Historically, the Congress has limited VA’s authority to provide medical care to veterans, expanding it in a careful and deliberate manner. Although VA’s authority has increased significantly over the years, important limitations have not been recognized by VA in establishing and operating new access points. At the access points we visited, many veterans receive primary care contrary to applicable statutory limitations and priorities on their eligibility for such services. As authority for operating contract access points, VA relies on a statute (38 U.S.C. 8153) that permits it to enter into agreements “for the mutual use, or exchange of use, of specialized medical resources when such an agreement will obviate the need for a similar resource to be provided” in a VA facility. Specialized medical resources are equipment, space, or personnel that—because of cost, limited availability, or unusual nature—are unique in the medical community. VA officials assert that primary care provided at access points is a specialized medical resource because its limited availability to veterans in areas where VA facilities are geographically inaccessible (or inconvenient) makes it unique. One significant aspect of VA’s reliance on this authority is that it effectively broadens the eligibility criteria for contract outpatient care, thus allowing some veterans, who would otherwise be ineligible, to receive treatment. In our view, this statute does not authorize VA to provide primary care through its access points. Nothing in the statute suggests that the absence of a VA facility close to veterans in a particular area makes primary care physicians unique in the medical community. The purpose of allowing VA to contract for services under the specialized medical resources authority is not to expand the geographic reach of its health care system, but to make available to eligible veterans services that are not feasibly available at a VA facility that presently serves them. Furthermore, contracting for the provision of primary care at access points does not obviate the need for primary care physicians at the parent VA facility. VA has specific statutory authority (38 U.S.C. 1703) to contract for medical care when its facilities cannot provide necessary services because they are geographically inaccessible. that are more restrictive than those under 38 U.S.C. 8153, upon which VA relies. For example, under 38 U.S.C. 8153, a veteran who has income above a certain level and no service-connected disability is eligible for pre- and post-hospitalization medical services and for services that obviate the need for hospitalization. But under 38 U.S.C. 1703, that same veteran is not eligible for pre-hospitalization medical services or for services that obviate the need for hospitalization. If access points are established in conformance with 38 U.S.C. 1703, VA would need to limit the types of services provided to all veterans except those with service-connected disabilities rated at 50 percent or higher (who are eligible to receive treatment of any condition). All other veterans are generally eligible for VA care based on statutory limitations (and to the extent that VA has sufficient funds). For example, veterans with service-connected conditions are eligible for all care needed to treat those conditions. Those with disabilities rated at 30 or 40 percent are eligible for care of non-service-connected conditions at contract access points to complete treatment incident to hospital care. Furthermore, veterans with disabilities rated at 20 percent or less, as well as those with no service-connected disability, may only be eligible for limited diagnostic services and follow-up care after hospitalization. Most veterans currently receiving care at access points do not have service-connected conditions and, therefore, do not appear to be eligible for all care provided. VA is to assess each veteran’s eligibility for care on the merits of his or her unique situation each time that the veteran seeks care for a new medical condition. We found no indication that VA requires access point contractors to establish veterans’ eligibility or priority for primary care or that contractors were making such determinations for each new condition. Last year, VA proposed ways to expand its statutory authority and veterans’ eligibility for VA health care. Several bills have been introduced that, if enacted, should authorize VA hospitals to establish contract access points and provide more primary care services to veterans in the same manner as the new access points are now doing. VA hospital directors are likely to face an evolving series of financial challenges as they establish new access points. In the short term, hospitals must finance new access points within their existing budgets; this will generally require a reallocation of resources among hospitals’ activities. Over the longer term, VA hospitals may incur unexpected, significant cost increases to provide care to veterans who would otherwise not have used VA’s facilities. These costs may, however, be offset somewhat if access points allow hospitals to serve current users more efficiently. So far, VA hospitals have successfully financed access points by implementing local management initiatives, unrelated to the access points, which allow the hospitals to operate more efficiently. For example, one hospital director estimated that he had generated resources for new access points by consolidating underused medical wards at a cost savings of $250,000. To date, most directors have concluded that it was more cost-effective to contract for care in the target locations than operate new access points themselves. Essentially, they have found that it is not cost-effective to operate their own access points for a relatively small number of veterans. For example, one hospital that targeted 173 veterans for an access point concluded that this number could be most efficiently served by contracting for care. By contrast, private providers seem willing to serve small numbers of veterans on a contractual, capitated basis because they already have a non-VA patient base and sufficient excess capacity to meet VA’s needs. The longer-term effects of new access points on VA’s budget are less certain. This is because VA has not clearly delineated its goals and objectives; nor has it developed a plan that specifies the total number of potential access points, time frames for beginning operations, estimates of current and potential new veterans to be served, and related costs. Of these, key cost factors appear to be the magnitude of new users and their willingness to be referred to VA hospitals for specialty and inpatient care. Costs could potentially vary greatly depending on whether VA hospitals’ primary objective is to improve convenience for current users or to expand their market share by attracting new users. average, each spend about $300,000 a year to provide primary care to about 1,500 veterans. This hospital can reduce the number of teams to 4 once it enrolls 1,500 veterans at new access points closer to their homes. These newly established access points could be cost-effective if their total costs are the same or lower than the VA hospital’s costs—$300,000 or less in this case. VA hospitals, however, could experience significant budget pressures if new access points modestly increase VA’s market share. For example, VA currently serves about 2.6 million of our nation’s 26 million veterans. To date, 40 percent of the 5,000 veterans enrolled at VA’s 12 new access points had not received VA care within the last 3 years. Most of the new users we interviewed had learned about the access