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House, Senate Pass Separate Veterans Affairs Healthcare Reform Bills

By Shai Akabas, Brian Collins

Wednesday, June 25, 2014

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Recently, the House and Senate each passed bills to address the serious ongoing problems with the Veterans Health Administration under the Department of Veterans Affairs (VA). The Veteran Access to Care Act of 2014 (passed by the House on a 426-0 vote) and the Veterans’ Access to Care through Choice, Accountability, and Transparency Act of 2014 (passed by the Senate on a 93-3 vote) address revelations of lengthy, secretive waiting lists for healthcare services, bonuses paid based on misrepresented wait times, and potentially criminal conduct by VA employees. Though the bills share several common reforms, a conference committee is expected to reconcile differences between the two and send a final package to President Obama’s desk.

Care from Outside Providers

Both bills propose to alleviate excessive wait times for VA care by allowing certain veterans to receive care from outside providers. Both measures would also grant the VA authority to contract with non-VA medical providers to provide care to veterans who the VA cannot treat within its wait-time goals or who live more than 40 miles away from the nearest VA facility.1 The House bill would employ the VA’s current wait-time goal of 14 days to determine eligibility, whereas the Senate bill would direct the VA to publish new wait-time goals within 90 days of the legislation’s enactment.2 In both the House and Senate versions, this authority would only be temporary, expiring after two years without further congressional action.

The House bill would go further by allowing veterans to seek care at non-contracted facilities if contracted facilities cannot provide timely care; such providers would be reimbursed by the VA at the greatest of the Medicare, Tricare, and VA rates.3 This authority would also expire after two years.

Budgetary Impacts: Difficult to Estimate

The two bills use different funding mechanisms to finance outside care to veterans. The Senate bill, a compromise negotiated by Veterans’ Affairs Chairman Sen. Bernie Sanders (I-VT) and former Armed Services Ranking Member Sen. John McCain (R-AZ), designates its spending as an “emergency requirement” under budget laws and would appropriate “such sums as may be necessary” to carry out its provisions. Therefore, all spending on the bill would be designated as emergency spending and would fall outside the caps set in the Budget Control Act of 2011 (BCA). The Senate bill’s cost would therefore be directly added to the federal budget deficit.

The House bill, sponsored by House Veterans’ Affairs Chairman Rep. Jeff Miller (R-FL), takes a different approach. It would fund the temporary outside-care program only “to the extent that appropriations are available,” thereby leaving most of the responsibility for funding the program to congressional appropriators.4 Appropriations would be subject to spending caps previously agreed to in the BCA and the recent budget compromise negotiated by Budget Chairmen Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI). Because of this, additional appropriations for the Veterans Health Administration would need to be offset by other reductions in discretionary spending, unless Congress acted to waive or otherwise modify the BCA caps.

While CBO has prepared “preliminary and partial” cost estimates for both bills, it qualifies its estimates as “highly uncertain.” CBO estimates that the Senate outside-care program would cost the federal government, on net, $35 billion over two years, whereas the House version, assuming all necessary appropriations are made, would cost $44 billion on net over the same period (independent of offsets elsewhere in the budget needed to meet BCA spending caps).5

CBO also considers the possibility that the programs could be extended and fully implemented beyond 2016 and estimates that under the Senate version, ultimate net costs to the federal government would total $50 billion per year. The House version, if extended and fully funded, would have an estimated net cost of $54 billion per year (again, independent of offsets to meet BCA caps).

According to CBO, the cost differential between the two bills is largely attributable the House bill’s shorter wait-time goal (which expands eligibility relative to the Senate version) and the House bill’s provision allowing the VA to reimburse non-contracted providers for care, which could allow the provision of outside care to begin more quickly. (See the Appendix on Budgetary Impact for more detail.) CBO’s reports estimate only the costs of the outside-care programs because estimates have not yet been prepared for other provisions of the bills.

