VA provides medical services to various veteran populations—including an aging veteran population and a growing number of younger veterans returning from the military operations in Afghanistan and Iraq. VA operates approximately 170 VAMCs, 130 nursing homes, and 1,000 outpatient sites of care. In general, veterans must enroll in VA health care to receive VA’s medical benefits package—a set of services that includes a full range of hospital and outpatient services, prescription drugs, and long-term care services provided in veterans’ own homes and in other locations in the community. The majority of veterans enrolled in the VA health care system typically receive care in VAMCs and community-based outpatient clinics, but VA may also authorize care through community providers to meet the needs of the veterans it serves. For example, VA may provide care through its Care in the Community (CIC) programs, such as when a VA facility is unable to provide certain specialty care services, like cardiology or orthopedics. CIC services must generally be authorized by a VAMC provider prior to a veteran receiving care. In addition to its longstanding CIC programs, VA may also authorize veterans to receive care from community providers through the Veterans Choice Program, a new CIC program which was established through the Veterans Access, Choice, and Accountability Act of 2014 (Choice Act), enacted on August 7, 2014. Implemented in fiscal year 2015, the program generally provides veterans with access to care by non-VA providers when a VA facility cannot provide an appointment within 30 days or when veterans reside more than 40 miles from the nearest VA facility. The Veterans Choice Program is primarily administered using contractors, who, among other things, are responsible for establishing nationwide provider networks, scheduling appointments for veterans, and paying providers for their services. The Choice Act also created a separate account, known as the Veterans Choice Fund, which can only be used to pay for VA obligations incurred for the Veterans Choice Program. The use of Choice funds for any other program requires legislative action. The Choice Act appropriated $10 billion to be deposited in the Veterans Choice Fund. Amounts deposited in the Veterans Choice Fund are available until expended and are available for activities authorized under the Veterans Choice Program. However, the Veterans Choice Program activities are only authorized through August 7, 2017 or until the funds in the Veterans Choice Fund are exhausted, whichever occurs first. As part of the President’s request for funding to provide medical services to veterans, VA develops an annual estimate detailing the amount of services the agency expects to provide as well as the estimated cost of providing those services. VA uses the Enrollee Health Care Projection Model (EHCPM) to develop most elements of the department’s budget estimate to meet the expected demand for VA medical services. Like many other agencies, VA begins to develop these estimates approximately 18 months before the start of the fiscal year for which the funds are provided. Unlike many agencies, VA’s Veterans Health Administration receives advance appropriations for health care in addition to annual appropriations. VA’s EHCPM makes these projections 3 or 4 years into the future for budget purposes based on data from the most recent fiscal year. In 2012, for example, VA used actual fiscal year 2011 data to develop the budget estimate for fiscal year 2014 and for the advance appropriations estimate for fiscal year 2015. Similarly, in 2013, VA used actual fiscal year 2012 data to update the budget estimate for fiscal year 2015 and develop the advance appropriations estimate for fiscal year 2016. Given this process, VA’s budget estimates are prepared in the context of uncertainties about the future—not only about program needs, but also about future economic conditions, presidential policies, and congressional actions that may affect the funding needs in the year for which the estimate is made—which is similar to the budgeting practices of other federal agencies. Further, VA’s budget estimates are typically revised during the budget formulation process to incorporate legislative and department priorities as well as to respond to successively higher levels of review in VA and OMB. Each year, Congress provides funding for VA health care primarily through the following appropriation accounts: Medical Support and Compliance, which funds, among other things, the administration of the medical, hospital, nursing home, domiciliary, construction, supply, and research activities authorized under VA’s health care system. Medical Facilities, which funds, among other things, the operation and maintenance of the Veterans Health Administration’s capital infrastructure, such as the costs associated with nonrecurring maintenance, utilities, facility repair, laundry services, and groundskeeping. Medical Services, which funds, among other things, health care services provided to eligible veterans and beneficiaries in VA’s medical centers, outpatient clinic facilities, contract hospitals, state homes, and CIC services. With the exception of the Veterans Choice Program, which is funded through the Veterans Choice Fund, medical services furnished by community providers have been, and will continue to be, funded through this appropriation account through fiscal year 2016. Starting in fiscal year 2017 and thereafter, with the exception of the Veterans Choice Program, it is anticipated that Congress will fund medical