Veterans Affairs deep in the red and going deeper
WASHINGTON – Fred Malphurs has canceled plans to replace equipment, postponed two new outpatient clinics and holds a waiting list of 7,844 people who want appointments at veterans hospitals and clinics in North Florida and South Georgia.
Malphurs, director of the veterans health-care network that straddles the two states, said he told superiors in the Department of Veterans Affairs last September that his 11 facilities, including hospitals in Gainesville and Lake City, expected to be $108 million in the red for 2005.
Republican lawmakers on Capitol Hill professed shock last week at news that the VA faces a large budget shortfall this year and an even wider gap in 2006, but Malphurs did not.
“It’s not surprising to me,” he said.
VA officials say they will divert $1 billion from maintenance, equipment and reserve accounts to cover a health-care funding gap through the 2005 fiscal year that ends Sept. 30. In the next fiscal year, the shortfall could be as much as $2.7 billion, the VA said last week.
Criticism fell on VA officials and President Bush as the political and concrete effects of the crunch sank in.
The Bush administration admitted for the first time that despite substantial funding increases since 2001, two wars and policy choices have left the VA short on cash.
In response, the House and Senate passed different solutions for this year and then left for the Fourth of July break without reaching agreement. They have yet to tackle the larger funding dilemma in the 2006 budget and possibly beyond.
The VA said its models for health care enrollment in the 2005 fiscal year assumed 23,553 patients would be veterans of the wars in Iraq and Afghanistan. A new estimate in March boosted the figure to 103,000 – which represents $273 million of the 2005 shortfall in the roughly $28-billion health-care budget.
A continuing influx of older veterans accounts for most of the shortfalls this year and next, but the VA admits the wars are pinching hospitals and clinics after months of downplaying their effect.
Now, lawmakers don’t trust the VA to predict its true needs. Democrats blame the Bush administration for deliberately lowballing VA budget requests since 2002 in an effort to balance the books.
“The buck stops, as Harry Truman said, with a man named George Bush,” Senate Minority Leader Harry Reid of Nevada said.
Embarrassed and angry, lawmakers in both parties vow to plug the holes.
“Count on us,” Rep. C.W. Bill Young, a Florida Republican who chairs the Defense Appropriations Subcommittee, assured VA Secretary James Nicholson.
The finger pointing and unusually sharp debate may offer veterans groups their hardest evidence yet that health care funding should not be part of the annual budget process. Veterans groups want funding to be automatic, like an entitlement program.
“This whole situation really makes the case for assured mandatory funding,” said Sen. Daniel Akaka of Hawaii, the ranking Democrat on the Senate Veterans Affairs Committee.
Veterans see a silver lining in that kind or response.
“Every time we try to bring it up with some members of Congress, they say the system is working and they’re giving VA what they need,” said Joseph Violante, legislative director for Disabled American Veterans. “This clearly demonstrates that they’re not.”
Nicholson, who took office four months ago, is bearing the brunt of outrage.
House Appropriations Committee Chairman Jerry Lewis of California told Nicholson the VA’s failure to tell Congress of the funding problem months ago “borders on stupidity.”
Sen. Robert Byrd, D-W.Va., called the situation “a shabby way to treat America’s veterans.”
Nicholson, a veteran and former chairman of the Republican National Committee whose last post was ambassador to the Vatican, denied he tried to “hide the ball,” as one Republican put it.
“The defining element of what we do at VA is take care of our veterans,” he said.
But Republicans, in particular, are stung.
In April, Republican senators helped defeat a Democratic effort led by Sen. Patty Murray of Washington to add $2 billion to the 2005 budget. Nicholson had assured Sen. Kay Bailey Hutchison of Texas, chairwoman of the Military Construction and Veterans Affairs Appropriations Subcommittee, in a letter that more money wasn’t needed.
“It was a frustration to me,” Sen. Larry Craig, the Idaho Republican who chairs the Veterans Affairs Committee, said last week of being wrong, “and an embarrassment.”
Nicholson testified the VA discovered the shortfall during a midyear review in March that showed enrollment for 2005 would increase by 5.2 percent instead of the predicted 2.3 percent. Now, 2006 enrollment is expected to rise 6 percent instead of 2.4 percent. The problem became public during questioning at a June 23 hearing.
Nicholson said that because the VA could use reserves and money intended for maintenance and equipment, the department had the 2005 shortfall under control. He said congressional staff was informed.
“I don’t think the VA has been forthcoming,” said Sen. Richard Burr, R-N.C., a member of the veterans panel.
Democrats say regional VA officials warned them months ago that they were in trouble, which led Democrats to seek more money in 2005. The comments from Malphurs appear to confirm that. He said deficit projections last year resulted in savings directives from above “so we wouldn’t go belly up.”
Last week, the Senate passed a $1.5 billion amendment to an Interior Department spending bill intended to cover this year’s VA shortfall and some of next year’s.
The House only approved $975 million, an amount the administration requested on Thursday. Senators dug in and demanded more.
Congress adjourned for Independence Day at an impasse.
The administration and some GOP leaders have tried to clamp down on VA spending, which has risen 40 percent since 2001.
House leaders this year replaced the chairman of the House veterans panel, who often sided with veterans who complained of inadequate funding. And the previous VA secretary, Anthony Principi, said last year that the White House budget for 2005 was $1.2 billion less than he requested.
Nicholson blamed the shortfalls on models used by the VA to predict growth in the health care system, which don’t account for uncertainties of war or include long-term care, dental needs, prosthetics and several other health care areas.
The administration says the shortfall next year compared to the president’s budget plan could be up $1.6 billion. That assumes Congress will approve Bush’s proposed enrollment fees and drug co-payment increases that lawmakers have repeatedly rejected. Without those added fees, add another $1.1 billion to the gap.
The VA also blames a data lag. Projections for 2005 were based on data from 2002. Projections for 2006 are based on 2003 data, and so on.
“We have computers for crying out loud,” said Rep. Michael Bilirakis, a Florida Republican who chairs the Veterans Affairs Oversight and Investigations Subcommittee. “Can’t we do better than that?”
Rep. Bob Filner, Democrat of California, asked Nicholson to resign, but he refused.
“The model is not the problem,” Filner told Nicholson during a hearing. “You are the problem and the president is the problem.”
I-Told-You-So’s are plentiful among veterans and their allies who have complained of crisis for years, but what to do? The VA is working on its 2007 budget using models it says it can’t trust.
“We are in a combat era,” Nicholson told House members. “We’re going to have to calculate as best we can what that means.”