VA Medical Care

For more than a decade, the Department of Veterans Affairs (VA) has been authorized to recover from private health insurers some of its expenses in providing health care to veterans with no service-connected disabilities. VA's recovery authority was expanded in 1990 to include care provided to veterans with service-connected disabilities, as long as that care was for treatment of conditions unrelated to the veterans' service-connected disabilities. In fiscal year 1996, VA sought to recover $1.6 billion but obtained only 31 percent of the billed amount--or $495 million--a five-percent decline from fiscal year 1995 recoveries. In its fiscal year 1998 budget submission, however, VA projects that it will be able to recover $826 million from private health insurers by fiscal year 2002. This is important because VA sought and was recently authorized to keep the money it recovers and to use it to supplement future appropriations. This report (1) identifies factors that limit VA's ability to recover more of its billed charges, (2) evaluates VA's ability to achieve its revenue targets by identifying factors that could decrease future recoveries and by assessing the potential for VA initiatives to boost medical care cost recoveries, and (3) evaluates the way that VA applies insurance payments to veterans' copayment liability for veterans in the discretionary care category.

GAO noted that: (1) attaining VA's goal to increase recoveries from private health insurance from $495 million in fiscal year (FY) 1996 to $826 million in FY 2002 will be difficult; (2) for GAO's sample, most of the charges VA was unable to recover for bills submitted to private health insurers were appropriately denied or reduced by the insurers; (3) recoveries from private health insurance dropped for the first time in FY 1996 and have continued to drop during FY 1997; (4) several factors help explain the decreases and suggest that further decreases are likely, including: (a) the declining and aging of the veteran population, meaning that VA must serve a greater proportion of veterans to maintain its current workload and that more VA users will have secondary, rather than primary, health insurance coverage in the future; (b) veterans' increased enrollment in health maintenance organizations (HMOs) and other managed care plans, and decreased enrollment in fee-for-service plans, which reduces the number of veterans covered by insurance from which VA can reasonably expect to recover; (c) changes in how insurers process VA claims that could result in refunds to insurers of overpayments that VA estimates exceeded $600 million and could reduce future recoveries by over 20 percent; and (d) shifts in care from inpatient to outpatient settings that, while both needed and appropriate, could reduce private insurance recoveries and increase recovery costs; (5) VA has a number of initiatives to address some of these problems and to help it attain its recovery goals; (6) these include legislation to: (a) allow VA to retain recoveries from private health insurance and veteran copayments as an incentive to improve the identification and pursuit of recoveries; and (b) extend lapsing authority to recover the costs of services provided to veterans for conditions unrelated to their service-connected disabilities; (7) VA's initiatives would address some, but not all, of the factors affecting future recoveries; (8) however, considerable uncertainty remains about VA's ability to achieve its revenue goal; (9) VA was unable to provide an analytical basis for its recovery projections; (10) projected increases in VA's future recoveries were not supported by or attributed to improvements related to its planned initiatives; and (11) VA's General Counsel interprets the relationship between recoveries from private health insurance and veterans' copayments as requiring that a portion of insurance recoveries to be used to reduce veterans' copayment obligations.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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