VERA allocates nearly 90 percent of VA’s medical care appropriation. VERA’s Design Is a ReasonableApproach to Resource Allocation

VERA’s design is a reasonable approach to resource allocation and has  helped promote more comparable resource allocations for comparable  workloads in VA. VERA is a reasonable approach because it allocates resources to networks  primarily based on workload. Each network receives an allocation based  on a predetermined dollar amount per veteran served. When VERA was established, the number of higher income veterans  without service-connected disabilities that VA treated was about 4 percent  of the total number of veterans treated in fiscal year 1996. VERA allocations would have increased to 9  networks in the Northeast and Midwest and decreased to 10 networks in  the South and West in the fiscal year 2001 VERA allocation. To improve its adjustment for cost differences beyond networks’ control,  we also recommended that VERA use more case-mix categories to  adequately adjust for differences in patients’ health care needs across  networks. 3). Yet VA needs to correct weaknesses in  VERA’s implementation to better align resources with workload and to  adequately account for important variations in health care needs among  networks. The amount of  resources provided to networks through the supplemental funding process  for the National Reserve Fund has continued to increase, yet VA has not  been able to determine the relative contribution of factors such as  imperfections in VERA, network inefficiency, or lack of managerial  flexibility to close or consolidate programs or facilities to the need for  supplemental resources.
Why GAO Did This Study

The Department of Veterans Affairs (VA) spent $21 billion in fiscal year 2001 to treat 3.8 million veterans--most of whom had service-connected disabilities or low incomes. Since 1997, VA has used the Veterans Equitable Resource Allocation (VERA) system to allocate most of its medical care appropriation.

What GAO Found

GAO found that VERA has had a substantial impact on network resource allocations and workloads. VERA shifted $921 million from networks primarily in the northeast and midwest to networks in the south and west in fiscal year 2001. VERA, along with other VA initiatives, has provided an incentive for networks to serve more veterans. In GAO's view, VERA's overall design is a reasonable approach to allocating resources according to workloads. It provides a predetermined dollar amount per veteran served to each of VA's 22 health care networks. This amount varies depending upon the health care needs of the veteran served and local cost differences. However, GAO identified weaknesses in VERA's implementation. First, VERA excludes about one fifth of VA's workload in determining each network's allocation. Second, VERA does not account well for cost differences among networks resulting from variation in their patients' health care needs. Third, the process for providing supplemental resources to networks through VA's National Reserve Fund has not been used to analyze how the need for such resources is caused by potential problems in VERA's allocation, network inefficiency, or other factors. This testimony is based on an April report (GAO-02-338).