Veterans Deserve Better Treatment – But So Does the Budget

The Bipartisan Policy Center (BPC) applauds congressional leaders for joining together to uphold the commitments that we have made to our nation’s veterans. Nonetheless, the budgetary impact of these bills is uncertain and of some concern – particularly with regard to the new open-ended spending obligation, which we hope will be addressed by the conference committee.

Further work remains to address the appalling failures at the VA, and BPC hopes that elected officials will continue to collaborate across the aisle on this and other policy issues.

Appendix on Budgetary Impact and Further Details

One of the main reasons for the uncertainty in CBO’s estimates is the importance of veterans’ behavioral response, which is hard to predict. CBO anticipates that, in addition to paying for outside care for some current VA health system enrollees, both the House and Senate outside-care programs would encourage some non-enrolled veterans to enroll in search of the improved access to care that would be available. Much of the additional care for these veterans would have otherwise been paid for by Medicare, however, creating savings for that program that would partially offset increased VA spending. Because these behavioral changes and other factors are “very difficult to predict,” CBO cautions that its estimates “should be viewed as falling in the middle of a wide range of possible outcomes.” The open-ended funding structure of the Senate bill and the House bill’s reliance on future appropriations create additional uncertainty.

In addition to the funding structure, there are several other differences between the bills that the conference committee must reconcile before President Obama can sign legislation. Most notably, the Senate bill would authorize the VA to lease an additional 26 medical facilities at a cost of about $1 billion and to use $500 million in unobligated funds in its budget to hire additional medical personnel. The House bill would not include these expansions of existing VA infrastructure.

Additionally, the Senate bill would prohibit the use of wait-time goals as a performance metric for VA employees, whereas the House approach would ban all bonus payments to VA employees through 2016.

CBO estimates the House outside-care program to be somewhat more expensive than the Senate proposal in the aggregate for several reasons. CBO assumes that under the Senate bill, the VA would use a wait-time goal of 30 days to determine eligibility for outside care. Since the House bill uses the current goal of 14 days, more veterans would be eligible for outside care than under the Senate bill. According to CBO, this translates to greater spending on currently enrolled veterans as well as on new enrollees relative to the Senate bill. CBO estimates that under the House bill, about one-quarter of the approximately 8 million eligible, non-enrolled veterans would enroll in the VA health system in response to improved access to care. CBO does not provide similar detail in its report on the Senate bill

The provision in the House bill allowing the VA to reimburse non-contracted providers at Medicare rates would represent a further expansion of access relative to the Senate bill. CBO anticipates that as a result of the provision, the “VA would provide about 30 percent and 60 percent [of the amount of additional care sought by veterans] in 2015 and 2016, respectively, under the House bill, compared with 20 percent and 50 percent under the Senate bill.” Moreover, because the VA would be able to provide outside care under this provision while contracts are negotiated, “CBO anticipates that VA payments to private providers resulting from the legislation would commence sooner under the House bill.” CBO expects these effects to increase costs relative to the Senate bill due to a greater volume of outside care over the programs’ statutory two-year windows. Some, but not all, of this cost differential would be offset by a lower average payment rate under the House bill, since negotiated contract rates are likely to exceed corresponding Medicare rates.

Alex Gold and Alex Cave contributed to this post.

1 If enacted, this would be a major expansion of the VA’s authority to furnish outside care to veterans who live far from VA facilities. The VA’s existing authority on the matter is limited to specialty care only and is not widely used.
2 The Congressional Budget Office (CBO) anticipates a new goal of 30 days.
3 CBO expects that Medicare rates are likely to be used.
4 CBO anticipates that over the next two years – the period that the bill covers – $620 million in VA appropriations that would have otherwise lapsed would be spent under the proposed reform, but additional funding beyond that amount would require further action by Congress.
5 As currently drafted and explained above, however, the House bill’s costs must be offset elsewhere in the discretionary portion of the budget to meet BCA spending caps, unlike the Senate bill.