VA Health Care: Changes Needed to Improve Resource Allocation to 
Health Care Networks (14-MAY-02, GAO-02-744T).			 
                                                                 
The Department of Veterans Affairs (VA) spent $21 billion in	 
fiscal year 2001 to treat 3.8 million veterans--most of whom had 
service-connected disabilities or low incomes. Since 1997, VA has
used the Veterans Equitable Resource Allocation (VERA) system to 
allocate most of its medical care appropriation. GAO found that  
VERA has had a substantial impact on network resource allocations
and workloads. VERA shifted $921 million from networks primarily 
in the northeast and midwest to networks in the south and west in
fiscal year 2001. VERA, along with other VA initiatives, has	 
provided an incentive for networks to serve more veterans. In	 
GAO's view, VERA's overall design is a reasonable approach to	 
allocating resources according to workloads. It provides a	 
predetermined dollar amount per veteran served to each of VA's 22
health care networks. This amount varies depending upon the	 
health care needs of the veteran served and local cost		 
differences. However, GAO identified weaknesses in VERA's	 
implementation. First, VERA excludes about one fifth of VA's	 
workload in determining each network's allocation. Second, VERA  
does not account well for cost differences among networks	 
resulting from variation in their patients' health care needs.	 
Third, the process for providing supplemental resources to	 
networks through VA's National Reserve Fund has not been used to 
analyze how the need for such resources is caused by potential	 
problems in VERA's allocation, network inefficiency, or other	 
factors. This testimony is based on an April report (GAO-02-338).
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-744T					        
    ACCNO:   A03332						        
  TITLE:     VA Health Care: Changes Needed to Improve Resource       
Allocation to Health Care Networks				 
     DATE:   05/14/2002 
  SUBJECT:   Health care cost control				 
	     Health care programs				 
	     Program evaluation 				 
	     Veterans benefits					 
	     National Reserve Fund				 
	     VA Veterans Equitable Resource			 
	     Allocation System					 
                                                                 

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GAO-02-744T
     
A

Test i mony Before the Subcommittee on National Security, Veterans Affairs,
and International Relations, Committee on Government Reform, House of
Representatives

For Release on Delivery Expected at 2: 00 p. m. VA HEALTH CARE Tuesday, May
14, 2002 Changes Needed to

Improve Resource Allocation to Health Care Networks

Statement of Cynthia A. Bascetta Director, Health Care- Veterans? Health and
Benefits Issues

GAO- 02- 744T

Mr. Chairman and Members of the Subcommittee: We are pleased to be here
today to discuss the Department of Veterans Affairs? (VA) health care
resource allocation system and how it could be improved. In fiscal year
2001, VA used the Veterans Equitable Resource Allocation (VERA) system to
allocate $17.8 billion of its $20.3 billion health care budget to 22
regional health care networks. Networks allocate the resources they receive
from VERA to their respective facilities. VERA was intended to equitably
allocate resources by providing comparable resources to networks with
comparable workloads. Before VERA was

implemented, resources were allocated to facilities primarily on the basis
of their historical expenditures. By aligning resources with workloads, VERA
shifted approximately $921 million among VA?s networks in fiscal year 2001
compared to what the allocations would have been under the previous
allocation system.

In my remarks today, I will briefly discuss our conclusion that VERA?s
design is reasonable and highlight our recommendations for improving its
implementation to better align resources with workload. My comments are
based on a report we issued on February 28, 2002. 1 To examine these issues,
we reviewed VA documents and consultants? reports on VERA?s original design,
proposed VERA changes, and actual VERA changes. We also interviewed VA
management officials in headquarters and eight

networks, conducted site visits in five VA health care networks, interviewed
VA and other public and private sector health care resource allocation
experts, and analyzed current literature on health care resource allocation.
We also relied on our more than 10 years of work reviewing VA?s resource
allocation process in addition to other health care financing

work. 2 In addition, we analyzed changes that have been made in resources
allocated among the networks since VERA was implemented and the effect of
making adjustments to VERA.

