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

by U.S. Medicine

September 7, 2011

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.

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

The Impact of PTSD

One wild card in the process of estimating the lifetime cost of treating OEF/OIF veterans is the prevalence of PTSD, TBI and major depressive disorder (MDD) in this population. Discussed extensively at the Senate hearing was a Rand Corp. study in spring 2008 that found 18.4% of all returning servicemembers met criteria for PTSD or major depression. If this estimate applied across all 2.2 million OEF/OIF servicemembers, the number of new veterans returning with PTSD or depression would be more than 400,000.

PTSD adds significant cost to patient treatment. According to Rand, evidence-based PTSD care averages about $4,000 per year — in addition to other healthcare expenses. Co-morbid PTSD and MDD costs average $6,000 per year.

Costs for treating TBI are much more difficult to estimate, because the injury can affect such a wide range of physical functions.  Because TBI and PTSD can be challenging to identify immediately after a servicemember returns home, the true prevalence of both conditions is currently unknown, making planning that much more difficult.

However, according to the Rand report, the greater costs would be from lost productivity among those patients not treated for these disorders. The cost from lost productivity is nearly 20 times the cost of the mental-health care for these patients.

Rand also estimated that half of those with probable PTSD or MDD had not been evaluated by VA in the year prior to their survey. This means they could present in the future, increasing VA’s resource need.

 “The VA caseload is largely consisting of older veterans,” explained James Hosek, PhD, a Rand senior economist, at last month’s Senate hearing. “The immediate growth of the new generation of veterans is a challenge for [VA] because they need to adapt their provider mix. Those are [expected] growth problems.”

VA should investigate using resources and physicians available in the private sector if they cannot build up their own infrastructure soon enough to accommodate the needs of these new veterans, Hosek suggested.

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