services that VA authorizes veterans to receive from community providers through a new appropriations account—Medical Community Care—which the VA Budget and Choice Improvement Act requires VA to include in its annual budget submission. Higher-than-expected obligations identified by VA in April 2015 for VA’s CIC programs accounted for $2.34 billion (or 85 percent) of VA’s projected funding gap of $2.75 billion in fiscal year 2015. These higher- than-expected obligations for VA’s CIC programs were driven by an increase in utilization of VA medical services across VA, reflecting, in part, VA’s efforts to improve access to care after public disclosure of long wait times at VAMCs. VA officials expected that the Veterans Choice Program would absorb much of the increased demand from veterans for health care services delivered by non-VA providers. However, veterans’ utilization of Veterans Choice Program services was much lower than expected in fiscal year 2015. VA had estimated that obligations for the Veterans Choice Program in fiscal year 2015 would be $3.2 billion, but actual obligations totaled only $413 million. According to VA officials, the lower-than-expected utilization of the Veterans Choice Program in fiscal year 2015 was due, in part, to administrative weaknesses in the program, such as provider networks that had not been fully established and VAMC staff who lacked guidance on when to refer veterans to the program, both of which slowed enrollment in the program. Instead of relying on its Choice Program, VA provided a greater amount of services through its CIC programs, resulting in total obligations of $10.2 billion in fiscal year 2015, which VA officials stated were much higher than expected. The unexpected increase in CIC obligations in fiscal year 2015 exposed weaknesses in VA’s ability to estimate costs for CIC services and track associated obligations. While VA officials first became concerned that CIC obligations might be significantly higher than projected in January 2015, they did not determine that VA faced a projected funding gap until April 2015—6 months into the fiscal year. VA officials made this determination after they compared authorizations in the Fee Basis Claims System (FBCS)—VA’s system for recording CIC authorizations and estimating costs for this care—with obligations in the Financial Management System (FMS)—the centralized financial management system VA uses to track all of its obligations, including those for medical services. In its 2015 Agency Financial Report (AFR), VA’s independent public auditor identified the following issues as contributing to a material weakness in estimating costs for CIC services and tracking CIC obligations: VAMCs individually estimate costs for each CIC authorization and record these estimates in FBCS. This approach leads to inconsistencies because each VAMC may use different methodologies to estimate the costs they record. Having more accurate cost estimates for CIC authorizations is important to help ensure that VA is aware of the amount of money it must obligate for CIC services. VAMCs do not consistently adjust the estimated costs associated with authorizations for CIC services in FBCS in a timely manner to ensure greater accuracy, and they do not perform a “look-back” analysis of historical obligations to validate the reasonableness of estimated costs. Furthermore, VA does not perform centralized, consolidated, and consistent monitoring of CIC authorizations. FBCS is not fully integrated with FMS, VA’s system for recording and tracking the department’s obligations. As a result, the obligations for CIC services recorded in the former system may not match the obligations recorded in the latter. Notably, the estimated costs of CIC authorizations recorded in FBCS are not automatically transmitted to VA’s Integrated Funds Distribution, Control Point Activity, Accounting, and Procurement (IFCAP) system, a procurement and accounting system used to send budgetary information, such as information on obligations, to FMS. According to VA officials, because FBCS and IFCAP are not integrated, at the beginning of each month, VAMC staff typically record in IFCAP estimated obligations for outpatient CIC services, and they typically use historical obligations to make these estimates. Depending on the VAMC, these estimated obligations may be entered as a single lump sum covering all outpatient care or as separate estimated obligations for each category of outpatient care, such as radiology. Regardless of how they are recorded, the estimated obligations recorded in IFCAP are often inconsistent with the estimated costs of CIC authorizations recorded in FBCS. In fiscal year 2015, the estimated obligations that VAMCs recorded in IFCAP were significantly lower than the estimated costs of outpatient CIC authorizations recorded in FBCS. VA officials told us that they did not determine a projected funding gap until April 2015, because they did not complete their analysis of comparing estimated obligations with estimated costs until then. A key factor contributing to the weaknesses identified in VA’s AFR was the absence of standard policies across VA for estimating and monitoring the amount of obligations associated with authorized CIC services. Specifically, in fiscal year 2015, the Chief Business Office within the Veterans Health Administration had not developed and implemented standardized and comprehensive policies for VAMCs, VISNs, and the office itself to follow when estimating costs for CIC authorizations and for monitoring these obligations. The AFR and VA