VA Health Care: Estimating Resources Needed to Provide Community Care
Released: 2019-06-12T00:00:00

Letter

Background

VA’s Community Care Programs and Planned Consolidation

VA has purchased health care services from community providers since as early as 1945. In general, veterans may be eligible for community care when they are faced with long wait times or travel long distances for appointments at VA medical facilities, or when a VA medical facility is unable to provide certain specialty care services, such as cardiology or orthopedics. In general, community care services must be authorized in advance of when veterans access the care.

Currently, there are several community care programs through which VA purchases hospital care and medical services for veterans, including the Choice Program. In implementing the VA MISSION Act, VA plans to consolidate four of its community care programs for veterans under the Veterans Community Care Program, which is expected to go into effect by June 2019. (See table 1.)

VA also provides health care services to veterans and other eligible beneficiaries through community providers under additional benefit programs. These benefit programs include the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA) and the Camp Lejeune Family Member Program, among others. After implementing the VA MISSION Act, VA will continue to operate the community care programs for other eligible beneficiaries, such as CHAMPVA and others, as it has historically done. Appendix I contains more information about VA’s community care programs.

Developing a Budget Estimate for VA Health Care

The amount of funding VA receives to provide its health care services is determined during the annual appropriations process. In preparation for the process, VA develops an estimate of the resources needed to provide its health care services—known as its health care budget estimate—for two fiscal years. This budget estimate is one step in a complex, multistep budget formulation process, which culminates in an appropriation request for VA health care that updates the earlier, advance appropriation request for the upcoming fiscal year and an advance appropriation request for the next fiscal year in the President’s annual budget request to Congress.

VA’s health care budget estimate includes the total cost of providing health care services, including direct patient costs, as well as costs associated with management, administration, and maintenance of facilities. VA uses its Enrollee Health Care Projection Model (EHCPM) to estimate the majority of resources needed to meet the expected demand for health care services, and uses other methods for the remaining services. VA uses the EHCPM to make projections 3 and 4 years into the future for budget purposes based on data from the most recent fiscal year. For example, in 2017, VA used data from fiscal year 2016 to develop its health care budget estimate for the fiscal year 2019 request and advance appropriation request for fiscal year 2020. The EHCPM’s estimates are based on three basic components: (1) the projected number of veterans who will be enrolled in VA health care, (2) the projected quantity of health care services enrollees are expected to use, and (3) 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. (See fig. 1.)

VA uses other methods to estimate resources needed for the remaining portion of its budget estimate. This portion of the budget includes the state home per diem program, CHAMPVA, and other health care programs for veterans and other eligible beneficiaries, as well as health- care-related initiatives proposed by the Secretary of Veterans Affairs or the President. (See app. II for more information about the other methods VA uses in developing its health care budget estimate.)

VHA generally starts to develop a health care budget estimate approximately 10 months before the President submits the budget to Congress, which should occur no later than the first Monday in February. The budget estimate changes during the 10-month budget formulation process, in part, due to successively higher levels of review in VA and OMB before the President’s budget request is submitted to Congress. (See table 2.) The Secretary of Veterans Affairs considers the health care budget estimate developed by VHA when assessing resource requirements among competing interests within VA, and OMB considers overall resource needs and competing priorities of other agencies when deciding the level of funding requested for VA’s health care services. OMB passes back decisions, known as a “passback,” to VA and other agencies on their budget estimate, along with funding and policy proposals to be included in the President’s budget request. VA has an opportunity to appeal the passback decisions before OMB finalizes the President’s budget request. Concurrently, VA prepares a congressional budget justification that provides details supporting the policy and funding decisions in the President’s budget request.

As of fiscal year 2017, VA primarily receives funding for all health care it provides or purchases through the following appropriation accounts:

Medical Services: health care services provided to eligible veterans and other beneficiaries in VA facilities and non-VA facilities, among other things.

Medical Community Care: health care services that VA authorizes for veterans and other beneficiaries to receive from community providers.

Medical Support and Compliance: the administration of the medical, hospital, nursing home, domiciliary, supply, and research activities authorized under VA’s health care system, among other things.