In summary, VERA?s design is reasonable for equitably allocating resources,
but certain improvements to VERA?s implementation could result in a better
allocation of comparable resources for comparable workloads. VERA?s design
is reasonable because allocations are based primarily on

1 U. S. General Accounting Office, VA Health Care: Allocation Changes Would
Better Align Resources with Workload, GAO- 02- 338 (Washington, D. C.: Feb.
28, 2002). 2 See the Related GAO Products page at the end of this testimony.

network workload and adjustments are made for factors beyond the control of
network management. These include the health care needs of veterans and
certain local cost differences. In addition, VERA?s design protects patients
from the effects of network budget shortfalls. But

implementation weaknesses we identified result in approximately $200 million
annually that could be reallocated to better align network resources with
workloads. First, VERA?s measurement of network workload is not as accurate
as it could be to determine each network?s allocation because VERA excludes
most veterans with higher incomes who do not have service- connected
disabilities- about one- fifth of VA?s workload. Second, VERA does not
adjust as accurately as it could for cost differences among networks that
result from differences in patients? health care needs or case mix across
networks. We also found that VA has not analyzed whether the networks? need
for supplemental resources- provided through the National Reserve Fund- is
the result of potential problems in VERA, network inefficiency, or other
factors. Without such information, VA can neither ensure the appropriateness
of supplemental funding nor take corrective action.

We made recommendations to correct weaknesses in VERA?s workload and case-
mix measures. Although VA concurred with all our recommendations, in
commenting on a draft of our report, VA stated that it planned to wait for
further study before determining how and whether to change VERA for fiscal
year 2003. Given the already extensive study by VA and others of VERA?s
workload and case- mix measures, we believe VA should implement these
changes for fiscal year 2003. In addition, VA?s response to our
recommendation regarding the supplemental funding process does not fully
address our recommendation because it does not provide information on the
relative contributions of specific factors to network shortfalls such as
network inefficiency, imperfections in VERA, and other factors.

Background Before VERA was implemented during fiscal year 1997, VA based its
allocation of resources primarily on facilities? historical expenditures. By

the 1990s, the share of the veteran population in the Northeast and Midwest
declined while the share of the veteran population in the South and West
increased. However, resources continued to be allocated based on historical
expenditures, resulting in inequitable resource allocations to some VA
networks. VERA was intended to correct these regional inequities.

VERA allocates nearly 90 percent of VA?s medical care appropriation. These
allocations are for six categories of expenses: complex patient care, basic
patient care, equipment, nonrecurring maintenance, education support, and
research support. 3 Resources for the first four categories are allocated on
the basis of patient workload and account for approximately 96 percent of
the resources VERA allocates. 4 Allocations for education support and
research support are based on workload measures specific to

those activities within the VA health care system. As VERA was being
implemented, two major changes in VA health care occurred as a result of the
Veterans? Health Care Eligibility Reform Act of 1996. First, by eliminating
certain restrictions preventing VA from treating some veterans in outpatient
care settings, the act allowed VA to begin delivering care, where
appropriate, in outpatient rather than inpatient settings- a practice
consistent with care delivery throughout the health care industry. Second,
VA introduced an enrollment system to manage access to VA health care in
relation to available resources. As required by the act, VA established
seven priority categories for enrollment. Higher priority for enrollment is
given to veterans with service- connected

disabilities, lower incomes, or other statuses such as former prisoners of
war. Priority 7, the lowest priority level, is given primarily to veterans
without a service- connected disability, who have higher incomes.

VERA?s Design Is a VERA?s design is a reasonable approach to resource
allocation and has

ReasonableApproach helped promote more comparable resource allocations for
comparable workloads in VA. Consistent with the literature and expert views
on

to Resource Allocation resource allocation, VERA allocates resources
primarily on the basis of

network patient workload, attempts to adjust network resources for factors
beyond the control of network management, and provides protection to
patients against network budget shortfalls. As a result, VERA

has shifted substantial resources among regions to better reflect workload.
3 Networks and their facilities also receive resources from the medical care
appropriation not allocated through VERA for such things as prosthetics,
homeless programs, and readjustment counseling. In addition, VA facilities?
budgets include collections for insurance reimbursements, copayments, and
deductibles for the care of some veterans.