officials we interviewed explained that because oversight of the CIC programs was consolidated under the Chief Business Office in fiscal year 2015 pursuant to the Choice Act, this office did not have adequate time to implement efficient and effective procedures for monitoring CIC obligations. To address the fiscal year 2015 projected funding gap, on July 31, 2015, VA obtained temporary authority to use up to $3.3 billion in Veterans Choice Program appropriations for amounts obligated for medical services from non-VA providers—regardless of whether the obligations were authorized under the Veterans Choice Program or CIC—for the period from May 1, 2015 until October 1, 2015. Table 1 shows the sequence of events that led to VA’s request for and approval of additional budget authority for fiscal year 2015. Unexpected obligations for new hepatitis C drugs accounted for $0.41 billion of VA’s projected funding gap of $2.75 billion in fiscal year 2015. Although VA estimated that obligations in this category would be $0.7 billion that year, actual obligations totaled about $1.2 billion. VA officials told us that VA did not anticipate in its budget the obligations for new hepatitis C drugs—which help cure the disease—because the drugs were not approved by the Food and Drug Administration until fiscal year 2014, after VA had already developed its budget estimate for fiscal year 2015. According to VA, the new drugs cost between $25,000 and $124,000 per treatment regimen, and demand for the treatment was high. Officials told us that about 30,000 veterans received these drugs in fiscal year 2015. In October 2014, VA reprogrammed $0.7 billion within its medical services appropriation account to cover projected obligations for the new hepatitis C drugs, after VA became aware of the drugs’ approval. However, in January 2015, VA officials recognized that obligations for the new hepatitis C drugs would be significantly higher than expected by year’s end, due to higher-than-expected demand for the drugs. VA officials told us that they assessed next steps and then limited access to the drugs to those veterans with the most severe cases of hepatitis C. In June 2015, VA requested statutory authority to use amounts from the Veterans Choice Fund to address the projected funding gap. To help prevent future funding gaps, VA has made efforts to improve its cost estimates for CIC services and the department’s tracking of associated obligations. VA has also taken steps to more accurately estimate future utilization of VA health care services, though uncertainties about utilization of VA health care services and emerging treatments remain. Faced with a projected funding gap in fiscal year 2015, VA made efforts to improve its cost estimates for CIC services as well as the department’s tracking of associated obligations. First, in August 2015, VA issued a policy to VAMCs for recording estimated costs for inpatient and outpatient CIC authorizations in FBCS. This policy, among other things, stipulates that VAMCs are to base estimated costs on historical cost data provided by VA. These data, which represent average historical costs for a range of procedures, are intended to help improve the accuracy of VAMCs’ cost estimates. To help implement this policy, in December 2015 VA updated its FBCS software so that the system automatically generates estimated costs for CIC authorizations based on historical CIC claims data. As a result, in many cases, VAMC staff will no longer need to individually estimate costs using various methods and manually record these estimates in FBCS. Officials we interviewed at six selected VISNs shortly after the implementation of the software update told us that the update sometimes produces inaccurate cost estimates or no cost estimates at all. VA officials told us that the problems affecting the software update were largely due to VA’s adoption of a revised medical classification system in October 2015. The change in the classification system meant that there were relatively few paid claims with the new codes to inform FBCS’s automated cost estimates for CIC services. VA officials told us they anticipate this problem diminishing throughout fiscal year 2016 as more CIC claims using the new codes are paid and as the amount of data used to inform the cost estimates increase. Second, in November 2015, VA issued a policy requiring VAMCs to systematically review and correct potentially inaccurate estimated costs for CIC authorizations recorded in FBCS, a step which was previously not required. VA officials told us this policy was created to detect and correct obvious errors in the cost estimates, such as data entry errors that fall outside of the range of reasonable cost estimates. Additionally, this policy requires VISNs to certify monthly to VA’s Chief Business Office that the appropriate review and corrective actions have been completed. We found that all six VISNs certified that they had implemented this policy. Third, in November 2015, VA issued a policy requiring VAMCs to identify any discrepancies between the estimated costs for CIC authorizations recorded in FBCS and the amount of estimated obligations recorded in FMS. VA’s policy also requires VAMCs to correct discrepancies they identify—such as increasing unreasonably low estimated obligations to make the estimates more accurate—and document the corrections they make. This policy also requires VISNs to certify monthly to VA’s Chief Business Office that the appropriate review and corrective actions have been taken and appropriately documented. As we previously stated, in