Veterans’ Medical Care: FY2013 Appropriations
Released: 2013-06-13T00:00:00

Introduction

The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans who meet certain eligibility rules; these benefits include medical care, disability compensation and pensions, education, vocational rehabilitation and employment services, assistance to homeless veterans, home loan guarantees, administration of life insurance as well as traumatic injury protection insurance for servicemembers, and death benefits that cover burial expenses.

The VA carries out its programs nationwide through three administrations and the Board of Veterans Appeals (BVA). The Veterans Benefits Administration (VBA) is responsible for, among other things, providing compensation, pensions, and education assistance. The National Cemetery Administration (NCA) is responsible for maintaining national veterans' cemeteries; providing grants to states for establishing, expanding, or improving state veterans' cemeteries; and providing headstones and markers for the graves of eligible persons, among other things. The Veterans Health Administration (VHA) is responsible for health care services and medical and prosthetic research programs. The VHA is primarily a direct service provider of primary care, specialized care, and related medical and social support services to veterans through the nation's largest integrated health care system. The VHA is also a provider of health care education and training for physician residents and other health care trainees.

In general, eligibility for VA health care is based on previous military service, presence of service-connected disabilities, and/or other factors. Veterans generally must enroll in the VA health care system to receive medical care. Once enrolled, veterans are assigned to one of eight categories (see Table A -1 ). It should be noted that in any given year, not all enrolled veterans obtain their health care services from VA. While some veterans may rely solely on VA for their care, others may receive the majority of their health care services from other sources, such as Medicare, Medicaid, private health insurance, and the military health system (TRICARE). VA-enrolled veterans do not pay premiums or enrollment fees to receive care from the VA; however, they may incur out-of-pocket costs for VA care related to conditions that are not service-connected.

This report focuses on appropriations for VHA. It begins with a brief overview of the VA's budget as a whole for FY2012 and the President's request for FY2013. It then presents a brief overview of VHA's budget formulation, a description of the accounts that fund the VHA, and a summary of the FY2012 VHA budget. The report ends with a section discussing recent legislative developments pertaining to the FY2013 VHA budget.

Advance Appropriations16

In order to understand annual appropriations for the Veterans Health Administration (VHA), it is essential to understand the role of advance appropriations. In 2009, Congress enacted the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ) authorizing advance appropriations for three of the four accounts that comprise VHA: medical services, medical support and compliance, and medical facilities. The fourth account, the medical and prosthetic research account, is not funded with an advance appropriation. P.L. 111-81 also required the Department of Veterans Affairs to submit a request for advance appropriations for VHA with its budget request each year. Congress first provided advance appropriations for the three VHA accounts in the FY2010 appropriations cycle. The Consolidated Appropriations Act, 2010 ( P.L. 111-117 ) provided advance appropriations for FY2011; the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ) provided advance appropriations for FY2012; the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), enacted into law on December 23, 2011, provided advance appropriations for FY2013; and the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), enacted into law on March 26, 2013, provided advance appropriations for FY2014.

Under current budget scoring guidelines, new budget authority for an advance appropriation is scored in the fiscal year in which the funds become available for obligation. Therefore, throughout the funding tables of this report, advance appropriations numbers are shown under the label "memorandum" and in the corresponding fiscal year column. For example, advance appropriations for FY2013 authorized by the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), are shown under a separate memorandum and in the FY2013 column. However, it should be noted that budget authority for FY2013 refers to the budget authority authorized in P.L. 112-74 and augmented by supplemental funding provided by the Disaster Relief Appropriations Act, 2013 ( P.L. 113-2 ) and by additional funding provided by Division E of the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ) that included funding for the medical and prosthetic research account (the account that is not funded as advance appropriations). Funding shown for FY2013 does not include advance appropriations provided in FY2013 by P.L. 113-6 for use in FY2014.

Department of Veterans Affairs Budget

The VA budget includes both mandatory and discretionary funding. Mandatory accounts fund disability compensation, pensions, vocational rehabilitation and employment, education, life insurance, housing, and burial benefits (such as graveliners, outer burial receptacles, and headstones), among other benefits and services. Discretionary accounts fund medical care, medical research, construction programs, information technology, and general operating expenses, among other things.

