VA Health Care:

Estimates of Available Budget Resources Compared with Actual Amounts

GAO-12-383R: Published: Mar 30, 2012. Publicly Released: Mar 30, 2012.

Additional Materials:


Randall B. Williamson
(202) 512-7114


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What GAO Found

VA estimates the amount of collections and reimbursements it expects to receive each year by using a projection model and other methods. These estimates have varied when compared with actual amounts for various reasons. VA used a projection model to estimate its collections for fiscal years 2005 through 2012 based on data reflecting the amount of health care—known as workload—VA has provided in the past and the amounts VA has collected in the past. To estimate its collections in fiscal year 2013, VA began using a second projection model, known as the Integrated Collections Forecasting Model (ICFM) to estimate collections. The ICFM relies on many of the same data sources as VA’s previous collections model, but it also incorporates forecasts related to future workload. For fiscal years 2005 through 2011, VA both overestimated and underestimated its collections. For example, for fiscal year 2011, VA overestimated the amount of its collections by about $582 million, or 17 percent. VA officials attribute this difference to several factors, such as overestimating the amount of collections VA would receive when it billed veterans’ third-party insurance plans. To estimate the amount of reimbursements it would likely receive in each of the fiscal years, VA used one of two methods depending on the year. For fiscal years 2005 through 2011, VA applied a growth rate to its most recent full year data on actual reimbursement amounts received to reflect anticipated increases in reimbursements, and for fiscal years 2012 and 2013, VA relied on individual reimbursement estimates provided by each of VA’s 21 Veterans Integrated Service Networks. While VA’s estimates of reimbursements were relatively consistent with actual amounts in fiscal years 2005 through 2007, in fiscal years 2008 through 2011, VA underestimated reimbursements by an average of $74 million, or 26 percent annually.

VA estimates its unobligated balances based on anticipated spending, and these estimates have been generally less than actual amounts for various reasons. Approximately 18 months in advance of the fiscal year for which it is requesting appropriations, VA begins to develop an estimate of the unobligated balance likely to be carried over from the prior year into that year. VA determines this amount based on an estimate of its likely spending—that is, obligations—in that prior fiscal year, relative to available resources. To the extent VA does not obligate all of its available resources in the previous year, it can carry over these resources into the following fiscal year up to the amount authorized by appropriations acts. For fiscal years 2005 through 2011, VA’s estimates of its unobligated balances available to be carried over were generally less than the actual amounts available to be carried over. For example, while VA estimated it would have an unobligated balance of $0 to carry over into fiscal year 2011, VA’s actual unobligated balance was about $1.4 billion. In contrast, for fiscal year 2012, VA’s estimated and actual unobligated balances were nearly equal—$1.1 billion and $1.16 billion, respectively. A change in VA policy helps explain the changing relationship between VA’s estimates and its actual unobligated balances. VA officials told us that prior to fiscal year 2012, VA’s policy was for its annual budget estimate to assume that VA would not have unobligated balances to carry over that would help lower the request for new appropriations for that fiscal year. In order to implement this policy, VA assumed that it would obligate all of its available resources during the fiscal year for which they were first made available. In contrast, VA officials told us that VA changed this policy so that the agency’s annual budget estimate was based on the assumption that VA would have an unobligated balance to carry over into fiscal year 2012 in order to help lower the amount of new appropriations requested for that year.

In commenting on a draft of this report, VA requested that we replace some of the language from our report that described VA’s change in policy when estimating the unobligated balance to be carried over into fiscal year 2012. VA requested that we substitute language explaining that three unique events contributed to the unobligated carry over into fiscal year 2012: a federal pay freeze, savings from operational improvements, and updated estimates that reduced program funding requirements. We did not remove the language VA requested concerning the information on the fiscal year 2012 change in policy that VA officials consistently provided us throughout the course of our work. We did, however, revise our draft report to include VA’s new information although we also note that VA did not provide documentation to support its assertion.

Why GAO Did This Study

The Department of Veterans Affairs (VA) is one of the nation’s largest health care providers. In fiscal year 2011, VA spent about $51.4 billion to provide health care to about 6.2 million patients. To provide this care, VA operates more than 150 hospitals, 130 nursing homes, 800 outpatient clinics, and 300 readjustment counseling centers through 21 regional health care networks known as Veterans Integrated Service Networks. VA is required by law to provide health care services to certain veterans and may provide care to other veterans on a discretionary basis. In general, veterans must enroll in the VA health care system to receive VA’s medical benefits package, which includes coverage for a full range of hospital and outpatient services, prescription drug coverage, 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 amount of funding VA receives to provide its health care services is determined by Congress in the annual appropriations process. Congress provided new appropriations of about $48.2 billion for fiscal year 2011 and advance appropriations of $50.6 billion for fiscal year 2012 for VA health care. In preparation for the appropriations process, VA must annually develop a budget estimate of the resources that it believes are needed to provide its health care services. This estimate is subsequently used to help inform the President’s formal budget request for appropriations for VA health care.

VA’s annual budget estimate for a fiscal year includes estimates of the resources available to provide VA health care services. This includes an annual estimate of the amount of resources expected to be available from collections and reimbursements that VA anticipates it will receive in the fiscal year. It also includes an estimated amount of resources VA has not spent—known as an unobligated balance—that VA is authorized to carry over into the following fiscal year from the previous one. VA’s collections 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). As indicated in the President’s budget request for VA for fiscal year 2012, VA estimated it would receive $3.4 billion in collections and reimbursements and would carry over an unobligated balance of $1.1 billion from fiscal year 2011. The President’s fiscal year 2012 budget request assumed that VA’s total spending for health care services would be $54.9 billion to serve an estimated 6.2 million patients.

VA’s estimates of collections, reimbursements, and unobligated balances are part of VA’s overall formulation of its annual budget estimate. This process is inherently complex, as VA must rely on assumptions and imperfect information. The process begins approximately 18 months in advance of the fiscal year for which the President is requesting funding. As such, VA’s budget formulation, including its estimates of collections, reimbursements, and unobligated balances, occurs with significant uncertainty about the future. Our past work has highlighted VA’s challenges regarding budget formulation in making realistic assumptions about the budgetary impact of policy changes, making accurate calculations, and obtaining sufficient data for useful budget projections.

Given the importance of VA’s collections, reimbursements, and unobligated balances in the formulation of its budget estimate and given VA’s budget formulation challenges, you asked us to examine VA’s experience estimating these funds in the context of the President’s budget request. In this report, we examine how VA:

  1. estimates the amount of collections and reimbursements, how the estimated amounts have compared to actual amounts in recent years, and what factors may explain any differences; and

  2. estimates the amount of its unobligated balances, how the estimated amounts have compared to actual amounts in recent years, and what factors may explain any differences.

For more information, contact Randall B. Williamson, (202) 512-7114 or .

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