Summary: With a 1997 medical care appropriation of $17 billion and a declining veteran population, the Department of Veterans Affairs (VA) faces mounting pressure to control spending as part of efforts to achieve a balanced budget. Last year, GAO reported that VA's health care system could reduce its operating costs by billions of dollars over the next several years. VA has requested medical care funding of $17.6 billion in 1998. This consists of an appropriation of nearly $17 billion and a legislative proposal to retain insurance payments and other third-party reimbursements. VA characterizes this as the first step in a five-year plan to reduce its per patient cost by 30 percent, increase patients served by 20 percent, and finance 10 percent of its expenditures using nonappropriated revenues by the year 2002. This testimony focuses on VA's five-year plan, including the outlook for attaining the stated targets and the potential effects on veterans and others. GAO also offers preliminary observations on VA's progress on two major initiatives: developing a method to more equitably allocate resources and establishing a decentralized management structure to more efficiently and effectively deliver services.