Figure 1 provides a breakdown of FY2012 budget allocations for both mandatory and discretionary programs. In FY2012, the total VA budget authority was approximately $122.2 billion; discretionary budget authority accounted for about 48% ($58.5 billion) of the total, with about 88% ($51.2 billion) of this discretionary funding going toward supporting VA health care programs, including medical and prosthetic research. The VA's mandatory budget authority accounted for about 52% ($63.8 billion) of the total VA budget authority, with about 80% ($51.2 billion) of this mandatory funding going toward disability compensation and pension programs.

Figure 2 provides a breakdown of the FY2013 President's budget request for both mandatory and discretionary programs (also see Table 3 ). For FY2013, the Administration requested approximately $135.6 billion. This includes approximately $61 billion in discretionary funding and nearly $74.6 billion in mandatory funding.

Overview of Veterans Health Administration's Budget Formulation20

Similar to most federal agencies, the VA begins formulating its budget request approximately 10 months before the President submits the budget to Congress, generally in early February. VHA's budget request to Congress begins with the formulations of the budget based on the Enrollee Health Care Projection Model (EHCPM). The model estimates the amount of budgetary resources VHA will need to meet the expected demand for most of the health care services it provides.

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 adjustments to account for the characteristics of VA health care and the veterans who access VA's health care services. The EHCPM makes projections three or four years into the future. Each year, VHA updates the EHCPM estimates to "incorporate the most recent data on health care utilization rates, actual program experience, and other factors, such as economic trends in unemployment and inflation." For instance, in 2011, VHA used data from FY2010 to develop its health care budget estimate for the FY2013 request, including the advance appropriations request for FY2014.

Funding for the VHA

As noted previously, VHA is funded through four appropriations accounts. These are supplemented by other sources of revenue. Although the appropriations account structure has been subject to change from year to year, the appropriation accounts used to support the VHA traditionally include medical care, medical and prosthetic research, and medical administration. Congress also appropriates funds for construction of medical facilities through a larger appropriations account for construction for all VA facilities. In FY2004, "to provide better oversight and [to] receive a more accurate accounting of funds," Congress changed the VHA's appropriations structure. Specifically, the Department of Veterans Affairs and Housing and Urban Development and Independent Agencies Appropriations Act, 2004 ( P.L. 108-199 , H.Rept. 108-401 ), funded VHA through four accounts: (1) medical services, (2) medical administration (currently known as medical support and compliance), (3) medical facilities, and (4) medical and prosthetic research. Brief descriptions of these accounts are provided below.

Medical Services

The medical services account covers expenses for furnishing inpatient and outpatient care and treatment of veterans and certain dependents, including care and treatment in non-VA facilities; outpatient care on a fee basis; medical supplies and equipment; salaries and expenses of employees hired under Title 38, United States Code (U.S.C.); cost of hospital food service operations; aid to state veterans' homes; and assistance and support services for family caregivers of veterans authorized by the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ). For FY2013, the President's budget request proposed the transfer of funding for biomedical engineering services from the medical facilities account to this account. The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ) approved this transfer.

Medical Support and Compliance (Previously Medical Administration)

This account provides for expenses related to the management, security, and administration of the VA health care system through the operation of VA medical centers, and other medical facilities such as community-based outpatient clinics (CBOCs) and Vet Centers. It also funds 21 Veterans Integrated Service Network (VISN) offices and facility director offices; chief of staff operations; public health and environmental hazard programs; quality and performance management programs; medical inspection; human research oversight; training programs and continuing education; security; volunteer operations; and human resources management.

Medical Facilities

The medical facilities account funds expenses pertaining to the operations and maintenance of the VHA's capital infrastructure. These expenses include utilities and administrative expenses related to planning, designing, and executing construction or renovation projects at VHA facilities. It also funds leases, laundry services, grounds maintenance, trash removal, housekeeping, fire protection, pest management, and property disposition and acquisition.

Medical and Prosthetic Research

As required by law, the medical and prosthetic research program (medical research) focuses on research into the special health care needs of veterans. This account provides funding for many types of research, such as investigator-initiated research; mentored research; large-scale, multi-site clinical trials; and centers of excellence. VA researchers receive funding not only through this account but also from the Department of Defense (DOD), the National Institutes of Health (NIH), and private sources.

In general, VA's research program is intramural; that is, research is performed by VA investigators at VA facilities and approved off-site locations. Unlike other federal agencies, such as NIH and DOD, VA does not have the statutory authority to make research grants to colleges and universities, cities and states, or any other non-VA entities.