part because FBCS is not fully integrated with FMS, VA officials concluded this policy was necessary to detect and address discrepancies between the two systems. According to VA officials, if estimated costs for CIC authorizations recorded in FBCS are higher than estimated obligations recorded in FMS, it may leave VA at risk of potentially being unable to pay for authorized care. Alternatively, if estimated costs for CIC authorizations recorded in FBCS are lower than estimated obligations recorded in FMS, VA may be dedicating more resources than needed for this care. While we found that all six selected VISNs and the VAMCs they manage certified that they had implemented this new policy, the methods used to identify and correct discrepancies between estimated costs for CIC authorizations in FBCS and the amount of estimated obligations in FMS varied. Moreover, in some cases, we found that discrepancies VAMCs identified and associated corrections were not documented or that documentation lacked specificity, making it difficult to determine whether appropriate corrections were made. To achieve greater consistency in how VAMCs implement this new policy, VA officials reviewed VAMCs’ reports and in February 2016, provided VISNs and VAMCs with additional guidance and best practices for identifying discrepancies and documenting corrections. For example, VA instructed VAMCs to be as specific as possible in documenting corrections they make to the estimated obligations. VA officials also told us that they are developing additional guidance that would define an acceptable level of variation between estimated costs for CIC authorizations and the amount of estimated obligations in FMS. This guidance, once implemented, would require that VAMCs ensure that estimated costs and estimated obligations were no more than $50,000 or 10 percent apart, whichever is less. Finally, to better track that VAMCs’ obligations for CIC do not exceed available budgetary resources for fiscal year 2016, VA allocated funds specifically for CIC to each VAMC. VA officials, including some VISN officials we interviewed, told us that they identify VAMCs that may be at risk for exhausting their funds before the end of the fiscal year by reviewing monthly reports comparing each VAMC’s obligations for CIC to the amount of funds allocated for that purpose to the VAMC. Officials from the Office of Finance within the Veterans Health Administration told us that once a VAMC had obligated all of its CIC funds, it would have to request realignment of funds from other VA programs, assuming additional funds could be made available. VA would, in turn, evaluate the validity of a VAMC’s request. VA is employing a similar process to track VAMCs’ use of funds for hepatitis C drugs. Officials told us that these steps are intended to reduce the risk of VAMCs obligating more funds than VA’s budgetary resources allow. Despite these efforts, VA still faces challenges accurately estimating CIC costs and tracking associated obligations, in large part because of the uncertainty inherent in predicting the CIC services veterans will actually receive. According to VA Chief Business Office and VISN officials, a single authorization may allow for multiple episodes of care, such as up to 10 visits to a physical therapist. Alternatively, a veteran may choose not to seek the care that was authorized. Furthermore, system deficiencies also complicate both the development of accurate CIC cost estimates and the tracking of related obligations. Chief Business Office and VISN officials told us that due to systems limitations, cost estimates for inpatient CIC authorizations are estimated in FBCS based on a veteran’s diagnosis at the time the care is authorized and cannot be adjusted if a veteran’s diagnosis—and associated treatment plan—changes. For example, a veteran may be authorized to obtain inpatient care to treat fatigue and nausea, but may be subsequently diagnosed as having a heart attack and receive costly surgery that was not included in the cost estimate. Chief Business Office officials told us that while the cost estimate cannot be adjusted in FBCS, VAMC officials should adjust the estimated obligation that corresponds to the authorization in IFCAP to reflect the cost difference; they should also document why they made the adjustment. To better align cost estimates for CIC authorizations with associated obligations, in the long term, VA officials told us that VA is exploring options for replacing IFCAP and FMS, which officials describe as antiquated systems based on outdated technology. The department has developed a rough timeline and estimate of budgetary needs to make these changes. Officials told us that the timeline and cost estimate would be refined once concrete plans for replacing IFCAP and FMS are developed. Officials told us that replacing IFCAP and FMS is challenging due to the scope of the project and the requirement that the replacement system interface with various VA legacy systems, such as the Veterans Health Information Systems and Technology Architecture, VA’s system containing veterans’ electronic health records. Moreover, as we have previously reported, VA has made previous attempts to update IFCAP and FMS that were unsuccessful. In October 2009, we reported that these failures could be attributed to the lack of a reliable implementation schedule and cost estimates, among other factors. To more accurately project future health care utilization of VA services given the implementation of the Veterans Choice Program, in November 2015 VA took steps to update