4 We examined these four categories in our analysis. We did not examine the
education support and research support categories, which constitute
approximately 4 percent of VERA?s allocation.

VERA is a reasonable approach because it allocates resources to networks
primarily based on workload. Each network receives an allocation based on a
predetermined dollar amount per veteran served. This is consistent with how
other federal health care payers, such as the Medicare and

Medicaid programs, allocate resources to managed care plans for their
patient workload. Because VERA uses workload to allocate resources, networks
that have more patients generally receive more resources than networks that
have fewer patients. By receiving funding based on workload, VA?s health
care networks have an incentive to focus on aligning facilities and programs
to attract patients rather than focusing on maintaining existing operations
and infrastructure regardless of the number of patients served. In addition,
VERA adjusts network allocations for cost differences beyond

the networks? control. VERA does this through adjustments for networks? case
mix by classifying patients into one of three categories- complex care,
basic vested care, and basic ?non- vested? care- which are based on the
level of patient health care need and the costs associated with that care.

Complex care comprises about 4 percent of VA?s workload and includes
patients who generally require significant high- cost inpatient care as an
integral part of their rehabilitation or functional maintenance. Basic
vested care and basic non- vested care patients- who compose 84 percent and
12 percent of VA?s workload, respectively- include patients whose health
care needs are more routine and can be met in an outpatient setting. These
patients typically require significantly fewer resources than complex care
patients. However, basic vested care patients rely primarily or completely
on VA for meeting their health care needs, while basic non- vested care
patients receive only part of their care through VA and have not undergone
comprehensive medical evaluations by VA practitioners. In fiscal year 2001,
the capitation amount- or dollar amount per patient served- was $42,765 for
complex care, $3, 126 for basic vested care, and $121 for basic non- vested
care. 5 In addition, VERA adjusts for cost differences beyond networks?
control by applying a price adjustment factor to each network?s allocation
to account for uncontrollable geographic price differences. The adjustment
lowers the VERA allocation for networks located in lower cost

5 VERA allocated about $16.2 billion in fiscal year 2001 for basic and
complex care and $878 million for equipment and nonrecurring maintenance
based on patient workload. In addition, VERA allocated about $688 million
for research support and education support based on other workload measures.

areas and increases the allocation for networks located in higher cost
areas.

Also contributing to the reasonableness of VERA?s approach is that it
provides protection to patients against network budget shortfalls. VERA does
this by providing supplemental resources through the National Reserve Fund
to networks that have difficulty operating within their available resources.
These supplemental allocations protect patients from the risk that a health
care network would be unable to provide services if its expenditures
exceeded available resources. Since fiscal year 1999, resources distributed
through the National Reserve Fund have supplemented VERA allocations in six
networks and averaged approximately 1 percent of total VERA allocations.

As a result of VERA?s approach, resources have shifted among regions to
better reflect workload. Consequently, resources moved primarily from
networks located in the Northeast and Midwest to networks located in the
South and West. In fiscal year 2001, VERA shifted approximately $921 million
among networks compared to what the allocations would have been if networks
received the same proportion of funding they received in fiscal year 1996,
the year before VERA was implemented. VERA shifted the most resources in
fiscal year 2001 to Network 8 (Bay Pines)- approximately $198 million- and
the most resources from Network 3 (Bronx)- approximately $322 million-
compared to what allocations would have been if both networks had received
the same proportion of funding they received in fiscal year 1996.

