Lawmakers appear ready to ensure the Department of Veterans Affairs has access to the money it needs to prevent a shutdown of its hospitals this August, but there will probably be strings attached.

Before the House and Senate leave for a monthlong August recess, they will need to act to patch a $2.5 billion gap in the agency’s budget, the result of higher than anticipated demand for veterans health services and a lack of flexibility to shift money within the budget, VA officials say.

To cover the gap, Secretary Robert McDonald has requested lawmakers allow the VA to divert $3 billion from the so-called Choice Program, an emergency fund set up in the wake of last year’s wait-time scandal to subsidize non-VA care for veterans and help trim the time it takes to get medical appointments. It is not the preferred method of funding for House Veterans’ Affairs Chairman Jeff Miller, but the Florida Republican said on July 23 he was inclined to grant VA’s request to divert money from the program, albeit reluctantly.

“I don’t see any other way at this point, and given the information that VA has finally provided us, I don’t know if there is anywhere else to get the money that’s necessary,” said Miller, who pointed out Choice funds were already appropriated.

In lieu of funding, McDonald warned lawmakers at a House Veterans’ Affairs hearing on July 22 that hospital services would shut down in August.

“Without flexibility, we will have no option at the end of July but to defer all remaining non-Choice, Care in the Community authorizations until October, provide staff furlough notices and notify vendors that we cannot pay them as we begin an orderly shutdown of hospitals and clinics across the country,” McDonald said. “These are unfortunate conclusions to an otherwise productive year of progress.”

The VA is forecasting a $2.5 billion shortfall for the current fiscal year because of increased demand for Care in the Community programs, which permit veterans to obtain medical care outside of the VA-run system. The programs are separate from the Choice Program, which was authorized for three years and funded through $10 billion in emergency appropriations that roll over into the next fiscal year if left unspent.

Extracting Concessions

VA officials have also pointed to the growing cost of treating hepatitis C, which will cost an estimated $1.1 billion this year. In a letter to lawmakers, McDonald said the timing of approval for new hepatitis C treatments by the Food and Drug Administration didn’t allow the VA to budget for the drugs in the current year. As a result, the VA had to shift $697 million to cover the cost of the drugs. A portion of the proposed $3 billion would go toward hepatitis C treatments, but would be capped at $500 million under draft legislation submitted to Congress by McDonald.

“I’m working with leadership now,” Miller told CQ Roll Call on July 23 regarding a legislative fix, after the House had cast its final votes for the week. The House begins its month long recess next week, which leaves only a handful of days for lawmakers to pass legislation.

On July 24, Miller filed legislation that would permit the VA to transfer $3.4 billion in Choice funds for hospital and medical care, including up to $500 million for hepatitis C treatment, through the end of the fiscal year on Oct. 1. It would require VA to report to Congress on how much of the money it has spent every two weeks.

But the quick-fix legislation will include strings, something Miller indicated he would push for in a budget deal.

“We’re convinced that something has to be done, and within the fix there has to be some things that work to the advantage of the veterans other than the money,” Miller said.

To that end, Miller’s legislation also requires the VA to come up with a plan to consolidate all non-VA care programs into a single program, called simply the “Veterans Choice Program,” by Nov. 1 and would mandate the president’s future budget requests for VA contain an appropriations account for non-VA medical and hospital care programs.

The bill also includes the text of the so-called Hire More Heroes Act. The measure, which was highly touted by House and Senate Republicans, would exempt individuals enrolled in Tricare or VA health care from counting toward the total number of employees that would trigger the employer health care mandate under the 2010 health care overhaul.

Omitted from Miller’s draft legislation is a requirement that the Choice Program be made permanent, an idea he had floated in return for the VA being allowed to raid the fund. Miller, along with many other Republicans who have doubts about the VA’s capacity to deliver quality and timely health care, has advocated allowing the Choice Program to continue past its current authorization permanent.

In July 2014, Miller and then-Senate Veterans’ Affairs Chairman Bernard Sanders, I-Vt., hammered out legislation aimed at cutting wait times for appointments after media reports exposed the manipulation of the VA’s scheduling system to hide wait times that were higher than publicly acknowledged. As part of the legislation, Congress set aside $10 billion in emergency funds to subsidize the use of non-VA health care by veterans who face a long wait for appointments or who live 40 miles or farther from VA medical facilities. Another $5 billion in emergency funds was allocated to hire more doctors and nurses at VA.

Inflexible Budget

Citing uncertainty in how the program would be received by veterans, the VA first requested the authority to transfer Choice funds to other medical accounts within the department in its fiscal 2016 budget request — submitted to Congress in February — a maneuver lawmakers roundly rejected. But McDonald has countered that VA’s budget is far too rigid. He counts more than 70 budget lines that are inflexible.

During the July 22 hearing, McDonald compared the stringent status of VA’s budget to having separate checking accounts for gas and groceries, and not being able to use money from one to pay for the other when necessary.

“My worst nightmare is a veteran going without care because I have the money in the wrong pocket,” McDonald told lawmakers.

The pre-August health care shortfall isn’t the first time this year that VA has requested Congress free up money, and extracted changes in VA programs in return.

Since January, lawmakers have twice raised the cost cap for beleaguered VA’s Denver replacement hospital construction project when work on the site would have halted without action. In exchange for raising the authorized amount of spending on the project and permitting the VA to transfer more money for construction, which has soared to more than $1 billion in cost, lawmakers required the agency to clarify eligibility of rural veterans for the Choice program, which also permits veterans to get medical treatment outside of the VA system if they live 40 or more miles from a VA facility. The VA was required to calculate the eligible distance as 40 miles in driving distance, not a straight line.