Think VA’s Budget Has Grown Rapidly? You May Not Have Seen Anything Yet

VA’s medical-care budget has grown rapidly since 2001 —$27 billion or 130% — but government budget officials suggest that is a minor increase compared to what is coming: the lifetime costs of treating troops who have returned from Iraq and Afghanistan.

At this point, VA is challenged to even estimate how much care will be needed by Operations Enduring Freedom and Iraqi Freedom (OEF/OIF) veterans and how much it will cost in the long run, let alone actually provide it.

The number of OEF/OIF veterans accessing VA care has grown 100,000 per year for the past several years. During the next 10 years, the Congressional Budget Office (CBO) estimates the costs for treating them will total between $40 billion and $55 billion, depending on the number of military personnel deployed overseas during that timeframe.

For example, if there are 30,000 U.S. servicemembers deployed overseas, VA’s bill will come to around $40 billion. If there are 60,000 deployed overseas, that figure could approach $55 billion with a higher number of servicemembers eventually coming back and transitioning to veteran status.

The biggest challenges VA has in preparing to treat these veterans are projecting the amount of healthcare they will need, what kind of services those will require and what facilities will be needed to provide them.

For 2012, VA is requesting $61.9 billion in discretionary funding, most of which will go toward medical services. It came to this figure using a projection model that looks at the types of healthcare veterans might need, the cost for that care and the number of veterans who might enroll for healthcare.

That model, however, is intrinsically flawed, according to the Government Accountability Office (GAO). Testifying at a Senate VA hearing on treatment costs, Lorelei St. James, director of physical infrastructure issues at GAO, told legislators that the model looks at 60 healthcare services that account for 83% of VA’s healthcare cost estimate.

“The models’ projections provide only a starting point for the budget,” St. James said. “The model is based on imperfect data and estimates that change. And it projects several years in to the future. The estimates, like the processes VA uses, are not perfect. And all budget requests must compete for funding.”

The result is a budget projection that is, at best, only in the ballpark of what VA will need in any given year and dependent on congressional approval, St. James said.

Facility Planning

An equally vital projection the VA has to make is just what healthcare facilities these new veterans are going to require in the future. Over the last decade, VA has reduced the number of large hospitals and opened 82 community-based outpatient clinics.

“VA’s planning process seems to have been moving in the right direction,” St. James said. “But it’s not all good news.”

VA faces a daunting backlog of repairs — about $10 billion worth — and 24 ongoing construction projects that need an additional $4.4 billion to complete, according to a January 2011 GAO report.

Over the last several years, VA has changed its approach to the capital planning, implementing the Strategic Capital Investment Planning Process (SCIP). According to VA, SCIP allows them to better prioritize capital projects and project costs. It also extends VA’s projections from five years to 10.

However, because SCIP’s implementation is so recent, GAO cannot evaluate its effectiveness. “I can’t tell you if it’s an effective planning tool,” St. James said. “It’s too early to tell.”

Regardless of whether the process provides accurate estimates, VA faces many challenges, St. James said. These include getting stakeholders to agree on what changes are needed, the legal and budgetary limitations, and getting rid of excess or underutilized property.

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