VA Health Care: Progress and Challenges in Providing Care to Veterans
(Testimony, 07/15/99, GAO/T-HEHS-99-158).

Pursuant to a congressional request, GAO discussed the Department of
Veterans Affairs' (VA) new system for enrolling veterans for health
care.

GAO noted that: (1) since implementing its enrollment system at the
beginning of fiscal year (FY) 1999, VA has enrolled about 4 million
veterans and its health care expenditures for these enrollees are on
track with VA's projections; (2) however, each of the 22 Veterans
Integrated Service Network (VISN) directors GAO surveyed told GAO that
demand for care has increased in FY 1999 and that this increase has
affected the delivery of timely care to veterans in some VISNs; (3) 80
percent of the directors GAO surveyed said that the waiting time to
schedule primary and specialty care appointments has increased since the
beginning of FY 1999; (4) while 18 of the 22 directors told GAO that
enrollment was a factor to some extent in the increased demand, 13 cited
the expansion of health care benefits and 12 cited additional VA
outpatient clinics as other factors contributing to this increased
demand; (5) 8 of the 22 VISN directors reported that VA's decision to
open enrollment to all veterans has negatively impacted access to care
for veterans in higher priority groups to some extent; (6) 9 told GAO
that they had less than adequate capacity to meet the increased demand,
and 5 directors chose to limit outreach efforts that would attract new
veterans into the VA health care system; (7) this has created uneven
access to care by making care available to veterans in some locations
but not in others; (8) as VA nears its FY 2000 enrollment decision, VA's
ability to continue its current level of care is unlikely, primarily
because its FY 2000 budget request is based on an overly optimistic
assumption that it will realize $1.4 billion in management efficiencies;
(9) in prior testimony before the House Committee on Veterans' Affairs,
Subcommittee on Health, some VISN directors stated that they will have
difficulty achieving these management efficiencies; all of the 22
directors GAO surveyed told GAO that they anticipate having problems
meeting veteran demand for health care in FY 2000; (10) if VA does not
have the resources available to continue to enroll veterans in all
priority groups in FY 2000, it will need to consider: (a) limiting
health care eligibility to only those veteran priority groups or
subgroups to which VA can provide timely care, as the act requires; (b)
modifying the benefits it offers to all enrollees; or (c) both; (11) VA
may have difficulty determining the financial effect of these options
because its data on treatment costs and veteran income levels are
insufficient; and (12) although VA has efforts under way to improve its
data, it is unlikely that these improvements will occur in time for VA's
FY 2000 enrollment decision.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-HEHS-99-158
     TITLE:  VA Health Care: Progress and Challenges in Providing Care
	     to Veterans
      DATE:  07/15/99
   SUBJECT:  Veterans benefits
	     Health care cost control
	     Health services administration
	     Federal agency reorganization
	     Health resources utilization
	     Presidential budgets
	     Patient care services
	     Veterans
	     Eligibility determinations
	     Surveys
IDENTIFIER:  VA Veterans Integrated Service Network
	     VA National Enrollment System

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Cover
================================================================ COVER

Before the Subcommittee on Health, Committee on Veterans' Affairs,
House of Representatives

For Release on Delivery
Expected at 9:30 a.m.
Thursday, July 15, 1999

VA HEALTH CARE - PROGRESS AND
CHALLENGES IN PROVIDING CARE TO
VETERANS

Statement of Stephen P.  Backhus, Director
Veterans' Affairs and Military Health Care Issues
Health, Education, and Human Services Division

GAO/T-HEHS-99-158

GAO/HEHS-99-158T

(406168)

Abbreviations
=============================================================== ABBREV

  VA - test
  VISN - test

VA HEALTH CARE:  PROGRESS AND
CHALLENGES IN PROVIDING CARE TO
VETERANS
============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to be here today to discuss the Department of Veterans
Affairs' (VA) new system for enrolling veterans for health care. 
Historically, VA's health care system was a network of hospitals
established to provide specialty care to veterans with injuries or
conditions directly resulting from their military service.  Over
time, eligibility was expanded to provide both inpatient and
outpatient care to low-income veterans for conditions not directly
resulting from military service--establishing VA's role as a safety
net provider for indigent veterans.  VA typically provided inpatient
hospital care to these veterans and restricted outpatient care by
linking it to inpatient admissions.  VA also had different
eligibility rules for care, based on veterans' degree of injury or
condition directly resulting from military service. 