its EHCPM projection to better inform future budget estimates. Officials told us that the updated EHCPM projection in November 2015 included available data from fiscal year 2015 to inform the department’s budget estimate for fiscal years 2017 and 2018. Without the updated projection, VA would have relied on the EHCPM projection from April 2015 using actual data from fiscal year 2014. The updated EHCPM projection using fiscal year 2015 data showed increased utilization of CIC services in that year. According to VA officials, this increase was an unexpected result of implementing the Veterans Choice Program. Specifically, because of administrative weaknesses affecting the Veterans Choice Program, veterans seeking services through this program were generally provided care through other VA CIC programs instead. Additionally, according to VA, analysis of fiscal year 2015 data showed that the implementation of the Veterans Choice Program resulted in veterans relying on VA services rather than on services provided by other health care benefit programs for a greater share of their health care needs. VA officials told us that they plan to continue relying on the EHCPM projection from April of each year using data from the most recently completed fiscal year and updating the EHCPM later in the year using more current data. As we have previously reported, while the EHCPM projection informs most of VA’s budget estimate, the amount of the estimate is determined by several factors, including VA policy decisions and the President’s priorities, and will not necessarily match the EHCPM projection in any given year. Historically, the final budget estimate for VA has consistently been lower than the amount projected by the EHCPM. For example, in December 2015, to develop the budget estimates for fiscal year 2017 and advance appropriations for fiscal year 2018, VA officials made a policy decision to use a previous EHCPM projection that does not take into account the increased utilization of CIC services by veterans in fiscal year 2015. VA officials told us that if demand for VA services exceeds the amount requested for VA’s Medical Services Account in the President’s budget request for fiscal year 2017, the difference can be made up by greater utilization of the Veterans Choice Program. VA officials also told us that VA will likely request an increase in funding for health care services in the President’s budget request for fiscal year 2018, which is expected to be submitted to Congress in February 2017. To help increase utilization of the Veterans Choice Program, VA issued policy memoranda to VAMCs in May and October 2015, requiring them to refer veterans to the Veterans Choice Program if timely care cannot be delivered by a VAMC, rather than authorizing care through VA’s other CIC programs. In addition, on July 31, 2015, the VA Budget and Choice Improvement Act eliminated the requirement that veterans must be enrolled in the VA health care system by August 2014 in order to receive care through the program. While data from January 2016 indicate that utilization of care under the Veterans Choice Program has begun to increase, VA officials, including at the VISNs we interviewed, expressed concerns whether existing contracts were sufficient to address veterans’ needs in a timely manner. For example, officials we interviewed from five of the six selected VISNs cited inadequate provider networks, delays in scheduling appointments, and delays in providers receiving payment for services delivered, as factors limiting program utilization. To address these concerns, VA is granting VAMCs the authority to establish agreements directly with providers to deliver services through the Veterans Choice Program and schedule appointments for veterans if VA’s contractors are unable to schedule them in a timely manner. These efforts have the potential to increase Veterans Choice Program utilization beyond the levels VA estimated for fiscal year 2016, which, according to VA officials, may limit the funds available to the program in fiscal year 2017. Conversely, some of these officials told us that if VA does not succeed in increasing Veterans Choice Program utilization in fiscal years 2016 and 2017, veterans may have to seek care through other CIC programs, which may not have the funds available to meet the demand for services. In either case, according to VA officials, veterans may face delays in accessing VA health care services. In addition to the challenges associated with the Veterans Choice Program, VA, like other health care payers, faces uncertainties estimating the utilization—and associated costs—of emerging health care treatments—such as costly drugs to treat chronic diseases affecting veterans. VA, like other federal agencies, prepares its budget estimate 18 months in advance of the start of the fiscal year for which funds are provided. At the time VA develops its budget estimate, it may not have enough information to estimate the likely utilization and costs for health care services or these treatments with reasonable accuracy. Moreover, even with improvements to its projection, VA, like other federal agencies, must make tradeoffs in formulating its budget estimate that requires it to balance the expected demand for health care services against other competing priorities. Close scrutiny and careful monitoring in all these areas should assist VA in managing its available resources and better protect against a reoccurrence of budgetary circumstances similar to those that existed in fiscal year 2015. VA provided written comments on a draft of this report, which we have reprinted in appendix I. While we are not making any recommendations in this report, in its comments, VA agreed with our findings and reiterated the uncertainty the department faces in estimating the cost of emerging health care treatments. VA also provided technical comments on the draft report, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees and the Secretary of Veterans Affairs. