Challenges Making Realistic Assumptions Related to Proposed Policy Changes, Making Accurate Calculations, and Obtaining Sufficient Data

Our 2006 report on VA’s overall health care budget illustrated that in  formulating its budget, VA faces challenges making realistic assumptions  about the budgetary impact of its proposed policies. We reported that the  President’s requests for additional funding for VA’s medical programs for  fiscal years 2005 and 2006 were in part due to unrealistic assumptions VA  made about how quickly the department would realize savings from  proposed changes in its nursing home policy. Challenges Projecting the Amount and Cost of Long- Term Care Services

Our recent work on VA’s budget showed how VA continued to face  challenges formulating its budget for long-term care services. To strengthen the credibility of the estimates of long-term care spending in  VA’s budgeting proposals and increase transparency for Congress and  stakeholders, we recommended that in future budget justifications VA use  workload projections for estimating noninstitutional long-term care  spending that are consistent with VA’s recent experience or report the  rationale for using projections that are not. In commenting on a draft of  our report, VA did not indicate whether it agreed with this  recommendation, but stated it would complete an action plan that  responds to the recommendation by the end of March 2009. In our January 2009 report, we also found that VA’s estimate of the amount  it would spend for noninstitutional long-term care services in fiscal year  2009 appeared to be unreliable—in part because VA based this estimate on  a cost assumption that appeared unrealistically low, when compared to  VA’s recent experience and to economic forecasts of increases in health  care costs. VA Faces Challenges in Executing Its Budget for Health Care Services

Our prior work highlights some of the challenges VA faces in executing its  health care budget. Challenges Spending and Tracking Funds Designated for VA Health Care Initiatives

After formulating its estimates of likely spending on its health care  services, VA is also responsible for executing its budget efficiently and  effectively. However, our 2006 report on VA’s funding for specific mental  health initiatives showed that in executing its budget, VA faces challenges  spending and tracking the use of funds designated by VA for specific VA  health care initiatives, in particular funds that VA intends to use to expand  services to improve access to care for its veteran population. For example,  in 2006, we reported that in fiscal years 2005 and 2006, VA had difficulty  spending and tracking funds it had designated for new initiatives included  in VA’s mental health strategic plan, which were to expand mental health  services in order to address gaps previously identified by VA. These  initiatives—which were to be funded by $100 million in fiscal year 2005  and $200 million in fiscal year 2006—were intended to enhance VA’s larger  mental health program. As we reported in 2006, VA faced challenges in  both spending the funds and tracking their use in fiscal years 2005 and  2006:    Challenges in spending funds—We found that, by the end of fiscal years  2005 and 2006, some VA medical centers had not spent all of the funds  they had received for mental health strategic plan initiatives for those  fiscal years, according to VA medical center officials and other available  information. Challenges Providing Timely and Useful Information to Congress Regarding Budget Execution Progress and Problems

As VA executes its budget, VA also faces the challenge of providing timely  information to Congress about the agency’s progress and any problems the  agency encounters during this process. For example, in our 2006 report on  VA’s overall health care budget, we reported that although VA staff had  closely monitored its budget execution and identified problems for fiscal  years 2005 and 2006, VA did not report this information to Congress in a  timely manner. For example,  in 2006, we also found that VA’s reporting of its budget execution progress  and problems to Congress could have been more informative. Concluding Observations

Sound budget formulation, monitoring of budget execution, and the  reporting of informative and timely information to Congress for oversight  continue to be essential as VA addresses budget challenges we have  identified in recent years. While the budget process inevitably involves  imperfect information and uncertainty about future events, VA has the  opportunity to improve the credibility of its budgeting process by  continuing to address problems that we have identified in recent years. In addition, our prior report on new VA mental health  initiatives to address identified gaps in services may provide a cautionary  lesson regarding the expansion of new VA health care programs more  generally. Namely, that the availability of funding for new health care  initiatives does not in itself mean that these initiatives will be fully  implemented within a given fiscal year—in part because new initiatives  can bring challenges in hiring and training new staff—or that monitoring  and tracking of such funding will be adequate to report the extent to which  new initiatives are being implemented as planned.
Why GAO Did This Study

