A Department of Veterans Affairs proposal in President Clinton's fiscal 1999 budget submission to Congress would result in layoffs of doctors, nurses and other medical personnel and force the VA to turn away lower-priority veterans, according to critics of the proposal.
Veterans groups and some members of Congress are alarmed that the proposal actually would shrink the VA healthcare system's budget slightly next fiscal year, which begins Oct. 1. Meanwhile, future increases depend on the VA's ability to collect more from third-party payers, including Medicare.
The critics argue the VA's newfound ability to keep insurance payments ought to be used to supplement, not replace, its ongoing government revenues.
Veterans groups cite a statement by VA Health Undersecretary Kenneth Kizer, M.D., that the VA's 172-hospital system will "hit a wall" under current budget constraints unless it receives supplementary funding. Included in that would be a needed congressional authorization to collect Medicare reimbursement.
"The question is how close you are to the brick wall as you plan your budget for next year," said Richard Fuller, national legislative director for Paralyzed Veterans of America.
The VA budget assumes Clinton will hold firm on legislation that will freeze or even lower appropriations at their current level of about $17 billion between now and 2002.
The hope is that the VA can then supplement that by collecting about $1 billion a year by 2002 from the insurers of veterans eligible for, but not entitled to, care at VA facilities. The VA has been able to collect those revenues for some time, but 1998 marks the first year it is able to keep them to finance healthcare services rather than simply return the funds to the U.S. Treasury.
The budget assumes that about an additional $900 million by 2002 will come from sharing agreements with Defense Department facilities, sales of excess services to private-sector providers and collections from Medicare for treating Medicare-eligible veterans who receive treatment at VA facilities.
The ability to collect Medicare reimbursements is crucial to the VA healthcare system's future, top VA officials said, yet it's the most questionable source of revenues without congressional authorization.
VA officials acknowledge that even with those projected new collections, the VA's budget will grow at only half the inflation rate. They hope improved efficiency will absorb the other half of the inflation increases.
But they insist that, according to their financial models, the VA healthcare system can meet the challenge. The system is attempting to do so by shifting its emphasis to outpatient care, giving more managerial authority to 22 network directors in the field and capitating network budgets.
It has set a goal of reducing the cost per patient by 30% in inflation-adjusted terms by 2002. Its moves to become more efficient in 1999 include trimming its roster of registered nurses and physicians by more than 400 and reducing the number of inpatients it treats by 9.4%, even after it has closed thousands of its hospital beds.
"The numbers aren't something that we ginned up," said Todd Grams, chief financial officer of the VA's healthcare system. "We're confident that we can do it. What we need to do over the next five years is prove it."
At a confirmation hearing last week for acting VA Secretary Togo West to become the permanent secretary, members of the Senate Veterans Affairs Committee questioned whether the budget would be adequate.
Responding to West's assertion that he wanted the VA healthcare system to be the finest in the country, committee Chairman Arlen Specter (R-Pa.) said, "I do not think (that standard) is being attained.
"You're going to have to be a tough advocate at the White House . . . and in this Congress to do that," Specter said. "To do that, the budget's going to have to be substantially increased."
Clinton's fellow Democrats also raised that concern.
While acknowledging the VA has improved efficiency and access, Sen. John D. Rockefeller (D-W.Va.), the committee's senior Democrat, warned during West's confirmation hearing that the VA's efforts have placed "great strain" on the system.
"The challenge now is to know when to stop stretching the system," Rockefeller said in written testimony. "The onus will be on you to tell us when the VA is about to hit that proverbial brick wall."
West responded that the prospects of a tight budget underscore the importance of passing legislation that would permit some VA facilities to begin collecting Medicare reimbursements for treating Medicare-eligible veterans not entitled to VA care.
That proposal for Medicare "subvention" has been debated by Congress but never enacted. A recent agreement by two key House GOP leaders might have broken the legislative logjam, however (Jan. 26, p. 28).
"Medicare subvention is essential to the future of funding for veterans healthcare," West told the Senate committee.
Despite the possibility of getting a new revenue stream, the extremely slow growth of the VA budget has many worried. It will come at a time when the system also is trying to increase the number of patients it treats by 20% by 2002.