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or williamsonr@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact named above, Rashmi Agarwal, Assistant Director; Luke Baron; Krister Friday; Jacquelyn Hamilton; and Michael Zose made key contributions to this report. VA’s Health Care Budget: Preliminary Observations on Efforts to Improve Tracking of Obligations and Projected Utilization. GAO-16-374T. Washington, D.C.: February 10, 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 Affairs: Issues Related to Real Property Realignment and Future Health Care Costs. GAO-11-877T. Washington, D.C.: July 27, 2011. 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.

Summary: VA projected a funding gap of about $3 billion in its fiscal year 2015 medical services appropriation account, which funds VA health care services except for those authorized under the Veterans Choice Program. To close this gap, VA obtained temporary authority to use up to $3.3 billion from the $10 billion appropriated to the Veterans Choice Fund in August 2014. GAO was asked to examine VA's fiscal year 2015 projected funding gap and any changes VA has made to prevent potential funding gaps in future years. This report examines (1) the activities or programs that accounted for VA's fiscal year 2015 projected funding gap in its medical services appropriation account and (2) changes VA has made to prevent potential funding gaps in future years. GAO reviewed VA obligations data and related documents to determine what activities accounted for the projected funding gap in its fiscal year 2015 medical services appropriation account, as well as the factors that contributed to the projected funding gap. GAO interviewed VA officials to identify the steps taken to address the projected funding gap. GAO also examined changes VA made to prevent future funding gaps and reviewed the implementation of these changes at the VAMCs within six VISNs, selected based on geographic diversity. GAO found that two areas accounted for the Department of Veterans Affairs' (VA) fiscal year 2015 projected funding gap of $2.75 billion. Higher-than-expected obligations for VA's longstanding care in the community (CIC) programs—which allow veterans to obtain care from non-VA providers—accounted for $2.34 billion or 85 percent of VA's projected funding gap. VA officials expected that the Veterans Choice Program—which is a relatively new CIC program implemented in fiscal year 2015 that allows veterans to access care from non-VA providers under certain conditions—would absorb veterans' increased demand for more timely care after public disclosure of long wait times. However, administrative weaknesses slowed enrollment into this program, and use of the Veterans' Choice Fund was far less than expected. Moreover, as utilization of CIC programs overall increased, VA's weaknesses in estimating costs and tracking obligations for CIC services resulted in VA facing a projected funding gap. Unanticipated obligations for hepatitis C drugs accounted for the remaining $408 million of VA's projected funding gap. VA did not anticipate in its budget the obligations for these costly, new drugs because the drugs did not gain approval from the Food and Drug Administration until fiscal year 2014—after VA had already developed its budget estimate for fiscal year 2015. To help prevent future funding gaps, VA has made efforts to better estimate costs and track obligations for CIC services and better project future utilization of VA's health care services. Specifically, VA implemented new policies directing VA medical centers (VAMC) and Veterans Integrated Service Networks (VISN) to better estimate costs for CIC authorizations—by using historical data and correcting for obvious errors—and to better track CIC obligations by comparing estimated costs with estimated obligations, correcting discrepancies, and certifying each month that these steps were completed. These policies are necessary, in part, because deficiencies in VA's financial systems make tracking obligations challenging. The VISNs and associated VAMCs GAO reviewed have implemented these policies. VA also allocated funds to each VAMC for CIC and hepatitis C drugs and began comparing VAMCs' obligations in these areas to the amount of funds allocated to help ensure that obligations do not exceed budgetary resources. VA updated the projection it uses to inform budget estimates 3 to 4 years in the future, adding fiscal year 2015 data reflecting increased CIC utilization. While VA has made these efforts to better manage its budget, uncertainties remain regarding utilization of VA's health care services. For example, utilization of the Veterans Choice Program in fiscal years 2016 and 2017 is uncertain because of continued enrollment delays affecting the program. Moreover, even with improvements to its projection, VA, like other federal agencies, must make tradeoffs in formulating its budget estimate that requires it to balance the expected demand for health care services against other competing priorities. GAO is not making any recommendations. After reviewing a draft of this report, VA agreed with what GAO found.