VA operates a national health care system that provides health care services to over 5 million patients annually. As part of that system, VA provides mental health services to veterans in inpatient and outpatient settings in a variety of VA health care facilities, including medical centers, CBOCs, and Vet Centers. Veterans receiving these services include homeless veterans, veterans with serious mental illness, and veterans returning from combat who are dealing with postdeployment readjustment issues. Mental health services are provided for a range of conditions such as depression, PTSD, and substance abuse disorders. VA’s Under Secretary for Health heads VA health care programs and is responsible for oversight of operations in VA’s 21 health care networks, which are structured to manage and allocate resources to more than 150 VA medical centers. Mental health services are provided on an inpatient and outpatient basis in medical centers and may also be provided on an outpatient basis in CBOCs, which are associated with medical centers. Within VA, the lead mental health expert is the Deputy Chief Patient Care Services Officer for Mental Health. This position does not have direct authority for operations, but instead serves as an advisor to VA networks and medical centers on mental health services. In addition, the official in this position is responsible for oversight of the Office of Mental Health Services (OMHS) located at VA headquarters. OMHS includes various clinical experts who provide consultation on mental health services, including PTSD and substance abuse, to VA program officials in the networks and medical centers. VA headquarters allocates most of its medical program services budget each year through a general resource allocation system to its 21 health care networks. This system, the Veterans Equitable Resource Allocation (VERA) system, uses a case-mix formula to allocate funding to the networks, which in turn allocate funding to their medical centers. Although the VERA system is used to allocate funds, it does not designate funds for specific purposes or prescribe how those funds are to be used. Medical centers also receive funding for specific purposes, such as prosthetics, from VA headquarters that is not allocated through the VERA system. In addition, VA medical center resources include collections from insurance reimbursements, copayments, and deductibles for the care of some veterans. In April 2002, President Bush established the President’s New Freedom Commission on Mental Health and directed the Commission to identify policies that could be implemented by federal, state, and local governments to improve the delivery of mental health care across the country. In July 2003, the Commission released its final report and recommendations for improving the American mental health care system. After release of the report, VA’s Under Secretary for Health formed a work group of mental health and health care professionals charged with reviewing the Commission’s recommendations to determine if those recommendations were relevant to VA’s mental health program. Following that effort, in July 2004, VA completed its mental health strategic plan for improving the delivery of mental health services within its health care system. This plan was formally approved by the Secretary of VA in November 2004. The mental health strategic plan contained recommended initiatives for improving VA mental health services by addressing a range of issues, including, for example, improving awareness about mental illness and improving access to mental health services. According to VA officials, the mental health strategic plan was designed to address gaps in mental health services provided to veterans across the country. Some of the service gaps identified by the VA were in treating veterans with serious mental illness, female veterans, and veterans returning from combat in Iraq and Afghanistan. The implementation of the mental health strategic plan sought to ensure, for example, that mental health services are provided in community-based outpatient settings; that veterans have consistent access to mental health services across the country; and that acute inpatient mental health services are coordinated with other inpatient services provided to veterans. Within VA, OMHS is responsible for coordinating with the networks and medical centers on the overall implementation of the mental health strategic plan. This includes formulating strategies for allocating funds committed for the plan’s implementation. Such strategies include, for example, the use of RFPs solicited from networks for specific initiatives to be carried out at their individual medical centers. In addition to making these funding decisions, OMHS is also responsible for tracking the use of funds allocated for implementing the mental health strategic plan. While VA initially attempted to develop an estimate of the cost to fully implement the mental health strategic plan, VA has since decided that a comprehensive cost estimate is inappropriate. According to VA, a full- implementation cost estimate is inappropriate because the plan is a “living document” that will continue to change over time as it is implemented, and thus, the costs will change as well. VA, working with an actuarial firm that used certain assumptions provided by VA, developed both a long-term and a shorter-term “unofficial” estimate of implementation costs for the initiatives included in the plan because VA wished to have a “rough estimate” of what might be entailed in providing all services that might be needed if capacity were not a constraint, according to VA