[Senate Hearing 107-744]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-744
 
           THE FISCAL YEAR 2003 BUDGET FOR VETERANS' PROGRAMS
=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 14, 2002

                               __________

      Printed for the use of the Committee on Veterans' Affairs 




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


 deg.?

                     COMMITTEE ON VETERANS' AFFAIRS

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman

BOB GRAHAM, Florida                  ARLEN SPECTER, Pennsylvania
JAMES M. JEFFORDS (I), Vermont       STROM THURMOND, South Carolina
DANIEL K. AKAKA, Hawaii              FRANK H. MURKOWSKI, Alaska
PAUL WELLSTONE, Minnesota            BEN NIGHTHORSE CAMPBELL, Colorado
PATTY MURRAY, Washington             LARRY E. CRAIG, Idaho
ZELL MILLER, Georgia                 TIM HUTCHINSON, Arkansas
E. BENJAMIN NELSON, Nebraska         KAY BAILEY HUTCHISON, Texas

                     William E. Brew, Chief Counsel

      William F. Tuerk, Minority Chief Counsel and Staff Director

                                  (ii)

  









                            C O N T E N T S

                              ----------                              

                           February 14, 2002

                                SENATORS

                                                                   Page
Rockefeller, Hon. John D. IV, U.S. Senator from West Virginia, 
  prepared statement.............................................     3
Specter, Hon. Arlen, U.S. Senator from Pennsylvania, prepared 
  statement......................................................     6
Thurmond, Hon. Strom, U.S. Senator from South Carolina, prepared 
  statement......................................................     7

                               WITNESSES

Bollinger, John C., Deputy Executive Director, Paralyzed Veterans 
  of America, prepared statement.................................    77
Fischl, James, Director, National Veterans Affairs and 
  Rehabilitation Commission, The American Legion.................    91
    Prepared statement...........................................    93
    Response to written questions submitted by Hon. John D. 
      Rockefeller IV.............................................   101
Fuller, Richard, National Legislative Director, Paralyzed 
  Veterans of America............................................    76
Hayden, Paul, Associate Director, National Legislative Service, 
  Veterans of Foreign Wars.......................................    85
    Prepared statement...........................................    87
Jones, Bob, National Executive Director, AMVETS..................    74
    Prepared statement...........................................    75
Jones, Richard, National Legislative Director, AMVETS............    88
    Prepared statement...........................................    90
Principi, Hon. Anthony, Secretary of Veterans Affairs, 
  accompanied by Frances Murphy, M.D., Acting Under Secretary for 
  Health; Guy H. McMichael III, Acting Under Secretary for 
  Benefits; Robin L. Higgins, Under Secretary for Memorial 
  Affairs; Tim S. McClain, General Counsel; and D. Mark Catlett, 
  Acting Assistant Secretary for Management......................    10
    Prepared statement...........................................    13
    Response to written questions submitted by:
        Hon. John D. Rockefeller IV..............................    18
        Hon. James M. Jeffords...................................    61
Surratt, Rick, Deputy National Legislative Director, Disabled 
  American Veterans..............................................    80
    Prepared statement...........................................    81

                                APPENDIX

Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, 
  prepared statement.............................................   117
Craig, Hon. Larry E., U.S. Senator from Idaho, prepared statement   117
Friends of VA Medical Care and Health Research, prepared 
  statement......................................................   118
Weidman, Richard, Director of Government Relations, Vietnam 
  Veterans of America, prepared statement........................   123

                                 (iii)

  












           THE FISCAL YEAR 2003 BUDGET FOR VETERANS' PROGRAMS

                              ----------                              


                      THURSDAY, FEBRUARY 14, 2002

                                       U.S. Senate,
                            Committee on Veterans' Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:09 a.m., in 
room SR-418, Russell Senate Office Building, Hon. John D. 
Rockefeller IV (chairman of the committee) presiding.
    Present: Senators Rockefeller, Jeffords, Akaka, Wellstone, 
Nelson, Specter, Thurmond, and Hutchison.
    Chairman Rockefeller. Good morning, and I apologize, as I 
often have to, for being a little bit late. And I welcome our 
witnesses to our hearing today. I look forward to working, as I 
always do, with Senator Specter, with Secretary Principi and 
with other veteran service organizations and all parties 
concerned to try to make some sense and do some good with the 
2003 fiscal budget.
    This is a process that we start today, and it is a crucial 
process. While other issues come up, and I think Senator 
Specter would agree with me, ultimately, nothing is more 
important than the budget. The early reviews of the 
administration's budget for the VA are mixed, and some have 
characterized it as the biggest increase in history for the VA 
and others as the best that can be expected during this 
difficult time.
    In my view, we can do better, and in the process, we can be 
more forthcoming with veterans. And I think that is important. 
Regardless of how good or how bad a budget might be, it is 
important to be forthcoming.
    I have a number of concerns that I will discuss today and 
work on in the weeks ahead with my colleague, Senator Specter, 
and my colleagues on the committee, because we always want to 
make the budget better. No one should object to that. For 
years, when we looked at the health care budget, we focused on 
the declining veteran population and therefore the declining 
demand. We are in a totally different predicament today. More 
veterans are turning to the VA health care system, and one can 
say that is a success story. But, of course, it carries with it 
budget consequences.
    There can be little doubt that the proposed funding for 
medical care is below the amount needed to fund current 
services. The proposed shift of funding for retirement and 
other staff costs from OPM is cause for a great deal of 
uncertainty in this Senator's mind as is the proposed 
deductible, which is designed at its heart, to be blunt, to 
drive veterans away. I will be exploring these matters in some 
detail during the course of this and future meetings.
    At the time Congress was enacting eligibility reform, I 
spoke about the dilemma that we would face in opening up the 
doors and providing a rich benefit package and how, down the 
road, we would have to face the music. Well, we are now facing 
the music. In my view, we and the administration have a choice: 
either own up to the demand for health care services and 
provide funding--my preference--or manage enrollment to cut 
back those who can receive services. This budget seems to 
choose the second path, but really does neither in the view of 
this Senator.
    The administration has not requested additional 
appropriations sufficient to cover demand. That is, of course, 
the great game that we play in Washington, to claim that there 
is this big increase. And, of course, if the big increase is 
less than the cost of medical inflation, it is not really an 
increase and is in fact a decrease in terms of the veterans. 
So, you know, one can work that however one wants, but that is 
why I think being straight with veterans is important.
    VA, but when I say VA, I suspect it is not really VA or 
Tony Principi. What I really mean is that OMB has chosen 
instead to artificially suppress demand. That is a fairly harsh 
thing to say, but I want it out there so we can talk about it. 
I will be exploring the rationale behind this as well as the 
likely impact if it were to be enacted.
    I also express my concerns that there is much in this 
budget which is misleading. We seem to have an agreement on a 
certain level of funding but not a commitment to appropriate 
that amount. I intend to explore in detail how we can be 
certain that the VA will achieve the level of funding, get the 
money which is requested in the budget documents and what 
consequences will there be if we fail to actually get that 
money, authorizing and appropriating.
    While there seems to be a lot of activity and energy at VBA 
these days, I am very concerned about the state of benefits 
adjudication. Some indicators show improvement, but there is a 
long way to go. So that is positive yet still raises a 
question. My comments are not all intended to be negative. I 
completely agree that veterans should not have to wait an 
average of 208 days for their claims to be decided. We have 
been discussing this issue of timeliness for my 18 years on 
this committee, but I want to be clear that gains in timeliness 
cannot come at the expense of the quality of the decisions, et 
cetera, that are made. I note that Admiral Cooper has stated in 
a couple of settings that he cannot justify a staffing 
increase, and I hope that the limited increase that you are 
requesting is sufficient to implement the VISN for VBA.
    I am very concerned about the administration's proposal to 
shift the veterans' employment grant programs from the 
Department of Labor and, at the same time, convert them to 
competitive grant programs. I do not believe this proposal is 
sufficiently thought out to have already been included as a 
fait accompli, so to speak, in the President's budget; again, 
this is simply my view. While logistics are something that can 
be worked through, it is not clear to me that it makes sense to 
take employment programs away from the department, that is, 
Labor, that knows employment best.
    So again, to my colleague, Senator Specter and my 
colleagues, we welcome you all here today. These are some of 
the things that I will want to talk about. I look forward to 
trying to get the best fiscal year 2003 budget for you to be 
able to care for the veterans that you so badly want to care 
for, and I call now upon my distinguished colleague, Senator 
Specter.
    [The prepared statement of Senator Rockefeller follows:]

 Prepared Statement of Hon. John D. Rockefeller IV, U.S. Senator From 
                             West Virginia

    I welcome our witnesses to today's hearing. I look forward 
to working with Senator Specter and the other Members, 
Secretary Principi, and with the veterans service organizations 
on this critical FY 2003 budget. Today is only one step in a 
process that will continue through the year.
    The early reviews of the Administration's budget for VA 
have been mixed. Some have characterized it as the biggest 
increase in history for VA, others as the best that can be 
expected during this difficult time. In my view, we can do 
better and, in the process, be more forthcoming with veterans.
    I have a number of concerns that I will discuss today and 
work on in the weeks ahead as we seek to shape the Department's 
budget for next year.
    For years, when we looked at the health care budget, we 
focused on the declining veteran population and declining 
demand. We are in a totally different predicament today. More 
veterans are turning to the VA health care system, and that is 
a success story.
    There can be little doubt that the proposed funding for 
medical care is below the amount needed to fund current 
services. The proposed shift of funding for retirement and 
other staff costs from OPM is cause for a great deal of 
uncertainty, as is the proposed deductible which is designed--
at its heart--to drive veterans away. I will be exploring these 
matters in some detail.
    At the time Congress was enacting eligibility reform, I 
spoke about the dilemma that we would face in opening up the 
doors and providing a rich benefit package and how, down the 
road, we would have to face the consequences. That time has 
arrived.
    In my view, the Administration has a choice: Either own up 
to the demand for health care services and provide funding--my 
preference--or manage enrollment to cut back on those who can 
receive services. This budget seems to choose the second path, 
but really does neither.
    The Administration has not requested additional 
appropriations sufficient to cover demand, nor was there a 
decision to manage enrollment last Fall. VA has chosen instead 
to artificially suppress demand with the new deductible. I will 
be exploring the rationale behind this, as well as the likely 
impact if it were to be enacted.
    I am concerned that the VA is expecting to collect $1.5 
billion in third party collections, deductibles and copayments 
in FY 2003. That is almost $500 million more than they expect 
to collect this year, and it means that they will have to 
average about $125 million a month in collections. This would 
be an incredible improvement over the $76 million a month in 
collections that they are averaging so far this year.
    The Administration's budget also counts on new revenue 
generated by the proposed $1,500 deductible that all 
nonservice-connected veterans with incomes over $24,000 would 
have to pay for health care services. The purpose is obviously 
to keep health care enrollment open to all veterans, but the VA 
predicts that more than 100,000 veterans would not use VA 
health care services because of the new deductible. I am 
concerned about what will happen to these veterans. How many of 
them are currently using the VA system? How many are uninsured? 
And how many will have to turn to the already over-burdened 
Medicare system?
    I also express my concerns up front that there is much in 
this budget which is misleading. What we seem to have is 
agreement on a certain level of funding but not a commitment to 
appropriate that amount. I intend to explore in detail how we 
can be certain that VA will achieve the level of funding which 
is included in the budget documents and what the consequences 
will be if we fail.
    The Administration's proposal to include the full costs of 
the accrual of retirement and health care benefits in each 
agency's discretionary spending account is being touted to 
``correct a longstanding understatement of the true cost of'' 
these programs. I realize that this is a government-wide 
initiative with which VA is complying. However, if the amount 
was previously aggregated in a central account and the budget 
books say the ``proposal does not increase or decrease total 
budget outlays government wide,'' I don't understand how the 
costs were previously underestimated. Further, it has the added 
consequence of obscuring the actual funding provided for 
veterans services and creating a seeming competition among 
discretionary accounts for what had previously been a mandatory 
account.
    While there seems to be a lot of activity and energy at the 
Veterans Benefits Administration these days, I am very 
concerned about the state of benefits adjudication. Some 
indicators show improvement, but there is a long, long way to 
go. I completely agree that veterans should not have to wait an 
average of 208 days for their claims to be decided, but I want 
to be clear that gains in timeliness cannot come at the expense 
of quality, which was already questionable.
    I note that Admiral Cooper has stated in a couple of 
settings that he cannot justify a staffing increase. I hope 
that the limited increase VA is requesting is sufficient to 
implement the vision for the system's future. I do not believe 
that every problem can be solved by throwing more money at it, 
but the possibility of additional funding should not be 
foreclosed for what has been heralded as a Presidential 
priority.
    I am also very concerned about the Administration's 
proposal to shift the veterans employment grant programs from 
the Department of Labor, and at the same time, convert them to 
competitive grant programs. I don't believe this proposal is 
sufficiently thought-out to have already been included in the 
President's budget. While logistics are something that can be 
worked through, it is not clear to me, that it makes sense to 
take employment programs away from the Department that knows 
employment best. I anticipate hearing much more on this before 
it can be considered.
    Again, welcome to all of you here today. I look forward to 
our work on behalf of the nation's veterans in the weeks and 
months ahead, as the Committee continues in our efforts to get 
a good FY 2003 budget for veterans programs.

    Senator Specter. Thank you very much, Mr. Chairman, and may 
I say at the outset that I believe you and I have made a good 
team. We have passed the gavel back and forth as chairman and 
ranking member, but Senator Rockefeller and I, the chairman and 
I, concur that partisanship has no place on veterans' issues, 
and I think we would also concur that there is too much 
partisanship on other matters.
    I learned a long time ago that if you want to get something 
done in Washington, you have to be willing to cross party 
lines. With Senator Harkin on the LHHS Subcommittee of the 
Appropriations Committee, and with Senator Rockefeller on this 
committee, I think I have done that, and I think it is to the 
benefit of veterans. Chairman Rockefeller and I see virtually 
eye-to-eye in our efforts to improve services for veterans.
    Let me thank Senator Thurmond for being here. Senator 
Thurmond created the Veterans' Committee, just as he created so 
many of the institutions in the U.S. Senate. Among the many 
colleagues who are on this committee, Senator Thurmond is here 
regularly, as he is on the floor of the Senate regularly 
voting, notwithstanding the fact that Strom celebrated his 99th 
birthday last December 5. We are looking forward to the 100th 
anniversary of his birth this December 5.
    When I say others are not here, I am not being critical of 
them. We all have many conflicting assignments; I have to 
excuse myself early this morning due to another commitment, a 
budget hearing on the Coast Guard and homeland security. We all 
have so many competing assignments, so I do not mean my comment 
about the absence of others to be critical in any way. 
Everybody is hard at work, I know, as we speak.
    With respect to the VA budget, I would like my full 
statement included in the record, Mr. Chairman, if I may. And I 
would like to make a couple of supplementary comments. Since 
1996, the VA medical care enrollment has increased 62 percent 
from 2.9 million to 4.7 million patients, while funding for 
medical care has gone up only 24 percent. And there is also an 
inflation factor which makes it even more difficult. We had a 
budget proposal last year which requested an added $700 
million, but the Congress upped that figure, on a bipartisan 
basis under the leadership of Chairman Rockefeller, to add $1.1 
billion to VA medical care funding. Candidly, even that has 
been insufficient to provide the kind of care which is 
necessary.
    I have served on the Veterans' Committee for all of my 22 
years in the Congress, and I consider it a heavy 
responsibility. I serve here in recognition of my father, Harry 
Specter, who was a veteran of World War I. He came from Russia, 
literally walked across Europe, with barely a ruble in his 
pocket. He did not know he had a round-trip ticket to France, 
not to Paris and the Follies, but to the Argonne Forest where 
he was wounded in action. During the Depression days, he 
received care from the Veterans Administration. He had an 
automobile accident; a spindle bolt broke on a defective car; 
crushing his right arm. And in 1937, he was cared for at the 
Veterans hospital in Wichita, KS. I used to ride a bicycle 
miles out of town to visit him there. Now, the city of Wichita 
has all grown up. But knowing what VA care meant to my own 
father, I am very concerned that VA care is adequate for 
veterans. We have a duty to care for veterans.
    With respect to VA's proposed budget, there are a couple of 
opportunities, I think, for supplements, and I have discussed 
them with the Secretary. And let me commend you, Secretary 
Principi, for the outstanding job that are doing. You came to 
this job perhaps better prepared than any other Secretary, 
having been a Senate staffer. Nothing like having been a Senate 
staffer. It is a lofty position, loftier than Senator----
    [Laughter.]
    Senator Specter [continuing]. In many people's minds, 
especially in staffers' minds. [Laughter.]
    But as you and I have discussed, on medical care insurance 
collections, a lot more can be done. You have candidly said 
that VA doctors are not as concerned with filling out the forms 
to collect insurance as they should be. And I have suggested to 
you that you might terminate some doctors who do not fill out 
the forms--fire them--because there is a lot of extra money out 
there that could, and should, come back to the VA. And on the 
Medicare subvention issue: there ought to be an allocation of 
Medicare funds to VA for the care of Medicare-eligible 
veterans. I know there is resistance to that in the House, but 
there ought to be a real effort to secure passage of Medicare 
subvention legislation.
    VA has suggested that certain veterans pay a $1,500 annual 
deductible. I am opposed to that in the form you have 
articulated. You state it is going to be paid by those who can 
afford it, but it starts at an income level of $28,000 a year. 
I do not know anybody at $28,000 a year who can afford much of 
anything. I asked the Secretary what his salary was, and he 
told me $161,000. And I commented that he made more than 
Senators. He quickly adjusted the figure; said he was not sure. 
[Laughter.]
    But I do know--stop blushing, Mr. Secretary. [Laughter.]
    But I do know that someone who makes $28,000 a year is not 
in a position to pay a $1,500 annual deductable.
    And the final comment I want to make relates to homeland 
security. I would like to see your department, Mr. Secretary, 
more involved. You get drugs, pharmaceutical supplies, at 
wholesale minus 24 percent.
    Secretary Principi. As a starting point.
    Senator Specter. As a starting point. Well, I think that 
you are in a good position to negotiate on those purchases, and 
I think that we ought to see you more deeply involved in 
procuring drugs to meet our homeland security needs.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Senator Specter follows:]

      Prepared Statement of Hon. Arlen Specter, U.S. Senator From 
                              Pennsylvania

    Thank you, Mr. Chairman. I join you in welcoming our 
witnesses to this important hearing. And I look forward to 
hearing the testimony of Secretary Principi and his colleagues. 
Welcome, Tony.
    I also look forward to hearing from the service 
organizations that will testify today. Of course, we are always 
eager to hear their views on the Administration's budget 
request--and on other issues that concern the organizations' 
members. Welcome, gentlemen. We very much value your work in 
preparing the ``Independent Budget.''
    I start by commending the Administration for a proposal 
that very much improves on last year's budget submission. Last 
year, VA requested an increase of only $700 million in medical 
care funding. The Republican members of this Committee 
unanimously urged, in writing, that VA medical care funding be 
increased by $1.8 billion--more than double the 
Administration's requested increase. We did not fully prevail--
but Congress did significantly improve on VA's request by 
adding over $1.1 billion in VA medical care funding, more than 
$\1/2\ billion more than the request VA submitted.
    Even so, last November, the Secretary nearly ordered a 
moratorium on new enrollments of non-service-connected, non-
poor--so-called, ``Priority 7''--veterans in VA. One point 
needs to be emphasized now: last year, Congress needed to know 
how much of a medical care funding increase VA actually 
needed--and we did not get that information. As a result, even 
though Congress exceeded VA's budget request by a substantial 
margin, VA nearly declared a moratorium on new enrollments. Mr. 
Secretary, we need to know the amount of funding that you will 
need this year to avoid that result.
    It would seem that while VA requests an additional $1.4 
billion for medical care spending, it actually needs more than 
this. Otherwise, VA would not be up here asking that the 
Congress act to deter ``Priority 7'' enrollments by imposing a 
new $1,500 per year copayment obligation. You need to tell us, 
Mr. Secretary, what you actually need to avoid an enrollment 
moratorium. And you need to tell us what you actually need to 
avoid the imposition of arbitrary fees designed solely to scare 
veterans away from VA. VA should welcome the opportunity to 
treat veterans--even supposedly ``low priority'' veterans.
    A further word, if I may, on VA's proposal that Congress 
impose new fees on veterans--fees over and above the increased 
drug copayments promulgated by VA last year--in order to raise 
money and deter ``low priority'' demand. VA is doing poorly--
I'm told pitifully--in collecting funds due from veterans' 
insurance carriers. As I understand it, VA collects only one-
quarter of what is owed to it. By my reckoning, VA could raise 
an additional $1 billion per year just by increasing 
collections from 25% to 50% of the amount owed. That, it seems 
to me, would be a low bar to clear.
    So I must say, Mr. Secretary, that I will seriously 
consider your proposal to impose new fees on veterans. But I 
will insist that VA do better on collecting what is already 
owed to it by non-veterans--the insurance companies--before I 
will become very receptive to the idea of new fees on veterans.
    And I will also suggest that VA advise this Committee what 
it will need to meet projected demand in fiscal year 2003--and 
that it ask for funding at that level. It seems plain to me 
that before we attempt to drive veterans away from VA by 
imposing fees--and that is what these fees are really all about 
. . . they are not about raising money--VA ought to try to get 
the level of funding that is needed to meet projected demand. 
That is what I expect the service organizations will propose. I 
will be hard pressed to oppose that suggestion. After all, that 
has always been my position in the past. And it has always been 
the position of this Committee.
    Mr. Chairman, that concludes my opening remarks. I look 
forward to an informative hearing.

    Chairman Rockefeller. Thank you, Senator Specter.
    Senator Thurmond?
    Senator Thurmond. Welcome, Mr. Secretary.
    [The prepared statement of Senator Thurmond follows:]

  Prepared Statement of Hon. Strom Thurmond, U.S. Senator From South 
                                Carolina

    Mr. Chairman: It is a pleasure to be here this morning to 
consider the budget requests for the Department of Veterans 
Affairs for fiscal year 2003. I join you and the members of the 
Committee in welcoming Secretary Principi and representatives 
of the Veterans Service Organizations.
    Mr. Chairman, I support the President's budget plan for 
fighting terrorism, for our homeland defense, and for economic 
revitalization. I am pleased that among the President's 
priorities is his commitment to revitalize National Defense and 
to our Veterans. The President's Budget request allows the 
Administration to continue its focus on high-quality health 
care and timely benefits.
    I look forward to working with you, other members of this 
Committee, and the Administration in providing our Veterans 
with the services and benefits they deserve.
    Mr. Chairman, I thank the witnesses for appearing here 
today and I look forward to reviewing the testimony.

    Chairman Rockefeller. All right; Senator Akaka?
    Senator Akaka. Thank you very much, Mr. Chairman. I want to 
add my warm welcome to the witnesses from Veterans Affairs 
appearing before the committee this morning, particularly 
Secretary Principi, whom I have enjoyed working with to improve 
the benefits and services for our country's veterans.
    I also want to welcome the witnesses from the Disabled 
American Veterans, Veterans of Foreign Wars, Paralyzed Veterans 
of America, AMVETS, and the American Legion. While, Mr. 
Chairman, I will not be able to stay for the duration of this 
hearing, please be assured that I will review today's record 
and work with my colleagues on the matters raised by the 
administration in its fiscal year 2003 budget request.
    Mr. Chairman, I am concerned with the level of what I call 
true funding in this year's budget request. While the VA fiscal 
year 03 budget has been hailed as one of the best ever, the 
true increases in funding I feel are disappointing. While all 
Federal agencies have been required to shift payments for 
employee retirements and benefits from mandatory to 
discretionary funds, these shifts are being characterized as 
increases in funding, in the case before us for benefits and 
services for all veterans, when they are not increases at all.
    I am also concerned with the proposal to create the $1,500 
deductible for Priority 7 veterans and look forward to 
testimony today about this issue.
    Mr. Chairman, I am pleased, however, to see continued 
collaboration between the VA and the Department of Defense. 
There are some exciting projects on the horizon that will truly 
meet the needs of those who serve in the defense of our great 
nation. Thank you, Mr. Chairman, and I will look forward to the 
testimony today.
    Chairman Rockefeller. Thank you, Senator Akaka.
    Senator Jeffords?
    Senator Jeffords. Thank you, Mr. Chairman.
    First of all, I want to thank you for the excellent job 
that you are doing. In working with you over the years, I have 
full confidence you are going to be the best. And I really 
deeply appreciate that.
    I also talked a little bit about the budget that you have 
fought so hard for, a budget that calls for an increase in 
veterans health services and veterans benefits. And I am 
concerned that in a climate of increasing health costs, the 
overall level of funding may not be sufficient to provide the 
services that veterans are entitled to and deserve. I would 
like to discuss your plans for requesting supplemental funding 
for the current year.
    While I strongly support the President's decision to 
continue to provide care for Priority 7 veterans, I am 
concerned that the funding is insufficient to cover the actual 
costs incurred by VA medical centers, leaving them in a 
precarious position. When one takes into account the historic 
shortfalls in health care funding, I believe that it is 
critical that we fully support the system this year. I hope to 
pursue these issues later on.
    Chairman Rockefeller. Senator Jeffords has concluded his 
statement.
    Senator Jeffords. Yes.
    Chairman Rockefeller. Senator Nelson?
    Senator Nelson. Thank you, Mr. Chairman, and I apologize 
for being tardy. The Senate Armed Services Committee is also 
meeting at this very moment.
    I want to begin by saying to my good friend Secretary 
Principi that it is good to see you, and I have enjoyed the 
working relationship. I look forward to learning more about the 
current budget proposal. I have certainly been impressed with 
your personal commitment and attention to the issues and the 
workings of your administration and your agency. I think you 
continue to work to maintain a high level of care and 
compassion for the veterans who are within your jurisdiction. 
And certainly, I appreciate your efforts on behalf of 
Nebraska's veterans.
    I want to personally thank you for your work on the 
renovation issue in Grand Island, NE. It was critical to 
ensuring that a project that was not working necessarily in the 
right way; had been passed over but certainly now is in the 
right frame of renovation.
    I have a question for you, though, about the proposed--
which I understand today from further discussion with members 
of your staff that it may not be proposed; it may be a fait 
accompli--but integration of VISN's 13 and 14. And as we are 
looking at the budget today, the questions that will be raised, 
the comments that you are going to hear will always be about 
whether or not we are doing the right thing or enough of the 
right thing for our veterans.
    We sent a letter on January 24 addressing my concerns about 
this. The mail being what it is in Washington today, that may 
or may not have gotten to you, but it may be there with the 
pile of letters from the rest of the Nebraska Congressional 
delegation raising questions about the merger of these two 
VISN's. My concern is whether or not, in a State like Nebraska 
that is geographically challenged or States like the Dakotas, 
where we have broad expanses of geography and few people, that 
we have capacity and that we have not only availability and 
affordability but the expectation that care is within some 
proximity of the location of our veterans.
    And so, I was concerned with what appeared to me to be a 
unilateral decision made within a bureaucracy rather than 
brought to this body for consideration, and I have even 
considered a field hearing to try to go into what this means to 
people who have to travel the broad distances. Going to 
Minneapolis-St. Paul is a joyful experience--I say that even 
though Senator Wellstone is not here. [Laughter.]
    But to go there because you have to for care, hundreds and 
hundreds of miles, may change your view of that travel. And so, 
I thought about what we could try to do to get the kind of 
information we need both as to budgets and as to care from the 
people on the ground, those who are the veterans or otherwise 
served. But I really do appreciate the willingness that you 
have had to step in to these areas, and I hope you will 
continue to have that kind of commitment to these line item 
budgets.
    As one who has put budgets together in the past at the 
State level, I know that they are not easy. I know that you are 
aware as I became aware that there are faces behind these 
numbers. And I am looking at what we might do to put faces 
behind the VISN's merger that is apparently a fait accompli, 
and I hope it is not.
    Thank you, Mr. Chairman.
    Chairman Rockefeller. Thank you, Senator Nelson.
    Senator Hutchison, welcome.
    Senator Hutchison. Thank you.
    Thank you, Mr. Chairman, and I wish to thank each of the 
witnesses for being here. I just would like to say that the 
main part of the budget that I looked at is Gulf War illness 
about which we have spoken many times, and I want to thank you, 
Mr. Secretary, for creating the research review committee that 
would start looking at this. But in your budget, you have $14 
million in research on military occupations and environmental 
exposures, which is a pretty big category. It is the right 
approach, because we know that environmental concerns are going 
to be part of the new wars that we fight. Chemical warfare is 
very much a hazard that our service members are going to face.
    I want to ask you if part of this $14 million will go for 
research into the Gulf War Syndrome? Do you intend to continue 
the commitment to looking at the causes of 1 in 7 Gulf 
veterans' maladies and thus try to protect those who are in the 
field today and will be in the field tomorrow from the chemical 
warfare that we know they may face?
    That is the major point that I want to clarify. Certainly, 
your spending level is greater, and we are pleased with that. I 
do have one facility in Texas that I think needs attention. The 
VA Hospital in Dallas certainly has a need for improvement. I 
relate to what Mr. Nelson says, that many of my veterans--and 
Texas has a huge number of veterans, as you know--have to 
travel for miles and miles and miles. From the Valley to San 
Antonio is probably the same as from Omaha to Minneapolis, and 
this travel is difficult. I think that, as we have closed 
bases, we have shut off some of the veterans' care and retiree 
care that had been available before.
    I think we really have to make sure that our veterans' 
facilities are accessible and would hope that this would also 
be one of the priorities that you should be looking at.
    So with that, I thank you for being here, and I thank you, 
Mr. Chairman.
    Chairman Rockefeller. Thank you, Senator Hutchison.
    We should probably go to the 5-minute rule on all of us all 
around the table, and Mr. Secretary, I join others who 
congratulate you for your work----
    Secretary Principi. Thank you, sir.
    Chairman Rockefeller [continuing]. And look forward to what 
you have to say.

   STATEMENT OF HON. ANTHONY PRINCIPI, SECRETARY OF VETERANS 
  AFFAIRS, ACCOMPANIED BY FRANCES MURPHY, M.D., ACTING UNDER 
   SECRETARY FOR HEALTH; GUY H. McMICHAEL III, ACTING UNDER 
 SECRETARY FOR BENEFITS; ROBIN L. HIGGINS, UNDER SECRETARY FOR 
MEMORIAL AFFAIRS; TIM S. McCLAIN, GENERAL COUNSEL; AND D. MARK 
       CATLETT, ACTING ASSISTANT SECRETARY FOR MANAGEMENT