Medical Facilities: the operation and maintenance of VHA’s capital infrastructure, such as the costs associated with nonrecurring maintenance, leases, utilities, facility repair, laundry services, and groundskeeping, among other things.

Separate from VA’s health care appropriation accounts, the Veterans Access, Choice, and Accountability Act of 2014 provided $10 billion in funding for the Choice Program, which was implemented in early fiscal year 2015 and authorized until funds were exhausted or through August 7, 2017, whichever occurred first. However, VA received additional authority and funding to maintain the Choice Program through June 6, 2019, when the new Veterans Community Care Program is expected to go into effect. VA expects that the new Veterans Community Care Program will be primarily funded through the Medical Community Care appropriation account.

VA Obligations for and Number of Veterans Authorized to Use Community Care Have Grown from Fiscal Year 2014 through Fiscal Year 2018

VA’s Obligations for Community Care Increased by Over 80 Percent from Fiscal Years 2014 through 2018, and VA Estimates Obligations Will Grow an Additional 20 Percent through 2021

Our analysis of VA budget justification data shows that from fiscal year 2014 through fiscal year 2018, the total amount VA actually obligated for community care increased 82 percent, from $8.2 billion to $14.9 billion. Since VA implemented the Choice Program in fiscal year 2015, the share of VA’s obligations for community care relative to VA’s total obligations for health care services increased through fiscal year 2018, from about 14 to 19 percent of VA’s total obligations for health care services. By fiscal year 2021, VA estimates that the total amount obligated for community care will increase to $17.8 billion, an increase of about 20 percent from the $14.9 billion in actual obligations for fiscal year 2018. (See fig. 2.)

As figure 2 shows, the largest increase in actual obligations for community care occurred from fiscal years 2015 through 2016, when they increased by $3.4 billion, from $8.9 billion to $12.3 billion. According to VA officials, this increase in obligations during this period reflected veterans’ expanded use of community care through the Choice Program, as more providers participated in the provider networks established by third-party administrators or entered into provider agreements with VA facilities. (Fig. 3 provides information on VA’s obligations for community care by the Choice Program and by other community care programs.) The increase in actual obligations for community care from fiscal year 2016 through fiscal year 2017 was also largely due to expanded use of community care through the Choice Program. VA officials attributed this increase to efforts to obligate as much of the available Choice Program funding as possible before the anticipated end of the Choice Program in August of 2017. From fiscal years 2017 through 2018, obligations for community care continued to increase, but the increase was partially due to greater use of other community care programs, according to VA officials.

From fiscal years 2014 through 2018, the increases in total actual obligations for VA community care were driven largely by increases in obligations for outpatient and inpatient services. Over this time period, VA’s actual obligations for outpatient services increased by $2 billion, from $2.3 billion to $4.3 billion, and actual obligations for inpatient services increased by $818 million, from $1.8 billion to $2.7 billion. Figure 4 illustrates how outpatient and inpatient services accounted for most of VA’s total community care obligations for fiscal year 2018.

VA estimated that from fiscal years 2019 through 2021, obligations for community care will increase to $17.8 billion, which VA officials said are attributable to the new eligibility criteria under the VA MISSION Act. The authority for the Choice Program ends June 6, 2019, after which the new Veterans Community Care Program—which consolidates VA’s community care programs under the VA MISSION Act—will be expected to begin. For comparison purposes, the largest increase in obligations for services provided at VA medical facilities is estimated to occur between fiscal years 2020 and 2021. VA officials said this increase is attributable, in part, to efforts related to hiring and telehealth in response to the eligibility criteria under the VA MISSION Act.

The Number of Veterans Authorized to Use Community Care Increased about 40 Percent from Fiscal Years 2014 through 2018

Our analysis of VA data on authorizations for community care shows that the number of veterans authorized to use community care increased 41 percent from fiscal years 2014 through 2018. (See fig. 5.) The approximately 1.8 million veterans authorized to use community care in 2018 represented about 30 percent of all veterans accessing VA health care services that year (approximately 6.2 million veterans). By fiscal year 2021, VA officials told us that they estimate that at least 1.8 million veterans will still use community care.

