WASHINGTON, DC — President Joe Biden’s fiscal year 2023 budget request for VA totals $301.4 billion—an 13.3% jump from the FY22 enacted levels. This is in addition to an FY24 Advanced Appropriations request totaling $287 billion.
According to VA leaders, the increase in projected spending is being driven by medical inflation, aging veterans, the continuing fallout from the pandemic and the expanded use of community care, which can be more costly to provide per patient than treating at VA facilities.
Testifying before the Senate VA Committee last month, VA Secretary Denis McDonough informed legislators that the cost of community care now accounts for about one-third of VA’s total healthcare costs—up from 26% last year.
“Care has increased more intensely, actually more in community care than in the direct system,” McDonough declared. “If you were to roughly measure by relative value units, [then] about one-third of the care that we give right now is care in the community. That’s a high number and the highest number yet of the three years of the MISSION Act.”
Asked if he thought that something needed to change, McDonough said, “My hunch is we should change the access standards. We would do that pursuant to public comments and regulation … in full consultation with you.”
Ranking Republican Jerry Moran (R-KS) pressed McDonough on previous VA spending projections, which have not held up. He focused on the $70.6 billion in advanced medical care appropriations earmarked for FY24—$261 million above the advanced appropriation for FY23. The advanced appropriations requests include funding earmarked for one year beyond the upcoming fiscal budget, allowing VA to plan hiring and spending in advance, and creating a buffer in the event of Congress being late passing the budget.
“During the pandemic, VA requested supplemental funding and an adjusted base request for FY22 to account for long-term COVID funding,” Moran said. “[VA said] the FY23 advanced appropriation request [would] address a wave of pandemic-deferred care. VA said it expected things to stabilize to pre-pandemic levels, thus requiring fewer resources in FY24.”
Why was the number continuing to go up? Moran asked.
According to McDonough, variant-driven COVID-19 surges have thrown off previous VA spending projections. Consequently, the wave of veterans seeking care and scheduling procedures that had been put off during the height of the pandemic has been spread out.
“We would have anticipated that the return to care would have peaked by now, or even several months ago,” McDonough said. “But because of the virulence of the omicron variant, we did not see the peak return to care that we anticipated. Moreover, we continue to see more complex conditions related to veterans affected by the various variants of COVID-19. Staff are [also sometimes] unable to work. Today [that number is] about 3,000. We got as high as 16,500 in January and February, which impacted access to care.”
Aging population, medical inflation
The other major factors driving increased costs are ones that VA has long been familiar with: medical inflation and an aging population.
“We believe the issue that’s driving cost overall is obviously healthcare cost inflation, which has been an issue for us for generations,” McDonough told the committee.
There’s also [increasing] complexity,” he added. “Fifty percent of our veterans are 60 or older. That number is only going to increase over time… And as anyone ages, the intensity of the cost and the reliance on the system increases.”
Legislators also questioned McDonough on VA’s ability to handle the influx of patients and benefits claims expected as a result of recently included presumptive service conditions, as well as the many more that would be added as part of the PACT Act, which was expected to be passed later that month.
McDonough said they expected about 100,000 claims and 70,000 appeals related to its new presumptive conditions of asthma, sinusitis and rhinitis. As for the addition of rare respiratory cancers, McDonough expects those claims to be much lower. Last year, VA received 1.65 million claims. This year it expects 1.75 million.
VA is in the process of hiring 2,000 additional claims adjusters, he said, and expects VA to be in a “good position that first year.”
Of those 2,000 new employees, about 94% of the claims professionals included in that number have been hired and are currently getting trained.
“Now the issue with training is that the new person isn’t fully productive, and the person training them has to take time [from handling claims] to do so,” McDonough noted. Which could mean a slowing down of processing before the expected speeding up.
As for the increase from the PACT Act, McDonough said they were still examining how VA would handle the claims increase.
“We’ve been thinking about this and talking with a great number of people across the board on this,” he said. “[There’s a projected] 1.5 million claims over the next two years, so we go from 1.75 this year to an almost 100% increase. Do we need to entirely hire up for that? Or contract out?”
The creators of the Independent Budget, developed annually by a partnership of veterans service organizations, are generally pleased with the totals, but are skeptical that the budget request will cover unexpected costs that may come over the next two years.
“VA and Congress must be prepared to adjust the levels of VA medical care funding for FY 2023 and FY 2024 in response to significant changes in demand, whether resulting from unprojected utilization due to the pandemic, or changes in enrollment or utilization resulting from administrative, regulatory, or statutory changes,” the VSOs said in a joint statement to the committee. “VA must be prepared to request, and Congress must be prepared to approval, supplemental appropriations if necessary.”
