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Value-Based Care News

$2.75B in Unexpected Healthcare Spending Impacts VA Budget

According to a GAO report, the VA experienced a funding gap of $2.75 billion in 2015 due to unforeseen healthcare spending for community-based care programs and new drug costs.

By Jacqueline LaPointe

- The Department of Veteran’s Affairs (VA) has encountered $2.75 billion in unanticipated healthcare spending  during the 2015 fiscal year due to an increase in community care program participation and new hepatitis C drugs, according to a recent report from the Government Accountability Office (GAO). 

VA encountered $2.75 billion in unanticipated healthcare spending in 2015

The GAO found that the VA had not managed its healthcare budget using transparent and consistent methods for calculating accurate expenditures.

“We and others have reported on past challenges VA has faced regarding the reliability, transparency, and consistency of its budget estimates for medical services used to support the President’s budget request, as well as the agency’s ability to accurately track obligations for medical services,” explained the report.

While the VA operated its healthcare initiatives using $51 million in budgetary resources in 2015, the department requested additional funding by April to account for unexpected healthcare costs related to care in the community programs.

The programs needed $2.34 billion to maintain an increase in participation. This accounted for 85 percent of the total funding gap in 2015.

READ MORE: Prescription Drug Rates Remain Top Healthcare Supply Chain Issue

To resolve funding gaps in the healthcare budget, Congress allowed the VA to use $3.3 billion from the Veteran’s Choice Program, an initiative that allows veterans to receive care from different providers when their local VA medical centers cannot provide close or timely care.

Despite an increase in veteran care access through these programs, the reallocation of funds indicated that the Veterans Choice Program experienced significantly lower utilization rates that anticipated.

Out of the $3.2 billion program budget, the Veterans Choice Program only used $413 million. The report explained that the initiative suffered from administrative weaknesses, such as incomplete provider networks and uninformed VA medical center staff who recommended veterans to other community care programs despite a separate budget for the Veterans Choice Program.

“The unexpected increase in CIC [community in care program] obligations in fiscal year 2015 exposed weaknesses in VA’s ability to estimate costs for CIC services and track associated obligations,” noted the report.

The report also stated that the VA experienced unpredicted healthcare spending for new hepatitis C drugs, totaling $0.41 billion.

READ MORE: 32 Orgs to Cut Healthcare Costs, Use Under CMS Community Demo

“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,” added the GAO report.

The new chronic disease management drug was used to treat about 30,000 veterans at $25,000 to $124,000 per treatment regimen. The VA even had to limit access to the drug due to budgetary restrictions.

The GAO reported that a lack of standard policies across the VA for calculating and monitoring healthcare obligations led to funding gaps. The VA medical centers, Veterans Integrated Service Network, and the department did not follow consistent procedures despite having the responsibility of creating healthcare budgets.

Budgets are also recorded on several claims and accounting systems that are not integrated, stated the report. Unintegrated systems require staff to record healthcare spending separately, but the GAO noticed that this led to discrepancies.

The VA has defined several changes to the healthcare budget process to prevent future funding gaps.

READ MORE: Hospitals Maintain Test Use Despite Healthcare Price Transparency

To better estimate care in the community program costs, the VA has implemented new policies that use historical healthcare spending data to calculate potential budgets. The VA updated its Fee Basis Claims System to automatically populate estimated costs of many procedures using historical claims data.

VA medical centers are also required to regularly review and correct inaccurate estimated costs in the claims systems. The new policy intends to correct obvious errors, such as data entry mistakes.

Additionally, the VA has started to allocate funds specifically to medical centers to ensure these facilities stay within budget. If a VA medical center runs out of funds, it would have to request additional resources from the department. The VA intends for the new policy to encourage medical centers to track specific healthcare spending trends, such as hepatitis C drug costs.

More staff have also been educated about referring patients to the Veterans Choice Program, which should help alleviate budgetary restrictions on overpopulated community care programs.

In the long-term, the VA intends to replace several claims and accounting systems, but these plans depend on future budgets and the scope of the project.

“While VA has made these efforts to better manage its budget, uncertainties remain regarding utilization of VA’s health care services,” stated the GAO report.

Dig Deeper:

Patient Scheduling Still Problematic at VA Medical Settings

Does Veterans’ Care Delivery Require Stronger Monitoring?


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