Medical Care Collections Fund (MCCF)

In addition to direct appropriations accounts mentioned above, the Committees on Appropriations include medical care cost recovery collections when considering funding for the VHA. Congress has provided VHA the authority to bill some veterans and most health care insurers for nonservice-connected care provided to veterans enrolled in the VA health care system, to help defray the cost of delivering medical services to veterans. Funds collected from first and third party (copayments and insurance) bills are retained by the VA health care facility that provided the care for the veteran.

Total MCCF revenue increased 25% over the past four fiscal years, from approximately $2.2 billion in FY2007 to nearly $2.8 billion in FY2011 (see Table 1 ). VHA is expecting MCCF total collections to approximate $2.8 billion in FY2012, although this amount is lower than MCCF collections in FY2009 and FY2010. Furthermore, total third-party revenue increased 42.7% over the last four fiscal years from $1.3 billion in FY2007 to approximately $1.8 billion in FY2011. However, in FY2012 VHA expects lower first-party copayments. This estimated decline is "attributable to fewer veterans with billable insurance and increased numbers of veterans requesting hardship waivers and exemptions from first-party copayments." Furthermore, VHA has stated that it continues to experience a decline in third-party collections "to billings ratios as commercial health insurers shift more responsibility to the patient for health care costs including copayments and deductibles, which VHA cannot collect." It should be noted that 38 U.S.C. Section 1729 prevents VHA from billing the veteran if the health insurer does not pay. Additionally, according to VHA, "FY2012 begins to reflect the shift in workload for Vietnam-era veterans aging to 65 years and older. Once a veteran is Medicare-eligible, Medicare becomes the primary insurance coverage and VA can bill insurance companies only for the portions Medicare does not cover (typically their deductibles). This significantly reduces the amount VA can collect."

FY2012 Budget Summary34

President's Request

The President submitted his FY2012 budget request to Congress on February 14, 2011. The Administration's FY2012 budget request for VHA (medical services, medical support and compliance, medical facilities, and medical and prosthetic research) was $51.4 billion (reflecting the advance appropriation provided in FY2011 and excluding estimated MCCF collections). The President's budget proposed to set up a contingency fund that would have provided additional funds up to $953 million, to become available for obligation if the Administration determined that additional funds were required due to changes in economic conditions in 2012. Furthermore, as required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), the President's budget requested $52.5 billion in advance appropriations for the three medical care accounts (medical services, medical support and compliance, and medical facilities) for FY2013 ( Table 4 ).

House and Senate Action

On June 14, 2011, the House passed the Military Construction and Veterans Affairs and Related Agencies Appropriations bill (MILCON-VA Appropriations bill) for FY2012 ( H.R. 2055 ; H.Rept. 112-94 ). The House-passed measure provided $51.1 billion for VHA for FY2012 ( Table 2 ). The Senate passed its version of the MILCON-VA Appropriations bill for FY2012 ( H.R. 2055 ; S.Rept. 112-29 ) on July 20. The Senate-passed version of H.R. 2055 provided a total of $51.2 billion for VHA ( Table 2 ). The House- and Senate-passed versions of the MILCON-VA Appropriations bill for FY2012 each provided $52.5 billion in advance appropriations for FY2013. Furthermore, both the House and Senate versions of the MILCON-VA Appropriations bill for FY2012 ( H.Rept. 112-94 ; S.Rept. 112-29 ) did not approve the President's proposal to set up a $953 million contingency fund.

Consolidated Appropriations Act, 2012

Congress did not pass the MILCON-VA Appropriations bill for FY2012 before the fiscal year began on October 1, 2011, and funded most of the VA through a series of short-term continuing resolutions (CRs). On December 15, 2011, House and Senate conferees of H.R. 2055 reported a conference agreement ( H.Rept. 112-331 ), which was titled the Consolidated Appropriations Act, 2012, and included nine appropriations bills. Division H of this measure contained the MILCON-VA Appropriations Act, 2012. The Consolidated Appropriations Act, 2012 ( P.L. 112-74 ; H.Rept. 112-331 ), was enacted into law on December 23, 2011. P.L. 112-74 provided a total of $51.2 billion for VHA for FY2012 and $52.5 billion in advance appropriations for FY2013 ( Table 2 ). The Consolidated Appropriations Act, 2012 ( P.L. 112-74 ) did not include the President's proposal to set up a $953 million contingency fund.