The Veterans' Health Care Eligibility Reform Act of 1996 was enacted
to equip VA with ways to provide veterans with medically needed care
in a more equitable and cost-effective manner.  The act required VA
to establish a system for enrolling veterans for health care and to
use this system for managing delivery of services.  VA is to annually
enroll veterans according to seven priority groups established by the
act--with the highest priority given to veterans with significant
service-connected disabilities.  VA is also required by the act to
enroll only those veterans for which it has sufficient resources to
provide timely health care.  For fiscal year 1999, VA decided that it
had adequate resources to enroll veterans in all seven priority
groups; by August 1, 1999, VA will decide which veterans it will
enroll in fiscal year 2000. 

A number of stakeholders, including Members of this Subcommittee,
have raised concerns about VA's basis for offering enrollment to
veterans in all seven priority groups and whether VA's budget was
sufficient to provide care to these veterans.  These stakeholders
also raised concerns about the basis that VA would use in deciding
which veteran priority groups to enroll in fiscal year 2000.  To the
extent data are available, you asked that we evaluate the effect of
VA's decision to enroll all veteran groups in fiscal year 1999 on
veteran demand for health care and the timeliness of that care.  You
also asked us to identify the challenges and options VA has in making
its fiscal year 2000 enrollment decision.  My remarks today are based
on information we received from VA headquarters, contractors, and
Veterans' Service Organizations as well as surveys of all 22
directors of VA's Veterans Integrated Service Networks (VISN). 

In summary, since implementing its enrollment system at the beginning
of fiscal year 1999, VA has enrolled about 4 million veterans and,
according to VA's latest enrollment data, its health care
expenditures for these enrollees are on track with VA's
projections.\1 However, each of the 22 VISN directors we surveyed
told us that demand for care has increased in fiscal year 1999 and
that this increase has affected the delivery of timely care to
veterans in some VISNs.  Eighty percent of the directors we surveyed
said that the waiting time to schedule primary and specialty care
appointments has increased since the beginning of fiscal year 1999. 
While 21 of the 22 directors told us that enrollment was a factor to
some extent in the increased demand, 13 cited the expansion of health
care benefits and 12 cited additional VA outpatient clinics as other
factors contributing to this increased demand.  In addition, 8 of the
22 VISN directors reported that VA's decision to open enrollment to
all veterans has negatively impacted access to care for veterans in
higher priority groups to some extent.  Nine told us that they had
less than adequate capacity to meet the increased demand, and three
directors, believing that their VISN's capacity to deliver health
care was limited, chose to limit outreach efforts that would attract
new veterans into the VA health care system.  This, in turn, has
created uneven access to care by making care available to veterans in
some locations but not in others. 

As VA nears its fiscal year 2000 enrollment decision, VA's ability to
continue its current level of care--or to enroll more veterans--is
unlikely, primarily because its fiscal year 2000 budget request is
based on, in our view, an overly optimistic assumption that it will
realize $1.4 billion in management efficiencies.  In prior testimony
before this Subcommittee, some VISN directors stated that they will
have difficulty achieving these management efficiencies; all of the
22 directors we surveyed told us that they anticipate having problems
meeting veteran demand for health care in fiscal year 2000.  If VA
does not have the resources available to continue to enroll veterans
in all priority groups in fiscal year 2000, it will need to consider
limiting health care eligibility to only those veteran priority
groups or subgroups to which VA can provide timely care, as the act
requires; modifying the benefits it offers to all enrollees; or both. 
VA may have difficulty determining the financial effect of these
options because its data on treatment costs and veteran income levels
are insufficient.  Although VA has efforts under way to improve its
data, it is unlikely that these improvements will occur in time for
VA's fiscal year 2000 enrollment decision. 