Implementation Although VERA?s overall design is a reasonable approach to
equitably

Specifics Weaken allocate resources, we identified weaknesses in its
implementation that

compromise the achievement of its goal of allocating comparable VERA

resources for comparable workloads. To correct these weaknesses we made
several recommendations that, if implemented, would better align
approximately $200 million in resources with workloads in VA?s health care
networks. 6 Specifically, we recommended that VERA improve its workload
calculations to include all veterans served- including Priority 7 veterans,
the most rapidly growing proportion of VA?s workload. We also recommended
that VA improve its adjustment for cost differences beyond

6 We also made several other recommendations to improve VERA?s
implementation. For a complete discussion of our recommendations, see GAO-
02- 338.

network control by incorporating more categories into VERA?s case- mix
adjustment to more accurately account for the differences in networks?
patient health care needs. Finally, we recommended that VA improve its
process to protect patients from network budget shortfalls by determining
the extent to which different factors cause networks to need supplemental
resources in order to address factors, such as inefficiency, that may cause
budget shortfalls.

VA Could Better Align To improve its network workload calculation, VERA
should account for all

Resources with Workload veteran workload served- including Priority 7
veterans, who have higher

incomes and no service- connected disabilities. 7 By excluding most and
Network Cost

Priority 7 veterans from VERA?s workload calculation, networks with a
Differences

higher proportion of Priority 7 veterans have fewer resources per patient to
treat veterans than networks with a lower proportion of Priority 7 veterans.
For example, in fiscal year 2001, Network 3 (Bronx) had the highest

proportion of Priority 7 veterans, 37 percent, and Network 20 (Portland) had
the lowest proportion, 14 percent. Nationally, VA?s proportion of Priority 7
veterans was 22 percent of total workload in fiscal year 2001.

When VERA was established, the number of higher income veterans without
service- connected disabilities that VA treated was about 4 percent of the
total number of veterans treated in fiscal year 1996. VA decided not to
include most of these Priority 7 veterans in VERA?s basic care workload
calculations because of their small numbers and the expectation that
collections from copayments, deductibles, and third- party insurance would
cover most of their costs. However, Priority 7 veterans accounted for 22
percent of VA?s workload in fiscal year 2001- a substantial increase from
107,520 patients in fiscal year 1996 to an estimated 827,722 patients in
fiscal year 2001. 8 In addition, VA projects that the growth in Priority 7
patients

will continue at least through fiscal year 2010. Although VA initially
expected to cover the majority of Priority 7 patient costs through

7 VA?s Office of Inspector General also recommended that VA include Priority
7 workload in the VERA model. See Office of Inspector General, Department of
Veterans Affairs, Audit of The Availability of Healthcare Services in the
Florida/ Puerto Rico Veterans Integrated Service Network (VISN) 8, Report
Number 99- 00057- 55 (Washington, D. C.: Aug. 13, 2001).

8 VERA does include some Priority 7 veterans in its workload measure. In
fiscal year 2000, about 8 percent of Priority 7 veterans treated were
included in VERA?s workload measure because they were complex care patients
or basic care patients with service- connected conditions.

collections, VA collected only 24 percent of Priority 7 veterans? costs in
fiscal year 2000. As a result, networks pay for most of the costs of
Priority 7 services through VERA allocations made for the service- connected
and low- income veteran workloads.

Inclusion of Priority 7 veterans in VERA?s basic vested care workload would
increase the comparability of resources among networks? per patient treated.
If VERA were to have funded Priority 7 basic vested veterans at 50 percent
of their costs, as VA had considered, resources would have moved from
networks with smaller proportions of Priority 7 veterans to networks with
larger proportions of Priority 7 veterans based on our simulation (see fig.
1). VERA allocations would have increased to 9 networks in the Northeast and
Midwest and decreased to 10 networks in the South and West in the fiscal
year 2001 VERA allocation.