FY2013 VHA Budget

President's Request35

The Obama Administration's FY2013 budget request was submitted to Congress on February 13, 2012. The President's budget requested $135.6 billion in budget authority for the VA as a whole. This included approximately $75 billion in mandatory funding and $61 billion in discretionary funding ( Table 3 ). For FY2013, the Administration requested $53.3 billion (reflecting the advance appropriation provided in FY2012 and excluding estimated MCCF collections) for VHA. This included $41.5 billion for the medical services account, $5.7 billion for the medical support and compliance account, $5.4 billion for the medical facilities account, and nearly $583 million for the medical and prosthetic research account ( Table 4 ). The total requested amount for VHA represents a 4.1% increase over the FY2012-enacted appropriations. According to the VA, this increase reflects the increased costs of the implementation of the Caregivers and Veterans Omnibus Health Services Act ( P.L. 111-163 ), and the Agent Orange and Amyotrophic Lateral Sclerosis (ALS) presumptions established by the VA.

As required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), the President's budget requested $54.5 billion in advance appropriations for the three medical care appropriations (medical services, medical support and compliance, and medical facilities) for FY2014, an increase of approximately 3.7% over the FY2013-enacted amount of $52.5 billion for the same three accounts. In FY2014, the Administration's budget request would have provided $43.6 billion for the medical services account, $6.0 billion for the medical support and compliance account, and $4.9 billion for the medical facilities account ( Table 4 ).

House Budget Resolution

On March 20, 2012, the chairman of the House Budget Committee released the chairman's mark of the FY2013 House budget resolution. The House Budget Committee considered the chairman's mark on March 21, 2012, and voted to report the budget resolution to the full House. H.Con.Res. 112 was introduced in the House on March 23, 2012, and was accompanied by the House Budget Committee report ( H.Rept. 112-421 ). The House passed H.Con.Res. 112 on March 29, 2012. According to the Committee report to accompany H.Con.Res. 112 :

The resolution calls for $134.6 billion in budget authority [for VA] and $135.2 billion in outlays in fiscal year 2013.... Discretionary spending is $61.3 billion in budget authority and $62.1 billion in outlays in fiscal year 2013. This resolution also provides for up to $54.5 billion in advance appropriations for medical care, consistent with the Veterans Health Care Budget and Reform Transparency Act of 2009. Mandatory spending in 2013 is $73.3 billion in budget authority and $73.2 billion in outlays.

The Senate did not pass a budget resolution, but on April 19, 2012, the Senate Appropriations Committee allotted subcommittee funding levels that were equal to the total $1.047 trillion cap in the Budget Control Act of 2011 (BCA, P.L. 112-25 ).

House Floor Action and Senate Committee Action

On May 8, 2012, the House Military Construction and Veterans Affairs Subcommittee approved its version of a Military Construction and Veterans Affairs and Related Agencies Appropriations bill for FY2013 (MILCON-VA Appropriations bill). The full House Appropriations Committee voted to report the measure on May 16, and the House passed H.R. 5854 on May 31, 2012. The MILCON-VA Appropriations bill for FY2013 ( H.R. 5854 ; H.Rept. 112-491 ) proposed a total of $135.4 billion for the VA. This amount was $13.2 billion (10.8%) above the FY2012-enacted amount of $122.2 billion and 0.2% below the President's requested amount of $135.6 billion for FY2013 (excluding the Hurricane Sandy Funding Needs supplemental request).

H.R. 5854 ( H.Rept. 112-491 ) as passed by the House proposed $53.1 billion for VHA, which comprises four accounts: medical services, medical support and compliance, medical facilities, and medical and prosthetic research. The total amount for VHA was approximately $2.0 billion above the FY2012-enacted amount and 0.3% less than the Administration's budget request for FY2013 (excluding the Hurricane Sandy Funding Needs supplemental request).

