updated 9/20/2006 7:16:12 PM ET 2006-09-20T23:16:12

The Department of Veterans Affairs used prewar data to estimate the cost of caring for veterans from Iraq and Afghanistan, a mistake that contributed to a $3 billion budget shortfall since 2005, government investigators say.

Asked by lawmakers to examine what led to the agency’s financial troubles in the last two years, the Government Accountability Office said in a report Wednesday that the VA used “unrealistic assumptions, errors in estimation and insufficient data” to project its budget.

The VA failed to estimate correctly the costs for Iraq and Afghanistan veterans party because it could not get accurate information from the Defense Department, the GAO found.

The agency also failed to tell Congress in a timely way that it was struggling to meet its expenses. The problems led officials to make requests for an extra $3 billion in June and July of last year, according to the GAO.

Democrats, who commissioned the report after the funding requests, used it to blast the Bush administration for not adequately caring for veterans of Iraq and Afghanistan. The VA will receive about $31.5 billion to provide health care for about 5.4 million patients this year.

The report is “a stunning indictment of this administration’s commitment to our troops,” said Sen. Patty Murray, D-Wash.

Democrats called on VA Secretary Jim Nicholson to provide an accurate plan for how it will meet veterans’ needs in the future.

“We should not be running a VA system that is going to be short on the funding for health care,” said Sen. Ken Salazar, D-Colo.

2005 expected to be a tight fiscal year
VA officials said they had not seen the report and were not immediately able to respond to questions. In comments attached to the report, officials said they agreed with the findings and were working to improve.

GAO investigators said the VA knew 2005 would be a tight budget year and attempted to manage the expenses and cut costs. But officials were overly optimistic — and sometimes plain wrong — about how effective the changes could be, the GAO found.

One such plan called for the VA to reduce the average daily patient workload in its nursing homes. But the proposal would have required the agency to cut staff and discharge or transfer in a short time potentially thousands of veterans with severe, chronic physical or mental disabilities.

The plan also would have forced the veterans to dip into Medicaid, private insurance or their own savings to pay for care, the GAO found.

Instead, in June 2005, with three months remaining in the federal budget year, the Bush administration requested an extra $975 million from Congress to meet its expenses. That included $273 million for Iraq and Afghanistan veterans.

A month later, the administration asked for another $1.977 billion for the 2006 budget year.

In response, Congress required the VA to provide quarterly status reports. But the GAO review found the agency has left out key information about the cost to treat patients in its reports. The first two were almost two months late and used data that was as much as three months old.

The agency has since worked to improve its estimates and its coordination with Congress and the administration’s budget office, said the GAO report. But investigators recommended the agency better explain cost savings from policy changes and that it give Congress more information.

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