    Secretary Principi. Thank you, Mr. Chairman, Senator 
Specter, members of the committee, it is a pleasure to be with 
you today.
    I am accompanied by Dr. Murphy, our Acting Under Secretary 
of Health; Robin Higgins, our Under Secretary of Memorial 
Affairs; Judge Guy McMichael, our Acting Under Secretary of 
Benefits; Tim McClain, our General Counsel; and, of course Mark 
Catlett, who, many of you know, is our Chief Financial Officer.
    Mr. Chairman, Senator Specter, committee members, I will be 
brief and try to highlight my prepared testimony so we can get 
on with the questions. Again, I am pleased to talk with you 
today about our 2003 budget request. We are requesting $58 
billion for the VA for fiscal year 2003; $30.1 billion for our 
entitlement programs and $27.9 billion for our discretionary 
programs. Overall, for both discretionary and entitlement 
spending, this budget request represents a $6.1 billion 
increase over 2002 as enacted.
    I know there has been some discussion: is it the largest 
increase in health care or not? Overall, it is a $2.7 billion 
increase, but to be fair and to be real and for an apples-to-
apples comparison, you really have to take $793 million from 
that figure, because that is the accrual to cover health care 
costs and retirement costs for our employees. That amount is 
coming over from OPM to the VA. It is really not fair to 
include that in the increased funding requested for health 
care. Also, $260 million of the request would be revenues from 
the deductible, which leaves us with an actual increase, if you 
will, of $1.57 billion in medical care increase for 2003.
    I am very proud and thankful to the President that we have 
been able to achieve this level of increase. I think it is the 
largest requested increase for VA health care. But as you 
mentioned, Mr. Chairman, and Senator Specter, VA faces a 
tremendous demand for health care in the years ahead and 
tremendous challenges in trying to accommodate all of the 
veterans who are coming to us for care.
    We are also requesting $536 million for our capital funding 
program. That is our construction and our grant program. It is 
the largest request since fiscal year 1996. I think it will 
help us with the backlog of some of our construction projects 
and seismic deficiencies, and some of the extended care 
projects that we hope to get going in the future.
    In our research program, we are requesting $409 million 
overall. This amount, coupled with the supplement from the 
medical care appropriation, funding from other departments of 
Government and from NIH, will give us an overall research 
budget of $1.46 billion for the VA to continue our important 
research in all areas focusing on veterans' illnesses, diseases 
and, as Senator Hutchison has said, to look at the 
environmental hazards of the battlefield as well.
    Members of the committee, clearly VA has faced 
extraordinary growth in recent years. Since the enactment of 
eligibility reform in 1996, the number Priority 1-6's has grown 
38 percent. The number of our patients treated has increased 11 
percent between 2000 and 2001, and we project continuing 
increases in 2002. Concerning Priority 7 veterans--and I do not 
mean to pit Priority 7 veterans against the other six 
categories of veterans, but that is the way the distinction has 
been formulated in law--I am asked each year to make an 
enrollment decision with regard to Priority 7 veterans based 
upon resources available.
    The growth in Priority 7's has been staggering: 500 percent 
since 1996. That was basically 3 percent of our workload. 
Today, it has grown to over a million, and the Priority 7 
veterans represent 33 percent of our enrollees. With no change 
in law, that number will grow to almost 50 percent by the year 
2010. That is what the projections say. The cumulative cost 
between 2003 and 2007 for Priority 7 veterans we estimate will 
be about $20 billion.
    So I think patients are coming to us. I think we are the 
victim of our own success. I think quality in VA has never been 
better. Patient safety has never been better. We have opened 
about 600 outpatient clinics around the country in almost every 
community throughout the country so that veterans only have to 
drive about 30 minutes for primary care. And coupled with this, 
we have a lot of Medicare HMO's that have closed down 
throughout the country. There also are fluctuations in the 
economy where veterans have lost their health insurance. They 
may have taken a lower-paying job; the pay may still be above 
$28,000, which, as Senator Specter rightly said, is not a lot 
of money, but they fall into this category of Priority 7's.
    So we are faced with a real dilemma of how we meet this 
growing demand for care. There are options. And let me be 
truthful about it: This budget does not provide the resouces to 
care for every veteran who wants to use VA--notwithstanding the 
fact that $1.57 billion is, in actual dollars, the largest 
increase ever requested--not the largest increase Congress has 
ever given us. Congress has given us more money than $1.57 
billion, but the $1.57 billion is the largest increase 
requested by an administration.
    But it is not enough money to take care of every veteran 
who wants to come to VA for care. Consider the pharmacy benefit 
that we have. Whether you are 100 percent service connected or 
non-service connected with higher income, you get the same 
benefits, from primary care all the way to nursing home care 
and extended care. We have a very generous benefit health care 
program.
    So there is not enough money, notwithstanding this 
increase. There is another option: Medicare subvention. Senator 
Specter and I talked a little bit about that. That issue has 
been raised in the past. I think when the decision was made for 
eligibility reform and open enrollment and to open up all these 
outpatient clinics, there was an assumption that the VA was 
going to get outside funding, and that funding was going to 
come from the Medicare Trust Fund. Well, guess what happened? 
The outside funding never happened. Congress never passed it. 
President Clinton may have requested it; I am not sure, but it 
never occurred.
    The issue of Medicare subvention is a key one, because the 
majority of our veterans are Medicare-eligible. They have paid 
into the Medicare Trust Fund. And we are working very hard with 
Secretary Thompson. I am working with Tom Scully and Dr. Murphy 
to look at coordination of benefits between VA and HHS. It just 
simply needs to be done. Whether it will be in the form of 
Medicare subvention or not, I do not know, but we need to 
coordinate our care.
    Another option is to suspend enrollment for Category 7's. 
That is the option you have given me. I certainly do not want 
to say diminished quality is an option. I think we have worked 
hard; VHA has worked hard to improve the quality of VA health 
care. I think we need to maintain that at all costs, and I was 
prepared to suspend enrollment for new Priority 7's enrollees 
if we did not get enough money. In the 11th hour, we did get 
enough money. We can talk later about the supplemental. But the 
fact of the matter is that I thought suspending enrollment of 
Category 7's was something that I had to do to ensure quality 
and to ensure that the issue of waiting time to get an 
appointment at a primary care clinic did not continue to get 
worse, and indeed, it has been getting worse.
    Another option is to change the benefit package; to 
consider whether Priority 7's should get the full range of 
benefits. But that is another tough issue. Another option is a 
deductible to let the higher-income non-service connected share 
in the cost of their care.
    I guess my bottom line, Senator, is--can we get more money? 
I am not here to ask for more money; I am loyal to my 
administration, and the President has given me a good budget. 
But I think we all collectively have to make some tough 
decisions as to how we are going to meet this growing demand 
for care. A lot of Priority 7 veterans come to us for pharmacy 
medication benefits only because of our great, great program. 
But somehow, we have to grapple with this, and I am prepared to 
make the tough decisions, because I thought that without 
additional funding, the deductible was the best way; rather 
than cutting off enrollment--I cannot enact Medicare subvention 
or change the benefit package, so I went with the deductible as 
the best of the alternatives available to me to ensure that 
every veteran can come to the VA.
    The deductible is not a standard deductible, either--and 
Senator Specter, again, alluded to this. I want to point out 
that I want the insurance companies to pay as much of that 
deductible as possible. Not all veterans have insurance, and 
Medicare is the best insurance company in the Nation, and--as 
we discussed, we cannot get any money from Medicare, so those 
factors do limit our reimbursements.
    But we will go to the insurance companies when we can. I 
think the deductible will be an incentive for veterans to tell 
us if they have insurance rather than having to pay it out of 
their own pockets. If a veteran does not have insurance, we are 
not going to deny care. They may only be able to pay $10 a 
month, and we will have a payment plan, because I do not want 
to deny veterans the opportunity to come to the VA for care. 
But somehow, we have to make ends meet. There is a disconnect 
between authorization and appropriation. I worked up here. We 
know that; we authorize, but then, sometimes, appropriation 
does not always follow through. And then, VA is stuck trying to 
balance the demands.
    We are not even in compliance with the Mill bill on the 
number of VA nursing home beds. You have told me we must have 
13,000-plus nursing home beds. We do not have them. Now, we can 
do that, but I am going to have to take money from some other 
program to pay for that. So there is a real crunch here. And I 
have not even talked about benefits. [Laughter.]
    I will stop at that point, Mr. Chairman, members of the 
committee. I appreciate this opportunity, and I know we will 
have an opportunity to engage in this dialog a little further.
    Thank you, Mr. Chairman.
    [The prepared statement of Secretary Principi follows:]
 Prepared Statement of Hon. Anthony J. Principi, Secretary of Veterans 
                                Affairs
    Mr. Chairman, and members of the Committee, good morning. I am 
pleased to be here today to discuss the President's 2003 budget 
proposal for the Department of Veterans Affairs (VA) and tell you about 
the significant progress we are making on behalf of the Nation's 
veterans.
    Our budget reflects the largest increase ever proposed for 
veterans' discretionary programs. It ensures more veterans will receive 
high-quality health care, that we will provide more timely and accurate 
benefit claim determinations, and that we will maintain a dignified and 
respectful setting for deceased veterans. Our proposal reflects the 
debt of gratitude we owe to those who have served our country with 
honor. It also signals our enduring commitment to the men and women in 
uniform who today defend our freedom many miles away.
    We are requesting $58 billion for veterans' benefits and services--
$30.1 billion for entitlement programs and $27.9 billion for 
discretionary programs. This is an increase of $6.1 billion over the 
2002 enacted level. Our budget increases VA's discretionary funding by 
$3.1 billion over the 2002 level, including medical care collections. 
Increases for specific programs are as follows: $2.7 billion for 
medical programs; $17 million for burial services; $94 million for the 
administration of veterans' benefits; and $64 million for capital 
programs and other departmental administration.
    Our budget request includes $197 million for a new grant activity 
that replaces programs currently administered by the Department of 
Labor and $892 million for certain Federal retiree and health benefits 
as proposed by the Administration's Managerial Flexibility Act of 2001. 
Excluding these new activities, our budget for discretionary programs 
reflects an increase of $1.9 billion, or 7.8 percent over last year's 
funding level.
                              medical care
    For Medical Care, we are requesting budgetary resources of $25 
billion, including $1.5 billion in collections. This increase will 
provide health care for nearly 4.9 million unique patients--an increase 
of 156 thousand, or 3.3 percent, over the current 2002 estimate.
    Mr. Chairman, I'm pleased to report that we are making substantial 
improvements to our billing and collection from third party insurers. 
In a collaborative effort with an external contractor, we have 
identified 24 actions that will yield significant enhancements to our 
ability to collect revenue. While many of these actions require time 
and investment, we have already begun improvements to the revenue 
collection process. I have directed that we begin the process of 
consolidating billing and collection services, and that we explore the 
cost and benefits of outsourcing these services. In addition, we are 
aggressively pursuing insurance identification by obtaining new HIPAA 
compliant software to facilitate exchange of medical information with 
non-VA entities. We are also mounting increased veteran and employee 
awareness and training campaigns. Further, we have developed a web-
based performance metrics program that is used by central office and 
medical center staff to monitor and evaluate the critical steps in the 
revenue cycle. Following the original implementation of reasonable 
charges in September 1999, we have implemented two updates. Work is 
nearly complete on the next reasonable charges update, which we expect 
to publish in the Federal Register as an Interim Final Rule and 
implement during Spring 2002. We expect to collect over $1 billion this 
year with continuing increases in 2003 and beyond. We are committed to 
maximizing our revenue opportunities from this source.
    VA has experienced unprecedented growth in the medical system 
workload over the past few years. The total number of patients treated 
increased by over 11 percent from 2000 to 2001--more than twice the 
prior year's rate of growth. For the first quarter of 2002, we 
experienced a similar growth rate when compared to the same period last 
year. The growth rate for Priority 7 medical care users has averaged 
more than 30 percent annually for the last 6 years, and they now 
comprise 33 percent of enrollees in the VA health care system. Based on 
current law, this percentage is expected to increase to 42 percent by 
2010.
    I am proud that an increasing number of veterans are choosing to 
receive their health care in the VA system. Despite this success, we 
have much to accomplish. Patient access to our medical facilities must 
be improved and this budget reaffirms our commitment to do so. Our goal 
is for veterans to receive non-urgent appointments for primary and 
specialty care in 30 days or less, while being seen within 20 minutes 
of their scheduled appointment. We have included an additional $159 
million in our request to work toward this goal.
    Mr. Chairman, I know you agree that VA's health care system should 
maintain timely, high quality care for service-connected and low income 
veterans and remain open to all veterans. To effectively manage 
participation in the system, we are proposing a $1,500 medical 
deductible for Priority 7 veterans. With no change in policy, the cost 
of care for Priority 7 veterans would grow from $1 billion in 2000 to 
over $5 billion in 2007. To assure that rising workload does not dilute 
the quality of care, Priority 7 veterans are being asked to pay for a 
greater portion of their health care than in the past. We are 
recommending that these veterans be assessed a deductible for their 
health care at a percentage of the reasonable charges up to a $1,500 
annual ceiling. This is not a standard deductible that must be paid 
upfront and veterans' insurance may cover all charges. If all 
projections, funding levels, and the new deductible are realized, VA 
anticipates continued open enrollment to all veterans in 2003 without 
detriment to our traditional core patients--those with service-
connected disabilities and lower incomes.
    VA is working to meet the challenges in long-term care for 
veterans. However, we believe that a literal interpretation of P.L. 
106-117, the ``Veteran's Millennium Health Care and Benefits Act of 
1999'' will result in less than optimal solutions for increasing our 
long-term care capacity. The number of individual veterans who received 
care in VA increased from more than 3 million veterans in 1998 to more 
than 4 million veterans in 2001, due primarily to VA's efforts to 
expand access for primary care. During that same time period, efforts 
have been made to meet the increased demand for long-term care. 
Although the average daily census in VA nursing homes declined, 
veterans mandated under P.L. 106-117 to receive such care are being 
served in VA and contract community nursing homes. VA is also 
supporting a significantly increased census of veterans in state 
veterans nursing homes. At the same time, VA has been expanding care 
for veterans in home and community-based extended care, consistent with 
the mandates of P.L. 106-117. Indications we have received from 
veterans show that they are pleased with options providing long-term 
care closer to home, as well as alternatives to more traditional 
skilled-nursing environments. We look forward to working with Congress 
to pursue the best options to provide veterans with long-term care.
    Our rapidly aging veteran population requires more health care 
services. Our request includes $817 million to address this rising 
demand. These funds will support our emphasis on access and service 
delivery, pharmaceutical support, prosthetics, CHAMPVA for Life, and 
information technology. Management savings of over $316 million will 
partially offset resource needs. For example, I am establishing a 
program across the VA system that will implement ``best practice'' 
standards for dispensing and prescribing pharmaceuticals.
    The 2003 budget supports our cooperative efforts with the 
Department of Defense (DoD) to improve federal health care delivery 
services. Over the past year, we have undertaken unprecedented efforts 
to improve cooperation and sharing in a variety of areas through a 
reinvigorated VA and DoD Executive Council. VA and DoD entered into a 
Memorandum of Understanding (MOU) in December 1999, with the objective 
of reducing contract duplication. The first addendum to that MOU 
resulted in the conversion of DoD's Pharmaceutical Distribution and 
Pricing Agreements (DAPAs) to reliance on VA's Federal Supply Schedule 
(FSS) contracts for pharmaceuticals, which was completed in December 
2000. The second addendum is an agreement to convert DoD's DAPAs for 
medical/surgical products to reliance on VA's FSS. This effort was 
completed in December 2001. To address some of the remaining 
challenges, the Departments have identified four high-priority items 
for improved coordination: veteran enrollment, computerized patient 
records, cooperation on air transportation of patients, and facility 
sharing instead of construction.
                    medical and prosthetic research
    VA's clinical research program is funded at the highest level in 
history with a partnership of government, universities and the private 
sector. Over $1.46 billion will be invested in 2003: $409 million in 
direct appropriation; $401 million in support from the VA Medical Care 
appropriation primarily in the form of salary support for the clinical 
researchers; $460 million from federal organizations such as DoD and 
NIH; and $196 million from universities and other private institutions. 
This investment will allow VA to expand knowledge in areas critical to 
veterans' and other citizens' health care needs including 
schizophrenia, diabetes, further implementation of cholesterol and 
other guidelines, aging, renal failure treatment, and clinical drug 
treatment evaluations. This investment is relevant to the medical needs 
of the entire Nation and will enhance future quality of life.
        capital asset realignment for enhanced services (cares)
    We continue our effort to transform the veterans' health care 
system under the Capital Asset Realignment for Enhanced Services 
(CARES) initiative. We are evaluating the health care services we 
provide, identifying the best ways to meet veterans' future medical 
needs, and realigning our facilities and services to meet those needs 
more effectively.
    Mr. Chairman, this initiative is not a perfunctory exercise. The 
CARES process has already had a significant impact on our planning 
process. Last week, I announced my decision on realigning VA health 
care facilities in VISN 12. For example, we will shift inpatient 
services to a remodeled Chicago West Side Division, and maintain a 
Lakeside Division multi-specialty outpatient clinic in the downtown 
area. The Hines VA Medical Center will be renovated, including the 
Blind Rehabilitation and Spinal Cord Injury Centers. Sharing 
opportunities between the North Chicago VA Medical Center and the 
adjacent Naval Hospital Great Lakes will be enhanced.
    CARES is critical to the future of VA health care. It will allow us 
to redirect funds from the maintenance and operation of facilities we 
no longer need to direct patient care. I am prepared to make the 
difficult choices necessary to ensure accessible care to more veterans 
in the most convenient and appropriate settings. We will complete CARES 
studies of our remaining health care networks within two years. Any 
savings that result from CARES will be put back into the community to 
provide higher quality care and more services to veterans. Changes will 
affect only the way VA delivers care--health care services will not be 
reduced.
                 major and minor construction programs
    For all capital programs (construction and grants) this is the 
largest request since 1996. Specifically for major construction, new 
budget authority of $194 million is requested. We are requesting funds 
for four seismic projects in exceptionally high-risk areas: two in Palo 
Alto, one in San Francisco, and one in West Los Angeles, CA. These 
projects involve primary care buildings and a consolidated research 
facility--all of which will be part of any service delivery option 
resulting from the CARES process. Seismic improvements will ensure 
veterans and their families, and VA staff, will continue to be cared 
for, and work in a safe environment. The 2003 Major request also 
addresses critical National Cemetery needs. Resources are included for 
new cemeteries in Pittsburgh, PA and Southern Florida and a columbaria 
and cemetery improvements project at the Willamette National Cemetery, 
OR. Design funds are provided in the amount of $3.4 million for the 
design of new cemeteries in Detroit, MI and Sacramento, CA. We are also 
requesting funds to remove hazardous waste and asbestos from 
Department-owned buildings, perform an emergency response security 
study, reimburse the judgment fund, and support other construction-
related activities.
    To date, we have received $80 million in Major Construction funding 
to support the design and construction of projects that result from 
CARES studies. Our Major request for 2003 includes $5 million to 
continue efforts to realign our facilities.
    New budget authority in the amount of $211 million is requested for 
the Minor Construction program. Particular emphasis will be placed on 
outpatient improvements, patient environment, and infrastructure 
improvements. A total of $35 million is earmarked for CARES-related 
design and construction needs. These funds have been proposed to allow 
VA to immediately implement CARES options that can be accomplished 
through the minor construction program (i.e., capital projects costing 
more than $500 thousand and a total project cost less than $4 million). 
In addition, $20 million is dedicated to a newly created category to 
fund minor seismic projects, which will allow VA to further address its 
seismic corrections needs.
                           veterans' benefits
    For the administration of veterans' benefits, we are requesting 
$1.2 billion and an additional 125 employees over the 2002 level. The 
President has promised to improve the timeliness and quality of claims 
processing. Last year, I established a claims processing task force to 
recommend changes that would improve the time it takes to process 
claims. The results of that task force, as well as implementation 
plans, have been presented to me and we have already begun to execute 
many of the recommendations.
    I have set a goal of reaching 100 days to process compensation and 
pension claims by the summer of 2003. While the annual average number 
of days for these claims is projected to be 165 for 2003, we expect to 
achieve the 100-day goal by the last quarter of the year. Four months 
ago, we began a major effort to resolve 81,000 of the oldest 
Compensation and Pension claims. A key element of this effort involves 
a ``Tiger Team'' at the Cleveland Regional Office that will tackle many 
of these claims over an 18-month period. The team became fully 
operational in November 2001. Additionally, consolidation of pension 
benefit maintenance at three sites will allow VBA to free up employees 
to focus on rating compensation claims.
    At the same time we are reducing the time it takes to process 
claims, we continue to improve the quality of claims processing. During 
2003, the national accuracy rate for compensation and pension claims is 
projected to grow to 88 percent--a significant improvement from the 59 
percent rate evidenced in 2000. This budget contains $3.5 million to 
support 64 additional employees dedicated to the Systematic Individual 
Performance Assessment (SIPA) initiative. This is an important 
contribution to enhance internal control mechanisms and bring 
accountability to the accuracy of claims processing.
    This budget provides additional staff and resources to continue the 
development of information technology tools to support improved claims 
processing. Over the last several years, VBA has developed and 
implemented major initiatives, established cooperative ventures with 
other agencies, and used technology and training to address accuracy 
and timeliness. This budget continues to focus on initiatives in these 
high payoff areas. For example, this budget requests $6 million in 
support of the Virtual VA initiative. This effort, when complete, will 
replace the current intensive paper-based claims folder with electronic 
images and data that can be accessed and transferred through a web-
based application.
    Our budget also addresses the mandate to ensure that Montgomery GI 
Bill (MGIB) education benefits provide meaningful transition assistance 
and aid in the recruitment and retention of our Armed Forces. Recent 
legislation has improved these benefits and our priority is to deliver 
them as efficiently as possible. I am pleased to report that the 
Imaging Management System (TIMS) is now functioning in all four 
Regional Processing Offices. The electronic folders that result from 
this effort have expanded access points, improved data access, and 
enhanced customer satisfaction. This budget requests $6.2 million to 
develop and install the Education Expert System (TEES). Among other 
benefits, this expert system will enable us to automate a greater 
portion of the education claims process and expand enrollment 
certification. In 2003, we will continue to improve the accuracy and 
timeliness of education claims and improve blocked call rates.
    Mr. Chairman, I would like to take this opportunity to mention one 
of VA's great success stories--the administration of more than 4 
million insurance policies in force. The American Customer Satisfaction 
Index (ASCI) and the University of Michigan conducted a study of the 
insurance death claims process and the satisfaction of beneficiaries 
who received awards. This study gave the VA's insurance program a score 
of 90 on a scale of 100. This is one of the highest scores ever 
recorded for either government or private industry. This budget 
provides funding to continue the Insurance Center's history of 
excellence. Our request includes a paperless processing initiative, 
which improves timeliness and quality of service while reducing the 
cost to policyholders.
                 new veterans employment grants program
    Veterans represent a unique and invaluable human resource for 
American society and the economy. Service personnel leave the military 
knowing they have made a vital contribution to their country. Veterans 
want to continue making meaningful contributions as they return to 
civilian life. However, in 21 states, fewer than 10 percent of veterans 
between the ages of 22 and 44 were placed in employment after seeking 
job search assistance from state service providers; during 2001, there 
was an average of 519,000 unemployed veterans, and in the same time 
period, 32 percent of unemployed veterans experienced 15 or more 
consecutive weeks of unemployment.
    America's labor exchange market has evolved in the time since the 
foundation for current programs was laid. This budget proposes 
legislation that will allow VA to create a new competitive grant 
program to help veterans obtain employment. VA is working with the 
Department of Labor (DOL), veterans' service organizations and others 
to propose a veterans' employment program tailored to the needs of 21st 
century veterans seeking assistance in finding suitable employment. The 
details of the legislative proposal to implement this initiative are 
not yet final. If authorized by Congress, the new program will broaden 
our ability to assist veterans with employment and training services. 
Our first priority will be serving unemployed service-connected 
disabled veterans and those recently separated from military service. 
We will also help other veterans searching for employment. Our budget 
request for discretionary programs includes $197 million for the grant 
initiative.
    We have the flexibility to design a program that will incorporate 
elements currently contained in the DOL grant program--transition 
assistance; disabled veterans' outreach; local veterans' employment 
representatives; and homeless veterans reintegration. Veterans look to 
the VA for education benefits, home loan assistance and, in some 
instances, rehabilitation and employment, medical care and compensation 
benefits in the transition years after leaving active duty. Later in 
life, many veterans may return to the VA for health care and ultimately 
burial benefits. Adding an enhanced employment opportunity program to 
the spectrum of care and services provided by VA would provide veterans 
with a single access point to a full continuum of benefits and services 
throughout their lifetime.
    I know there are many questions left unanswered regarding this new 
program. We are in the process of finalizing our legislative proposal 
within the Administration and will submit it to you in the near future. 
At that time, we will be prepared to address your questions in greater 
detail.
                    national cemetery administration
    The budget proposal includes $138 million to operate the National 
Cemetery Administration. The request preserves our commitment to 
maintain VA's cemeteries as National shrines, dedicated to preserving 
our Nation's history, nurturing patriotism, and honoring the service 
and sacrifice of our veterans. It provides a total of $10 million to 
continue renovation of gravesites, as well as clean, raise, and realign 
headstones and markers.
    As noted earlier in my testimony, our budget request for Major 
Construction includes funds for the development of two new national 
cemeteries in the vicinity of Pittsburgh, PA and Miami, FL. Operating 
funds also are requested to prepare for interment operations in 2004 at 
these two locations and to begin interment operations at new cemeteries 
at Fort Sill, OK, and near Atlanta, GA.
                        management improvements
    Mr. Chairman, last year I stated my commitment to reform VA's use 
of information technology. I am pleased to report that we have made 
substantial progress in this area and will continue our reform efforts. 
As VA moves forward with implementation of the One-VA Enterprise 
Architecture developed in 2001, we will manage information technology 
resources to account for all expenditures and ensure our scarce 
resources are spent in compliance with this Enterprise Architecture. A 
strong program is under development for Cyber Security. We are re-
engineering our IT workforce to ensure we have the proper skill sets to 
support our program needs. I have recently approved a comprehensive 
change in how we manage our IT projects to ensure they deliver high 
quality products, meet performance requirements, and are delivered on 
time and within budget.
    VA is bringing enterprise-wide discipline and integration of our 
telecommunications capability to increase security, performance, and 
value. Command and control capabilities are being established to 
support the Department in times of emergency. Electronic government 
will be expanded and internet capabilities will be enhanced to improve 
the delivery of services and the sharing of knowledge for the benefit 
of the veteran. All of these efforts will focus on meeting the 
objectives of the President's Management Agenda.
    We are pursuing other important initiatives that will promote 
better management practices throughout the Department. For example, I 
recently convened the VA Procurement Reform Task Force to examine our 
acquisition process and develop recommendations for improvement. The 
Task Force has presented 60 recommendations to accomplish several major 
goals that will enhance our ability to: 1) leverage purchasing power; 
2) obtain comprehensive VA procurement information; 3) improve VA 
procurement organizational effectiveness; and 4) ensure a sufficient 
and talented VA acquisition workforce. Mandatory use of the Federal 
Supply Schedule, reorganization and elevation of the VHA logistics 
function to more quickly standardize medical and surgical supplies, and 
establishment of a National Item File are some of the more prominent 
recommendations being made in order to maximize savings in our medical 
care procurements. We are well on our way to achieving savings and 
increased effectiveness in VA's acquisition arena.
    Finally, our 2003 request includes funds for a new Office of 
Operations, Security and Preparedness (OS&P). Since the tragic events 
of September 11, 2001, we have made substantial investments to address 
the Department's security and preparedness, and to meet our primary and 
critical emergency response missions. VA is the only pre-deployed 
nationwide health care system. We must be prepared for any disaster 
response. OS&P will play an important role in the Federal government's 
continuity of operations in the event of an emergency situation. The 
new office is formed with the specific intent of improving VA's ability 
to respond to any contingency with minimal disruption to services for 
veterans and their families. This office will coordinate all VA 
involvement with the Office of Homeland Security, FEMA, the Department 
of Health and Human Services and DoD.
    Mr. Chairman, that concludes my formal remarks. Although many 
challenges lie ahead, I am proud of the accomplishments that have taken 
place over the past year. Our budget request for 2003 is a good budget 
for veterans and positions us for continued success. I thank you and 
the members of this Committee for your dedication to our Nation's 
veterans. I look forward to working with you. My staff and I would be 
pleased to answer any questions.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                         to Anthony J. Principi
                              health care
    Question 1. What is the actual amount in requested appropriations 
for medical care and what is that as a percentage increase? How does 
that compare to the projected increase in medical inflation?
    Answer. The FY 2003 appropriations request for medical care is 
$22,743,761,000, which represents a 6.6 percent increase over the FY 
2002 appropriation of $21,330,078,000. This amount excludes medical 
collections ($1,448,874,000), the Civil Service Retirement System 
(CSRS) accrual ($251,515,000) and the Federal Employee Health Benefits 
(FEHB) accrual ($541,907,000). The Medical CPIU inflation rate for FY 
2003 is projected to be 3.9 percent.
    Question 2. Based on VA's best analysis, what is the amount the VA 
health care system would need next year to operate without any 
suppression of demand?
    Answer. Twenty five billion, eight hundred seventy one million, 
three hundred four thousand dollars ($25,871,304,000), including the 
retirement liability, would be required in FY 2003 if the $1,500 
deductible legislation is not passed. This amount includes 
$24,682,304,000 in appropriations and $1,189,000,000 in projected 
collections from the Health Services Improvement and Medical Care 
Collections Funds and an additional $40 million in reimbursements from 
the Extended Care Revolving Fund.
    Question 3a. Please provide additional information on the budget 
and the effect on staffing. What staffing adjustments/RIFs will be 
required based upon the FY 2003 budget?
    Answer. The FY 2003 staffing levels will decrease from 181,500 in 
FY 2002 to 181,331 in FY 2003, a 169 decrease in full-time equivalents 
due to attrition. RIFs are not anticipated and are always considered 
only as a last resort.
    Question 3b. Will VA offer early outs/buyouts in FY 2003? What are 
the potential cost savings associated with these incentives?
    Answer. VA has been authorized by the Office of Personnel 
Management (OPM) to offer early outs through September 30, 2002. We 
expect to ask OPM for new authority for FY 2003. Legislation 
authorizing current buyout authority for VA expires December 31, 2002. 
Legislative action would be necessary for VA to offer buyouts beyond 
that date.
    Buyouts generally achieve immediate cost savings when used as 
incentives to get more highly paid employees to leave sooner than 
planned. Cost of the buyout, when paid early in the fiscal year, is 
less than the continued cost of the employee's salary.
    Question 3c. Does the budget include any anticipated request to 
raise physician special pay?
    Answer. No, the FY 2003 budget does not include any costs 
associated with additional increases in physician special pay. Any 
increases that may be proposed would be paid from existing resources. 
The Administration is getting ready to propose legislation (for the 
short term) to address physician pay. This legislation will allow VA to 
save money from contracts and use it for physician pay.
    Question 4a. As you know, I remain concerned about the CARES 
process, and its effect on critical construction needs within VA's 
health care system. Please provide the list of medical facilities, and 
describe what constitutes a facility.
    Answer: Attached is a list of medical facilities, ``VA Facilities 
by Type.'' The following glossary, extracted from the end of year 
report for FY 2001 VA Site Tracking (VAST) describes each type of 
facility. These definitions were set by the VHA Policy Board in 
December 1998 and are the basis for defining the category and the 
additional service types for each VHA service site. These definitions 
cover sites generally owned by the VA with the exception of leased and 
contracted CBOCs.
    VA Hospital--An institution owned, staffed, and operated by VA that 
provides inpatient services. Each division of an integrated medical 
center is counted as a separate hospital.
    VA Nursing Home--A Nursing Home Care Unit (NHCU) provides care to 
individuals who are not in need of hospital care, but who require 
nursing care and related medical or psychosocial services in an 
institutional setting. A VA NHCU is designed to care for patients who 
require a comprehensive care management system coordinated by an 
interdisciplinary team. Services provided include nursing, medical, 
rehabilitative, recreational, dietetic, psychosocial, pharmaceutical, 
radiological, laboratory, dental and spiritual.
    VA Domiciliary--A VA facility that provides comprehensive health 
and social services to eligible veterans who are ambulatory and do not 
require the level of care provided in nursing homes.
VA Outpatient Clinics:
    Hospital-Based Outpatient Clinic (HBOC)--A clinic located within a 
hospital that provides outpatient clinic functions.
    Independent Outpatient Clinic (IOC)--A full-time, self-contained, 
freestanding, ambulatory care clinic that provides primary and 
specialty health care services in an outpatient setting. IOCs have no 
management, program, or fiscal relationship to a VA hospital.
    Mobile Outpatient Clinic (MOC)--A specially equipped van with 
multiple scheduled stops that provides outpatient care. A mobile clinic 
is under the jurisdiction of a parent medical facility.
    Community-based Outpatient Clinic (CBOC)--A VA operated, VA funded, 
or VA reimbursed health care facility or site geographically distinct 
or separate from a parent medical facility. This term encompasses all 
types of VA outpatient clinics, except hospital-based, independent, and 
mobile clinics. Satellite, community-based, and outreach clinics have 
been redefined as community-based outpatient clinics.
    VA Owned--A CBOC owned and staffed by the VA.
    Leased--A CBOC where the space is leased (contracted), but is 
staffed by the VA.
    Contracted--A CBOC where the space and staff are not VA. This is 
typically an HMO type provider where multiple sites can be associated 
with a single station identifier.
    Not Operational--A CBOC that has been approved by Congress, but has 
not yet become operational. CBOCs opened after March 1995 require 
Congressional approval.
    Veterans Center--A center, managed by VHA's Readjustment Counseling 
Service, that provides professional readjustment counseling, community 
education, outreach to special populations, brokering of services with 
community agencies, and access to links between the veteran and the VA.
        Attachment--VA Facilities by Type (as of December 2001)
                    employee education centers (19)
    Alabama: Birmingham; Tuskegee
    Arizona: Prescott
    Arkansas: North Little Rock
    California: Long Beach
    District of Columbia: Washington
    Georgia: Dublin
    Idaho: Boise
    Maine: Togus
    Maryland: Perry Point
    Minnesota: Minneapolis
    Missouri: St. Louis (Jefferson Barracks Division)
    Nebraska: Lincoln
    New York: Northport
    North Carolina: Durham
    Ohio: Cleveland (Brecksville Div.)
    Pennsylvania: Erie
    South Dakota: Fort Meade
    Utah: Salt Lake City
         canteen service central office and finance center (1)
    Missouri: St. Louis
                   canteen service field offices (3)
    California (Western): Sepulveda
    Maryland (Eastern): Ft. Howard
    Missouri (Central): St. Louis (Jefferson Barracks)
        geriatric research, education, and clinical centers (21)
    Alabama/Georgia: Birmingham/Atlanta
    Arkansas: Little Rock
    California: Palo Alto; Sepulveda; West Los Angeles
    Florida: Gainesville; Miami
    Maryland: Baltimore
    Massachusetts: Boston
    Michigan: Ann Arbor
    Minnesota: Minneapolis
    Missouri: St. Louis (John J. Cochran Division)
    New York: Bronx/New York Harbor
    North Carolina: Durham
    Ohio: Cleveland
    Pennsylvania: Pittsburgh
    Tennessee: Murfreesboro/Nashville
    Texas: San Antonio
    Utah: Salt Lake City
    Washington: Seattle (Puget Sound HCS)
    Wisconsin: Madison
                  service and distribution center (1)
    Illinois: Hines
                           central office (1)
    District of Columbia: Washington
                          finance centers (2)
    Texas: Austin
    Illinois: Hines
                     records management center (1)
    Missouri: St. Louis
                         automation center (1)
    Texas: Austin
                    national acquisition center (1)
    Illinois: Hines
                    systems development centers (2)
    Illinois: Hines
    Texas: Austin
                     denver distribution center (1)
    Colorado: Denver
                    central dental laboratories (2)
    District of Columbia: Washington
    Texas: Dallas
                  preventive dental support center (1)
    Texas: Houston
           miami development center for dental operations (1)
    Florida: Miami
          prosthetic and sensory aids restoration clinics (6)
    California: West Los Angeles
    Georgia: Decatur (Atlanta)
    Missouri: St. Louis (Jefferson Barracks Division)
    New York: New York
    Ohio: Cleveland
    Oregon: Portland
                  law enforcement training center (1)
    Arkansas: Little Rock
              health administration management center (1)
    Colorado: Denver
                 orthotic/prosthetic laboratories (59)
    Alabama: Montgomery
    Arizona: Tucson
    Arkansas: Little Rock
    California: Long Beach; Palo Alto; San Diego; San Francisco; 
Sepulveda; West Los Angeles
    Colorado: Denver
    Florida: Bay Pines; Gainesville; Miami; Tampa; West Palm Beach
    Georgia: Decatur (Atlanta)
    Illinois: Chicago (Westside); Hines
    Indiana: Indianapolis
    Kansas: Wichita
    Kentucky: Louisville
    Louisiana: New Orleans
    Maine: Togus
    Maryland: Ft. Howard
    Massachusetts: Boston; Brockton (West Roxbury)
    Michigan: Detroit
    Minnesota: Minneapolis
    Missouri: Kansas City; St. Louis
    New Jersey: East Orange
    New Mexico: Albuquerque
    New York: Albany; Bronx; Brooklyn; Buffalo; Castle Point; New York; 
Northport
    Ohio: Cincinnati; Cleveland; Dayton
    Oklahoma: Oklahoma City
    Oregon: Portland
    Pennsylvania: Pittsburgh (UD); Wilkes Barre
    Puerto Rico: San Juan
    South Carolina: Columbia
    Tennessee: Memphis; Nashville
    Texas: Dallas; Houston; San Antonio; Temple
    Virginia: Hampton; Richmond
    Washington: Seattle
    West Virginia: Martinsburg
    Wisconsin: Milwaukee
                     health eligibility center (1)
    Georgia: Atlanta
                           domiciliaries (43)
    Alabama: Tuskegee
    Alaska: Anchorage
    Arizona: Prescott
    Arkansas: North Little Rock
    California: Palo Alto-Menlo Park; West Los Angeles
    Florida: Bay Pines; Orlando
    Georgia: Augusta; Dublin
    Illinois: N. Chicago
    Iowa: Des Moines; Knoxville
    Kansas: Leavenworth
    Maryland: Perry Point
    Massachusetts: Bedford; Brockton
    Minnesota: St. Cloud
    Mississippi: Biloxi
    Missouri: St. Louis
    New Jersey: Lyons
    New York: Bath; Canandaigua; Montrose; St. Albans
    Ohio: Chilicothe; Cincinnati; Cleveland; Dayton
    Oregon: Portland; White City
    Pennsylvania: Butler; Coatesville; Pittsburgh
    South Dakota: Hot Springs
    Tennessee: Mountain Home
    Texas: Bonham; Dallas; Temple
    Virginia: Hampton
    Washington: Tacoma
    West Virginia: Martinsburg
    Wisconsin: Milwaukee
                           va hospitals (172)
    Alabama: Birmingham; Montgomery; Tuscaloosa; Tuskegee
    Arizona: Northern Arizona HCS Phoenix; Southern Arizona HCS
    Arkansas: Central Arkansas Veterans HCS LR; Central Arkansas 
Veterans HCS NLR; Fayetteville
    California: Fresno; Livermore; Loma Linda; Long Beach HCS; Palo 
Alto (Menlo Park); Palo Alto (Palo Alto); San Diego HCS; San Francisco; 
West Los Angeles (Brentwood); West Los Angeles (Wadsworth)
    Colorado: Denver; Fort Lyon; Grand Junction
    Connecticut: Newington; West Haven
    Delaware: Wilmington
    District of Columbia: Washington
    Florida: Bay Pines; Lake City; Miami; North Florida/South Georgia 
HCS; Tampa; West Palm Beach
    Georgia: Augusta; Decatur; Dublin; Lenwood (Uptown)
    Idaho: Boise
    Illinois: Chicago (Westside); Chicago (Lakeside Division); 
Danville; Hines; Marion; North Chicago
    Indiana: Indianapolis (Cold Springs); Indianapolis (West 10th 
Street); North Indiana HCS-Ft. Wayne; North Indiana-Marion
    Iowa: Des Moines; Iowa City--Central Plains HCS; Knoxville
    Kansas: Leavenworth; Topeka-Colmery-O'Neil; Wichita
    Kentucky: Lexington (Cooper Drive); Lexington (Leestown); 
Louisville
    Louisiana: Alexandria; New Orleans; Shreveport (Overton Brooks)
    Maine: Togus
    Maryland: Baltimore; Fort Howard; Perry Point
    Massachusetts: Bedford; Boston VAMC; Brockton Division; Brockton 
(West Roxbury); Northampton
    Michigan: Ann Arbor HCS; Battle Creek; Detroit (John D. Dingell); 
Iron Mountain; Saginaw
    Minnesota: Minneapolis; St. Cloud
    Mississippi: Biloxi (Gulfport); Gulf Coast HCS; Jackson (G. V. 
(Sonny) Montgomery)
    Missouri: Columbia; Kansas City; Poplar Bluff; St. Louis (Jefferson 
Barracks); St. Louis (John J. Cochran)
    Montana: Fort Harrison; Miles City
    Nebraska: Grand Island; Lincoln; Omaha
    Nevada: Sierra Nevada HCS (Reno); Southern Nevada HCS (Las Vegas)
    New Hampshire: Manchester
    New Jersey: Lyons; East Orange
    New Mexico: New Mexico HCS
    New York: Albany; Bath; Bronx; Brooklyn (Poly PI.)--New York Harbor 
HCS; Canandaigua; Castle Point; Hudson Valley HCS; New York Harbor HCS; 
New York Harbor HCS (St. Albans Campus); Northport; Saracuse; Upstate 
New York HCS (Buffalo); Upstate New York HCS (Batavia)
    North Carolina: Asheville--Oteen; Durham; Fayetteville; Salisbury--
W. G. (Bill) Hefner
    North Dakota: Fargo
    Ohio: Chilicothe; Cincinnati; Cleveland (Brecksville); Cleveland 
(Wade Park); Dayton
    Oklahoma: Muskogee; Oklahoma City
    Oregon: Portland; Roseburg (HCS)
    Pennsylvania: Altoona--James E. Van Zandt; Butler; Coatesville; 
Erie; Lebanon; Philadelphia; Pittsburgh HCS--(Aspinwall); Pittsburgh 
HCS--(Highland Drive); Pittsburgh HCS--(University Drive); Wilkes-Barre
    Rhode Island: Providence
    South Carolina: Charleston; Columbia
    South Dakota: Fort Meade; Hot Springs; Sioux Falls
    Tennessee: Memphis; Middle Tennessee HCS; Middle (Nashville); 
Tennessee HCS--(Murfreesboro); Mountain Home
    Texas: Amarillo HCS; Bonham; Dallas; Houston; Kerrville; Marlin; 
San Antonio; Temple; Waco; West Texas HCS
    Utah: Salt Lake City HCS
    Vermont: White River Junction
    Virginia: Hampton; Richmond; Salem
    Washington: American Lake (Tacoma); Seattle; Spokane; Vancouver; 
Walla Walla
    West Virginia: Beckley; Clarksburg; Huntington; Martinsburg
    Wisconsin: Madison; Milwaukee; Tomah
    Wyoming: Cheyenne; Sheridan
                        nursing home units (137)
    Alabama: Tuscaloosa; Tuskegee
    Arizona: Phoenix; Prescott; Tucson
    Arkansas: Little Rock
    California: Fresno; Livermore; Loma Linda; Long Beach; Martinez; 
Palo Alto; San Diego; San Francisco; Sepulveda; Greater Los Angeles
    Colorado: Denver; Southern Colorado HCS; Grand Junction
    Connecticut: West Haven
    Delaware: Wilmington
    District of Columbia: Washington
    Florida: Bay Pines; Gainesville; Lake City; Miami; Orlando; Tampa; 
West Palm Beach
    Georgia: Augusta; Decatur; Dublin; Lenwood
    Hawaii: Honolulu
    Idaho: Boise
    Illinois: Danville; Hines; Marion; North Chicago
    Indiana: Fort Wayne; Indianapolis; Marion
    Iowa: Knoxville
    Kansas: Leavenworth; Topeka; Wichita
    Kentucky: Lexington
    Louisiana: Alexandria; New Orleans
    Maine: Togus
    Maryland: Baltimore; Loch Raven; Perry Point
    Massachusetts: Bedford; Brockton; Northampton
    Michigan: Ann Arbor; Battle Creek; Detroit; Iron Mountain; Saginaw
    Minnesota: Minneapolis; St. Cloud
    Mississippi: Biloxi; Jackson
    Missouri: Columbia; Poplar Bluff; St. Louis
    Montana: Fort Harrison; Miles City
    Nebraska: Grand Island
    Nevada: Reno
    New Hampshire: Manchester
    New Jersey: East Orange; Lyons
    New Mexico: Albuquerque
    New York: Albany; Batavia; Bath; Bronx; Buffalo; Canandaigua; 
Castle Point; Montrose; Northport; St. Albans; Syracuse
    North Carolina: Asheville; Durham; Fayetteville; Salisbury
    North Dakota: Fargo
    Ohio: Chilicothe; Cincinnati; Cleveland; Dayton
    Oklahoma: Oklahoma City
    Oregon: Roseburg
    Pennsylvania: Altoona; Butler; Coatesville; Erie; Lebanon; 
Philadelphia; Pittsburgh (Aspinwall); Pittsburgh (HD); Wilkes Barre
    Puerto Rico: San Juan
    South Carolina: Columbia; Charleston
    South Dakota: Fort Meade; Sioux Falls
    Tennessee: Mountain Home; Murfreesboro
    Texas: Amarillo; Big Spring; Bonham; Dallas; Houston; Kerrville; 
Marlin; San Antonio; Temple
    Virginia: Hampton; Richmond; Salem
    Washington: Seattle; Spokane; Tacoma; Vancouver; Walla Walla
    West Virginia: Beckley; Martinsburg
    Wisconsin: Milwaukee; Tomah
    Wyoming: Cheyenne; Sheridan
                           vet centers (206)
    Alabama: Birmingham; Mobile
    Alaska: Anchorage; Fairbanks; Soldotna; Wasilla
    Arizona: Phoenix; Prescott; Tucson
    Arkansas: North Little Rock
    California: Anaheim; Capitola; Chico; Commerce; Concord; Culver 
City; Eureka; Fresno; Gardena; North Bay; Oakland; Peninsula (Redwood 
City); Riverside; Rohnert Park; Sacramento; San Bemadino; San San 
Diego; San Francisco; San Jose; Santa Barbara; Sepulveda; Vista
    Colorado: Boulder; Colorado Springs; Denver
    Connecticut: Hartford; New Haven; Norwich
    Delaware: Wilmington
    District of Columbia: Washington, DC
    Florida: Fort Lauderdale; Jacksonville; Lake Worth; Miami; Orlando; 
Pensacola; Sarasota; St. Petersburg; Tallahassee; Tampa
    Georgia: Atlanta; Savannah
    Guam: Agana
    Hawaii: Hilo; Honolulu; Kailua-Kona; Lihue; Wailuku
    Idaho: Boise; Pocatello
    Illinois: Chicago; Chicago Heights; East St. Louis; Evanston; 
Moline; Oak Park; Peoria; Springfield
    Indiana: Evansville; Fort Wayne; Highland (Gary); Indianapolis
    Iowa: Cedar Rapids; Des Moines; Sioux City
    Kansas: Wichita
    Kentucky: Lexington; Louisville
    Louisiana: New Orleans; Shreveport
    Maine: Bangor; Caribou; Lewiston; Portland; Sanford
    Maryland: Baltimore; Bel Air; Silver Spring
    Massachusetts: Boston; Brockton; Lowell; New Bedford; Springfield; 
Worcester
    Michigan: Detroit; Grand Rapids; Lincoln Park (Detroit)
    Minnesota: Duluth; St. Paul
    Mississippi: Biloxi; Jackson
    Missouri: Kansas City; St. Louis
    Montana: Billings; Missoula
    Nebraska: Lincoln; Omaha
    Nevada: Las Vegas; Reno
    New Hampshire: Manchester
    New Jersey: Jersey City; Newark; Trenton; Ventnor
    New Mexico: Albuquerque; Farmington; Sante Fe
    New York: Albany; Babylon (Long Island); Bronx; Brooklyn; Buffalo; 
Harlem; Manhattan; Rochester; Staten Island; Syracuse; White Plains; 
Woodhaven
    North Carolina: Charlotte; Fayetteville; Greensboro; Greenville; 
Raleigh
    North Dakota: Fargo; Minot
    Ohio: Cincinnati; Cleveland; Columbus; Dayton; Parma (Cleveland)
    Oklahoma: Oklahoma City; Tulsa
    Oregon: Eugene; Grants Pass; Portland; Salem
    Pennsylvania: Erie; Harrisburg; McKeesport; Philadelphia (2); 
Pittsburgh; Scranton; Williamsport
    Rhode Island: Cranston (Providence)
    South Carolina: Columbia; Greenville; North Charleston
    South Dakota: Rapid City; Sioux Falls
    Tennessee: Chattanooga; Johnson City; Knoxville; Memphis
    Texas: Amarillo; Austin; Corpus Christi; Dallas; El Paso; Fort 
Worth; Houston (2); Laredo; Lubbock; McAllen; Midland; San Antonio
    Utah: Provo; Salt Lake City
    Vermont: South Burlington; White River Junction
    Virginia: Alexandria; Norfolk; Richmond; Roanoke
    Washington: Bellingham; Seattle; Spokane; Tacoma; Yakama Valley
    West Virginia: Beckley; Charleston; Huntington; Martinsburg; 
Morgantown; Princeton; Wheeling
    Wisconsin: Madison; Milwaukee
    Wyoming: Casper; Cheyenne
    Puerto Rico: Arecibo; Ponce; Rio Piedras
    Virgin Islands: St. Coix; St. Thomas
  va outpatient clinics (684) (excludes clinics located at va medical 
                   centers (as of december 31, 2001))
    Alabama: Anniston; Decatur; Dothan; Florence; Gadsden; Huntsville; 
Jasper; Mobile
    Alaska: Fairbanks; Kenai
    Arizona: Bellemont; Casa Grande; Green Valley; Kingman; Lake 
Havasu; Mesa; Safford; Show Low; Sierra Vista; Sun City; Yuma
    Arkansas: Eldorado; Ft. Smith; Harrison; Hot Springs; Jonesboro; 
Mountain Home; Paragould
    California: Anaheim; Antelope Valley; Bakersfield; Cabrillo; Chico; 
Chula Vista; Corona; Culver City; East Los Angeles Clinic; El Centro; 
Eureka; Fairfield; Gardena; Lompoc; Los Angeles; Martinez; McClellan; 
Merced; Mission Valley; Modesto; Monterey; Oakland; *** Palm Desert; 
Palo Alto HCS (Capitola); Port Hueneme; Redding; San Francisco; San 
Jose; San Luis Obispo; Santa Ana; Santa Barbara; Santa Rosa; Sepulveda; 
Sierra Foothills; Stockton; Sun City; Travis; ** Tulare; Ukiah; 
Vallejo/Mare Island; Victorville; Vista
    Colorado: Alamosa; Aurora; Colorado Springs; Ft. Collins (LaPorte); 
Greeley; La Junta; Lakewood; Lamar County; Montrose; Pueblo; Southern 
Colorado HCS
    Connecticut: New London; * Newington Campus; Norwich Screening 
Clinic; Stamford; * Waterbury; * Windham; * Winsted
    Delaware: Dover AFB; Millsboro
    District of Columbia: Southeast Washington
    Florida: Avon Park; Brooksville; Clearwater; Daytona Beach; Delray 
Beach; Fort Pierce; Ft. Myers; Homestead; Inverness; Jacksonville; Key 
West; Kissimmee; Lakeland; Leesburg; Manatee; Miami; Naples; Oakland 
Park; Ocala; Okeechobee; Orlando; Panama City; Pembrook Pines; 
Pensacola; Port Charlotte; Port Richey; Sanford; Sarasota; South St. 
Petersburg; St. Augustine; Stuart; Tallahassee; Vero Beach; Viera; 
Zephyrhills
    Georgia: Albany; Atlanta (Midtown); Cobb County; Columbus; 
Lawrenceville; Macon; NE Georgia/Oakwood; Savannah; Valdosta
    Guam: Agana Heights
    Hawaii: Hilo; Kailua-Kona; Lihue; Wailuku
    Idaho: Lewiston; Ontario; Pocatello; Twin Falls
    Illinois: Aurora; Bellville; Chicago Heights; Decatur; Effingham; 
Elgin; Evanston; Galesburg; Joliet; LaSalle; Manteno; McHenry; Mt. 
Vernon; Oak Lawn; Oak Park; Peoria; Quincy; Rockford; Springfield; 
Woodlawn
    Indiana: Bloomington; Crown Point; Evansville; Lafayette; Muncie; 
New Albany; Richmond; South Bend; Terre Haute
    Iowa: Bettendorf; Dubuque; Ft. Dodge; Marshalltown; Mason City; 
Sioux City; Waterloo
    Kansas: Abilene; Chanute; Dodge City; Emporia; Fort Riley; Fort 
Scott; Garnett; Hays; Holton; Junction City; Lawrence; Liberal; Paola; 
Parsons; Seneca; Russell; Wyandotte County
    Kentucky: Bellvue; Bowling Green; Fort Knox; Hopkinsville; 
Louisville; Paducah; Prestonburg; Somerset; Whitesburg
    Louisiana: Baton Rouge; Jennings; Lafayette Parish; Monroe
    Maine: Aroostook County; Bangor; Calais; Machias; Portland; 
Rumford; Saco
    Maryland: Cambridge; Cumberland; Glen Burnie; Hagerstown; Landover; 
Loch Raven; Southern Maryland
    Massachusetts: Causeway Clinic; Dorchester; Edgartown; Framingham; 
* Greenfield; Haverhill; Hyannis; ** Lowell; Nantucket; New Bedford; ** 
North Shore; Pittsfield; **** Quincy; Springfield (2); Winchendon; 
Worcester
    Michigan: Benton Harbor; Flint; Gaylord; Grand Rapids; Hancock; 
Ironwood; Jackson; Lansing; Marquette; Menominee; Muskegon; Oscoda; 
Pontiac; Sault Ste. Marie; Traverse City; Yale
    Minnesota: Brainerd; Fergus Fall; Hibbing (4); Mankato (10); 
Maplewood (St. Paul)
    Mississippi: Byhalia; Greenville; Hattiesburg; Meridian; Smithville 
(2)
    Missouri: Belton; Cape Girardeau; Ft. Leonard Wood; Gene Taylor; 
Kirksville; Lake of the Ozarks; Nevada; St. Charles County; St. Joseph; 
St. Louis CBOC; West Plains
    Montana: Anaconda; Billings; Bozeman; Glasgow; Great Falls; Lame 
Deer; Miles City; Missoula; Northeast (Sidney); Whitefish
    Nebraska: Alliance; Gering; Grand Island; Lincoln; Norfolk; North 
Platte; Rushville; Sidney
    Nevada: Carson City; Ely; Henderson; Las Vegas Homeless; Pahrump
    New Hampshire: Conway; Portsmouth; Tilton; Wolfeboro
    New Jersey: Brick; Cape May; Elizabeth; Ft. Dix; Hackensack; Jersey 
City; Morristown; Newark; New Brunswick; State Soliders Home; Trenton; 
Ventnor
    New Mexico: Alamogordo; Artesia; Clovis; Espanola (6); Farmington; 
Gallup; Hobbs; Las Cruces; Las Vegas (6); Raton; Santa Rosa; Sante Fe 
County; Silver City; Truth or Consequences
    New York: Auburn; Batavia; Binghamton Community; Buffalo; Brooklyn 
(Bedford); Brooklyn (Sister Boman); Carmel (Putnam County); Catskill; 
Chapel St; Clifton Park; Courtland; Dunkirk; East Buffalo; 
Elizabethtown; Elmira; Far Rockaway; Fonda; Geneseo; Geneva; Glen Falls 
(2); Harlem; Harlem Homeless; Harris; Islip; Ithaca; Jamestown; 
Kingston; Lackwanna; Lindenhurst; Lockport; Lynbrook; Lyons; Malone; 
Massena; Middletown; Mt. Morris; Mt. Sinai; New City; New York SOC; 
Olean; Oswego; Patchoque; Plainview; Plattsburg; Port Jervis; 
Poughkeepsie; Queens; Riverhead; Rochester; Rome; Sayville; 
Schenectady; Sidney; Soho; Sonyea; South Bronx; Staten Island; Troy; 
Watertown; Wellsville; White Plains; Yonkers
    North Carolina: Charlotte; Greenville; Jacksonville (2); Raleigh; 
Wilmington; Winston-Salem
    North Dakota: Bismarck; Grafton; Minot
    Ohio: Akron; Ashtabula County; Athens; Canton; East Liverpool; 
Grove City; Lancaster; Lima; Lorain; Mansfield; Marietta; McCafferty; 
Middletown; Painesville; Portsmouth; Sandusky; Springfield; St. 
Clairsville; Toledo; Warren; Youngstown; Zanesville
    Oklahoma: Ardmore; Clinton; Konawa; Lawton; McAlister; Ponca City; 
Tulsa
    Oregon: Bandon; Bend; Brookings; Eugene; Klamath Falls; Salem; 
White City
    Pennsylvania: Aliquippa; Allentown; Berwick; Camp Hill; # Clarion 
County; Coatesville; Crawford County; ** Dubois (Clearfield); Good 
Samaritan; ### Greensburg; Health Place; Jamison Health Center; 
Johnstown; Kittanning; Lancaster; Mckean County Media; Philadelphia; 
Reading; Sayre; Spring City; State College; Tobyhanna; Washington Co.; 
Williamsport; York
    Puerto Rico: Arecibo; Mayaguez; Ponce
    Rhode Island: Middletown
    South Carolina: Beaufort; Florence; Greenville; Myrtle Beach; 
Orangeburg Co.
    South Dakota: Aberdeen; Eagle Butte; Kyle; McLaughlin; Pierre; Pine 
Ridge; Rapid City; Rosebud; Winner
    Tennessee: Chattanooga; Clarksville; Cookeville; Dover; Knoxville; 
Mountain City; Rogersville; Savannah; Tullahoma
    Texas: Abilene; Alice; Austin Satellite; Beaumont; Beeville; Bonham 
Care; Network ## (20); Brownsville; Brownwood; Camp-Fannin; Cedar Park; 
Childress; Cleburne ## (3); College Station (Bryan); Corpus Christi 
Satellite; Dallas County; ## Decatur Area ## (3); Del Rio; Denton Area 
##; Eagle Pass; Eastland Area ## (3); Ft. Stockton; Fort Worth 
Satellite; Greenville Area ## (4); Kingsville; Laredo; Longview; 
Lubbock; Lufkin; Marlin VAMC; McAllen Satellite; Odessa; Palestine; San 
Angelo; San Antonio (5); San Marcos; Sanquin; South Bexar County; 
Stamford; Stratford; Tarrant County ## (4); Frank M. Tejeda; Texarkana; 
Uvalde; Victoria; Wichita Falls
    Utah: Ogden; Orem; Roosevelt; Saint George
    Vermont: Bennington; Burlington; VICC--Newport; VICC--St. 
Johnsbury; Wilder
    Virgin Islands: St. Croix; St. Thomas
    Virginia: Alexandria; Covington; Danville (Riverside Drive) (2); 
Danville (A.L. Post 325); Harrisonburg; Hillsville; Lynchburg; Marion; 
Martinsville; Norton (2); Pulaski; St Charles (8); Stephens City; 
Stuarts Draft; Tazewell
    Washington: Bremerton; King County (2); Longview; Richland; 
Vancouver; Yakima
    West Virginia: Charleston; Franklin; Gassaway; Logan County; 
Petersburg; Tucker County; Wood County
    Wisconsin: Appleton; Baraboo; Beaver Dam; Chippewa Falls; 
Cleveland; Eau Claire; Edgerton; La Crosse; Loyal; Rhinelander; 
Superior; Union Grove; Wausau
    Wyoming: Casper; Gillette; Green River; Newcastle; Powell; Riverton

    * VA Primary Care Center
    ** Primary Care Clinic
    *** Substance Abuse Treatment Clinic
    **** Veterans Community Care Center
    # Outpatient Clinic
    ## Primary Care Network
    ### Regional Medical Center
                            independent (4)
    Alaska: Alaska HCS
    Ohio: Columbus
    Manila: Passay City
    Texas: El Paso HCS
                           mobile clinic (8)
    District of Columbia: Washington
    Maryland: Baltimore
    Missouri: Poplar Bluff
    North Carolina: Fayetteville
    Pennsylvania: Northeastern Pennsylvania
    Washington: Spokane
    West Virginia: Martinsburg
    Wisconsin: Milwaukee
                medical and regional office centers (11)
    Alaska: Anchorage
    Delaware: Wilmington
    Hawaii: Honolulu
    Kansas: Wichita
    Maine: Togus
    Montana: Fort Harrison
    North Dakota: Fargo
    South Dakota: Sioux Falls
    Vermont: White River Junction
    Wyoming: Cheyene
    Manila: * Pasay City
    * Manila is classified as an Independent Outpatient Clinic not a 
Medical Center

    Question 4b. What were the costs of the Phase I CARES study?
    Answer. Current payments to the Booz-Allen and Hamilton CARES 
contractor, actuary, and facility condition assessment contractors are 
$4.8 million.
    Question 4c. Will you be doing a Phase II and Phase III CARES study 
and if so, what is the schedule and funding?
    Answer. VA is exploring performing all remaining CARES studies 
simultaneously in Phase II. The initial target date for completing the 
remaining studies is calendar year 2003. During Phase I, VA staff 
played a key role in the CARES process; as a result consideration is 
being given to VA staff performing the majority of the work in future 
studies. Until the overall process is finalized, cost information for 
the future studies will not be available.
    Question 5a. In FY 2001, VHA collected $771 million in copayments 
and third party collections. In FY 2003, VHA has estimated that it will 
collect $1.5 billion. Part of this increase will be based upon new 
revenues generated by raising the prescription copayment from $2 to $7 
and part of the increase will be due to anticipated improved collection 
processes. With that in mind: VA is estimating $1.5 billion in 
collections for FY 2003, doubling the amount from the FY 2001 level of 
$771 million. What is the primary reason for this increase, and can we 
realistically anticipate this level of collections?
    Answer. The primary reasons for the increase from $771 million in 
FY 2001 to the projected $1.5 billion in FY 2003 are as follows:
          $364 million for the $5 (from $2 to $7) increase in 
        medication copayment;
          $260 million for proposed legislative initiative for the 
        $1,500 deductible;
          $40 million for the long term care copayment;
          Improvements derived from the Revenue Improvement Plan; and
          Four broad-sweeping activities (Electronic Data Interchange 
        (EDI), Centralization & Consolidation, Outsourcing & 
        Contracting Medicare remittance advice for a project)--all of 
        which will have a profound impact upon the MCCF program to help 
        increase collections.
    Question 5b. Please provide all background assumptions, 
spreadsheets and analyses used in the determination that 121,000 
veterans would no longer use VA health care services and that an 
estimated annual savings of $885 million in reduced workload will be 
realized due to the proposed annual $1,500 deductible to Priority 7 
veterans. Please also include how many of the 121,000 are current users 
and how many are potential enrollees.
    Answer. The attachment, ``Background on VA's $1,500 Deductible 
Proposal for Priority 7 Veterans'', provides the background assumptions 
and details of this proposal.
attachment--background on va's $1,500 deductible proposal for priority 
                               7 patients
    VA's estimate of the financial and programmatic impact of the 
$1,500 deductible upon Priority 7 veterans was based upon the Milliman 
USA, Inc. actuarial estimates for projections of enrollees and 
resources that were used as the foundation of the FY 2002 enrollment 
decision. The actuarial estimates were based upon FY 2000 actual 
experience and did not reflect increased utilization by Priority 7 
veterans seen in FY 2001. The actuarial estimates were first available 
in late summer of 2001.
Future Year Projections
    This deductible policy would not have been proposed if the growth 
in Priority 7 veterans was estimated to be a one or two year anomaly. 
As the chart below shows, the Priority 7 workload is estimated to 
continue to rise through 2010.
               Projected Enrollment by Patient Priority 


    VA's primary reason for proposing a significant policy change is to 
assure that quality of care is maintained.
The Deductible Proposal
    The table below shows the forecast of key workload factors 
including associated workload expenditures. Estimates are shown with 
and without the deductible in place for 2003. Priorities 1-6 veterans 
are VA's core veterans-service connected and low income--Priority 7 
veterans--(higher income veterans, about $25,000 for a single veteran 
and $28,000 for a married veteran). As the table indicates, Priority 7 
users are projected to rise by 43 percent from 2001 to 2003 and 
resource requirements by 61 percent without the $1,500 deductible. With 
the $1,500 deductible, the growth is held to 29 percent and 12 percent 
respectively

----------------------------------------------------------------------------------------------------------------
                                                                                   2003 Without      2003 With
                                                   2001 Estimate   2002 Estimate    Deductible      Deductible
----------------------------------------------------------------------------------------------------------------
Priority 7 Enrollees (Average) in millions......             1.4             1.9             2.2             2.1
Patients (unique)...............................         841,153       1,060,482       1,206,860       1,085,074
Workload Expenditures in millions...............          $1,790          $2,320          $2,885          $2,000
Deductible Revenue in millions..................  ..............  ..............  ..............            $260
----------------------------------------------------------------------------------------------------------------

    Application of the deductible proposal reduces Priority 7 veterans 
by 10 percent and their related workload expenditures by 31 percent in 
2003. Their expenditures decline by a greater amount because a large 
portion of the veterans will seek fewer medical services from VA and 
will shift some of their care to other providers. The following graphic 
displays the Priority 7 expenditures projected for 2000-2007 with and 
without the proposed deductible starting in 2003.
              Deductible Impact on Priority 7 Expenditures
      [Assumes Actuary's FY 2003 Percentage Impact for Outyears] 


    The actuarial estimate concentrates on medical procedures workload 
(outpatient visits--CPT codes and inpatient episodes of care--DRG) of 
Priority 7 patients, as this factor is more directly related to 
expenditures than the number of patients or enrollees. The actuarial 
expectation is that, with the application of the $1,500 deductible, VA 
will experience a 10 percent reduction in unique medical users 
(122,000), a 50 percent decline in outpatient procedures, a 40 percent 
decline in inpatient episodes of care, and a 10 percent decline in 
pharmacy utilization. The overall effect on resources is expected to be 
a 31 percent decline in cost.
    Because this type of policy change has not been seen in any large 
health care system before, or in a system with similar characteristics 
to the VA--a system where the patient pays only a small fraction of 
their health care costs, the change in Priority 7 veterans behavior due 
to the introduction of a $1,500 deductible could be different than that 
forecasted. The ramification of expenditure savings and the impact on 
budgets in the future is very significant.
Revenue Estimate
    The actuary estimates that this proposal will bring in an 
additional $260 million in revenue in addition to the $885 million in 
cost reduction for an overall reduction to the appropriation request of 
$1.145 billion.
Why This Proposal Was Chosen?
    Continued growth in the demand for VA health care services will 
require significant increases in budget resources. Without significant 
increases in resources or the implementation of an alternative policy/ 
policies (limit enrollment, change uniform benefits package, cost share 
proposal), VA would face critical issues impacting quality, such as, 
increasing waiting times, increasing system congestion impacting all 
patients, inability to meet demand. VA considered these policies and 
determined that the deductible (cost sharing) proposal seemed to be the 
preferable option that addresses the following most overarching 
concerns:
     Maintain quality of care for all those that VA serves
     Continue VA open enrollment for all veterans
     Maintain, not reduce, the basic benefit package of medical 
services for core veterans
     Provide veterans appropriate access to outpatient, 
inpatient, and non-institutional long-term care services
     Require veterans that have higher incomes to contribute 
more to their cost of care than other veterans
     Assess a charge for use of healthcare services as opposed 
to assessing an upfront charge or enrollment fee
     Allow veterans to benefit from private insurance coverage 
and encourage veterans to identify their insurance coverage and improve 
third party collections
     Continue VA long-term services, especially non-
institutional care
     Provide catastrophic coverage for those with high annual 
medical costs
How does the Deductible Work?
    Who pays the deductible?
     All Priority 7s for non-preventive, non-service connected 
care
     Insurance will help offset deductible charge to veterans
          Dollar for dollar
          Veteran will not be billed until insurance payment is made
    How much is the deductible?
     Pay only for care received (no upfront charge)
     Once annual deductible ($1,500) is met, no more deductible 
for that year
     Excludes pharmacy (only $7 copay applies)
    How do co-payments work with the deductible?
     Inpatient and outpatient copays start after deductible cap 
is reached
     Pharmacy copays will be in effect the entire year
    How was the $1,500 cap determined?
     The deductible amount is below the average overall cost 
for priority 7 veterans ($1,900)
     Would encourage veterans to identify insurance
     The cap provides catastrophic coverage for those with huge 
annual medical costs
     Not likely to devastate those without insurance who need 
health care as the cost of most Priority 7's care is low, a greater 
share of their total cost is for pharmacy and a small percentage have 
large medical costs
    Question 5c. Last year Congress passed Public Law 107-135, the 
Department of Veterans Affairs Health Care Programs Enhancement Act of 
2001, and one of the provisions in this legislation was geographic 
means testing for inpatient care copayments. How will this adjustment 
to inpatient copayments be affected by the new $1,500 deductible?
    Answer. If VA is given legislative authority to implement the 
$1,500 deductible, a veteran will be required to meet the entire 
deductible amount prior to paying for regular VA copayments. There will 
be no change in procedure for veterans who will be subject to the 
geographic means test inpatient copayment. They will be charged the 
full amount of the deductible until that amount has been satisfied. 
Once that amount has been satisfied, then the geographic means test 
copayments for inpatient care will be assessed. At that time, veterans 
impacted by the geographic means test will be assessed regular VA 
copayments for outpatient care and extended care services.
    Question 6. Considering last year's funding shortfall, does this 
budget provide for full and complete funding--above the FY 2002 
baseline (which will not include the additional amount that was 
provided)--for veterans' health care, so that VA does not again face 
the dilemma of choosing which veterans to serve?
    Answer. There are many variables that impact health care in general 
(new diseases, new treatments, inflation changes, etc.) and impact 
veteran enrollment in VA health care (other health care alternatives, 
availability and accessibility of VA services, etc.). This budget 
incorporates a ``Base Health Care Demand Adjustment'' initiative that 
identifies and requests the resources required to support an actuarial 
estimate of the demand and case mix changes needed for all seven 
patient priorities in FY 2003. Based on this initiative, this year's 
budget estimates should better account for the relationship of planned 
workload requirements and the full funding needed.
    Question 7. Although I am pleased with the decision to continue 
enrolling new Priority 7 veterans in the current fiscal year, I remain 
very concerned about where the additional funding came from. I 
understand that a supplemental will be coming in the amount of $142 
million to cover unforeseen costs in FY 2002. I understand, however, 
that the VA health care system was running a $400 million deficit. It 
seems that this supplemental is not sufficient. Where will the 
additional money come from?
    Answer. Based on the continuation of full enrollment, VHA 
determined there would be a shortage of about $441 million in FY 2002, 
after available resources were subtracted from projected expenditures. 
Approximately $300 million in management savings is anticipated in FY 
2002. These savings are expected to be generated from a multi-year 
effort to improve standardization and compliance in the procurement of 
equipment, pharmacy, and medical supplies. Other savings are expected 
from program efficiencies related to new criteria to assess community-
based outpatient clinics and centrally managed programs. The balance of 
the shortfall, $142 million, is required as supplemental funding in FY 
2002 to continue enrollment of new priority 7 veterans.
    Question 8a. The Medical Care Cost Fund takes on new importance in 
the budget. What is the status of the 24 initiatives in the Revenue 
Improvement Plan?
    Answer. Attached is our Status of Revenue Improvement Plan 
Recommendations.

