The Veterans Affairs Department is facing a projected $2.5 billion budget shortfall and is asking for funding to help cover the rest of its fiscal year.
Deputy VA Secretary Sloan Gibson says it's caused in part by increased demand, mistakes made by outdated technology, the high cost of drugs and poor planning.
Gibson spoke Thursday at a House Veterans' Affairs Committee hearing on the budget for fiscal 2015 fiscal, which ends Sept. 30. He said that the VA is considering furloughs and hiring freezes. He added VA officials want to use $500 million from the new Veterans Choice program, which makes it easier for veterans to receive federally paid medical care from local doctors. Congress approved $10 billion over three years for the program as it responded to scandals over long wait times and falsified records to cover up the delays.
Gibson said VA officials suspected in March that their financial reporting system did not reflect the reality of the agency's financial situation. An audit covering “millions” of fee-for-service transactions was conducted after which the projected budget shortfall was brought to light.
Rep. Jeff Miller, (R-Fla.), chairman of the Veterans' Affairs panel, called it "disturbing" that VA officials waited nearly nine months into the budget year to announce such a large budget gap.
Still, Miller said he would work with colleagues on the House Appropriations Committee "to give VA the flexibility it is seeking to use a limited amount of Choice funds for non-VA care."
While Gibson blamed the 20-year-old financial management computer system, Miller recalled how more than a decade ago, the VA had been allocated almost $500 million to test its Core Financial and Logistics System at the Bay Pines VA Medical Center in St. Petersburg, Fla., and that had turned into another boondoggle project.
“This money was squandered and we have nothing to show for it,” Miller said.
A more recent waste of VA money in Florida was also noted. The St. Augustine Community Based Outpatient Clinic is paying monthly penalties, reportedly in the $50,000 range, for failing to vacate its property in time for the new tenant to move in.
“We've got I don't know how many hundreds of lease transactions in the pipeline,” Gibson acknowledged. “St. Augustine is just one example.”
He said the VA is working on developing a process to relocate facilities long before their leases expire and to standardize the leases they sign.
While expiring leases should be an anticipated expense, Gibson said the VA could not prepare for the release of new, more expensive drugs to treat hepatitis C. He said new drugs came out long after the appropriations process had begun.
The agency moved almost $700 million from its VA Community Care program to help pay for hepatitis C treatments in fiscal 2015, Gibson said, adding “But it wasn't enough.”
The agency has learned from the experience, though. Gibson said it is now monitoring for the release of new “blockbuster” drugs. He noted how the VA is anticipating the release of new cardiology drugs and accounting for their cost early in the budget process.
Rep. Mark Takano (D-Calif.) said he had heard the VA was receiving a certain hepatitis C drug for $600 a pill, which was well below the commercial price of $1,000 a pill. Gibson wouldn't confirm, but noted that the VA had negotiated an “attractive arrangement” with manufacturers for the drug.
He added that this increased the demand for VA services, as Medicare was requiring beneficiaries to make a co-payment for the drug and the VA wasn't.
Similarly, Gibson noted how Medicare reimburses providers $25,000 for knee replacements and requires beneficiaries to contribute a 20% co-payment. So, going to the VA for the procedure saves veterans $5,000.
Gibson cited a Veterans of Foreign Wars Survey (PDF) which found that, when offered a choice of where to receive their care, 47% of veterans chose the VA—even if there was a wait involved. Also, 78% said they were satisfied with their VA care and 82% said they would recommend the VA to a fellow vet.
Since last April, the VA health system has increased its staff by 12,000. This includes 1,000 physicians and 2,700 nurses, but when asked, Gibson could not detail who the remaining new hires were and what clinical services they provided.
The additional staff has led to increased demand. Gibson noted how the VA has added 337 people to its staff in the Phoenix area, but the continued problem of wait times is reflected in Phoenix where demand for primary care has jumped 11%, specialty-care demand has grown 17% and demand for mental health care increased 16% over the same period.
Since opening a new medical center in Las Vegas, he said demand for care has grown 18% there. Gibson said nationwide the VA has increased its amount of night and weekend appointments by 12% and is making wider use of telemedicine visits and e-consults.
Expanding its network of non-VA providers has proven a challenge, however. Gibson said the VA's reputation for paying “low and slow” remains a lingering problem even though, under the Choice Act, third-party administrators pay non-VA providers within 30 days of a visit.
House Speaker John Boehner sneered at Gibson's remarks and criticized the agency for asking for additional funding.
"The VA's problem isn't funding—it's outright failure. Absolute failure to take care of our veterans," Boehner said at a news conference. The Ohio Republican mocked Gibson's message to Congress as: "Get your checkbooks out."
The Choice Act provided $10 billion to pay for healthcare services and $5 billion to hire more staff and to build or lease more clinical space.
The VA's staffing shortage has had a wide impact. Rep. Aumua Amata Coleman Radewagen, American Samoa's nonvoting delegate to Congress, told how the VA facility in her territory has new audiology equipment but no one to operate it and new physical therapy equipment but no physical therapists.