--------------------
\1 Prior to fiscal year 1999, VA did not enroll veterans in its
health care system.  Therefore, VA tracked only the number of
patients it served, not those that might seek care in the future. 

   BACKGROUND
---------------------------------------------------------- Chapter 0:1

The Eligibility Reform Act was enacted to help VA improve its
management of care and provide this care in more cost-effective ways;
it also sought to increase veterans' equity of care.  To improve
cost-effectiveness, the act allowed VA to provide needed hospital
care and health care services to veterans in the most clinically
appropriate setting--including care for conditions not directly
resulting from military service.  To administer this care locally, VA
established, in fiscal year 1996, 22 regional VISNs to serve as the
basic budgetary and decisionmaking units for how best to provide
services to veterans within these VISNs' geographic boundaries. 

To improve VA's management of health care, the act required VA to
establish and implement a national enrollment system.  VA is to use
this system as a tool to manage veterans' access to care through the
seven priority groups established by the act; each year, VA must
decide which of these priority groups it can afford to enroll so that
it can provide timely care.  VA is also required to maintain capacity
for veterans with special disabilities, including spinal cord injury,
blindness, amputation, and mental illness.  If VA decides it cannot
enroll veterans in all priority groups, veterans in the lowest
groups--beginning with priority group 7--would not be offered
enrollment.  Table 1 summarizes the seven veteran priority groups. 

                          Table 1
          
               Seven Veteran Priority Groups

Priority
group         Eligibility criteria
------------  --------------------------------------------
1 (highest)   Veterans with service-connected conditions
              resulting in disability of 50 percent or
              more

2             Veterans with service-connected conditions
              resulting in disability of 30 to 40 percent

3             --Veterans with service-connected conditions
              resulting in disability of 10 to 20 percent
              --Former prisoners of war
              --Veterans discharged from active duty for a
              disability incurred or aggravated while on
              active duty
              --Veterans with special eligibility
              classification

4             --Veterans receiving aid and attendance or
              who are housebound
              --Veterans with catastrophic disability

5             Veterans with incomes below the means-test
              threshold (currently, $22,351 for single
              veterans and $26,824 for veterans with one
              dependent)

6             --World War I and Mexican-border veterans
              --Veterans receiving care for radiation or
              toxic substance or environmental hazard
              exposures

7 (lowest)    All other veterans who agree to pay
              established copayments (that is, veterans
              who have non-service-connected disabilities
              and/or noncompensable 0 percent service-
              connected disabilities above the means-test
              threshold)
----------------------------------------------------------
Note:  Groups 1 through 6 were covered under VA's former health care
system.  Veterans under group 7 were only covered when space and
resources were available.  Under the new enrollment system, VA has
offered care to all veteran priority groups for fiscal year 1999. 

To ensure that all enrolled veterans have access to the same level of
health care, VA has expanded its health care benefits by offering a
comprehensive and uniform benefits package to all enrollees.  VA's 22
VISNs administer these benefits, and each has the flexibility to
decide where and how medical care is provided--through in-house
services, contracts, or other arrangements.  Through this benefits
package, enrollees are eligible for any medically necessary
outpatient or inpatient care that (1) will promote, preserve, or
restore health; (2) has been prescribed by a VA clinical care
provider; and (3) is consistent with generally accepted standards of
clinical practice.  Once enrolled, veterans can receive care,
regardless of their priority group. 

The act specified that, after October 1, 1998, VA may not provide
hospital care or medical services to veterans unless they are
enrolled in VA's health care system.  VA began accepting applications
for enrollment in October 1997, as a test period, and officially
began enrolling veterans on October 1, 1998, as mandated by the act. 
Veterans who had used the VA health care system in the previous year
were automatically enrolled.\2 Further, veterans who meet the
following criteria do not need to enroll:  (1) veterans with a
service-connected condition of 50-percent disabled or more; (2)
veterans seeking care for a service-connected condition; and (3)
veterans discharged from active duty for a disability incurred within
the prior 12 months but who have not yet received a disability rating
from VA. 