----------------------------------------------------------------------------------------------------------------
                                                               Date
   Rpt Item and Description        Action/Status    --------------------------   Chg Due          Comments
                                                        Complt        Due
----------------------------------------------------------------------------------------------------------------
1. Mandate pre-registration    VHA Directive 98-042     12/01/01     12/01/01  ...........  Completed. Addtl
 of veterans.                   issued 9/23/98.                                              followup required
                                ADUSH memo dtd 12/                                           to monitor
                                10/01 to network                                             compliance.
                                and facility
                                directors re-
                                emphasizing
                                requirement.
                                Project Team will
                                serve as Focus
                                Group for the EDI
                                Insurance Team.
                                ADUSH issued memo
                                dtd 12/26/01
                                summarizing Revenue
                                Office action(s).
                                Re-issue Directive
                                scheduled for 2nd
                                Qtr, presently in
                                concurrence.
                                Article for Fast
                                Track Newsletter
                                drafted, pending
                                publication.
2. Define standards for        Project team             12/31/01  ...........   10/30/03 *  In-Progress. EDI
 complete/accurate              established 12/01;                                           Team addressing
 (insurance) data capture.      Team meeting (conf                                           long-range
                                call) conducted Feb                                          conversion. *
                                2002. Project Team                                           Indicates revised
                                will serve as Focus                                          HIPAA deadline.
                                Group for EDI
                                Insurance Team.
                                Team Report on
                                intake requirements
                                for insurance data
                                issued 02/02, and
                                presently in
                                clearance process.
                                Guidelines to
                                address procedural
                                requirements during
                                interim period
                                prior to EDI
                                implementation
                                being drafted.
                                Completion date is
                                revised HIPAA
                                deadline coinciding
                                w/EDI
                                implementation.
3. Implement veteran           Pamphlets and            12/31/01      1/31/02  ...........  Initial distribution
 education program              posters on new                                               completed 1/02.
                                copay amounts                                                Additional
                                developed.                                                   education/training
                                Statement inserts                                            program development
                                distributed in                                               in-progress.
                                January 2002
                                mailing. Inter/ 
                                Intranet websites 
                                updated 01/02. An
                                Education workgroup 
                                was formed 02/02 to 
                                collaborate WEES on 
                                education/awareness 
                                campaign.
4. Implement employee          Project team             12/31/01  ...........  ...........  In-Progress. EDI
 education program.             established 12/01;                                           Team addressing
                                Team meeting (conf                                           long-range
                                call) conducted Jan                                          conversion
                                and Feb 2002.                                                requirements for
                                Additionally, the                                            IPAA
                                Education workgroup                                          implementation.
                                is coordinating
                                with the (HEC) pre-
                                registration
                                workgroup in
                                collaborating w/EES
                                on education/ 
                                awareness campaign. 
5. Implement electronic        Project team               3/1/02  ...........   10/30/03 *  In-Progress. EDI
 insurance identification and   established 12/01;                                           Team addressing
 verification.                  Team meeting (conf                                           long-range
                                call) conducted Feb                                          conversion. *
                                2002. Pilot in-                                              Indicates revised
                                progress in VISN 2.                                          HIPAA deadline.
                                Project Team will
                                serve as Focus
                                Group for EDI
                                Insurance Team.
                                Completion date is
                                the revised HIPAA
                                deadline which
                                coincides w/EDI
                                implementation.
                                Conference call
                                with the EDI Team
                                was held 02/02 to
                                coordinate
                                integration of both
                                team's efforts in
                                identifying system
                                requirements and
                                establishing
                                business rules and
                                models.
6. Consolidate insurance       Project team               7/1/02  ...........  ...........  In-Progress.
 information at the             established
 enterprise level.              December 2001.
                                Results from VISN 2
                                Pilot (in-progress)
                                may provide support
                                to this item.
                                Discussions w/St
                                Anthony's
                                Publishing and
                                Ingenix ref:
                                electronic
                                insurance directory
                                file in progress.
7. Develop an employer master  Project team              12/1/02  ...........  ...........  In-Progress.
 file.                          established
                                December 2001.
                                Project team
                                meeting (conf call)
                                conducted Feb 2002.
                                Identification of
                                systems
                                requirements in
                                progress.
8. Enforce national            ADUSH memo dtd 12/10/    11/30/01     12/10/01  ...........  Completed. Addtl
 documentation policy.          01 issued to                                                 followup and
                                network and                                                  monitoring
                                facility directors.                                          required.
                                Contract awarded to
                                PwC on national
                                documentation
                                policy. Draft VHA
                                Directive in
                                progress.
9. Mandate use of electronic   ADUSH memo dtd 12/10/     6/30/02  ...........      8/30/02  Performance
 medical records (CPRS).        01 issued reminding                                          indicators to
                                network and                                                  monitor CPRS
                                facility directors                                           compliance in
                                of this                                                      approval process.
                                requirement.
                                Additional guidance
                                published 1/30/02
                                mandating full
                                implementation via
                                EDMS (166245).
10. Develop national clinical  Mtg scheduled 02/11-     12/31/02  ...........       2/2/02  In-Progress.
 education program.             12/02 in
                                Minneapolis for
                                development of
                                (education/
                                training) tool kit 
                                which is in
                                progress.
11. Develop and mandate use    One encounter form         1/1/03  ...........  ...........  In-Progress.
 of electronic encounter form   developed and is in
 and documentation template.    testing. Other
                                encounter forms
                                anticipated due by
                                2/28/02.
12. Develop and implement      Requirements             12/31/03  ...........  ...........  In-Progress.
 Documentation tracking         identification in
 system.                        progress by Project
                                team. Draft of VHA
                                Directive in
                                progress.
13. Develop staffing plan for  Requirements              12/1/01  ...........      3/30/02  Questionnaire in-
 coding resources.              identification in                                            progress. Recruit/                                progress by Project                                          Retention Handbook
                                team. Questionnaire                                          in draft.
                                in-progress.
                                Recruitment and
                                Retention Handbook
                                in draft. Extension
                                requested thru 3/30/
                                02. 
14. Mandate use of encoder     ADUSH memo dtd 12/10/    12/31/01     12/10/01  ...........  emo drafted on use
 software.                      01 issued to                                                 of standard
                                network and                                                  software in review
                                facility directors.                                          by CIO.
                                Followup required
                                to monitor
                                implementation of
                                encoder software.
15. Develop national standard  Project Lab and           3/29/02  ...........  ...........  In-Progress.
 for laboratory, radiology      Radiology subteams
 and other ancillary test       reviewing (VistA)
 names and corresponding CPR    clinical packages
 codes.                         to determine
                                feasibility of
                                subroutines tied to
                                national annual CPT
                                roll out to update
                                all xray/lab and
                                ancillary codes.
16. Mandate minimum access     ADUSH memo dtd 12/10/     12/1/01     12/10/01  ...........  Completed. Addtl
 policy to VistA ancillary      01 issued to                                                 followup via joint
 packages.                      network and                                                  CIO/ADUSH memo
                                facility directors.                                          scheduled for 02/02
                                Additional guidance
                                in draft to network
                                and facility
                                directors to
                                provide minimum
                                access to field
                                Revenue Staff is in
                                progress.
17. Complete implementation
 of:
  EDI Billing Project........  National training        12/31/01     12/31/01  ...........  In-Progress. Systems
                                completed in                                                 capacity testing
                                Chicago and                                                  successfully
                                Atlanta. Site                                                completed 02/02.
                                testing in progress.
  MRA Project................  Alpha testing in          4/30/02  ...........   10/01/03 *  In-Progress. *
                                progress.                                                    Indicates revised
                                Identification of                                            HIPAA deadline.
                                Systems
                                Requirements
                                Specifications
                                anticipated 05/02.
                                Completion date is
                                revised HIPAA
                                deadline.
18. Implement claims analyzer  ....................      3/29/02  ...........  ...........  In-Progress. See
 tools.                                                                                      Item #14.
19. Improve the charge         Project Subteams          10/1/03  ...........  ...........  In-Progress.
 capture process.               reviewing high
                                dollar volume
                                clinical packages
                                for billable
                                events. CIO billing
                                package plan
                                development in
                                progress. Project
                                Team meeting
                                scheduled for 03/02
                                to conduct
                                requirements
                                analysis and
                                develop systems
                                specifications.
20. Consolidate/outsource VHA  ADUSH memo dtd 12/10/    12/31/01  ...........      8/30/02
 3rd party accounts             01 issued to
 receivable follow-up.          network and
                                facility directors,
                                RFI closes 2/6, RFP
                                follows. Extension
                                due to contracting
                                and budget
                                constraints. PwC
                                contract for
                                development of CIP
                                for nationwide
                                contract solution,
                                Requirements
                                analysis and draft
                                of proposal in
                                progress. 90 day
                                pilot in VISN 12 in
                                progress to collect
                                on aged receivables
                                thru private vendor.
21. Develop utilization        Project Team              3/29/02  ...........      9/30/02  In-Progress.
 review program.                drafting SOPs,                                               Questionaire
                                policy, position                                             results under
                                description &                                                review.
                                identifying
                                software
                                enhancements.
                                Project Scope
                                change to include
                                Web-based training
                                module, national UR
                                training initiative
                                & proposing more
                                software
                                enhancements for UR
                                activities extends
                                due date to 9/30/
                                02. Questionaire 
                                administered 12/01.
22. Request VA GC more         Discussions w/OGC          4/1/02  ...........  ...........  In progress. On 03/ 
 aggressively pursue referred   held Dec 2001, Jan                                           05/02, the Office
 3rd party AR.                  and Feb 2002.                                                of General Counsel
                                Meeting planned for                                          released
                                Jan/Feb w/Project                                            instructions to
                                Subteam Leaders.                                             Regional Counsels
                                                                                             for reconciling
                                                                                             accounts with VA
                                                                                             Medical Centers.
23. Implement 3rd party        Project team (Mellon       1/1/03  ...........     10/01/03  In-Progress.
 payment and remittance         Bank, AAC and
 program (EDI Lockbox).         Technical
                                Development Staff
                                of Revenue Office)
                                established.
                                Systems
                                requirements
                                identified,
                                currently in
                                design. Systems
                                stress testing
                                completed 2/19/02.
                                Software deployment
                                anticipated Apr/May
                                02.
24. Implement accounts         UNISYS providing           6/2/03  ...........  ...........  In-Progress.
 receivable management          DEMO of product
 software.                      currently in use in
                                Pitts VAMC. Visit
                                to Asheville CRU
                                scheduled January
                                2002. RFI in
                                progress for
                                assessment of
                                additional vendor/
                                products. Other 
                                CRUs to view demo @
                                Pitts, VAMC 03/02.
----------------------------------------------------------------------------------------------------------------

    Question 8b. What is VHA doing to reduce the third party accounts 
receivable backlog?
    Answer. VHA is currently in the process of conducting market 
research through a Request for Information (RFI) to identify private 
sector practices that can readily be adapted to VA's business 
operations and thereby align VA with industry hallmarks. VHA plans to 
release a Request for Proposal (RFP) soliciting bids for third-party 
accounts receivable management by Spring 2002 and to award one or more 
contracts by Fall 2002. Simultaneously, VHA initiated a contractor 
pilot in VISN 12 to resolve third-party accounts receivables greater 
than 90 days. The contractor will be doing all follow-up actions on 
these accounts.
    Question 8c. Despite the recent improvements in developing better 
billing methods, I think there is general recognition that VA's 
collections efforts could be much better. Please compare VA's costs to 
collect third party revenue with the costs of private industry.
    Answer. VA's cost to collect from third-parties is very difficult 
to compare with private industry's cost to collect. VA's measurement 
for this process is a cost to operate. VA's data systems cannot provide 
data for collections and costs to differentiate between first and 
third-parties. The cost accounting system records only total 
collections and cannot identify cost expenditures to the first and 
third-party level. There have been cost assessment studies done in 
prior years by contractors and one currently underway; both of which 
have shown (show) how the cost to collect/operate has declined over the 
past few years. This decrease in cost to operate can be attributed to a 
number of improvements in the process for billing and collecting of 
first and third-party receivables. These enhancements include the 
electronic generation of patient statements from one location, the 
receipt of payments for first party charges through a lock box bank, 
and the automatic posting of those payments to a patient's account. 
Additionally, improvements made to the third-party billing process 
include facilities using an Electronic Data Interchange (EDI) process 
to submit a bill to an insurance company in the near future, 
centralization/consolidation of like functions, and outsourcing/
contracting out. 
    Systems Flow, Inc., has been contracted to study and develop annual 
reports to Congress on an assessment and an interim evaluation of 
alternative business models presented in VHA's Business Plan for 
Revenue Collection. Systems Flow, Inc. reviewed three VISNs on various 
subject matters including cost to collect data. A draft based on 
preliminary data results (using December 2001 data) was issued February 
12, 2002. The cost to operate on average for three VISNs for third-
party collections averaged 22 cents to collect $1 and averaged 16 cents 
to collect $1 of total collections (first and third-party).
    Question 8d. Three years ago VA began an initiative to test 
contracting out its Revenue Process. I understand that this effort 
never achieved its intended goal of a complete contracting out of all 
billing and collection activities in two VISNs. Why wasn't it fully 
contracted out and when will we see the report on this pilot?
    Answer. As you note, several years ago VHA undertook an initiative 
to evaluate whether it was feasible to contract out the Revenue process 
or parts of the process. Unfortunately, that initiative has not 
produced the positive results that were anticipated. Volunteer VISNs 
were sought to pilot the contract and franchise revenue collection 
models, and VISN Directors provided constructive comments and 
recommendations. This approach, however, did not provide as many 
positive results as expected. Many VISNs sought autonomy in tailoring 
the models to their organizations. That later turned out to be a major 
impediment to the pilot's efficacy. Nevertheless, other contracting-out 
related initiatives are currently being pursued.
    Question 8e. Does VA anticipate changing the prescription or 
outpatient copayment amounts in FY 2003?
    Answer. As VHA indicated in the final regulation regarding the 
medication copayment, the medication copayment will be reviewed on an 
annual basis and increases will be based on the Prescription Drug 
Component of the Medical Consumer Price Index. This is most relevant to 
the cost of prescriptions and should be relevant to any general 
increases in medication copayments in the private sector. VHA will also 
periodically review the outpatient copayments and will recommend 
adjustments as appropriate.
    Question 9. I understand that the VA is considering requesting 
legislation to authorize Medicare Subvention. How much did DOD gain or 
lose in revenue as a result of their pilot program? Given DOD's 
experience, how do you believe VA would fare?
    Answer. VA is currently in the process of discussing some options 
for Medicare coordination of benefits with the Centers for Medicare and 
Medicaid Services (CMS). CMS and VA are positioned to begin exploring 
some options for improving federal efficiencies through the provision 
of choices for the veteran beneficiary. These efforts could result in 
high quality, comprehensive, unduplicated, and coordinated care within 
a national health care environment.
    While the overall gains or losses from the DOD demonstration are 
not available (only FY 1999 figures have been released by GAO), reports 
have been released addressing the increased costs to DOD as a result of 
the demonstration. DOD faced significant challenges during the 
demonstration. VA expects to face some of the same, and some very 
different challenges. The Administration is studying the issues.
    Question 10. What efficiencies could be gained from centralizing 
contracting decisions for CBOC's, personal services, and other clinical 
services? What oversight does headquarters staff currently exercise on 
these issues?
    Answer. Efficiencies could be gained in developing a pool of 
acquisition specialists who are expert at this type of contracting. 
Additionally, standardized quality and patient safety requirements 
could be included in all contracts. However, it would be difficult to 
determine specific requirements because those issues are driven by 
local clinical circumstances. VHA is developing a policy directive on 
health care contracts that will require a review process for 
significant dollar volume health care contracts. Additionally, pursuant 
to the policy directive VHA will require specific language that 
addresses quality and safety in all health care contracts.
    Currently, headquarters staff review and approve all 38 U.S.C. 8153 
contracts for clinical services, including CBOC contracts, that satisfy 
certain monetary thresholds. As a result, headquarters staff, including 
Strategic Healthcare Group Chief Consultants, Office of Acquisition and 
Materiel Management, and General Counsel, thoroughly review all CBOC 
contracts that exceed the monetary thresholds prior to approval. Such 
reviews include the submission of veteran population data, alternative 
methods for delivering care, and estimated costs associated with the 
proposed CBOC. Once expert headquarters staff reviews the submitted 
information, the National Leadership Board does the same. Moreover, 
subsequent to awarding a CBOC contract, the CBOC contract may be 
audited by the Office of Acquisition and Materiel Management. This 
subsequent audit is considered part of the ongoing Business Review 
performed at the VHA contracting activity.
    Question 11. What mechanism do you have in place to guarantee 
quality of care in contracted CBOCs and how much money is in the budget 
for quality management programs at CBOCs?
    Answer. VHA's ability to measure and report on quality of care 
allows VHA to identify areas for improvement at all system levels. 
Quality management is embedded in VHA's core processes through 
performance measurement. Recent initiatives are underway to enhance the 
value of performance data provided. For example, the VHA Office of 
Quality and Performance (OQP) provides field and Central Office 
leadership with routine reports on actual and comparative performance 
data at the network level, coupled with information on successful 
approaches for improving performance. This synergistic approach 
supports management by linking strategy with relevant measurement 
regarding actions intended to improve the quality of care.
    In late FY 2002, OQP will increase the frequency of outpatient 
satisfaction, functional assessment, and health behavior surveys (from 
annually and semiannually) to quarterly to improve the timeliness of 
data. Analyses will include not only Network comparisons of 
performance, but also periodic CBOC, special population, or cohort 
analyses to assure that data provides more valuable guidance and 
clearer direction for improving care. Finally, sampling methods are 
being modified to assure that OQP is maximizing the power of analyses 
wherever possible. Performance analyses, powered for specificity at the 
particular CBOC level, would require additional funding and would be 
predicated on adverse finds at a more aggregated level.
    There is no specific line item in VHA's budget identified as CBOC 
quality management. The quality management activity is matrixed 
throughout the organization and quality is monitored at all sites of 
care through the activities of many employees at the Central, Network, 
and local level. The costs that could be attributed to CBOC quality 
management within Central Office's Quality and Performance Office are 
roughly $3.5 million. This figure includes costs associated with 
External Peer Review Activities, veteran satisfaction and functional 
status surveys, utilization management guidance, and credentialing 
support. It does not include Joint Commission on Accreditation of 
Healthcare Organizations (JCAHO) accreditation costs--which are 
difficult to attribute because they are facility-wide expenses. It also 
does not reflect the local and Network operational costs (e.g., medical 
center quality managers, network quality management officers, local 
training, etc.). There is no local quality manager at the CBOC-rather, 
this function is subsumed by the local quality management staff that 
are responsible for managing the quality at all sites of care 
affiliated with the local facility. Additionally, CBOC contracts 
include requirements designed to ensure quality care for veterans.
    Question 12. Is there a central data bank that VA field contract 
specialists can use to assess the value of the contracts that they are 
negotiating?
    Answer. Yes. Contract Specialists are given information on how to 
assess the value of contracts they negotiate. Examples include salary 
schedules for medical school affiliate physicians and Medicare websites 
with specific rate schedules for their vicinity. Another tool for 
negotiating costs is use of Medicare rates for both technical and 
professional medical services for the local area. These are established 
and verified rates and can greatly assist the contract specialists in 
awarding cost-effective contracts.
    Question 13. What are the cost estimates for implementation of the 
chiropractic provisions of Public Law 107-135 in FY 2003?
    Answer. VHA estimates that $7.5 million will be required in FY 2003 
for this program.
    Question 14a. Sharing between VA and DOD is a key element in this 
budget. What is the status of the VA relocation to Fitzsimons? How does 
this impact CARES?
    Answer. Since its inception the Denver VAMC has had an affiliation 
with the University of Colorado Health Sciences Center (UCHSC). This 
affiliation has served to enhance the provision of health care to 
veterans. UCHSC is now moving to the former Fitzsimons army base in 
Aurora, which is in the eastern part of the Denver metropolitan area. 
The University of Colorado Hospital (UCH) will soon be part of this 
move. In fact, it has already established a major presence with the 
Anschutz Center for Advanced Medicine, a major ambulatory facility, and 
has begun construction of a 12-story inpatient facility at the 
location. The University and LICH will be part of a larger complex that 
is anticipated to draw world-class research and developmental talent 
and resources.
    The move of the University and UCH to Fitzsimons presents both 
challenges and opportunities for the VA. The future of the VA at the 
present location is problematic. Continued remodeling will not yield an 
optimal result and the recruitment of physicians and other medical 
staff will be much more difficult without the University adjacent to 
the Denver VAMC. These concerns have led VA leadership to examine the 
possibility of moving VA health care to Fitzsimons through enhanced 
partnership with UCH. Three options are under study by the VA.
          Option A--Build a freestanding VA Hospital adjacent to UCH
          Option B--Build a VA Bed Tower/VA Clinic attached to UCH
          Option C--VA Outpatient Clinic and merged Hospital
    VA has contracted with a consultant to help us further evaluate the 
pros and cons and the costs of relocation of the Denver VA Medical 
Center to the Fitzsimons campus. They are also assisting in preparing a 
Capital Investment Application for this project, which will include a 
financial analysis of several scenarios for relocation. The analysis 
will include demand projections and service needs through the year 
2020. It will also consider the residual value of the existing land and 
facility as well as the cost associated with each scenario. Their work 
is scheduled for completion in late Spring 2002. Until that work is 
completed, VA is not able to make a decision about the optimal solution 
for the future location on the Denver VAMC. This timetable did not 
permit the project to be included in the President's budget for FY 
2003.
    The consultants who are assisting the VA and the University are 
familiar with the CARES process and criteria. As noted, projections of 
demand and service needs are being made through the year 2020. The 
ongoing evaluation of the potential relocation of the Denver VAMC to 
Fitzsimons is highly compatible with the letter and the spirit of the 
CARES initiative. The planning for this project will be incorporated 
into the CARES study for VISN 19 and assessed during the CARES review 
process.
    Question 14b. What is the status of the VA/Tripler joint venture? 
How does this impact CARES?
    Answer. In May 2000, the VA activated a new Ambulatory Care Center 
on the Tripler campus and relocated the administrative offices of the 
VAMROC. In addition, VA has a 60-bed Center for Aging on the campus and 
staffs a 20-bed psychiatric unit within the Tripler Medical Center. The 
VA continues to contract with Tripler for most of its inpatient medical 
and surgical needs.
    The recent relocation of VAMROC Honolulu to Tripler campus has 
increased congressional interest in moving towards creation of an 
integrated federal medical center to provide seamless health care 
services to active duty members, retirees, military dependents, 
veterans and other federal beneficiaries in Hawaii.
    Congress is requiring that three sites be selected as pilot 
projects to pursue additional integration of services between VA and 
DOD facilities. Tripler Army Medical Center was mentioned in 
congressional language as a site that should be considered for one of 
the pilots. VHA supports including Tripler, which is one of the most 
functionally integrated VA/DOD joint venture sites in the nation.
    The planning and potential changes to the VA/DOD joint venture will 
be incorporated into the CARES study for VISN 21 and assessed during 
the CARES review process.
    Question 14c. How much progress has been made on the VA-DOD joint 
efforts to develop a compatible computer-based patient record to 
support post-separation health care delivery and claims processing?
    Answer. VA and DOD began a substantially expanded effort last fall 
entitled HealthePeople (VA, DOD, Indian Health Service (IHS), other 
agencies) and Federal Health Information Exchange (DOD, VA and IHS), 
to: improve sharing of health information; develop and adopt common 
standards; seek appropriate opportunities for joint procurements and/or 
building of systems; work toward improved, model health information 
systems; and explore the potential convergence of VA and DOD health 
information software applications.
    The specific actions that are being taken include the following:
     DOD is establishing a national patient record using a 
Health Data Repository product from 3M;
     VHA intends to pursue a comparable solution and has staff 
working with DOD on a regular basis;
     DOD and VA will have separate repositories in order to 
ensure privacy, security, and reduce the consequence of any failures. 
Both DOD and VA repositories should be up and running by 2005 and would 
use common data standards and support retention of records from DOD and 
VHA;
     VHA intends to explore with DOD the potential to create a 
second phase to this effort that supports creation of government-owned 
repository architecture/software, not dependent on vendor technology. 
This architecture/software could also be used throughout government to 
create health care repositories that can easily share patient 
information;
     VHA and DOD are also standing up a national repository, 
which may be temporary, under Government Computer Patient Record (GCPR) 
that allows for sharing of select DOD patient data at VHA locations. 
Additional phases of this project will support DOD viewing of VHA 
information.
    The VA/DOD Executive Council Information Management and Information 
Technology Work Group manages the VA/DOD interagency Government 
Computer Patient Record (GCPR) program, to be renamed the Federal 
Health Information Exchange. The goal is to make DOD data available to 
VA clinicians with the highest functionality at the lowest cost. The 
transfer of DOD data to VA is in the testing phase. As part of the FY 
2002 budget process, VA and DOD funding has been apportioned for 
development of a business case plan and implementation plan to address 
the interoperability of GCPR with CHCS II (DOD's new system in 
development) and VistA (VA's patient information system).
    Additionally, the VA Deputy Secretary and the DOD Under Secretary 
for Personnel and Readiness have agreed to conduct quarterly reviews of 
VA-DOD coordination initiatives. Other information technology sharing 
efforts underway between DOD and VA include: Health Insurance 
Portability and Accountability Act of 1996 (HIPAA); standards 
development; pharmacy initiatives; technology integration laboratories; 
VA/DOD Laboratory Data Sharing and Interoperability; and collaboration 
for a VA/DOD Consolidated Mail Order Pharmacy (CMOP) pilot.
    We have provided a list of additional joint efforts in the 
attachment accompanying this question. Additional details are available 
for each.
                               attachment
    Specific joint IT efforts between VA and DOD intended to ultimately 
support post-separation health care delivery by VA are:
     IT sharing efforts underway between DOD and VA, including:
          Health Insurance Portability and Accountability Act of 1996 
        (HIPAA) implications for IT
          IT Standards Development
          Pharmacy Initiatives (more details below)
          VA/DOD Laboratory Data Sharing and Interoperability (more 
        details below)
          Software Technology Integration Laboratory
          Support for VA/DOD joint venture local R&D initiatives
          TRAC2ES System (more details below)
          Collaborating in such areas as Scheduling System Replacement, 
        Billing System, VA/DOD Consolidated Mail Order Pharmacy (CMOP), 
        Health Data Repository, Web Based Consumer Health Information 
        System, IT Architecture and Standards
     VA/DoD Consolidated Mail Order Pharmacy (CMOP) Pilot 
Project
          Progress is being made to enable DoD to use VA's Consolidated 
        Mail Order Pharmacy. A prototype will be tested late in FY 2002
     Other Pharmacy Initiatives
          The MHS is discussing VA participation in the Pharmacy Data 
        Transaction Service (PDTS), which allows DoD to build a patient 
        medication profile for all beneficiaries regardless of the 
        point of services
     VA/DoD Laboratory Data Sharing and Interoperability
          This project focuses on development of an interface for 
        electronic transfer of reference laboratory data between 
        federal health care systems (various DoD Composite Health Care 
        System sites, VA's Veterans Health Information Systems and 
        Technology Architecture sites, and commercial reference 
        laboratories) to replace current manual methods. The 
        Preliminary System Testing is underway.
     The TRANSCOM Regulating and Command and Control Evacuation 
System (TRAC2ES)
          Provides global patient evacuation planning in an integrated 
        system. It facilitates the decision-making process of 
        evacuating military casualties from a combat theater to a 
        source of definitive medical care within the continental United 
        States. Emergency management personnel within VHA facilities 
        have the ability to use TRAC2ES to submit bed 
        reporting and contingency data information to DOD.
          Per the ``Report of the Preparedness Review Working Group to 
        the Secretary of Veterans Affairs'' recommendation in October, 
        2001: Goal is to provide information on the capabilities of VA 
        health care facilities to the Global Patient Movements 
        Requirements Center (GPMRC) and incorporate that data into 
        TRAC2ES so that the U.S. military can evacuate 
        wounded military personnel to an appropriate VA facility.
    Question 15. What are the implementation costs associated with the 
consolidation of VISNs 13 and 14? What are the first year savings?
    Answer. The start-up costs associated with the integration of the 
two VISNs are not anticipated to be significant. While the merger, in 
and of itself, will not bring financial stability to VISN 13 and 14, 
the integration is expected to generate cost savings through economies 
of scale and reduced administrative overhead. The precise programs 
where these efficiencies will be obtained is not determined at this 
point, but the leadership at the network and facility level have 
already begun the task of sharing best practices and possible avenues 
through collaboration that they can obtain management efficiencies. The 
cost savings gained will be redirected into veterans healthcare 
services throughout the integrated network.
    Question 16. What adjustments to VERA will be put into place in FY 
2003 and what is being done by headquarters to reduce the need for 
supplemental funding by VISNs?
    Answer. For the FY 2003, VHA is continuing to review VERA to 
improve the equitable allocation of funds, including all Priority 7 and 
improving the case-mix weighting and risk adjustment elements of VERA. 
Decisions on these adjustments will be made later this fiscal year. 
Also, during FY 2001, VHA re-engineered its VERA adjustment 
(supplemental funding) process. The process now involves a thorough 
review of each networks' financial plan by assessing projected revenues 
versus expenses in a systematic standardized approach across networks. 
VHA plans to complete the FY 2003 VERA adjustment process prior to 
distribution of the FY 2003 network allocations, after VA receives its 
FY 2003 Medical Care Appropriation.
    Question 17. As I understand it, under the proposed long-term care 
copayment regulations, the monthly long-term care copayment can be over 
$3,000. A veteran whose annual income is just over $9,000 is required 
to make these copayments. With the average long-term care stay being 13 
months, the proposed copayment structure could either bankrupt veterans 
or, even worse, deter them from using VA services. What, if anything, 
is VA doing to ensure that this does not happen?
    Answer. VA has developed procedures, through the calculation of the 
financial cap, to avoid a veteran and spouse from incurring a financial 
hardship.
    For any month, the maximum copayment amount a veteran will be 
charged is $97/day times the number of days in the month ($3,007 for 31 
days; $2,910 for 30 days). A veteran's calculated monthly copayment cap 
amount for extended care services is determined by a formula using 
financial data provided by the veteran. The amount will vary from 
veteran to veteran and can range from $0 to the maximum copayment 
amount.
    A veteran will be obligated to pay the extended care copayment only 
to the extent the veteran and the veteran's spouse have available 
resources. Available resources would mean the sum of the value of the 
liquid assets, fixed assets, and income of the veteran and the 
veteran's spouse minus the sum of the veteran allowance and the spousal 
allowance. Liquid and fixed assets are not included in the copayment 
calculations until a veteran reaches the 181st day of institutional/ 
inpatient extended care. The primary residence is a fixed asset, the 
value of which is only included in the veteran's copayment calculation 
on the 181st day of institutional/inpatient extended care if there is 
no spouse or dependent residing in the primary residence.
    Question 18. VA is moving its National Centers for War-Related 
Illnesses. However, a final action plan to implement the National 
Center for Military Health and Deployment Readiness is long overdue. 
The law requires that VA, DOD, and HHS submit a report to Congress 
about how they will implement the center. Both VA and DOD seem to be 
satisfied with the current activities of the Military and Veterans 
Health Coordinating Board, which does not incorporate the National 
Academy of Sciences' recommendations as mandated. Although it is 
certainly difficult for three large departments to focus on a matter of 
joint concern, this is critically important to service members. When 
can I expect to see your action plan on this?
    Answer. In compliance with section 103(c) of Public Law 105-368, 
the Departments of Veterans Affairs, Health and Human Services, and 
Defense prepared a report to Congress responding to the IOM report 
``National Center for Military Deployment Health Research.'' That 
report, signed by the Secretaries for the three agencies, was submitted 
to Congress in September 2000. That report concluded that the new 
National Center be composed of the existing Research Working Group 
(RWG) of the interagency Military and Veterans Health Coordinating 
Board (MVHCB). Since that report, the RWG has partially fulfilled the 
role envisioned for the National Center, in terms of generating 
research reports on existing Gulf War research, identifying gaps, and 
making recommendations for improving research in this area.
    The MVHCB was decommissioned in February of this year. The future 
of the RWG under these circumstances has not been decided. However, we 
expect that the RWG will continue in some form, and that it will be 
responsible for the activities envisioned for the National Center, as 
it has over the last several years.
    Question 19. Last fall, VA commissioned a working group to review 
VA's readiness for the potential medical consequences of terrorism. The 
group recommended a budget of $118 million for health care preparedness 
needs alone; this budget proposes to accomplish these goals, plus 
boosting VA's other readiness activities, with less than half of that 
amount. Given the discrepancy between VA's own internal recommendations 
and the budget, how many of these emergency preparedness goals will VA 
realistically be able to meet? Will VA be able to protect staff and 
veterans adequately during a medical crisis?
    Answer. Following the September 11 attack, as well as the 
bioterrorism campaign using the anthrax sent in the U.S. Mail, VA 
critically re-examined the potential medical consequences of terrorism 
and looked at gaps in the protection of VA's capital assets, its 
infrastructure, as well as patients and staff. VA needs to insure 
adequate supplies, pharmaceuticals, and decontamination and Personnel 
Protective Equipment (PPE) are available in case of mass casualties 
from chemical, biological, or radiological (CBR) terrorism.
    VHA is currently upgrading its pharmaceutical caches, PPE, and 
training in FY 2002. We are committed to making this program fully 
operational in the near-term.
    Question 20. The CARES process went on in the Great Lakes Network 
as planned, despite new emphasis on the VA's Fourth Mission and its 
role as a Federal support agency during disasters. This budget 
continues to cite CARES as a source of significant savings, while 
funding for VA's contingency roles remains woefully inadequate, 
especially as compared to the large sums budgeted to other agencies for 
emergency response. How does VA plan to weigh DOD contingency and 
emergency care criteria, including community needs, as you continue 
with the next phases of the CARES process, and how will other planning 
aspects be affected?
    Answer. VHA re-evaluated the Great Lakes Network ability to meet 
its Fourth Mission responsibilities during the review and public 
comment period on the CARES recommendations. In particular, the overall 
CARES Criteria was re-structured by VA's Policy Board to raise the 
Fourth Mission priority from an 8 percent to a 20 percent weighted 
score. This 2.5 fold increase was then applied for impact and analysis 
to each of the options considered. It was found that no decrease in bed 
numbers or ability to deliver health care by VA exceeded the projected 
overall decrease in veteran population. In other words, if the veteran 
demand for services in the next ten years decreased by 28 percent, a 
comparable adjustment in inpatient and outpatient services resulted. No 
reductions above the 28 percent were made. VA continues to interact 
with DOD to determine if there is a threshold or minimum number of 
services necessary for backup contingency. At this point, no such 
minimum level has been determined by DOD. Future CARES studies will 
undergo increased emphasis on VA's Fourth Mission. A new VA/DOD 
Executive Committee has been formed to fully coordinate VA CARES and 
DOD strategic planning efforts. All of these efforts combine to provide 
significant additional emphasis and attention to our Fourth Mission. 
The VISN 12 CARES plan has sufficient flexibility to address DOD 
contingency and responses to chemical, biological and radiological 
emergencies.
    Question 21. I understand that VA is moving both substance abuse 
and PTSD funds from special purpose funds into VERA. What is the reason 
for this and won't this have a negative effect on these programs in 
that they won't get the attention that goes along with being a specific 
budget item?
    Answer. Substance Abuse and PTSD have always been included in the 
VERA General Purpose Funding and distributed through the VERA model. 
Both classes are included in both Basic Care and Complex Care 
components of VERA. This has had no demonstrated negative impact on 
these programs. These programs receive positive attention not only in 
VERA, but also through quarterly monitoring of cost and utilization of 
special programs in operating plans and special disabilities reports to 
Congress.
    Question 22. Please provide a list and a description of the 
management efficiencies that VA is counting on to save $316 million in 
medical care funding in FY 2003.
    Answer. The savings of $316 million will be achieved through 
standardization and compliance in the procurement of supplies, 
pharmaceuticals, equipment, and other capital purchases and through 
efficiencies in centrally managed programs and Community-Based 
Outpatient Clinics.
    Question 23. Please provide a list, by state, of all enrolled 
veterans by priority group.
    Answer. See attached table.
                attachment--summary by state & priority

                                                    End of Fiscal Year 2001 Geocoded Enrollment Data
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Priority Group
                    State                    ------------------------------------------------------------------------------------------------    Total
                                                  P1          P2          P3          P4          P5          P6          P7A         P7C      Enrollees
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alaska......................................       3,177       2,126       3,149         337       6,059         325         409       4,671      20,253
Alabama.....................................      11,446       9,042      16,932       5,060      42,179       2,006       1,410      24,051     112,126
Arkansas....................................      10,444       6,334      11,769       3,879      34,092       1,536       1,178      21,359      90,591
Arizona.....................................      13,344       9,689      19,747       3,667      44,620       2,765       2,005      30,603     126,440
California..................................      44,136      32,990      64,746      13,855     185,116       8,538       7,230     115,309     471,920
Colorado....................................       9,507       6,886      11,940       2,415      25,470       1,487       1,377      17,618      76,700
Connecticut.................................       4,248       3,079       7,073       2,291      21,683         837         898      25,679      65,788
Delaware....................................       1,459       1,170       2,257         439       6,632         204         233       5,854      18,248
Florida.....................................      47,283      30,888      65,001      14,090     162,135       7,233       7,772     138,250     472,652
Georgia.....................................      16,548      12,720      24,032       5,762      55,861       3,093       2,579      36,269     156,864
Hawaii......................................       3,085       2,449       4,310         491       7,356         273         660       6,315      24,939
Iowa........................................       4,706       3,590       7,586       2,336      22,847       1,869         796      29,958      73,688
Idaho.......................................       3,320       2,440       4,910       1,184      11,239         637         660       7,870      32,260
Illinois....................................      11,667       9,941      23,487       8,634      90,699       4,243       2,651      79,126     230,448
Indiana.....................................       8,521       6,746      14,553       3,587      43,451       2,251       1,216      37,738     118,063
Kansas......................................       4,937       3,700       7,780       2,085      19,338       1,201       1,107      20,540      60,688
Kentucky....................................       9,096       6,634      12,365       3,447      40,253       1,832       1,025      24,170      98,822
Louisiana...................................       9,259       6,368      12,537       4,817      45,244       2,278       1,069      19,157     100,729
Massachusetts...............................      13,161       8,448      16,847       3,913      37,125       1,832       1,290      30,386     113,002
Maryland....................................       8,694       6,751      12,608       2,898      38,141       1,603       1,034      24,904      96,633
Maine.......................................       5,855       2,791       4,859       1,267      12,378         632         483      10,279      38,544
Michigan....................................      10,771       8,185      16,819       4,543      55,072       2,142       1,503      31,672     130,707
Minnesota...................................       8,794       5,825      12,443       2,853      25,708       2,423       1,984      29,889      89,919
Missouri....................................      10,514       7,946      15,735       4,955      50,419       2,966       1,540      32,786     126,861
Mississippi.................................       7,344       4,802       9,384       3,217      31,760         987       1,042      17,677      76,213
Montana.....................................       3,000       2,044       3,866         844      10,449         638         491       9,281      30,613
North Carolina..............................      19,445      14,603      25,373       5,999      56,758       3,738       2,106      38,234     166,256
North Dakota................................       1,400       1,066       2,408         586       5,584         345         370       8,857      20,616
Nebraska....................................       4,527       3,314       5,895       1,513      14,818         717         791      16,659      48,234
New Hampshire...............................       3,407       2,336       4,517         819       8,393         489         516       8,351      28,828
New Jersey..................................      10,389       7,596      17,297       2,995      37,274       1,476       1,753      57,747     136,527
New Mexico..................................       6,697       3,799       6,768       1,648      20,501       1,124         823      10,678      52,038
Nevada......................................       4,811       3,818       7,952       2,016      24,508       1,094       1,015      15,513      60,727
New York....................................      26,025      18,627      46,557      11,388     148,286       6,509       6,003     175,111     438,506
Ohio........................................      16,463      13,093      27,683       7,589     102,292       4,022       2,442      57,416     231,000
Oklahoma....................................      13,446       7,657      12,279       4,192      35,165       1,887       1,002      17,625      93,253
Oregon......................................       9,505       5,765       9,888       3,112      31,144       1,737       1,055      22,646      84,852
Pennsylvania................................      21,049      15,034      31,840       8,741     114,788       4,503       3,845     101,078     300,878
Rhode Island................................       2,505       1,600       3,355         737       8,063         353         214       6,128      22,955
South Carolina..............................      10,184       7,653      15,083       4,264      37,717       2,517       1,824      26,354     105,596
South Dakota................................       2,249       1,681       3,638       1,023       9,149         797         603      11,585      30,725
Tennessee...................................      12,920       9,406      17,795       5,191      46,138       2,907       1,638      26,771     122,766
Texas.......................................      46,057      33,250      62,664      14,075     153,685       8,549       6,019      84,808     409,107
Utah........................................       3,153       2,217       4,261       1,069      11,524         767         542       8,501      32,034
Virginia....................................      16,149      13,473      23,016       4,510      48,761       2,567       2,656      36,891     148,023
Vermont.....................................       1,441         993       1,926         411       5,696         361         307       6,095      17,230
Washington..................................      17,672      12,093      20,163       4,224      34,751       2,283       1,554      21,117     113,857
Wisconsin...................................       9,628       6,758      13,111       3,399     ,32,710       2,083       1,724      34,966     104,379
West Virginia...............................       6,291       3,786       7,098       2,168      30,986       1,957         626      20,133      73,045
Wyoming.....................................       1,327       1,080       2,241         524       6,260         347         367       6,707      18,853
Unknown.....................................         426         261         503          92       1,299          45          39       1,395       4,060
Guam........................................         216         189         325          16         386          31          49         219       1,431
Philippines.................................         261         345         529          17         207          24          38         105       1,526
Puerto Rico.................................       7,978       3,622       7,078       4,424      43,156       1,041         484       6,878      74,661
Virgin Islands..............................         103          95         263          66       1,050          31          45         930       2,583
Washington, DC..............................       1,187         855       1,715         721       7,102         346         135       2,455      14,516
                                             -----------------------------------------------------------------------------------------------------------
    Total...................................     561,227     399,649     789,956     200,395   2,203,477     110,478      84,227   1,663,364   6,012,773
--------------------------------------------------------------------------------------------------------------------------------------------------------
P7A 0% Service-Connected Priority 7s.
P7C Non-Service-Connected Priority 7s.

    Question 24. This budget breaks out and requests funds for the 
accrued employee costs such as retirement and health benefits that use 
to be consolidated government-wide, in compliance with the 
Administration-proposed ``Managerial Flexibility Act.'' The budget 
reflects this change as an increase to the various accounts such as 
health care, general operating expenses, or research. But it is not a 
real increase. Are you expecting additional money on top of the 2.9 
percent to cover these accrued benefits costs to fund VA programs such 
as research, at the touted $409 million, or will the real number be $38 
million less--$394 million?
    Answer. The FY 2003 appropriation request for research excluding 
the CSRS accrual ($6,258,000) and the FEHB accrual ($8,444,000) is 
$394,373,000, which represents a 6.3 percent increase over the FY 2002 
appropriation of $371,000,000.
                                benefits
    Question 25. The budget request calls for an increase of 125 FTE 
for benefits programs, but according to a briefing by the Department of 
Labor, 200 FTE are required to administer the VETS programs that are 
proposed to be transferred. Do you anticipate additional FTE if the 
transfer is authorized, or would the net effect be a loss of 75 FTE to 
VBA?
    Answer. The FY 2003 budget request does not include any FTE or 
funding to support the transfer of the VETS programs to VA. The 
Administration will transmit legislation that will establish a new 
competitive grant program in VA that will assist the States in 
establishing, expanding, or improving training services for veterans. 
If enacted, 199 FTE and $20 million will be transferred from the 
Department of Labor to VA to administer the program.
    The increase of 125 FTE shown in VA's budget request supports 
initiatives in the C&P, Education, and Vocational Rehabilitation and 
Employment programs.
    Question 26. In evaluating the success of VA programs and crafting 
new legislative initiatives, Congress depends on VBA's Data Management 
Office to deliver accurate information--for example, the regular 
reports on Gulf War veterans' claims, which in the past proved to be 
less than reliable. What will you do to ensure the validity of the data 
you provide to Congress?
    Answer. The creation of the Data Management Office reflects the 
organizational recognition of the value and importance of quality data 
and information management across VBA. We intend to build on the 
established data management foundation, refining and enhancing existing 
capabilities and carefully exploring opportunities for blending 
organizational knowledge with emerging technologies. All of this is 
being pursued to improve the quality, integrity and availability of 
data that speak to VBA workload and productivity, organizational 
performance, and service quality.
    Consistent with themes expressed in the recently released VA Claims 
Processing Task Force Report, efforts are also being directed toward 
the development of data that accurately gauge accountability, 
communications and change management compliance. Plans are being 
formulated to expand the current scope of data management by formally 
establishing internal analysis and evaluation, planning, and program 
integrity capabilities to further identify data-driven process and 
service improvement opportunities.
    Understanding that multiple factors (including volume, source, 
input accuracy and timeliness) ultimately influence data validity, we 
believe the strategy being executed within VBA to better qualify and 
define the variables affecting data validity and to engage staff and 
stakeholders in decision dialogue is an appropriate course of action.
    Since November 1997, the Gulf War Veteran Information System has 
been reliably reporting data specific to the outcomes of compensation 
claims including those for undiagnosed illnesses, prevalence of 
service-connected conditions, and detailed benefit utilization data 
regarding other unique cohorts of the Gulf War veteran population. We 
will continue to work to refine and improve the quality and reliability 
of data collected and reported.
    Question 27. Under the budget's VBA-wide initiatives, you list the 
``Procedures Manual Rewrite'' to reorganize and make more readable the 
procedural manuals used in decision making for the Education, Loan 
Guaranty, and Vocational Rehabilitation and Employment programs. Why is 
the Compensation and Pension (C&P) program manual not part of this 
initiative? How does the regulation rewrite lead by General Huffman 
underway in C&P fit in with this manual rewrite?
    Answer. The Compensation and Pension Service began an initiative to 
rewrite its procedural manual 14 months ago. All of the adjudicative 
manuals used to process C&P claims are being rewritten for clarity, 
readability, and ease of use in an on-line environment. Initial 
feedback has been positive and VIBA is therefore undertaking similar 
projects in the other business lines (Education, Loan Guaranty, and 
Vocational Rehabilitation and Employment).
    The C&P manual rewrite initiative is being coordinated with General 
Huffman's effort to reorganize and clarify the regulations. Any 
regulatory changes affecting the manual will be incorporated 
effectively and timely.
    Question 28. Please describe the collocation/relocation projects in 
the budget request for VBA.
    Answer. VIBA is pursuing public/private partnerships for enhanced-
use leasing at several Regional Office locations. The FY 2003 budget 
request supports co-locating the following VA Regional Offices through 
enhanced-use leases:

----------------------------------------------------------------------------------------------------------------
               Location                    Activation Date               Amount                  Purpose
----------------------------------------------------------------------------------------------------------------
Chicago..............................  FY 2003................  $472,000 [GOE].........  Move from leased GSA
                                                                                          space into a new
                                                                                          enhanced-use facility.
                                                                                          The funds will be used
                                                                                          for security
                                                                                          equipment, LAN
                                                                                          electronics, shipment
                                                                                          of files, and
                                                                                          equipment to the new
                                                                                          location.
Milwaukee............................  FY 2003................  $471,000 [GOE].........  Move from a 120-year-
                                                                                          old VA Regional Office
                                                                                          into a new enhanced-
                                                                                          use facility. The
                                                                                          funds will be used for
                                                                                          security equipment,
                                                                                          LAN electronics,
                                                                                          shipment of files, and
                                                                                          equipment to the new
                                                                                          location.
Los Angeles..........................  FY 2004................  $3,000 [GOE]...........  Move from a GSA leased
                                                                                          facility into a new
                                                                                          enhanced-use facility.
                                                                                          The funds will be used
                                                                                          for the groundbreaking
                                                                                          ceremony.
Indianapolis.........................  FY 2005................  $1,000,000 [Minor].....  Move from leased GSA
                                                                                          space into new
                                                                                          enhanced-use facility.
                                                                                          The funds will be
                                                                                          applied towards the
                                                                                          purchase of furniture,
                                                                                          the telephone switch,
                                                                                          and LAN electronics
                                                                                          for the new facility.
Nashville............................  FY 2005................  $1,000,000 [Minor].....  Move from leased GSA
                                                                                          space into a new
                                                                                          enhanced-use facility.
                                                                                          The funds will be
                                                                                          applied towards the
                                                                                          purchase of furniture,
                                                                                          the telephone switch,
                                                                                          and LAN electronics
                                                                                          for the new facility.
Buffalo..............................  FY 2003................  $1,331,000.............  Move into another GSA
                                                                                          facility. Existing GSA
                                                                                          building is asbestos
                                                                                          contaminated and not
                                                                                          large enough to
                                                                                          support station
                                                                                          operations. Funding is
                                                                                          for security
                                                                                          equipment, LAN
                                                                                          electronics, guard
                                                                                          service, and shipment
                                                                                          of files and equipment
                                                                                          to new location.
Louisville...........................  FY 2003................  $1,357,000.............  Move to another GSA
                                                                                          facility. Lease is
                                                                                          expiring and
                                                                                          facilities are
                                                                                          inadequate. Funding is
                                                                                          for security
                                                                                          equipment, LAN
                                                                                          electronics, guard
                                                                                          service, and the
                                                                                          shipment of files and
                                                                                          equipment to new
                                                                                          location.
Phoenix..............................  FY 2003................  $3,189,000.............  Move to VA-leased
                                                                                          facility. Current GSA?
                                                                                          leased facility is
                                                                                          inadequate in both
                                                                                          size and quality.
                                                                                          Funding is requested
                                                                                          for security
                                                                                          equipment, LAN
                                                                                          electronics,
                                                                                          furniture, guard
                                                                                          service, and shipment
                                                                                          of files and equipment
                                                                                          to new location.
----------------------------------------------------------------------------------------------------------------

    The FY 2003 Budget request supports relocating the following VA 
Offices:

----------------------------------------------------------------------------------------------------------------
               Location                    Activation Date               Amount                  Purpose
----------------------------------------------------------------------------------------------------------------
Las Vegas............................  FY 2003................  $72,000................  Relocated from
                                                                                          temporary trailers to
                                                                                          a new co? located
                                                                                          Enhanced Use facility.
                                                                                          Funding is for guard
                                                                                          service and shipment
                                                                                          of files and equipment
                                                                                          to new location.
Sacramento...........................  FY 2003................  $520,000...............  Move from GSA-leased to
                                                                                          new VA-leased
                                                                                          facility. VBA will be
                                                                                          shifting workload from
                                                                                          the more expensive
                                                                                          Oakland area to
                                                                                          Sacramento. The
                                                                                          existing Sacramento
                                                                                          lease expires and the
                                                                                          current building
                                                                                          cannot support the
                                                                                          planned expanded
                                                                                          operations. Funding is
                                                                                          for security
                                                                                          equipment, LAN
                                                                                          electronics,
                                                                                          furniture, and
                                                                                          shipment of files and
                                                                                          equipment to new
                                                                                          location.
----------------------------------------------------------------------------------------------------------------