Our analysis of VA data also shows that after being authorized for care, veterans’ utilization of certain community care services increased from fiscal years 2014 through 2018. Over this time period, a number of outpatient services experienced increases of more than 200 percent in utilization, especially chiropractic visits (418 percent, from 143,000 to 743,000 visits), physical therapy visits (252 percent, from 857,000 to 3 million visits), and non-mental health related office visits (243 percent, from 651,000 to 2.2 million visits). In comparison, our analysis found relatively smaller increases in veteran utilization for certain inpatient services. For example, the utilization for surgical inpatient stays increased about 39 percent—from 253,000 to 352,000 bed days.

VA Updated Its Projection Model to Develop Most of Its Community Care Budget Estimate; Subsequent Changes Reflect More Current Information and Other Factors

VA first developed a separate budget estimate for community care to inform the President’s fiscal year 2017 budget request. Beginning with the President’s fiscal year 2018 budget request, VA updated its EHCPM to develop over 75 percent of its community care budget estimate and used other methods to develop the remainder. Subsequent changes were made to the community care budget estimates developed by the EHCPM for fiscal years 2018 and 2019 through successively higher levels of review in VA and OMB.

VA First Developed a Separate Budget Estimate for Community Care as Part of the President’s Fiscal Year 2017 Budget Request for VA

VA first developed a separate budget estimate of the resources it would need for community care—as distinct from the care provided in VA medical facilities—in order to inform the President’s fiscal year 2017 budget request for VA. Prior to this fiscal year 2017 budget request, VA developed a single budget estimate of the resources needed to provide all VA health care services, regardless of whether these services were purchased from community providers or delivered in VA medical facilities, because all these services were to be funded through the same appropriation account. According to VA officials, at the time a separate community care appropriation account and budget estimate were unnecessary, because community care accounted for a relatively small portion of VA’s overall health care budget. However, once the medical community care appropriation account was established in fiscal year 2017, VA began developing a separate budget estimate for community care, as required by law.

To develop its first estimate of the resources needed for community care for fiscal year 2017, VA made adjustments to existing estimates for total demand for care—both in VA medical facilities and community care combined—developed by the EHCPM. At the time, VA used the EHCPM to estimate the resources needed to provide VA health care services to veterans, including inpatient, outpatient, and long-term care. However, the EHCPM did not make separate estimates for community care and care provided at VA facilities; according to VA officials, VA adjusted the EHCPM estimates by assuming that for each service, the share of total utilization and costs devoted to community care would be the same as they had been in the most recently completed fiscal year. In addition, after this adjustment, VA made additional changes to the community care budget estimate, which resulted in a net increase of $2.5 billion. Nearly all of this increase reflected an anticipated impact of the expanded access under the Choice Program, according to VA officials. Overall, this approach accounted for about 75 percent of the $12.3 billion community care budget estimate that informed the President’s budget request for fiscal year 2017.

To develop the remaining portion of its community care budget estimate, VA used methods other than the EHCPM that, according to VA officials, were used historically to develop estimates of the resources needed for the state home per diem program and benefit programs. For example, VA develops budget estimates for certain services under the state home per diem program by creating projections of the amount of care to be provided using information about the size and demographic characteristics of the enrolled veteran population and projections of the unit cost of providing one day of care using recent cost experience. According to VA officials, VA was able to continue using these other methods, because the services under these programs have been provided through community providers and not VA medical facilities. While methods for each program vary, in general, these methods are based on each program’s historical utilization and costs. (See app. II for additional information on the methods VA uses to develop the budget estimates for each of these community care programs.)

Beginning with the President’s Fiscal Year 2018 Budget Request, VA Updated Its Projection Model to Develop over 75 Percent of Its Community Care Budget Estimate

Beginning with the President’s fiscal year 2018 budget request, VA updated its EHCPM directly to estimate most of the resources needed to purchase community care for veterans. Specifically, VA updated the EHCPM to estimate the amount of resources needed to purchase a set of more than 40 community care services that have accounted for over 75 percent of VA’s total community care budget estimates of $12.6 billion for fiscal year 2018 and $12.4 billion for fiscal year 2019. These health care services were grouped into seven service types and include outpatient care, inpatient care, and long-term care. (See app. III for a list of the health care services). Of these services, outpatient services typically accounted for the largest share of VA’s community care budget estimate. For the remainder of community care services—including services provided under the state home per diem program and benefit programs— VA did not use the EHCPM and instead continued to use the other methods it has historically used to develop budget estimates for these services. (See fig. 6.)