Figure 1: Estimated Change in VERA Allocations from Adding Priority 7 Basic
Vested Veterans to VERA Workload at Half Their National Cost, Fiscal Year
2001

Network In dollars

1 (Boston)

928,351

2 (Albany)

2,544,252

3 (Bronx)

10,326,688

4 (Pittsburgh)

4,659,927

5 (Baltimore)

-1,051,028

6 (Durham)

-2,348,346

7 (Atlanta)

269,207

8 (Bay Pines)

-2,449,086

9 (Nashville)

-1,474,387

10 (Cincinnati)

-1,404,498

11 (Ann Arbor)

945,779

12 (Chicago)

1,717,229

13 (Minneapolis)

314,752

14 (Lincoln)

1,021,387

15 (Kansas City)

412,685

16 (Jackson)

-5,495,659

17 (Dallas)

-2,354,313

18 (Phoenix)

-920,077

19 (Denver)

1,235,141

20 (Portland)

-3,550,297

21 (San Francisco)

-1,172,620

22 (Long Beach)

-2,155,086 $0 Note: For this simulation we used VERA fiscal year 2001
workload numbers for basic vested care, which are the total unduplicated
numbers of veterans served for fiscal years 1997, 1998, and 1999.

Source: GAO analysis of VA data.

To improve its adjustment for cost differences beyond networks? control, we
also recommended that VERA use more case- mix categories to adequately
adjust for differences in patients? health care needs across networks. Based
on the results of our simulation, this change to VERA would have the largest
effect on resource allocation. VERA?s three casemix categories- complex,
basic vested, and basic non- vested- are based on 44 patient classes.
Because average costs of patients in the classes within the VERA categories
vary significantly and can be dramatically higher or lower than their
capitation amounts for the three case- mix categories, VERA?s ability to
allocate comparable resources for comparable workloads is limited. The wide
variation in cost between home- based

primary care and ventilator- dependent care- two of the patient classes in
complex care- illustrates this point. The national average cost for
homebased primary care in fiscal year 2000 was about $24,000, roughly
$18,000 less than the $42,153 capitation amount for complex care. In
contrast, the

average patient cost for ventilator- dependent care in that year was about
$163,000, roughly $121,000 more than the complex care capitation amount. As
a result of VERA?s having only three case- mix categories, networks with

proportionately more workload in less expensive patient classes, such as
home- based primary care, receive more resources relative to their costs
than other networks. Similarly, networks with more workload in more
expensive patient classes, such as ventilator- dependent care, receive fewer
resources relative to their costs. If VERA were to use VA?s current 44
patient classes rather than the three

case- mix categories, resources would move from networks having
proportionately fewer patients in expensive patient classes to networks
having proportionately more patients in expensive patient classes. As figure
2 shows, based on our simulation, there would be a significant movement of
resources- an average of 2 percent per network. 9 9 For our simulation we
used the 44 patient classes VA uses to construct the three VERA

case- mix categories.

Figure 2: Estimated Change in VERA Allocations among Networks as a Result of
Using 44 Case- Mix Categories, by Network, Fiscal Year 2001 Network

In dollars 1 (Boston)

40,537,063

2 (Albany)

-11,093,936

3 (Bronx)

32,254,369

4 (Pittsburgh)

31,575,297

5 (Baltimore)

-21,906,515

6 (Durham)

9,258,404

7 (Atlanta)

-14,181,751

8 (Bay Pines)

16,827,649

9 (Nashville)

31,955,011

10 (Cincinnati)

-5,659,975

11 (Ann Arbor)

10,335,432

12 (Chicago)

-7,415,374

13 (Minneapolis)

5,342,154

14 (Lincoln)

3,176,377

15 (Kansas City)

-2,804,687

16 (Jackson)

3,773,183

17 (Dallas)

-10,138,298

18 (Phoenix)

-21,841,759

19 (Denver)

1,108,355

20 (Portland)

-36,471,841

21 (San Francisco)

-21,797,992

22 (Long Beach)

-32,831,165

$0

Note: We used fiscal year 1999 expenditure data for the calculations, the
most recent data available for fiscal year 2001 VERA allocations.

Source: GAO analysis of VA data.

The combined effect of including basic vested Priority 7 veterans in VERA?s
workload and using all 44 VA patient classes in VERA?s case- mix adjustment
would provide additional resources to some northeastern and midwestern
networks and reduce resources for some southern and western networks (see
fig. 3). The allocation change would represent about 2 percent of networks?
budgets but would be more substantial for some networks. The two networks
with the largest percentage change are Network 1 (Boston) with an
approximate 5 percent increase and Network 20 (Portland) with an approximate
5 percent decrease.

