VA’s federal role was expanded in 1924 to include a safety net function partly because of declining use by veterans with service-connected disabilities and limited public and private insurance coverage available to veterans with lower incomes. The nation’s veteran population is expected to decline significantly in the future. This year, VA expects to receive over $19 billion from several sources to operate its health care system. VA’s Ongoing Systemwide Transformation

VA has made progress in transforming its health care delivery system away from its previous focus on inpatient care to an emphasis on outpatient care. Challenges VA Faces as Its Role Evolves

With its transformation to a more competitive health care system, VA faces difficult decisions concerning its existing infrastructure, as well as other management and implementation challenges. How well VA deals with these challenges will in large part determine how successful it will be in maintaining or increasing the number of veterans served. The condition of these buildings varies greatly. Ironically, some of the hospitals, which VA has recently spent millions of dollars to construct or renovate, are underutilized, while many other hospitals need expensive renovations in order to serve veterans in a manner comparable to private sector providers. Challenges Complicating Infrastructure Decisions

VA’s decisions regarding its infrastructure are complicated by several other challenges, including ongoing transformations of VA’s affiliations with medical schools, medical research activities, and DOD medical contingency activities. VA’s inpatient population provides an important focus for educational and research activities. These include (1) designing a strategy, including marketing materials, for informing veterans of VA’s newly transformed system, (2) establishing a system for enrolling new users, and (3) creating integrated networks of VA and non-VA providers to serve veterans. These challenges include (1) deciding when, where, and what health care services to purchase; (2) developing contract specifications for health care purchases that include not only the types of care to be provided but also administrative requirements such as periodic reporting, utilization management, eligibility verification, and care coordination with VA’s direct care providers; and (3) administering contracts and monitoring contractor performance. In addition, our past work has also highlighted significant shortfalls in other areas, which VA is currently addressing. As difficult as VA’s currently envisioned transformation will be, the challenges will be even greater if, as some have suggested, VA’s patient base is expanded to further enhance its competitiveness by including veterans’ spouses and dependents and active duty military members and their spouses and dependents. Expanding VA’s competitive role may also pose significant risks to veterans and other health care providers. VA Health Care: Status of Efforts to Improve Efficiency and Access (GAO/HEHS-98-48, Feb. 6, 1998). Department of Veterans Affairs: Programmatic and Management Challenges Facing the Department (GAO/T-HEHS-97-97, Mar. 8, 1996). VA Health Care: Challenges and Options for the Future (GAO/T-HEHS-95-147, May 9, 1995).
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the future health care role of the Department of Veterans Affairs (VA), focusing on: (1) how VA's system transformation is progressing and what challenges VA faces as its role evolves; and (2) the relationship between VA's health care role and that of other public and private health benefits programs, including the effects changes in those programs could have on VA health care.

What GAO Found

GAO noted that: (1) VA has made progress in transforming its health care system to compete more effectively with health care providers in order to become veterans' provider of choice; (2) these initiatives have enabled VA to avoid over $1 billion in unnecessary expenses--savings that have provided critical financing needed to further improve the system's overall accessibility and quality of care; (3) in addition, the networks are planning to develop and implement additional efficiency initiatives over the next 5 years; (4) but VA faces several challenges before completing its transformation; (5) of these, VA's decisions concerning existing infrastructure may be the most significant and contentious; (6) VA continues to serve veterans in other locations, using aged and deteriorating buildings that will require billions of additional dollars to renovate or replace; (7) VA's decisions to consolidate inpatient medical care at fewer locations are complicated by such challenges as VA's longstanding relationships with universities' medical schools for education and research, and with the Department of Defense for contingency medical support; (8) in GAO's view, VA's future success in fulfilling its health care role, as envisioned by recent eligibility reforms, depends in large part on its ability to transform its current delivery infrastructure into an integrated system of VA and private-sector providers, which may be more attractive to new users, especially those already insured, who could provide VA with an additional source of revenue; (9) VA's strategy also suggests that it will ultimately purchase much more health care from private-sector providers than it does now and deliver care using its existing infrastructure only in those geographic areas where a private-sector alternative is not reasonably available or where VA is the acknowledged leader; (10) VA's success also will depend on its ability to overcome several management and implementation challenges; (11) if, as some have suggested, VA's competitive role is expanded to include not only the current veteran population but also veterans' spouses and dependents, the challenges facing VA will be even greater; (12) it is essential that VA address these infrastructure and other management challenges; (13) if VA is ultimately unable to overcome these challenges, it is conceivable that VA could have to limit enrollment among lower-income veterans; and (14) this could include those with the greatest need, because they have no other health care alternatives.