VA projects $15B shortfall driven by costs for veterans benefits, prescription drugs and a bigger workforce

The Department of Veterans Affairs is anticipating a $3 billion budget shortfall through fiscal 2024 from an increase in veterans benefits, and a $12 billion spending gap in 2025 driven by higher costs for prescription drugs and the hiring of more workers.

VA chief financial officers from the Veterans Benefits Administration and Veterans Health Administration informed the House Veterans’ Affairs Committee on Monday of budget shortfalls projected through fiscal 2025.

Rep. Mike Bost, R-Ill., chairman of the House VA Committee, blasted VA Secretary Denis McDonough and other VA leaders on Wednesday, accusing them of mismanaging the VA budget and misleading lawmakers in testimony at budget hearings in the spring.

“This represents by far the largest budget shortfall that VA has experienced under any administration,” Bost said, referring to the total $15 billion. “This is not just fiscal mismanagement. It is strategic whiplash.”

Terrence Hayes, the VA press secretary, described the miscalculations as a result of historic demand for veterans benefits and health care services that has exceeded projections. He said the monthly average disability compensation payment for veterans has increased by nearly 8% since the start of fiscal 2024.

“These results are life-changing for veterans, their families, caregivers and survivors, and VA will continue push to make sure that they get the care and benefits they deserve,” Hayes said.

He said the agency is working closely with lawmakers and the Office of Management and Budget to close the spending gaps without creating any “adverse impacts on veterans.”

But Bost sent a letter Wednesday to McDonough, citing statements the VA secretary made at budget hearings saying the agency was able to adequately cover the surge in claims for VA disability compensation and had plans to reduce its workforce by 10,000.

McDonough previously described the VA’s 2025 proposed spending plan, which totals $370 billion, as a “maintenance budget.” It represents a $33 billion increase from the VA’s budget for fiscal 2024, which ends Sept. 30.

Bost said the VA should have estimated more accurately increased costs to deliver health care services and disability under the Sergeant First Class Heath Robinson Honoring our Promise to Address Comprehensive Toxics Act, known as the PACT Act, which offers disability compensation to tens of thousands of veterans exposed to hazardous substances while on active duty. About 1.5 million claims for toxic exposure have been filed since the PACT Act was signed into law in August 2022. More than 694,000 veterans and survivors have been awarded benefits, according to the VA.

Bost criticized the VA for promoting the PACT Act without effectively budgeting for its costs.

“I question how VA could have failed to budget for increased health care and benefits costs resulting from the PACT Act that we all knew were coming, and I have major doubts about some of the department’s excuses,” he wrote in the letter.

The PACT Act provides medical care and monthly disability compensation to veterans diagnosed with diseases connected to toxic exposures from burn pits, radiation at weapons testing sites, and aerial spraying of Agent Orange and other herbicides.

Bost wrote in the letter that he felt McDonough misled lawmakers when he testified the VA planned to impose hiring restrictions and reduce the full-time workforce after increasing the ranks to help process a windfall of claims from veterans seeking benefits.

The VA employes more than 400,000 workers. The agency now projects an increase of more than 22,000 full-time employees to its workforce through 2025.

Bost also criticized VA leaders for not calculating higher costs for community care as more veterans seek referrals to see private doctors close to home when VA care is not available in a timely manner. He also accused the VA of shifting expenses into different funds rather than being transparent about rising expenses in some budget areas, an accusation he first made at a budget hearing earlier this year.

Bost said it appears the VA is shifting dollars from regular VA expenses to the toxic exposures fund that compensates disabled veterans under the PACT Act. The fund is projected to provide $24.5 billion in benefits in 2025, up $4 billion from this year.

The congressman also sought clarity for the reasons for higher drug costs, saying “speculation” from VA leaders about greater demand for Ozempic and other popular prescription diet drugs does not hold weight with lawmakers. Bost requested McDonough respond to his letter by July 26 and more fully explain the budget shortfall.

He also indicated the committee could subpoena the VA secretary if the panel does not receive a complete response by the requested deadline.