VA made several changes to the EHCPM to develop most of its community care budget estimate. Historically, the EHCPM estimated resources needed to meet the total expected demand for VA health care—a combination of care provided in VA medical facilities and through community care programs. VA updated the EHCPM to determine the proportion of demand met by community care by projecting enrolled veterans’ expected utilization of community care and the expected costs of purchasing these services. In what follows, we describe five major changes made to the EHCPM allowing VA to estimate the budgetary resources needed for community care. 1. Reliance on community care services. The EHCPM has historically accounted for the extent to which enrolled veterans would be projected to obtain health care services through the VA as opposed to other health care programs or insurers—referred to as reliance on VA health care. VA updated the EHCPM so that it can further account for the extent to which enrolled veterans would be expected to use VA’s community care programs as opposed to using care in VA’s medical facilities. Each year, the EHCPM determines reliance on VA community care based on a combination of historical experience—or the extent to which community care was used in prior fiscal years— and on the projected impact of new VA policies and operational guidance. For example, for the fiscal year 2019 budget estimates, the EHCPM projected reliance on VA care to be about 38 percent, of which 14 percent would be met through community care. Thus, the EHCPM projected reliance on VA’s community care programs to be about 5.3 percent for all care enrolled veterans are projected to use in fiscal year 2019. 2. Accounting for difference in community providers’ efficiency delivering inpatient services. VA also updated the EHCPM so that community care utilization projections account for the fact that veterans receiving inpatient care through community providers generally have relatively shorter lengths of inpatient stays compared with veterans receiving care at VA medical facilities. According to officials from VA and its actuarial consultant, community providers on average have historically performed better than VA providers on national benchmarks measuring how well providers manage the length of inpatient stays, while not affecting quality of care. To account for this difference, VA uses an adjustment factor when projecting utilization of inpatient services based on potentially avoidable days of care for community providers. 3. Comparing projected utilization with actual utilization for community care services. VA developed an adjustment factor for the EHCPM’s utilization estimates to account specifically for the differences between projected utilization and actual utilization of community care for the most recently completed fiscal year of data. According to VA officials, the difference typically reflects utilization behavior among providers or patients that are difficult to estimate based solely on historical data—such as changes in local practice patterns (e.g., providers choosing to use magnetic resonance imaging versus x-rays). To account for this behavior, VA compares projected and actual utilization and creates an “actual-to-expected” adjustment factor for each health care service to account for the difference. 4. Projecting unit costs for community care services. VA updated the EHCPM so that it could estimate what are known as the unit costs of purchasing community care services for veterans. In general, the unit cost of a community care service comprises the payment made to the provider (known as direct patient costs), as well as the indirect costs associated with administration and overhead. Indirect costs include (1) the fees paid to the contractors for administrative responsibilities for the Choice Program, (2) VA billing and processing costs and care coordination costs associated community care programs, and (3) certain costs associated with the VA Central Office that support community care (e.g., the salaries for officials from the Office of Community Care and other VA Central Office officials). 5. Accounting for community care service complexity and inflation.

VA made other changes to the EHCPM’s unit cost projections for community care. For example, VA updated the EHCPM so that it accounts for costs associated with changes in the complexity—that is, the level of resources required to deliver—of health care services VA purchases from community providers. Officials from VA and its actuarial consultant noted that more complex services require relatively more resources to deliver, such as more expensive equipment (e.g., magnetic resonance imaging); more provider time; or higher-cost providers, such as surgeons. Officials anticipate that most services that VA purchases in the community will increase in complexity, leading to higher projected unit-costs for community care. VA also updated the EHCPM so that its unit cost estimates for community care account for inflation in the cost of labor and equipment.

VA’s Community Care Budget Estimates Projected by the Model for Fiscal Years 2018 and 2019 Were Subsequently Changed to Reflect More Current Information, Among Other Factors

VA’s community care budget estimates are reviewed at successively higher levels at VA and OMB to inform the President’s budget request for VA. VA identified several changes made during the review process to its estimates projected by the EHCPM for fiscal years 2018 and 2019; these changes were due to the availability of more current information related to utilization and costs, among other factors.

