VA provides health care 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 150 hospitals, 130 nursing homes, 800 outpatient clinics, as well as other facilities to provide care to veterans. 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. VA also provides some services that are not part of its medical benefits package, such as long-term care provided in nursing homes. VA develops a health care budget estimate each year of the resources needed to provide these services for 2 fiscal years. Typically, VA’s Veterans Health Administration (VHA), which administers VA’s health care program, starts to develop a health care budget estimate approximately 10 months before the President submits the budget request to Congress the following February. The 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 develops most of its budget estimate for health care services using the Enrollee Health Care Projection Model (EHCPM). VA uses other methods to develop the remaining parts of its budget estimate, that is, the costs of long-term care and other health care programs. VA’s annual budget estimate for a fiscal year includes estimates of anticipated funding from several sources. These sources include new appropriations, which refer to the appropriations to be provided during the current annual appropriations process for the upcoming fiscal year, and with respect to advance appropriations, the next fiscal year. For example, VA estimated it needed $52.7 billion in new appropriations for fiscal year 2013 and $54.5 billion for fiscal year 2014. In addition to new appropriations, sources of funding include resources expected to be available from unobligated balances and collections and reimbursements that VA anticipates it will receive in the fiscal year.include third-party payments from veterans’ private health care insurance for the treatment of nonservice-connected conditions and veterans’ copayments for outpatient medications. VA’s reimbursements include amounts VA receives for services provided under service agreements with the Department of Defense (DOD). VA’s health care budget estimate informs the President’s annual request for appropriations for VA health care services, which includes an advance appropriations request for these services. The budget estimate can change during each budget formulation cycle, due to the availability of updated data and the successively higher levels of review in VA and OMB before the President’s budget request is submitted to Congress. The Secretary of VA 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. VA prepares a budget justification that provides information supporting the policy and funding decisions in the President’s budget request. In its budget justification, VA includes estimates related to the following: Ongoing health care services, which include acute care, rehabilitative care, mental health, long-term care, and other health care programs. Initiatives, which are proposals by the Secretary of VA or by the President to provide, expand, or create new health care services. Some of the proposed initiatives can be implemented within VA’s existing authority, while other initiatives would require a change in law. Operational improvements, which are changes in the way VA manages its health care system to lower costs, such as changes to its purchasing and contracting strategies. Collections and reimbursements, which are resources VA expects to collect from health insurers of veterans who receive VA care for nonservice-connected conditions and other sources, such as veterans’ copayments, and to receive as reimbursement of services provided to other government agencies or private or nonprofit entities. The President’s fiscal year 2013 budget request for VA health care services was $165 million more than the advance appropriations request for the same year. This increase came about as a result of changes in the estimates supporting the two requests. Specifically, the President’s fiscal year 2013 request reflected an estimate of funding needed for initiatives that increased by $2 billion and an estimate for ongoing health care services that decreased by $2.1 billion, for a net decrease of $110 million. In addition, VA’s estimate of anticipated resources from collections and reimbursements decreased by $275 million. This decline in anticipated resources was partially offset by the $110 million decrease in expected obligations, which resulted in the net increase in the President’s request of $165 million. (See table 1.) Three factors accounted for most of the changes in the estimates that supported the President’s fiscal year 2013 budget request when compared to the earlier, advance appropriations request; however, VA, in its budget justification, was not transparent about two of the factors. The three factors that accounted for the $2 billion increase in the initiatives estimate and the $2.1 billion decrease in the ongoing health care services estimate were: (1) a new approach in reporting the estimate for initiatives, (2) updated assumptions and data to estimate ongoing health care services, and (3) additional funding needed for initiatives. The first factor—VA’s new reporting approach—accounted for $1.2 billion of the increase in VA’s initiatives estimate and a corresponding decrease in VA’s ongoing health care services estimate. The second factor accounted for a $900 million decrease in VA’s ongoing health care services estimate. This decrease was largely offset by the third key factor—an almost $800 million increase in additional funding for initiatives. (See table 2.) A new approach in reporting the estimate for initiatives. VA used a new reporting approach for initiatives that combined both funding for initiatives and funding for certain ongoing health care services in its initiatives estimate, which increased VA’s initiatives estimate and decreased VA’s ongoing services estimate. In prior budget justifications, VA’s estimated funding for initiatives only included funding identified for initiatives during that year while funding needs for all ongoing services were included in VA’s estimate for ongoing health care services. However, VA, in its budget justification, did not disclose that it had used a new reporting approach for initiatives. OMB staff and VA officials told us that the reason for this change in reporting was to be more transparent about the total amount of funding needed to support VA’s initiatives. Nevertheless, by not stating in its budget justification that it made this change, VA has not made it transparent that the estimate for initiatives is greater and the estimate for ongoing services is less than they would have been using VA’s past reporting approach. Updated data and assumptions to estimate ongoing health care services. As reported in its budget justification, VA used updated assumptions and data, which reduced VA’s estimate for ongoing health care services. Specifically, the amount of funding needed to support health care services estimated by the EHCPM decreased because VA updated some of the assumptions used in the EHCPM. For example, VA updated the EHCPM’s assumption accounting for the pay freeze for civilian employees in fiscal years 2011 and 2012, which reduced the base salary of VA employees in future years. VA also used updated data to adjust the estimates produced by the EHCPM and the estimates for long-term care and other health care programs. Updated data for long-term care and other health care programs generally indicated that costs for these services would grow at a slower rate than the data used to support the President’s fiscal year 2013 advance appropriations request indicated. Additional funding for initiatives. According to VA’s budget justification, as a result of the reduced estimate for ongoing health care services, VA increased the estimate of funding needed for its initiatives. This estimate of funding included funding for all initiatives for which funding was not requested in the fiscal year 2013 advance appropriations request and increased funding for some initiatives for which funding had been identified in the earlier request. However, in its fiscal year 2013 budget justification, VA did not make it clear that part of the additional increase in its initiatives estimate occurred because VA’s earlier estimate in support of the advance appropriations request did not include funding for all the initiatives the agency intended to continue. According to OMB staff, the purpose of the advance appropriations request is to provide assurance for the continuation of ongoing health care services and select initiatives that represent direct care to veterans. As a result, rather than including estimates of funding needed to support all initiatives in advance appropriations requests—including the fiscal year 2013 advance appropriations request and the fiscal year 2014 advance appropriations request—the funding needs for all initiatives are taken into account during the following budget formulation cycle. At that time, once updated data are available to produce revised estimates for ongoing health care services, VA and OMB assess the amount of likely resources available to fund initiatives in the context of overall budget constraints. However, VA did not state that some initiatives for which estimates were included in the fiscal years 2013 and 2014 advance appropriations requests would require additional funding if the initiatives were to be continued. (Table 3 indicates the difference in the fiscal year 2013 initiative estimates attributable to VA’s new reporting approach versus additional funding.) VA’s budget justification is used to provide Congress with relevant information for making decisions. The lack of transparency regarding the factors that changed VA’s estimates for ongoing health care services and initiatives results in unclear information for congressional deliberation. Our analysis of the estimates supporting the President’s fiscal year 2013 budget request found that VA’s supporting estimates (1) do not address historical discrepancies between estimated and actual NRM spending and (2) lack analytical support for expected savings from some operational improvements.