1. Follow-up to workshop on 10/25 (20 points)

Finish the cost estimate about expanding health care for female veterans that we worked on in class. Please submit Excel spreadsheet to show calculations.

II. 10-Year Budget Baseline & Estimates

To answer the following question, you will need to create a 10-year budget baseline in Excel to determine spending during that decade (following fiscal year 2021), and then modify the projection to determine the effects of potential policy changes.

Consider the case of a publicly financed retirement program. Under current law, the program had:

14. 8.0 million beneficiaries in fiscal year 2021
15. Each of whom received a benefit of $7,200 for that year.

Given current eligibility rules, government statisticians estimate that the gross population of beneficiaries will grow at a rate of 5% per year, but that about 1% of the population will die each year, so that there will be a NET growth in program beneficiaries of 4% each year from 2022 through 2031.

In addition, current law requires that benefits be increased each year at a rate of 2.5%.

Tasks

1. Create an Excel spreadsheet showing the estimated costs for 2021 and the 10-year baseline projection for 2022 through 2031 under this program. Calculate estimated spending for 2021 using the starting points of 8.0 million beneficiaries and a benefit of $7,200 per person for that year, and then project spending growth over the 2022-2031 period (next 10 years). (50 points)

Create and submit an Excel table that shows the baseline projections. Be sure to LABEL and double-check your units: Provide the dollar answers first in millions of dollars and then in billions of dollars where you round to the nearest tenth of a billion (i.e., $x.y billion).

14. What is the estimated cost of the program in 2021?
15. What is the projected cost of the program for the sum of the 10 years of the 2022-2031 baseline period?

2. Suppose, instead, that current law sets the annual benefit increase to 2.25% in 2022 (and thereafter) rather than 2.5%. Calculate the 10-year budgetary impact of that change in the baseline. (15 points)

2b. What if the reduction in the annual benefit inflator to 2.25% is not effective until 2025? What would be the difference over the baseline period relative to an annual increase of 2.5% annually for each year? (15 points)

supporting material

Expanding Health Care for Women Veterans

at the Department of Veterans Affairs

Case Study

Background: The Department of Veterans Affairs (VA) is the federal agency that provides benefits and services to the nations 20 million living veterans and their dependents in the form of compensation to veterans disabled due to their service in the United States military, education benefits, means-tested pensions, health care, insurance, and burial benefits.

In 2020, VA provided health care to about 7 million veterans in the largest integrated health care system in the United States. Of those veterans, roughly 10 percent (or 700,000) are women. VA health care is a discretionary program, which means its funding is provided by annual appropriation acts.

Policy Proposal: Under current law, VA may pay for neonatal health care for up to seven days after birth for newborn children of women veterans who receive maternity care from the department. Section 3 of S. 3182, Helping Expand and Launch Transitional Health for Women Veterans Act (116^th Congress) would have authorized VA to pay for more than seven days of neonatal health care provided to those children.[1] Specifically the bill would have:

• Allowed VA to cover neonatal care for babies of women veterans beyond 7 days of delivery (and necessary transportation costs from medical facilities)
• Applied to women veterans who receive health care from VA
• Covered neonatal care at non-VA facilities

Data (see spreadsheet):

• Average cost per complicated birth
• Projected number of births, by fiscal year

Other Information:

• 15 percent of all births covered by the VA are considered complicated (i.e., would require more than 7 days of hospitalization)
• On average, women with complicated births require 18 days in the hospital
• Data for previous years suggests that hospitalization costs grow by 4.4 percent per year

Estimate:

Assuming S. 3182 is enacted at the beginning of fiscal year 2022, determine the total costs to provide neonatal care beyond 7 days to newborns of women veterans over the 2022-2026 projection period, by doing the following in an excel spreadsheet:

• Set up a model by entering the estimated costs per complicated birth and the number of births each year over the 2022-2026 projection period
• Using the information provided in the case study and data, calculate the annual cost for complicated births
• Display the 5-year cost for the 2022-2026 period in $thousands (i.e., divide your answer by 1,000)

Additional Consideration:

• Under the proposal, VA may provide neonatal care for any duration beyond 7 days of birth. What if that period were limited to 14 days, how could that effect the estimate? How could you change your model for that adjustment?
• For our estimate, we assumed broad eligibility. How would you adjust your model if the proposal specified the number of individuals eligible each year?
• Assume 10 percent of births are eligible for expanded health care. How would this affect your estimate?

Uncertainties:

• Discuss the uncertainties in this estimate
• Which factors could reduce or increase costs?

[1] Refer to CBOs Cost Estimate of S. 3182, Helping Expand and Launch Transitional Health for Women Veterans Act (February 20, 2020), www.cbo.gov/publication/56186.