For fiscal year 2018, changes resulted in a budget request for VA community care in the President’s budget request that was approximately $1 billion lower than VA’s original EHCPM budget estimate of $10.7 billion. These changes included the following:

A $996 million decrease reflecting the availability of more current information showing that an anticipated increase in utilization due to the Choice Program was too high.

A $600 million decrease reflecting the availability of more current information showing that overhead costs initially allocated to community care in the data used in the EHCPM were too high.

A $180 million decrease accounting for VA’s implementation of a new law that reduces VHA’s use of community care for examinations determining veterans’ disability ratings.

A $500 million increase accounting for a court ruling that affected veteran eligibility for reimbursement of emergency community care, which was expected to increase utilization.

A $250 million increase reflecting the availability of more current information that indicated administrative costs for the Choice Program in the data used in the EHCPM were too low.

For fiscal year 2019, changes resulted in a budget request for VA community care in the President’s budget request that was nearly $1 billion higher than VA’s original EHCPM budget estimate of $8.6 billion. These changes included the following:

A $1.7 billion increase reflecting more current information indicating that community care administrative costs and the utilization levels in the data used in the EHCPM were too low.

A $1 billion increase accounting for a delay in the timing of the implementation of community care network contracts. According to VA officials, this resulted in the continued use of reimbursement rates in community care that were higher than Medicare reimbursement rates.

A $1.8 billion decrease that reflected VA’s implementation of a new policy that changed the timing of community care obligations from when a veteran is authorized to use community care to the when a claim for actual services is paid.

VA’s Actual Obligations for Community Care in Fiscal Years 2017 and 2018 Were Higher than Estimated and Included Additional Funding Received for the Choice Program

VA’s Actual Obligations for Community Care in Fiscal Years 2017 and 2018 Were $1.2 Billion and $2.2 Billion Higher than Estimated, Respectively

Our analysis of data included in VA’s budget justifications shows that in fiscal years 2017 and 2018, VA obligated $1.2 billion and $2.2 billion more for community care than originally estimated at the time of the President’s budget requests for those years. In both years, VA’s actual obligations for both the Choice Program and other community care programs were higher than estimated. (See table 3.) According to VA officials, the higher-than-estimated obligations for the Choice Program for fiscal year 2017 were driven, in part, due to changes in Choice Program policies and a large increase in the cost per authorization for care. In the case of other community care programs, VA officials told us that the higher-than-estimated obligations for both fiscal years 2017 and 2018 were driven, in part, by local practice patterns (e.g., providers choosing to use magnetic resonance imaging versus x-rays) and the capacity of VA medical facilities to provide services. As discussed later in this report, VA also received and reallocated additional funding to purchase community care in fiscal years 2017 and 2018, which contributed to actual obligations being higher-than-estimated obligations.

Our analysis of VA’s obligations by service type shows that in fiscal year 2017, VA’s higher-than-estimated obligations for community care were primarily for outpatient and inpatient services, as shown in table 4. In fiscal year 2018, the higher-than-estimated obligations for community care were primarily for outpatient services, while there was an overall decrease in obligations for inpatient services. (See table 5.) Additionally, for some service types, VA’s actual obligations were lower than estimated in fiscal years 2017 and 2018.

VA’s Higher-Than- Estimated Obligations for Community Care Included Additional Funding VA Received for the Choice Program Outside of the Annual Appropriations Process

To obligate $13.6 billion for community care in fiscal year 2017 and $14.9 billion in fiscal year 2018—amounts that were $1.2 billion and $2.2 billion higher, respectively, than what VA originally estimated for its budget request, and what VA received in its annual appropriation—VA requested and received additional Choice Program funding outside of the annual appropriations process. VA also reallocated funding from other sources, including unobligated funding from a prior fiscal year and collections, to pay for the other community care programs.

Specifically, the $13.6 billion and $14.9 billion VA obligated for community care in fiscal years 2017 and 2018, respectively, came from the following sources:

Choice Program. For both fiscal years, VA obligated from its remaining funding and prior-year recoveries from the previous fiscal years, and requested and received additional funding three times outside of the annual appropriations process. (Table 6 below summarizes the time frames during which VA requested and received additional appropriations for the Choice Program outside of the annual appropriations process for fiscal years 2017 and 2018.)

