The V.A.'s $1.5 Trillion Financial Reassessment

In 2022, the net cost of running the U.S. Department of Veterans’ Affairs (VA) was an astounding $1.9 trillion based on U.S. Treasury financial reports.

For that year alone, it was the most expensive agency on record, beating out Health and Human Services (HHS), despite the VA only covering somewhere around one-tenth that of Medicaid—6.2 million unique VA patients, or 9.1 million enrollees, versus 91.7 million with Medicaid. And that’s not including Medicare and all the other activities handled by HHS.

But that was just for 2022. The prior year, 2021, total net costs were a more reasonable $693.4 billion. The vast majority of costs for 2022 were all from a massive restatement of liabilities. According to the VA, it was a $1.5 trillion restatement.

According to the VA’s annual report:

The increase was due to updates in actuarial assumptions of Veterans compensation plan participation and benefit level distribution rates, mortality rates and methodology for setting future long-term COLA. The increase in plan participation and benefit level distribution rates is the result of legislation and VA policy changes that expanded eligibility. The mortality rates decreased, which indicate Veterans are living longer with their disabilities. Lastly, the projected COLA rate was updated to the long-term rate of inflation used by the Social Security Administration (SSA).

The VA could certainly see more plan participation in coming years and longer lifespans of its members, but would it be enough to triple its budget overnight?

Certainly inflation has risen recently, but total expected benefits to be paid out went from $4.7 trillion to $6.1 trillion overnight—a 38 percent increase—far beyond the high inflation rates of 8 percent in 2022.

In 2022, Congress passed the Promise to Address Comprehensive Toxics Act of 2022, or PACT Act, which would enable all veterans who were in a combat zone or exposed to toxins to be immediately eligible for VA benefits without having to enroll. Certainly that might expand veteran participation, but not ten-fold.

Rising Costs and Expenditures, But Nothing Exceptional

In general, VA expenditures rise year over year and so do the number of patients covered by the VA. But the year over year increase has been in steady decline and in 2022, the year of the spike in costs, the VA actually lost patients. On average, only 28 percent of potential veterans are patients through the VA.

Based on annual expenditures, the VA doesn’t come close to needing trillions any time soon. Even if they covered every potential veteran—18.2 million in 2023—at a rate of $45,600 of expenditures per patient—the high point for VA spending, which includes all non-medical expenditures like construction, research, and education as well, it would only reach $829 billion in a year—less than half of what they received from the Treasury in 2022.

Medical expenditures by themselves continue to rise above inflation, but they top out at $110 billion in 2023. Fifty-one percent of the agency’s budget goes to compensation and pensions.