VA uses third-party collections to satisfy veterans’ first-party debt. The law and the relevant legislative history are not clear on whether  third-party collections can be used for this purpose. Lack of Guidance Results in Inaccurate Reporting of Costs

VA has not provided guidance to the Chief Business Office or VISNs for  accounting for the costs associated with collecting payments from  veterans and private health insurers. As a result, we found that VA’s Chief  Business Office and VISNs did not allocate certain costs associated with  activities related to collecting first- and third-party payments to the two  cost centers used in the calculation of cost to collect. In addition, we  found inconsistencies in the way VISNs allocated these costs to the field  office cost center. Satisfying First-Party Debt with Third-Party Payments Limits Overall Collections

VA’s practice of satisfying veterans’ copayment debt with collections from  third-party insurers has reduced overall collections and increased  administrative expenses. Consequently, VA’s reported cost-to-collect  measure is inaccurate. Furthermore, VA has determined that it should use  collections from private health insurers to satisfy veteran copayment debt. Recommendation for Executive Action

To accurately determine and report the cost to collect first- and third-party  payments, we recommend that the Secretary of Veterans Affairs direct the  Under Secretary for Health to provide guidance for standardizing and  consistently applying across VA the accounting of costs associated with  collecting payments from veterans and private health insurers. 1. 2. Continued Stay Reviews: Reviewing clinical information and  obtaining payment authorization from third-party insurer for  continuation of care.
Why GAO Did This Study

During a May 2003 congressional hearing, questions were raised about the accuracy of the Department of Veterans Affairs' (VA) reported costs for collecting payments from veterans and private health insurers for its Medical Care Collections Fund (MCCF). Congress also had questions about VA's practice of using third-party collections to satisfy veterans' first-party debt. GAO's objectives were to determine: (1) the accuracy of VA's reported cost for collecting first- and third-party payments from veterans and private health insurers, and (2) how VA's practice of satisfying first-party debt with third-party payments affects the collections process.

What GAO Found

VA has not provided guidance to its Chief Business Office and Veterans Integrated Service Networks (VISN) for accounting for the costs associated with collecting payments from veterans and private health insurers. As a result, GAO found that the Chief Business Office and VISNs excluded some costs associated with collecting first- and third-party payments. In addition, GAO found inconsistencies in the way VISNs allocate these costs. Consequently, VA's reported costs to collect are inaccurate. VA's practice of satisfying--or paying for--first-party, or veterans' copayment debt, with collections from third-party insurers has resulted in a reduction in overall collections and increased administrative expenses due to the reconciliation process. VA has taken the position that payments made from third-party insurers should be used to satisfy veterans' first-party debt. The law and legislative history are not clear on whether third-party collections can be used for this purpose.