Other community care programs. For both fiscal years, VA obligated from its annual appropriation and transferred a portion of its overall collections from its Medical Care Collections Fund to the medical community care account. In addition, for fiscal year 2018, VA used unobligated funding and prior-year recoveries from fiscal year 2017.

Agency Comments

We provided a draft of this product to VA and OMB for comment. VA provided technical comments, which we incorporated as appropriate. OMB had no comments.

We are sending copies of this report to the Secretary of Veterans Affairs, the Director of the Office of Management and Budget, appropriate congressional committees, and other interested parties. This report is also available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-7114 or silass@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.

Appendix I: The Department of Veterans Affairs’ Community Care Programs for Veterans and Other Eligible Beneficiaries

While the majority of veterans utilizing Department of Veterans Affairs’ (VA) health care services receive care in VA-operated medical facilities, veterans may also obtain services from non-VA providers in the community—known as community care—through one of several community care programs aimed at helping to ensure that veterans receive timely and accessible care. In implementing the VA MISSION Act, VA plans to consolidate four of its community care programs for veterans—dialysis contracts, individually authorized care, the Patient- Centered Community Care Program, and the Veterans Choice Program— under the Veterans Community Care Program, which is expected to go into effect by June 2019. In addition, VA has several other community care programs that serve veterans and programs that provide health care services to other eligible beneficiaries, including a veteran’s spouse or dependent child.

Community Care Programs for Veterans that VA Plans to Consolidate

Dialysis contracts. When dialysis services—a life-saving medical procedure for patients with permanent kidney failure—are not feasibly available at VA medical facilities, veterans may be referred to one of VA’s contracted dialysis providers, and veterans may receive dialysis at local clinics on an outpatient basis, or at home (if the contractors offer home- based dialysis services).

Individually authorized care. When a veteran cannot access a particular specialty care service from a VA medical facility—either because the service is not offered, the veteran would have to wait too long for an appointment, or the veteran would have to travel a long distance to a VA medical facility—VA medical facility staff may request an individual authorization for the veteran to obtain the service from a community provider who is willing to accept VA payment.

Patient-Centered Community Care. VA contracted with two third-party administrators to develop regional networks of community providers of specialty care, mental health care, limited emergency care, and maternity and limited newborn care when such care is not feasibly available from a VA medical facility. To be eligible to obtain care from Patient-Centered Community Care providers, veterans must meet the same criteria that are required for individually authorized care.

Veterans Choice Program. VA modified its Patient-Centered Community Care contracts with the two third-party administrators to implement the Veterans Choice Program. This program allows eligible veterans to obtain health care services from community providers if the veteran meets certain criteria, including when a veteran cannot receive care within 30 days from the veteran’s or physician’s preferred date, or face an unusual or excessive burden in traveling to a VA medical center.

Other Community Care Programs for Veterans

Agreements with federal partners and academic affiliates. When services are not available at VA medical facilities, VA may obtain specialty, inpatient, and outpatient health care services for veterans through different types of sharing agreements—those with other federal facilities (such as those operated by the Department of Defense and the Indian Health Service), those with Tribal Health Programs, and those with university-affiliated hospitals, medical schools, and practice groups (known as academic affiliates).

Emergency care. When emergency community care is not preauthorized, VA may reimburse community providers for emergency care for eligible veterans for a condition related to a service-connected disability, and for eligible veterans for a condition not related to a service- connected disability.

Foreign Medical Program. The Foreign Medical Program is VA’s health care benefits program for eligible veterans who are residing or traveling abroad and have a service-connected disability.

State Home Per Diem Program. Under the State Home Per Diem Program, states provide care for eligible veterans in three different types of programs: nursing home, domiciliary, and adult day health care.

