VA Says Health Care Costs Grew Faster Than Expected; Department Faces $1B Shortfall

The Department of Veterans Affairs has an unexpected $1 billion shortfall in its current budget for veterans' health care, the AP/Chicago Sun-Times reports (AP/Chicago Sun-Times, 6/24). According to the Washington Post, the shortfall came to light during an administration mid-year budget review and "was acknowledged only during lengthy questioning" of Jonathan Perlin, VA undersecretary for health, by House Veterans' Affairs Committee Chair Steve Buyer (R-Ind.) at a hearing Thursday. Perlin said VA has used more than $300 million on health care from a fund that had been expected to be carried over into the fiscal year 2006 budget. Further, he said as much as $600 million originally intended for capital spending will go toward the shortfall (Edsall, Washington Post, 6/24).

Reason Behind Shortfall
VA officials told Congress that the unexpected shortfall occurred because they had used an inaccurate, two-year-old financial model to calculate their spending requests. VA officials said the model underestimated the impact of the Afghanistan and Iraq wars and made other forecasting errors. Perlin said budget forecasts are created two years in advance, meaning that the current year's predictions were made before the 2003 invasion of Iraq. Spending growth was projected by VA to grow 2.5% this year but has actually increased by 5%.

Additional Funding?
The House already has approved its FY 2006 appropriations for VA, allocating $28.8 billion for health programs (Katz/Starks, CQ Today, 6/23). According to the Spokane Spokesman-Review, the Senate still has time to address funding shortfalls for FY 2006 (Graman, Spokane Spokesman-Review, 6/24). VA health care programs received $28.2 billion in FY 2005, and a similar amount was requested by President Bush for FY 2006. Sen. Kay Bailey Hutchison (R-Texas) said additional funding should come through the regular budget process rather than by supplemental request. She added that she would like the Bush administration to come up with a funding plan. Democrats have revived an amendment Sen. Patty Murray (D-Wash.), a member of the Senate Appropriations VA subcommittee, first offered in April that would add $1.9 billion for VA health care (CQ Today, 6/23). Senate Veterans' Affairs Committee Chair Larry Craig (R-Idaho) said the Senate will take no action on supplemental funding for FY 2005 until more information on the shortfall is available. Craig said he will hold a hearing next week on the issue (Washington Post, 6/24).

VA Denied Problem in April
Murray at a press conference cited an April 5 letter from VA Secretary Jim Nicholson that states: "I can assure you that VA does not need emergency supplemental funds in FY 2005 to continue to provide timely, quality service that is always our goal." The letter was written "in a bid to defeat" Murray's amendment, the Post reports. Murray aides said they had obtained a draft copy of the administration's mid-year review, which occurred in early April, "suggesting that the department knew of the budget problems at the time Nicholson wrote the letter," the Post reports (Washington Post, 6/24). The Senate ultimately adopted an amendment introduced by Craig that increased VA health care funding by $410 million.

Congressional Reaction
Craig on Thursday said, "When I made the argument for the additional funding, I was assured by the department that the $410 million in additional money was sufficient to meet the needs of veterans. To find out soon afterward that I was supplied with inaccurate or dated information is extremely frustrating" (Spokane Spokesman-Review, 6/24). He added, "I was on the phone this morning with [Nicholson] letting him know that I am not pleased that this has happened" (AP/Newark Star-Ledger, 6/24). Buyer said, "This situation is unacceptable, and we will solve the problem" (Cohn, CongressDaily, 6/24). Murray said VA's initial denial then admission of budget problems is "outrageous," adding, "It's either incompetence or they were directly lying to us" (Spokane Spokesman-Review, 6/24). The Post reports that "[i]n a rare display of bipartisanship," Craig appeared with Murray at the news conference "and said he agreed with many of her comments" (Washington Post, 6/24). Senate Minority Leader Harry Reid (D-Nev.) said the Bush administration "assured [Congress] that the VA had the funding they needed; this was clearly either shortsighted or intentionally misleading" (Katz/Starks, CQ Today, 6/23). Rep. Ginny Brown-Waite (R-Fla.), a member of the House Veterans Affairs Committee, said, "Some would say this is a vindication of ... Buyer, who wanted to impose enrollment fees." Buyer had supported a proposal from the Bush administration that would have charged some veterans annual $250 enrollment fees for health care (Allen, CQ Today, 6/23).

Nicholson Response
Nicholson in a written statement said, "The health care needs of America's veterans are among VA's highest priorities. Working with our partners in Congress, I'm confident that VA's budget will continue to provide world-class health care to the nation's veterans" (AP/Newark Star-Ledger, 6/24).

Veterans' Reaction
Richard Fuller, legislative director of Paralyzed Veterans of America, said, "You could see [the shortfall] happening, clinics shutting down, appointments delayed." Joseph Violante, legislative director of the Disabled American Veterans, said Perlin's testimony confirmed veterans' beliefs that the Bush administration is "shortchanging veterans." The Post reports that "[v]eterans groups are particularly angry with Buyer, who was specially chosen by the House leadership ... to keep spending down" (Washington Post, 6/24).