During committee markup of the MILCON-VA Appropriations bill, the House Appropriations Committee noted with concern VHA's revision of budget estimates for FY2012 and FY2013 and the lack of timely notification to the Appropriation Committees. According to the President's budget submission in February 2012, there had been a significant revision to both the FY2012 and FY2013 VHA budget estimates. This revision occurred after VHA ran its Enrollee Healthcare Projection Model in the spring of 2011 using updated information. The result of this update was a lowering of required appropriations for VHA in FY2012 by nearly $3 billion, and nearly $2 billion for FY2013. VHA subsequently made an internal decision to reallocate those resources to fund a variety of initiatives. To address this lapse of notification to Congress, the committee included bill language requiring the VHA to notify the Congress of any changes in funding requirements exceeding $250 million identified when the Enrollee Healthcare Projection Model is recalculated in the spring of each year. Additionally, H.R. 5854 contained bill language requiring the VHA to submit a reprogramming request when it proposes a change in funding for initiatives listed on the ''VA Medical Care Obligations by Program'' page in the President's budget submission to Congress.

The Senate Appropriations Committee, Military Construction, Veterans Affairs Subcommittee approved its version of a draft MILCON-VA Appropriations bill on May 15, 2012; the full Senate Appropriations Committee reported the draft measure on May 22, 2012. The Senate Appropriations Committee-reported MILCON-VA Appropriations bill ( S. 3215 ; S.Rept. 112-168 ) proposed a total of $135.6 billion for VA, same as the President's request (excluding the Hurricane Sandy Funding Needs supplemental request), and $13.4 billion above the FY2012-enacted amount.

The Senate Appropriations Committee reported MILCON-VA Appropriations bill ( S. 3215 ; S.Rept. 112-168 ) proposed $53.3 billion for VHA for FY2013, which comprises four accounts: medical services, medical support and compliance, medical facilities, and medical and prosthetic research. The total amount for VHA was approximately $2.1 billion above the FY2012-enacted amount and $10 million less than the Administration's request (excluding the Hurricane Sandy Funding Needs supplemental request).

Disaster Relief Appropriations Act, 2013 (P.L. 113-2)

On December 7, 2012, the President submitted a $235.6 million supplemental request for VA for costs associated with Hurricane Sandy. On January 29, 2013, the Disaster Relief Appropriations Act, 2013, a disaster assistance measure largely focused on responding to Hurricane Sandy, was signed into law as P.L. 113-2 . Among other provisions, this act provided funding of approximately $236.6 million for the VA as a whole. This included $21 million for the medical services account and $6 million for the medical facilities account. In total P.L. 113-2 provided $27 million for VHA for FY2013 (see Table 4 ). This funding is designated for replacing medical equipment, and repairing and reconstructing VA medical facilities, which sustained flood damage during the storm.

Consolidated and Further Continuing Appropriations Act, 2013 (P.L. 113-6)

House and Senate Action

The 112 th Congress did not enact a regular Military Construction and Veterans Affairs and Related Agencies Appropriations bill for FY2013 (MILCON-VA Appropriations bill) prior to the beginning of FY2013, and funded most of the VA (excluding the three medical care accounts: medical services, medical support and compliance, and medical facilities) through a six-month government-wide continuing resolution ( P.L. 112-175 ). That extended into the start of the 113 th Congress.

On March 6, 2013, the House passed the Department of Defense, Military Construction and Veterans Affairs, and Full-Year Continuing Appropriations Act, 2013 ( H.R. 933 ). The Senate passed an amended version of the bill on March 20, 2013, and the House agreed to the amended version the next day. The Consolidated and Further Continuing Appropriations Act, 2013 ( H.R. 933 ; P.L. 113-6 ) was signed into law by the President on March 26, 2013. Division E of P.L. 113-6 contained funding for the VA. P.L. 113-6 provides $133.9 billion in budget authority for the VA as a whole. This included approximately $72.9 billion in mandatory funding and $61 billion in discretionary funding. P.L. 113-6 provides $53.3 billion for VHA for FY2013, which comprises four accounts: medical services, medical support and compliance, medical facilities, and medical and prosthetic research. The total amount for VHA is approximately $2.1 billion above the FY2012-enacted amount and $10 million less than the Administration's request (excluding the Hurricane Sandy Funding Needs supplemental request).

Table 3 and Table 4 provide funding levels for FY2013 and advance appropriations for FY2014. Funding levels for VA for FY2013 include funding provided in the Disaster Relief Appropriations Act, 2013 ( P.L. 113-2 ) and the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ); they exclude the across-the-board rescissions discussed in the text box.

Appendix A. VA Priority Groups and Their Eligibility Criteria