Community Care Programs for Other Beneficiaries

Camp Lejeune Family Member Program. The Camp Lejeune Family Member Program is for family members of veterans that lived or served at U.S. Marine Corps Base Camp Lejeune, North Carolina, for no fewer than 30 days between January 1, 1957, and December 31, 1987, and were potentially exposed to drinking water contaminated with industrial solvents, benzene, and other chemicals. The program provides health care to veterans who served on active duty at Camp Lejeune and to reimburse eligible Camp Lejeune family members for health care costs related to one or more of 15 specified illnesses or medical conditions specified in law.

Children of Women Vietnam Veterans Health Care Benefits Program. This program provides health care benefits to female Vietnam veterans’ birth children who the Veterans Benefits Administration has determined to have a covered birth defect. This program is not a comprehensive health care plan and only covers those services necessary for the treatment of a covered birth defect and associated medical conditions.

Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). CHAMPVA is a comprehensive health care program that provides health care coverage for spouses, children and primary caregivers of veterans who are permanently and totally disabled from a service-connected disability. CHAMPVA functions similarly to traditional health insurance, with most care in the program delivered using non-VA community providers.

Spina Bifida Health Care Benefits Program. This program provides health care benefits to certain Korea and Vietnam veterans’ birth children who have been diagnosed with spina bifida.

Appendix II: Budget Formulation Process for the State Home Per Diem Program and Non- Veteran Community Care Programs

The Department of Veterans Affairs (VA) and its actuarial consultant use the Enrollee Health Care Projection Model to develop most of the department’s estimate of the resources needed to meet the expected demand for VA’s health care services. VA uses other methods to estimate the remaining resources needed. This remaining portion includes community care programs for veterans and other eligible beneficiaries, including the State Home Per Diem Program and the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA).

State Home Per Diem Program. This program pays per diem for state- provided care for eligible veterans in three different types of programs: domiciliary, nursing home, and adult day health care. For state home domiciliary and nursing care, categorized as institutional care, VA creates budget projections based on historical funding data. For state home adult day health care, categorized as non-institutional care, VA’s budget estimates are based on projections of the amount of care provided— which is known as workload—and the unit cost of providing a day of this care. VA projects the demand for non-institutional care services using information about the size and demographic characteristics of the enrolled veteran population. VA projects unit cost for non-institutional care services by calculating unit-cost increases observed from recent experience and then using this information to project future unit costs. VA multiplies the workload estimates, unit-cost estimates, and the number of days in the fiscal year to develop an estimate of the amount of resources needed for non-institutional care.

CHAMPVA. CHAMPVA provides health care coverage for spouses and children of veterans who are permanently and totally disabled from a service-connected disability. CHAMPVA functions similarly to traditional health insurance—most care within CHAMPVA is delivered using non-VA community providers. Therefore, developing estimates of the resources needed for CHAMPVA requires factoring in utilization patterns and cost inflation that are generally outside of VA’s control. Budget estimates for CHAMPVA are developed using a formula that computes the predicted number of users and costs per-member per-year. VA works with its actuarial consultant to generate projections of CHAMPVA users that incorporate changes related to the population of disabled veterans and projections of expected increases and decreases in the CHAMPVA- eligible population. In addition, the actuarial consultant projects the costs per-member per-year, which is calculated by dividing the most current fiscal year data on total CHAMPVA expenditures by the number of actual users. Trends are then incorporated to predict the future costs per- member per-year, which is multiplied by projections of the number of CHAMPVA users to develop CHAMPVA budget estimates.

Appendix III: Health Care Services included in the Enrollee Health Care Projection Model for Fiscal Year 2019

Using its Enrollee Health Care Projection Model (EHCPM), the Department of Veterans Affairs (VA) developed estimates for 79 health care services—available in VA medical facilities or through community care—for the fiscal year 2019 President’s budget request. As shown in table 7, VA developed separate estimates for the 43 services that were available through community care. Some of these 43 services were only available through community care. These services were primarily long- term care, including nursing home care provided at community nursing homes, home hospice care, home respite care, homemaker or home health aid programs, and purchased skilled nursing care.

Appendix IV: Community Care Data Sources in the Department of Veterans Affairs’ Enrollee Health Care Projection Model

The Department of Veterans Affairs (VA) and its actuarial consultant use the Enrollee Health Care Projection Model (EHCPM) to develop most of the department’s budget estimate to meet the expected demand for VA’s health care services. This estimate includes the services that VA purchases from non-VA community providers through its various community care programs, including the Veterans Choice Program (Choice Program).

