VA Leaders: Capital Construction Funds Essential for Meeting Veteran Needs

by U.S. Medicine

May 20, 2011

WASHINGTON—VA’s 10-year capital construction plan calls for an investment of $53 billion to $65 billion over that timeframe; however, this year the agency is asking for only $2.8 billion.

This has legislators alternately questioning whether the amount for 2012 is enough and whether the funding will be available in the next decade for VA to meet its construction goals.

“I’m interested to learn the health-care utilization assumptions that were used in adopting the plan, especially given the expected dramatic decline in the veterans’ population over the next 20 to 30 years,” Rep. Jeff Miller, R-FL, chair of the House VA Committee (HVAC) told VA officials at a hearing last month. “Second, I’m interested to learn whether the $53 to $65 billion price tag can realistically be met, given that the President’s FY 2012 request, if carried forward annually for 10 years, would only meet roughly half the total cost.”

A number of other HVAC members echoed Miller’s questions. While VA leaders sought to alleviate some of the legislators’ concerns, they flatly stated that, if Congress wanted to serve the needs of veterans—especially those from the latest conflict—these funds would be necessary.

Predicting the Future

For 2012, VA is requesting more than $2.8 billion for major, minor, non-recurring maintenance and leasing programs. This includes new budget authority of $1.27 billion for VA’s construction programs—$589.6 million for major construction and $550.1 million for minor construction and $131 million for grants.  VA also plans to apply an additional $135.7 million that had been previously appropriated by Congress to 2012 major construction projects.  In addition to major and minor construction programs, VA is requesting $868.9 million to fund the medical facilities’ non-recurring maintenance account, and an additional $834 million for 2012 leasing activities.  

The $1.27 billion in new budget authority is comparable to previous years. Legislators have shown particular interest in this year’s budget, however, because this is the first year that VA is utilizing its Strategic Capital Investment Planning (SCIP) process. SCIP is designed to use a number of forecasting techniques to determine where service gaps exist in the VA system and where demand will increase and decrease, creating a 10-year action plan for VA’s capital construction.

“SCIP is part of a larger effort for VA to become a more efficient department,” VA Deputy Secretary Scott Gould told committee members at the hearing. “VA capital decisions are no longer made in stovepipes. SCIP uses a corporate approach that [evaluates all VA needs] across the nation and prioritizes them annually.”

Miller was skeptical that SCIP could be an accurate oracle, especially across a 10-year span. He noted that SCIP uses the same algorithms used in the VA budget process—a process that a RAND Corp. study found to be good for short-term planning but of limited usefulness for long-term analysis.

“That is true,” Gould said. “But we use a variety of methods to try to forecast our demand in the system. The purpose of our modeling is to look as far in the future as we can. We try to push ourselves to a 20-year point. We use our model to accomplish that, and it has proved quite accurate in the near term.”

“RAND did acknowledge that there were some challenges in the long-term projections,” added Pat Vandenberg, assistant deputy undersecretary for health for policy and planning. “Since the RAND study has been received, we’ve looked for ways to strengthen the reliability of the model and to pay better attention to understanding the cohort that’s enrolled with us, in particular the needs of veterans returning from the current conflicts.”

One of the ways VA is testing the SCIP predictions is by comparing it to Medicare’s projection tools. Because many of VA’s enrollees are also enrolled in Medicare, comparing the results of the two can help determine the reliability of the SCIP numbers.

“SCIP’s central contribution is to transparently and clearly define how big the problem is,” Gould said. “Up until this point, there were no figures available over a five- or 10-year period that would have allowed this committee to evaluate where we were relative to this problem.”

Unknown Costs

Regardless of whether the projection is accurate or not, it does not include many of the associated costs of creating new facilities. Miller pointed out that VA’s budget does not include activation costs and operating expenses.

Gould admitted that VA purposefully did not include those figures in the budget, because they were unable to accurately calculate them at the time. “We clearly identify that it’s not included in the budget,” he said. “What we are doing right now is developing a better model to help us determine what those activation costs are.”

Gould pointed out that over the last decade, VA has not embarked on a lot of large infrastructure construction projects. With a number of major facilities planned to open across the country over the next several years, VA’s old model for determining associated costs is outdated.

“What we’ve discovered is that our ability to estimate what those activation costs are has atrophied,” he said.

Legislators also complained about long lag times between the decision to build a new facility and breaking ground on construction. VA officials stated that the expected completion time of a smaller medical facility or a cemetery was 18 to 24 months, with a major medical facility taking as long as 42 months to complete.

However, there are many ways for construction to be delayed. “Unfortunately we are making these [construction] decisions in an environment where lots of folks get to second-guess and review and come around a third or fourth time on all those decisions,” Gould said.

The Cost of War

Legislators wanted to know how VA expected to fund a 10-year construction plan that could cost as much as $60 billion, if they were only asking for 5% of the total cost in the first year.

Gould explained to committee members that the total $2.8 billion that VA wants to put toward construction this year is a compromise. “Every member of the committee here would frankly admit that we are in a tough situation in terms of the budget. We have to make sure that every dollar counts,” he said. “It was with those needs in balance—the 10-year demand combined with the constraints of the budget—that we arrived at a figure of $2.8 billion for major, minor, interim and leasing in our system.”

With none of the legislators forecasting a significant economic turnaround in the next decade, several questioned how VA could realistically expect future budgets to make up the difference. The financial reality, they said, likely meant that every year would be a financially tight one.

If caring for veterans was considered part of the expense of war, Gould responded, then this was what it is going to cost.

“This is the size of the demand for our veterans. We have to provide these facilities. We have to step up,” Gould said. “Our No. 1 priority is to ensure that those that go into battle have the equipment that they need and that this VA is there for them when they return home. This quantification through SCIP is all about saying, ‘this is a very big number. We have to go out and fund this.’ The [construction budget] will need to be more as we go forward. My hope is that Congress will be able to find those funds.”

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