points through conversations with other veterans, friends, and relatives or from television, newspapers, and radio. VA’s access points may prove more attractive to veterans in part because they overcome barriers such as geographic inaccessibility and quality of care. About half of the veterans who have used VA health care in the past, and a larger portion of the new users, said that it matters little whether they receive care in a VA-operated facility. In fact, almost two-thirds of the new users indicated that if hospitalization is needed, they would choose their local hospital rather than a distant VA facility. Veterans will also generally benefit financially by enrolling in new VA access points. For example, prior VA users will save expenses incurred traveling to distant VA facilities as well as out-of-pocket costs for any primary care received from non-VA providers; most said that they use both VA and non-VA providers. New VA users will also save out-of-pocket costs, with low-income veterans receiving free care and high-income veterans incurring relatively nominal charges. now VA pays the contract provider a capitated rate and then bills the insurer to recover its costs on a fee-for-service basis. The combination of these factors could lead to VA attracting several hundred thousand new users through its access points. This may force VA to turn veterans away if sufficient resources are not available, or it may cause VA to seek additional appropriations to accommodate the potential increased demand. Currently, VA is to provide outpatient care to the extent resources are available. When resources are insufficient to care for all eligible veterans, VA is to care for veterans with service-connected disabilities before providing care to those without such disabilities. Furthermore, when VA provides care to veterans without service-connected disabilities, it is to provide care for those with low incomes before those with high incomes. Presently, most of the nine hopsitals encourage current and new users to enroll in their new access points. For example, the 3 hospitals we visited had enrolled 1,250 veterans in new access points. Of the 1,250, about 20 percent had service-connected disabilities, including about 4 percent rated at 50 percent or higher. Of the remaining 80 percent, most had low incomes, including about 10 percent who were receiving VA pensions or aid and attendance benefits. Inequities in veterans’ access to VA care have been a long-standing concern. For example, about three-fourths of veterans (both those with service-connected conditions and others) using VA clinics live over 5 miles away, including about one-third who live over 25 miles away. Establishing new access points gives VA the opportunity to reduce some of these veterans’ travel distances. Although VA provided general guidance, it left the development of specific criteria for targeting new locations and populations to be served to network and hospital directors. Directors have several options when targeting new locations and populations to be served. For example, they could target those current users or potential new users living the greatest distances from VA facilities. have improved convenience for existing users and attracted new users as well. However, two new access points have served only current VA users, while another one has served only new users. VA’s plans to establish access points could represent a defining moment for its health care system as it prepares to move into the 21st century. On one hand, VA hospitals could use a relatively small amount of resources to improve access for a modest number of current or new users, such as those living the greatest distances from VA facilities or in the most underserved areas. On the other hand, VA hospitals could, over the next several years, open hundreds of access points and greatly expand market share. There are over 26 million veterans and 550,000 private physicians who could contract to provide care at VA expense. VA’s growth potential appears to be limited only by the availability of resources and statutory authority, new veteran users’ willingness to be referred to VA hospitals, and other health care providers’ willingness to contract with VA hospitals. Although VA should be commended for encouraging hospital directors to serve veterans using their facilities in the most convenient way possible, VA has not established access points in conformance with existing statutory authority. In our view, under current statutes, new access points should be VA-operated or provide contract care for only those services or classes of veterans specifically designated by VA’s geographic inaccessibility authority. While legislative changes are needed to authorize VA hospitals to provide primary care to veterans in the same manner as the new access points are now doing, such changes carry with them several financial and equity-of-access implications. In addition, VA has not developed a plan to ensure that hospitals establish access points in an affordable manner. If developed, such a plan could articulate the number of new access points to be established, target populations to be served, time frames to begin operations, and related costs and funding sources. It could also articulate specific travel times or distances that represent reasonable veteran travel goals that hospitals could use in locating access points. points in accordance with the statutory service priorities. If sufficient resources are not available to serve all eligible veterans expected to seek care, new access points that are established would serve, first, veterans with service-connected disabilities and then, second, other categories of veterans, with higher income veterans served last. Finally, this approach could provide for more equitable access to VA care than VA’s current strategy of allowing local hospitals to establish access points that serve veterans on a first-come, first-served basis and then rationing services when resources run out. Mr. Chairman, this concludes my statement. I will be happy to answer any questions that you or other Members may have. For more information, please call Paul Reynolds, Assistant Director, at (202) 512-7109. Michael O’Dell, Patrick Gallagher, Abigail Ohl, Robert Crystal, Sylvia Shanks, Linda Diggs, Larry Moore, and Joan Vogel also contributed to the preparation of this statement. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. 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Summary: GAO discussed the Department of Veterans Affairs' (VA) plan to improve veterans' access to primary health care. GAO noted that: (1) by creating new access points, VA may be able to cost-effectively improve users' access to health care and reduce the inequities in veterans' access caused by geographic inaccessibility; (2) creating new access points may increase costs dramatically, since VA failure to adhere to statutory eligibility limitations has resulted in an increase in the amount of services provided and members receiving benefits; (3) the lack of a VA facility in a particular area does not necessarily justify the establishment of a new primary care access point in that area; (4) VA hospitals need to find ways to finance new access points through reorganization of resources rather than with additional funds; (5) in some underserved areas, it has been more cost-effective to contract for health care services rather than establishing a new VA access point; and (6) new access points could cause financial difficulties for VA, because these new facilities will make VA funded care more accessible to veterans who would otherwise not have used VA facilities.