Figure 3: Estimated Change in VERA Allocations from Incorporating 44 Case-
Mix Categories and Priority 7 Basic Vested Veterans Treated, Fiscal Year
2001 Network

In dollars 1 (Boston)

41,360,897

2 (Albany)

-8,718,416

3 (Bronx)

41,573,159

4 (Pittsburgh)

35,767,167

5 (Baltimore)

-23,395,750

6 (Durham)

6,757,548

7 (Atlanta)

-13,596,270

8 (Bay Pines)

14,540,999

9 (Nashville)

30,637,119

10 (Cincinnati)

-7,454,361

11 (Ann Arbor)

11,133,452

12 (Chicago)

-6,647,790

13 (Minneapolis)

5,335,814

14 (Lincoln)

4,298,150

15 (Kansas City)

-2,041,802

16 (Jackson)

-541,935

17 (Dallas)

-12,456,323

18 (Phoenix)

-21,888,405

19 (Denver)

2,735,082

20 (Portland)

-39,781,854

21 (San Francisco)

-23,159,943

22 (Long Beach)

-$ 34,456,538

$0

Note: We allocated resources for Priority 7 basic vested care veterans at 50
percent ($ 849) of the national average cost based on a policy VA had
considered implementing to minimize possible incentives for networks to
serve more Priority 7 veterans. We used fiscal year 1999 expenditure data
for these calculations.

Source: GAO analysis of VA data.

While VA concurred with our recommendations to better align VERA?s measure
of workload with actual workload served and to incorporate more (not
necessarily 44) categories into VERA?s case- mix adjustment, it plans to
wait for further study before making a decision about modifications to VERA
for the fiscal year 2003 allocation. VA and others have conducted various
studies on including all Priority 7 workload in VERA and increasing the
number of VERA case- mix categories. 10 Given the extensive studies by VA
and others of VERA?s workload and case- mix measures, we believe that VA
should make needed improvements to VERA for the fiscal year 2003 allocation
and further refine VERA as needed in subsequent years.

Identifying Reasons for To improve its process to protect patients from
network budget shortfalls,

Budget Shortfalls Would we also recommend that VA?s supplemental funding
process determine to

Help VA Take More what extent networks need supplemental resources due to
such factors as Appropriate Corrective

imperfections in VERA, lack of network efficiency, or lack of managerial
Actions

flexibility to close or consolidate programs or facilities. VA?s
supplemental funding processes have not collected the information necessary
to make these determinations. As a result, VA cannot provide adequate
assurance that supplemental allocations are appropriate or correct problems
that cause networks to have budget shortfalls.

VA has focused its process for providing supplemental funding from the
National Reserve Fund almost solely on providing supplemental resources to
networks to get through a fiscal year, but it has not included in this
process an examination of the root causes of networks? needs for additional
resources. From fiscal years 1999 through 2001, VA used different approaches
for evaluating networks? supplemental funding

requests and distributing a total of approximately $323 million in
supplemental resources to six networks. However, in none of these approaches
has VA collected adequate information for determining the extent to which
certain factors cause budget shortfalls. For example, in fiscal year 2001,
about half of the supplemental resources provided to networks was for
?inflation and miscellaneous program adjustments.? All

networks experienced inflation, however, and VA did not distinguish 10 For
example, RAND, An Analysis of the Veterans Equitable Resource Allocation
(VERA) System (Santa Monica, Calif., 2001), pp. 21- 22, discusses the need
for additional case- mix adjustment in VERA as does Price Waterhouse LLP and
The Lewin Group, Inc., Veterans Equitable Resource Allocation Assessment-
Final Report, March 27, 1998.

between the level of inflation in networks that requested supplemental
resources and those that did not.

