VA’s Office of Budget is responsible for overseeing the budget formulation  process for the department as a whole on behalf of the Secretary and  submitting VA’s budget request for OMB’s review and consideration in  developing the President’s Budget. VA uses other methods to develop nearly all of the remaining  portions of its health care budget estimate for long-term care and other  services as well as proposed initiatives. VA Uses a Projection Model to Develop Most of Its Health Care Budget Estimate to Meet Expected Demand

VA uses what is known as the Enrollee Health Care Projection Model  (EHCPM)—a model developed in partnership with VA’s actuarial  consultant—to estimate the amount of resources VA will need to meet  the expected demand for most of the health care services VA provides. These services accounted for 83 percent of VA’s health care budget  estimate for fiscal 2011. VA used the EHCPM to estimate the resources  needed for fiscal year 2011 for 61 health care services, which VA grouped  into seven service types (see app. The EHCPM’s estimates are  based on three basic components: the projected number of veterans who  will be enrolled in VA health care, the projected utilization of VA’s health  care services—that is, the quantity of health care services enrollees are  expected to use—and the projected unit cost of providing these services. Each component is subject to a number of complex  adjustments to account for the characteristics of VA health care and the  veterans who access VA’s health care services. For example, in 2009, VA used data from  fiscal year 2008 to develop its health care budget estimate for the fiscal  year 2011 request, including the advance appropriations request for fiscal  year 2012. To project the utilization or the quantity of VA’s health care services  veterans will use and the unit costs of VA’s health care services, VA groups  these services into two major categories in the EHCPM: (1) those services  that VA provides in a manner comparable to other providers, whose  services are paid for by Medicare and private health insurers; and (2) those  services that are unique to or are provided in a different manner by VA.  For example, VA provides services, such as emergency room visits and  physician office visits, in a manner comparable to other providers. For example, these adjustments take into account enrollees’ age, gender,  priority level, and geographic location. VA Uses Other Methods to Develop Portions of Its Health Care Budget Estimate Related to Long- term Care and Other Services

VA uses methods other than the EHCPM to develop estimates of the  amount of resources needed for long-term care and other services. VHA’s  Office of Finance coordinates the development of the estimates for these  services, which accounted for 16 percent of VA’s health care budget  estimate for fiscal year 2011. For fiscal year 2011, health-care-related initiatives made up   1 percent of VA’s health care budget estimate. VA’s Health Care Budget Estimate Informs the Decision- making Process for the President’s Budget Request

VA’s health care budget estimate prepared by VHA is reviewed at  successively higher levels. Within the agency, the Secretary of VA reviews  the health care budget estimate in the context of departmentwide  priorities, including trade-offs between health care and other services. OMB considers VA’s budget submission in light of presidential priorities  and needs governmentwide. The budget estimate for health care services is presented in different ways  for review and decision making. Congress funds VA health care services in  three appropriations accounts. VA may appeal the decision before OMB finalizes the President’s  budget request. VA and  OMB provided technical comments, which we incorporated as  appropriate. We are sending copies of this report to the Secretary of Veterans Affairs  and the Director of the Office of Management and Budget, and appropriate  congressional committees.
Why GAO Did This Study

Funding for the Department of Veterans Affairs' (VA) health care is determined by Congress in the annual appropriations process. Prior to this process, VA develops a budget estimate of the resources needed to provide health care services to eligible veterans. The Veterans Health Care Budget Reform and Transparency Act of 2009 requires GAO to assess whether the funding requested for VA health care in the President's budget requests submitted to Congress in 2011, 2012, and 2013 is consistent with VA's estimates of the resources needed to provide health care services. In anticipation of these future studies, GAO was asked to obtain information on how VA prepares its health care budget estimate. In this report, GAO describes (1) how VA develops its health care budget estimate, and (2) how VA's health care budget estimate is used in the President's budget request to Congress. To conduct this work, GAO reviewed VA documents on the methods, data, and assumptions used to develop VA's health care budget estimate that informed the President's budget request for fiscal year 2011 and request for advance appropriations for fiscal year 2012. GAO also interviewed VA officials responsible for developing this estimate and staff from the Office of Management and Budget (OMB), which is responsible for overseeing the development and implementation of the federal budget.

What GAO Found

VA uses what is known as the Enrollee Health Care Projection Model (EHCPM) to develop most of its health care budget estimate and uses other methods for the remainder. Specifically, VA used the EHCPM to estimate the resources needed to meet expected demand for 61 health care services that accounted for 83 percent of VA's health care budget estimate for fiscal year 2011 and similarly for fiscal year 2012. The EHCPM's estimates for these services are based on three basic components: projected enrollment in VA health care, projected use of VA's health care services, and projected costs of providing these services. To make these projections, the EHCPM uses data on the use and cost of these services that reflect data from VA, Medicare, and private health insurers. The EHCPM makes a number of complex adjustments to the data to account for characteristics of VA health care and the veterans who access VA's health care services. For example, these adjustments take into account veterans' age, gender, geographic location, and reliance on VA health care services compared with other sources, such as health care services paid for by Medicare or private health insurers. VA uses other methods to develop nearly all of the remaining portion of its budget estimate for long-term care and other services, as well as initiatives proposed by the Secretary of VA or the President. Long-term care and other services accounted for 16 percent and initiatives accounted for 1 percent of VA's health care budget estimate for fiscal year 2011 and similarly for fiscal year 2012. VA's health care budget estimate is reviewed at successively higher levels. Within the agency, the Secretary of VA reviews the health care budget estimate in the context of departmentwide priorities, including trade-offs between health care and other services. The budget estimate is presented in different ways, including the appropriations accounts structure used by Congress for decision making. OMB considers VA's budget submission in light of presidential priorities and needs governmentwide. VA can appeal decisions before OMB finalizes the President's budget request to Congress. VA and OMB provided technical comments, which GAO incorporated as appropriate.