Veterans may enroll in person or through the mail.  When completing
the one-page enrollment application, veterans choose a primary care
provider employed by VA.  Once enrolled, veterans receive a letter
from VA confirming their enrollment.  VA uses a rolling enrollment
system, meaning that veterans may submit an application for
enrollment at any time and are generally enrolled for the duration of
the fiscal year. 

In making its decision to offer enrollment nationwide to veterans
within the seven priority groups for fiscal year 1999, VA estimated
the number of veterans who would enroll, their need for services, the
portion of services they would seek from VA, and VA's expenditures to
provide these services under its Uniform Benefits Package.  VA then
compared its estimated expenditures for the Uniform Benefits Package
to the anticipated funding and concluded that it could afford to
offer enrollment to veterans in all priority groups.\3

--------------------
\2 VA defines these veterans as past enrollees, since they have
used VA health care since 1996.  In contrast, veterans who have not
used VA health care since 1996 are defined as new enrollees. 

\3 VA is required by the Eligibility Reform Act to report on its
experience in implementing certain sections of the act, including
management of health care.  Although the report for fiscal year 1999
was due by April 1, 1999, VA expects to issue this report by July of
this year. 

   VA'S FISCAL YEAR 1999
   ENROLLMENT DECISION AND OTHER
   FACTORS INCREASED VETERAN
   DEMAND FOR CARE AND WAITING
   TIMES IN SOME LOCATIONS
---------------------------------------------------------- Chapter 0:2

Since implementing its enrollment system, VA has expanded its health
care services and locations of care to increasing numbers of
veterans.  Halfway through the fiscal year 1999 enrollment year, VA
is generally on track with its projections of enrollee demand for
health care and its expenditures on these enrollees at the national
and VISN levels; VA has spent about half of its $14.1 billion
available to fund the Uniform Benefits Package.  Table 2 shows VA's
most recent data on the number of enrollees and users and the
associated costs for each by priority group for the first 6 months of
fiscal year 1999. 

                          Table 2
          
             Number of Enrollees and Users and
            Associated Costs by Priority Group,
              October 1998 Through March 1999

                 Total
Priority     number of   Number of    Cost per       Total
group        enrollees       users      user\a       costs
----------  ----------  ----------  ----------  ----------
1              443,134     362,240      $4,514  $1,635,117
                                                      ,425
2              297,480     205,256       2,394  491,465,72
                                                         8
3              532,913     329,059       2,216  729,292,27
                                                         1
4              120,398      94,786      11,733  1,112,088,
                                                       333
5            1,378,924   1,047,098       2,679  2,805,336,
                                                       809
6               58,678      27,095       1,542  41,767,687
7              486,260     243,080       2,629  316,213,51
                                                         0
Unprioriti     685,921     141,253       1,991  281,186,73
 zed                                                     5
==========================================================
Total        4,003,708   2,449,867      $3,026  $7,412,468
                                                      ,498
----------------------------------------------------------
\a To determine the cost per user, VA divided the total costs by the
number of users. 

Source:  VA's Office of Policy and Planning. 

VISN directors told us that, during this time, veteran demand for
health care services has increased in all 22 VISNs.  While 21 of the
22 directors told us that the decision to offer enrollment to all
veterans was a factor in the increased demand, 13 directors cited the
expanded health care benefits and 12 noted the additional VA
outpatient clinics as factors contributing to this increased
demand.\4 One VISN recently applied for and was granted supplemental
funding from VA's National Reserve Fund, in part, to help meet
veteran demand for health care.\5

VA conducted activities at a national level to inform veterans about
enrollment.  After VA made its decision to offer enrollment to all
veterans, however, several VISNs expressed concerns about potentially
excessive demands on capacity.\6 Similarly, 9 of the 22 VISN
directors we surveyed told us that given their present level of
demand, the facilities within their VISN had less than adequate
capacity to meet this demand.  Over two-thirds of the 22 VISN
directors told us they made moderate efforts to inform veterans about
enrollment, but 3 directors made small or little to no
effort--believing they had less than adequate capacity to meet the
increased veteran demand for health care.  By making care available
to veterans in some locations but not in others, access to care is
uneven. 