    Question 29a. Your budget assumes that the vendee loan program will 
be terminated administratively. What savings are you projecting and 
where are the savings being redirected?
    Answer. The VA estimates that 22 FTE ($1.4 million) will be saved 
in administrative funding by eliminating vendee financing in FY 2003. 
However, this funding was removed from the base recognizing savings 
from this action.
    Question 29b. What is the basis for assuming that there will be 
savings from the elimination of the vendee loan program when VA's study 
from Booz Allen found that properties sold with vendee loans ``achieve 
a higher net value to VA than do properties sold for cash.''
    Answer. Vendee loans extend the government's liability for many 
years. By selling all properties on a cash basis, future expenses due 
to foreclosure of vendee loans will be eliminated.
    Question 29c. Assuming the vendee loan program were eliminated, 
have you considered the impact of a declining economy which would boost 
inventory or reduced flexibility on financing which could result in 
lower selling prices?
    Answer. We believe that there is sufficient private mortgage 
financing available to allow VA to sell all properties for cash without 
a build up of inventory.
    Question 29d. Your budget assumes the administrative elimination of 
the vendee loan program, after years of requesting legislation to 
implement this proposal. What is the basis for the change in the 
assumption that this action required legislation?
    Answer. Public Law 98-369, enacted on July 18, 1984, specified both 
a minimum and maximum percentage of sales of VA-owned properties that 
had to be sold with vendee financing. Public Law 102-54, effective 
October 1, 1990, repealed those percentage limitations. Since that 
date, the Secretary has the authority to sell acquired properties on 
terms the Secretary determined appropriate. Elimination of vendee 
financing would be a significant change. Therefore the Department 
requested that Congress consider whether this should be a legal 
restriction on the Secretary's authority.
    Question 29e. Does the elimination of the vendee loan program 
affect the A-76 study on VA Loan Guaranty property management?
    Answer. The elimination of vendee financing will have no 
significant impact on the outcome of the A-76 cost comparison.
    Question 30. What is the status of the A-76 study on VA Loan 
Guaranty property management?
    Answer. VA's Property Management A-76 Cost Comparison Study is in 
the solicitation phase. The deadline for the receipt of the proposals 
was October 3, 2001. The evaluation of the private proposals was 
completed in late January 2002. Currently, we are projecting a 
tentative decision on the winner of the competition in April or May of 
2002. Meeting this milestone will depend upon completing the final 
evaluation, making any necessary modifications to the Government's bid, 
and conducting an independent review.
    Question 31. In 1998, Congress created a pilot project designed to 
increase the availability of transitional housing for homeless 
veterans. To date, no loans have been approved and disbursed. Please 
provide detailed information on the status of the program and describe 
the reasons it has not been put in place.
    Answer. The Loan Guaranty for Multifamily Transitional Housing for 
Homeless Veterans was established under Public Law 105-368, ``Veterans 
Benefits Enhancement Act of 1998.'' This program is to provide large-
scale transitional housing for homeless veterans. The law authorizes VA 
to establish a pilot program to guarantee no more than 15 loans with an 
aggregate value of $100 million for construction, renovation of 
existing property, land, refinancing of existing loans, facility 
furnishing and working capital. By law, the loan cannot exceed 90 
percent of costs. It is hoped that up to 5,000 transitional housing 
units will be created using this initiative.
    Eligible transitional projects are those that: (1) provide 
supportive services, including job counseling; (2) require veterans to 
seek and maintain employment; (3) require veterans to pay reasonable 
rent; (4) require sobriety as a condition of occupancy; and (5) serve 
other veterans in need of housing or other homeless people on a space 
available basis.
    In determining whether to guarantee each loan, the Secretary of 
Veterans Affairs must consider the availability of VA medical services 
to residents of the housing project and the extent to which a variety 
of needs of homeless veterans are met in a community.
    This new initiative requires significant collaboration among VA 
offices, including: the Veterans Benefits Administration's Loan 
Guaranty Division; VHA's Office of Facilities Management; VA's Office 
of Acquisition and Materiel Management and Office of General Counsel; 
Office of Public and Intergovernmental Affairs; and other offices.
    As mandated by law, VA entered into a contract with the consulting 
firm, Birch and Davis Associates, in January 2000. Birch and Davis 
Associates, in turn subcontracted with Century Housing Corporation, 
Culver City, CA, for their expertise in financing and development of 
transitional housing for homeless veterans. The role of the contractor 
is to assist in designing a guarantee program.
    VA has held numerous meetings with the contractor reviewing their 
work and suggesting modifications consistent with the goals established 
by the Congress. The unique nature of this program has meant that we 
have proceeded with great care trying to balance our fiduciary 
responsibilities for this program, as well as trying to ensure the 
needed supportive services will exist to aid those veterans in their 
transition.
    This Department remains hopeful that this complicated review is 
near completion. It is anticipated that this program will become 
available, to a limited number of sites later this year, and that we 
may have one or more proposals that may be reviewed and approved next 
year.
    Question 32a. In 2000, Congress passed significant enhancements to 
the GI Bill--increasing the basic monthly benefit, paying for licensure 
and certification exams, and covering the remaining costs of service 
members' courses after payment from DOD's tuition assistance. Your 
projections last year predicted that these provisions would double the 
workload of the education service, adding further stress on top of some 
recent increases in your backlog due to the imaging of claims at one of 
your four processing centers. In 2001, Congress again, expanded and 
increased educational benefits. What are your workload projections from 
the new changes?
    Answer. In 2001, we made payments to 421,078 eligible individuals 
under the various GI Bill education programs, a six percent increase 
over the previous year. The 500,000 beneficiaries we expected to serve 
did not materialize, primarily because claims for the new programs did 
not begin arriving until March and April. The pace of incoming work 
increased as FY 2002 began. If it continues, more than 600,000 
beneficiaries will seek GI Bill benefits this year.
    Question 32b. What are your plans to address increased claims?
    Answer. In anticipation of the increased workload, VA hired over 
100 new employees to handle education claims. Because incoming work was 
less than expected, we were able to reduce the backlog and provide the 
new employees adequate training. Those employees are becoming more 
proficient with each passing day. As 2002 progresses, we expect the 
staff we have hired and trained to be able to process the anticipated 
workload.
    Question 32c. What are you doing to decrease the current backlog of 
education claims, particularly at the time of fall enrollment?
    Answer. When compared to the prior year, performance improved 
significantly during the most recent fall enrollment (August through 
October 2001). Claims were processed more timely during that period and 
output improved by more than ten percent. Several actions contributed 
to this improved performance. First, adequate overtime was authorized 
earlier in the fall and was focused on achieving production targets. 
Second, seasonal employees were hired to perform certain tasks during 
peak periods, allowing station managers to shift their experienced 
staff to areas in claims processing. Third, the new employees gained 
experience throughout the period, resulting in increased per capita 
output. We will continue to appropriately target our overtime and use 
seasonal employees during peak enrollment cycles to effectively manage 
our workload.
    Question 33a. This budget request includes a proposal to shift the 
Veterans Employment Training Service grant programs to VA and convert 
them to a competitive grant. What short-term and long-term effects will 
the proposed transfer of employment and training services have on 
veterans? How will you prevent a gap in service for veterans using 
these programs?
    Answer. Because of the lead-time required to implement grants, VA 
plans to keep the Department of Labor (DOL) funded grants in place 
during the first year after transfer. DOL staff transferring to the VA 
will bring with them the requisite expertise and familiarity to 
effectively continue the Disabled Veterans Outreach Program (DVOP) and 
Local Veterans Employment Representative (LVER) program grants thus 
ensuring no degradation of service to veterans during the initial 
transition year.
    Because the current DOL grants are staffing grants, continuity of 
the existing programs during the first year after transfer is also 
important to DOL's ability to maintain current services level in FY 
2002.
    In succeeding years, changing the federally funded employment and 
training program non-competitive, staffing grants to competitive, 
performance-based grants will have the positive effect of both 
increasing the number of veterans who are served and improving the 
service effectiveness resulting in more veterans obtaining employment 
as a result of these services.
    Regarding the Homeless Veterans' Reintegration Program (HVRP), VA's 
relationship with DOL's grantees under HVRP has been good, however, the 
proposed transfer will allow VA to improve coordination with the 
employment programs. This enhanced relationship should help to ensure 
that the expensive and extensive health care services VA provides to 
tens of thousands of veterans will have enhanced opportunities to 
succeed by obtaining and retaining employment with a more collaborative 
program design.
    VA and DOL are in the process of developing a program transition 
plan that will keep the DOL funded DVOP, LVER and HVRP grants in place 
during the first year after transfer. This should ensure continuity of 
service.
    Regarding HVRP, veterans who have been homeless and are discharged 
from VA programs will be in better position to succeed since the effort 
will allow us as the funding source to demand collaborative efforts to 
assist those hardest to serve veterans.
    Question 33b. The VA is already facing many of its own challenges, 
including a significant claims backlog and a new focus on employment in 
the Vocational Rehabilitation and Employment program. How is the VA, 
having little job placement expertise equipped to administer these 
programs at this time?
    Answer. VA has extensive experience in grant administration. The 
immediate tasks facing the VA are designing a new program that is 
significantly more cost-effective and to organize an employment, 
business opportunity and training office within VA that will provide 
effective oversight of the grant program. Effective oversight of 
performance-based, competitive grants is critical to VA's efforts to 
transform veterans' employment programs. VA expects that the DOL 
federal staff who transfer to VA when the program transfers will bring 
their expertise to support administration of the program at VA.
    Question 33c. What was the basis for determining that VA was better 
equipped than the Department of Labor to provide employment and 
training services? What outside entities, if any, was consulted in 
developing this proposal?
    Answer. It is clear that the DVOP and LVER programs have not served 
veterans' job search assistance needs well for a long time. The 
Commission on Servicemembers and Veterans Transition Assistance 
(Commission) report and at least six GAO reports issued in the past 
five years extensively document long-standing shortfalls with the DVOP 
and LVER programs. In spite of the public awareness that these two 
programs, as currently administered, are falling far short of the 
excellence we should demand of programs so important to many veterans' 
ability to enjoy the secure and productive life that their service 
defended for all Americans, change to the programs has not occurred.
    While VA can much more easily step ``outside the box'' when 
evaluating veterans' employment assistance needs and develop a program 
that better meets the needs of today's veterans and ensures adequate 
flexibility in design to allow for adapting to the needs of tomorrow's 
veterans.
    Specifically pertaining to HVRP, VA expects to expand upon what we 
believe have been highly successful partnering with states, local 
governments, Native American Tribal governments, faith-based and non-
profit organizations under the State Cemetery, State Home and Homeless 
Service Providers Grant and Per Diem Program.
    To ensure that the VA program is able to provide optimal job search 
services to veterans VA is informally consulting with veterans' 
representatives, employers, governors, and service providers regarding:
     What employment and training services do America's 
veterans of the 21st Century need most?
     What is the most cost-effective way to provide these 
services?
     How can the new program better meet the needs of 
employers?
    Question 33d. Were smaller-scale modifications to the program 
considered, such as a pilot competitive grant program?
    Answer. As mentioned earlier, the shortfalls of the DVOP and LVER 
programs are so extensive that marginal changes will not produce the 
degree of change essential for meeting the job search assistance needs 
of today's veterans and effectively linking employers in the global 
economy with highly qualified veteran job applicants.
    VA intends to work with Governors to ensure that veterans in every 
state have equal access to high quality core services regardless of 
where they live or where they want to work. VA is considering an option 
to seek legislative authority to reserve up to 25 percent of the total 
available funding for competitive grants to finance pilot programs and 
demonstration projects of innovative service types and delivery 
systems. Successful pilot projects will be incorporated into flexible 
national baseline service delivery systems.
    Question 33e. How does VA plan on partnering with the Department of 
Labor to ensure that veterans are getting access to all appropriate 
employment programs?
    Answer. As pointed out in the Commission's 1999 report, a close 
working relationship between VA, DOL and the Department of Defense 
(DOD) is essential for ensuring seamless job search assistance and 
training, particularly for recently separated veterans. The more 
successful we are in ensuring that the highly trained and motivated 
separating service members are able to secure employment that leads to 
a successful career the less likely they will become dependent on our 
services later in life.
    VA looks forward to developing a long and mature relationship with 
DOL at both the administrative and policy levels. VA expects that the 
requirement that veterans will receive priority in all DOL funded 
employment programs will continue as national policy. VA intends to 
meet shortly with DOL's Employment and Training Administration (ETA) to 
discuss the most cost-effective way for VA to link its employment 
program to the several electronic labor market systems funded by ETA. 
VA anticipates that in the future, as necessary, issues of national 
employment policy as they affect veterans will be addressed at the 
Cabinet level thus adding the weight of two Secretaries to any ensuing 
policy decisions.
    Question 33f. One of the criticisms of the program at the 
Department of Labor has been a lack of accurate performance measures. 
If the Administration's plan is implemented, how will the shift to VA 
affect performance and cost-effectiveness measurement?
    Answer. There are two essential components directly affecting 
grantee performance. First, VA intends to set clear, obtainable and 
easily measured outcome performance standards. Measures such as the 
number of veterans who obtain a job and duration of employment are 
examples of such outcome measures.
    Second, there must be something at risk for the grantees in order 
for VA's grant oversight to be effective. Simply stated-rewards for 
exceptionally high performance and a cost for failing to deliver agreed 
upon outcomes. Quite frankly, a new grant program that is not 
competitive in nature can only fare marginally better than the existing 
programs. This is not to suggest that the competition must be at the 
national level, competition within states can be just as effective.
    As to the HVRP, employment has always been a measure of success for 
veterans who have been homeless. Without health care, housing and 
employment the likelihood of long term success for the veteran is 
greatly handicapped. While VA has done a creditable job in responding 
to the health care needs, housing and employment are largely outside of 
VA's direct efforts. While our homeless veterans grant and per them 
program has greatly aided the need for housing with supportive 
services, the longer term need of employment and independent living has 
largely been outside of our direct line of responsibility.
    Combining the health care, housing and employment outcomes for 
homeless veterans will enhance VA's opportunities to effectively 
monitor not only costs, but also the long-term values of each.
    Question 33g. This budget basically asks for level funding for the 
VETS program. Without increased resources for improving this program, 
does the Administration seek to merely transfer the current program to 
a different agency? How does VA know that this budget request for the 
transfer is adequate without a specific implementation design? How does 
VA plan to administer the new competitive grant program without 
additional FTEs?
    Answer. As discussed in an earlier answer, because of the lead-time 
required to implement grants, VA has little choice but to keep the 
Department of Labor (DOL) funded grants in place during the first year 
after transfer. Thus, program costs should remain constant for the 
first year--FY 2003.
    In the long term, there would be no advantage to merely transfer 
the grant programs from DOL to VA. The Administration acknowledges that 
the DVOP and LVER programs have not served our nation's veterans well 
for a long time as evidenced by DOL's report that the national average 
percentage of registered veterans between the ages 22-44 who were 
placed in a job steadily declined from an unacceptable low of 16 
percent in PY 1997 to an unbelievable 12 percent in PY 2000. This 
performance, during a period of historically low unemployment, simply 
cannot continue.
    Through this initiative, the Administration seeks to redesign and 
reenergize our national job search assistance services in such a way as 
to ensure that all veterans and eligible service members have equal 
access to the services they need to secure employment regardless of 
where they live or are stationed. VA believes that this goal can be 
accomplished, without substantial increases in funding, by connecting 
things (technology, systems and service providers) that exist presently 
and managing them in a way that transforms our national employment 
service delivery system for veterans.
    VA intends to ensure that the design of the new grant program will 
focus available resources and effort at the veteran in need of services 
and employers, not on bureaucracy. Quantifiable results rather than 
status quo will be our measuring stick.
    As stated above, because of the lead-time required to implement 
grants, VA intends to keep the Department of Labor (DOL) funded grants 
in place during the first year after transfer. Thus, program costs 
should remain constant for the first year.
    VA believes that the 199 DOL FTE projected to-transfer with the 
program are adequate to administer the grant program at VA.
    Question 33h. Will the Administration's plan include outreach to 
help current state employees working for existing grant recipients meet 
requirements to apply for the new competitive grants?
    Answer. It is in everyone's best interest, but most certainly the 
veterans seeking assistance and employers looking for good applicants, 
that highly qualified service providers seek and are awarded service 
grants. VA is committed to do everything possible to ensure that it 
happens. It seems logical that where the current grantee (State 
Employment Security Agency) is performing well that they will be 
competitive when seeking future veterans grants.
    The first year after transfer VA will continue all existing DOL 
funded grants. VA is considering a program structure that would award 
new grants (replacing the DVOP & LVER grants) to the Governors in the 
second year with the requirement that the States sub-award competitive 
grants or contracts to service providers. The VA awarded State grants 
will include provisions requiring the States to conduct ``bidders 
conferences'' intended to assist potential offerors to understand the 
new program service requirements and better enable them to be fully 
responsive to the State's solicitation for grant applications (SGA). 
Additionally, VA will consider conducting a national forum to 
communicate program changes and expectations directly to interested 
potential service providers.
    Question 34a. The Employment Specialist pilot program within the 
Vocational Rehabilitation and Employment program has improved disabled 
veterans placement numbers, but in order to broaden its reach, VA will 
require personnel with specialized expertise in employment markets and 
job markets. How will VA recruit such personnel? Does your budget 
request of 15 additional FTEs cover needed specialists?
    Answer. The Employment Specialist Pilot Program has proven to be 
highly successful. We recruited nearly 40 Employment Specialists to 
help us more rapidly shift the focus of the Vocational Rehabilitation 
and Employment Program to employment. We believe that the request for 
15 FTE in 2003, along with the flexibility provided by the transfer of 
funds from the Readjustment Benefits account to the General Operating 
Expense account, provides opportunities for further realignment of the 
staff and recruitment of additional Employment Specialists. The 
Employment Specialist Pilot Program helped us identify the skills sets 
needed to focus on marketing and placement of people with disabilities 
and made it easier to find individuals to fill this gap.
    Question 34b. Improving outcome-based performance measures of the 
VR&E program is needed to determine why a significant percentage of 
program participants eventually drop out. However, VA states in the 
budget that this cannot be accomplished until Corporate WINRS is fully 
implemented. What is the status of Corporate WINRS and does VA have the 
funding necessary to support rapid development?
    Answer. To gain a better understanding of why people leave the 
program without a successful outcome, we asked our in-house 
rehabilitation staff to identify the reasons based on their 
experiences. Through this in-house survey, we identified the top five 
reasons why veterans leave the program. We validated this information 
through a third-party study. The top five reasons for participants 
leaving the program are:
          Medical reasons
          Family responsibilities
          Financial issues
          Participant took a job
          Disabilities
    Since the time of this study, we have developed a number of 
strategies (e.g., Case Management, Corporate WINIRS, the Employment 
Specialist Pilot Program) that will help us better assist participants 
who are at-risk for leaving the program due to these or other reasons. 
While we believe that any veteran leaving the program without a 
positive outcome is a lost opportunity, we are pleased to report that 
the rehabilitation rate last year was 65 percent, the highest in the 
program's history. Conversely, our drop out rate was the lowest in the 
program's history.
    In September 2001, VBA nationally deployed Phase I of Corporate 
WINRS. This represented the first phase of a multi-year information 
technology initiative. Our FY 2002 funds will permit us to develop and 
deploy new enhancements that will enable us to extract data to conduct 
a myriad of analyses to include the characteristics of veterans leaving 
the program. With approval of future funding, we expect to continue to 
increase the functionality of Corporate WINIRS to support future 
program strategies and build on our capacity to collect meaningful 
program data about disabled veterans who participate in the VR&E 
program.
                         information technology
    Question 35. Is VA running into any unforeseen problems in 
implementing the One-VA Enterprise Architecture?
    Answer. No. The One-VA Enterprise Architecture has been embraced 
across the Department. While there remains a great deal to be done to 
develop this architecture, remarkable progress has been made in a very 
short period of time, given that full funding for Enterprise 
Architecture will not begin until FY 2003.
    The following progress has been made between October 2001 and 
February 2002, in developing the Enterprise Architecture:
     The Department of Veterans Affairs ``Enterprise 
Architecture: Strategy, Governance & Implementation'' was approved in 
September 2001.
     The Information Technology Board (1713), which is a 
critical element of the Enterprise Architecture Governance, was 
established in October 2001.
     VA's ITB has chartered an Enterprise Architecture Council 
(EAC), and an Enterprise Architecture Working Group has been 
established.
     An Acting Chief Architect has been appointed; we are in 
the process of establishing and recruiting for a VA Chief Architect 
(SES level); and a program-staffing plan has been developed.
     The top-level definition of the VA functional enterprise 
has been completed.
     A technical model for the implementation of new IT 
projects has been defined.
     A comprehensive change in how we oversee the management of 
our IT Projects has recently been approved. This new oversight process 
will ensure that all new IT projects are developed in compliance with 
the Enterprise Architecture.
     Two prototype applications are being developed to 
integrate the Enterprise Architecture and VA's new IT Management 
Process. Both applications are paperless and intranet-accessible. The 
current proof-of-concept prototype implementation is functional on the 
VA-Intranet and was presented to GAO on January 30, 2002. This 
implementation will be followed by a more robust and extensive 
implementation when FY2003 funding is received.
    For the remainder of FY2002, using in house resources:
     The EAC will undertake a preliminary analysis of the 
requirements, business functions and business processes and complete 
the initial functional allocation of VA's business functions this 
summer. This is a major, long-term effort involving both business and 
technical leadership across VA.
    Question 36. Has VA effectively instituted a central review process 
to guard against individualized and non-compatible technology 
investments, which may not fit into VA's strategic plan?
    Answer. VA has instituted a new process that integrates IT project 
planning, budgeting, Enterprise Architecture, Project Management 
Oversight and project execution. This new process is applied to all 
investments in information technology. The process includes periodic 
senior management reviews to determine how well a project is 
performing. These senior management reviews approve project initiation, 
approve proceeding with a prototype or pilot, approve proceeding to 
full-scale development based on the results of the prototype, approve 
project deployment, and review in-service performance. At each of these 
reviews the project manager must demonstrate that the project meets 
objectives of the VA Strategic Plan, is not duplicative, and meets the 
requirements of the Enterprise Architecture from both a business and 
technical perspective. Adherence to the standards will cause 
compatibility issues to be sharply reduced. In addition, we have 
implemented a tracking system to ensure that all funds expended on IT 
meet the requirements of only approved projects.
    Question 37. VA has been criticized by its Inspector General and 
GAO for failing to ensure data confidentiality and allowing 
vulnerabilities within its information technology systems. It is clear 
that VA must rapidly implement initiatives to secure mission-critical 
systems and beneficiary data. There is not enough specific discussion 
of VA's long-term cyber security plans in the budget submission. Is 
this really a priority, and does the proposed budget provide sufficient 
funds to cover these needs?
    Answer. The protection of the Department of Veterans Affairs' 
information assets is a top priority, and through continued senior 
management attention, we can institute effective computer security.
    During the past year, the Department has made significant progress 
in institutionalizing IT security as a priority issue. In March 2001, 
the Office of Cyber Security (OCS) was established to serve as the 
much-needed focal point for leveraging existing resources and 
implementing security initiatives on a global basis within the 
Department. In August, the Secretary appointed the Department's first 
Chief Information Officer, who also serves as the Assistant Secretary 
for Information and Technology. In September, the Department completed 
its first ever cyber security program review under the provisions of 
the Government Information Security Reform Act.
    In December, OCS, in conjunction with VA components, requested the 
advice of the VA OIG in determining those key deficiencies that should 
take immediate precedence for remediation in order to maximize 
resources and make the most significant improvement in the Department's 
overall security posture in the near term (next twelve months). 
Discussions with the OIG identified ``key weakness areas'' that were 
deemed to require priority action. These weakness areas included 
fielding Department-wide intrusion detection system and anti-virus 
capabilities; integrating critical infrastructure protection into IT 
security planning; updating and testing disaster recovery plans at VA 
Data Centers; upgrading security features on VA Internet Gateways; and 
remediating deficiencies relating to the areas of application software 
development, change controls, and system software controls.
    With the above priorities in mind, we have made substantial 
progress in correcting these weaknesses. In FY2003, we will have a 
Department wide, integrated cyber security execution plan that 
optimizes and prioritizes the expenditure of all Department and 
Administration Cyber Security funding to continue correcting these 
weaknesses. As the integrated FY2003 execution plan is being developed, 
we will determine the levels of funding necessary in FY2004 and beyond 
to complete the job of removing all cyber security material weaknesses 
and institutionalizing cyber security as a critical element in each of 
our IT projects.
                   franchise fund enterprise centers
    Question 38. Have the Franchise Fund Enterprise Centers been able 
to successfully market services to other Federal agencies? Please 
provide specific customers and describe efforts to reach new government 
customers.
    Answer. Most of our customers come from within VA--which accounts 
for 94.5 percent ($141.8 million) of our FY 2001 revenue. The 
individual Enterprise Centers have encountered varied success in their 
ability to attract outside business. In FY 2001, 5.5 percent ($8.2 
million) of our revenue came from cross servicing arrangements with 
Other Government Agencies (OGAs). In FY 2001, the Austin Automation 
Center accounted for most of this OGA revenue, i.e., $6.7 million. We 
estimate that our FY 2002 revenue will be approximately $148 million 
($140 million from VA business and $8 million for OGA).
    We have made significant enhancements to the Enterprise Center 
Websites and to our marketing materials, e.g., corporate brochures. 
Website enhancements include compliance with Federal Government 
standards and the incorporation of a common navigation scheme with 
links to each other. Our corporate brochure vividly conveys the product 
offerings of our Enterprise Centers. In addition, the Enterprise 
Centers exhibit and speak at various conferences that attract Federal 
agencies (Association of Government Accountants Professional 
Development Conference, Excellence in Government Conference, E-Gov 
Conference, FOSE Conference, etc).
Website URLs
    Enterprise Fund Office--http://www.va.gov/fund
    Austin Automation Center--http://www.aac.va.gov
    Debt Management Center--http://www.va.gov/debtman
    Financial Services Center--http://www.fsc.va.gov
    Law Enforcement Training Center--http://www.va.gov/osle/valetc
    Security and Investigations Center--http://www.va.gov/sic
    VA Records Center and Vault--http://www.va.gov/vault

                           Specific Customers
------------------------------------------------------------------------
             Enterprise Center                 Other Federal Customers
------------------------------------------------------------------------
Austin Automation Center..................  Department of Commerce
                                            Departments of Defense
                                            Department of Labor
                                            Department of Justice
                                            Department of the Treasury
                                            Federal Highway
                                             Administration
                                            Federal Energy Rate
                                             Commission
                                            General Accounting Office
                                            General Services
                                             Administration
                                            National Aeronautics and
                                             Space Administration
                                            National Archives and
                                             Records Administration
                                            National Oceanic &
                                             Atmospheric Administration
                                            Office of Federal Housing
                                             Enterprise Oversight
                                            U.S. Army Medical Command
Debt Management Center....................  Department of Agriculture
                                            Drug Enforcement
                                             Administration
                                            Federal Bureau of
                                             Investigation
                                            Immigration and
                                             Naturalization Service
                                            Minnesota Cooperative
                                             Administrative Support Unit
Financial Services Center.................  Department of the Interior
                                            Federal Energy Regulatory
                                             Commission
                                            Immigrant Health Services
                                            Indian Health Services
                                            Office of Federal Housing
                                             Enterprise Oversight
                                            U.S. Mint
                                            U.S. Naval Home
Law Enforcement Training Center...........  Indian Health Service
                                            National Guard
                                            National Museum of Art
                                            Walter Reed Army Medical
                                             Center
                                            Washington Navy Yard
Security and Investigations Center........  Export/Import Bank
                                            Office of Federal Housing
                                             Enterprise Oversight
                                            Office of Occupational
                                             Safety Health Review
                                             Commission
                                            National Council on
                                             Disability
VA Records Center and Vault...............  Defense Finance and
                                             Accounting Services (DFAS)
                                            DFAS--Cleveland (Navy)
                                            DFAS--Indianapolis (Army)
                                            Defense Technical
                                             Information Center
                                            Department of Energy
                                            Postal Rate Commission
------------------------------------------------------------------------

                                vetsnet
    Question 39. The VA Claims Processing Task Force recommended that 
VA take a close look at the viability of VETSNET, an 8-year-old 
enterprise solution project that is still not operational. The Task 
Force implementation team has determined that VETSNET is a necessary 
stepping stone to migrating to new technologies that allow greater 
interoperability and seamless data access. Have other system solutions 
been sufficiently demonstrated? What is VA's long-term replacement 
strategy for VETSNET?
    Answer. In accordance with the VA Capital Investment process, VA 
identified a total of five alternatives and conducted a comprehensive 
analysis of each before choosing the VETSNET approach. The five 
alternatives are (1) upgrading the Benefits Delivery Network, (2) 
continue designing and developing a custom built system, (3) outsource 
or obtain cross-servicing for at least some of the VETSNET processes, 
(4) acquiring COTS software and (5) a combination of custom building 
and COTS. After an extensive analysis of these alternatives, VA chose 
to continue designing and developing a custom built system--i.e., 
VETSNET.
    VA has identified a three-phased approach to support a redesigned 
and integrated claims process. The three-phased approach includes (1) 
determining viability, (2) internally implementing an integrated claims 
process, and (3) addressing the strategic plans of VA in regard to 
integrating the claims process.
    VA's Enterprise Architecture (EA) is the blueprint for 
systematically and completely defining and documenting the 
organization's current (baseline) and desired (target) environment, and 
includes a sequencing plan for transitioning from the baseline 
environment to the target environment.
    VA's Enterprise Architecture strategy is essential for evolving VA 
information systems such as VETSNET. Therefore, as an initial step, 
VETSNET application development will be continued in the VETSNET 
architecture and integrated into the VA Enterprise Architecture. As the 
next step, VA will conduct studies leading to the development of an 
integrated claims process, which will determine the precise manner of 
the VETSNET ``replacement'' for the long-term.
                      office of inspector general
    Question 40. The Office of Inspector General (OIG) is tasked with 
increasing internal audits, investigations and inspections, but this 
budget does not include an increase in the OIG FTE's or any significant 
increase, outside of personal services. How can the OIG effectively 
meet the goals set forth in the budget documents without additional 
resources?
    Answer. The VA recognizes that the record-setting accomplishments 
of the VA OIG during the past few years clearly demonstrate the cost 
effectiveness and value added from an investment in the OIG. The final 
numbers for FY 2001 were even higher than expected. The OIG identified 
over $4 billion in funds put to better use, for a return on investment 
of $86 to $1. They also recovered $33.7 million in fines, penalties, 
restitutions and civil judgments in FY 2001, and generated contract 
audit hard dollar returns in excess of $42 million that went directly 
back to VA during the past year alone. As impressive as these numbers 
are, they do not capture other important performance results. The OIG 
achieved a 300 percent increase in investigative actions since 1998. 
This performance includes a 34 percent increase in indictments in 2001 
and the successful conclusion of high profile cases that led to the 
conviction of two serial killers who murdered veterans.
    For 2002, the OIG received a $6 million or 13 percent increase over 
the previous year's funding level. The 2003 request provides an 
additional $2.7 million (excluding CSRS and FEHB funds). The request is 
consistent with the level of performance the OIG expects to achieve in 
2003. The strategic targets represent the ideal level of performance 
that each VA organization--including the OIG--is striving to 
accomplish.
                       office of general counsel
    Question 41a. The budget request for the Office of General Counsel 
(OGC) cites that the funding level will enable OGC to continue to meet 
the increasing demand for legal services by the VA, while still 
managing its representation responsibilities at the U.S. Court of 
Appeals for Veterans Claims (CAVC). Please provide a breakdown of the 
type and volume of work that OGC is performing.
    Answer. The Office of General Counsel (OGC) provides legal advice 
and representation to the Secretary and subordinate managers in VA 
headquarters and field locations. In the field, twenty-three Regional 
Counsels and their staffs provide such legal advice and representation. 
Six Assistant General Counsels and their staffs act on behalf of 
headquarters managers. The following charts in spreadsheet format 
provide the numbers of cases that OGC field attorneys are responsible 
for or have completed during the current fiscal year (October 2001 
through January 2002), arranged by subject matter categories.
    Combined Workload Summary for Regional Counsel Offices (Chart 1)--
The Regional Counsel Offices provide comprehensive legal services to 
Veterans Health Administration (VHA), Veterans Benefit Administration 
(VBA) and National Cemetery Administration (NCA) managers throughout 
the United States and in Puerto Rico. The major subjects (minus Medical 
Care Cost Recovery) for which Regional Counsel provide advice and 
representation are represented on Chart 1.

                        CHART 1.--COMBINED WORKLOAD SUMMARY FOR REGIONAL COUNSEL OFFICES
----------------------------------------------------------------------------------------------------------------
                                           ADMIN     ADMIN       LIT       LIT       TOTAL     TOTAL      TOTAL
     NATIONWIDE [thru January 2002]       PENDING  COMPLETED   PENDING  COMPLETED   PENDING  COMPLETED  WORKLOAD
----------------------------------------------------------------------------------------------------------------
1 Medical Malpractice..................     1,989        352       527        100     2,516        452     2,968
2 Personal Injury......................       327         84        86         16       413        100       513
3 Property Damage......................       398        205        12          2       410        207       617
4 FMCRA................................     5,953      1,199        91          9     6,044      1,208     7,252
5 Workers Compensation.................     2,558        615        18          1     2,576        616     3,192
6 Health Insurance.....................   232,346      5,415   263,388      1,455   495,734      6,870   502,604
7 Category C (Co-Payment)..............       191         17        26          7       217         24       241
8 Ineligible/Humanitarian..............        51          0         5          0        56          0        56
9 Auto Reparations.....................       827        337         2          0       829        337     1,166
10 Crime Victims Act...................         3          0         0          0         3          0         3
11 Debt Collection.....................       205         52        68         28       273         80       353
12 Bankruptcy..........................     2,115      2,564       872        306     2,987      2,870     5,857
13 Escheat/General Post Fund...........       145         48         3          0       148         48       196
14 Probate Claims......................     1,158        441        37         14     1,195        455     1,650
15 VA Rroperty Damage..................        44          8         1          0        45          8        53
16 Other Recoveries....................       197        155        21          3       218        158       376
17 Commitment..........................       599        100        12         40       611        140       751
18 Guardianship........................       599        831       162        176       761      1,007     1,768
19 VA Benefits.........................         0        134         9          9       134        143
20 Contracts...........................       327        371        14          0       341        371       712
21 VABCA...............................         6          1         0          0         6          1         7
22 Personnel Actions...................     2,236        614       355         45     2,591        659     3,250
23 Law Enforcement.....................        80         33         7          1        87         34       121
24 MPCE Claims.........................       113         62         1          0       114         62       176
25 Loan Guaranty Actions0..............         0          0         0          0         0          0
  a. Acquisitions......................     1,406      6,300       108         13     1,514      6,313     7,827
  b. Assumption Agreements.............         3          9         0          0         3          9        12
  c. Evictions.........................       560        501        81         67       641        568     1,209
  d. Mortgage Releases.................        53         58         0          0        53         58       111
  e. Sale Of VA Loans..................        90        629         1          0        91        629       720
  f. Sales VA Properties...............       398      1,789         7          3       405      1,792     2,197
  g. Multi-Units.......................        29         97         0          0        29         97       126
  h. Other Loan Guaranty...............       823      1,351        77         49       900      1,400     2,300
26 Written Opinions....................       196        203         0          0       196        203       399
27 Other Cases.........................     3,793      7,797       101         63     3,894      7,860    11,754
    Total..............................  ........  .........  ........  .........    30,176     27,900    58,076
----------------------------------------------------------------------------------------------------------------

    Combined Medical Care Cost Recovery Statistics for the Office of 
General Counsel (Chart 2)--The Regional Counsel Offices and 
Professional Staff Group I advise VHA managers concerning the 
collection of monies due VA from insurance carriers, tortfeasors, 
worker's compensation insurance carriers and others. These entities owe 
monies to VHA for care provided veterans (or others on a humanitarian 
basis) at VA medical centers on a partially or fully reimbursable 
basis.

              CHART 2.--COMBINED MEDICAL CARE COST RECOVERY
------------------------------------------------------------------------
            Nationwide [thru January 2002]
------------------------------------------------------------------------
FMCRA................................................      $2,721,745.50
Workers Compensation.................................       1,094,025.52
Health Insurance.....................................         918,117.00
Category C (Co-Payment)..............................           2,350.70
Ineligible/Humanitarian..............................              25.00
Auto Reparations.....................................         291,617.89
Crime Victims Act....................................             995.38
Debt Collection......................................          52,782.09
Bankruptcy...........................................         134,722.15
Escheat/General Post Fund............................         285,375.57
Probate Claims.......................................         1,334,287.
VA Property Damage...................................          14,160.95
Other Recoveries.....................................         514,016.89
                                                      ------------------
    Total............................................       7,364,221.67
------------------------------------------------------------------------

    Information regarding Professional Staff Group VII's workload is 
provided in the answer below. OGC does not currently have a reliable 
method for capturing the complete workloads of its other headquarters 
elements. Recognizing the problem, OGC is now field-testing a new 
computer-based workload-reporting system that will accurately capture 
the varied administrative, legal and representational activities 
performed by the attorneys at VA headquarters. OGC will be able to 
report reliably on its workload in the near future.
    Question 41b. What is the current caseload of Group VII before the 
CAVC?
    Answer. There were 1,822 cases pending as of January 31, 2002.
    Group VII is responsible for preparing the record and submitting 
the proper pleadings in all appeals filed in the CAVC. In addition, 
Group VII is responsible for answering petitions for extraordinary 
relief under the All Writs Act filed with the Court, and answering all 
applications for attorney fees under the Equal Access to Justice Act 
filed with the Court.
    In fiscal year 2001, there were 3,521 new cases filed with the 
Court, comprised of 2,203 appeals, 105 petitions for extraordinary 
relief, and 1,213 applications for attorney fees. On top of these new 
cases, when the fiscal year commenced in October 2000, there were 2,580 
cases carried over as pending from the previous fiscal year. The Court 
closed 4,118 cases during the year.
    In the first one-third of fiscal year 2002 (October 1, 2001 through 
January 31, 2002), there were 795 new cases filed with the CAVC, 
comprised of 548 appeals, 67 petitions for extraordinary relief, and 
180 applications for attorney fees. There were 1,982 cases carried over 
as pending from the preceding fiscal year. The Court closed 955 cases 
in the first four months of fiscal year 2002. Hence, there were 1,822 
cases pending as of January 31, 2002.
    Question 41c. Veterans issues are a very limited specialty. When 
veteran's cases are appealed from the CAVC to the U.S. Court of Appeals 
for the Federal Circuit, Department of Justice attorneys represent the 
government. However, VA cases are a smaller part of their caseload. 
What is your opinion of the VA representing the government in these 
cases at the Federal Circuit?
    Answer. Because cases involving VA benefit claims are heard only in 
the CAVC and in the Federal Circuit, those two courts have most 
affected the development of case law governing veterans' benefits. The 
Federal Circuit in particular has been taking an increasingly active 
role in formulating that law. It has issued many precedential decisions 
during the past year with far-reaching and fundamental effect on VA's 
processing of claims. For that reason, it is important that VA's 
position in litigation, including all the background information 
necessary to put the position into context, be presented to the Federal 
Circuit as fully and persuasively as possible.
    VA administers many programs established by law for the benefit of 
veterans, their dependents, and their survivors. The claim process is 
extensive and complicated. Consequently, it takes a number of years of 
working with the system to develop familiarity with, and expertise in, 
the system.
    VA attorneys can provide valuable assistance throughout all stages 
of appellate litigation involving veterans' benefits especially at oral 
arguments because of their familiarity with VA regulations and 
procedures and their detailed knowledge of the intricacies of the VA 
adjudication system. As VA has opened a discussion with DOJ on this 
issue, and we intend to work with DOJ to continually improve United 
States' representation in the Federal Circuit.
                       board of veterans' appeals
    Question 42a. Now that the regulations to implement the direction 
to the Board of Veterans' Appeals (BVA) to develop claims that lack 
some key piece of evidence are in place: How is the BVA implementing 
this new activity?
    Answer. The Board restructured to provide dedicated BVA assets for 
case development. Our efforts have been coordinated with the Veterans 
Benefits Administration (VBA) which will provide co-located 
adjudicators for benefit awards. BVA has authority to begin developing 
cases as of February 25, 2002. Initial receipt and processing of 
appeals will continue as before. When a decision team reviews a case 
and determines that a decision cannot be entered without additional 
evidence, a team member will prepare a development order setting out 
the development required (in the past this would have been a remand 
decision). The case is then forwarded to the Board's Development Team 
which will obtain the needed information. (Individuals comprising this 
team had 30 days of classroom training with a VBA trainer and 30 days 
of hands-on training developing cases at the Washington regional 
office.) BVA has been given access to VBA and VHA systems development 
software. These programs have been installed and/or enhanced to permit 
development to be accomplished effectively and efficiently at the 
Board. When all requested development has been completed and 
information received by the Board, the case will be returned to the 
decision team for review and preparation of a decision.
    Question 42b. What is the projected impact on BVA output?
    Answer. It is unclear what the extent of this new workload will be. 
The Board's best estimates indicate that initially about 25 percent of 
the appeals caseload will require development, thus reducing the 
decision output by that amount.
    Question 43a. In the past year, since the passage of the ``Veterans 
Claims Assistance Act,'' VBA has slowed the volume of cases it sends to 
the BVA as it reworked affected claims. Please provide the monthly 
input and output of cases for the last 12 months.
    Answer.

------------------------------------------------------------------------
                     Month                       Receipts *   Decisions
------------------------------------------------------------------------
February 2001.................................        1,396        3,023
March 2001....................................        1,155        3,503
April 2001....................................        1,315        2,720
May 2001......................................        1,827        2,798
June 2001.....................................          971        2,396
July 2001.....................................        1,737        2,233
August 2001...................................        1,669        2,215
September 2001................................        1,096        1,780
October 2001..................................        1,392        1,878
November 2001.................................          688        1,228
December 2001.................................        1,620          881
January 2002..................................        1,620        1,077
                                               -------------------------
    Total.....................................       16,486       25,732
------------------------------------------------------------------------
* Consists of all cases physically received at the Board, including
  original appeals and cases returned to the Board's docket (i.e., cases
  returned following remand development, cases remanded by the Court,
  and cases received for reconsideration or vacate actions).

    Question 43b. Describe the number of travel board and satellite 
hearings conducted, and requests still outstanding.
    Answer. Shown below is the number of travel board and video 
hearings conducted over the last several years:

------------------------------------------------------------------------
                                                   Travel
                  Fiscal Year                      Board        Video
------------------------------------------------------------------------
1997..........................................        4,564          233
1998..........................................        2,469        1,151
1999..........................................        3,512        1,282
2000..........................................        2,505        1,385
2001..........................................        3,336        1,308
2002 [Four Months]............................          600          479
------------------------------------------------------------------------

    At the end of January 2002, there were 6,975 pending requests for 
travel board hearings. Of those, 1,558 were certified by VBA as ready. 
There were 1,523 pending requests for video hearings. Of those, 310 
were certified as ready.
                    national cemetery administration
    Question 44. What is the status of each of the six new cemeteries 
authorized in 1999? Is the funding requested for FTE sufficient to 
staff the new facilities that will be open and is the construction 
funding sufficient to complete the last two projects?
    Answer. The status of the efforts to establish six new national 
cemeteries is described below. The 2003 budget request for the National 
Cemetery Administration (NCA) includes sufficient funding ($4.8 million 
and 30 FTE) for four facilities which will require operational funding 
in 2003. These resources will support interment operations on fast-
track parcels completed as a part of Phase I construction of new 
cemeteries at Ft. Sill, Oklahoma, and Atlanta, Georgia, and to prepare 
for the activation of interment operations in 2004 on fast-track 
parcels to be completed for new cemeteries in Southern Florida, and in 
the vicinity of Pittsburgh, Pennsylvania. There are no 2003 operational 
funding requirements for the two remaining sites at Detroit and 
Sacramento.
    The 2003 Major Construction budget for NCA includes sufficient 
funding to continue progress in developing new national cemeteries. 
Resources are requested for Phase I construction of the new cemeteries 
in Southern Florida and near Pittsburgh, Pennsylvania. The 2003 budget 
also includes additional funding for design of the new cemeteries 
planned in the areas of Detroit, Michigan, and Sacramento, California. 
Full construction funding for the new cemeteries at Ft. Sill, Oklahoma 
and Atlanta, Georgia was provided in the 2001 and 2002 budgets 
respectively.
    The status of development of the six new national cemeteries 
follows:
    Ft. Sill, Oklahoma: A fast-track burial section was dedicated in 
November 2001, which will allow interments to begin prior to full 
completion of all construction activities at the new cemetery. The 
Phase I construction contract is planned to be awarded in March 2002. 
Funding for all Phase I design and construction costs was provided in 
prior year appropriations.
    Atlanta, Georgia: An Architectural/Engineering (A/E) firm has been 
selected to develop the master plan for the new cemetery. The contract 
should be awarded in March 2002. Funding for all Phase I design and 
construction costs was provided in prior year appropriations.
    Pittsburgh, Pennsylvania: The environmental assessment process on 
the preferred site was completed. The land acquisition process is 
currently underway. When this process is complete, master planning will 
begin. Resources for master planning and land acquisition were included 
in the 2001 and 2002 appropriations respectively. The 2003 President's 
construction budget requests $16.4 million for Phase I construction.
    South Florida area: The environmental assessment public comment 
period for the evaluated sites ended in January 2002. A boundary survey 
and title search is currently being conducted. When land acquisition is 
complete, master planning will begin. Resources for master planning and 
land acquisition were included in the 2001 appropriation. Funding for 
design was included in the 2002 appropriation. The 2003 President's 
budget includes $23.3 million for Phase I construction.
    Detroit, Michigan: The environmental assessment public comment 
period for the evaluated sites ended in January 2002. A boundary survey 
and title search is currently being conducted. When land acquisition is 
complete, master planning will begin. Resources for master planning and 
land acquisition were included in the 2001 and 2002 appropriations 
respectively. The 2003 President's construction budget requests $1.7 
million for the design of this new national cemetery.
    Sacramento, California: The environmental assessment of potential 
sites is in process. This process should be completed in March 2002. 
Resources for master planning and land acquisition were included in the 
2001 and 2002 appropriations respectively. The 2003 President's 
construction budget requests $1.7 million for the design of this new 
national cemetery.
    Question 45. Please provide a breakdown of the minor construction 
NCA projects. How does this compare to the findings in the study that 
is to be submitted pursuant to Public Law 106-117?
    Answer. The 2003 President's budget requests $21 million of Minor 
Construction funding for the National Cemetery Administration. Of the 
requested amount, $18.9 million is for projects to continue service 
delivery by providing additional gravesites or columbaria niches at 
existing national cemeteries that are nearing depletion of their 
inventory of burial space; $1.6 million is for irrigation projects 
which will improve national cemetery appearance; and the remaining 
$500,000 is for building construction and other site improvement 
projects.
    Data from the facility condition assessment study required by 
Public Law 106-117 is not yet available. A draft report submitted by 
the contractor conducting the study is currently under review. We 
anticipate that the study findings will be transmitted to Congress in 
May 2002. When the study is completed, a comparison with the minor 
construction request will be performed. The study will identify repairs 
needed to ensure that national cemeteries are maintained as national 
shrines. The study will not address gravesite expansion projects 
necessary to provide burial space for veterans and their eligible 
family members.
    Question 46. The State Cemetery Grants Program has proven to be a 
popular alternative for states with diffused or small veteran 
populations as a way to honor and commemorate their veterans. I'm 
pleased to see that the budget request provides a $7 million increase 
in the funding for the program.
    Have any requests been denied in the last two years due to lack of 
funds?
    How many projects is this increased appropriation expected to 
finance?
    Do you anticipate an increased demand for the program since the 
increase in the plot allowance provided in Public Law 107-103 that will 
go to offset the states' operational costs?
    Answer. The State Cemetery Grant Program appropriations provided in 
2000 and 2001 have met program needs. There were no grant requests 
denied due to lack of funds. The $32 million requested in the 2003 
budget is expected to fund nine projects.
    The change in the plot allowance resulting from enactment of Public 
Law 107-103 increases the amount paid for an eligible veteran not 
buried in a national cemetery from $150 to $300. This increase should 
encourage states to participate in the State Cemetery Grants Program, 
but it is too soon to determine the extent of the impact this increase 
will have on demand for State Cemetery Grant Program funding. Texas, 
Washington, Michigan, Mississippi and New York, among others, have 
expressed interest in requesting funding for state veterans cemeteries.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. James M. Jeffords to 
                          Anthony J. Principi
    Question 1. I appreciate that you have had to press hard for the 
funding increases for veterans programs, but I am concerned that the 
budget before us is not adequate to meet our needs. While it contains 
an increase of $1.4 billion over last year's levels, the Independent 
Budget estimates that an additional $1.7 billion is needed to adequate 
funds current services. Your budget also contains some pretty rosy 
assumptions, such as an additional $500 million in third-party 
collections above this year's projected level.
    I am also concerned about the decision to request a new annual 
$1,500 deductible from all Priority 7 veterans. Many VISNs, and New 
England is one of them, have worked hard to enroll new veterans and to 
reach the large population of veterans who have never stepped foot in a 
VA facility. It would seem that this initiative could seriously 
undercut that effort.
    I would appreciate you commenting on both of these matters.
    Answer. An additional $1.4 billion in appropriation (excluding the 
retirement accrual transfer and including management savings, $1,500 
cost share deductible and increases in revenue, reimbursement, and 
unobligated balances availability) provides funding for:
     Current service requirements
     Our enrolled population, which is requiring more health 
services as that population ages
     Pharmaceutical increases as a result of new patients 
accessing the system for their pharmaceuticals coupled with the 
increased treatment of enrolled patients in the ambulatory care 
environment
     Prosthetics and sensory aids due to the continuing impact 
of mandated eligibility reform
     CHAMPVA for Life,
     Continuing open enrollment
     Faith-based and other Community-based programs
     Outpatient dental care for former Prisoners of War
     Newborn care as a part of basic benefits
    The Independent Budget recommends a $3.1 billion increase over the 
FY 2002 appropriation. The Independent Budget does not take into 
consideration the effects of management efficiencies, the $1,500 annual 
deductible for Priority 7 veterans, or improved collections on the 
appropriation level.
    The FY 2003 budget projects a $418 million increase for the Health 
Services Improvement (HSIF) and Medical Care Collections Funds (MCCF) 
over the FY 2002 current estimate. The primary reasons for the increase 
are the medication copayment (increase from $2 to $7), proposed 
legislative initiative for the $1,500 deductible, anticipated revenue 
from the long term care copayment, and improvements derived from the 
Revenue Improvement Plan, Electronic Data Interchange (EDI), 
Centralization & Consolidation, and Outsourcing & Contracting. All of 
these will all have a profound impact upon the HSIF and MCCF programs 
to help increase the level of collections.
    Recent collections have increased significantly from earlier 
estimates. For example, actual collections in FY 2001 exceeded the 
original budget estimate by over 26 percent.
    The following addresses the policy considerations made in regards 
to the $1,500 deductible proposal. Continued growth in the demand for 
VA health care services will require significant increases in budget 
resources. Without significant increases in resources or the 
implementation of an alternative policy/policies (e.g., limit 
enrollment, change uniform benefits package, cost share proposal), VA 
would face critical issues impacting quality, such as, increasing 
waiting times, increasing system congestion impacting all patients, 
inability to meet demand. VA considered these policies and determined 
that the deductible (cost sharing) proposal seemed to be the preferable 
option that addresses the following most overarching concerns:
     Maintain quality of care for all those that VA serves.
     Continue VA open enrollment for all veterans.
     Maintain, not reduce, the basic benefit package of medical 
services for core veterans.
     Provide veterans appropriate access to outpatient, 
inpatient, and non-institutional long-term care services.
     Require veterans that have higher incomes to contribute 
more to their cost of care than other veterans.
     Assess a charge for use of healthcare services as opposed 
to assessing an upfront charge or enrollment fee.
     Allow veterans to benefit from private insurance coverage 
and would encourage veterans to identify their insurance coverage.
     Continue VA long-term services, especially non-
institutional care.
     Provide catastrophic coverage for those with high annual 
medical costs.
    Question 2. Your budget proposes to move employment and training 
services for veterans out of the Department of Labor and into the VA. 
While I appreciate the effort to avoid duplication of services, I do 
not believe a strong case has been made by the VA to explain how they 
could run this program better. In fact, having worked for many years on 
job training issues, I would prefer to see the focus on improving the 
program at DOL. That is where the expertise on job training lies and I 
believe we would be wise to first try a through reform effort before 
uprooting the program entirely. I would appreciate your views on this.
    Answer. It is clear that the DVOP and LVER programs have not served 
veterans' job search assistance needs well for a long time.
    The Commission on Servicemembers and Veterans Transition Assistance 
(Commission) report and at least six GAO reports issued in the past 
five years extensively document long-standing shortfalls with the DVOP 
and LVER programs. In spite of the public awareness that these two 
programs, as currently administered, are failing far short of the 
excellence we should demand of programs so important to many veterans' 
ability to enjoy the secure and productive life that their service 
defended for all Americans, change to the programs has not occurred.
    While the challenges to VA are real we are confident that the 
mission of this Department to serve veterans is clear and focused. That 
is an important distinction since the programs involved are limited to 
and focused specifically on veterans. Unencumbered by a long history 
and long-standing relationships, VA can much more easily evaluate 
veterans' employment assistance needs and develop a program that better 
meets the needs of today's veterans and ensures adequate flexibility in 
design to allow for adapting to the needs of tomorrow's veterans.
    Question 3. As you know, many VA hospitals are having a very hard 
time recruiting procedural specialists. The VA has always had a lower 
pay scale than the private sector. But because a VA job brings other 
advantages, the VA has usually had good success in recruiting top 
specialists. But as the gap widens between VA salaries and the private 
sector, many medical centers are finding it increasingly difficult to 
hire procedural specialists. This could have a very significant effect 
on the level of care the institution is able to provide.
    Have you examined this issue of the competitive pay scale? How big 
a problem do you see it to be? How can this issue be addressed before 
it has a significant effect on health care quality?
    Answer. The amounts of special pay authorized for physicians have 
not been adjusted since 1991 and are less competitive for many 
specialties and categories of physicians. After 1991, physician 
staffing stabilized or improved in most medical categories. However, 
VA's current competitive situation is eroding in many areas of the 
country and will continue to erode due to the 11-year old limits on 
special pay amounts. The Administration is about ready to propose 
legislation (for the short term) to address physician's special pay. We 
are also exploring long-term solutions.
    VA salaries for some scarce subspecialties, such as anesthesiology, 
radiology, cardiology, and surgical subspecialties, are far behind the 
salaries offered by non-Federal institutional employers. VA is able to 
assure quality care to veterans through the use of contracts. When VA 
cannot offer a competitive salary to a highly paid specialist, then VA 
must obtain the service on scarce specialty contracts, often at 
significantly higher cost.
    VA is in the process of developing its findings for the Quadrennial 
Report to the President on the Adequacy of Physician and Dentist 
Special Pay. Those findings will form the basis for recommendations for 
comprehensive compensation reform to ensure that VA is able to 
capitalize on its advantages in attracting and employing specialists 
and other direct care providers.

    Chairman Rockefeller. Thank you, thank you very much, Mr. 
Secretary, and that was candid. When you were up for 
confirmation, I asked if you would be candid? And today you 
were candid. You were doing two things. You were saying I am a 
member of the administration, but I want to take care of the 
veterans. I do not think that we can ask for more candor than 
that.
    I want to bring up something which is sort of out of order, 
and that is long-term care. Here we are, talking about the year 
2002, when Congress passed long-term care changes in 1999. It 
took 2 years to get interim guidance, and that guidance is 
weak. The question I am going to ask you is when are we going 
to get a final directive? I am speaking about noninstitutional 
long-term care--the first long-term care benefit involving the 
Federal Government that has been passed since Medicare.
    Along with the lack of mental health parity--long-term care 
is 1 of the 2 great health care needs that we consistently 
ignore in this country. But in the law, we said under section 
101, VA is required to provide noninstitutional extended care 
services. In the interim guidance which came out after 2 years, 
you have very different language--and that is all VHA 
facilities are either to have these services available to their 
veterans or to incorporate into their strategic plan a process 
for establishing the access of these services.
    I am really concerned and upset about the inaction, because 
long-term care was a very serious matter that Senator Specter 
and I negotiated in conference. We thought we were going to 
meet resistance on the other side of the Capitol, we did not. 
And it is something that is tremendously important for the 
veterans. I want to know when are we going to get a final 
directive? And is it going to follow the law?
    Secretary Principi. Yes, Senator, I will try to be brief.
    We are not in compliance with the law. I apologize for 
that. I have asked the Acting Under Secretary for Health to 
give me a plan by March 15 on how we will be in compliance with 
the law. I want to know where the additional nursing home beds 
will be; a timeline for activating those nursing home beds; the 
cost of activating those nursing home beds, both recurrent and 
nonrecurring costs; and what will we use to pay for them? In 
other words, there will have to be an offsetting program 
savings somewhere within our budget.
    It will cost us approximately $150 million to be in 
compliance with the law. We will have to take that money from 
other programs. At the same time, I will request that the 
committee seriously consider changing the law so that it does 
not put just a floor on VA nursing home beds but looks at our 
state nursing home program, our community nursing home program 
and the advances we are making in noninstitutional care. We 
have expanded our state nursing home beds census rather 
significantly over the past several years, but that does not 
count. We have to have a floor on VA nursing home beds.
    Chairman Rockefeller. Are those equal beds on par, as you 
describe it?
    Secretary Principi. Are they equal? Let me ask Dr. Murphy 
to answer whether the services are actually equal. I do not 
think that is true in community nursing home beds. I think VA 
is the best, but I think the State----
    Chairman Rockefeller. But I want to make sure that when you 
are talking about beds, you are talking about services.
    Dr. Murphy. As long as the beds are staffed, they would be 
equivalent. To be absolutely clear, we are looking for a level 
of the average daily census to be the same as 1998. That way, 
we know that veterans are actually getting the long-term care 
that you have determined they are entitled to.
    Secretary Principi. Does that answer the question?
    Chairman Rockefeller. Yes, and I will just need to wait. 
You say it is going to be March?
    Secretary Principi. Yes. I have asked this morning--earlier 
this morning, I asked for a plan by March 15. I think the 
time----
    Chairman Rockefeller. You need to. You need to.
    Secretary Principi. If we cannot reach an agreement that we 
need to change the law to reflect noninstitutional and non-VA 
provided care, then we need to be in compliance. But there will 
be costs. We know that.
    Chairman Rockefeller. And you do agree that that is the 
direction of veterans' health care?
    Secretary Principi. Noninstitutional?
    Chairman Rockefeller. Yes.
    Secretary Principi. Absolutely.
    Chairman Rockefeller. Yes.
    Secretary Principi. I think we do need institutional 
nursing home beds. Veterans with Alzheimer's and dementia 
cannot be easily kept in the home. So I think we do need to 
fulfill a certain commitment, in VA, the State, and in the 
community. But at the same time, veterans and their families 
benefit the longer we can keep them in their own homes with the 
noninstitutional programs: the hospital-based home care; the 
respite care, where the veteran goes into an institutional 
setting for a couple of weeks so the caregiver can get some 
rest; the adult day programs where veterans go into the 
hospital for 8 hours so that they can exercise and be involved 
therapeutically and then return home in the afternoon. Those 
are wonderful programs.
    Dr. Murphy. Senator, if I could add, I think you would be 
pleased to know, that VA has projected that in 2002, the number 
of veterans receiving home-based care, noninstitutional care, 
will increase by 54 percent. Also the current budget requests 
additional resources for the 2003 allocation, and we project a 
91 percent increase or over 26,000 ADC for noninstitutional 
programs. So we are very aggressively building our home-based 
extended care programs, and we know that that was the mandate 
in the Mill bill. In addition to addressing the institutional 
VA nursing home beds, we will be aggressively addressing the 
noninstitutional care.
    Chairman Rockefeller. My time is up. I want to get behind 
this. It is the law. I recognize the costs involved, but 
together, we have an obligation to work that out.
    Senator Specter?
    Senator Specter. Thank you very much, Mr. Chairman.
    Secretary Principi, I start with the business about the 
$1,500 deductible, starting at $28,000 a year annual income. On 
its face, that is simply not acceptable. Somebody who earns 
$28,000 a year is not in the position to undertake a $1,500 
deductible. Means testing is something which is generally 
rejected as a matter of Federal policy, and to impose a 
deductible on veterans seems to me to be unduly harsh because 
veterans are not getting gifts or gratuities. They are being 
given medical services as a contractual matter for the service 
which they performed for their country.
    When you say that no veteran will go without benefits and 
medical services, and if they can only pay $10 a month, so be 
it, that kind of approach is not realistic or doable under the 
proposal which has been made. If you call for a $1,500 
deductible, that is that. And the veteran is going to have to 
pay that amount of money in order to receive any benefits. So 
what I would like to see you do is go back to the drawing 
board. Figure out what this deductible would produce by way of 
revenues, and figure out what you can produce from other 
sources, and then determine whether it really is necessary, or 
indispensable, to impose a deductible. When other alternatives 
have been exhausted, then determine what is the income line 
where VA ought to impose a deductible. I know it is not 
$28,000. It may be your salary. What did you say your salary 
was? [Laughter.]
    Secretary Principi. Same as yours, Senator.
    Senator Specter. Next time you appear, I want you better 
prepared. I want you to know your salary, Mr. Secretary. 
[Laughter.]
    And on the issue of insurance collections, you stated that 
not all veterans have insurance coverage. And you stated that 
the amount of money collected from the insurance company might 
be offset against the proposed annual deductible. Well, that 
really is not a practical way of dealing with the issue to try 
to deal with veterans that have insurance. But to return to the 
issue of doctors not filling out forms to submit to the 
insurance companies: that situation is intolerable. They do not 
miss a beat on filling out forms when their compensation is at 
stake and I understand their motivation for doing that. But 
they are part of the system, and I would like to know what your 
thoughts are about imposing a little discipline to require the 
doctors to fill out those forms, and if not, then what? How 
about a little threat here? How about a little discipline here?
    Secretary Principi. Certainly, it is very important that 
the documentation take place. If we do not code, then without 
the proper documentation, we cannot bill. And the physicians 
are the only ones who can ensure proper documentation. If they 
are not doing that, then, I do think we have to take some 
action, because the veterans are being penalized because we are 
not able to collect from insurance companies.
    Senator Specter. Would you give some thought to that?
    Secretary Principi. I will.
    Senator Specter. And give us a written response within 2 
weeks as to what you propose to do to get VA doctors to do 
their duty and fill out these forms?
    Secretary Principi. Yes, sir.
    [The information referred to follows:]

    I am considering a variety of alternatives that will lead 
to significant improvements in VA's third party billing 
operations.
    The tool that I believe will be most effective is to 
identify specific performance goals related to the timeliness 
and accuracy of each component of our billing process, and to 
establish performance standards pertaining to documentation for 
medical center directors, chiefs of staff, and attending 
physicians. We are currently exploring options to link 
physician pay to performance. If needed, we will seek 
legislation to provide us the authority to implement this, 
possibly as part of a broader legislative package we will 
submit later this year on a variety of special pay provisions 
for VA physicians.
    I fully expect that incorporating billing documentation 
requirements into physician performance standards and linking 
these to pay will improve compliance. However, I expect the 
Under Secretary for Health to turn to traditional disciplinary 
measures in instances where any physician repeatedly fails to 
meet documentation standards. If a specific provider does not 
comply with requirements following education/training and 
feedback from monitoring efforts, specific management actions 
would include validating the understanding of requirements and 
determining willfulness of noncompliance. Disciplinary steps 
for a full-time permanent physician could then include formal 
counseling, admonishment, reprimand, 15-day suspension and, 
finally, removal depending upon the seriousness and nature of 
the non-compliance. For part-time, temporary or physicians in a 
probationary period, only one or two warnings are required 
before moving for termination.
    As noted, the most significant requirement for physicians 
is to provide thorough and timely documentation in the process 
of cost recovery. For outpatient care, this includes notes 
describing the treatment provided during the visit in order to 
allow billing for an office visit or consultation. With regard 
to inpatient care, documentation requirements apply to notes 
regarding the reason for the admission so as to allow 
professional billing for the first day of the stay; notes 
during an inpatient stay as the patient's condition changes; 
operating reports completed immediately after surgery; and 
notes at the time of patient discharge. To assist physicians, 
we have developed and implemented software allowing the 
electronic entry of practitioner identification, lists of 
patient problems, diagnosis, and treatment provided.
    While setting clear performance requirements and holding 
physicians accountable for their performance will be the most 
effective strategy to use in improving our billing process, 
there are other important steps we are taking that will lead to 
better outcomes. For example, we have already established 
compliance policies and guidelines through official directives 
issued to all Veterans Integrated Service Networks (VISN) and 
medical centers. We are supplementing this with ongoing staff 
education and training to reinforce the requirements outlined 
in the directives. In addition, we established a physician 
education task force charged with developing a toolkit that 
will provide physicians with easy-to-use references and 
reminder materials. Recognizing the importance of monitoring 
compliance with key policies and procedures, we are 
implementing a national monitoring program that will be 
instituted in all VISNs and medical centers. The results of 
this monthly monitoring program will be reported to VA Central 
Office for review and follow-up action.
    I am firmly committed to improving all facets of the 
Department's billing and collections operations. As a result of 
new steps to enhance physician accountability for performance 
as well as the other improvement strategies I have outlined 
above, I am confident that our performance will be markedly 
better in the future.

