A dispute over veterans health care funding is holding up bipartisan negotiations on the framework for an omnibus spending package that would avoid a partial government shutdown next month, according to sources familiar with the talks.
House Minority Leader Kevin McCarthy, R-Calif., is insisting that $12.5 billion for veterans’ medical care should not be classified as emergency spending that is exempt from budget caps, these people said.
The White House has sent mixed signals, but administration officials don't appear ready to formally back the position of House Democratic and Senate GOP leaders that the veterans money should be exempt. These sources spoke on condition of anonymity to discuss private deliberations.
A two-year budget deal in 2019 imposed limits on discretionary spending, and exempting the veterans funding from those limits would free up more money for other nondefense programs. Overall nondefense accounts would see increases greater than 2 percent on average for the budget year that began Oct. 1, as opposed to a less than 0.5 percent boost without the veterans health care carve-out.
The snag over a funding classification dashed hopes of reaching a bipartisan agreement this week on spending allocations for the 12 appropriations bills needed for a year-end omnibus package. Current stopgap funding is set to expire on Dec. 11, and congressional leaders had hoped appropriators would be able to start hashing out compromises as soon as next week after receiving joint subcommittee allocations to work from.
Senate Republicans, who back the veterans health care exemption, thought they had resolved the matter last spring, after meeting with President Donald Trump. Senate Appropriations Chairman Richard C. Shelby, R-Ala., said in May that Trump was “neutral” about allowing for an exemption.
But McCarthy has always opposed the move, according to sources, arguing it would bust the two-year budget agreement and allow appropriators to spend more money on nondefense programs. During his May meeting with Shelby, Trump called McCarthy for his views.
McCarthy aides weren't immediately available for comment Saturday on the renewed dispute, which was first reported by the Washington Post. Neither were White House Office of Management and Budget staff or aides to Treasury Secretary Steven Mnuchin, who has been involved, according to a person familiar with the discussions.
Another source familiar with the talks said Mnuchin is not necessarily opposed to the veterans emergency adjustment, but wants to make sure all parties in the negotiations are on board since it would deviate from last year's spending caps deal.
The administration expressed some unease about the veterans cap exemption in July.
In a Statement of Administration Policy on a House spending package (HR 7608), White House officials said treating the veterans’ money as emergency spending raised “concerns about the programmatic rationale for this designation and impeding efficient budget execution.” It also noted that the White House fiscal 2021 budget request “fully funds VA requirements without emergency funding by prioritizing funding within the non-defense cap.”
But the White House's veto threat on the broader bill — which also included funding for the departments of State, Agriculture and Interior and the EPA — didn't include the VA funds in a list of specific provisions they took issue with on the first page of the document.
It wasn’t clear how strongly the White House was prepared to battle for removing the exemption. A source familiar with the negotiations said Saturday the administration may be open to compromise and that talks remain fluid.
With tight budget limits in place, lawmakers have wrestled for months over how to accommodate rising costs in a VA program designed to let certain veterans seek health care at private facilities outside the VA system if they would otherwise face long waits.
Exempting the program from spending limits frees up about $12.5 billion that could be used for other nondefense programs. The effect on the annual Military Construction-VA spending bill is dramatic.
By allowing the emergency designation, appropriators in both chambers were able to propose boosting the VA's fiscal 2021 budget by roughly 13 percent, meeting the White House's request for programs at that agency. Without the emergency designation, total VA discretionary funds would be slightly below the prior year's enacted level of $92.5 billion.
Increases were sought by the VA to account for a rising patient population; millions more expected outpatient visits; implementing a sweeping new electronic health records project; and new funds for mental health services and oncology.
The money also includes increases to meet the demands of a vast network of urgent care providers partnering with the VA to provide private care closer to where veterans live. That's a function of a 2018 law overhauling delivery systems and promoting private care options, which also transferred the costs of the new programs to appropriators rather than being funded outside the regular budget process for several years after the 2014 wait time scandal.
Veterans medical care is mostly funded through "advance" appropriations so the agency can have some planning certainty. Under advance funding for fiscal 2021 enacted in last year's spending package, appropriators have already had to accommodate a $7.5 billion increase — more than 9 percent — for VA health care in this year's bill, amid tight overall nondefense limits.
Without the emergency designation, appropriators would either need to jettison additional VA increases requested by the White House, or find cuts within other veterans programs or nondefense accounts in other spending bills. That would mean appropriators in both chambers would have to go back to the drawing board on their 12 fiscal 2021 bills, with a deadline for action just weeks away.
Another option is extending the current stopgap into the new calendar year to await the arrival of President-elect Joe Biden in the Oval Office. But leaders in both parties say they want to get this year's work done by next month to clear the decks for next year's agenda.
Paul M. Krawzak contributed to this report.