The Eligibility Reform Act requires VA to ensure that enrollees
receive timely health care.  However, 17 directors told us the
waiting times to schedule primary care have increased since the
beginning of fiscal year 1999, and 16 directors told us that the same
had occurred for specialty care appointments.  In addition, VA's
guideline states that new patients wanting routine care--that is
nonemergent and nonurgent--and specialty care patients will receive
appointments within 30 days.  However, information we obtained from
two VISN directors suggests that VA is not always meeting these
timeliness standards.  For example, one VISN director told us that
veterans have to wait 150 days to obtain a follow-up appointment with
a primary care provider and that the waiting time for specialty care
appointments exceeds 30 days on average.  Another VISN director told
us that some veterans must wait more than 40 days to obtain primary
care and between 50 and 100 days to obtain specialty care.  Further,
8 VISN directors told us that VA's decision to offer enrollment to
veterans in all seven priority groups has reduced access to care for
higher priority veterans (priority groups 1 through 4) to some
extent. 

In addition to surveying VISN directors, we also spoke with
representatives of Veterans' Service Organizations, such as the
Paralyzed Veterans of America and Disabled American Veterans, to
obtain their views on the timeliness of veterans' health care.  Like
some VISN directors, these representatives expressed concerns about
increased waiting times for veterans--especially those waiting to see
specialty care providers.  For example, according to a representative
of the Paralyzed Veterans of America, veterans had to wait 3 to 5
months to obtain orthopedic or urology appointments at one VA medical
center. 

Currently, VA does not gather and track information on primary and
specialty clinic appointment waiting times.  However, it is designing
a system to collect this information and testing is under way at four
medical centers.  VA expects to install software for this system at
all of its medical centers by the end of August 1999 and to generate
its first report on waiting times by September 1999.  We plan to
monitor VA's efforts to measure veteran waiting times. 

--------------------
\4 To enhance primary care access, VA has over 1,000 primary care
teams at large medical facilities and opened over 183 outpatient
clinics.  These clinics provide primary care closer to veterans'
homes, especially those living in underserved areas.  Currently, VA
plans to open 272 community clinics in fiscal years 1999 and 2000 and
expects to open about 200 more by fiscal year 2003. 

\5 This fund was established to provide a source of funds during each
fiscal year for unanticipated needs in VISNs or in
headquarters-administered programs.  The initial source of these
reserve funds is the annual appropriation to the Medical Care
account. 

\6 Department of Veterans Affairs:  Veterans Health Administration,
Office of Communications:  VA Eligibility Reform, VISN Outreach
Programs and Initiatives, Survey Report, prepared by Louden
Associates, Inc.; Jan.  3, 1999. 

   BUDGET AND OTHER CHALLENGES
   CONFRONT VA IN MAKING ITS
   FISCAL YEAR 2000 ENROLLMENT
   DECISION
---------------------------------------------------------- Chapter 0:3

To provide timely notification to veterans, VA must decide soon who
it will enroll in fiscal year 2000.  VA is facing budget constraints
for fiscal year 2000 that may limit its ability to enroll and fully
serve all priority groups, as it did in fiscal year 1999. 
Recognizing this potential dilemma and its need to realize savings in
the short-term, VA is exploring two options to manage the delivery of
health care within its proposed fiscal year 2000 budget request:  (1)
limit health care eligibility to only those veteran priority groups
or subgroups for which VA can provide timely care or (2) modify the
benefits it offers to all enrollees.  However, VA may have difficulty
calculating the cost savings it could achieve through these options
due to some data limitations.  Further, VA will not know what its
fiscal year 2000 appropriation will be until after it makes its
enrollment decision in August. 

      VA'S BUDGET DILEMMA IN
      FISCAL YEAR 2000
-------------------------------------------------------- Chapter 0:3.1

As we testified in April 1999, VA will be severely challenged to
serve all veterans seeking to enroll in fiscal year 2000 within its
proposed budget.\7 This is primarily because the budget is based on,
in our view, an overly optimistic assumption that VA will realize
substantial savings through management efficiencies in fiscal year
2000.  In addition, VA may have underestimated the cost of treating
veterans with hepatitis C. 

