VA operates one of the largest health care delivery systems in the nation, providing care to a diverse population of veterans. VA operates about 150 hospitals, 130 nursing homes, 950 outpatient clinics, and 230 readjustment counseling centers—Vet Centers—through 21 regional health care networks called Veterans Integrated Service Networks. VA is responsible for providing health care services to various populations—including an aging veteran population and a growing number of younger veterans returning from the military operations in Afghanistan and Iraq. VA is required by law to provide health care services to certain veterans and may provide care to other 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 noninstitutional 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 nursing home care. The population of veterans to whom VA is required to provide nursing home care is more limited than the population to whom VA is required to provide other health care services. VA is required by law to provide nursing home care to certain veterans needing such care who also have service-connected disabilities, and VA also makes nursing home care available to other veterans on a discretionary basis as resources permit. VA’s enrollment system includes eight categories for enrollment established by law to manage access to services in relation to available resources. The order of priority for the categories is generally based on service-connected disability, income, or other special status such as having been a prisoner of war. If sufficient resources are not available to provide care that is timely and acceptable in quality, VA must restrict enrollment consistent with its priority categories. VA also provides enhanced priority status for veterans with combat experience—including those who participated in Operation Enduring Freedom in Afghanistan, Operation Iraqi Freedom, and Operation New Dawn in Iraq—for up to 5 years from their date of discharge or release from active-duty service. Veterans who enroll in VA health care may choose not to access VA’s health care services in any given year. This is in part because many veterans have other options, such as Medicare, Medicaid, or private health insurance, to access and pay for health care services. Enrollees choose whether to access services through VA or other providers based on factors such as their proximity to VA providers. Additionally, downturns in economic conditions may reduce veterans’ access to sources of private insurance, such as employer-sponsored insurance, and influence enrollees’ choice to access VA health care. Estimating the resources required to provide health care services to veterans and developing VA’s budget request is a collaborative process involving several offices within VA, mainly at VA headquarters. Within VA, VHA’s Office of Finance is responsible for policy and operational issues relating to budget formulation for all VHA services. It works with the Office of the Assistant Deputy Under Secretary for Health for Policy and Planning, which has responsibilities for managing knowledge and data related to VHA’s policies and strategic planning. Program offices, which are responsible for setting policies for providing specific health care services, provide information to support the budget formulation process. VA’s Office of Budget is responsible for overseeing the budget formulation process for the department as a whole on behalf of the Secretary and submitting VA’s budget request for OMB’s review and consideration in developing the President’s Budget. OMB plays a key role in the budget formulation process by providing the framework for agencies to follow. OMB annually issues Circular No. A-11, which contains detailed instructions and schedules for the submission of agencies’ budget estimates. It also includes other material to ensure that agency budget requests adhere to standardized conventions and formats. OMB also provides general guidance to federal agencies via bulletins and memoranda that include, among other things, the President’s priorities to consider as agencies prepare their budget submissions. Additional communications between OMB and an agency can occur anytime during the year. VA, like other agencies, begins formulating a budget request approximately 10 months before the President submits the budget to Congress in early February. This is approximately 18 months before the start of the fiscal year to which the request relates and about 30 months prior to the start of the fiscal year to which the advance appropriations request relates. The formulation of VA’s budget request is a process that follows the general schedule in table 1. VA uses a projection model to develop estimates of the resources needed to deliver most of the health care services VA provides. These services accounted for most of VA’s health care budget estimate for fiscal year 2011. VA uses other methods to develop nearly all of the remaining portions of its health care budget estimate for long-term care and other services as well as proposed initiatives. VA uses what is known as the Enrollee Health Care Projection Model (EHCPM)—a model developed in partnership with VA’s actuarial consultant—to estimate the amount of resources VA will need to meet the expected demand for most of the health care services VA provides. These services accounted for 83 percent of VA’s health care budget estimate for fiscal 2011. VA used the EHCPM to estimate the resources needed for fiscal year 2011 for 61 health care services, which VA grouped into seven service types (see app. I for a list of the 61 health care services that were grouped into the seven service types). Outpatient services accounted for almost half of the resources VA estimated using the EHCPM for fiscal year 2011. (See fig. 1.) The EHCPM is used to estimate needed resources based on the total cost of providing each health care service. VA officials said this total cost reflects direct patient costs as well as costs associated with management, administration, and maintenance of facilities. 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. (See fig. 2.) Each component is subject to a number of complex adjustments to account for the characteristics of VA health care and the veterans who access VA’s health care services. The EHCPM makes these projections 3 or 4 years into the future for budget purposes based on data from the most recent fiscal year. For example, in 2009, VA used data from fiscal year 2008 to develop its health care budget estimate for the fiscal year 2011 request, including the advance appropriations request for fiscal year 2012. To project the expected number of veterans who will be enrolled in VA health care, the EHCPM relies on a combination of VA and other federal data to identify current enrollees and to estimate how many eligible, nonenrolled veterans will choose to enroll. The EHCPM uses VA data to identify the number of current enrollees in VA health care and to calculate historical enrollment rates by various characteristics, including age, gender, priority level, and geographic location. In addition, the EHCPM uses data developed by VA that combine federal census data on veterans and Department of Defense data on service members separated from active duty since the last decennial census to identify the number of eligible veterans not currently enrolled in VA health care. The data developed by VA also incorporate Department of Defense estimates of how many service members will separate from active duty each year into the future. The EHCPM uses these data to estimate how many eligible veterans will choose to enroll in VA health care by applying VA’s historical enrollment rates to this population. To project the utilization or the quantity of VA’s health care services veterans will use and the unit costs of VA’s health care services, VA groups these services into two major categories in the EHCPM: (1) those services that VA provides in a manner comparable to other providers, whose services are paid for by Medicare and private health insurers; and (2) those services that are unique to or are provided in a different manner by VA. For example, VA provides services, such as emergency room visits and physician office visits, in a manner comparable to other providers. In contrast, VA provides rehabilitation services to homeless veterans and certain types of prosthetic services that VA officials said are not generally offered by other providers. For health care services that VA provides in a manner comparable to other providers, the EHCPM uses utilization and unit-cost data developed by VA’s actuarial consultant that reflect data from Medicare and private health insurers in addition to data from VA’s own experience. VA used these data for 33 of the 61 health care services whose estimates were developed by the EHCPM for fiscal year 2011. (See app. I for the data sources used to generate utilization and unit-cost projections for each of the 61 health care services for fiscal year 2011.) Data from Medicare and private health insurers allow the EHCPM to better account for the impact of a number of factors—such as age, gender, geographic location, and benefit structure—that may affect utilization and unit-cost projections because these data represent more than 60 million individuals, compared with the 8.5 million veterans expected to be enrolled in VA health care in fiscal year 2011. Additionally, VA officials said that using data from Medicare and private health insurers allows the EHCPM to account for enrollees’ utilization of health care services outside of VA health care. For health care services that are unique to or are provided in a different manner by VA, the EHCPM uses utilization and unit-cost data from VA’s own experience. VA used these data for 28 of the 61 health care services whose estimates were developed by the EHCPM for fiscal year 2011.