    Senator Specter. Let me pick up on the issue of homeland 
security for the very brief time that I have left. Congress 
last year appropriated more than $3 billion for homeland 
security. We did not want to wait for this year's budget to 
fund homeland security. We put up $1.050 billion for public 
health services and then very substantial additional money for 
smallpox vaccinations and for purchases of Cipro to guard 
against anthrax, and for other items.
    You have, as you describe it--how do you describe it--the 
largest public health system in the world?
    Secretary Principi. Certainly the largest integrated health 
care system in the world and a system completely under Federal 
control in every community in America. So all of our employees 
are Federal employees, and I think are a wonderful resource in 
the event of a man-made or a natural disaster.
    Senator Specter. Senator Harkin and I are going to be 
meeting this afternoon with Health and Human Services Secretary 
Thompson about preliminaries for his budget, and I am going to 
ask him to call you, and I am going to ask you to call him--
your calls may intercept one another--to get your department 
involved. You have a great public health system all set up, and 
$1 billion is a good start on public health in America, but it 
is not going to do the whole job. When you get wholesale minus 
24 percent--that is what you get on pharmaceuticals?
    Secretary Principi. That is a starting point because we can 
negotiate below that price.
    Senator Specter. Well, that is a starting point. You ought 
to be involved in expending the large sums of money which are 
going to be spent on pharmaceuticals for homeland defense.
    Secretary Principi. Absolutely.
    Senator Specter. My staff will be here to hear the balance 
of the testimony. We will follow very carefully what the 
service organizations have to say. Bill Tuerk, who is a veteran 
of these committee hearings, has already talked to the service 
organizations, and we will give very heavy weight to what the 
service organizations have to say. I regret that I have got to 
go to a budget hearing on Coast Guard, again, on homeland 
defense, and I thank you, Mr. Chairman.
    Chairman Rockefeller. Thank you, Senator Specter, and thank 
you for coming. And we were talking earlier about how busy it 
is around here, when many of us serve on five committees and 
everything takes place at the same time. So we appear rude, and 
perhaps sometimes, we are, but we do not intend to be.
    Senator Jeffords. Mr. Secretary, I am very concerned about 
the funding situation in the current year. Overall, the VA 
health care system may be as much as $400 million short. We are 
expecting a deficit of over $40 million. Even assuming we meet 
the optimistic third-party collection targets, coming on the 
heels of several years of inadequate funding, most medical 
centers have already squeezed as much as they can out of their 
programs and put off needed maintenance and repairs.
    We in VISN 1 are committed to serving the Priority 7 
veteran population, it should not have to come out of the 
expense of other programs. I understand that the administration 
plans to request additional funding for VA care somewhere in 
the neighborhood of $140 million. Do you believe this amount 
will cover the actual cost of Priority 7 veterans' care?
    Secretary Principi. The $142 million will not entirely 
cover those costs. I think the $142 million will certainly go a 
long way to meeting the workload growth of Priority 7's in 
2002. We are taking other steps to be more efficient, both 
medical care cost recovery--I will let Dr. Murphy talk in a 
moment about the additional money that will be going up to the 
Vermont VISN this year.
    Senator Jeffords. My back of the envelope calculations--it 
looks like it would be about $40 million short up there. I just 
want to leave that----
    Dr. Murphy. Senator Jeffords, we know that VISN 1 is making 
the best use of their resources, and they are challenged this 
year. We have sent them an adjustment to their VERA budget 
allocation already, as you know. And in looking at how we can 
deal with the shortfall in the 2002 budget, we made some 
efficiencies in our centralized funds, and we will be 
reallocating over $160 million out to the field through VERA.
    In addition, we expect to be getting a supplement of at 
least $142 million. With the combination of those two 
additional funding sources, VISN 1 will be getting at least $14 
million in addition to the adjustment that has already been 
made. We know that if they could complete the Boston 
integration between the West Roxbury Medical Center and Jamaica 
Plains that they would save a substantial amount of money. And 
we will be sending some additional minor construction dollars 
to speed that integration along and to allow them to become 
more efficient and hopefully to live within their VERA 
allocation in future years.
    Senator Jeffords. I appreciate that information.
    Thank you, Mr. Chairman.
    Chairman Rockefeller. Thank you, Senator Jeffords.
    Senator Nelson?
    Senator Nelson. Thank you, Mr. Chairman.
    Mr. Secretary, as I indicated earlier, I am concerned about 
VISN's 13 and 14 being merged together and having it presented 
as a done deal as opposed to a proposal that might come before 
this committee as part of the budget. And as I look at what is 
being proposed, I question whether or not merging two VISN's 
together that neither is doing well will somehow make a healthy 
VISN to begin with.
    And I think part of the shortfall that is projected is on 
the basis of determining what the needs for that VISN are to 
begin with. If you look at the $1,500 deductibility in the 
Priority 7 veteran category, we may have a false assumption at 
the very beginning as to what the needs truly are, whether or 
not people in the farm states truly should be in Category 7 
based on assets. Do they have to sell the farm to get care?
    And I think that is, in fact, a part of the difficulty in 
determining what resources should have been put into the VISN 
in the first place which I think were underfunded because of a 
basic false assumption as to the ability of some of the 
veterans in the area to pay. I would like to have us go back 
and address that. I would like to invite you to Nebraska to 
talk to people on the ground, either informally or through a 
field hearing or in some capacity to truly find what the 
challenges are, because there are three As about it. 
Affordability is obviously one of them; availability and 
accessibility, and if it is not accessible, I can assure you it 
is not available. And if it is not affordable, then the other 
As are in doubt as well.
    So I am hopeful that we can work through this. I am 
concerned about the ability of people to pay, and certainly, 
Category 7 or Priority 7 veterans need to be addressed. I am 
also mindful of finding a way to stretch dollars to meet the 
needs. I am not callous toward that, nor am I particularly 
parochial about Nebraska or our surrounding area. This problem 
exists in other states as well, and so, we are committed to 
work with you in every way that we can, but the bottom line is 
we have to find a solution. And if we can do it together, I 
think it is better than if we are trying to find it separately 
and work it at counterpurposes with one another.
    And so, I appreciate this opportunity; thank you, Mr. 
Chairman, and we will be getting back in touch with your office 
about the possibility of a field hearing on this merger.
    Secretary Principi. I would be happy, Senator Nelson, to 
visit Nebraska with you and to do a town hall meeting together 
or to do a field hearing. Call the chairman, and we can work 
out a mutually convenient date, I am sure, in the very near 
future.
    Perhaps Dr. Murphy can add, but I would just like to say at 
the outset in case there is a misunderstanding: at one time, we 
had seven what you might call VISN's. We then went down to four 
regional headquarters. Then, a change was made in the mid-
1990's to go to--we called them regions back then--to go to 22 
VISN's or networks. So there is really no magic number, sir. I 
tend to think that we have too many, but the cost and the 
instability of consolidating more are important factors. We had 
an opportunity to take two very small networks, Networks 13 and 
14, and bring them together. But, sir, all we did was combine 
the administrative overhead, about 15 or 20 people in each 
office. None of the hospitals or the clinics were, so to speak, 
merged. None were closed.
    The only thing we did was to take a look at the admin 
offices that oversaw the respective VISN's and put them 
together. Even with the combined admin office, 13 and 14 
combined is one of the smallest networks. I thought a 
compelling business case was made to put that overhead together 
and I certainly made that decision. But I would be more than 
happy to come out to Nebraska and talk about the decision and 
the rationale and what we need.
    I visited Omaha not too long ago. We have a wonderful 
hospital in Omaha, and it will stay as a vibrant hospital.
    Senator Nelson. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary.
    Dr. Murphy. I think the Secretary has made a very important 
point. The merger of Networks 13 and 14 into a single network 
hopefully should be completely transparent to the veteran, 
because they will be seeing their same doctor at the same 
clinic or medical center that they did prior to the merger. 
This is really an administrative efficiency and hopefully will 
allow us to recruit an energetic leader who will help solve 
some of the financial problems.
    The other thing that you mentioned was the Priority 7 
funding issue. We will be looking at some adjustments to the 
VERA allocation model this year with the help of the RAND 
Corporation Study. And we may be looking at a mechanism to fund 
Priority 7 veterans and a way to risk-adjust for the most 
complex patients and to appropriately fund networks who have 
both more Priority 7's and more seriously ill patients. I think 
both of those will help the funding levels in the new Network 
23.
    Senator Nelson. Mr. Chairman, if I might, just 1 second. I 
heard you say and I have heard it as well that one of the 
reasons for merging the VISN's is that it might be easier to 
find a more energetic person. I think there are energetic 
people in Nebraska. I know that is not what you are suggesting, 
but I heard that as part of the explanation, that we could not 
find somebody where the VISN's were currently located to do it, 
but we might be able to find somebody by merging them.
    And I do not understand that logic. I really do not. I will 
help you find somebody if----
    [Laughter.]
    Senator Nelson. I am not in that business, but I can sure 
get into that business real quickly if that seems to be the 
challenge. But I know that it is more than that, but I did not 
understand that at the beginning. You do not need to respond to 
it. It is just something--I just want the record to reflect 
that there are energetic, well-educated and talented people in 
our area as well. [Laughter.]
    Thank you.
    Dr. Murphy. And I did not mean to suggest otherwise.
    Senator Nelson. I know you did not. I know you did not.
    Chairman Rockefeller. Nobody will dispute that.
    Senator Nelson. OK; thank you.
    Chairman Rockefeller. Is that all, Senator Nelson?
    Senator Nelson. That will do it. Thank you.
    Chairman Rockefeller. OK.
    Senator Nelson. And I have to get back to the Armed 
Services, too, so thank you.
    Chairman Rockefeller. I am very interested when you talk 
about Nebraska as being geographically challenged, because I 
think of all of the flat land in Nebraska, and I think of West 
Virginia as having only 4 percent flat land and 96 percent 
mountains. I am trying to figure out how you are challenged. 
[Laughter.]
    Senator Nelson. Well, the difference, Senator, may be that 
your population lives on that 4 percent of your land that is 
not mountainous. Ours is flat, and people live everywhere. It 
is just that there are not very many of them. [Laughter.]
    And it is as far from the western part of the State to the 
eastern part of the State, from the Wyoming border to the 
Missouri River as it is from the Missouri River in Nebraska to 
Chicago. So it is a challenge. Thank you. I invite you to come 
out.
    Chairman Rockefeller. Thank you, Senator.
    Mr. Secretary, there are four more questions now that I 
have the place to myself--that I wanted to ask. And one is to 
followup on something that Senator Specter was talking about, 
and that is the homeland security aspect. I mean, let us face 
it: philosophically, what makes this year so hard--and probably 
the next 25 years so hard--is that we are fighting a war on 
terrorism. This takes an enormous amount of resources, and 
nobody questions, in general terms, those resources. And yet, 
you do not stop the work of being a country, and people do not 
stop having needs.
    So we go into budget deficits. I cannot object to that, 
because we have to get things done, and veterans really need to 
be at the head of that list. So, I mean, things become harder, 
but it cannot ultimately be an excuse for us not doing what 
needs to be done. So with that as a preface: let's talk about 
your internal committee recommended for preparedness. Emergency 
preparedness is huge in the present-day context. I mean, you 
know, that we have got an alert out now, and will for many 
years to come.
    You recommend a minimum budget of $118 million to equip 
hospitals with necessary staff, training and materials for 
disasters, particularly for bioterrorism. And there is just a 
lot of talk about that happening. VA's 2003 budget includes 
only $55 million for all emergency preparedness, and VA got $2 
million, barely enough for its existing HHS obligations, from 
the Defense supplemental. How do you work that? I mean, 
everybody has got to get to the table on this subject of 
preparedness. Everybody agrees that the VA hospitals are an 
absolute national resource, which a lot of even my colleagues 
do not recognize, because they are thinking in sort of more 
conventional terms. But this is an enormous resource, and we 
have been talking about it for awhile.
    How do you justify this?
    Secretary Principi. Unfortunately, the VA is not thought of 
when some of the decisions are being made, if you will, on 
homeland security. You think of addressing the health care 
needs, and rightfully so, the funding goes to HHS and other 
security needs, homeland security. It is not that we are not at 
the table discussing these issues. We are fighting; we are 
working with HHS and Homeland Security for part of the 
resources that are being made available to those agencies to 
address the bioterrorism threat.
    I just believe that the VA has such enormous capability and 
size that we can bring great value and preparedness to this 
area. But like everything else, to build toxicologic capacity, 
burn capacity, decontamination and the other capacities, you 
have to invest resources. And I am very reluctant to take 
scarce resources, obviously, from treatment of veterans to 
devote to this area without the additional resources necessary 
to do so.
    Chairman Rockefeller. So, then, should you not go scare the 
dickens out of the appropriators? VA is a national resource, 
and therefore we need to take them through what the other 
alternatives are. Private hospitals cannot do it alone. A 
couple of them are preparing in my state of West Virginia, but 
they cannot afford to do everything--80 percent of our 
hospitals are losing money.
    You are on a budget. It is strictly up to the 
Appropriations Committee. They purport to be highly interested 
in national security and homeland security, and VA is central 
to that. I mean it is sort of a question of being sort of 
brutal with them, is it not?
    Secretary Principi. Absolutely; I agree, and we will. 
Perhaps we need to articulate our case better. That is not to 
say we are not working with them. I do not want to misrepresent 
the situation--we are working very, very closely with HHS and 
Homeland Security. Dr. Murphy can talk more about the 
specifics. But clearly, the funding has not been what we 
believe is necessary to have that level of readiness, if you 
will. And again, I think the beauty of the VA is the fact 
that--not only that we are dispersed throughout America but 
that we are under complete Federal control, and Dr. Murphy, or 
whomever, can direct people to do things if it is necessary.
    That is a little different than in the private sector. The 
private sector does not have that level of control and 
direction. We do. I believe we procure the pharmaceuticals for 
the caches that are prepositioned around the country in the 
event of a national emergency. I also believe we have 
purchased--you can go into more of the detail, Dr. Murphy--
other drugs that are needed by HHS. Clearly, more needs to be 
done, and it requires funding.
    Dr. Murphy. If I could add to what the Secretary said, I 
think there is a basic lack of understanding of the VA health 
care system. We are part of the Federal public health 
infrastructure. And when you talk about planning for improving 
the public health infrastructure of this country, VA needs to 
be seen as a core part of that. The public health resources are 
now going out to the States and the communities. Well, VA is 
part of those communities, and we need to be an active player. 
If we are going to provide the kind of matrix needed for a 
Federal cadre of health care providers in this country, the one 
organization that can do that--that is on the ground, taking 
care of patients and can help lead in a time of national 
emergency--it is the VA. It is the VA health care providers and 
their expertise.
    We have begun a national training program for all of our 
health care providers in emergency preparedness. Each of our 
medical centers has been given a guidebook on how to develop an 
all-hazards plan. We have made a proposal and begun putting 
together pharmaceutical caches that will be located at each of 
our medical centers, and depending on the size of the community 
or the size of the veteran population, they will be prepared to 
take care of either 2,000 or 1,000 individuals who might have 
been exposed to a chemical or a biological attack.
    So far, we have purchased enough for 22 sites, and over 
time, we will be, you know, as quickly as possible, putting 
them together and locating them at each of our medical centers.
    Why do that if we have national caches? Well, because if 
there is an emergency, we want to be able to take care of 
veterans who are hospitalized and our staff, so that they can 
continue providing care. It is a necessary part of being a 
health care provider. We need to do that. We also need to have 
decontamination equipment, and we need to have personal 
protective equipment so that our staff can be protected and 
continue to provide the care that is so important not only for 
the veterans but for the communities that we work in.
    And I think that it is a deficiency of the current plan 
that VA has not been given a more active role. It is part of 
our primary mission, and it is part of our fourth mission.
    Chairman Rockefeller. So make your case.
    Secretary Principi. Will do.
    Chairman Rockefeller. And I know you will. I know you will.
    One thing on copayments--I have already made a point, as 
has Senator Specter, but this is interesting to me. I think 
this is the first budget where you anticipate collecting more 
revenue from veterans than you do from insurance companies.
    Secretary Principi. That is correct.
    Chairman Rockefeller. And it is a little bit odd, because, 
on the one hand, we can say we are providing more money to VA, 
but then, VA turns around and collects huge amounts from 
veterans, rather than insurance companies.
    Secretary Principi. Yes, of course, and that increase 
includes the deductible; you are right.
    Chairman Rockefeller. I know that, and you were very candid 
about that in your opening statement. You were very candid 
about all of that.
    On claims processing, your goal for the coming fiscal year 
is to go to 100 days, down from 208 days, while still 
increasing the accuracy of the decisionmaking, and perhaps this 
is you, Mr. McMichael. What specific measures do you expect 
will shave that kind of time off? Whenever I hear something 
that is that good, I want to hear how it happens without 
sacrificing the accuracy factor.
    Secretary Principi. Important point, Senator, and that is 
by the end of the third quarter of 2003, we hope to have 
achieved that goal. I will let Guy McMichael talk about the 
particulars. I think that there are a couple of factors that 
Guy can build on. First, Congress and the administration gave 
us over 1,000 people last year: 1,100 or 1,200 people, the vast 
majority in our disability compensation arena. Those folks have 
been trained. That will make a big difference.
    Chairman Rockefeller. And I have seen some of the 
technology. You have unique technology.
    Secretary Principi. They are good, young, talented people 
that I see around the country. We will hire another 100 to 125 
people in 2003. If I need more, I will come to you and ask for 
more. We have those people now on board, getting them trained. 
And I believe that Admiral Cooper's task force has come up with 
some excellent recommendations that, by triaging, 
specialization, the tiger team to address the claims of the 
oldest veterans, I believe will help us get there.
    Am I convinced that we are going to achieve it? I am 
optimistic, but are watching it very carefully. Every month, 
Guy briefs me on where we are, what our performance has been 
for the previous month, and our production goals. We are 
looking at measuring quality. We are adding people to our 
review teams. Our quality has never been higher--at least I 
should say our accuracy, because our quality is timeliness, 
too, but our accuracy is at 88 percent. You know, it was 59 
percent in the year 2000, so our accuracy is very, very good.
    It is going to take a lot of disciplined, focused 
leadership, and people are going to be held to high performance 
levels. There have not been performance standards in the past, 
and we have those now. People are responding. I am very, very 
gratified by what have I seen. Guy, could you add to that, 
please?
    Mr. McMichael. Well, the Claims Task Force had 34 principal 
recommendations which we have translated into 66 action items. 
I have had the opportunity to brief your staff on these 
matters, Mr. Chairman. I think the important thing is there is 
accountability. I would like to simply indicate that in January 
2002, we made some 62,000 rating decisions. That is compared to 
29,000 rating decisions for the previous January. So I think we 
are beginning to see the workload turn around. As new employees 
gain greater experience and as we are able to fit them into 
specialized teams so that we can use the appropriate experience 
they have to buildup expertise in particular areas, I think we 
will see increased productivity and a decline in the average 
number of days.
    There is a great deal we can do in reducing cycle time 
processing. We now have inventory management systems in place 
which we can pinpoint how long it takes to get a claim under 
control; how long it takes to initiate development. I was 
astounded to find, for example, that getting a claim under 
control took an average of 30 days and that the average time 
for initiating development on a claim was close to 68 days. 
These are real opportunities to reduce processing time. We are 
watching this very closely through an inventory management 
system so that we can track the status of cases at the regional 
office, team, or individual employee level.
    Chairman Rockefeller. Gentlemen and ladies, thank you very, 
very much. Thank you for your patience, and thank you for your 
candor. Thanks, Tony.
    Our second panel will be veterans service organizations. If 
I could have order, please. The gentleman on the right, please.
    The second panel includes representatives of the 
independent budget, who will be introduced by Bob Jones, who is 
Executive Director of AMVETS; Richard Fuller, National 
Legislative Director, Paralyzed Veterans of America; Rick 
Surratt, Deputy Legislative Director, Disabled American 
Veterans; Paul Hayden, Associate Director of Legislation, VFW; 
and Rick Jones, Legislative Director, AMVETS; and here also is 
Jim Fischl, National Veterans Affairs and Rehabilitation 
Commission, the American Legion. We will start with Mr. Jones.

  STATEMENT OF BOB JONES, NATIONAL EXECUTIVE DIRECTOR, AMVETS

    Mr. Bob Jones. Mr. Chairman, thank you so very much for 
having us here this morning. Sir, I would request that my 
prepared testimony be entered into the official records, 
please.
    Chairman Rockefeller. That is always the case.
    Mr. Bob Jones. Thank you, sir. Sir, I would like to thank 
you and Ranking Member Specter and the rest of the committee 
for their continuing invaluable support for the independent 
budget. As you are aware, this is the 16th year for the 
independent budget, and it has been endorsed by over 40 
veteran, military, and medical associations.
    We believe that the independent budget provides rational, 
rigorous and sound review of our veterans' needs. We believe 
that the VA is an excellent investment for America, and with 
proper resourcing, it is essential to maintain a well-
functioning system. VA services should not suffer with unfunded 
mandates. We do not want to see the possibility of rationed 
health care in the future. The President expressed in his State 
of the Union support for an improved medical care program 
within the Department of Veterans Affairs, and we are pleased 
with that.
    However, Mr. Chairman, we believe that the administration's 
proposed $22.75 billion for health care is approximately $1.75 
billion lower than we in the independent budget organizations 
believe is required for maintaining that health care system. 
Yesterday, we heard from the Chairman of the House Veterans' 
Affairs Committee and Ranking Member Evans who pledged their 
opposition to the $1,500 deductible for Category 7s that has 
been proposed by the administration. We sincerely appreciate 
your comments of concern, and we hope that the Congress will 
overturn that administration proposal.
    Sir, though the independent budget does not have a position 
concerning the transfer of VETS, we do have a position 
concerning the adequate resourcing and the outcomes of service 
delivery. I would like to stress that AMVETS as a national 
organization strongly opposes the transfer of the Veterans' 
Employment and Training Service from the Department of Labor to 
the Department of Veterans Affairs. We do believe that improved 
service delivery outcomes that are based on performance 
standards are absolutely critical, and we believe that the 
current proposal has been ill-defined and do not support that 
proposal.
    Sir, with your concurrence, I would like to yield the rest 
of my time to my colleagues so that we can get to the core of 
the independent budget.
    Chairman Rockefeller. Certainly.
    [The prepared statement of Mr. Bob Jones follows:]

  Prepared Statement of Bob Jones, National Executive Director, AMVETS

    Mr. Chairman, Ranking Member Specter, and Members of the 
Committee.
    I am Mr. Bob Jones, Executive Director of AMVETS and 
Chairman of The Independent Budget for Fiscal Year 2003.
    Thank you for the opportunity to be here today to present 
The Independent Budget, co-authored AMVETS, Disabled American 
Veterans, Paralyzed American Veterans and the Veterans of 
Foreign Wars. As you know, this is the 16th annual budget 
presented by our coalition, and we are proud that more than 40 
veteran, military and medical service organizations endorse 
these recommendations. In whole, these recommendations provide 
Congress with a rational, rigorous and sound review of the 
budget required to support the vital programs for our nation's 
veterans.
    In developing this document, we believe in certain guiding 
principles. Veterans must not be forced to wait for the 
benefits promised them. Veterans must be assured of access to 
high quality healthcare. Veterans must be guaranteed access to 
a full continuation of healthcare services, including long-term 
care. And, veterans must be assured burial in state or national 
cemetery in every state.
    It is our firm belief that the mission of the VA must 
continue to include support of our military in times of 
emergency and war. Just as this support of our military is 
essential to national security, the focus of the VA medical 
system must remain centered on specialized care. VA's mission 
to conduct medical and prosthetics research in areas of 
veterans' special needs is critical to the integrity of the 
veterans healthcare system and to the advancement of American 
medicine.
    In addition, it must be recognized that VA trains most of 
the nation's healthcare workforce. The VA healthcare system is 
responsible for great advances in medical science, and these 
advanced benefits all Americans. The VHA is the most cost 
effective application of federal healthcare dollars, providing 
benefits at 25 percent lower cost than other comparable medical 
services. In times of national emergency, VA medical services 
can function as an effective backup to the DoD and FEMA. In the 
State of the Union Address, the President stated his support 
for increased funding for VA healthcare services.
    After mentioning the important mission of the VA, I must 
now point to the areas where VA funding must be increased. The 
VA budget must address the pending wage increases for VA 
employees. It must also address VA's large casework backlog. 
There are severely disabled veterans and those needing home-
based healthcare in those backlogs and I think we can all agree 
that this situation should be reversed.
    Without adequate funding, healthcare services may need to 
be rationed. The funding shortfall of the FY '02 budget, paired 
with continued open enrollment makes it very difficult for VA 
to provide quality healthcare in a timely manner.
    On the administration's legislative proposal, we call on 
Congress to provide adequate funding to avoid implementation of 
the $1,500 deductible on priority seven veterans.
    The bottom line Mr. Chairman is that VA is an excellent 
investment for America. Proper funding levels for the VA makes 
good fiscal sense to maintain a well functioning system. To 
this end, the administration must increase VA medical care 
funding to $24.5B for FY '03, an increase of $3 billion over 
last year's VA budget.
    One more point that deserves comment is the proposed 
transfer of the Veterans Employment and Training Services 
(VETS) to VA. Clearly, VA has its own challenges with 
healthcare waiting lists and backlogs in claims processing. VA 
is ill prepared to accept a program, which is so naturally 
suited to the Department of Labor (DOL). DOL has the 
departmental knowledge regarding the job-market. It knows where 
the jobs are and the skill required to fill them. Shifting VETS 
from one department to another is not a ``magic bullet,'' and 
it will not serve veterans better. Now is not the time to cut 
VETS programs from DOL.
    Mr. Chairman, this concludes my remarks. I will now 
introduce the gentleman who will testify to specific 
recommendations of The Independent Budget for FY '03. Rick 
Surratt, representing the Disabled Americans Veterans, will 
brief you on The Independent Budget's benefits priorities. 
Harley Thomas, of the Paralyzed Veterans of America, will 
address the vital needs in the VA healthcare system. Fred 
Burns, of the Veterans of Foreign Wars, will inform you of the 
critical problems of the VA's infrastructure and construction 
needs, and Rick Jones, of AMVETS, will offer you The 
Independent Budget concerns regarding our nation's veterans 
cemeteries.

  STATEMENT OF RICHARD FULLER, NATIONAL LEGISLATIVE DIRECTOR, 
                 PARALYZED VETERANS OF AMERICA

    Mr. Fuller. Good morning, Mr. Chairman. I am Richard 
Fuller, National Legislative Director of Paralyzed Veterans of 
America. I am sitting in today for our Deputy Executive 
Director, Mr. John Bollinger.
    As we have for the past 16 years, Paralyzed Veterans of 
America is once again pleased to be responsible for the health 
care recommendations and analysis for the Department of 
Veterans Affairs, Veterans Health Administration budget. I 
shall address these today in my testimony. For fiscal year 
2003, ``The Independent Budget'' recommends a medical care 
appropriation of $24.468 billion. That is an increase of $3.1 
billion over fiscal year 2002. This proposed increase does not 
assume any new initiatives or work load increases.
    Over the last 5 years, the VA has served a constantly 
growing number of veterans with appropriations that have 
steadily declined in purchasing power. The fiscal year 2001 
health care appropriation was $564 million short of the amount 
recommended by ``The Independent Budget,'' and the fiscal year 
2002 budget falls $1.5 billion short. Already a few months into 
fiscal year 2002, the administration has reported a shortfall 
of close to $500 million and is seeking supplementary funding, 
which is a step we fully support.
    Nationally, Mr. Chairman, we are witnessing an explosion in 
health care costs, especially in pharmaceutical costs, which 
have been discussed today. The VA has not been immune to this 
trend, even though it does purchase pharmaceuticals at discount 
rates. According to a report from the Department of Health and 
Human Services, national health care spending increased 6.9 
percent in the year 2000, and the fastest-growing segment of 
health care spending is, of course, prescription drugs, which 
increased 17.3 percent in 2000.
    This represents the sixth consecutive year of double-digit 
increases in pharmaceutical costs. Spending on prescription 
drugs has doubled between 1995 and 2000 and has tripled between 
1990 and 2000. VA health care budgets have not kept pace with 
this explosive spending growth. The real effect of inadequate 
health care appropriations is felt by sick and disabled 
veterans every day, and inadequate appropriations force the VA 
to ration care by lengthening waiting times and delaying 
services.
    As has been discussed here this morning, when you subtract 
all of the window dressing from the administration's budget, 
the administration has proposed a medical care appropriation of 
$22.7 billion, an increase of only $1.4 billion over fiscal 
year 2002. Although veterans appreciate any increase, we are 
also cognizant of the fact that this does not meet the needs of 
the VA in the coming fiscal year and does not provide the 
resources necessary to ameliorate the recent effects of 
inadequate appropriations.
    Again this year, Mr. Chairman, we have not included 
collections as part of our recommendations concerning 
appropriated dollars. As we state in ``The Independent 
Budget,'' we recognize that nonappropriated funding may be 
available to expand VHA operations and ultimately improve care 
for veterans, but we are strongly committed to the principle 
that the cost of VA health care is a Federal responsibility 
that must be met in full by Congress and the administration 
through adequate appropriations. VA must not be forced to rely 
on subsidies from veterans or their insurance to cover the cost 
of caring for veterans, and veterans must not be held hostage 
through collection estimates that very well may be far-fetched 
or issued solely to cover budgetary holes left by inadequate 
appropriations or other budget requests.
    As discussed earlier as well, ``The Independent Budget'' is 
opposed to the administration's proposal to begin charging a 
$1,500 deductible for health care for Category 7 veterans. The 
only reason, I believe we would concur with you, Mr. Chairman, 
for the imposition of a deductible requirement is not to raise 
money, but is just a means of discouraging currently eligible 
veterans from seeking VA health care. Last year, the 
administration announced that it would continue to enroll 
Category 7 veterans, and it said that it would find the money 
someplace. But instead of finding the additional resources, it 
has proposed to have veterans pay for this care out of their 
own pockets or disenroll themselves.
    The VA itself estimates that a deductible will deter 
121,000 veterans from seeking health care. Requiring the 
deductible could adversely affect lower-income veterans, 
veterans whose insurance will not pay the deductible and who 
want and need to go to the VA.
    I would just like to, in closing, Mr. Chairman, say that 
``The Independent Budget'' fully concurs with the comments that 
were made here about the VA's role in homeland defense. The 
Secretary requested $250 million last year. That was the 
estimate he gave. We strongly believe that potentially, that 
could be part of a supplemental appropriation going through the 
Congress. The VA has an enormous role to play.
    We would also like to underscore our support for the VA 
research program. VA research needs consistent and steady 
funding from year to year and not funding ups and downs and ups 
and downs. ``The Independent Budget'' recommends $460 million 
for VA research, which is an increase of $89 million over 
fiscal year 2002.
    That concludes my part of the testimony, Mr. Chairman.
    [The prepared statement of the Paralyzed Veterans of 
America follows:]

  Prepared Statement of John C. Bollinger, Deputy Executive Director, 
                     Paralyzed Veterans of America

    Mr. Chairman, Ranking Minority Member Specter, members of 
the Committee, the Paralyzed Veterans of America (PVA) is 
honored, on behalf of our members and the Independent Budget, 
to present our views on the Department of Veterans Affairs' 
(VA) budget for fiscal year (FY) 2003. We are proud to be one 
of the four co-authors, along with AMVETS, the Disabled 
American Veterans, and the Veterans of Foreign Wars, of the 
16th Independent Budget, a comprehensive policy document 
created by veterans for veterans.
    The Independent Budget is an annual budget and policy 
review for veterans programs and represents an unprecedented 
joint effort by the veterans' community to identify the major 
issues facing the veterans' community today while serving as an 
independent assessment of the true resource and policy needs 
facing veterans. As we have for the past 16 years, it is our 
distinct pleasure, once again, to be responsible for the health 
care recommendations and analysis, and I shall address these in 
my testimony today.
    For FY 2003, the Independent Budget recommends a medical 
care appropriation of $24.468 billion, an increase of $3.1 
billion over FY 2002. This proposed increase does not assume 
any new initiatives or workload increases. Unfortunately, we 
are seeing the effects of an inadequate budget for FY 2002, a 
budget that we estimate to be $1.5 billion less than the amount 
required. To address this shortfall, and to provide for the 
current services requirements of the VA, the Independent Budget 
has requested this $3.1billion increase.
    This amount is a realistic assessment of what the VA must 
have in order to meet its obligations, both statutorily and 
morally. This recommended increase addresses the ``current 
services'' requirements of VA health care for FY 2003, while 
recognizing the cumulative funding shortfalls faced by the 
system over the last two years.
    Over the last five years, the VA has served a constantly 
growing number of veterans with appropriations that have 
steadily declined in purchasing power. The FY 2001 health care 
appropriation was $564 million short of the amount recommended 
by the Independent Budget, and the FY 2002 budget falls $1.5 
billion short. Already, a few months into FY 2002, the 
Administration has reported a shortfall of close to $500 
million, and is seeking supplementary funding, a step we fully 
support.
    Nationally, we are witnessing an explosion in health care 
costs, especially in pharmaceutical costs. The VA has not been 
immune to this national trend. According to a report from the 
Department of Health and Human Services, national health care 
spending increased 6.9 percent in 2000. The fastest growing 
segment of health care spending is prescription drugs, which 
increased 17.3 percent in 2000. This represents the sixth 
consecutive year of double-digit increases. Spending on 
prescription drugs has doubled between 1995 to 2000, and has 
tripled between 1990 and 2000. VA health care budgets have not 
kept pace with this explosive spending growth.
    The real effect of inadequate health care appropriations is 
felt by sick and disabled veterans every day. Inadequate 
appropriations force the VA to ration care by lengthening 
waiting times and delaying services.
    The Administration has proposed a medical care 
appropriation of $22.744 billion,\1\ an increase of $1.4 
billion over FY 2002. Although veterans appreciate any 
increase, we are also cognizant of the fact that this does not 
meet the needs of the VA in the coming fiscal year, and does 
not provide the resources necessary to ameliorate the effects 
of recent inadequate appropriations. Unless additional 
resources are provided, the current situation, as intolerable 
as it is, will continue into the foreseeable future, and sick 
and disabled veterans will once again be shortchanged by the 
very government they have served, and rely upon to care for 
them.
---------------------------------------------------------------------------
    \1\ We have subtracted, from all Administration requests, amounts 
attributable to the legislative proposal put forth by the 
Administration that would include accrual costs for pension and post-
retirement benefits for federal retirees. For medical care, this figure 
is estimated to be $793 million for FY 2003.
---------------------------------------------------------------------------
    Again, we note that the Administration's budget relies upon 
``management efficiencies'' to address real budgetary needs. It 
seems that every year ``management efficiencies'' are a handy 
way of making the budgets seemingly balance. As the Independent 
Budget states, ``there are no more `efficiencies' to be wrung 
out of the system. For the last five years, VHA [Veterans 
Health Administration] has served a constantly growing number 
of veterans with appropriations that have been steadily 
declining in purchasing power.''
    Again this year we have not included collections as part of 
our recommendations concerning appropriated dollars. As we 
state in the Independent Budget, we recognize ``that 
nonappropriated funding may be available to expand VHA 
operations and ultimately improve care for veterans, we are 
strongly committed to the principle that the cost of VA health 
care is a federal responsibility that must be met in full by 
Congress and the Administration through adequate 
appropriations. VA must not be forced to rely on subsidies from 
veterans or their insurers to cover the costs of caring for 
veterans.'' Veterans must not be held hostage through 
collection estimates that very well may be far-fetched or 
issued solely to cover budgetary holes left by inadequate 
appropriations.
    The Independent Budget is opposed to the Administration's 
proposal to begin charging a $1500 deductible for health care 
for category 7 veterans. The primary reason we can see for the 
imposition of a deductible requirement is to discourage 
currently eligible veterans from seeking VA health care. 
Recently, the Administration announced that it would continue 
enrolling category 7 veterans. It said that it would find the 
resources to cover the costs of these health care services. 
Instead of providing the additional resources, it has proposed 
to have veterans pay for this care out of their own pockets. 
The VA itself estimates that a deductible will deter 121,000 
veterans from seeking health care. Requiring a $1500 deductible 
could adversely affect lower-income veterans, veterans whose 
insurance will not pay the deductible, and who want and need to 
go to the VA particularly to provide services they cannot find 
elsewhere in the private sector or on Medicare, for instance 
long-term care, prescription drugs, or specialized services. 
Finally, we are concerned about the perverse disincentive that 
this deductible scheme could have on veterans who represent the 
core mission of the VA. The Independent Budget proposal fully 
covers the cost of providing care for these category 7 
veterans.
    We are very concerned that the Administration has failed to 
provide funding for the VA to meet its critical fourth 
mission--to serve as a backup to the Department of Defense in 
times of war or national emergency. The VA is also a critical 
component of the federal government's emergency response 
capabilities, and an integral part of our national homeland 
defense efforts. Headlines read ``Bush's Budget Doubles 
Homeland Funds,'' and ``Bush to Request Big Spending Push on 
Bioterrorism,'' but there are no resources made available to 
the VA. As the Washington Post reports, ``while police and 
firefighters, border security agents, bioterrorism experts and 
intelligence agencies understandably were among the biggest 
winners in the new budget--which contains nearly $38 billion 
for domestic security activities--agencies that once had only 
the most remote links to homeland security would be showered 
with funds for that purpose.'' Pianin and Miller, ``Security 
Permeates Budget,'' Washington Post, February 5, 2002, A7. But 
the VA has been forgotten.
    This national emergency entails not only a crisis abroad, 
but a crisis here at home. As the VA serves as a backup to our 
Armed forces, it also serves as a backup to, and an integral 
part of, our Nation's health care system. When terrorists 
struck New York City, the VA was there, caring for victims. In 
fact, the Government Accounting Office, in its January 2001 
report entitled ``Major Management Challenges and Program 
Risks'' (GAO-01-255) characterizes the VA's role as the 
``primary backup to other federal agencies during national 
emergencies.'' The VA must be prepared, and provided with the 
resources it needs, to accomplish this comprehensive and vital 
mission.
    Taking its lead from requirements detailed in Congressional 
testimony by Secretary Principi, the Independent Budget has 
requested $250 million to meet its duties in this area.
    The stresses on the VA system will only become more severe. 
The VA plays an indispensable role as part of the federal 
commitment to states and local communities in times of national 
emergency and disaster. The VA does not have the resources to 
meet its responsibilities to sick and disabled veterans, and 
the Independent Budget fears that the VA will not be able to 
fulfill its important responsibilities under this critical 
fourth mission.
    The Independent Budget has recommended an increase for 
Medical Administration and Miscellaneous Operating Expenses 
(MAMOE) of $9 million, bringing this account up to $76 million. 
The Administration has requested $70 million, an increase of 
only $3 million. Funding shortfalls in the MAMOE account have 
left the VA unable to adequately implement quality assurance 
efforts or to provide adequate policy guidance within the 22 
Veterans Integrated Service Networks (VISN). Veterans Health 
Administration headquarters staff play the essential role of 
providing leadership, policy guidance, and quality assurance 
monitoring under the decentralized VA health care system. It is 
important that these important roles be strengthened.
    Although VA Medical and Prosthetic Research has not 
suffered the same budget pressures that have beset health care, 
it is still suffering from the uncertainty it faces each budget 
cycle. Research, which is essential to VA's continuing 
partnerships with medical schools and universities, requires a 
long-term commitment and stable, reliable funding. This needed 
stability is undermined by the annual budget game, where the 
Administration submits an unreasonably low budget for this 
vital program and relies upon Congress to partially redress the 
shortfall. This has a direct impact upon the research 
community, hampering its planning and funding decisions as it 
tries to adjust to this yearly funding whiplash. This game must 
stop. VA research must receive consistent and adequate budget 
increases in order to keep pace with our national research 
effort. For FY 2003, the Independent Budget recommends an 
appropriation of $460 million, an increase of $89 million over 
FY 2002.
    The Administration has proposed $394 million for VA 
research, an increase of $23 million over the amount provided 
in FY 2002, but a full $66 million below the $460 million 
recommended by the Independent Budget.
    We recognize that this Committee does not appropriate 
dollars, but you do authorize them. You serve as a resource, 
and as advocates, to the appropriators as they fashion 
budgetary policy. The authorization process must recognize the 
real resource requirements of the VA. We look to you, and your 
expertise in veterans' issues, to help us carry this message 
forward, to your colleagues and to the public.
    The VA is facing a crucial hour in a critical time. As a 
Nation we must not forget the sacrifices, and the service, of 
the men and women who served on the ramparts of freedom. If we 
provide inadequate budgets we are sending a clear message 
concerning what we value as a society. Let us make sure that 
the message we send is consistent with what we believe 
ourselves to be.
    We need your help, and we offer our assistance, to ensure 
that the VA receives the funding it needs to ensure that 
veterans receive the health care they have earned, and the 
health care they have been promised. Let us move forward from 
our accomplishments of the last couple of years and build a 
strong, and continuing base, for the national asset that is the 
VA.
    On behalf of the co-authors of the Independent Budget, I 
thank you for this opportunity to testify concerning the 
resource requirements of VA health care for FY 2003. I will be 
happy to answer any questions you might have.

    Chairman Rockefeller. Thank you.

    STATEMENT OF RICK SURRATT, DEPUTY NATIONAL LEGISLATIVE 
              DIRECTOR, DISABLED AMERICAN VETERANS

    Mr. Surratt. Mr. Chairman, good morning. I am Rick Surratt 
with the DAV. I will focus on the benefit programs, the DAV's 
primary area of responsibility in the independent budget. Other 
than permanent authority for income-matching between the 
agencies for pension purposes, the President's budget includes 
only one legislative proposal for the benefit programs, and 
that is for an annual compensation COLA. In addition to 
recommending a COLA to keep compensation in line with the 
increase in the cost of living, the IB makes a number of 
recommendations to improve the benefit programs.
    Last year, you enacted several of the things recommended by 
the IB, and we appreciate that. In this year's IB, we have 
identified other areas where we think the benefits need changes 
to make them better or more equitably serve veterans. I will 
not cover those several recommendations here, but we hope you 
will give them careful consideration.
    Of course, the President's budget includes no funding to 
cover the cost of these improvements, and that is always an 
issue for this committee. No matter how carefully the benefit 
programs are crafted, they lose effectiveness if they are not 
administered well. If claims are not decided correctly, and 
benefits are not delivered timely, veterans suffer, especially 
veterans seeking compensation to make up for the economic 
losses caused by service-connected disabilities and 
impoverished veterans, totally disabled veterans seeking 
pensions.
    VA has struggled unsuccessfully for years to overcome 
serious deficiencies in its processing of compensation and 
pension claims. There is no longer any question about the 
magnitude of the problem. The question is whether VA has the 
will and the resolve to take the necessary steps to correct the 
problem. In the context of the budget, there is a question of 
whether VA must have additional resources to enable it to gain 
control over its quality problems and its enormous volume of 
long-pending claims. The IB has recommended to the VA that it 
concentrate its focus first on solving the root causes of its 
claims processing problems. We have identified those root 
causes as inadequately trained adjudicators or lack of 
accountability for proper actions and legally correct claims 
decisions and management weaknesses.
    The IB observes that VA's repeated failures to successfully 
overcome its claims processing problems stem from its failure 
to tackle the toughest problems, that is, the root causes and 
stay the course until those problems are resolved.
    Chairman Rockefeller. What are the toughest problems you've 
identified?
    Mr. Surratt. Well, it is quality, and quality stems 
somewhat from resources and from a lack of accountability and a 
lack of strong management, and the quality, in turn, causes 
rework and overburdens in an already heavily loaded system.
    VA must also resist its self-defeating tendency to rush 
decisionmaking to reduce its claims backlog only to rework a 
substantial portion of these cases because of errors and add to 
the volume of work and ultimately to the backlog. While the IB 
agrees with the argument that VA must get more serious about 
implementing meaningful reforms and follow through until those 
reforms are fully achieved, we do not agree with the convenient 
suggestion that VA needs no increase in staffing to accomplish 
this. To allow it to take the necessary steps to properly train 
its work force and monitor quality without reducing the number 
of employees working on pending claims, VA still needs to 
increase staffing in its claims processing system.
    VA cannot succeed without properly training those who 
decide claims and without enforcing quality standards. With the 
large volume of pending claims, VA must at the same time 
maintain full claims processing capacity. The IB, therefore, 
recommends that 350 additional FTE be authorized for VA's 
Compensation and Pension Service. The President's budget seeks 
only 96 additional employees for C&P.
    Even with the very best administrative process, mistakes 
are inevitable in a mass adjudication system like VA's. That is 
why an effective judicial review process is essential to ensure 
that veterans receive the benefits to which they are entitled. 
The IB has made three recommendations to improve judicial 
review in veterans benefits matters, and we hope this committee 
will take action on these recommendations this year.
    Mr. Chairman, let me now turn to the $1,500 medical 
deductible scheme to make a point. It is a sad day when VA's 
new mission is to drive veterans away from the system. 
Regrettably, that tactic is not new to the benefits area. VA's 
new regulations these days seem designed to freeze veterans out 
of the system. VA attempts to inhibit what it cannot prohibit. 
The DAV and other veterans' organizations have begun to 
challenge VA regulations more frequently in court; in fact, it 
is becoming commonplace because of that reason. We hope this 
committee will work with us to ensure VA maintains its mission 
of service to veterans.
    Mr. Chairman, that concludes my statement. Thank you for 
allowing us to come before you today to offer our views on the 
fiscal year 2003 budget.
    [The prepared statement of Mr. Surratt follows:]

    Prepared Statement of Rick Surratt, Deputy National Legislative 
                  Director, Disabled American Veterans