Based on our interviews with various VA officials, VA’s Office of Enrollment and Forecasting provided utilization and cost data from fiscal year 2016 community care claims from four different sources for use in the 2017 EHCPM, which was used to project the fiscal year 2019 budget estimate. (See fig. 7.) Specifically, the Office of Enrollment and Forecasting—which is responsible for compiling the claims data used in the EHCPM—obtained community care claims data, including Choice Program claims, from VA’s Fee Basis Claims System. In addition, the Office of Enrollment and Forecasting worked with VA’s Allocation Resource Center to gather additional utilization and cost data from Choice Program claims processed outside the Fee Basis Claims System, and other data needed for the 2017 EHCPM. Specifically, the Allocation Resource Center compiled claims data for those Choice Program claims paid through expedited payments. The Allocation Resource Center also pulled data on dual eligible veterans, from the Department of Defense’s Medical Data Repository, and indirect costs associated community care claims (for example, costs associated with care coordination or claims processing) from VA’s Managerial Cost Accounting system.

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Rashmi Agarwal (Assistant Director), Aaron Holling (Analyst-in-Charge), Chad Clady, and Kate Tussey made key contributions to this report. Also contributing were Krister Friday, Jacquelyn Hamilton, and Muriel Brown.

Related GAO Products

Veterans Choice Program: Further Improvements Needed to Help Ensure Timely Payments to Community Providers. GAO-18-671. Washington, D.C.: September 28, 2018.

Veterans Choice Program: Improvements Needed to Address Access- Related Challenges as VA Plans Consolidation of its Community Care Programs. GAO-18-281. Washington, D.C.: June 4, 2018.

VA’s Health Care Budget: In Response to a Projected Funding Gap in Fiscal Year 2015, VA Has Made Efforts to Better Manage Future Budgets. GAO-16-584. Washington, D.C.: June 3, 2016.

Veterans’ Health Care: Proper Plan Needed to Modernize System for Paying Community Providers. GAO-16-353. Washington, D.C.: May 11, 2016.

Veterans’ Health Care Budget: Improvements Made, but Additional Actions Needed to Address Problems Related to Estimates Supporting President’s Request. GAO-13-715. Washington, D.C.: August 8, 2013.

Veterans’ Health Care: Improvements Needed to Ensure That Budget Estimates Are Reliable and That Spending for Facility Maintenance Is Consistent with Priorities. GAO-13-220. Washington, D.C.: February 22, 2013.

Veterans’ Health Care Budget: Better Labeling of Services and More Detailed Information Could Improve the Congressional Budget Justification. GAO-12-908. Washington, D.C.: September 18, 2012.

Veterans’ Health Care Budget: Transparency and Reliability of Some Estimates Supporting President’s Request Could Be Improved. GAO-12-689. Washington, D.C.: June 11, 2012.

VA Health Care: Estimates of Available Budget Resources Compared with Actual Amounts. GAO-12-383R. Washington, D.C.: March 30, 2012.

VA Health Care: Methodology for Estimating and Process for Tracking Savings Need Improvement. GAO-12-305. Washington, D.C.: February 27, 2012.

Veterans’ Health Care Budget Estimate: Changes Were Made in Developing the President’s Budget Request for Fiscal Years 2012 and 2013. GAO-11-622. Washington, D.C.: June 14, 2011.

Veterans’ Health Care: VA Uses a Projection Model to Develop Most of Its Health Care Budget Estimate to Inform the President’s Budget Request. GAO-11-205. Washington, D.C.: January 31, 2011.

VA Health Care: Challenges in Budget Formulation and Issues Surrounding the Proposal for Advance Appropriations. GAO-09-664T. Washington, D.C.: April 29, 2009.

VA Health Care: Challenges in Budget Formulation and Execution. GAO-09-459T. Washington, D.C.: March 12, 2009.

VA Health Care: Long-Term Care Strategic Planning and Budgeting Need Improvement. GAO-09-145. Washington, D.C.: January 23, 2009.

VA Health Care: Budget Formulation and Reporting on Budget Execution Need Improvement. GAO-06-958. Washington, D.C.: September 20, 2006.