult tradeoffs to manage within the resources provided.
This observation reflects the real possibility that exists should VA health care, as well as other programs funded through the discretionary process, be subject to spending reductions.
At the same time, Congress once again failed to fulfill its obligations to complete work on appropriations bills funding all federal departments and agencies, including VA, by the start of the new fiscal year on October 1, 2011. Fortunately, as has become the new normal, last year the enactment of advance appropriations shielded the VA health-care system from the political wrangling and legislative deadlock.
In February 2011, the Administration released its budget submission for VA for FY 2012, recommending an overall discretionary funding authority of $61.9 billion, approximately $3.6 billion less than The Independent Budget recommended last year. The Administration’s recommendation included a revised estimate for total Medical Care of approximately $53.9 billion for FY 2012, including approximately $3.1 billion in medical care collections. The budget also included $509 million in funding for Medical and Prosthetic Research, a substantial decrease of approximately $72 million below the FY 2011 funding level.
The IBVSOs expressed serious concerns about the downward revision of the Medical Care estimates for FY 2012. While we certainly understood that the Administration revised the estimates for Medical Care down by $713 million due to the proposed federal pay freeze (a factor not included in the FY 2011 appropriations bill), the revised budget included ideas of greater concern. Specifically, the IBVSOs had reservations about the outline of an ill-defined contingency fund that would provide $953 million more for Medical Services for FY 2012. Moreover, we were especially troubled that VA presumed “management improvements” of approximately $1.1 billion to be directed toward FY 2012 and FY 2013. The use of management improvements or efficiencies is a gimmick that has been commonly used in the past to reduce the requested level of discretionary funding; yet rarely did VA realize any actual savings from those gimmicks. This is particularly troubling in light of the fact that we have been told that the VA’s efforts to achieve those efficiencies explicitly outlined in the FY 2012 Budget Request have failed.
Finally, we were concerned about the revised estimate in Medical Care Collections from the originally projected $3.7 billion (included in last year’s advance appropriations recommendation and supported by Congress) to now only $3.1 billion. Given this revision in estimates, we believed then, as we do now, that the VA budget request, and ultimately the funding provided through the appropriations process, was insufficient for VA to meet the demand on the health-care system.
For FY 2012, The Independent Budget recommended that the Administration and Congress provide $65.5 billion in discretionary funding to VA, an increase of $4.9 billion above the FY 2011 operating budget level, to adequately meet veterans’ health-care and benefits needs. Our recommendations included $55 billion for health care and $620 million for medical and prosthetic research.
The Administration also included an initial estimate for the VA health-care accounts for FY 2013. Specifically, the budget request called for $55.8 billion in total budget authority, with $52.5 billion in discretionary funding and approximately $3.3 billion for medical care collections. Deeper analysis of the Administration’s budget documents seems to suggest that the VA actually believed then that it needed approximately $56.6 billion in total funding authority to meet all of the health care demands placed on the system. Given the pressures being placed on VA as a result of deficit and debt reduction, we have serious concerns whether VA will be able to meet new demand with the resources that it is being provided.
Funding for FY 2013
For FY 2013, The Independent Budget recommends approximately $57.2 billion for total medical care, an increase of $3.3 billion over the FY 2012 operating budget level provided as an advance appropriation by P.L. 112-10, the “the Department of Defense and Full-Year Continuing Appropriations Act for FY 2011.” Meanwhile, the Administration recommended an advance appropriation for FY 2013 of approximately $52.5 billion in discretionary funding for VA medical care as a part of its FY 2012 Budget Request. When combined with the $3.3 billion Administration projection for medical care collections, the total available operating budget recommended for FY 2013 is approximately $55.8 billion.
The medical care appropriation includes three separate accounts—Medical Services, Medical Support and Compliance, and Medical Facilities—that comprise the total VA health-care funding level. For FY 2013, The Independent Budget recommends approximately $46.0 billion for Medical Services. Our Medical Services recommendation includes the following recommendations:
Current Services Estimate…………………………$43,855,969,000
Increase in Patient Workload………………………..$1,510,394,000
Additional Medical Care Program Costs…..………….$675,000,000
Total FY 2013 Medical Services……………….…..$46,041,363,000
Our growth in patient workload is based on a projected increase of approximately 110,000 new unique patients—priority groups 1–8 veterans and covered nonveterans. We estimate the cost of these new unique patients to be approximately $1 billion. The increase in patient workload also includes a projected increase of 96,500 new Operation Enduring Freedom and Operation Iraqi Freedom (OEF/OIF), as well as Operation New Dawn (OND) veterans at a cost of approximately $349 million. Our recommendations represent an increase in projected workload in this population of veterans over previous years as a result of the withdrawal of forces from Iraq, the drawdown of forces in Afghanistan, and a potential drawdown in the actual number of service members currently serving in the Armed Forces. And yet, we believe that growth in demand for this cohort specifically could be far greater given the changing military policies mentioned above.