    Mr. Chairman and Members of the Committee:
    Representing the Disabled American Veterans (DAV) as a 
participant in The Independent Budget (IB), I am pleased to 
appear before you to discuss the President's fiscal year (FY) 
2003 budget proposal for the Department of Veterans Affairs 
(VA). The budget is, of course, a matter of paramount 
importance to the more than one million disabled veterans who 
are members of our organization and to the members of our 
Women's Auxiliary. The effectiveness of essentially all 
veterans' programs--and therefore the welfare of veterans and 
their families--is dependent upon full funding for the benefits 
and services and resources adequate to allow for their timely, 
efficient delivery.
    Joining with AMVETS, the Paralyzed Veterans of America 
(PVA), and the Veterans of Foreign Wars of the United States 
(VFW), the DAV incorporates its annual recommendations for 
funding of veterans' programs, and many of its legislative and 
policy proposals, in the IB. With the shared goal of ensuring 
that the needs of America's veterans are adequately addressed, 
the four organizations pool their resources and work together 
to assess and present the budgetary requirements and related 
issues facing veterans' programs.
    Each of the four organizations takes primary responsibility 
for selected portions of the IB. Here, I will focus on Benefit 
Programs, General Operating Expenses (GOE), and Judicial Review 
in Veterans' Benefits, the DAV's assigned areas of the IB. The 
members of the IB group appreciate the courtesy this Committee 
has extended in permitting us to present our views together in 
this format.
    The President's total budget of $58 billion includes nearly 
$1.5 billion VA projects it will realize by offset from medical 
care collections, $892 million to pay a newly assumed 
obligation to fund employee health care and retirement costs, 
and $197 million for a new grant program for veterans' 
employment services to replace those veterans' employment 
programs now administered by the Department of Labor. The $58 
billion in budget authority for VA includes $29.6 billion for 
the benefit programs and $1.3 billion for GOE. Within the GOE 
appropriation, the President's budget would provide $1.2 
billion for the delivery of benefits in the Veterans Benefits 
Administration (VBA) and $278 million in budget authority for 
General Administration.
    For the benefit programs, the President's budget includes 
funding for its legislative recommendation to increase 
compensation, which includes dependency and indemnity 
compensation and the clothing allowance, to meet a projected 
increase in the cost of living of 1.8% this year. The IB also 
recommends a cost-of-living adjustment (COLA) for these 
benefits /and urges Congress not to extend provisions for 
rounding down the compensation COLA beyond the current sunset 
date.
    Regrettably, the President's budget does not propose any 
other improvements to compensation and related benefits, 
readjustment benefits, or insurance programs. For these benefit 
programs, the IB makes the following recommendations for 
legislation:
     to exclude compensation from countable income for 
Federal Programs
     to repeal the prohibition of service connection 
for disabilities related to tobacco use
     to authorize a presumption of service connection 
for noise-induced hearing loss and tinnitus suffered by combat 
veterans and veterans who had military duties with typically 
high levels of noise exposure
     to repeal delayed beginning dates for payment of 
increased compensation based on temporary total disability
     to authorize payment of fees under the Equal 
Access to Justice Act (EAJA) to nonattorneys who represent 
appellants before the United States Court of Appeals for 
Veterans Claims
     to authorize refund of contributions to veterans 
who become ineligible for the Montgomery GI Bill by reason of 
discharges characterized as ``general'' or ``under honorable 
conditions''
     to increase the amount of the specially adapted 
housing grants and to provide for automatic annual adjustments 
for increased costs
     to provide a grant for adaptations to a home that 
replaces the first specially adapted home
     to increase the amount of the automobile grant and 
to provide for automatic annual adjustments for increased costs
     to exempt the dividends and proceeds from and cash 
value of VA life insurance policies from consideration in 
determining entitlement under other Federal programs
     to authorize VA to use modern mortality tables 
instead of 1941 mortality tables to determine life expectancy 
for purposes of computing premiums for Service-Disabled 
Veterans' Insurance
     to increase the face value of Veterans' Mortgage 
Life Insurance
     to repeal the 2-year limitation on payment of 
accrued benefits
     to protect veterans' benefits from unwarranted 
court-ordered awards to third parties in divorce actions
    The IB also recommends legislation to remove the offset 
between military retired pay and disability compensation and 
legislation to extend the 3-year limitation on recovery of 
taxes withheld from disability severance pay and military 
retired pay later determined exempt from taxable income.
    The coauthors of the IB carefully identify areas in the 
benefit programs that need adjustment or improvement to make 
the benefits more effectively or equitably fulfill the purposes 
for which Congress established them. Last year, Congress 
enacted legislation that addressed several IB recommendations. 
We appreciate your action on these matters. Although it is in a 
position to know where beneficial legislative changes could 
better serve our Nation's veterans, the Administration has not 
taken the lead in recommending legislation to improve veterans' 
programs. Therefore, if meritorious improvements are to be 
made, the members of this Committee must initiate action on 
them. In developing your legislative agenda this year, we ask 
that you again give thorough consideration to the 
recommendations we have included in this year's IB.
    Unlike the lack of positive recommendations in the budget 
to improve the benefit programs, VA Secretary Principi has made 
improving VA's administration of the benefit programs, 
especially compensation and pension claims processing, one of 
his foremost priorities. We are confident of his sincerity and 
determination on this issue. We have not seen great progress in 
this area to date, however, and despite this budget's stated 
focus on improving claims processing, it does not request 
resources to match actions with words.
    Although the President's budget recommends a $94-million 
increase in funding for VBA under the GOE account, $53.9 
million of that would cover a new obligation to fund employees' 
retirement and health benefits. With the net increase of $40.2 
million above last year's funding, the increase for VBA is 
approximately 3.6%, which is well below the average increase of 
approximately 10% requested by the President over the past 5 
years. The President's budget recommends only 96 additional 
employees for compensation and pension (C&P) service. Within 
this budget, VA promises to reduce the average time for rating 
actions on C&P claims from 208 days to 100 days in the last 
quarter of FY 2003, while improving training for claims 
processors and increasing the accuracy rate for core rating 
work from 78% in FY 2001 to 88% in FY 2003. Other initiatives 
in C&P include:
     begin to transition from a paper-based to an 
electronic claims record
     consolidate pension cases in three pension centers
     continue the implementation of four new training 
and support systems for adjudicators
     analyze the needs of the C&P claims development 
and adjudication process and design a new system known as C&P 
Evaluation Redesign (CAPER)
     deploy an individual performance assessment 
program to measure and enforce employee proficiency, known as 
the Systematic Individual Performance Assessment (SIPA)
     pursue development of a modern system to replace 
the existing benefit payment system
     expand the Veterans On-Line Application program, 
which allows veterans to apply for benefits over the Internet
    While improved processes, new technology, better training, 
and real accountability for legally correct decisions--if 
properly, timely, and completely implemented--will enable VA to 
eventually increase efficiency and overcome its intolerable 
claims backlog, VA still needs additional employees for C&P in 
the short term. Training new employees, retraining VA's 
existing workforce, and conducting quality reviews of the work 
of individual adjudicators will require substantial numbers of 
employees who will not be devoted to production and reducing 
the backlog. We believe the President's request for only 96 
additional employees for C&P is tied more to budget targets 
than to the real needs of VA. The IB recommends funding for 350 
additional employees in C&P Service. Additionally, based on 
unofficial estimates, the IB recommends $4.5 million, instead 
of the $2 million requested in the President's budget, to fund 
CAPER.
    Unless VA makes other reforms in management and takes a 
more direct and decisive approach to tackling the claims 
backlog, it is likely to continue to fail in its efforts to 
make meaningful improvements in the accuracy and timeliness of 
its claims processing. Currently, the head of VA's C&P service 
and VBA's other program directors do not have management 
authority over their employees in VA field offices. The C&P 
director is powerless to enforce quality standards and C&P 
policy. Higher-level officials in VA's Central Office are more 
removed from and do not have the daily hands-on experience that 
the C&P director has in the C&P programs. The IB recommends 
that the C&P director and other VBA program directors be given 
line authority over field offices to strengthen VBA's 
management structure and allow for more effective enforcement 
of quality and performance standards.
    Those who have witnessed C&P's repeated failures to 
overcome its claims processing deficiencies know that those 
failures involve repetitive patterns in which VA develops plans 
but fails to follow through with decisive steps to solve the 
difficult problems. VA attempts to overcome its serious 
deficiencies by fine-tuning its procedures and employing new 
technology. While those efforts may aid in improving claims 
processing, alone or in combination they are not enough to 
enable VA to overcome its longstanding problem. The coauthors 
of the IB believe that it is obvious VA must resolve to focus 
primarily on eliminating the root causes of its claims backlog 
if it is to ever succeed in restoring the system to acceptable 
levels of performance and service. As noted, we believe that 
adequate resources are key to the effort. However, VA's 
adjudicators make erroneous decisions because they have not 
been properly trained in the law, they have operated in a 
culture that tolerated indifference to the law, and they have 
not been held accountable for poor performance and proficiency. 
Accordingly, in conjunction with the deployment of better 
training, VA must take bold steps to change its institutional 
culture, and it must make its decisionmakers and managers truly 
accountable.
    If VA's ambitious goal of improving timeliness takes 
precedence over its goal of improving quality, VA will merely 
repeat the failures of the past. Speeding up the process with 
the single goal of reducing claims processing times and claims 
backlogs is self-defeating if, because quality is compromised, 
a substantial portion of the cases must be reworked. In this 
respect, VA has shown some inability to learn from its past 
mistakes.
    VA has made similar mistakes in its efforts to avoid 
meeting some of the obligations Congress has imposed upon it 
and in its efforts to avoid fully implementing legislation 
enacted by Congress. In exploiting an erroneous line of 
decisions by the courts to avoid its duty to assist claimants 
in developing and prosecuting claims, VA made additional work 
for itself in the end because it had to rework thousands of 
these claims after Congress intervened and restored the duty to 
assist. Several veterans' organizations have now challenged in 
court VA's rules to implement this legislation. While courts 
tend to indulge agencies in rulemaking, the veterans' 
organizations challenging the validity of VA's regulation in 
this instance have a high level of confidence about the 
prospects for having VA's regulations set aside because of 
their clearly arbitrary nature and conflict with the law. If 
the Court of Appeals for the Federal Circuit finds that VA's 
regulations do not fulfill the mandates of the law, VA may once 
again be saddled with the task or reviewing thousands of cases 
to apply the law properly. These self-inflicted setbacks 
complicate VA's efforts to overcome its claims backlog. In this 
vein and because of the adverse effects upon veterans' rights, 
the IB has urged the VA Secretary to reform his department's 
rulemaking. Court challenges to what is viewed as self-serving 
VA rules are becoming commonplace.
    Under the VBA portion of the GOE appropriation, the IB also 
includes a recommendation to fund new information technology 
for VBA's Education Service. Administration of VA's education 
programs involves the routine exchange of massive amounts of 
data between educational institutions and VA. This routine 
exchange of correspondence and data is particularly well suited 
to automated systems, which can greatly reduce personnel costs 
and processing times. The IB therefore recommends that Congress 
provide $16 million for upgrading and expanding the limited 
application and capabilities of the existing system. For this 
VA initiative, known as The Education Expert System (TEES), the 
President's budget requests only $6.3 million. Again, 
information not revised to meet the objectives of the 
Administration's budget process indicates that $16 million is 
the real funding level needed for this project.
    The President's budget proposes legislation to establish a 
new program in VBA for providing grants to states for 
employment and training services for veterans. This new VA 
program would replace the veterans' employment and training 
services of the Department of Labor. The IB has taken no 
position on this issue, but the DAV and other veterans' 
organizations have mandates from their membership to oppose the 
transfer of veterans' employment and training services to VA 
from the Department of Labor. The President's proposal raises 
many questions about the nature and effectiveness of such a 
program. When the details of this proposal are made available, 
the IB will give it additional consideration.
    The President's budget request would reduce the number of 
employees authorized for the Board of Veterans' Appeals (BVA) 
from 464 to 451. The caseload at the Board is temporarily down 
because VA regional offices have directed their resources to 
reducing the backlog of claims and neglected work on their 
appellate workload. However, new VA regulations recently 
assigned BVA the added responsibility for correcting the 
regional offices' failure to obtain all necessary evidence. 
Eventually, VA regional offices must resume work on their 
pending appeals, and BVA will begin receiving large numbers of 
appeals that have been allowed to accumulate in regional 
offices. Many of VA's problems stem from improvident reductions 
in staff in the face of impending increases in workload. We 
therefore recommend caution in considering any reduction in 
BVA's workforce at this time.
    In enacting legislation in 1988 to authorize veterans to 
challenge VA decisions in court, Congress recognized the 
importance of the right to have VA's decisions reviewed by an 
independent body. Judicial review has had the beneficial effect 
of exposing administrative departure from the law and forcing 
reforms within VA. However, the judicial review process needs 
some adjustments itself to make it serve veterans in the manner 
envisioned by Congress.
    The IB recommends legislation to change the standard under 
which the Court of Appeals for Veterans Claims (CAVC) reviews 
VA's findings of fact in claims decisions. The current 
``clearly erroneous'' standard conflicts with and undermines 
the benefit-of-the-doubt rule. Under the statutory benefit-of-
the-doubt rule, VA is mandated to resolve factual questions in 
the veteran's favor unless the evidence against the veteran is 
stronger than the evidence for him or her. However, CAVC will 
uphold a VA decision if there is any evidence to support it, 
and this renders the benefit-of-the-doubt rule unenforceable.
    Currently, VA regulations, with the exception of provisions 
in the Schedule for Rating Disabilities, are subject to 
challenge in the Court of Appeals for the Federal Circuit 
(CAFC). The IB recommends expanding CAFC jurisdiction to permit 
it to review challenges to the validity of the rating schedule 
on the narrow basis of whether the rating is contrary to law or 
is arbitrary and capricious. The coauthors of the IB believe 
that no unlawful or arbitrary and capricious rating schedule 
provision should be immune to review and correction.
    The jurisdiction of CAFC is restricted in another manner 
that does not serve the cause of justice well. While CAFC has 
jurisdiction to consider an appeal that involves a dispute 
about the proper interpretation of a law or regulation, it has 
no jurisdiction to consider an appeal that involves a dispute 
about the proper application of the law to the facts in a case. 
The IB recommends that CAFC jurisdiction be expanded to cover 
these so-called ordinary questions of law.
    Much of what this Committee will seek to accomplish on 
behalf of veterans this year will be subject to what Congress 
appropriates for veterans' programs. We urge the Committee to 
press for a budget that is adequate for existing programs and 
allows for some improvement in benefits and services for 
veterans. We hope our independent analysis of the resources 
necessary for veterans' programs and our legislative and policy 
recommendations are helpful to you, and we sincerely appreciate 
the opportunity to present our views and recommendations to the 
Committee.

    Chairman Rockefeller. Thank you, Rick. I hope the committee 
tries to maintain its commitment to veterans also.
    Please.

    STATEMENT OF PAUL HAYDEN, ASSOCIATE DIRECTOR, NATIONAL 
         LEGISLATIVE SERVICE, VETERANS OF FOREIGN WARS

    Mr. Hayden. Mr. Chairman, on behalf of the 2.7 members of 
the Veterans of Foreign Wars of the United States and its 
Ladies' Auxiliary, I would like to thank you for the 
opportunity to participate in today's hearing. The VFW's 
primary contribution as a member of the Independent Budget is 
an analysis of the Department of Veterans Affairs' construction 
programs. Therefore, as in years past, I will confine my 
remarks to this particular area of the VA budget.
    As this committee is well aware, VA possesses an immense, 
aged infrastructure that is in need of urgent funding. Your 
colleagues in the House of Representatives acted during the 
First Session of the 107th Congress to arrest the shortfall in 
VA construction funding by passing H.R. 811, the Veterans 
Hospital Emergency Repair Act. The Independent Budget was 
pleased to endorse this bill, and we respectfully request this 
committee to favorably report this much-anticipated legislation 
to the full Senate without further delay.
    The administration is requesting $194 million for major 
construction, up $11 million over fiscal year 02 funding, while 
funding for minor construction remains nearly flatlined at $211 
million. An $11 million increase is hardly sufficient to 
sustain and improve nearly 1,300 care facilities, including 163 
hospitals, 800 ambulatory care and community-based outpatient 
clinics, 206 counseling centers, 135 nursing homes and 43 
domiciliary facilities. In fact, VA's capital assets value is 
in a constant state of deterioration. For nearly 5 years, we 
have cited an independent study conducted by Price Waterhouse 
that concluded VA should be investing an amount equal to 2 to 4 
percent of its facilities to maintain and another 2 to 4 
percent to improve them. In other words, VA should be investing 
roughly a minimum of $700 million annually on just upkeep.
    Yet, a quick analysis of VA's construction budget since the 
1998 study was published show us that VA received an average of 
$291 million a year for both major and minor construction since 
fiscal year 99, and if we figure in the fiscal year 03 
proposal, it would bring that 5-year average to a mere $314 
million. These figures represent less than half the recommended 
investment and have forced VA to delay high priority projects 
and other renovations to meet basic patient safety standards.
    Realizing that restructuring could reduce budget pressures 
or generate revenues that could be used to enhance veterans 
health care benefits, we continue to be supportive of VA's 
capital assets realignment for enhanced services, or the CARES 
process. We note that CARES remains behind schedule, while 
needed construction is being held hostage. The independent 
budget recommends that VA immediately identify all of the 
facilities that will certainly be retained and allow 
construction of already-approved and/or urgently needed 
projects to improve patient safety and environment.
    As always, stakeholders need to be included and consulted 
in every step of the process. Of great concern to the 
Independent Budget is that veterans and staff continue to 
occupy high-risk buildings. For example, 1 year after 
experiencing a 6.8 magnitude earthquake, the American Lake VA 
Medical Center and the State of Washington has yet to receive a 
dime for structural repairs to its main hospital and nursing 
home.
    In order for VA to properly operate, maintain and improve 
its facilities, the Independent Budget recommends a minimum of 
$800 million for major and minor construction projects for 
fiscal year 03. For major construction, we recommend that 
Congress appropriate $400 million, $217 million higher than 
fiscal year 02. We have also recommended $400 million for VA's 
minor construction account. This represents an increase of $190 
million. This increase will support construction projects for 
inpatient and outpatient care support, infrastructure and 
physical plant improvements, research, infrastructure upgrades 
and a historic preservation grant program to protect VA's most 
important historic buildings.
    In order for VA to more effectively carry out these 
projects, we also recommend raising the ceiling on minor 
construction projects from the current $4 million per project 
to $16 million per project.
    Mr. Chairman, this concludes my statement, and I will be 
pleased to answer any questions you or members of the committee 
may have.
    [The prepared statement of Mr. Hayden follows:]

    Prepared Statement of Paul Hayden, Associate Director, National 
             Legislative Service, Veterans of Foreign Wars

    Mr. Chairman and members of the Committee:
    On behalf of the 2.7 million members of the Veterans of 
Foreign Wars of the United States (VFW) and its Ladies 
Auxiliary, I would like to thank you for the opportunity to 
participate in today's hearing. The VFW's primary contribution 
as a member of the Independent Budget is an assiduous analysis 
of the Department of Veterans Affairs' (VA) construction 
programs. Therefore, as in years past, I will confine my 
remarks to this particular area of the VA budget.
    As this committee is well aware, VA possesses an immense, 
aged infrastructure that is in need of urgent funding. Your 
colleagues in the House of Representatives acted during the 
first session of the 107th Congress to arrest the shortfall in 
VA construction funding by passing
    H.R. 811, Veterans Hospital Emergency Repair Act. The 
Independent Budget was pleased to endorse this bill, however, 
we are concerned by the inaction of this committee to address 
this important legislation that has been in your possession 
since March 28, 2001. We respectively /request this Committee 
to favorably report this much anticipated legislation to the 
full Senate without further delay.
    Unhappily, we again find that VA's budget request for 
fiscal year (FY) 2003 as it pertains to construction programs 
is inadequate. The administration is requesting $194 million 
(numbers are rounded up or down) for major construction, up $11 
million over FY 2002 funding, while funding for minor 
construction remains nearly flat-lined at $211 million. An $11 
million increase is hardly sufficient to sustain and improve 
nearly 1,300 care facilities, including 163 hospitals, 800 
ambulatory care and community-based outpatient clinics, 206 
counseling centers, 135 nursing homes, and 43 domiciliary 
facilities.
    In fact, VA's capital asset value is in a constant state of 
deterioration. For nearly five years we have cited an 
independent study conducted by Price Waterhouse that concluded 
VA should be investing an amount equal from 2 to 4 percent of 
the value of its facilities to maintain (nonrecurring 
maintenance) and another 2 to 4 percent to improve them. That 
means VA should be investing roughly a minimum of $700 million 
annually on just upkeep. Yet a quick analysis of VA's 
construction budgets since the 1998 study was published show us 
that VA received an average of $291 million a year for both 
major and minor construction since FY 1999; and if we figure in 
the FY 2003 proposal, it would bring the five-year average to 
$314 million. These figures represent less than half the 
recommended investment and have forced VA to delay high 
priority projects and other renovations to meet basic patient 
safety standards.
    Recognizing that VA has undergone a major transformation in 
its health care delivery process (primarily inpatient-based to 
outpatient-based) and noting a Government Accounting Office 
(GAO) report that ``without major restructuring, billions of 
dollars will be used in the operation of hundreds of unneeded 
VA buildings'' and ``restructuring'' could reduce budget 
pressures or generate revenues that could be used to enhance 
veterans' health care benefits' we continue to be supportive of 
VA's Capital Assets Realignment for Enhanced Services (CARES) 
process.
    We note that CARES remains behind schedule while needed 
construction is being held hostage. The Independent Budget 
recommends that VA immediately identify all the facilities that 
will certainly be retained and allow construction of already 
approved and/or urgently needed projects to improve patient 
safety and environment. Further, property divestures should be 
placed on hold until a comprehensive capital assets plan is 
formulated. As always, stakeholders need to be included and 
consulted in every step of the process.
    Of great concern to the Independent Budget is that veterans 
and staff continue to occupy high-risk buildings. We have 
identified and expanded our list to 73 facilities that are 
subject to collapse or serious structural damage from an 
earthquake. We commend VA for funding seismic corrections in 
four of its California-based facilities in its FY 2003 budget 
request. We, however, remain perplexed that one year after 
experiencing a 6.8 magnitude earthquake, the American Lake VA 
Medical Center in Washington has yet to receive a dime for 
structural repairs to its main hospital and nursing home.
    In order for VA to properly operate, maintain and improve 
its facilities, the Independent Budget recommends a minimum of 
$800 million for major and minor construction projects for FY 
2003. It is important to keep in mind that the administration's 
request is $400 million for FY 2003.
    For major construction, we recommend that Congress 
appropriate $400 million, $217 million higher than FY 2002. A 
majority of this funding request, $250 million, is needed for 
seismic corrections. Earlier in our testimony we noted our 
pleasure that VA is requesting major construction funds for 
seismic corrections, and we are also happy to see funding 
requests for national cemetery expansion.
    We have also recommended $400 million for VA's minor 
construction account. This represents an increase of $190 
million. This increase will support construction projects for 
inpatient and outpatient care support, infrastructure and 
physical plant improvements, research infrastructure upgrades, 
and an historic preservation grant program to protect VA's most 
important historic buildings. In order for VA to more 
effectively carry out these projects we recommend raising the 
ceiling on minor construction projects from the current $4 
million per project to $16 million per project. As we have 
testified in the past, the current limitation results in a 
piecemeal approach to design and completion of projects that 
adds unnecessary delays, facility disruptions, and promotes 
poor fiscal management practices.
    Other construction items recommended for increased funding 
include grants for state extended care facilities and state 
veterans' cemeteries.
    As stated previously, we believe the administration's 
request is inadequate as it pertains to VA's construction 
programs. Further, we believe we have presented compelling 
evidence such as patient safety, asset management, and 
continued access to support our proposed increase. Therefore, 
we look to Congress to correct this shortfall. The passage of 
H.R. 811 would be a good step in that direction and a valid 
attempt to forestall the continued deterioration of VA's 
infrastructure. Yet without continued increases in construction 
appropriations to sustain VA facilities during the CARES 
process, there will be a need for authorizing legislation such 
as H.R. 811 every year in addition to appropriations. We look 
to the leadership of this committee to ensure adequate funding 
for Major and Minor Construction so that VA may realize its 
potential without compromising veterans' services.
    Mr. Chairman, this concludes my statement and I will be 
pleased to answer any questions you or members of the committee 
may have.

    Chairman Rockefeller. Thank you very much, Paul.

  STATEMENT OF RICHARD JONES, NATIONAL LEGISLATIVE DIRECTOR, 
                             AMVETS

    Mr. Richard Jones. Mr. Chairman, we thank you for your time 
today. On behalf of Commander Joseph W. Lipowski, AMVETS is 
honored to join these veterans service organizations in 
providing you our best estimate for fiscal year 2003 spending.
    AMVETS' primary focus is on funding for the national 
cemeteries in the new year. Before beginning on the budget, I 
would like to commend the Chairman for your strong leadership 
on veterans issues and legislative achievements in the First 
Session of this Congress. AMVETS and the members of the 
Independent Budget are truly grateful to you.
    Members of the Independent Budget would also like to 
acknowledge the commitment of the National Cemetery 
Administration's staff. Their work at the World Trade Center, 
the Pentagon and Pennsylvania were outstanding.
    Since its establishment, the National Cemetery 
Administration has provided the highest standards of service to 
veterans and eligible family members. Their work oversees 120 
national cemeteries, located in 39 states, the District of 
Columbia and Puerto Rico. With the recent openings of four new 
national cemeteries within the last 2 years in Chicago, Albany, 
Cleveland, and Dallas and fast-tracked operations at Fort Sill 
and Atlanta, the National Cemetery Administration now maintains 
more than 2.5 million gravesites on nearly 14,000 acres of 
cemetery land.
    With adequate funding for design and construction, 
development of national cemeteries will continue to future 
facilities in Miami and Pittsburgh, Detroit, and Sacramento. 
Currently, NCA provides more than 83,000 burials yearly. That 
is an 8-percent increase in workload over last year.
    To ensure that the burial needs of veterans and eligible 
family members are met, the Independent Budget veterans' 
service organizations believe that the budget must be 
increased. To meet this commitment and maintain NCA facilities 
as national shrines, the Independent Budget veterans' service 
organizations recommend $138 million for NCA in fiscal year 
2003. That is an increase of $17 million, and it does not 
include the $5 million Office of Personnel Management bump that 
is in the administration's request.
    This level of funding will provide the additional full-time 
employees and the equipment necessary to maintain services. For 
funding the State Cemetery Grants Program, the members of the 
Independent Budget recommend $32 million for the new fiscal 
year. That is an increase of $7 million. As you know, the State 
Cemetery Grants Program works in complement with the NCA to 
establish gravesites for veterans in areas where NCA cannot 
fully respond to the burial needs of veterans.
    Enactment of the Veterans Program Enhancement Act of 1998 
has increased the activity and the attractiveness of this 
program. Through the State Grants Program, the National 
Cemetery Administration can now provide up to 100 percent of 
the planning, design and construction of approved new 
cemeteries in the states, and at the start of this current 
year, there were 10 new cemeteries under design, 11 in 
planning, and there were scheduled fast-track openings in 
central Indiana, northern Wisconsin, Arkansas, Massachusetts, 
Maine, and Montana.
    The Independent Budget veterans organizations also request 
Congress to please review a series of burial benefits that have 
seriously eroded in value over the years. These benefits were 
never intended to cover the full costs of burial, but now, they 
pay for only a fraction of what they covered when they were 
first initiated in 1973. These burial benefits are included in 
the Independent Budget and outlined there specifically. We 
fully appreciate action in the first session to increase burial 
benefits, however we also would appreciate your giving these 
burial benefits a second look in the second session.
    In addition, we would ask your committee to take a very 
careful look at the National Cemetery Administration's plans 
for the future. We face a dramatic upward increase in the 
interment rate, and members of the Independent Budget recommend 
the National Cemetery Administration work with you to help 
establish a strategic plan for the future. We must plan for a 
truly national system. It must have congressional and 
administrative budget support, and in this regard, we call on 
Congress to make funds available.
    Mr. Chairman, this concludes my statement. I thank you 
again for the privilege to be here today.
    [The prepared statement of Mr. Richard Jones follows:]

  Prepared Statement of Richard Jones, National Legislative Director, 
                                 AMVETS

    Mr. Chairman, Ranking Member Specter, and members of the 
Committee:
    AMVETS is honored to join fellow veterans service 
organizations in providing you our best estimates on the 
resources necessary to carry out a responsible budget for the 
fiscal year 2003 programs of the Department of Veterans 
Affairs.
    AMVETS--a leader since 1944 in preserving the freedoms 
secured by America's Armed Forces--provides, not only support 
for veterans and the active military in procuring their earned 
entitlements, but also community services that enhance the 
quality of life for this nation's citizens.
    AMVETS testifies before you today as a co-author of The 
Independent Budget. For over 16 years AMVETS has worked with 
the Disabled American Veterans, the Paralyzed Veterans of 
America, and the Veterans of Foreign Wars to produce a working 
document that sets out our spending recommendations on 
veterans' programs for the new fiscal year. Besides working 
with our coauthors on the overall development and publication 
of The Independent Budget, AMVETS' primary focus is on 
developing the recommendations for funding the National 
Cemetery Administration in the new year.
    Before I address budget recommendations for the National 
Cemetery Administration, I would like to say that AMVETS fully 
appreciates the strong leadership and continuing support 
demonstrated by the Senate Veterans Affairs Committee. AMVETS 
is truly grateful to the members who serve on this important 
committee. Clearly, your achievements in the first session of 
this Congress demonstrate you have at heart the best interests 
of veterans and their families. You have distinguished 
yourselves as willing to work in a bipartisan manner to address 
numerous issues of great importance to the Nation's veterans.
    Since its establishment, the National Cemetery 
Administration (NCA) has provided the highest standards of 
service to veterans and eligible family members in the system's 
120 national cemeteries in 39 states, the District of Columbia, 
and Puerto Rico. A year ago, NCA opened cemeteries in Chicago, 
IL; Albany, NY; Cleveland, OH; and Dallas, TX. Late last year, 
fast-track operations were started at Ft. Sill, OK, and 
Atlanta, GA. And development will continue, with adequate 
funding for design and construction, for future facilities in 
Miami, Pittsburgh, Detroit, and Sacramento.
    While the National Cemetery Administration maintains more 
than 2.5 million gravesites on nearly 14,000 acres of cemetery 
land, there remains a need to establish additional national 
cemeteries in some critically needed areas. AMVETS supports the 
Committee's active review of this matter and its continued 
encouragement of the Administration to meet the growing demand 
for space. Clearly, without the strong commitment of Congress 
and its authorizing and appropriations committees, VA would 
likely fall short of burial space for millions of veterans and 
their eligible dependents.
    The members of The Independent Budget recommend that 
Congress provide $138 million and 1,525 full time employees for 
the operational requirements of NCA in fiscal year 2003. This 
is an increase of $17 million and 65 FTE over the 2002 current 
estimate level.
    Currently, the NCA provides more than 83,000 interments 
annually, an eight percent jump over last year. The aging 
veteran population has created great demands on NCA operations 
and actuarial projections do not suggest a decline in these 
demands for many years. To ensure that the burial needs of 
veterans and eligible family members are met, the IBVSOs 
believe the budget must be increased to provide new staff and 
equipment improvements. Maintaining quality service with an 
accelerating workload will require additional resources. $138 
million for the NCA will provide the additional full-time 
employees and necessary supplies and equipment for grounds 
maintenance and program operations.
    For funding the State Cemetery Grants Program, the members 
of The Independent Budget recommend $32 million for the new 
fiscal year. The State Cemetery Grants Program works in 
complement with the NCA to establish gravesites for veterans in 
those areas where NCA cannot fully respond to the burial needs 
of veterans. The enactment of the Veterans Programs Enhancement 
Act of 1998 has made this program very active and attractive to 
the states. At the start of the current year, there were 10 new 
cemeteries under design and 11 new cemeteries in planning. 
There are also scheduled fast-track openings in central 
Indiana, northern Wisconsin, Arkansas, Massachusetts, Maine, 
and Montana. Through the State Grants Program, NCA can provide 
up to 100 percent of the planning, design, and construction of 
an approved new cemetery.
    To properly support veterans who desire burial in state 
facilities, members of The Independent Budget support 
increasing the plot allowance to $670 from the current level of 
$300. The plot allowance now covers only 6 percent of funeral 
costs. Increasing the burial benefit to $670 would make the 
amount proportionally equal to the benefit paid in 1973. In 
addition, we firmly believe the plot allowance should be 
extended to all veterans who are eligible for burial in a 
national cemetery not solely those who served in wartime.
    The IBVSOs also request Congress review a series of burial 
benefits that have seriously eroded in value over the years. 
While these benefits were never intended to cover the full 
costs of burial, they now pay for only a fraction of what they 
covered in 1973, when they were initiated.
    The IBVSOs recommend an increase in the service-connected 
benefits from $2,000 to $3,700. Prior to action in the last 
session of Congress, increasing the amount $500, the benefit 
had been untouched since 1988. The request would restore the 
allowance to its original proportion of burial expense.
    The IBVSOs recommend increasing the nonservice-connected 
benefit from $300 to $1,135, bringing it back up to its 
original 22 percent coverage of funeral costs. This benefit was 
last adjusted in 1978, and today covers just 6 percent of 
burial expenses.
    The IBVSOs recommend changing current law to provide a 
headstone to mark the grave of all honorably discharged 
veterans upon request of the family. The current code, allowing 
a headstone only for unmarked graves, causes unnecessary 
confusion and unsettling aggravation to the families who see VA 
headstones at nearby marked sites and cannot understand why 
their loved one cannot likewise be distinguished. Providing a 
headstone is a small price to pay for commemorating the service 
of a veteran to our Nation.
    The IBVSOs also recommend that Congress enact legislation 
to index these burial benefits for inflation to avoid their 
future erosion.
    Finally, the IBVSOs note that the National Cemetery 
Administration's greatest challenge is yet ahead. Based on 
statistics projecting a dramatic increase in the interment rate 
until 2010, members of The Independent Budget recommend that 
the National Cemetery Administration establish a strategic plan 
for the period 2003 to 2008. We must plan for a truly national 
system, and it must have congressional and administrative 
budgetary support. We call on Congress to make funds available 
for planning and fast-track construction of needed national 
cemeteries.
    Mr. Chairman, this concludes my statement. I thank you 
again for the privilege to present our views, and I would be 
pleased to answer any questions you might have.

    Chairman Rockefeller. Thank you, sir, for an excellent 
statement.
    Mr. Fischl?

STATEMENT OF JAMES FISCHL, DIRECTOR, NATIONAL VETERANS AFFAIRS 
       AND REHABILITATION COMMISSION, THE AMERICAN LEGION