VA concurred with our recommendation to improve the supplemental funding
process. For fiscal year 2002, VA developed a different approach to
providing supplemental resources to networks, one that it indicates will
better identify factors, such as inefficiency, VERA imperfections, or other
factors, that cause networks to require supplemental resources. However, the
actions VA discussed to improve the process do not address our
recommendation to identify the relative contributions of such factors to
network budget shortfalls. Until VA implements our recommendation, it

cannot provide assurance that supplemental resources are appropriate or take
needed actions to reduce the likelihood of network shortfalls in the future.

Concluding VERA?s design is a reasonable approach to resource allocation and
has had Observations

a significant effect on promoting more comparable resource allocations for
comparable workloads in VA. Yet VA needs to correct weaknesses in VERA?s
implementation to better align resources with workload and to adequately
account for important variations in health care needs among networks. Our
analysis shows that doing so would better allocate about $200 million
annually. Although most of the reallocation at this time would result from
better case- mix adjustments in VERA to reflect differences in health care
needs among networks, the importance of including all Priority

7 veterans in VERA workload could increase in the future because the number
of Priority 7 veterans is projected to continue to increase at least through
fiscal year 2010. Making changes to address these weaknesses in VERA will
add some complexity to how VA allocates resources, but

delaying these needed improvements to VERA will perpetuate inequities that
currently exist.

In addition, VA has not used the supplemental funding process to improve
VERA allocations and management of VA?s resources. The amount of resources
provided to networks through the supplemental funding process for the
National Reserve Fund has continued to increase, yet VA has not been able to
determine the relative contribution of factors such as imperfections in
VERA, network inefficiency, or lack of managerial flexibility to close or
consolidate programs or facilities to the need for supplemental resources.
Because VA has not identified the relative contribution of factors that
could cause network budget shortfalls, it is unable to ensure that the
supplemental funds provided are appropriate or

correct problems that cause networks to have budget shortfalls. Without
knowing the extent to which VERA imperfections or other factors are
responsible for budget shortfalls, stakeholders may lose confidence in
VERA?s ability to allocate resources equitably. Mr. Chairman, this concludes
my prepared remarks. I will be pleased to

answer any questions you or other members of the subcommittee may have.

Contacts and For further information regarding this testimony, please
contact me at

Acknowledgments (202) 512- 7101 or James Musselwhite at (202) 512- 7259.
Marcia Mann and

Thomas Walke also contributed to this statement.

Related GAO Products

VA Health Care: Changes Needed to Improve Resource Allocation. GAO02- 685T.
Washington, D. C.: April 30, 2002.

VA Health Care: Allocation Changes Would Better Align Resources with
Workload. GAO- 02- 338. Washington, D. C.: February 28, 2002.

Medicare Managed Care: Better Risk Adjustment Expected to Reduce Excess
Payments Overall While Making Them Fairer to Individual Plans. GAO/ T- HEHS-
99- 72. Washington, D. C.: February 25, 1999.

Medicare Managed Care: Payment Rates, Local Fee- for- Service Spending, and
Other Factors Affect Plans? Benefit Packages. GAO/ HEHS- 99- 9R. Washington,
D. C.: October 9, 1998.

VA Health Care: More Veterans Are Being Served, but Better Oversight Is
Needed. GAO/ HEHS- 98- 226. Washington, D. C.: August 28, 1998.

VA Health Care: Resource Allocation Has Improved, but Better Oversight Is
Needed. GAO/ HEHS- 97- 178. Washington, D. C.: September 17, 1997.

Veteran?s Health Care: Facilities? Resource Allocations Could Be More
Equitable. GAO/ HEHS- 96- 48. Washington, D. C.: February 7, 1996.

VA Health Care: Resource Allocation Methodology Has Had Little Impact on
Medical Centers? Budgets. GAO/ HRD- 89- 93. Washington, D. C.: August 18,
1989.

VA Health Care: Resource Allocation Methodology Should Improve VA?s
Financial Management. GAO/ HRD- 87- 123BR. Washington, D. C.: August 31,
1987.

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