To evaluate VA’s ability to achieve its revenue targets, we reviewed (1) VA’s fiscal year 1998 budget submission, the MCCR program’s 1996 business plan, and other documents detailing VA’s health care restructuring plans, such as VA’s Prescription for Change, new budget allocation system, and its use of performance measures; (2) interviewed MCCR and health care staff from VA facilities and VA’s headquarters; and (3) interviewed staff and reviewed documents from VA’s General Counsel and Regional Counsels. In addition to requiring that care be medically necessary and provided in an appropriate setting, policies may require the policyholder to pay a specified amount (such as $500), referred to as a deductible or out-of-pocket payment, for covered health care services before the insurance begins paying; require policyholders to pay a certain percentage of covered charges, known as a copayment or coinsurance; specify what services are covered and any limits on the days of coverage or frequency of services; require, as a condition for payment, that providers or policyholders obtain prior approval from the insurer before admission to a hospital; preclude or reduce payment (other than for emergency care) to providers that are not members of HMOs, preferred provider organizations (PPO), or point-of-service (POS) plans; and “wrap around” other insurance coverage and pay only that portion of approved charges not paid by the primary insurance, such as Medicare. Recoveries declined to $495.2 million in fiscal year 1996 and to $213.4 million during the first two quarters of fiscal year 1997. 1.) On the other hand, veterans in the discretionary care category have some financial incentive to help VA obtain information about their insurance coverage because a portion of insurers’ payments is used to reduce their copayments. Many Factors Could Lead to Decrease in Future Recoveries

Many factors help explain the decline in VA recoveries from private health insurance since fiscal year 1995 and make it likely that, without significant changes in the recovery program and/or an increase in the number of VA users with fee-for-service insurance coverage, declines will continue over the next 5 years. These factors include the declining and aging of the veteran population, increased enrollment in HMOs and other managed care plans, changes in how insurers process VA claims, shifts in care from inpatient to outpatient settings, and difficulty identifying care provided to veterans with service-connected disabilities for treatment of nonservice-connected conditions. This means that VA would have to increase the percentage of veterans using VA services just to maintain current workload. Continued Increase in Managed Care Plan Enrollment Could Reduce Future Recoveries

Continued increases in enrollment in HMOs, PPOs, and POS plans are likely to reduce future VA recoveries from private health insurance. Changes in How Insurers Process VA Claims Could Lead to Refunds and Reduced Recoveries

Changes in how insurers process VA claims could result in refunds of over $600 million in overpayments and reduce VA’s future recoveries by over 20 percent. VA Initiatives Seek to Reverse Decline and Increase Recoveries

VA officials identified a number of legislative and management initiatives intended to address the previously mentioned factors and help it achieve its recovery goals. The second problem VA sought to address through legislation was the lapsing of its authority to recover its costs for providing health care services to veterans with service-connected disabilities for conditions unrelated to their service-connected disabilities. VA has not estimated the potential increased recoveries from the initiative, but notes that the initiative is important to prevent further decreases in recoveries from Medicare supplemental policies. Conclusions

Although VA currently recovers less than a third of the amounts it bills to private health insurers, opportunities to recover more of its billed charges appear to be limited. VA’s ability to achieve its goals is uncertain considering the many factors likely to decrease future recoveries. Matters for Consideration by the Congress

The statutes governing VA recoveries from private health insurance and veteran copayments do not clearly specify the relationship between the two provisions. Develop procedures to ensure that authority to retain health insurance recoveries would not detract from services to veterans who lack private health insurance.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Veterans Affairs' (VA) efforts to recover from private health insurers the costs it incurs to provide health care services to veterans with no service-connected disabilities, focusing on: (1) those factors that limit VA's ability to recover more of its billed charges; (2) VA's ability to achieve its revenue targets by identifying factors that could decrease future recoveries and assessing the potential for VA initiatives to increase medical care cost recoveries; and (3) the way VA applies insurance payments to veterans' copayment liability for veterans in the discretionary care category.

What GAO Found

GAO noted that: (1) attaining VA's goal to increase recoveries from private health insurance from $495 million in fiscal year (FY) 1996 to $826 million in FY 2002 will be difficult; (2) for GAO's sample, most of the charges VA was unable to recover for bills submitted to private health insurers were appropriately denied or reduced by the insurers; (3) recoveries from private health insurance dropped for the first time in FY 1996 and have continued to drop during FY 1997; (4) several factors help explain the decreases and suggest that further decreases are likely, including: (a) the declining and aging of the veteran population, meaning that VA must serve a greater proportion of veterans to maintain its current workload and that more VA users will have secondary, rather than primary, health insurance coverage in the future; (b) veterans' increased enrollment in health maintenance organizations (HMOs) and other managed care plans, and decreased enrollment in fee-for-service plans, which reduces the number of veterans covered by insurance from which VA can reasonably expect to recover; (c) changes in how insurers process VA claims that could result in refunds to insurers of overpayments that VA estimates exceeded $600 million and could reduce future recoveries by over 20 percent; and (d) shifts in care from inpatient to outpatient settings that, while both needed and appropriate, could reduce private insurance recoveries and increase recovery costs; (5) VA has a number of initiatives to address some of these problems and to help it attain its recovery goals; (6) these include legislation to: (a) allow VA to retain recoveries from private health insurance and veteran copayments as an incentive to improve the identification and pursuit of recoveries; and (b) extend lapsing authority to recover the costs of services provided to veterans for conditions unrelated to their service-connected disabilities; (7) VA's initiatives would address some, but not all, of the factors affecting future recoveries; (8) however, considerable uncertainty remains about VA's ability to achieve its revenue goal; (9) VA was unable to provide an analytical basis for its recovery projections; (10) projected increases in VA's future recoveries were not supported by or attributed to improvements related to its planned initiatives; and (11) VA's General Counsel interprets the relationship between recoveries from private health insurance and veterans' copayments as requiring that a portion of insurance recoveries to be used to reduce veterans' copayment obligations.