    Mr. Fischl. Mr. Chairman, thank you for the opportunity to 
appear before you today to express the views of the American 
Legion concerning the President's VA budget for fiscal year 
2003.
    Mr. Chairman, the American Legion is very appreciative of 
the work that you have done to advance the cause of our 
nation's veterans. We look forward to working with you again 
this year. We all remember where we were on 9/11. The American 
Legion national commander, Richard J. Santos, was preparing for 
testimony in this very room--not in this room; in the Cannon 
Building--but he was preparing testimony before a joint session 
of the Veterans' Affairs Committee. This presentation was not 
to be, however. The American Legion was being suddenly and 
brutally attacked, and before his testimony, the decision was 
made to evacuate the Capitol.
    Although the national commander did not testify, he did 
submit his written testimony to both committees. In that 
testimony, the American Legion outlined its fiscal year 2003 
budget recommendations for VA. The American Legion greatly 
appreciates the actions of all Members of Congress regarding 
the $1.3 billion increase in VA medical care funding for fiscal 
year 2002.
    However, even with that substantial increase, it is not 
enough. It required a supplemental, and this becomes a very 
important issue, because the 2002 budget is the foundation for 
the 2003 budget. Because of the dramatic rise in the Priority 7 
veterans in the use of VA health care and to keep enrollment 
open to Priority 7 veterans, Secretary Principi asked for a 
supplemental of the $142 million in the fiscal year 2002 
appropriations. We applaud this effort to allow Priority 7 
veterans to continue to enroll.
    The American Legion believes, however, that this additional 
request will not cover the anticipated shortfall. The American 
Legion recommends increasing the proposed supplemental to $300 
million, reflecting our original fiscal year 2002 funding level 
for VA medical care.
    Focusing ahead to fiscal year 2003, the American Legion 
takes exception to the proposed budget being portrayed as an 
8.3 percent increase, and I think the Secretary addressed this 
issue somewhat this morning in his testimony. And also, the 
Secretary spoke of the additional money that is not really an 
increase in the budget, and you pointed out, Mr. Chairman, that 
we can do better. The budget request is, in fact, a decrease 
and not really an increase.
    While we understand that today's fiscal realities require 
VHA to seek other revenue streams to support the growing demand 
for service, the American Legion strongly recommends Medicare 
subvention as a more appropriate remedy. Medicare subvention 
will result in more accessible, quality health care for all 
Medicare-eligible veterans. Medicare is an entitlement that 
veterans have earned. The advocate community is strongly united 
on this issue. Medicare subvention must and will work.
    The American Legion appreciates the support of this 
committee and looks forward to working with you to make this a 
reality. We also commend the Secretary for his commitment to 
Medicare subvention.
    As for medical construction and infrastructure support, we 
believe that the CARES program has hampered this substantially, 
and there are many buildings that require seismic correction. 
We have identified over 70 buildings that need these 
corrections or modifications, and we feel that no veterans 
should be placed in harm's way while being hospitalized. They 
were placed in harm's way while in combat. They should not be 
placed in harm's way while in a VA hospital.
    I would like to briefly talk a little bit about benefits. 
The fiscal year 2003 budget proposal outlines the various 
internal changes that the VBA is making and intends to make to 
improve the level of quality of service it provides. We do have 
some concerns about this. We are concerned about the work 
measurement, and we are concerned about accountability. And the 
task force mentioned accountability many, many times. We are 
concerned that they speak of the VA being accountable, but yet, 
on the other hand, they speak of transferring work to offices 
that are more capable of doing it. Our question would be if you 
have an office that is not functioning the way that it should, 
why are we not doing something about that? Why are they not 
accountable? So that is a concern that we have.
    We are also concerned about implementing the intent of 
VCAA. This legislation was intended to bring veterans into the 
light, to tell them what was required to successfully prosecute 
their claims. We are now very concerned that claimants are 
receiving only boilerplate notices of why their claim is being 
disallowed, and we are very, very concerned about this.
    A claimant should know exactly what is happening with their 
claim and should know what it would take to perfect their 
claim, and we feel that they are just receiving boilerplate 
notices on that.
    We also share the concern of the Independent Budget people 
that VA perhaps needs additional personnel. The Secretary has 
said if he needs more, he will ask for more. We feel that might 
be too late. You need to have them trained and ready to go at 
the time that you need them, so we are concerned about that.
    We are also concerned in the decrease in the Board of 
Veterans Appeals staff. Their work is increasing, and we feel 
that they would need more rather than less people.
    Mr. Chairman, that concludes my testimony. I would be happy 
to answer any questions that you might have.
    [The prepared statement of Mr. Fischl follows:]
Prepared Statement of James Fischl, Director, National Veterans Affairs 
           and Rehabilitation Commission, The American Legion
    Thank you for the opportunity to appear before you today to express 
the views of The American Legion concerning the President's budget 
request for FY 2003 for VA.
    On September 11, 2001, The American Legion National Commander, 
Richard J. Santos, was preparing to present testimony before a joint 
session of the Veterans' Affairs Committees, when America was attacked 
by terrorists. Although the National Commander did not testify, he 
submitted his written testimony to both Committees. In that testimony, 
The American Legion outlined its FY 2003 budget recommendations for VA. 
Copies of this congressional testimony were shared with the 
Administration.
    The American Legion continues to believe that the primary mission 
of the Veterans Health Administration is to meet the health care needs 
of America's veterans. The American Legion greatly appreciates the 
actions of all Members of Congress regarding the $1.3 billion increase 
in VA medical care funding for FY 2002.
    Congress, like The American Legion, quickly recognized that the 
President's budget request for FY 2002 was totally inadequate. 
Immediately after the President signed the FY 2002 budget, Secretary 
Principi was prepared to end the enrollment of additional Priority 
Group 7 veterans. Many of these veterans would have included recently 
separated service personnel from the Persian Gulf War, Kosovo and even 
Afghanistan. Fortunately, President Bush intervened and agreed to seek 
supplemental appropriations to allow VHA to continue its enrollment of 
additional Priority Group 7 veterans. Recently, VA briefed The American 
Legion that the Administration will seek a $142 million supplement to 
the FY 2002 appropriations. The American Legion still believes this 
additional request will not cover the anticipated shortfall.
    The American Legion recommends increasing the proposed supplemental 
to $300 million reflecting The American Legion's original FY 2002 
funding level for VA medical care.
                  veterans health administration (vha)
    The American Legion finds it hard to contemplate the President's FY 
2003 budget request without a clear vision of FY 2002 funding. Focusing 
ahead, The American Legion is very concerned with VA's approach to the 
veterans' medical care budget in FY 2003.
    The major reason for Secretary Principi's inadequate FY 2002 
estimates was the dramatic increase of new patients choosing to enroll 
in VA. Many factors are driving more veterans to use VHA as their 
primary health care provider:
     Many Medicare+Choice health maintenance organizations 
(HMOs) withdrew from the program;
     Many HMOs have collapsed;
     VHA has opened community based outpatient clinics;
     Double-digit increase in health care premiums;
     The dramatic fluctuations in the national economy make VHA 
a more cost-effective option for veterans; and
     VHA's reputation for quality of care and patient safety is 
attracting new patients.
    Where comparable data exists, VHA continues to outperform the 
private sector in all indicators in health promotion and disease 
prevention. The American Legion adamantly believes VHA is the best 
health care investment of tax dollars. The average cost per patient 
treated within VHA is unmatched by any other major health care delivery 
system, especially with comparable quality of care.
    The reason VHA medical care continues to increase annually is not 
due to uncontrollable cost increases or poor cost estimates, but rather 
because thousands of veterans are voting with their feet. More and more 
veterans are choosing to use their earned benefit--access to VHA. 
However, enrollment in VHA is clearly limited by existing discretionary 
appropriations. The American Legion urges Congress to evaluate several 
options that would assure every veteran that wants to enroll in VHA can 
enjoy that earned benefit. The key factor driving the increases in 
medical care funding requirements is the unexpected and dramatic 
increase in demand for care from VHA.
    The American Legion does not oppose veterans paying for the 
treatment of nonservice-connected medical conditions. In fact, The 
American Legion's GI Bill of Health (a blueprint for VA health care for 
the 21st Century) advocates collecting from veterans and all third-
party insurers, including Federal health insurers. This plan also 
recommends VA provide health care benefits packages on a premium basis 
for those veterans with no health care coverage.
    To cover the cost of the dramatic increase in the enrolled Priority 
Group 7 veterans population, VA proposes a $1500 deductible for the 
Priority Group 7 veterans. The American Legion questions the 
President's logic behind this new initiative to collect $363 million. 
The VA shows an ``accounting adjustment'' of $892 million, (cost of the 
Civil Service Retirement System and Federal Employees Health Benefit 
Program accrual for employees) as an increase in the medical care 
funding. Add to that the first-party and third-party collections from 
the Medical Care Collection Fund (MCCF), which VA estimates will reach 
nearly $1.5 billion. This budget picture presented to veterans is 
seriously skewed. After stripping away all of these ``increases'' the 
actual request for increase in medical care funding is $1.4 billion, 
barely covering the cost of inflation. In essence, veterans will be 
paying the cost of the ``increase'' out of their pocket.
    Under the President's plan, VA would charge Priority Group 7 
veterans 45 percent of reasonable charges until the deductible amount 
of $1500 is reached. After the deductible is met, the inpatient and 
outpatient co-payments will resume. According to VA, approximately 25 
percent of Priority Group 7 veterans report having billable insurance. 
According to VA, 55-60 percent of Priority Group 7 veterans are over 
the age of 65, and thus Medicare-eligible. VA is prohibited from 
billing the Centers for Medicare and Medicaid Services (CMS), but can 
bill the Medicare supplemental insurers. Only the remaining 15-20 
percent of Priority Group 7 will be expected to generate over $500 
million in medical care costs.
    In FY 2002, VHA estimates first-party collections will reach $228 
million. VHA estimates that in FY 2003 it will collect $192 million in 
first-party collections. In FY 2002, VHA estimates third-party 
collections will reach $577 million. VHA predicts FY 2003 will generate 
$529 million in third-party reimbursements. VHA expects to collect $363 
million in deductibles in FY 2003. This new proposal calls for fewer 
first-party reimbursements, fewer third-party reimbursements, but more 
in deductibles.
    The American Legion believes these are optimistic estimates, at 
best. VHA's past MCCF performance in meeting collection expectations is 
a major concern to The American Legion. VHA's billing and collection 
reputation is rather embarrassing.
    The American Legion believes in order for billing and collections 
to improve VA must be provided with the resources to obtain the 
necessary technology and to properly train MCCF personnel or consider 
contracting out the entire process.
    Unlike in the private sector, Medicare-eligible veterans cannot use 
their Medicare benefits in a VHA facility. When Medicare-eligible 
veterans receive health care treatment for any medical condition in the 
private sector, the federal government reimburses the health care 
provider for a portion of that service. When Medicare-eligible veterans 
receive health care treatment for the same medical conditions within 
VHA, the federal government will not reimburse VHA for any portion of 
that service. This equates to a restriction on veterans' right to 
access health care of their choice and using their Medicare insurance 
coverage.
    The American Legion believes that Medicare subvention will result 
in more accessible, quality health care for all Medicare-eligible 
veterans. Furthermore, Medicare subvention should greatly reduce 
incidents of fraud, waste and abuse in billing because it will occur 
between two Federal agencies with congressional oversight. Today's 
fiscal realities requires VHA to seek other revenue streams to 
supplement the growing demand for service and not simply rely on saving 
more dollars to serve more veterans. The American Legion strongly 
recommends allowing Medicare subvention for Medicare-eligible veterans 
enrolled in VHA.
    While there is much dialogue concerning the tremendous patient 
population growth, very little has been mentioned about the addition of 
health care professionals to meet the growing demand for health care. 
The American Legion understands that there are currently many veterans 
waiting to enroll in VHA. Additional health care professionals will 
also help reduce the long waiting periods for appointments, especially 
for specialized care. In the private health care industry, there is 
great concern over the growing nursing shortage, yet this budget fails 
to address any recruitment or retention proposal, much less, funding.
    The American Legion recommends VHA medical care receive $23.1 
billion in FY 2003 and that all third-party reimbursement, to include 
Medicare, be considered as a supplement rather than an offset.
                    medical and prosthetic research
    The contributions of VA medical research include many landmark 
advances, such as the successful treatment of tuberculosis, the first 
successful liver and kidney transplants, the concept that led to the 
development of the CT scan, drugs for treatment of mental illness, and 
development of the cardiac pacemaker. The VA biomedical researchers of 
today continue this tradition of accomplishment. Among the latest 
notable advances are identification of genes linked to Alzheimer's 
disease and schizophrenia, new treatment targets and strategies for 
substance abuse and chronic pain, and potential genetic therapy for 
heart disease. Many more important potentially groundbreaking research 
initiatives are underway in spinal cord injury, aging, brain tumor 
treatment, diabetes and insulin research, and heart disease. The 
American Legion views these research advances as so significant that it 
has devoted a column in its magazine to VA Research and Development.
    Dollar for dollar, others recognize VA as conducting an 
extraordinarily productive research program. Currently the VA devotes 
75 percent of its research funding to direct clinical investigations 
and 25 percent to bioscience.
    The Quality Enhancement Research Initiative (QUERI) is the highest 
priority within the VA's Research and Development program. The 
Institute of Medicine has recognized this program as the best of its 
kind. QUERI is a multidisciplinary, data-driven national quality 
improvement program designed to promote the systematic translation of 
evidence into practice. In other words, ``putting research results to 
work.'' Currently, QUERI focuses on 10 priority conditions. These 
conditions include congestive heart failure, heart disease, mental 
health, substance abuse, HIV/AIDS, diabetes, stroke, spinal cord 
injury, dementia/Alzheimer's and prostate cancer. Without sufficient 
funding, VA will not be able to continue all of the QUERI initiatives 
that involve new technology and the cutting edge of scientific 
advances. This will have a direct impact on the rapidly aging veteran 
population.
    VA's overall research program requires a significant increase in 
funding above current levels in each of the next several years to 
perform important research and evaluation studies. The President's 
budget request of $409 million is inadequate and should be increased, 
especially with the growing threats of nuclear, biological and chemical 
terrorism.
    The American Legion recommends $420 million for the research budget 
in FY 2003.
            medical construction and infrastructure support
Major Construction
    The VA major construction program continues to be under funded. The 
major construction appropriation over the past few years has allowed 
for only one or two projects per year. For FY 2001, 16 major ambulatory 
care or seismic correction projects were submitted to OMB. Of this 
number, only one major VHA project was recommended. For FY 2002, 28 
major projects have been submitted for funding.
    Over the past several years, The American Legion has testified that 
VA's major and minor construction appropriation must include all 
infrastructure priorities. Unfortunately, over the past several years, 
VA has not received appropriate funding
    Private consultants have been warning for years that dozens of VA 
patient buildings were at the highest level of risk for earthquake 
damage or collapse. Currently, the VHA has identified 890 buildings in 
its inventory as being at risk. Of those 890, 560 are identified as 
essential--defined as bed, clinic, psychiatric, research, boiler plant, 
etc. Additionally, VHA has identified 67 patient care and other related 
use buildings as Extremely High Risk--danger of collapse or heavy 
damage. Along with the necessary ambulatory care and patient safety 
projects, it will require well over $250 million to address VHA's 
current major construction requirements.
    The Capital Asset Realignment for Enhanced Services (CARES) program 
has impeded construction projects throughout VHA. Many much needed 
construction projects that would maintain and update VHA's 
infrastructure are being put on the back burner while CARES awaits full 
implementation. The American Legion fears that the CARES process does 
not allow for the local VA managers to implement the facility 
improvement projects that they know are necessary to maintain a 
functional service delivery system. The President's budget request for 
only $194 million severely inhibits VHA's ability to properly care for 
America's veterans.
    The American Legion recommends $310 million for major construction 
in FY 2003.
Minor Construction
    The American Legion believes that Congress must be consistent from 
year to year in the amount invested in VHA's infrastructure. Annually, 
VHA must meet the infrastructure requirements of a system with 
approximately 5,000 buildings that support 600,000 admissions and over 
35 million outpatient visits. This accomplishment requires a 
substantial inventory investment. The FY 2001 appropriation of $166 
million for minor construction was not nearly enough to meet future 
physical improvement needs. With the added cost of the CARES program 
recommendations and the nearly $42 million request for minor upgrades 
in the research facilities, it is essential that funding be increased 
considerably from that of past fiscal years. It would be foolish to 
reduce this investment. The President's budget request for $211 million 
falls short of VHA's minor construction needs.
    The American Legion recommends $219 million for minor construction 
in FY 2003.
     grants for the construction of state extended care facilities
    The State Extended Care Facilities Grant Program continues to be a 
cost-effective provider of quality care services to the nations' 
veterans who require domiciliary, nursing home, and hospital care. The 
State Veterans Home Program must continue, and even expand its role as 
an integral vital asset to VA. State homes are in a unique position to 
help meet the long-term care requirements of the Veterans' Millennium 
Health Care and Benefits Act (Public Law 106-117). By 2010, 42 percent 
of the entire veteran population, an estimated 8.5 million veterans, 
will be 65 or older, with half of that number over 5 years of age. By 
2030, most Vietnam Era veterans will be 80 years of age or older.
    As many VA facilities reduce long-term care beds and VA has no 
plans to construct new nursing homes, state veterans' homes are relied 
upon to absorb a greater share of the needs of an aging population. If 
VA intends to provide care and treatment to greater numbers of aging 
veterans, it is essential to develop a proactive and aggressive long-
term care plan.
    The Veterans Millennium Health Care and Benefits Act requires VA to 
provide long-term nursing care to veterans rated 70 percent disabled or 
greater. The new law also requires VA to provide long-term nursing care 
to all other veterans for service-connected disabilities and to those 
willing to make a co-payment to offset the cost of care. Further, it 
requires VHA to provide veterans greater access to alternative 
community-based long-term care programs. These long-term care 
provisions have placed greater demand on VHA and on the State Extended 
Care Facilities Grant Program. This legislation has been on the books 
for almost 2 years and it is time for full implementation.
    The American Legion believes it makes economic sense for VA to look 
to State governments to help fully implement the provisions of PL 106-
117. VA spends on average $225 per day to care for each of their 
nursing care patients and pays private-sector contract facilities an 
average per diem of $149 per contract veteran. The national average 
daily cost of care for a State Veterans Home nursing care resident is 
about $140. VA reimburses State Veterans Homes a per diem of $40 per 
nursing care resident. Over the long term, VA saves millions of dollars 
through the State Extended Care Facilities Grant Program.
    The American Legion supports the State Extended Care Facilities 
Grant Program and believes the federal government must provide 
sufficient construction funding to allow for the expected increase in 
long-term care veteran patients. The President's budget request for 
$100 million should be increased to help meet the growing demand for 
care by veterans of the ``Greatest Generation.''
    The American Legion recommends $110 million for the Grants for the 
State Extended Care Facilities for FY 2003.
                 national cemetery administration (nca)
    The National Cemetery Administration (NCA) is making great strides 
in meeting the interment needs of the nation's veterans and their 
dependents. As of October 31, 2001, NCA maintains more than 2.4 million 
gravesites at 120 national cemeteries in 39 states (and Puerto Rico). 
Currently, 75 percent of all veterans live within 75 miles of open 
national or state veterans' cemeteries. The ultimate goal is to have 90 
percent of all veterans living within 75 miles of open national or 
state veterans' cemeteries.
    NCA's workload is increasing by nearly five percent per year, with 
cremations accounting for the majority of new interments. The peak 
years for the interment of World War II veterans is expected to be 2006 
to 2010. Over the next decade, new national cemeteries are planned for 
Atlanta, GA; Miami, Fl; Pittsburgh, PA; Detroit, MI; and Sacramento, 
CA. P.L. 106-117 requires NCA to contract a study to determine where 
additional national and state veterans' cemeteries will be required 
through 2020.
    NCA is preparing ``fast track'' construction projects to open new 
national cemeteries. This allows burials to occur in each section of a 
new cemetery as it is being constructed. Instead of taking the 
conventional approach to new cemetery construction, ``fast track'' 
authority would permit the planned new national cemeteries to open in 
less than half the normal time, which is seven years. The most recent 
cemetery to open under the ``fast track'' authority is the Fort Sill, 
Oklahoma National Cemetery. Burials began on November 5, 2001.
    The National Shrine Initiative continues to be one of the highest 
priorities of the NCA. This is an ongoing commitment and scheduling 
continues to fulfill the pledge of aesthetically improving the national 
cemeteries. Major improvements and renovations have started at several 
cemeteries with wonderful results. However, there is much that remains 
to be done. A tremendous amount of time and money is needed to continue 
this commitment.
    The American Legion recommends $140 million for NCA in FY 2003.
                     state cemetery grants program
    The State Cemetery Grants Program, which provides 100 percent 
federal funding for new state veterans' cemeteries, has received a 
significant increase in the number of state cemetery applications. 
Within the next several years, NCA is hopeful that up to 30 new state 
veterans' cemeteries will be opened. The workload and budgetary 
requirements of NCA will continue to grow over the next 15-20 years. 
The American Legion continues to fully support the further development 
of the State Cemetery Grants Program.
    The American Legion recommends $30 million for the State Cemetery 
Grants Program in FY 2003.
           veterans' employment and training programs (vets)
    The American Legion adamantly opposes the President's new 
initiative to transfer VETS from the Department of Labor (DoL) to VA.
    In the President's budget request for FY 2003, he proposes to add 
$197 million to VA budget for a new competitive grant program that 
replaces programs currently administered by DoL. The American Legion 
expressed opposition to a similar recommendation proposed by the 
Congressional Commission on Servicemembers and Veterans Transition 
Assistance back in 1999. The American Legion strongly suggests this 
Committee consider oversight hearings before such an initiative is 
allowed to prevail. DoL has all of the expertise and resources for 
effective job placement and training. The National Veterans Training 
Institute (NVTI) provides standardized training for all veterans' 
employment advocates in an array of employment and training functions.
    Some suggest that moving VETS to VA would improve the overall 
performance of VA's Vocational Rehabilitation Program (Voc Rehab). 
Others would argue that moving Voc Rehab to VETS in DoL would be a much 
better approach. Nearly all VETS employees attend NVTI and receive 
continuing training, few (if any) Voc Rehab employees have attended 
NVTI training. The American Legion perceives the relationship between 
VETS and DoL much more germane than VETS and VA.
    The American Legion welcomes the opportunity to work with the 
Assistant Secretary for Veterans' Employment and Training (ASVET) and 
his staff to improve and enhance the overall performance of VETS. 
However, The American Legion believes reinventing the wheel within VA 
would be counterproductive and ineffective. The American Legion 
believes that many of VETS problems stem from persistent inadequate 
Federal funding, failure to be staffed at Federally mandated levels, 
and inconsistent national leadership.
    The mission of VETS is to promote the economic security of 
America's veterans. This stated mission is executed by assisting 
veterans in finding meaningful employment.
    Annually, DoD discharges approximately 250,000 service members. 
These recently separated service personnel are actively seeking 
immediate employment or preparing to continue their formal or 
vocational education. The veterans' advocates in VETS program play a 
significant role in helping the recently separated service personnel 
(veterans) reach their employment goals.
    1) VETS continues to improve by expanding its outreach efforts with 
creative initiatives designed to improve employment and training 
services for veterans.
    2) VETS provides employers with a labor pool of quality applicants 
with marketable and transferable job skills.
    3) VETS took the initiative in identifying military occupations 
that require licenses, certificates or other credentials at the local, 
state, or national levels.
    4) VETS helps to eliminate barriers to recently separated service 
personnel and assist in the transition from military service to the 
civilian labor market.
    VETS started an information technology project with the Computing 
Technologies Industry Association, to recruit veterans recently 
separated from the military; assess their interest and skill level for 
a career in information technology; provide occupational skills 
training and certification; and place these veterans into information 
technology jobs. VETS continues to expand its PROVET (Providing Re-
employment Opportunities for Veterans) program. PROVET is an employer-
focused job development and placement program that focuses on 
screening, matching and placing job ready transitioning service members 
into career-building jobs. PROVET programs are currently operating in 
several states. In addition to employment services, VETS also supports 
the Transition Assistance Program (TAP), the Disabled Transition 
Assistance Program (DTAP), Veterans Preference in the Federal 
workplace, and the Uniformed Services Employment and Re-employment 
Rights Act (USERRA).
    The American Legion strongly recommends restoring funding for the 
ASVET within DoL's FY 2003 budget at a funding level of $300 million. 
Staffing levels for Disabled Veterans Employment Program Specialists 
and Local Veterans Employment Representatives should match the Federal 
mandates or those statutes should be rewritten. The American Legion 
recommends an increase in the NVTI budget to $3 million annually. The 
American Legion further recommends that VA send Voc Rehab employees to 
NVTI training.
                    veterans benefits administration
    Under the proposed budget for FY 2003, mandatory spending for 
compensation, pension, education, burial, and other benefit programs is 
expected to be $31.5 billion. This is an increase of $3.4 billion over 
the level approved for FY 2002. It represents the funding requirements 
for ongoing statutory benefit payments to some 3.25 million veterans, 
dependents, and survivors, as well as the impact of recent, expanded 
statutory and regulatory entitlements, higher average benefit payments, 
and certain new legislative proposals. It also includes an estimated 
1.8 percent cost-of-living adjustment.
    Under General Operating Expenses (GOE), the budget request for FY 
2003 includes a total of $1.2 billion for discretionary spending to 
cover staffing and other costs associated with the administration of 
the various benefits and service programs within the Veterans Benefits 
Administration (VBA). This represents a net increase of $94 million 
over the amount approved for FY 2002. It includes an additional 125 FTE 
to support current efforts to bring the case backlog under control and 
support a new case development program at the Board of Veterans 
Appeals. The budget request also includes funding for a number of 
information technology initiatives that will provide much needed direct 
and indirect support toward improving the claims process.
    In addition to this modest staffing increase, the FY 2003 budget 
request for VBA describes a number of steps that, over time, are 
expected to steadily reduce the backlog of pending cases to about 
250,000 and the claims processing time to 100 days by the end of FY 
2003. As part of the strategy to reach these rather ambitious goals, 
VBA has implemented a broad spectrum of regulatory, programmatic, and 
administrative changes, in addition to its long-term strategic plan 
initiatives, that are intended to improve the regional offices' 
operational efficiency and decision-making. Also, recommendations of 
the Secretary's Claims Processing Task Force have been accepted and are 
in the process of being implemented over the next year. VA expects 
these changes to produce both near-term and long-term improvements in 
the quality and timeliness of the decision-making process.
    The data upon which VBA's budget request is predicated shows a 
continued overall increase, rather than a decrease, in the volume of 
incoming claims. With more complex claims per case and the level of 
available adjudication expertise, it is doubtful that regional offices 
will be able to achieve the dramatic increases in production and 
improvements in quality that will be necessary to reach the claims 
processing goal of 100 days with a backlog of 250,000 cases. In an 
effort to achieve such ambitious production goals, The American Legion 
is concerned that regional offices will emphasize expediency rather 
than ensuring full compliance with the due process and assistance 
requirements of the Veterans Claims Assistance Act and other provisions 
of the law. Even with the implementation of the many changes and 
efficiencies described, claims development and adjudication will 
continue to be a very labor intensive and time-consuming process.
    The American Legion believes that the requested staffing increase 
is insufficient to meet the expected workload demand in FY 2003.
                            benefit programs
    The American Legion is pleased to see some special attention being 
given to expediting the 81,000 oldest claims by the nation's oldest 
veterans. No veteran or survivor should have to wait a year or longer 
for a decision on their claim, least of all elderly claimants. 
Tragically, many die before receiving a decision and the long-awaited 
benefits to which they were entitled. The Tiger Team initiative at the 
Cleveland VA Regional Office and the nine Service Delivery Network 
(SDN) Resource Centers will go a long way toward alleviating much of 
the hardship and frustration that thousands of veterans experience 
while waiting for their claim to be decided.
    The FY 2003 budget proposal outlines the various internal changes 
VBA is making and intends to make in order to improve the level and 
quality of the service it provides veterans. However, there are a 
number of external factors that have an ongoing impact on VBA's ability 
to drastically improve regional office performance and production. In 
FY 2003, while there will be a slight decrease in the number of pension 
claims, this will be more than offset by the substantial increase in 
the overall number of compensation claims. Most of this increase is 
expected to come from the continued influx of new and reopened claims. 
The number of Agent Orange-related diabetes claims is expected to be up 
substantially over FY 2002. VBA must also rework thousands of cases as 
a result of Nehmer v. United States Veterans' Administration.
    Congress has recently expanded entitlement to service connection 
for radiation-related diseases as well as disabilities affecting 
veterans who served in the Persian Gulf War. The requirements of the 
Veterans Claims Assistance Act of 2000 have greatly increased the 
regional office's workload and processing time. The United States Court 
of Appeals for Veterans Claims and the United States Court of Appeals 
for the Federal Circuit have continued to issue precedent decisions 
requiring frequent and often far-reaching changes in adjudication 
procedures and the reworking of thousands of previously decided and 
pending cases.
    The American Legion tentatively supports VBA's proposed initiatives 
for FY 2003. We hope these will enable substantial progress to be made 
toward the overall goal of providing veterans proper and timely 
decisions on their benefit claims.
    The American Legion is deeply concerned that the 125 additional 
staff for VBA in FY 2003 may not be adequate, if VBA is to be even 
partially successful in meeting its stated claims processing goal of 
100 days.
                       board of veterans appeals
    Veterans or other claimants must have the right to appeal any 
decision by the regional office to the Board of Veterans Appeals (BVA 
or the Board). BVA staffing for FY 2002 is 464 FTE. In FY 2003, 
however, it is projected to further decline to 451 FTE. The American 
Legion is again concerned by this reduction. Given the current number 
of initial appeals and remands pending in the regional offices coupled 
with the fact that the Board will soon begin a major new initiative to 
do the development work that the regional offices would have normally 
done pursuant to a BVA remand, manpower shortages may adversely impact 
on the timeliness of decisions.
    In FY 2001 and for the first quarter of FY 2002, the number of new 
appeals filed in the regional offices has continued to rise. This 
reflects a high level of dissatisfaction with regional office actions. 
However, over the same period of time, the number of cases transferred 
to the Board has steadily declined, due to the overall slow down in 
claims processing. In particular, regional office compliance with the 
requirements of the Veterans Claims Assistance Act has prolonged the 
development of appeals and their eventual transfer to the Board.
    The American Legion's longstanding concern with the appeals process 
is with those factors that contribute to an annual influx of 60,000 to 
70,000 new appeals. Veterans and other claimants feel they are not 
treated fairly or properly by a system that is very complex, highly 
bureaucratic, and legalistic. They feel very strongly that the process 
is basically adversarial and not ``user friendly.'' This perception is 
reinforced by the fact that, in FY 2001, the BVA allowed the claimant's 
appeal in 22.3 percent of the cases and remanded 48.8 percent of the 
appeals for further required action. The Board only affirmed regional 
office decisions 27 percent of the time.
    Of the approximately 60,000 appeals decided in FY 2000 and 2001, 
the Board remanded about 32,000 cases for additional development and 
readjudication. Unfortunately, most of the appellants in these cases 
are still waiting on action by the regional offices. Some of these 
appeals date from 1997 and 1998, and as noted previously, the issue on 
appeal in these cases is much older still.
    Remands involve substantial additional work for the regional 
offices. To try and reduce this portion of their workload as well as 
provide more timely decisions on all appeals, VA regulations will go 
into effect later this month authorizing the BVA to fully develop 
appeals without the necessity of remanding them back to the regional 
office of such action. This will involve reorganization of the BVA 
staff and the reassignment of a limited number of FTE from the 
Compensation and Pension Service to assist in the additional 
development work.
    Under this new program, it's expected that the Board will be able 
to provide more expeditious and complete development of appeals. In FY 
2001, with a staff of 454 FTE, the BVA issued approximately 31,000 
decisions. Of these decisions, approximately 8,500 or 48.8 percent were 
remands. Now, the Board itself will undertake this development in the 
majority of those cases, which would have otherwise been remanded. The 
American Legion believes that more, rather than fewer staff at the 
Board will be needed in FY 2003 to handle this additional workload.
    By substantially reducing the number of remands, the regional 
offices should be able to concentrate on completing more pending 
benefit claims and completing the outstanding remands. While The 
American Legion believes this new procedure will ultimately benefit 
veterans and provide more timely service, we are concerned that, in the 
interest of expediency, the regional offices may try and use this 
program as a way around full compliance with their responsibilities 
under the Veterans Claims Assistance Act. In our view, the high remand 
rate of the past several years is a direct reflection of poor decision-
making and the lack of an effective quality assurance program. Since 
the BVA will be assuming the responsibility for correcting errors and 
mistakes by the regional offices, there will be an incentive for the 
regional offices to try and shift as much of the appellate workload 
onto the Board as possible. VBA must ensure this does not happen. More 
stringent quality assurance standards and performance measures must be 
promptly implemented. To make this program a success there must also be 
a closer working relationship and improved communication between VBA 
and the Board at all levels.
    The American Legion recommends a total of $1.3 billion in VBA-GOE.
                           homeland security
    The important role of VA in Homeland Security is not highlighted in 
the President's budget request. The American Legion saw the critical 
actions of VA in response to the September 11, 2001 disasters. VA 
employees sprang into action to assist response personnel, victims, and 
surviving family members. Yet, VA was not actually a part of any 
emergency response plans immediately implemented, but rather acted 
unilaterally. VA employees provided medical care, counseling, and 
claims processing. VA was prepared to do even more if called into 
action.
    The Director of Homeland Security, Tom Ridge, will need the 
cooperation of an array of Federal agencies. Since VA medical 
facilities are geographically diverse, VHA is a logical partner for the 
pre-positioning of inoculations and medical supplies needed to address 
acts of terrorist or natural disasters. Currently, every VA campus is 
scheduled to undergo an evaluation under CARES. Homeland Security 
requirements must be included in the criteria used to determine 
possible utilization of physical plants that may currently be 
considered underutilized.
    In the event of a nuclear, chemical, or biological terrorist 
attack, each VA campus may become a key element in the care and 
treatment of mass causalities. As national emergency plans are reviewed 
at every level of government--local, state, and national--VA must be 
seen as valuable resource. Whether housing response workers, military 
forces, or law enforcement personnel; providing quality medical care; 
or serving as a command, control and communications center, VA must 
have the resources to meet the assigned mission as back up to DoD and 
the National Disaster Medical System.
                                summary
    Mr. Chairman and Members of this Committee, The American Legion 
applauds the leadership of President Bush and his Administration, 
especially under the current wartime conditions. As an organization of 
wartime veterans, we continue to stand shoulder-to-shoulder with the 
President, Congress, and our comrades-in-arms--past, present, and 
future.
    The American Legion knows that the President's budget request is 
focused on winning the war on terrorism. Therefore, adequate defense 
spending is extremely critical and The American Legion fully supports 
the direction the President has chosen. However, the cost of waging war 
continues long after the dead are buried, the guns are silenced, and 
the treaties are signed. The war continues to rage in the hearts and 
minds of its veterans. No combat veteran completely walks away from any 
war untouched, physically or mentally.
    The cost of freedom rests in this nation's ability to recruit and 
retain young men and women willing to pay the ultimate sacrifice in the 
name of liberty. This nation has been blessed since its inception with 
similar citizen-soldiers, sailors, airmen, and Marines that have set a 
standard of excellence for others to follow. Recently, a new generation 
of Purple Heart recipients demonstrated on the field of battle the 
courage, determination, and loyalty exhibited by--the Minutemen, the 
Roughriders, the doughboys, the GIs--that preceded them in protecting 
and defending America against all enemies, foreign or domestic.
    Mr. Chairman and Members of this Committee, The American Legion 
doesn't ask for much, just another installment in the ongoing cost of 
freedom.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                           to James R. Fischl
       discouraging priority 7 veterans through $1500 deductible
    Question 1. Please comment on the VA's proposed $1,500 deductible 
for Priority 7 veterans. In my memory, this is the first time we have a 
proposal on the table that aims to drive away existing VA health care 
users. What are your thoughts about this proposal?
    Answer. Many would argue that this is not the first time a proposal 
was offered to drive away existing VA health care users. With the 
enactment of PL 99-272, Congress established means testing within VHA 
that placed veterans into three categories: A, B, and C. Category C 
veterans had very little access to VHA. Wisely, Congress enacted PL 
104-262 that allows VHA to enroll all veterans within existing 
appropriations. Now the challenge is to generate enough revenue through 
Federal appropriations, co-payments, deductibles, and third-party 
reimbursements to meet the growing demands for quality health care.
    The American Legion opposes the $1500 deductible, as proposed in 
the President's budget request. The American Legion does not oppose 
certain veterans paying for the treatment of non-service-connected 
medical conditions. We have consistently offered alternative ideas on 
how veterans could pay for the care of their non-service-connected 
medical conditions. The American Legion's GI Bill of Health (a 
blueprint for VA health care for the 21st Century) advocates collecting 
from veterans and all third-party insurers, to include all Federal 
health insurers, such as Medicare. The GI Bill of Health also 
recommends VA provide health care benefits packages on a premium basis 
for those veterans with no health care coverage.
    The American Legion continues to advocate for Medicare subvention 
for VHA for the treatment of non-service-connected medical conditions 
of enrolled Medicare-eligible veterans in Priority Group 7. There are 
logical reasons to justify Medicare subvention:
     The majority of enrolled Medicare-eligible veterans meet 
or exceed the 40 quarters standard of Medicare covered employment.
     For Priority Group 7 veterans, Medicare is a pre-paid 
Federal health insurance plan.
     All enrolled Medicare-eligible veterans are free to choose 
any health care provider. Based on the quality of service provided in 
VHA and its pharmacy, many Medicare-eligible veterans wisely opt for 
VHA.
     As a Federal health care provider, VHA's billing should 
not exceed Medicare's allowable rates.
     Under current law, VHA is authorized to bill and collect 
third-party reimbursements, with few exceptions. Medicare is normally 
the secondary payer and would meet these criteria.
     VHA is an integrated health care delivery system, which 
could easily accommodate the Medicare+Choice option of the Centers for 
Medicare and Medicaid Services (CMS).
     Direct billing between two Federal agencies, VA and CMS, 
should greatly reduce opportunities for fraud, waste, and abuse.
     Priority Group 7 veterans' access is contingent upon the 
ability to collect both copayments and third-party reimbursements.
     Medicare-eligibility does not grant a person access to VHA 
health care.
     VHA's quality of care compares favorably when benchmarked 
against Medicare providers' performance measures of quality.
                    eliminating va's claims backlog
    Question 2. Clearly, VA's current claims backlog is intolerable, 
and new steps are needed to improve the claims process. We know from 
past experience that VA's attempts to streamline this process often 
lead to a temporary slowdown that makes the problem worse. What steps 
do you think that VA could take, and what resources would be necessary, 
to prevent the backlog from swelling even more while VA puts its new 
plans into place?
    Answer. The American Legion has a number of concerns with VA's 
recent efforts to address the backlog of pending claims, in regard to 
staffing, and quality assurance issues. Secretary Principi's often-
repeated promises to improve VA's service have significantly raised 
veterans' level of expectation. However, it remains to be seen if VA 
can, in fact, deliver quality decisions in a timely manner.
    Under ideal circumstances, a backlog of almost 600,000 pending 
cases might not be too large, if these could be processed in a 
reasonable amount of time with a high degree of user satisfaction and 
few appeals. However, when Secretary Principi took over VA in 2001, VBA 
was in the process of hiring large numbers of new adjudicators and 
integrating them into a very labor intensive, claims adjudication 
system. He also inherited a backlog that was growing in size, age, and 
complexity.
    At this time last year, the backlog of pending cases was some 
485,000 with about 91,000 over six months old. In the eight weeks since 
the first of this year, the number of compensation and pension cases in 
process has risen from 548,846 to 594,030 or a net increase of about 
5,800 cases per week. The core staff of experienced adjudicators must 
try and balance the continuing need to train the new hires with the 
need for production.
    It is apparent, based on VBA's weekly work reports, that despite 
current efforts, including the additional staff, VBA has not been able 
to stem the growth in the overall backlog of claims and appeals, 
although there has been a slight decline from 230,000 to 229,000 cases 
over six months old. This may be a sign of some initial progress in 
reducing at least one part of the backlog. More time is needed to see 
if this favorable trend continues.
    In recent months, there have also been a variety of new initiatives 
to process the oldest pending cases, such as the use of the Tiger Team 
and SDN Resource Centers. Regional offices are putting most of their 
time and effort into claims processing, rather than expediting appeals, 
which are claims that often go back two, three, or more years. There 
are currently about 96,400 pending appeals, including some 32,000 
remands. The recent change in VA regulations permitting the BVA to do 
development work on appeals rather than remanding them is a partial 
solution to the regional offices continuing poor quality decision-
making problem. A coordinated VBA/BVA quality assurance program may 
help improve regional office performance, in the long run.
    VA continues to emphasize that they are now doing more claims 
actions as more and more of the new adjudicators complete their basic 
training. We believe this gives a false impression that VA has turned 
the corner and the backlog is on its way to being controlled. More 
claims actions, however, does not necessarily mean that more claims are 
being completed and benefits paid. We are concerned about compliance 
with the VCAA.
    Claimants are entitled to an explanation of the decision process 
and what would be required to grant the benefit sought. In visiting 
regional offices we have observed that claimants are being provided 
with boilerplate explanations rather than meaningful responses. We are 
also concerned that the emphasis on requesting submission of evidence 
in thirty days will result in premature denials followed by reopened 
claims when the evidence is later submitted. Workload reports will then 
reflect improved timelines and productivity. The current work 
measurement system does not provide accurate, reliable data on the time 
it actually takes to complete a claim. It has a long history of 
manipulation and abuse and does not provide management necessary and 
appropriate information on regional office staffing and resource needs.
    We believe the backlog will get worse before it gets better. If VA 
is going to be even partially successful, it must avoid the types of 
problems it created for itself and veterans in the handling of the 
backlog crisis of the mid-1990s. At that time, all efforts were focused 
on production in order to reduce the backlog and claims processing 
time. VBA's training program was essentially put on hold. Quality in 
decision-making was subordinated to expediency. There was no effective 
quality assurance program. Overall ``customer dissatisfaction'' was 
reflected in a sustained high rate of appeals filed.
    BVA overturned the regional office's actions two-thirds of the 
time. The poor quality work and unnecessary appeals squandered valuable 
federal resources and taxpayers' dollars. It also subjected many 
veterans and their families to prolonged financial and emotional 
hardship while their claims and appeals churned through an uncaring 
system. The lessons of the recent past are: VBA must have a strong 
training program, even though it constrains station output somewhat in 
the short-term; VBA must have an independent, effective quality 
assurance program that tracks individual and station performance; and 
there must be sufficient staffing in order for VBA to carry out its 
claim processing responsibilities.
    Looking at its announced goals, current tasks, and future 
challenges, including the need for succession hiring, we do not believe 
the proposed increase of 125 FTE for VBA in FY 2003 will be adequate. 
Unfortunately, we are unable to suggest an appropriate staffing level, 
since the details of VBA's FY 2003 GOE request have not yet been 
released to the public.
                 shortfalls in the medical care budget
    Question 3. The level of funding proposed for this year includes a 
mishmash of shifting funds, revenue collections and new charges to 
veterans. It's hard to tell what the actual new appropriated medical 
care funding amount is but it is safe to say that it is no where near 
the $3.14 billion increase proposed by the Independent Budget. What 
initiatives and funding needs will the Independent Budget cover that 
are not going to be met by the Administration's budget?
    Answer. The American Legion is not affiliated with the Independent 
Budget; therefore, The American Legion will not comment on the 
Independent Budget or its recommendations. However, we applaud their 
dedication and commitment to America's veterans.
    Annually, The American Legion presents its budget recommendations 
before a joint session of the Veterans' Affairs Committees shortly 
after The American Legion's National Convention. During this early Fall 
hearing, The American Legion offers its recommendation for the next 
fiscal year. This provides the Committees, other Members of Congress, 
and the Administration The American Legion's expectations well before 
the President's budget request is submitted to Congress.
    On September 11, The American Legion submitted to the Veterans' 
Affairs Committees, its recommended funding level for VA in FY 2003. 
The American Legion recommends VHA medical care receives at least a 
$23.1 billion funding level in FY 2003. This is a $1.8 billion dollar 
increase over last year's medical care budget. Moreover, The American 
Legion has always believed that all third-party reimbursements, to 
include Medicare, be considered as supplements rather than offsets.
    Obviously, that recommendation does not include the transfer of 
funding from the Office of Personnel Management (OPM) to pay for the 
Federal employee benefits (Civil Service Retirement System and Federal 
Employees Health Benefit Program) addressed in the President's budget 
request for FY 2003. The American Legion does not oppose this 
bookkeeping adjustment; however, this adjustment would increase The 
American Legion's request, as well. Congress should not confuse this 
OPM transfer as an increase in funding for the delivery of health care. 
In fact, The American Legion believes the FY 2002 VA medical care 
budget still needs a $300 million in supplement appropriations to avoid 
the rationing of health care delivery in local VA medical facilities at 
the end of the fiscal year.
    VHA has seen a dramatic rise in the Priority Group 7 veterans' 
population use of VHA facilities and services, most notably pharmacy 
services. The American Legion believes that all veterans should 
maintain their eligibility status and none of the Priority Group 7 
veterans should ever be disenrolled because of budget constraints. The 
American Legion is deeply concerned with the Medical Care Collection 
Fund (MCCF). Eligibility reform was based on the premise that Priority 
Group 7 veterans would generate revenue through co-payment and third-
party reimbursements to offset the additional costs. The majority of 
the Priority Group 7 enrollees are either Medicare-eligible or do not 
have third-party insurance coverage.
    The American Legion recommends:
     Authorizing VHA to bill, collect and retain reimbursements 
from Medicare;
     Authorizing VHA to offer premium-based health care 
policies (basic care, complex care, or specialized services) for 
Priority Group 7 enrollees with no third-party coverage; and
     Requiring VHA to either dramatically improve internal MCCF 
collections or contract out MCCF collections.
    Another observation concerning the tremendous grow in VHA 
enrollment is the significant lack of additional health care 
professionals hired to meet the patient demand for services. Two years 
ago, PL 106-117, the Veterans' Millennium Health Care and Benefits Act 
of 1999, provided greater specificity in directing VA to address long-
term care. The American Legion is deeply concerned that VA is not 
aggressively meeting that congressional mandate.
    transfer of the veterans employment and training service (vets)
    Question 4. VA is proposing a new competitive grant program that 
would shift VETS from the Department of Labor to VA. Do you think that 
VA is better equipped to provide employment and training services to 
veterans? What effects will the transfer have on veterans?
    Answer. The American Legion adamantly opposes the President's new 
initiative to transfer VETS from the Department of Labor (DoL) to VA.
    DoL possesses all of the expertise and resources for effective job 
placement and training. The National Veterans Training Institute (NVTI) 
provides standardized training for all veterans' employment advocates 
in an array of employment and training functions.
    Some suggest that moving VETS to VA would improve the overall 
performance of VA's Vocational Rehabilitation Program (Voc Rehab). 
Others would argue that moving Voc Rehab to VETS in DoL would be a much 
better approach. Nearly all VETS employees attend NVTI and receive 
continuing training, few (if any) Voc Rehab employees have attended 
NVTI training. The American Legion perceives the relationship between 
VETS and DoL much more germane than VETS and VA.
    The American Legion welcomes the opportunity to work with the 
Assistant Secretary for Veterans' Employment and Training (ASVET) and 
his staff to improve and enhance the overall performance of VETS. 
However, The American Legion believes reinventing the wheel within VA 
would be counterproductive and ineffective. The American Legion 
believes that many of VETS problems stem from persistent inadequate 
Federal funding, failure to be staffed at Federally mandated levels, 
and inconsistent national leadership.
    The mission of VETS is to promote the economic security of 
America's veterans. This stated mission is executed by assisting 
veterans in finding meaningful employment.
    Annually, DoD discharges approximately 250,000 service members. 
These recently separated service personnel are actively seeking 
immediate employment or preparing to continue their formal or 
vocational education. The veterans' advocates in VETS program play a 
significant role in helping the recently separated service personnel 
(veterans) reach their employment goals:
     VETS continues to improve by expanding its outreach 
efforts with creative initiatives designed to improve employment and 
training services for veterans.
     VETS provides employers with a labor pool of quality 
applicants with marketable and transferable job skills.
     VETS took the initiative in identifying military 
occupations that require licenses, certificates or other credentials at 
the local, state, or national levels.
     VETS helps to eliminate barriers to recently separated 
service personnel and assist in the transition from military service to 
the civilian labor market.
    VETS started an information technology project with the Computing 
Technologies Industry Association, to recruit veterans recently 
separated from the military; assess their interest and skill level for 
a career in information technology; provide occupational skills 
training and certification; and place these veterans into information 
technology jobs. VETS continues to expand its PROVET (Providing Re-
employment Opportunities for Veterans) program. PROVET is an employer-
focused job development and placement program that focuses on 
screening, matching and placing job ready transitioning service members 
into career-building jobs. PROVET programs are currently operating in 
several states. In addition to employment services, VETS also supports 
the Transition Assistance Program (TAP), the Disabled Transition 
Assistance Program (DTAP), Veterans Preference in the Federal 
workplace, and the Uniformed Services Employment and Re-employment 
Rights Act (USERRA).
              saving money through sharing unused va space
    Question 5. Three years ago GAO criticized VA for having over 5% of 
its space unoccupied. GAO said that VA was losing a million dollars a 
day. I think that we would all agree that many more veterans could be 
served if the VA had an additional $360 million dollars. What can VA do 
to create more sharing opportunities? With what organizations might 
they share?
    Answer. Clearly best practices need to be shared by those that have 
a successful sharing agreement, joint venture or cooperation.
    Currently, VA and DoD sharing occurs among 165 Veterans Affairs 
Medical Centers (VAMC) and most military medical treatment facilities. 
VA and the military have agreed to share 7,963 services covering a 
broad range of hospital related activities. Both Departments are 
exploring ways to improve coordination of service delivery in such 
areas as long-term care, pharmacy, chiropractic services, and 
radiology.
    The American Legion is impressed with the joint venture sites it 
has visited and other sharing arrangements it has reviewed. There is a 
clear indication of benefits for both systems. The American Legion 
encourages VA and DoD to continue to explore more avenues for 
cooperation and to assist other areas of the country in formulating and 
negotiating these opportunities. The American Legion believes there are 
many more of these opportunities out there to be developed. The number 
and types of sharing agreements (as indicated by the amount of dollars 
exchanged) are minor, relative to the overall budgets for each Federal 
agency.
    In reviewing the cooperative efforts between VA and DoD, The 
American Legion identified several different ways in which VA and DoD 
could cooperate:
     buy or sell services between the Federal agencies. VHA 
facilities are authorized to make maximum effective use of their 
resources and can provide services to community entities when there is 
no diminution of services to veterans. All revenue generated from the 
sale of services is used to enhance care for eligible veterans. During 
2000, there were 1,136 new contracts for resources purchased 
($289,712,000) and provided ($32,090,000) totaling $321,802,000. This 
is a significant increase in activity from past years in resources 
purchased. The expanded authority gives VHA the mechanism to make the 
best use of available resources to purchase services in the most cost-
effective manner.
     share staff, such as having reservists drill at VA 
hospitals, especially since VA is affiliated with many medical schools.
     share technology and other equipment. A mammography 
machine, which might not be a justifiable cost for one, can become 
beneficial if bought jointly as was done in Albuquerque.
     conduct joint education and training. VA is affiliated 
with 103 medical schools.
     co-purchase pharmaceuticals and medical/surgical supplies. 
They can share supplies and borrow pharmaceuticals from each other in 
emergency situations.
     VA can increase its role as a TRICARE sub-contractor.
     patient medical records and other information can be 
jointly accessed to enable service members a smoother transition from 
active duty.
    The American Legion's approach to underutilized space is to utilize 
the space. Veterans are waiting to enroll in VHA--a great many of them 
are Priority Group 7 veterans--those veterans capable of generating new 
revenue through co-pays, deductibles, and third-party reimbursements. 
VHA has a long-term care congressional mandate that is currently not 
being aggressively met. Some of this current underutilized space may be 
a cost-effective approach towards meeting its long-term care 
objectives. Other veterans, already enrolled, experience long waiting 
periods for appointments. If they have other alternatives, such as 
Medicare or third-party coverage, they may very well go elsewhere with 
their health care dollars.
    The American Legion continues to caution Congress and VA to 
evaluate these physical plants from a proactive rather than a reactive 
mindset. Once the property is gone, replacement may be twice the cost 
of renovation, restoration, or replacement. These decisions should not 
be purely budget-driven, but rather patient-driven. The question should 
be asked, ``What services could this facility provide to VHA 
beneficiaries?''
    The American Legion would rather see these spaces used by contract 
health care provider, contracted long-term care providers, or National 
Guard medical battalions rather than being eliminated from VA's 
inventory. Based on increased concerns for Homeland Security and the 
War on Terrorism, VHA role as a back up to DoD during national 
emergencies or natural disasters must also be factored into future 
evaluation of capital assets.
                 deceptive increase in benefits budget
    Question 6. Although this year's budget recommends a $94 million 
increase in funding for VBA, more than half of that will be consumed in 
an administrative shift of employees' benefits. Even given the 
efficiencies that VBA hopes to gain in processing claims, what do you 
think the short- and long-term impact of this budget will be for 
veterans?
    Answer. VBA discretionary funding in FY 2003 indicated an increase 
of $94 million. This gives the general impression that additional 
funding is being requested for more staffing in the regional offices 
and, thereby, improving claims processing and service to veterans. 
However, in reality, the net increase in GOE is $40 million and 125 
FTE. The difference of $54 million reflects a bookkeeping adjustment 
for employee retirement benefit costs. We believe this an attempt to 
mislead veterans and the Congress into thinking that VBA has turned the 
corner on the backlog problem and only a modest increase in staff is 
needed.
    VBA has hired several thousand new employees in the last two years 
and embarked on a variety of major programmatic changes that are 
intended to improve the quality and timeliness of its services. We 
believe VBA is still in a transitional phase and the full impact of 
these initiatives has yet to be seen. The staff build-up of the last 
several years has been essential in order to offset previous years of 
severe staffing cutbacks and develop a new cadre of adjudicators to 
handle the existing workload and eventually replace retiring senior 
adjudicators. We strongly believe this build-up must continue, at least 
through FY 2003. However, a more specific recommendation about staffing 
needs will be contingent upon an analysis of the data in VBA's GOE FY 
2003 budget request, which is not yet available. Training is a long-
term investment and must remain a central part of VBA's strategy to 
provide veterans the benefits and services they expect and to which 
they are entitled.
                      funding for medical research
    Question 7. This year's Medical and Prosthetics Research Budget 
request is actually 6% higher than last year's request. The VA says 
that this will allow for 76 new projects and an additional 184 staff. 
What are your thoughts on this level of funding for research?
    Answer. The American Legion continues to recommend an increase in 
Medical and Prosthetics Research. The American Legion's budget 
recommendation for FY 2003 is $420 million. With the growing threats of 
nuclear, biological and chemical terrorism, and the direct impact 
medical and prosthetic research has on the rapidly aging veterans' 
population, we believe the level of funding for research outlined in 
the President's budget is too low. Recent advances, such as 
identification of genes linked to Alzheimer's disease and 
schizophrenia, new treatment targets and strategies for substance abuse 
and chronic pain, are very important to the veterans' population. 
Additionally, VA is conducting very progressive research in spinal cord 
injury, aging, brain tumor treatment, diabetes and insulin research, 
and heart disease. The American Legion views these research advances as 
so significant that it has devoted a column in The American Legion 
Magazine to VA Research and Development.
                          medicare subvention
    Question 8. I notice that you support Medicare subvention for the 
VA. Several years ago the Department of Defense had this opportunity 
and ended up spending more than they collected. Why do you feel that 
the VA would be successful at this when DoD wasn't?
    Answer. Currently, Indian Health Service is successfully billing 
and collecting from the Centers for Medicare and Medicaid Service (CMS) 
for both Medicare and Medicaid. TRICARE for Life is DoD's newest 
version of Medicare subvention and is being heralded by DoD as 
successful. The American Legion is unaware of any third-party 
reimbursement billing and collection problems being experienced with 
CMS by either of these Federal agencies. Therefore, The American Legion 
believes similar success could be experienced by VHA with CMS' 
assistance.
    One noticeable barrier is the concept known as level of effort or 
maintenance of effort. In DoD's first attempt with Medicare subvention, 
this philosophy became a reality in the budgeting formula. In essence, 
DoD was tasked to continue to treat an estimated number of Medicare-
eligible patients, before DoD could bill CMS for any new Medicare-
eligible patients. This faulty assumption was somewhat confusing, 
because the entire patient population being treated by DoD was eligible 
for care based solely on honorable military service. Medicare-
eligibility had absolutely nothing to do with access to care, but 
rather a coincidence. Medicare-eligibility in and of itself did not 
justify care within DoD. Initially, Medicare-eligibility disqualified a 
patient from participation in TRICARE. Level of effort or maintenance 
of effort should not apply to VHA, as well.
    Another problem with DoD's demonstration program was the negotiated 
reimbursement rate once DoD surpassed its level of effort or 
maintenance of effort. DoD agreed to bill CMS at 90 percent of the 
reimbursement rate. Private health care providers are screaming that 
the full reimbursement rate is too low, yet DoD would receive even 
less. The contractual agreement between CMS (HCFA) and DoD doomed this 
demonstration project from the very beginning.
    Medicare is a Federally mandatory, pre-paid senior health benefit 
insurance policy. Currently, Medicare-eligible beneficiaries are free 
to use their Medicare throughout the private sector and in other 
Federal health care delivery systems, except VHA. Enrollment in other 
health care insurance policies is normally voluntary, yet veterans' 
enrolled in VHA are required, by law, to identify any third-party 
health benefit coverage to be billed for the treatment of service-
connected and non-service-connected medical conditions. The American 
Legion believes VA and CMS could achieve Medicare subvention on two 
levels: fee-for-service or Medicare+Choice. However, in either case, VA 
must be treated like an integrated, quality health care delivery system 
by CMS. In return, CMS should not be billed for the treatment of any 
non-service-connected medical conditions or the treatment of 
economically indigent veterans. Under current law, VA is 
congressionally mandated to deliver quality health care for service-
connected medical conditions and economically indigent veterans.

    Chairman Rockefeller. Thank you, and thank you all very, 
very much.
    It happens occasionally that I miscalculate, and today is 
one of those days. I overestimated the amount of time that I 
would be able to be here. I also have 10 questions for you, and 
I have concluded that I cannot ask them at this time.. And so, 
what I am going to do is the next best thing, which is actually 
sometimes even better. I am going to submit the questions to 
you, and they will cover some of the areas that you have 
discussed and some that you have not discussed and would ask if 
you would be kind enough to get back to me within about 2 
weeks. There is no law on that; but as you can get them done, 
it would be very helpful.
    [The information referred to follows:]
Response to Written Questions Submitted by Hon. John D. Rockefeller to 
               the Co-Authors of the Independent Budget *
---------------------------------------------------------------------------
    * AMVETS, Disabled American Veterans, Paralyzed Veterans of 
America, and the Veterans of Foreign Wars.
---------------------------------------------------------------------------
       discouraging priority 7 veterans through $1,500 deductible
    Question 1. Please comment on the VA's proposed $1,500 deductible 
for Priority 7 veterans. In my memory, this is the first time we have a 
proposal on the table that aims to drive away existing VA health care 
users. What are your thoughts about this proposal?
    Answer. The Independent Budget is opposed to the Administration's 
proposal to begin charging a $1500 deductible for health care for 
category 7 veterans. The primary reason we can see for the imposition 
of a deductible requirement is to discourage currently eligible 
veterans from seeking VA health care. Recently, the Administration 
announced that it would continue enrolling category 7 veterans. It said 
that it would find the resources to cover the costs of these health 
care services. Instead of providing the additional resources, it has 
proposed to have veterans pay for this care out of their own pockets. 
The VA itself estimates that a deductible will deter 121,000 new 
veterans from seeking health care. Requiring a $1500 deductible could 
adversely affect lower-income veterans, veterans whose insurance will 
not pay the deductible, and who want and need to go to the VA 
particularly to provide services they cannot find elsewhere in the 
private sector or on Medicare, for instance long-term care, 
prescription drugs, or specialized services. Finally, we are concerned 
about the perverse disincentive that this deductible scheme could have 
on veterans who represent the core mission of the VA.
                     eliminating the claims backlog
    Question 2. Clearly, VA's current claims backlog is intolerable, 
and new steps are needed to improve the claims process. We know from 
past experience that VA's attempts to streamline this process often 
lead to a temporary slowdown that makes the problem worse. What steps 
do you think that VA could take, and what resources would be necessary, 
to prevent the backlog from swelling even more while VA puts its new 
plans into place.
    Answer. The claims backlog in VA is intolerable. We would not 
characterize the solution as ``new steps'' to ``improve the claims 
process,'' however. We believe the current claims process is 
fundamentally sound, although improvements can always be made with 
evolving technology and process innovations. We contend that decisive 
action is needed to improve claims processing. Experience has shown 
that past attempts to streamline the process has led to decreases in 
production. It is known that improvements come at a cost. Under what 
has been termed the ``incorporation effect,'' the incorporation of new 
skills or methods for long-term improvement causes short-term decline 
in performance. However, we believe VA's past attempts to improve have 
not produced the desired results because they were half-heartedly 
implemented, did not take a well-managed and carefully-monitored 
strategic approach, or, in some instances, were misguided.
    Perhaps several improvements could contribute to VA's overall 
efficiency in claims processing, but first and foremost, VA must tackle 
the root causes of the claims backlog. We have discussed the root 
causes and our recommendations in general terms in The Independent 
Budget for Fiscal Year 2003 at pages 26-27.
    One factor contributing to the backlog was the improvident 
reduction in staffing in VA's C&P service in past years. VA has 
increased its workforce to address the claims backlog. Initially, new 
employees tend to add to the burden on the system rather than to 
increase production, because experienced employees must devote part of 
their time to training. As training progresses, new employees can begin 
to contribute some to case production. This requires more employees in 
the short term, but eventually the work could be done with fewer 
employees if it were not for the continual turnover in old and new 
employees. The intervention of other unforeseen factors into this 
complicated situation makes accurate projection of future staffing 
needs very difficult. However, without OMB constraints, VA can roughly 
determine how many employees it currently needs to allow it to train 
new employees, retrain existing employees, perform essential quality 
review, and maintain case production enough to minimize short-term 
declines in case production. In the fluid dynamics of the current 
situation, perhaps the only workable solution is to let staffing levels 
follow current demand, and hopefully a more forward-looking, strategic 
approach can be employed once the current crisis is brought under 
control and a level of stability is attained. Unfortunately, the 
political goals of the budget process in OMB seem to drive VA's request 
for resources more than its real needs. The President's FY 2003 budget 
suggests that increased staffing is not the answer quoting the Chairman 
of the VA Claims Processing Task Force: ``I must say that I think the 
VA has the necessary resources right now to do the job . . . the Agency 
can't justify asking for more people right now.'' However, even the 
Administration does not appear to subscribe to that blanket statement 
because the President's budget requests authority for 96 additional FTE 
for compensation and pension claims processing. From our discussions 
with VA management outside the budget process, The Independent Budget 
recommends 350 additional FTE for C&P Service. We agree that any number 
of additional FTE will not solve the problem unless VA gets more 
serious about correcting the root causes of its problems.
                 shortfalls in the medical care budget
    Question 3. The level of funding proposed for this year includes a 
mishmash of shifting funds, revenue collections and new charges to 
veterans. It's hard to tell what the actual new appropriated medical 
care funding amount is but it is safe to say that it is no where near 
the $3.14 billion increase proposed by the Independent Budget. What 
initiatives and funding needs will the Independent Budget cover that 
are not going to be met by the Administration's budget?
    Answer. The Administration has proposed a medical care 
appropriation of $22.744 billion, an increase of $1.4 billion over FY 
2002. Although veterans appreciate any increase, we are also cognizant 
of the fact that this does not meet the needs of the VA in the coming 
fiscal year, and does not provide the resources necessary to ameliorate 
the effects of recent inadequate appropriations. Unless additional 
resources are provided, the current situation, as intolerable as it is, 
will continue into the foreseeable future, and sick and disabled 
veterans will once again be shortchanged by the very government they 
have served, and rely upon to care for them.
    The FY 2002 budget falls short by at least $1.5 billion. Already, a 
few short months into FY 2002, the Administration has reported a 
shortfall of close to $500 million, and is seeking supplementary 
funding, a step we fully support nationally, we are witnessing an 
explosion in health care costs, especially in pharmaceutical costs 
which increased 17.3 percent in 2000. VA health care budgets have not 
kept pace with this explosive spending growth.
    Again, we note that the Administration's budget relies upon 
``management efficiencies'' to address real budgetary needs. Inadequate 
appropriations force the VA to ration care by lengthening waiting times 
and delaying services.
    We have not included collections as part of our recommendations 
concerning appropriated dollars. We recognize that nonappropriated 
funding may be available to expand VHA operations and ultimately 
improve care for veterans. However, we are strongly committed to the 
principle that the cost of VA health care is a federal responsibility 
that must be met in full by Congress and the Administration through 
adequate appropriations. VA must not be forced to rely on subsidies 
from veterans or their insurers to cover the costs of caring for 
veterans.
    We are very concerned that the Administration has failed to provide 
funding for the VA to meet its critical fourth mission--to serve as a 
backup to the Department of Defense in times of war or national 
emergency. The Administration's budget fails to address this issue with 
adequate funding.
    transfer of the veterans employment and training service (vets)
    Question 4. VA is proposing a new competitive grant program that 
would shift VETS from the Department of Labor (DOL) to VA. Do you think 
that VA is better equipped to provide employment and training services 
to veterans? What effects will the transfer have on veterans?
    Answer. The authors of The Independent Budget for fiscal year 2003 
do not directly address the transfer of the Veterans Employment and 
Training Service programs. However, we do make recommendations on the 
DVOP and LVER programs.
    The members of The Independent Budget believe veterans would be 
best served by funding DVOP and LVER programs at the statutorily 
mandated levels. With adequate funding, we believe that enough staff 
would be available to provide maximum services to veterans. At minimum, 
we recommend sufficient funding to ensure the DVOP and LVER programs 
remain national in scope and that DVOP/LVER staff be assigned to each 
major office from which services are provided to veterans in transition 
to the job market.
    In addition, the members of The Independent Budget recognize a 
clear need to institute consistent performance standards for the VETS 
programs. These standards should be in place to improve and strengthen 
available management tools and enhance overall program effectiveness. 
Without performance standards, the system has no way to compare one 
state to another, or even one office to another within a state. Recent 
testimony from the DOL Assistant Secretary for VETS indicates movement 
in the right direction with a strong focus on developing these 
management tools.
    The partnership members of The Independent Budget have recommended 
several improvements in the DVOP/LVER programs to make these programs 
work better so more veterans can get the help they need to find better 
jobs. As outlined above, these include adequate funding and improved 
performance standards.

    AMVETS Answer.* Shifting VETS to VA from DOL will not improve the 
employment and training needs of veterans. Within DOL, VETS has a 
wealth of departmental knowledge at its disposal. DOL knows the job 
market and the skills required to fill jobs over and above any other 
executive department.
---------------------------------------------------------------------------
    * Because the proposal to cut the VETS programs from the Department 
of Labor arose after our collaboration on The Independent Budget, 
AMVETS submits the attached response to Question 4 regarding the 
transfer of DOL/VETS to VA.
---------------------------------------------------------------------------
    While we agree that DOL needs to review its structure and process 
for the delivery of employment services to veterans, AMVETS does not 
agree that radical amputation of VETS from DOL is a solution to 
improving job placement.
    We do not see how VA is prepared to accept a program, which so 
naturally suits DOL. VA has its own challenges with backlogs in claims 
processing and lengthy waiting lists for health care. In forcing VETS 
upon the VA, we fear that the main mission of the VA will be further 
backlogged and jeopardized.
    Certainly VA has the ability to provide outreach to veterans at 
their time of separation, but DOL knows the labor marketplace, and they 
know better than anyone else where the jobs are. To date, the only 
rationale given for the shift is that VA wants to become a ``one stop 
shop'' for veterans programs, but they have ignored veterans' programs 
in departments and agencies other than DOL. VETS must be retained 
within the DOL and the VA must be allowed to continue its valued 
service to our veterans.
    In addition, AMVETS notes that the administration proposes no funds 
in fiscal year 2003 for the National Veterans' Training Institute. 
Because NVTI is the only source of formal training available to federal 
and state employees for veterans employment programs, the Institute is 
vital to the success of VETS. We believe that NVTI should be funded at 
a level adequate to ensure training is continued.
              saving money through sharing unused va space
    Question 5. Three years ago GAO criticized VA for having over 5% of 
its space unoccupied. GAO said that VA was losing a million dollars a 
day. I think that we would all agree that many more veterans could be 
served if the VA had an additional $360 million dollars. What can VA do 
to create more sharing opportunities? With what organizations might 
they share?
    Answer. As you may recall, that same GAO report stated, 
``restructuring . . . could reduce budget pressures or generate 
revenues that could be used to enhance veterans' health care 
benefits.'' The VA's Capital Asset Realignment for Enhanced Services 
(CARES) process serves the purpose of identifying all the facilities 
that will be retained, consolidated, or reconfigured. It is, therefore, 
our position that VA needs to incorporate sharing agreements into this 
process as much as possible.
    One organization sticks out above all others when it comes to 
sharing and potential cost savings--the Department of Defense (DOD). It 
is important to note that although there are areas where VA and DOD can 
improve upon existing sharing agreements they are two, separate and 
distinct entities with different missions: One, to fight and win the 
nation's wars; and the other, to care for those who bear the scars from 
those wars. DOD conducts its health care mission as a direct care 
provider and insurance purchaser (TRICARE) for members of the Armed 
Forces, retirees, and their dependents through the Military Health 
System (MHS) while VA conducts its health care mission as a direct care 
provider to honorably discharged veterans through the Veterans Health 
Administration (VHA). As such, they both possess cultural and 
institutional barriers that must be broken down, or at the very least 
mitigated, in order to create a healthcare partnership. We know from 
experience that this is easier said than done.
    There are areas, however, such as joint ventures that come to mind 
immediately. For example, the Alaska VA Healthcare system that boasts a 
VA/DOD hospital shared with the 3rd Medical Group, Elmendorf Air Force 
Base. Locating other areas around the country where military bases and 
VA facilities are in close proximity has the potential to produce 
similar results.
    The Independent Budget cannot emphasize enough our conviction that 
any sharing agreement between DOD and VA conform to 38 U.S.C. 
Sec. 8111(c)(1) in that it not ``adversely affect the range of 
services, the quality of care, or the established priorities for care 
provided by either agency.'' Simply put, we will support only that 
which does no harm to the beneficiary no matter the cost savings that 
may be generated. Further, any savings realized as result of a sharing 
agreement should be immediately reinvested into their respective health 
care systems without offset from congressional appropriation.
    In addition to DOD, there is the potential to pursue sharing 
agreements with HHS and other governmental agencies charged with 
medical preparedness in case of war or national emergency.
    Further, the private sector provides another avenue for sharing, 
especially when it comes to long-term care. Contracting enhanced use 
leases to provide such services as Residential Care, Respite Care, 
Hospital Based Home Care, Adult Day Health Care, and other extended 
care programs.
    Aside from the private sector, VA should consider leasing space to 
non-profits, specifically homeless veterans advocates.
    We also support VA's partnering with the National Trust for 
Historic Preservation within the context of the CARES process to ensure 
the appropriate, lawful, and financially prudent management of VA's 
historic properties.

    VFW's Answer.* GAO found that DOD needed to manage patient care and 
cost more efficiently. Unlike DOD, VA's mission is to take care of 
veterans. It is our opinion that the Veterans Health Administration 
(VHA) is the most efficient and cost-effective health care system. 
Scientific research has proven that VHA provides care for 25 percent to 
30 percent less than comparable Medicare services. VHA makes no profit, 
buys no advertising, pays no insurance premiums, and compensates its 
physicians and clinical staff significantly less than private-sector 
health care systems. VA manages to provide this more efficient and 
cost-effective care even though it serves a population of veterans that 
is older, sicker, and has a higher prevalence of mental and behavioral 
health problems.
---------------------------------------------------------------------------
    * Although VFW's responses are in accordance with those of the 
Independent Budget's, our view differs slightly to question No. 5.
---------------------------------------------------------------------------
    Most important to us, as veterans' advocates, the report stated 
``enrollees in [the pilot program] said they were better able to get 
care when they needed it. They also reported better access to doctors 
in general as well as care at military treatment facilities. Enrollees 
generally were more satisfied with their care than before the 
demonstration.''
    The VFW has made Medicare subvention one of its top legislative 
priorities. This past August, our National Convention approved VFW 
National Resolution 4622 calling for a change in law that would 
authorize VA to collect and retain all Medicare dollars. I have 
attached a copy of this resolution for your information.
    Again, we thank you for affording us the opportunity to present our 
views before your committee.
               Resolution No. 622 VA MEDICARE SUBVENTION
    WHEREAS, the VA health care system must provide all veterans access 
to a full continuum of care; and
    WHEREAS, the Department of Veterans Affairs has suffered from years 
of chronic under-funding, limiting its ability to properly care for its 
current workload; and
    WHEREAS, it is now absolutely essential that VA be authorized to 
capture and retain federal dollars in addition to its annual 
appropriation so as to revamp and revitalize its health care system; 
and
    WHEREAS, a large number of VA's potential patients are Medicare 
eligible; now, therefore
    BE IT RESOLVED, by the Veterans of Foreign Wars of the United 
States, that we support the swift enactment of legislation authorizing 
VA to collect and retain all Medicare dollars.
                 deceptive increase in benefits budget
    Question 6. Although this year's budget recommends a $94 million 
increase in funding for VBA, more than half of that will be consumed in 
an administrative shift to employees' benefits. Even given the 
efficiencies that VBA hopes to gain in processing claims, what do you 
think the short- and long-term impact of this budget will be for 
veterans?
    Answer. This President's budget is concerned more with making VA's 
numbers fit within the President's overall political agenda in the 
budget than addressing VA's true needs. Regrettably, VA's future 
direction and policy positions seem to be determined more by a few 
``bean counters'' in OMB, who do not appreciate the purposes and 
philosophy of veterans' programs, than by VA management. OMB has become 
a dictatorship within a democracy, whose policies are moderated and 
countered only by a vigilant and determined Congress.
    The Independent Budget recommendation for VBA under the General 
Operating Expenses appropriation is a ``current services'' budget with 
money added only for our recommendations of additional FTE and funding 
for specific information technology initiatives. Obviously, the 
President's budget requests funding for other ongoing and new 
initiatives that we have not requested funding for in The Independent 
Budget. Given that, the President's budget would appear to be 
inadequate. The Independent Budget recommendation includes funding for 
350 additional FTE for C&P Service and two other information technology 
initiatives. Appropriations for other projects included in the 
President's budget should be added to The Independent Budget request. 
Otherwise, both the short- and long-term impact of this budget will 
only worsen an already unacceptable situation in claims processing. As 
with the President's budget overall, the request for VBA is inadequate. 
The $53.9 million included in the $94-million increase requested for 
VBA is somewhat deceptive but is unlikely to succeed in deceiving those 
who must give real consideration to its impact on veterans.
                      funding for medical research
    Question 7. This year's Medical and Prosthetics Research Budget 
request is actually 6% higher than last year's request. The VA says 
that this will allow for 76 new projects and an additional 184 staff. 
What are your thoughts on this level of funding for research?
    Answer. Although VA Medical and Prosthetic Research (MPR) has not 
suffered the same budget pressures that have beset health care, it is 
still suffering from the uncertainty it faces each budget cycle. The 
MPR account fell short by $24 million in FY 2002 and will result in 
numerous MPR projects to be placed on hold. With the modest increase 
requested by the Administration for FY 2003, the MPR account will be 
hard pressed to maintain the status quo.
                         va medicare subvention
    Question 8. I notice that you support Medicare subvention for the 
VA. Several years ago the Department of Defense had this opportunity 
and ended up spending more than they collected. Why do you feel that 
the VA would be successful at this when DoD wasn't?
    The Independent Budget Answer. The Independent Budget VSOs in 
general feel Medicare Subvention in some form may be appropriate. 
However, at this time there is no consensus with respect to the actual 
implementation or specifics of such. Each of the four Independent 
Budget VSOs will respond independently to this issue. Following are the 
responses from the Disabled American Veterans and the Paralyzed 
Veterans of America. AMVETS and the Veterans of Foreign Wars will 
respond by separate letter.
    DAV Answer. We understand that DoD negotiated an unfavorable 
contract with Medicare that required it to exceed the level of effort 
and in addition it was a complex program including an HMO and Medicare 
Plus Choice delivery model which resulted in additional administrative 
problems.
    We would encourage Congress to draft appropriate legislation to 
ensure problems faced by DoD would be rectified and that the contract 
between VA and Medicare would clearly outline the intended outcome for 
VA.
    The DAV supports Medicare Subvention and we believe VA 
participation in this initiative will benefit veterans, taxpayers, and 
ultimately VA as long as Medicare subvention dollars are a supplement 
to an adequate VA appropriation. To offset federal appropriations for 
VA health care by revenue from Medicare makes no sense and benefits no 
one, not veterans, not the VA, not the Medicare Trust Fund, and not 
American taxpayers.
    As you are aware, although access to health care is an earned 
benefit, based on honorable military service, it is not considered an 
entitlement; therefore, it is subject to annual discretionary 
appropriations. Priority level funding may change from year to year, 
depending on congressional appropriations. Currently, VHA is authorized 
to retain all copayments collected from Priority Group 7 veterans and 
third-party reimbursements collected from their private insurance 
companies. However, VHA is prohibited from billing Medicare for 
services rendered to Priority Group 7 Medicare-eligible veterans.
    Medicare-eligible Priority Group 7 veterans have earned the right 
to use VA health care services. We strongly believe that Congress 
should pass legislation that permits Medicare-eligible Priority Group 7 
veterans the option of choosing VA health care and using their Medicare 
coverage. Citizens purchase Medicare coverage through payroll 
deductions and should have the right to use those benefits to receive 
care from the provider of their choice. The VA health care system is 
well known for its specialized programs in areas such as blind 
rehabilitation, spinal cord injury, post-traumatic stress disorder, 
traumatic brain injury and mental health. Medicare subvention would 
give veterans who currently cannot use their Medicare coverage at VA 
facilities, but who need specialized care, the option of choosing the 
VA system and using their Medicare coverage. Additionally, VA believes 
it can deliver care to Medicare beneficiaries at a discounted rate, 
which would save money for the Medicare Trust Fund and stretch taxpayer 
dollars. Allowing Medicare-eligible Priority Group 7 veterans to apply 
their Medicare benefits in VA facilities would reduce the government's 
total health care expenditures. VA health care costs less, at least 25% 
less, than private-sector providers billing at Medicare rates. The 
savings could be realized by reduced cost to patients, through low or 
no copayments, or passed on to taxpayers by setting subvention rates 
discounted from standard Centers for Medicare & Medicaid Services (CMS) 
rates, or by a combination. A large number of Priority Group 7 veterans 
bring diversity to the case mix and lower average costs. Finally, this 
group comprises a body of users that could be directed to other 
Medicare providers outside the VA system in case VA is needed to 
fulfill its fourth mission as backup to the Department of Defense in 
time of War or domestic emergency.
    The VA Secretary determines Priority Group 7 veterans' access to VA 
health care on an annual basis. VA's ability to provide their care 
largely depends on if it receives an adequate appropriation for health 
care. From one year to the next, this group of veterans is not sure if 
they will be able to continue to use VA health care services. Secretary 
Principi was prepared to announce his decision to limit enrollment of 
new Priority Group 7 veterans for this year. At the last minute he 
reversed his decision based on a promise from the Administration to 
provide supplemental funding to VA to continue open enrollment for all 
priority groups in 2002. The potential closure of enrollment for new 
Priority Group 7 veterans demonstrates that appropriations cover only 
Priority Groups 1-6. Medicare Subvention would obviate the need to deny 
access to Priority Group 7 users.
    The cost of care for this growing population of enrolled Priority 
Group 7 veterans exceeds medical care cost recovery (MCCR) from these 
patients and their secondary insurers. The DAV along with the 
Independent Budget (IB) group has consistently opposed the offset of 
MCCR collections. We believe that it is the responsibility of the 
Federal government to fund the cost of veterans' care; therefore, we do 
not include any cost projections for MCCR in the IB budget development. 
VA's historical inability to meets its collection goals has eroded our 
confidence in VA estimates. We have urged the Administration and 
Congress to drop this budget gimmick and address the veterans' medical 
care appropriations in a straightforward manner by providing a 
realistic budget fully funded by appropriations. We strongly believe 
monies collected through MCCR should be a supplement to, not a 
substitute for, appropriations. Collections from Medicare-eligible 
Priority Group 7 veterans do not cover the cost of their care, and 
since appropriations are not sufficient, these funds are redirected 
away from service-connected and poor veterans to subsidize the Medicare 
trust fund. Additionally, because of the shortfall in appropriated 
funds, services provided for the care of service-connected and poor 
veterans are delayed, and those veterans particularly must wait much 
too long to receive necessary care.
    While we support Medicare subvention, we would want Congress to 
ensure that service-connected disabled veterans would not be displaced 
or forced to wait even longer for necessary care and that revenue 
generated from Medicare subvention will not be used to offset federal 
appropriations. It doesn't make any sense to replace appropriated funds 
with Medicare funds. There is no benefit to VA, Medicare, or taxpayers 
if VA appropriations are offset by Medicare revenues.
    The assumption that subvention dollars should necessarily be offset 
by VA appropriation reductions is invalid because it is based on the 
incorrect belief that current appropriations are sufficient to provide 
services to service-connected, poor, and Priority Group 7 Medicare-
eligible veterans. While VHA sets standards for quality and efficiency, 
veterans' access to health care is constrained. Consistently inadequate 
appropriations have forced VA to ration care by lengthening waiting 
times. Last year appropriations were barley sufficient to cover the 
cost of care for Priority Groups 1-6. Appropriations over the last 
several years have been insufficient to provide services to service-
connected, poor, and Priority Group 7 Medicare eligible-veterans. By VA 
estimates, there are approximately one million Priority Group 7 users 
with 50-65 percent Medicare eligibility. Only 15 percent of Priority 
Group 7 Medicare-eligible users have billable Medigap insurance, 
leaving 85 percent where VA receives no insurance reimbursement. The 
average collections from Medigap insurance for Priority Group 7 
Medicare-eligible veterans is estimated at only 12-13 percent of the 
possible total billable portion. Obviously, VA spends a significant 
amount of resources on providing health care services for Priority 
Group 7 Medicare-eligible veterans with little reimbursement. We 
strongly believe their health care costs should be covered by Medicare 
funds.
    The director of CMS has stated that veterans' care should be 
covered by VA appropriations and that subvention would represent a 
double payment by the government. This is a spurious argument; 
actually, the current situation represents ``reverse subvention'' with 
VA appropriations used to pay for care that has already been funded by 
contributions to the Medicare Trust Fund. We estimate that $600 million 
of the veterans medical care appropriation is used to subsidize 
Medicare.
    No veteran should be denied access to the veterans health care 
system. Veterans, even veterans like those in Priority Group 7, who are 
not poor, have the right to take advantage of VA health care. However, 
service-connected and poor veterans should not have to subsidize care 
for veterans who have public or private insurance coverage. Medicare 
subvention would allow Medicare-eligible Priority Group 7 veterans to 
become a source of funding rather than a drain on an already over-
extended system. We strongly urge the Committee to support Medicare 
subvention without offset to the annual appropriation.
    PVA Answer. Medicare Subvention could benefit the provision of 
veterans health care, but, in PVA's view, only if the services provided 
equated to the full range of fee-for-service Medicare, and, if VA could 
be assured that appropriations to provide the full range of services 
for non-Medicare eligible would not be offset by collections from the 
Medicare Trust Fund.
          remaining management efficiencies in va health care
    Question 9. In this year's Independent Budget, you state under 
Medical Care issues that ``There are no more `efficiencies' to be wrung 
out of the system.'' Are you saying that you believe that the VA can't 
be more efficient in their management of health care?
    Answer. The Independent Budget will be the first to acknowledge 
there are always ways in which efficiencies can be improved. However, 
VA management efficiencies historically are achieved through the 
rationing or elimination of services and personnel. This can only 
result in longer waiting lines for sick and disabled veterans.

