Official: VA Improperly Spends $5 Billion a Year on Health

WASHINGTON (AP) — The Department of Veterans Affairs is improperly spending at least $5 billion a year for medical care and supplies being purchased in violation of required practices for competitive bidding and written contracts, a senior VA official said Thursday.

"Gross mismanagement" by senior agency leaders has wasted billions of dollars and made a "mockery" of federal laws regarding purchasing of goods and services, said Jan Frye, deputy assistant secretary for acquisition and logistics.

Illegal purchases have been made for pharmaceutical drugs and medical supplies, putting veterans at risk and exposing the agency to widespread "fraud, waste and abuse," Frye said.

"I can state without reservation that VA has and continues to waste millions of dollars by paying excessive prices for goods and services due to breaches of federal laws," Frye told the House Veterans Affairs subcommittee on oversight and investigations.

VA Secretary Robert McDonald said in a statement Thursday that he appreciates the issues Frye brought to light. Frye first raised concerns in a 35-page memo to McDonald earlier this year.

As Frye made clear in his March memo and in testimony Thursday, "there are many acquisition paths within the Veterans Health Administration" to provide health care for veterans, McDonald said. "It is important to note that the vast majority of the funding identified in the memo went to provide veterans needed care in the community" and was not wasted, McDonald said.

McDonald said he has directed the VA's inspector general to review Frye's allegations. Any findings of wrongdoing or evidence of harm to veterans will be shared with the Justice Department for possible criminal prosecution, McDonald said.

Rep. Mike Coffman, R-Colo., chairman of the oversight panel, said "weak internal controls" at the VA have resulted in "serious violations of procurement laws," mostly through a purchase-card program intended as a convenience for minor purchases of up to $3,000. Instead, VA employees have used the cards to buy billions of dollars' worth of medical supplies and drugs without contracts.

In one example cited by Frye, about $1.2 billion in prosthetics were bought using purchase cards without contracts during an 18-month period that ended last year.

In all, VA has understated its annual acquisition totals by at least $5 billion in each of the past five years, "due to our inexcusable failure to acquire a substantial quantity of goods and services in accordance with federal laws and regulations," Frye said.

Coffman called that total "a truly staggering amount," adding that the problem goes far beyond "paying a little more for needed supplies and services, as some apologists for VA have asserted."

Among other things, "purchase-card abuse invites cronyism and the directing of business to favored vendors, including those who may employ former VA officials," Coffman said. In addition, buying drugs and medical supplies without proper contracts "imperils patient safety" and exposes VA to legal liability, Coffman said.

Edward Murray, acting assistant secretary for management and the VA's top financial officer, said the agency has more than 25,000 purchase cards that were used 6.1 million times to make $3.7 billion in purchases last year. The purchase cards help the VA acquire needed supplies and drugs more quickly than through usual government procedures, Murray said.

Murray conceded that the program has "experienced challenges" but said the quicker delivery of prosthetics, hearing aids and other needed supplies outweigh those concerns. In response to concerns by Congress and the internal watchdogs, the VA reduced the number of purchase cards from 37,000 in 2011 to 25,515 last year, Murray said. About 23,000 VA employees use purchase cards.

Rep. Kathleen Rice, D-N.Y., called those totals "just enormous" and said they invited abuse. Rice, one of 10 children, said she and her siblings "never would have attended college" if her parents had given each child a credit card.

The VA has tightened controls over use of the cards in recent years and instituted mandatory training, Murray said.