VA estimates that it will need $19.23 billion--$870 million more than
its estimated fiscal year 1999 spending level of $18.36 billion--to
maintain current service levels in fiscal year 2000 if no management
efficiencies were realized.  This $870 million difference primarily
involves payroll increases for existing employees, inflation, and
other mandatory rate changes.  In addition to these increases, VA
plans to use another $525 million to enhance services provided to
veterans.  In total, VA will need to reduce other expenditures by
nearly $1.4 billion to effect these increases. 

In general, VA estimates that it could save about $514 million of
this $1.4 billion in personal services savings.  To reach this level
of personal services savings, using VA's average cost of $60,236 per
full-time equivalent, VA would need to reduce its employment level by
8,529 full-time equivalents.  This is significantly higher than the
reduction of 3,606 that VA achieved in 1998 and the 2,518 reduction
that VA expects to achieve in 1999.  Further, VA needs to achieve the
employment reduction of 8,529 before fiscal year 2000 starts, less
than 3 months from now.  If VA does not achieve this reduction until
after the beginning of fiscal year 2000, it will have to eliminate
even more positions in order to meet its savings goal.  VA estimates
that the remaining $876 million in efficiencies will be achieved
through savings in nonpersonal services, such as prosthetics and
pharmaceuticals.  This, too, could prove challenging, given the rapid
increases in demand for these services.  If VA is unable to meet its
employment reduction goal, it will have to increase nonpersonal
services savings beyond this target level. 

Although all VISNs have prepared a plan indicating the strategies and
actions they may have to take to realize management efficiencies,
some VISN directors have expressed concern about their ability to
achieve these required efficiency savings.  At a hearing before this
Subcommittee in February 1999, two VISN directors stated that these
efficiency savings in VA's fiscal year 2000 budget would require
significant furloughs of employees.  Further, two VISN directors told
us that they believe that the cost savings achieved from
transitioning care from costly inpatient hospital settings to less
costly outpatient settings are approaching their maximum and that
many VISNs have exhausted their efficiency options.  All 22 VISN
directors told us that they will have difficulty meeting veteran
demand for health care services in fiscal year 2000 if VA continues
to offer enrollment to all veterans.  As a result, VA may not be able
to offer the same level of care to veterans in fiscal year 2000 as
they have been providing.  Nonetheless, 11 VISN directors told us
that they are generally in favor of offering enrollment to all
veterans again in fiscal year 2000, for varying reasons. 

Further, VA's fiscal year 2000 budget submission may have
underestimated the cost of treating veterans with hepatitis C.  For
example, VA's budget submission included $135 million to expand
treatment of veterans who have hepatitis C, based on an assumed
prevalence rate of 5.5 percent among the veteran population. 
However, VA's most recent estimate of the prevalence rate is 8 to 10
percent.  According to a VA official, if an 8-percent prevalence rate
proves accurate, it may cost VA $100 million more than it previously
estimated to provide services to veterans with this disease. 

--------------------
\7 Veterans' Affairs:  Progress and Challenges in Transforming Health
Care (GAO/T-HEHS-99-109). 

      VA ENROLLMENT OPTIONS AND
      INFORMATION CHALLENGES
-------------------------------------------------------- Chapter 0:3.2

Recognizing the potential budget dilemma for fiscal year 2000 and its
need to realize short-term financial savings, VA is exploring two
principal options to manage the delivery of health care.  The first
option is to limit health care eligibility to a subgroup of veterans
by dividing priority group 7 into two subgroups:  (1) those veterans
who have a service-connected condition but receive no compensation
for their disabilities and (2) all other priority group 7 veterans. 
VA is contemplating discontinuing enrollment to veterans in the
second subgroup as a way to reduce its costs.  Using VA's preliminary
cost data for the first half of fiscal year 1999, veterans in this
second subgroup represent about $284 million of VA's total health
care expenditures of approximately $7.4 billion.  However, priority
group 7 veterans typically have other health insurance that VA can
bill; thus, VA's net cost for these veterans is generally small, and
any savings it could achieve by no longer enrolling them would also
be small. 