officials. VA and the actuary it used concluded, however, that the methodology used to develop these estimates was problematic. For example, the estimates used incorrect projections for utilization of mental health services, in part, because VA’s population and mental health services are different from those in the private sector. VA officials said that more current and accurate data are becoming available for use in projecting the number of OIF and OEF veterans who would be entering the system and need such services, and that such data and improvements in projecting demand were used in development of the President’s budget request for fiscal years 2006 and 2007. VA headquarters allocated about $88 million of the $100 million that VA officials said would be allocated for VA mental health strategic plan initiatives in fiscal year 2005 by using several approaches. About $53 million was allocated directly to medical centers and certain offices and $35 million was allocated through VA’s general resource allocation system to its health care networks, according to VA officials. The approximately $12 million remaining of the $100 million was not allocated by any approach, headquarters officials said, because there was not enough time during the fiscal year to allocate the funds. Officials we interviewed at seven medical centers in four networks reported using allocated funds to provide new mental health services and to provide more of existing services. However, some medical center officials reported that they did not use all allocated funds for plan initiatives by the end of fiscal year, due in part to the length of time it took to hire new staff. VA headquarters allocated about $53 million directly to medical centers and certain offices based on proposals submitted for funding and other approaches targeted to specific initiatives related to the mental health strategic plan in fiscal year 2005. (See table 1.) VA headquarters developed RFPs and solicited submissions from networks for specific initiatives to be carried out at their individual medical centers through these RFPs. VA allocated resources through this and other targeted approaches to support a range of mental health services, based, in part, on the priorities of VA leadership and legislation for programs related to PTSD, substance abuse, and other mental health areas, according to VA headquarters officials. VA headquarters officials told us that the Secretary of VA had identified several areas of the mental health strategic plan that were to be priorities for implementation, including those related to substance abuse, PTSD, services for veterans of OIF/OEF, mental health in CBOCs, and homelessness. Nearly $20 million of the approximately $53 million allocated by using RFPs and other targeted approaches was for mental health services related to legislation that expressly required spending or authorized such services, according to VA officials. In addition, nearly $33 million was allocated for mental health services not directly related to such legislation. Most of the approximately $53 million allocated—about $48 million—went to VA medical centers. PTSD services and OEF/OIF veterans’ mental health care received combined allocations of about $18 million. In addition, combined allocations for Compensated Work Therapy (CWT) totaled nearly $10 million. Other initiatives receiving funding included substance abuse services, domiciliary expansion, and psychosocial rehabilitation for veterans with serious mental illness. In addition, VA allocated $4 million that was initially planned for CWT programs to VA’s Office of Geriatrics and Extended Care to support development of a new nursing home care model. This shift occurred toward the end of the fiscal year, when it appeared that not all mental health strategic plan funding would be allocated that year. VA officials noted that the nursing home model was aligned with initiatives in the mental health strategic plan related to the needs of veterans in long-term care settings. The remaining funds—$600,000—were allocated to VA’s Employee Education System to develop educational programs. VA headquarters officials issued five RFPs from October 2004 to January 2005 that described the specific types of services for which mental health strategic plan funding was available. The RFPs related to PTSD, veterans of OIF and OEF, substance abuse, and psychosocial rehabilitation services were issued in October 2004; the domiciliary RFP was issued in January 2005. All of the RFPs noted that funding would be provided to address unmet needs or gaps in services. Review panels headed by mental health experts within VA reviewed the proposals submitted by networks, ranked them, and provided their rankings to VA’s leadership who made the allocation decisions. VA then allocated funding directly to medical centers for the mental health strategic plan initiatives beginning in February 2005 and continuing throughout fiscal year 2005. In addition to RFPs, VA also used other approaches targeted to specific initiatives based on identified needs. For example, VA headquarters officials used a targeted approach to allocate funding to medical centers to expand mental health services at CBOCs that had fewer mental health visits than a standard that VA identified for this purpose. In addition, VA headquarters allocated funds to support the creation of CWT-supported employment mentor sites in each network. The medical centers selected at those sites were expected to provide training and support for existing and future CWT programs aimed at helping veterans with serious mental illness find and maintain employment.