Committee for a Responsible Federal Budget

Price Tag for VA Conference Bill: $10 Billion

Jul 30, 2014 | Health Care| Other Spending

Note: CBO has issued a more detailed score of the bill. The table has been updated to reflect these numbers.

The Congressional Budget Office yesterday released its score of the VA conference agreement, showing a $10 billion cost for the bill as written. The net cost reflects gross new spending of approximately $17 billion to improve veterans access to care offset by $4.5 billion of specific offsets within veterans’ programs and $2 billion in savings elsewhere in the budget from indirect effects of the legislation. This represents a significant improvement over earlier versions of the legislation. Not only does the agreement limit the costs of new authorities in the legislation and include some offsets, most significantly the agreement gave replaces the a blank check to the VA to expand access to private providers with a fixed appropriation and provides that the new program would end when those funds are exhausted.

The agreement includes $10 billion for a Veterans Choice Fund allowing veterans to see non-VA providers if they have experienced a lengthy wait time or live a long distance from a VA provider and $5 billion for the VA to hire medical personnel and make other improvements to its infrastructure. This appropriation results in $2 billion of savings, primarily in Medicare from veterans recieving care reimbursed by VA instead of Medicare as well as increased revenues as a result of savings in employer provided health insurance. In addition, the bill provides specific amounts totaling $1.3 billion to lease 27 medical facilities around the country.

The offsets come from reducing VA bonuses by $40 million per year and extending a number of policies already in place through 2024. These include reduced pensions for non-service connected disabled veterans who reside in Medicaid-covered nursing facilities, increased funding fees for VA home loan guarantees, and the use of IRS or Social Security Administration data to verify income for pensions.

Score of VA Conference Bill
Provision Ten-Year Costs/Savings (-)
Expand access to non-VA providers for certain veterans $10 billion
Hire medical personnel and improve VA infrastructure $5 billion
Incidental savings from above two policies -$1.8 billion
Lease 27 medical facilities $1.3 billion
Reduce VA bonuses $0 billion
Extend reduction in pensions for veterans in Medicaid-covered nursing facilities -$1.9 billion
Extend increased home loan guarantee fees -$2.6 billion
Extend authority to use IRS/SSA data for income verification -$0.1 billion
Other provisions $0.1 billion
Total $10.1 billion

 Source: CBO

While the agreement is a significant improvement over earlier versions from a fiscal perspective, it still would unnecessarily result in $10 billion in deficit spending. Policymakers should resist using the emergency designation to get around pay-as-you-go rules for a bill that does not meet the definition of an emergency.

There are many ways to pay for the $10 billion, many of which we specified last month in discussing the House and Senate versions of the bill. Savings options exist within the military retirement and disability system and the VA itself, plus policymakers could use small revenue-raisers to get there if they choose.

Potential VA Funding Offsets
Provision Ten-Year Savings
Discretionary Spending Options
End VA enrollment for groups with conditions less related to military duty* $25 billion
Cap basic pay raises for military service members at the growth of the Employment Cost Index minus 0.5% $25 billion
Increase enrollment fees, deductibles, and co-pays in TRICARE* $20 billion
Mandatory Spending Options
Exclude disabilities unrelated to military duty for veterans' disability compensation eligibility $25 billion
Reduce veterans' disability compensation to account for SSDI payments $25 billion
Use more accurate measure of inflation for federal retirement cost-of-living adjustments $25 billion
Restrict VA's individual unemployability benefits to disabled veterans below Social Security age $15 billion
Use highest five instead of highest three earning years to determine pensions $5 billion^
Extend round-down of cost-of-living adjustments $2 billion
Revenue Options
Start health insurance Cadillac tax two years earlier (2016) $15 billion
Tax carried interest as ordinary income $15 billion
Increase certainty with respect to work classification $9 billion
Limit accrual of retirement accounts $4 billion
Impose liability on shareholders to collect unpaid corporate income taxes $2 billion

Source: CBO, JCT, OMB
Note: Discretionary spending options can only be used to offset other discretionary spending unless spending caps are also lowered.
*Option also affects mandatory spending and revenue, whose effects are included in the total.
^Includes savings from both civilian and military retirement. Savings from just military retirement are $2 billion.