Funding the Veterans Affairs of the Future

Henry J. Aaron
Henry J. Aaron The Bruce and Virginia MacLaury Chair, Senior Fellow Emeritus - Economic Studies

October 3, 2007

Mr. Chairman:

Thank you for the invitation to testify today on the proposal to convert funding for the Veterans Health Administration (VHA) from a discretionary to mandatory basis. In the course of my remarks, I should like to stress four points:

First, the VHA faces an unusually difficult challenge-it must deliver an extraordinarily wide range of services to highly diverse populations. The VHA provides ordinary primary, secondary, and tertiary somatic medicine, as well as mental health services. One of its most important responsibilities is to offer a subtle combination of physical therapy, mental health services, and somatic treatment to victims of spinal cord and traumatic brain injury.

Second, the VHA has performed remarkably well of late. Inspired management has transformed the VHA from being the poster-child for low-quality medical care into a model organization that delivers higher quality health care than the average of private health care providers and does so at a comparatively reasonable price.

Third, the budget of the VHA is part of the long roster of federally financed health care services. The cost of federal health care obligations is projected under current law to increase enormously. In fact, growth of these programs accounts for more than all of the long-term deficits recently to which the Congressional Budget Office and various private analysts have recently drawn attention. Put more positively, if the nation deals with the imbalance between projected revenues and spending for health care, revenues at current levels are projected to be sufficient to pay for all other anticipated government commitments, including all Social Security benefits promised under current law.

Fourth, proposals to boost federal health care spending abound. Not all can be funded without unduly raising federal spending. Different groups would benefit from each of these proposed increases. Sensible budgeting requires a comparison of these competing claims. Unfortunately, Congressional committee structure inhibits such comparisons. To illustrate this problem, I list three such candidates for increased spending. For what it is worth, my judgment is that the priority of converting VHA spending into mandatory funding ranks below the other two possible uses of federal funds.