    Chairman Rockefeller. I very much appreciate the effort of 
veterans service organizations to try to work the budget 
process seriously, and I am on the Finance Committee. I receive 
many visitors who, shall we say, and always think about their 
particular niche. They never think about the larger situation. 
And what I think you all are trying to do--and I do not know of 
any representative that unite on behalf of an entire segment in 
our population. You look at the entire budget and try to 
present what you think is best and right for all veterans. And 
luckily you do not have the constraint of having to worry about 
the Office of Management and Budget.
    Mr. Paul Wellstone has just entered, which means that he 
may ask all of my questions, Paul Wellstone, and because I am 
about to leave, you also become chairman.
    Senator Wellstone. You know what, Jay, Mr. Chairman? I can 
do this in 30 seconds.
    Chairman Rockefeller. That, I have heard from you before. 
[Laughter.]
    Senator Wellstone. No, no, watch it. Watch it. A, thank you 
everyone, and I had to chair a hearing on working poor, and I 
could not leave, because I was chairing it, and I apologize for 
missing this very important hearing. B, if the Secretary is 
still here, you know, I would thank him, and I would thank 
everybody, all of the panelists and people who are here for all 
of the work and getting compensation for atomic veterans and 
the homeless veterans bill, and thank you, Mr. Chairman, and 
then, see, I have just got to say that I see that there is an 
increase in the budget, but when I look at inflation, and I 
look at the commitments that we have made, I actually do not 
see that in relation to--I think we are short, and there are 
huge gaps, and I think we have got to do a lot better. And I 
think there is going to be a pretty significant debate on the 
Independent Veterans Budget, which is the direction I think we 
need to go in.
    So thank you, everyone. I am ready to raise cain about the 
budget, and I will not say anything else.
    Chairman Rockefeller. That was not only substantive but 
accurate in terms of time.
    And more importantly to me is that generally people come to 
our hearings and leave. But when people have been at other 
committee hearings and then come here, that is very duly noted 
by me. And that shows your commitment, and I appreciate that 
very much.
    So with the previous apologies that I have made and thanks 
to all of you for your work and for your broader vision; thank 
you very much, and this hearing is adjourned.
    [Whereupon, at 11:59 a.m., the committee was adjourned.]
                            A P P E N D I X

                              ----------                              

 Prepared Statement of Hon. Ben Nighthorse Campbell, U.S. Senator From 
                                Colorado
    Thank you Mr. Chairman. I would like to welcome you, Mr. Secretary, 
and thank you for appearing before the committee today. I am looking 
forward to your testimony which will give us a better picture of how 
the Administration is going to address the serious issues facing the VA 
at this time.
    I am encouraged that President Bush wants to fulfill the nation's 
commitment to its veterans by guaranteeing that veterans' disability 
claims are processed accurately and quickly, and by focusing medical 
care resources on treating disabled and low-income veterans.
    Though I am encouraged with the overall FY 2003 funding increase, 
and particularly the increase for health care, I continue to be 
concerned that we find a way to take care of what will be an increasing 
number of elderly veterans. In my home state of Colorado, several 
veterans clinics are no longer able to take new primary care patients 
due to a lack of funding and providers. I think we can all agree that 
one of our greatest national responsibilities is the welfare of our 
nation's veterans. It is critical that we find a balanced way to make 
good on the promises to them.
    I also remain concerned about the backlog that continues to hinder 
the adjudication process of veterans' claims appeals. I understand that 
this is one of your priorities, and I heartily support you in that 
endeavor.
    I will be listening carefully to the veterans who are meeting with 
me this month and I am looking forward to the testimony of the many 
service organizations that will be testifying at the joint hearings 
during the next few weeks.
    Speaking as a veteran, I believe we need to do all we can to serve 
those who have so honorably served all of us.
    Mr. Secretary, again, I thank you for being here. I look forward to 
hearing details of your budget proposal and how you plan to address 
these issues in an efficient and effective manner within the proposed 
budget.
    I thank the chair and look forward to today's testimony.
                                 ______
                                 
   Prepared Statement of Hon. Larry E. Craig, U.S. Senator From Idaho
    Mr. Chairman. it is indeed a pleasure to welcome the VA Secretary 
Tony Principi and members of his staff. I applaud you and your team in 
your efforts to ensure our government honors our commitments to 
Veterans while implementing the most beneficial and cost effective 
programs. To do this, we must continually look for opportunities to 
reform the VA health care system, while maintaining as our number one 
priority, our combat veterans with disabilities or veterans with low 
incomes who often rely exclusively on the VA for their care.
    The VA's Budget proposal totals $56.5 billion for Veterans' 
benefits and services, $30.1 billion for entitlement programs and 
includes $26.4 billion in discretionary spending, for medical care, 
burial services, and the administration of Veterans' benefits. This is 
an increase of almost $6 billion over last year's budget, and it 
clearly demonstrates the President's commitment to Veterans' Health 
Care.
    I strongly support a VA which is committed to providing accessible, 
high quality medical care and other Veterans benefits and services in a 
timely and effective manner. However, we must expand and improve the 
delivery of service and benefits so that all Veterans have equal access 
to high quality medical care, particularly in under served rural areas 
such as Idaho. Of particular note are concerns that I have with the 
doctor shortage we are currently experiencing in our Pocatello 
facility. It is of utmost importance that the long list of Veterans 
waiting to receive various services, especially medical care, are able 
to get it in a timely, courteous manner with a minimal amount of 
necessary travel time. In recent years there were tremendous staff 
reductions that resulted in reduced services. The necessary steps must 
be taken to reverse this trend.
    In closing, Mr. Chairman, there is no way to over emphasize the 
honor and respect this nation owes the military men and women who 
sacrificed so much to accomplish a strong national defense. I believe 
that this proposed budget is a good beginning for ensuring our Veterans 
will receive high-quality health care, that we keep our commitment to 
maintain Veterans' cemeteries as national shrines, and we have the 
resources to process Veteran Benefit claims in a more timely and 
accurate manner. I look forward to working with Secretary Principi to 
meet the many challenges that the VA will face in the coming years.
                                 ______
                                 
    Prepared Statement of the Friends of VA Medical Care and Health 
                                Research
    The Friends of VA Medical Care and Health Research (FOVA), a 
coalition of 78 medical research, specialty, physician, academic, 
patient advocacy and industry organizations committed to quality care 
for veterans, is pleased to provide recommendations regarding FY 2003 
funding for the Department of Veterans Affairs (VA) medical and 
prosthetics research program. FOVA strongly encourages the Committee on 
Veterans Affairs to support VA research by recommending an FY 2003 
appropriation of at least $460 million and $45 million for research 
facility improvements.
    FOVA's FY 2003 VA research recommendation builds on the $20 million 
increase provided for the current year. FOVA thanks the Committee for 
recognizing that the less-than-inflationary increase requested by the 
Bush Administration last year would have been detrimental to the long-
term viability of the program. We are grateful for the Committee's 
strong leadership in securing a final outcome that was a significant 
improvement.
    The Administration's FY 2003 budget request for a $23 million (6%) 
increase in research program dollars * is notable for being the first 
time in many years that an administration has proposed funding 
sufficient to maintain VA's current level of effort in advancing 
treatments for conditions particularly prevalent in the veteran 
population including prostate cancer, diabetes, heart diseases, 
Parkinson's disease, mental illnesses, spinal cord injury and aging 
related conditions. We applaud the Bush Administration and Department 
of Veterans Affairs Secretary Anthony J. Principi for recognizing the 
invaluable contribution VA research makes to delivering high quality 
care for veterans and toward improving the health of veterans and the 
nation.
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    * The Administration's budget request for a $38 million increase 
for VA research includes a shift from OPM to VA of $15 million in 
accrued government health and retirement benefit funds. Consequently, 
the Administration's budget proposes a $23 million (6%) increase in 
research program funds plus $15 million in benefit expenses previously 
held in an OPM account, for a total increase of $38 million (10%) over 
current year funding of $371 million.
---------------------------------------------------------------------------
    However, a $23 million increase would not allow VA to expand its 
efforts to improve care for veterans, nor to meet the new challenges 
presented by the tragedies of September 11 and subsequent events. FOVA 
strongly encourages the Committee on Veterans Affairs to recommend an 
FY 2003 appropriation of at least $460 million for the VA medical and 
prosthetics research program. This represents growth in program dollars 
of $74 million (19%).
    Four core needs justify the FOVA recommendation of $460 million:
    1. Investments in investigator-initiated research projects at the 
VA have led to an explosion of knowledge that promises to advance our 
knowledge of disease and unlock new strategies for prevention, 
treatment and cures. Attachment 1 is a list of just a few of VA's 
recent achievements and initiatives. However, many health challenges 
still confront the veteran community. Additional funding is needed to 
take advantage of the burgeoning scientific opportunities and to 
improve quality of life for our nation's veterans as well as the 
general public. FOVA urges the Committee to support additional funding 
for the following research priority areas identified by the VA for FY 
2003:
     Quality of Care: Additional funding for the Quality 
Enhancement Research Initiative (QUERI) program would be used to fund 
centers in prostate cancer and dementia/Alzheimer's.
     Special Populations: VA would expand research in quality 
of care, community access and restoration of function to achieve 
greater understanding of existing racial, ethnic and gender disparities 
in health care.
     Diseases of the Brain: Additional studies are needed on 
the impact of different classes of psychiatric drugs on cognitive and 
behavioral function.
     Treatment Strategies in Chronic Progressive Multiple 
Sclerosis: Recent studies have shown that immunotherapy of acute MS can 
reduce disability. More studies are needed to determine the optimal 
therapy for patients.
     Micro Technology: In the area of low vision, work in 
retinal prostheses is an emerging science and may restore sight lost as 
a result of a variety of disorders including age-related macular 
degeneration and retinal pigmentosa.
     Patient Outcomes in Rehabilitative Care: Specific areas of 
emphasis include long-term care strategies to enhance patients' 
independence and activities of daily life, consequences of community 
reintegration and the impact of assistive technology on quality and 
functionality of life.
     Chronic Disease Management: VA is proposing two major 
initiatives in comparing clinical efficacy of 1) vascular surgery 
conducted on and off cardiopulmonary bypass machines, and 2) open 
versus endovascular surgery for abdominal aortic aneurysms.
    2. The complexity of research combined with biomedical research 
inflation has increased the costs of research. The average cost of each 
VA research project is now $150,000, a 9% increase in just two years. 
As a result, VA requires an increase of at least $15 million just to 
maintain a stable number of programs.
    3. In response to the events of September 11, VA seeks to establish 
a research portfolio to address the threats of bio-terrorism. This 
objective is consistent with VA's statutory obligation to provide 
medical back-up services in times of national emergencies. VA has an 
established history of research accomplishments in the areas of 
infectious diseases and immunology, including vaccine development. The 
laboratories of VA research scientists are disseminated nationwide, and 
are affiliated with top-flight universities. VA research provides a 
unique national resource that can be readily adapted and quickly 
mobilized in response to diverse biological threats.
    To meet this emerging challenge, consistent with H.R. 3253, the 
National Medical Emergency Medical Preparedness Act of 2001, FOVA 
strongly supports VA's proposal to establish four new centers of 
research excellence focusing on fundamental issues critical for 
responding to chemical, biological and radiological threats to public 
safety. The targeted research portfolio would include pathogen 
detection, disease diagnosis and treatment, protection, and vaccine 
development. The mission of these centers would also encompass the 
evaluation and management of illnesses consequent to military service, 
especially in our current conflict.
    4. VA's career development programs are a national resource for 
training the next generation of clinician scientists, those doctors who 
treat patients and address questions that have a direct impact on 
patient care. Additional funding is needed to expand this program in 
order to address the growing national shortage of clinician-
investigators.
    Separate from its recommendations for the VA research 
appropriation, FOVA strongly encourages the Committee to address the 
increasingly urgent need for improvements in VA's research facilities.
    In 1997, NIH conducted site visits of six VA research facilities 
and concluded that, ``VA has had increasing difficulty in providing 
sufficient resources via its congressional appropriation to 
satisfactorily fund the infrastructure necessary to support research at 
the VAMCs.'' It is FOVA's understanding that VA has made no 
significant, centrally administered investment in its existing research 
facilities since this finding. Ventilation, electrical supply and 
plumbing appear frequently on lists of needed upgrades along with space 
reconfiguration. Substandard facilities make VA a less attractive 
partner in research collaborations with affiliated universities; reduce 
VA's ability to leverage the R&D appropriation with other federal and 
private sector funding; and make it difficult to attract cutting edge 
researchers, both clinician investigators and laboratory scientists, to 
careers in VA. Facility R&D Committees regularly disapprove projects 
for funding consideration because the facility does not have the 
necessary infrastructure and has little prospect of acquiring it.
    Under the current system, research must compete with other medical 
facility and clinical needs for basic infrastructure and physical plant 
support. Unfortunately, the minor construction appropriation is 
chronically inadequate to meet facility needs for clinical improvements 
much less research upgrades, and year after year the list of urgently 
needed research repairs and upgrades grows longer. VA has identified 18 
sites in urgent need of minor construction funding to upgrade their 
research facilities. These sites plus the many facilities with smaller, 
but no less important needs, provide more than sufficient justification 
for an appropriation of $45 million specifically for research facility 
improvements.
    FOVA recommends that a new funding mechanism, such as a minor 
construction appropriation specifically for research facilities, be 
developed to provide a permanent, steady stream of resources dedicated 
to upgrading and renovating existing research facilities. State-of-the-
art research requires state-of-the-art facilities.
    FOVA thanks the Committee for consideration of its views. For 
questions or additional information, please contact any member of the 
FOVA executive committee listed on this letterhead. Thank you for your 
consideration.
Organizations that have endorsed FOVA's FY 2003 recommendations (as of 
        February 7, 2002):
    Administrators of Internal Medicine; Alliance for Aging Research; 
Alzheimer's Association; American Academy of Child and Adolescent 
Psychiatry; American Academy of Neurology; American Academy of 
Opthalmology; American Academy of Orthopaedic Surgeons; American 
Association of Colleges of Osteopathic Medicine; American Association 
of Colleges of Pharmacy; American Association of Neurological Surgeons; 
American Association of Spinal Cord Injury Nurses; American Association 
of Spinal Cord Injury Psychologists and Social Workers; American 
College of Clinical Pharmacology; American College of Physicians-
American Society of Internal Medicine; American College of 
Rheumatology; American Dental Education Association; American 
Federation for Medical Research; American Gastroenterological 
Association; American Geriatrics Society; American Gold Star Mothers of 
America; American Heart Association; American Lung Association; 
American Military Retirees Association; American Optometric 
Association; American Osteopathic Association; American Paraplegia 
Society; American Physiological Society; American Psychiatric 
Association; American Psychological Association; American Society for 
Pharmacology and Experimental Therapeutics; American Society of 
Hematology; American Society of Nephrology; American Thoracic Society; 
American War Mothers; Association for Assessment and Accreditation of 
Laboratory Animal Care International; Association for Research in 
Vision and Ophthalmology; Association of Academic Health Centers; 
Association of American Medical Colleges; Association of Pathology 
Chairs; Association of Professors of Medicine; Association of Program 
Directors in Internal Medicine; Association of Schools and Colleges of 
Optometry; Association of Subspecialty Professors; Association of VA 
Chiefs of Medicine; Blinded Veterans Association; Blue Star Mothers of 
America; Clerkship Directors in Internal Medicine; Coalition for 
American Trauma Care; Coalition for Heath Services Research; Congress 
of Neurological Surgeons; Digestive Disease National Coalition; 
Gerontological Society of America; Independence Technology, Inc.; 
Johnson & Johnson; Juvenile Diabetes Research Foundation International; 
Legion of Valor; Medicine-Pediatrics Program Directors Association; 
National Alliance for the Mentally Ill; National Association for 
Biomedical Research; National Association for the Advancement of 
Orthotics and Prosthetics; National Association for Uniformed Services; 
National Association of State Universities and Land Grant Colleges; 
National Association of VA Dermatologists; National Association of VA 
Physicians and Dentists; National Association of Veterans' Research and 
Education Foundations; National Mental Health Association; National 
Multiple Sclerosis Society; National Organization of Rare Disorders; 
Nurses Organization of Veterans Affairs; Paralyzed Veterans of America; 
Partnership Foundation for Optometric Education; Research Society on 
Alcoholism; Research!America; Society for Investigative Dermatology; 
Society for Neuroscience; Society of General Internal Medicine; 
Veterans Affairs Physician Assistant Association; Veterans of the 
Vietnam War.
      Attachment 1.--Research--Recent Achievements and Initiatives
                         promise for tb vaccine
    Researchers at the Portland VA have found a unique mechanism by 
which human T cells recognize cells infected with Mycobacterium 
tuberculosis, the bacteria that cause TB. They have found that the 
molecule HLA-E can present TB antigens to cytotoxic T cells. A further 
understanding of this mechanism may facilitate the development of an 
improved TB vaccine. Worldwide, over 2 million people die each year 
from TB. Advancement towards an effective TB vaccine has significant 
potential to improve both national and global health.
                new centers to study parkinson's disease
    VA created six new centers specializing in research, education and 
clinical care for Parkinson's disease. The centers--in Houston, 
Philadelphia, Portland (Ore.), Richmond (Va.), San Francisco and West 
Los Angeles--will conduct research covering basic biomedicine, clinical 
trials, rehabilitation, and health services. In addition, each center 
will take part in a major VA clinical trial to assess the effectiveness 
of surgical implantation of deep brain stimulators to reduce symptoms. 
(Feb. 2001)
                   key to wasting syndrome discovered
    Researchers at the San Diego VA Medical Center have unraveled the 
biological chain of events that causes wasting syndrome in mice, and 
identified the same process in liver and tissue from cancer patients. 
Wasting syndrome or cachexia, affects about half of all cancer and HIV/
AIDS patients, as well as those with bacterial and parasitic diseases, 
rheumatoid arthritis, and chronic diseases of the bowel, liver, lungs 
and heart. By noting the similarities between animal and human models, 
researchers hope to expedite the development of treatments to help 
patients. (Dec. 2001)
            va evaluating robotic walker for vision-impaired
    VA researchers in Pittsburgh and Atlanta are testing a new high-
tech walking frame designed to promote mobility and independence for 
the vision-impaired frail elderly. Using laser range finders, sonar 
sensors, steering motors and a motion controller, the Personal Adaptive 
Mobility Aid (PAM-AID) seeks to build the functionality of a guide dog 
into a robust walking frame. (Oct. 2001)
                 va establishes new hiv research center
    VA is the nation's largest single provider of health care to HIV-
infected persons. A new Center of HIV Research Resources at the Palo 
Alto VA Health Care System seeks to improve health care for veterans by 
assessing research and clinical trials throughout VA and other agencies 
and determining their potential for further research and clinical 
application. (Oct. 2001)
       rehab researchers collaborate in artificial retina trials
    VA researchers from the Rehabilitation Research and Development 
Service have recently collaborated with colleagues at the Louisiana 
State University Medical Center on studies to implant silicon-chip 
retinas in the eyes of patients blinded by retinal disease. About the 
size of a pinhead, the artificial silicon retinas are completely self-
contained and require no wires or batteries. They contain 3,500 
microscopic solar cells that generate electrical current in response to 
light. The implants stimulate healthy retinal cells underneath the 
retina in a pattern that resembles the light images focused on the 
chips. These images are then transmitted to the brain via the optic 
nerve. The implants are designed to treat retinitis pigmentosa and 
macular degeneration. (Sept. 2001)
            new blood test speeds diagnosis of heart attacks
    Researchers at the San Diego VA Medical Center have developed a 
simple, inexpensive blood test to increase the speed at which heart 
attacks are diagnosed in hospital emergency rooms. The new blood tests 
can rule out a heart attack with 100% accuracy within 90 minutes by 
looking for three cardiac enzymes released by distressed heart tissue 
during an attack. Ruling out a heart attack by traditional methods 
usually takes 6 to 24 hours. As a result, critical care admissions 
dropped 40% and overall hospital admissions dropped 20%. (Sept. 2001)
           chronic lymphocytic leukemia may be underestimated
    VA researchers at the Central Arkansas Veterans Healthcare System 
have found that the true incidence of Chronic Lymphocytic Leukemia 
(CLL) is substantially higher than estimated from the tumor registry 
database. Researchers credited the VA's Computerized Patient Record 
System (CPRS) as making the study possible by allowing researchers to 
review data from a large patient population without handling paper 
records. Revision in the data may show CLL to be the most common 
lymphoid malignancy in the United States. (Sept. 2001)
               friendly virus may slow replication of hiv
    VA researchers at the University of Iowa have shown that a form of 
the hepatitis virus called GPV-C may prolong the life of patients with 
HIV by preventing the HIV from replicating. GPV-C does not appear to 
cause any symptoms and may provide future therapy options for HIV. 
Specifically, the VA team showed that infecting human blood cells with 
GPV-C in the laboratory slowed the rate at which HIV multiplies. (Sept. 
2001)
   higher estrogen doses may enhance memory for alzheimer's patients
    VA researchers have found that higher doses of estrogen may enhance 
memory and attention for post-menopausal women with Alzheimer's 
Disease. Building on previous research showing the positive effects of 
estrogen administered by a skin patch, the researchers showed that a 
short-term administration of a higher dose of estrogen was found to 
significantly improve verbal and visual memory as well as attention in 
post-menopausal women. Although estrogen therapy does not show improved 
brain function for patients with mild to moderate Alzheimer's, it may 
slow the progression or prevent the disease. (Aug. 2001)
    diet and exercise reduce risk and delay onset of type 2 diabetes
    As part of the Diabetes Prevention Program (DPP), researchers at 
the VA Puget Sound Health Care System and the University of Washington 
have collaborated in a major clinical trial that showed at least 10 
million Americans can reduce their risk of contracting Type 2 diabetes 
with a regimen of diet and exercise. Funded by a wide group of federal 
agencies, private associations, pharmaceutical companies and product 
manufacturers, the DPP was ended a year early because the data had 
clearly answered the major research questions. (Aug. 2001)
              va researcher identifies breast cancer gene
    A VA researcher at the San Francisco VA Medical Center and the 
University of California at San Francisco led a study that showed that 
women who have a specific sequence of a transforming growth-factor gene 
have a 60% lower risk of developing breast cancer. (June 2001)
         increased ``good'' cholesterol reduces rate of strokes
    A VA Cooperative Study at 20 VA Medical Centers has found that 
treatment aimed at raising levels of high-density lipoproteins (HDL), 
commonly called ``good'' cholesterol, substantially reduces the 
incidence of strokes in some patients. Patients who received the drug 
Gemfibrozil had a 31% lower incidence of stroke. The result is part of 
a larger study aimed at showing that higher HDL levels reduce the risk 
of major cardiovascular events. (June 2001)
               brain development continues into late-40's
    An inter-agency study led by a VA researcher at the Central 
Arkansas Veterans Healthcare System has shown that the brain continues 
to develop in late 40-year olds. This view contradicts the current view 
that brain maturation ends before age 20 and may shed light on brain 
ailments such as Alzheimer's Disease, schizophrenia and drug addiction. 
Using magnetic resonance imaging (MRI) to measure brain development, 
the study showed that so-called white matter--where memory, higher 
reasoning, and impulse functions take place--continues to develop until 
the age of 48, on average. (May 2001)
    reduced opiate treatment may increase efficacy of chronic pain 
                               treatment
    Researchers at the Tampa VA Medical Center have found that patients 
taking opiates for chronic pain conditions reported no greater pain 
intensity than those not taking the drugs. Those receiving opiate 
treatment did report increased impairment. The program gradually phased 
out opiate use and those who remained off the drugs reported less pain 
and increased functionality and reduced depression. (May 2001)
         new technique to evaluate corneal tissue for implants
    Researchers at the Central Arkansas Veterans Healthcare System and 
the Jones Eye Institute at the University of Arkansas for Medical 
Sciences have developed a new technique to evaluate the surface of a 
cornea to determine suitability for transplantation. The new technique 
allows for evaluation of the entire surface of the cornea; current 
inspection is done visually or by methods that detect only large 
lesions. (May 2001)
                    old drug resists pull of cocaine
    Researchers at the Philadelphia VA Medical Center and the 
University of Pennsylvania report that Propranolol, a drug currently 
used to treat high blood pressure, helps addicts remain in treatment 
when the withdrawal effects of cocaine are especially high and 
treatment dropout rates are otherwise high. The research suggests that 
the drug reduces withdrawal symptoms by lowering the anxiety causing 
effects of adrenaline. (April 2001)
           new method to treat osteoporosis, grow bone tissue
    By using a synthetic form of estrogen that promotes bone growth 
without affecting the reproductive system, researchers at the Central 
Arkansas Veterans Healthcare System and the University of Arkansas for 
Medical Sciences may have discovered a new way to treat osteoporosis. 
Existing estrogen replacement therapy for osteoporosis is associated 
with several side effects including uterine cancer. This conceptual 
breakthrough could lead to a new generation of drugs and hormone 
therapies. (March 2001)
         natural recovery from spinal cord injury shown in rats
    Researchers at the San Diego VA Medical Center have found that rats 
with spinal cord injuries develop some spontaneous re-growth of nerves 
leading to increased motor function. In rats where 97% of the spinal 
cord connections are severed, rats were able to regain function within 
four weeks of surgery. Further research in continuing to determine how 
this process of ``sprouting'' can be enhanced. (March 2001)
        flu vaccines could save the nation $1.3 billion annually
    Routine influenza vaccinations of all working adults could save the 
nation as much as $1.3 billion each year according to a study led by 
researchers at the Minneapolis VA Medical Center and the University of 
Minnesota Medical School. By examining both the direct and indirect 
costs associated with influenza, researchers estimated that health care 
costs could be reduced by an average of $13.66 per person vaccinated. 
(March 2001)
             implanted electrodes help stroke patients walk
    Using a technique known as Functional Neuromuscular Stimulation 
(FNS), VA scientists implanted electrodes in the leg muscles of stroke 
patients and used sophisticated software to electrically stimulate the 
muscles over a six-month course of treatment. The patients experienced 
significant improvements in gait and other abilities, with no adverse 
effects. The research was described in the Journal of Rehabilitation 
Research and Development and other journals. (Feb. 2001)
                                 ______
                                 
     Prepared Statement of Richard Weidman, Director of Government 
                 Relations, Vietnam Veterans of America
    Chairman Rockefeller, Ranking Member Specter, and other 
distinguished members of the committee, Vietnam Veterans of America 
(VVA) is grateful for this opportunity to provide testimony on the 
administration's fiscal year 2003 budget request for vitally needed 
veterans services.
    I want to preface my remarks by saying that VVA continues to hold 
Secretary Principi in the highest regard. He has worked with us to 
address a number of issues of concern to VVA, its membership, and all 
veterans. We believe that his commitment to helping veterans is 
genuine. In contrast, VVA believes that some permanent members of the 
bureaucracy at the Office of Management and Budget (OMB) may not share 
his understanding or concern for veterans, particularly low-income and 
other economically disadvantaged veterans.
    When President Bush announced in his State of the Union speech that 
he would seek ``an historic increase'' in funding for veterans health 
care, VVA's leaders and members were left with the impression that the 
President was about to make a clean break with the past, that veterans 
could expect full and honest funding of real appropriated dollars for 
real health care. Having examined the budget in some detail, we have 
found budget gimmicks built into the overall request, making it less of 
an ``historic increase'' than it might seem at first glance.
    The President has asked for $1.414 billion more for FY2003 than the 
level set for FY2002, and this is a significant increase in comparison 
to some other programs. While the President was correct when he and the 
U. S. Department of Veterans Affairs (VA) stated in their press release 
of February 4 that the FY 2003 proposed budget was the largest overall 
increase in recent memory, it would in fact be the second largest 
increase ever provided for veterans health care in purely appropriated 
dollars. In ordinary times, this would be a major achievement. These 
are not ordinary times, however.
    We believe that the Veterans Health Administration (VHA) needs at 
least another $1.3 billion in addition to the $1.414 that the President 
requested. However, that additional $2.7 billion for veterans health 
care over the FY2002 level must be ``real'' appropriated dollars. An 
appropriation of this magnitude is vitally needed partly because of the 
significant shortfall this year, which made the starting base too low. 
Indeed, it is clear that a supplemental appropriation of approximately 
$750 million is needed to stop the reductions in force now occurring at 
every VA medical facility in the nation. A $2.7 billion increase in the 
appropriated dollars is vitally needed to advance meaningful and 
permanent improvements in veterans health care.
    VVA would also point out that one cannot speak realistically of 
preparedness for further attacks from our enemies on American soil and 
of homeland security without ensuring that the VA healthcare system is 
restored enough funding and positions for the VHA to be able to rebuild 
the organizational capacity lost since 1996. Put quite simply, in case 
of an attack resulting in 5,000 or more casualties at one time in any 
given congressional district, the civilian medical system would be 
overwhelmed and the VHA medical facilities would implode. Many American 
citizens would suffer and die needlessly in such a scenario. Currently 
the VA cannot properly meet its first three missions, much less 
adequately meet the vital ``Fourth Mission'' of acting as a backup to 
the National Disaster Medical System.
    I will spend the balance of my testimony providing specific 
examples that I think help illustrate this brutal reality.
                             ``fuzzy math''
    The VA press release touting the President's budget request claimed 
that it was ``the largest increase ever for the Department of Veterans 
Affairs.'' As House Veterans Affairs Committee Ranking Member Lane 
Evans has pointed out, of the $25.5 billion the Bush administration 
claims the budget will provide for veterans medical care, $794 million 
will simply shift personnel-related costs to VA from the Office of 
Personnel Management (OPM). Another $1.28 billion is to offset 
unavoidable cost increases like inflation, higher pharmaceutical 
prices, and federal pay raises. It was this type of budgetary sleight-
of-hand that helped produce the VA's current FY 2002 budget shortfall, 
which even the most conservative estimates place at $492 million. If 
the same accounting gimmicks are allowed to pass as ``realistic'' 
budget policy for FY 2003, we can expect even larger shortfalls by this 
time next year.
    What is especially disturbing about the administration's rosy 
claims over the FY 2003 budget is their belief that they will be able 
to achieve significant revenue increases through the Medical Care 
Collection Fund (MCCF), the third-party payer billing mechanism used by 
the VA to recover costs for treating service-connected veterans for 
nonservice-connected ailments. Every year between 1995 and 2000, MCCF 
collections consistently fell far short of the Executive branch 
projections--often by hundreds of millions of dollars. VVA is highly 
skeptical that this trend will suddenly reverse unless fundamental 
management reforms are implemented that lead to genuine increases in 
MCCF collections.
    The VA has an equally undistinguished track record of collecting 
from private insurers. As GAO reported in 1999, VA collections from 
insurers declined in every fiscal year from 1995 through 1999. From a 
peak of $532 million in 1995, VA third-party collections declined to 
roughly $400 million by the end of fiscal year 1999. While we 
understand that there was some slight improvement during 2001, GAO has 
reported that the increase was largely due to a shift from a flat rate 
to a ``reasonable charges'' billing model. The billing model change 
allowed the VA to do a better job of collecting reimbursements for 
treating roughly the same number of veterans as in FY 2001. Thus, 
unless other improvements in billing occur, MCCF collections are likely 
to level off or even decline in future years, invalidating OMB's 
optimistic assumptions about this revenue stream.
    VVA believes that the entire concept of using co-payments and 
third-party collections as an integral part of the VA budget request is 
a fundamentally flawed accounting gimmick, in addition to putting a 
significant part of the burden of paying for veterans health care on 
the backs of the veterans themselves. OMB's penchant for 
``discounting'' the Veterans Health Administration's budget request by 
the amount in collections anticipated inevitably makes the collections 
a wash in terms of bringing more revenue into the chronically starved 
veterans health care system. OMB has repeated this practice in the FY 
2003 budget, with what we believe will be predictably bad results.
    Additionally, VA's shift from an inpatient-based to an outpatient-
based healthcare model has dramatically reduced the number of 
opportunities to bill insurers for medical services; outpatient 
treatment episodes are almost always less costly than inpatient 
encounters. GAO reported in September 1999 that the annual number of VA 
inpatient episodes dropped by more than 250,000 between 1995 and 1998, 
while the number of outpatient episodes climbed by nearly 7 million. 
One could argue that this has made the system more ``efficient,'' 
although VVA would argue that in many instances veterans should be 
hospitalized, but there simply is no capacity for that clinically 
indicated inpatient care available at that facility or in the Veterans 
Integrated Service Network (VISN).
    VVA does not at present have figures on the numbers of outpatient 
encounters involving over-65 veterans. We would suggest to the 
committee that this is an area requiring further study and 
investigation, because another key problem facing the MCCF--and one 
completely outside of the VA's control--is the aging veteran 
population. An increasing number of veterans are over 65 and thus 
Medicare eligible. At present, however, there is no Medicare subvention 
program available to the VA through which the VA could bill Medicare 
for veteran's health care. Because the VA is not an authorized provider 
under any existing HMO plan, VA cannot bill those plans for services 
provided to veterans.
    This issue is becoming more acute due to the VA's Capital Asset 
Realignment for Enhanced Services (CARES) process. In essence, CARES 
serves as a vehicle for the VA to shut down aging medical centers, 
shift functions and services to more modern facilities, and expand the 
number of community-based outpatient clinics (CBOCs) within the VA 
system. We have testified before the full committee on previous 
occasions about our growing concerns over the decline in access to VA 
health care for hundreds of thousands of veterans across America.
    On September 17, VVA filed comments with the VA opposing their 
proposed CARES-driven reorganization of VISN 12 for a number of 
substantial reasons, including the VA's refusal to contract for medical 
service for veterans living in regions not within an easy drive of a 
VAMC or even a CBOC. Similarly, the VA's inability to bill Medicare for 
services compromises health care for elderly veterans by tying over-65 
veterans to VAMCs that are often hours from their homes. These issues 
are closely linked, and require a comprehensive Congressional response.
          co-payment deductibles: draconian and discriminatory
    The Administration's proposed $1,500 per year deductible for ``high 
income'' veterans (i.e., Category 7 veterans) can most charitably be 
described as a form of Darwinian class warfare, an attempt to force out 
of the VA system some of the most economically and socially 
disadvantaged members of the veteran community.
    What constitutes a ``high income veteran'' by VA standards? A 
single veteran earning more than $24,500 per year, or a veteran with a 
family of four making more than $28,800 per year. Both of these figures 
are well below the national poverty level. That most certainly is the 
case in any metropolitan area in the country, whether the veteran lives 
in New Jersey, Illinois, or California.
    Tens of thousands of veterans nationwide are living at or just 
slightly above the current VA Category 7 means test threshold. We can 
assure this committee and the American public that if the 
administration's proposal is adopted, tens of thousands of veterans 
will effectively be priced out of health care altogether. Given the 
decline in state health care budgets, these low-income veterans and 
their families will plunge straight through the remaining shreds of a 
very tattered social and economic safety net, perhaps to a future of 
homelessness and steadily declining health for themselves and their 
families.
    We remind this committee that many veterans who begin as Category 
7's move to higher categories once their claims have been approved. 
While they wait for their claims to be approved, these veterans are 
paying much more out of pocket for their medical care than would 
otherwise be the case. How many veterans have slipped into poverty in 
this way, by losing their ability to hold down a job as their health 
declined, all the while having to make significant co-payments as their 
claims sat for months or even years?
    What also happens in some cases is that veterans simply do not seek 
any medical care until they are so sick that they cannot work at all, 
therefore needing much more extensive and intensive care than if they 
had sought the care earlier. You can be sure that if the 
administration's proposal is adopted, without the Congress adjusting 
the means test to at least conform with the Federal poverty guidelines 
in a given area, the number of veterans who slip into poverty will 
increase as they are forced to choose between paying for health care or 
buying food or paying rent. Then the VA healthcare facilities will 
treat them, but those same veterans will cost a great deal more to 
treat.
    VVA is fully committed to the VA acting as the primary health care 
system for service-disabled veterans. We recognize that those veterans 
who wish to receive health care from the VA for nonservice-connected 
conditions should pay for those services, if their economic 
circumstances allow them to do so. Accordingly, VVA believes that the 
means test threshold for Category 7 veterans should be raised to not 
less than $38,000 per year for single veterans, and not less than 
$45,000 per year for a family of four. We also believe that the 
deductibles should be set on a sliding scale, with veterans at the 
lower economic end of the scale paying no more than a $250 per year 
deductible. We believe that these figures are far more realistic, 
affordable, and fair for the average veteran and/or veteran and family.
    VVA also urges this distinguished Committee to begin seriously 
examining the concept of making veterans health care for service-
connected disabled or potentially service-related illnesses a legally 
mandated right, and not merely a discretionary expenditure.
                 vet centers: cost effective and vital
    One critical VA program that received no substantive coverage in 
the administration announcement of the budget was the Readjustment 
Counseling Service Vet Centers. As this committee knows, the Vet 
Centers provide a nationwide system of community-based centers designed 
to provide counseling for psychological war trauma. VA operates 206 Vet 
Centers in all 50 states, Puerto Rico, the Virgin Islands, the District 
of Columbia, and Guam. In 2000, Vet Centers saw more than 131,000 
veterans and provided more than 890,000 visits to veterans and family 
members, according to the VA.
    Many have expressed surprise at the sheer number of persons 
exhibiting Post-Traumatic Stress subsequent to the attacks of last 
September 11. Many also seem surprised by the acuity and the 
persistence of both the symptoms and of the condition itself. VVA and 
many of the distinguished Members on this panel were not surprised. It 
is now time to recognize that the Vet Centers have a vital, unique, and 
positive role to play in the mix of services that is so needed by 
today's veterans, as well as those now serving in uniform when they 
return to civilian life.
    Interdisciplinary teams that include psychologists, nurses, and 
social workers staff the centers. Readjustment counseling features a 
non-medical setting, a mix of social services, community outreach 
activities, psychological counseling for war-related experiences and 
family counseling. These services are designed to assist combat-
affected veterans and other veterans have well-adjusted lives. In other 
words, the Vet Centers help families stay together, help veterans 
surmount problems that threaten their job, and help those unemployed to 
become more job ready. The Vet Centers are the only element of the VA 
that is authorized to treat family members, even when the veteran 
refuses to come in for treatment. This service is part of the holistic 
approach to health care that VVA has been advocating for many years.
    VVA knows from our members and from talking to Vet Center staff 
across the country that the Vet Centers have been inundated with 
``new'' veterans and their family members seeking counseling, as well 
as previously treated veterans and their families seeking additional 
counseling and assistance in the wake of the September 2001 terrorist 
attacks on the United States. We believe that this program needs a 
minimum increase of $17 million to both enhance organizational capacity 
and to be able to deal even more effectively with the new influx of 
cases related to the terrorist attacks. In addition, an additional 250 
FTEE must be added. Most of the $17 million would be used to pay for a 
family services counselor in each of the 206 Vet Centers, and to 
augment those Centers with the most overwhelming needs. This is a very 
modest increase that will pay very large dividends in assisting 
veterans, and indeed whole communities by extension.
           national center for post-traumatic stress disorder
    Related to our concerns regarding funding for the Vet Centers, VVA 
also believe that the National Center for Post-traumatic Stress 
Disorder (NCPTSD) must be expressly authorized and mandated in statute, 
and that NCPTSD should receive a line item funding directly in the 
appropriations bill of not less than $20 million each year. This is 
necessary in order to ensure that this invaluable national asset 
remains a viable research, repository, and consultation center for 
clinicians at VHA, FEMA, and other clinicians in the public and private 
sector. This national asset not only benefits combat veterans, but also 
many others who can benefit from its research into the effects of 
trauma such as the attacks on September 11 on the physical and 
emotional health.
                            medical research
    The administration has requested $409 million for the VA research 
budget in FY 2003, an approximately $38 million increase from FY 2002. 
VVA will support this request only if the committee issues report 
language mandating that VA approve only those research projects that 
are directly relevant to the specific health concerns or service-
related exposures of veterans.
    Moreover, new research projects should only be funded if the 
researchers collect the full military medical history of veteran 
subjects and patients involved in the study. We believe such 
prescriptive measures are the only way to begin changing the VA 
Research and Development Office's corporate culture, which currently 
seems to view the VA's research mission as one largely dedicated to 
general medical research, rather than one focused on medical research 
specific to and relevant for veterans. Despite continuing efforts of 
VVA leaders to help this section of VHA to understand the vital 
importance of this refocusing of their efforts, persuasion and 
intellectual arguments have not worked. Therefore, we ask the Congress 
to mandate such a proper focus.
    Moreover, VVA believes that it is long past time to end the DoD-VA 
monopoly on the control of funds allocated for military and veteran-
related medical research.
    As we testified before the Health subcommittee last month, for the 
last decade, Congress has allowed the agency that most likely created 
the Gulf War illness problem (DoD), and the agency charged with paying 
for the problem (i.e., the VA, through health care and disability 
payments to sick veterans), to investigate Gulf War illnesses and their 
own role in responding to sick Desert Storm veterans. This is an 
obvious conflict of interest, one that has prolonged the suffering of 
veterans, destroyed their trust in the federal government, and resulted 
in the waste of at least $150 million over the past five years through 
OSAGWI, as the Defense Department has ``investigated'' its own response 
to Gulf War illnesses. It is also how the Pentagon and the Air Force 
have managed to squander over $180 million on Agent Orange-related 
Ranch Hand research that has produced less than half-a-dozen peer-
reviewed scientific papers over the last 15 years.
       a national institute for veterans health (nivh) is needed
    To end this conflict of interest and restore integrity to the 
process of investigating and treating veteran's medical conditions, 
last year VVA called for the creation of a National Institute of 
Veterans Health (NIVH) within the NIH. NIVH would not only eliminate 
the conflict-of-interest problem outlined above, it would provide a 
vehicle for establishing a medical research corporate culture focused 
on veteran health care, in contrast to the current VA medical corporate 
culture of ``health care that happens to be for veterans.''
    VVA recognizes that the VA has established a reputation for 
providing advanced care for blinded veterans and those with severe 
ambulatory impairments. However, the VA has never truly developed a 
corporate culture focused on the diagnosis and treatment of the full 
range of environmental and occupational hazards that are unique to 
military service. This is especially true of the VA's Research and 
Development Office, where the overwhelming majority of VA-funded 
research programs are geared towards medical problems found in the 
general population, not those specific to the veteran patient 
population or those with military service. Many of the current projects 
could, at virtually no additional cost, be restructured to benefit 
veterans specifically, as well as the general population. This is not 
only proper for the VA's role, but it is also better science, since the 
impact of toxic exposures of war-related neuropsychiatric conditions 
may significantly affect both diagnosis and treatment modalities that 
are being investigated.
    We urge this distinguished Committee to work with other 
jurisdictional elements of the Congress to establish a new section of 
the National Institutes of Health to be known as NIVH, with veteran 
advocates serving along with scientists who understand veteran health 
issues on the peer-review panels that make research funding decisions. 
VVA believes that by so doing the Congress would be creating a research 
institute that would be truly focused on the unique medical needs of 
veterans. Locating the NIVH within NIH would ensure that the full 
medical resources of the federal government and private sector could be 
marshaled in a rational, veteran-friendly environment, free of the 
politicizing and conflict-ridden influences that have for more than 20 
years precluded effective research into the unique environmental and 
occupational hazards that have impacted the health of American 
veterans.
    Additionally, this proposed NIVH must be supplemented by the 
creation of a Congressionally directed mandatory declassification 
review panel, whose purpose would be to screen (on both a historical 
and an ongoing basis) and declassify any operational or intelligence 
records for evidence of data that would have an impact on the health 
and welfare of American veterans. The need for such an entity--
completely independent from the Pentagon and the U.S. intelligence 
community--is obvious.
    Even today, thousands of pages of Gulf War-related records remain 
classified. In January 1998, the CIA admitted that its own internal 
review had identified over one million classified documents with 
potential relevance to Gulf War illnesses. Virtually no documents 
associated with the 1960's era Shipboard Hazard and Defense (SHAD) 
program have been declassified, and DoD has thus far rebuffed VVA's 
FOIA requests that the documents be made public. Through the experience 
of the Kennedy Assassination Review Commission, we have learned that 
such specialized declassification panels work well. If we are to be 
certain that all data that may affect the health of American veterans 
is to be available for the veterans and their physicians, Congress must 
create such a standing declassification review panel immediately. Such 
a move would also help to restore trust and confidence among veterans 
in the federal government and its response to veteran's health issues.
 needed: more funds for veterans health care and greater accountability
    Mr. Chairman, while VVA believes that an increase of at least $2.7 
billion in appropriated dollars must be approved for FY2003 over the 
current FY2002 budget, there also must be additional steps taken 
towards assuring greater accountability for how these funds are used. 
Further, in order to stop further erosion of organizational capacity 
and prevent further reductions in vitally needed services at the VA, we 
must have a $750 million emergency supplemental appropriation 
immediately.
    While Secretary Principi deserves high marks for his initial 
efforts to better track use of funds within the VA, especially within 
VHA, much more needs to be done. As one example, there is yet to be a 
full accounting of what happened to the $350 million appropriated for 
screening, testing, and treating hepatitis C, which Congress authorized 
last spring, of the 80% of veterans who do not use VA veteran health 
care facilities at all.
    Additionally, VVA believes that the VA has a long way to go even to 
be able to tell who they have at each facility and what their function 
might be in the care of veterans. We would not tolerate this within the 
military. We should not tolerate it within the VA. If Secretary 
Principi needs more funds--in addition to those described above in 
order to speed his determined effort to develop and implement a viable 
management information system that will allow top leadership to make 
better and more timely decisions--then the Congress should provide said 
funds.
    VVA believes that the VA, as well as other executive departments 
and entities, need additional tools to hold GS14, 15, and Senior 
Executive Service employees more accountable for both performance and 
their compliance with the law. VVA National President Tom Corey has 
written to the President, with copies to Secretary Principi and 
Director of the Office of Personnel Management, pledging VVA's full 
support in seeking legislation to allow elected and duly appointed 
officials to be able to rein in the sometimes rogue fourth branch of 
government--namely, the permanent most senior civil service and 
excepted personnel.
    In the interim, VVA urges the Congress to require VA to post the 
criteria they will use to award bonuses at the beginning of each fiscal 
year in a given area. At the end of the year the amount of the dollar 
amount of each bonus and the specific reasons for awarding that amount 
to each recipient should be posted freely for public knowledge. If the 
size and reasons for these bonuses cannot stand the light of daylight 
and the sunshine, then said bonuses should not be awarded.
                        other key veteran issues
    VVA is grateful to all in Congress (but particularly to the 
distinguished leaders and Members on this Committee) for the increases 
in the Montgomery GI Bill. These increases will make it possible for 
many more young veterans to acquire the education that will not only 
help them personally as a reward for a job well done in military 
service, but will greatly benefit our nation's economy in the future. 
VVA continues to believe strongly that what is called for is a GI Bill 
modeled on that accorded to World War II veterans, as we are currently 
engaged in a world wide war against terrorist. The accomplishment of 
this largest ever increase in the Montgomery GI Bill for educational 
benefits is something of which all of you can and should be very proud.
    To ensure that all of the programs that can be utilized by eligible 
veterans for furthering their educations are sound and accredited, 
there must be an increase in the funding for the State Approving 
Authorities, which have the duty and expertise to accomplish this 
mission. VVA believes that these agencies need at least $18 million in 
appropriated dollars for FY2003, with increases for inflation in every 
year, as long as the use of these benefits stays at the current volume 
of usage.
    In regard to the Veterans Employment & Training Service at the 
United States Department of Labor, the Congress should increase the 
amount requested for the overall activities of this function to 
approximately $252 million appropriated dollars for FY2003. No matter 
where this vital employment function ultimately is housed, additional 
funds are needed to provide incentives for placement (not ``obtained 
employment'') of special disabled veterans, disabled veterans, and 
veterans who are at risk. Further, the specific line item for the 
National Veterans Training Institute (NVTI), currently at the 
University of Colorado at Denver, should be funded at least at the $3 
million mark. NVTI is one of the best elements of this entire 
operation, where excellence is not only taught but consistently 
practiced.
    The vital role of small business, especially very small businesses 
and self-employment, must not be overlooked. The President has only 
asked for $750,000 for the SBA Office of Veterans Business Development 
for FY2003. VVA points out that most of the provisions of Public Law 
106-50 have yet to be implemented some three and one half years after 
enactment. The Small Business Administration (SBA) appropriation for 
this function must be increased to at least $4 mission for FY 2003.
    While VVA recognizes that the SBA is outside the jurisdiction of 
this Committee, many of the Members of this panel, as well as staff on 
both sides of the aisle, played a most key role in formulation and 
passage of this vital legislation. Proper funding is necessary to 
ensure that the potential of this law is realized.
    VVA also notes that the Center for Veterans Enterprise (CVE), 
founded last year based on the recommendations of the ``Principi 
Report,'' has been somewhat helpful in this area. While there is a 
great deal more that could and should be done by the VA to augment that 
which is done by the SBA and other entities (such as the National 
Veterans Business Development Corporation), Secretary Principi is to be 
congratulated for his work in developing the CVE, and rewarded with 
additional funds targeted to augment current efforts in this area.
    Mr. Chairman, on behalf of Vietnam Veterans of America and our 
national leadership I thank you for this opportunity to express our 
views on the vital subject of the President's budget request for 
veterans services in FY2003.

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