If VA does not realize the $1.4 billion it plans to save in
management efficiencies from personal and nonpersonal services, it
may have to consider cutting deeper into the priority groups.  As
shown in table 2, according to VA's preliminary cost data, it has
spent $2.8 billion (about 38 percent) of its expenditures on veterans
in priority group 5.  Since its role has been defined as providing a
safety net for veterans in this group--who are generally
lower-income--VA would have difficulty discontinuing care to these
veterans.  However, if this were unavoidable, VA may need to identify
those veterans who do not have sources of health care other than VA
and continue offering enrollment to these veterans. 

The second option VA is considering is to modify the benefits it now
offers to all enrollees.  VA has established a task force to explore
possible changes to these benefits to reduce costs, and it plans to
use the results of this task force in making its fiscal year 2000
enrollment decision.  In our discussions with VISN directors, nine
suggested that they believe VA should consider modifying the existing
Uniform Benefits Package. 

Calculating the cost savings VA could achieve through these options
may be difficult, however, due to insufficient data on treatment
costs and veteran income levels. 

  -- Currently, VA's data systems do not fully track
     treatment-specific costs, making it difficult for VA to
     determine the exact cost savings it could realize by
     discontinuing care to some veterans or reducing benefits. 
     Recognizing this limitation, VA hired an actuarial firm to
     project the total number of veterans that might enroll for
     health care and forecast their utilization of VA health care and
     associated costs for fiscal year 2000, similar to its fiscal
     year 1999 decisionmaking process.  Further, VA is developing a
     database--the Decision Support System--to capture patient- and
     treatment-specific cost data.  This database is being
     implemented throughout VA's medical facilities, but according to
     VA officials, it will not fully replace VA's existing database
     until September 2001. 

  -- To determine if veterans are above or below a particular income
     level (means test) and to place them into one of the seven
     priority groups, VA needs veteran income data.  However, many
     veterans do not have information on their income status readily
     available to complete the enrollment application form when
     arriving at a medical facility.  As a result, almost 686,000 of
     the 4 million enrollees (or about 17 percent) were not assigned
     to a priority group, as of March 26, 1999.  To address this
     problem, VA recently verified the income of about 435,000 of
     these veterans and placed them in appropriate priority groups. 
     Further, VA officials are planning to annually send enrollment
     applications to each veteran's home, allowing the veteran to
     complete the application in the home setting and send it back to
     VA. 

These limitations restrict VA's ability to reliably determine its
cost savings under these options.  Although VA has efforts under way
to improve the data, it is unlikely that these improvements will
occur in time for VA's fiscal year 2000 enrollment decision. 

   CONCLUSIONS
---------------------------------------------------------- Chapter 0:4

The Eligibility Reform Act required VA to establish an enrollment
system and, through the seven priority groups, to manage and provide
timely health care within its resources.  While at this time it
appears that VA has the funding available in fiscal year 1999 to
offer health care to veterans in each of the seven priority groups,
it may not be providing timely care to enrollees in some areas of the
country.  Before the next annual enrollment period begins--less than
3 months from now--VA must decide whether it will continue offering
enrollment to veterans in all seven priority groups.  In the event
that VA cannot realize the $1.4 billion in management efficiencies it
needs to operate within the President's fiscal year 2000 budget, we
believe it will need to find other ways to realize significant
savings within a very short period of time.  If this is the case, VA
will need to use the enrollment system as the tool the Congress
intended and only enroll veterans in those priority groups for which
it has sufficient resources to provide timely care, or it will need
to modify the benefits it currently offers to all enrollees, or both. 
Regardless, VA may have difficulty calculating the cost savings it
could achieve through these options due to insufficient data. 

Mr.  Chairman, this concludes my prepared statement.  At this time, I
will be happy to answer any questions you or other Members of the
Subcommittee may have. 

   GAO CONTACTS AND
   ACKNOWLEDGMENTS
---------------------------------------------------------- Chapter 0:5

For further information regarding this testimony, please call Stephen
P.  Backhus at (202) 512-7101 or Ronald J.  Guthrie at (303)
572-7332.  Key contributors to this testimony include Lisa Gardner,
Jacqueline Clinton, and Janice Raynor. 

*** End of document. ***