The Department of Veterans Affairs (VA) estimates it will provide health care to 5.8 million patients with appropriations of $41.2 billion in fiscal year 2009. The President has proposed an increase in VA's health care budget for fiscal year 2010 to expand services for veterans. VA's patient population includes aging veterans who need services such as long-term care-- including nursing home and noninstitutional care provided in veterans' homes or community-- and veterans returning from Afghanistan and Iraq. Each year, VA formulates its medical care budget, which involves developing estimates of spending for VA's health care services. VA is also responsible for budget execution-- spending appropriations and monitoring their use. GAO was asked to discuss challenges related to VA's health care services budget formulation and execution. This statement focuses on (1) challenges VA faces in formulating its health care budget, and (2) challenges VA faces in executing its health care budget. This testimony is based on three GAO reports: VA Health Care: Budget Formulation and Reporting on Budget Execution Need Improvement (GAO-06-958) (Sept. 2006); VA Heath Care: Spending for Mental Health Strategic Plan Initiatives Was Substantially Less Than Planned (GAO-07-66) (Nov. 2006); and VA Health Care: Long-Term Care Strategic Planning and Budgeting Need Improvement (GAO-09-145) (Jan. 2009).

What GAO Found

VA faces challenges formulating its health care budget each fiscal year. As noted in GAO's 2006 report on VA's overall health care budget, these include making realistic assumptions about the budgetary impact of policy changes, making accurate calculations, and obtaining sufficient data for useful budget projections. For example, GAO found that VA made unrealistic assumptions about how quickly it would realize savings from proposed changes in nursing home policy. While VA took steps to respond to GAO's 2006 recommendations about VA budgeting, recent GAO work found similar issues. In 2009, GAO reported on VA's long-term care budget--namely, on challenges in projecting the amount and cost of VA long-term care. GAO found that in its fiscal year 2009 budget justification, VA used assumptions about the cost of nursing home and noninstitutional care that appeared unrealistically low given recent VA experience and other indicators. VA said it would complete an action plan responding to GAO's 2009 recommendations by the end of March 2009. VA also faces challenges executing its health care budget. These include spending and tracking funds for specific initiatives and providing timely and useful information to Congress on budget execution progress and problems. GAO's 2006 report on VA funding for new mental health initiatives found VA had difficulty spending and tracking funds for initiatives in VA's mental health strategic plan to expand services to address service gaps. The initiatives were to enhance VA's larger mental health program and were to be funded by $100 million in fiscal year 2005. Some VA medical centers did not spend all the funds they had received for the initiatives by the end of the fiscal year, partly due to the time it took to hire staff and renovate space for mental health programs. Also, VA did not track how funding allocated for the initiatives was spent. GAO's 2006 report on VA's overall health care budget found that VA monitored its health care budget execution and identified execution problems for fiscal years 2005 and 2006, but did not report the problems to Congress in a timely way. GAO also found that VA's reporting on budget execution to Congress could have been more informative. VA has not fully implemented one of GAO's two recommendations for improving VA budget execution. Sound budget formulation, monitoring of budget execution, and the reporting of informative and timely information to Congress for oversight continue to be essential as VA addresses budget challenges GAO has identified. Budgeting involves imperfect information and uncertainty, but VA has the opportunity to improve the credibility of its budgeting by continuing to address identified problems. This is particularly true for long-term care, where for several years GAO work has highlighted concerns about workload assumptions and cost projections. By improving its budget process, VA can increase the credibility and usefulness of information it provides to Congress on its budget plans and progress in spending funds. GAO's prior work on new mental health initiatives may provide a cautionary lesson about expanding VA programs--namely, that funding availability does not always mean that new initiatives will be fully implemented in a given fiscal year or that funds will be adequately tracked.