Finally, our increase in workload includes the projected enrollment of new priority group 8 veterans who will use the VA health-care system as a result of the Administration’s continued efforts to incrementally increase the enrollment of priority group 8 veterans by 500,000 enrollments by FY 2013. We estimate that as a result of this policy decision, the number of new priority group 8 veterans who will enroll in VA should increase by 125,000 between FY 2010 and FY 2013. Based on the priority group 8 empirical utilization rate of 25 percent, we estimate that approximately 31,250 of these new enrollees will become users of the system. This translates to a cost of approximately $134 million. When compared to the projections that the Administration had previously made for increased utilization for this Priority Group, we believe that our recommendations are on target for those projections.
Lastly, The Independent Budget believes that there are additional projected funding needs for VA. Specifically, we believe there is real funding needed to restore the VA’s long-term-care capacity (for which a reasonable cost estimate can be determined based on the actual capacity shortfall of VA) and to provide additional centralized prosthetics funding (based on actual expenditures and projections from the VA’s prosthetics service). In order to restore the VA’s long-term care average daily census (ADC) to the level mandated by Public Law 106-117, the “Veterans Millennium Health Care and Benefits Act,” we recommend $375 million. In order to meet the increase in demand for prosthetics, the IB recommends an additional $300 million. This increase in prosthetics funding reflects a significant increase in expenditures from FY 2011 to FY 2012 (explained in the section on Centralized Prosthetics Funding) and the expected continued growth in expenditures for FY 2013. Additionally, it is worth noting that the VA has actively implemented the new caregiver program mandated by Public Law 111-163, the “Caregivers and Veterans Omnibus Health Services Act.” However, we believe that still greater funding should be appropriated, above what the VA has currently allocated for this program, in order to more effectively and efficiently operate the program.
For Medical Support and Compliance, The Independent Budget recommends approximately $5.6 billion. Finally, for Medical Facilities, The Independent Budget recommends approximately $5.6 billion. While our recommendation does not include an additional increase for nonrecurring maintenance (NRM), it does reflect a FY 2013 baseline of approximately $900 million. While we appreciate the significant increases in the NRM baseline over the last couple of years, total NRM funding still lags behind the recommended two to four percent of plant replacement value. In fact, VA should actually be receiving at least $2.1 billion annually for NRM (Refer to Construction section article “Increase Spending on Nonrecurring Maintenance).
For Medical and Prosthetic Research, The Independent Budget recommends $611 million. This represents a $30 million increase over the FY 2012 appropriated level. We are particularly pleased that Congress has recognized the critical need for funding in the Medical and Prosthetic Research account in the last couple of years. Research is a vital part of veterans’ health care, and an essential mission for our national health care system.
Lastly, Mr. Chairman, I would like to note one late change to our IB budget recommendations for State Home Construction Grants which arose after we went to press. Late last week VA finally released the FY 2012 grant priority list for State Home repair, renovation and new construction projects and there was a significant increase in State matching funds certified as available. After reviewing the newly released Priority List for FY 2012, there are now $321 million worth of Priority 1 State Home projects for which the States have certified matching funds available. As a result, the federal funding required for Priority 1 projects will be at least $204 million in FY 2013, and that number is likely to rise even higher as States approve additional matching funding this year for a backlog of projects currently estimated at $400 million. While this recommendation is not reflected specifically in The Independent Budget, this change reflects what we believe our recommendation should now be.
Advance Appropriations for FY 2014
As we have noted in the past, P.L. 111-81 required the President’s budget submission to include estimates of appropriations for the medical care accounts for FY 2013 and subsequent fiscal years. With this in mind, the VA Secretary is required to update the advance appropriations projections for the upcoming fiscal year (FY 2013) and provide detailed estimates of the funds necessary for the medical care accounts for FY 2014. Moreover, the law also requires a thorough analysis and public report of the Administration’s advance appropriations projections by the Government Accountability Office (GAO) to determine if that information is sound and accurately reflects expected demand and costs.
The GAO’s responsibility is more important than ever, particularly in light of their findings concerning the FY 2012 budget submission last year. The GAO report that analyzed the FY 2012 Administration budget identified serious deficiencies in the budget formulation of VA. Yet these concerns were not appropriately addressed by Congress or the Administration. This analysis and the subsequent lack of action to correct these deficiencies simply affirm the ongoing need for the GAO to evaluate the budget recommendations of VA.
In the end, it is easy to forget, that the people who are ultimately affected by wrangling over the budget are the men and women who have served and sacrificed so much for this nation. We hope that you will consider these men and women when you develop your budget views and estimates, and we ask that you join us in adopting the recommendations of The Independent Budget.
This concludes my testimony. I will be happy to answer any questions you may have.
Information Required by Rule XI 2(g)(4) of the House of Representatives
Pursuant to Rule XI 2(g)(4) of the House of Representatives, the following information is provided regarding federal grants and contracts.
Fiscal Year 2012
No federal grants or contracts received.
Fiscal Year 2011
Court of Appeals for Veterans Claims, administered by the Legal Services Corporation — National Veterans Legal Services Program— $262,787.
Fiscal Year 2010
Court of Appeals for Veterans Claims, administered by the Legal Services Corporation—National Veterans Legal Services Program— $287,992.